CALGARY - Virtually all options are on the table as Encana Corp. charts a new strategic course, the new CEO of the Canadian natural gas giant said Wednesday, as it posted a higher operating profit that beat expectations.
Doug Suttles, the former BP executive who took the top job in June, said he has tasked an "internal strategy team" to take a hard look at the company's key strengths and weaknesses.
The work is slated to wrap up by year-end, with 2014 expected to be the first year with the new strategy in place. External help has also been enlisted in the process, Suttles said.
"We are doing what I'd call a roots-up look at our asset base and the strength of it, the opportunity in it, the margin structure in it," he said in a conference call with analysts.
"We're looking real hard at our core skills and what we're really good at and we're also taking a hard look at our competitive position."
On the call, Suttles was asked how wide the range of options could potentially be — whether it could encompass bold moves like a major acquisition or an all-out corporate sale.
"We haven't actually eliminated any course of action as part of the strategy, other than we're not going to get out of the oil and gas business — I can confirm that," said Suttles.
"But we are going to look at a very wide range of alternatives and look at what we think is the best one, the best choice to make sure that we can sustainably grow value. And so right now at this point, we haven't eliminated any potential options."
There won't be any big strategic acquisitions while the new strategy is still being worked out, Suttles said. Smaller "tactical" ones are a possibility, however.
Encana's board looked at more than 100 candidates, from both inside and outside the company, before picking Suttles for the top job.
At BP, Suttles led the cleanup of the massive oil spill in the Gulf of Mexico, triggered by the blowout of the Macondo well in April 2010. Some 757 million litres of oil spewed into the waters off the Louisiana coast.
Earlier in the day, Encana posted operating earnings of $247 million, or 34 cents per share — widely beating the average analyst estimate of 19 cents per share, according to Thomson Reuters.
A year earlier, operating earnings — which strip out one-time items — were $198 million, or 27 cents per share
Net earnings were $730 million, or 99 cents per share, reversing a year-earlier loss of $1.48 billion.
Encana also announced that David O'Brien — one of the company's founders — has stepped down as chairman of the board. He'll remain as a director of the company while Clayton Woitas takes on the role of board chairman.
O'Brien's move had been expected as part of a broader renewal at the upper echelons of Canada's largest natural gas producer, which has been hit by an extended period of low prices for its main commodity.
Production of oil and natural gas liquids — more valuable than ordinary dry natural gas — rose 69 per cent year-over-year to 47,600 barrels per day.
Dry natural gas production during the quarter was essentially flat at 2.8 billion cubic feet per day.
Capital spending for the year will be in the lower part of its 2013 guidance range of $3 billion to $3.2 billion. Cash flow is on track to be in the middle to higher end of its guidance of between $2.3 billion to $2.5 billion.
The company also said Wednesday it is shielding itself from commodity price volatility by hedging nearly 2.3 billion cubic feet per day of its July-to-December 2013 production at an average price of US$4.37 per 1,000 cubic feet. That represents about three-quarters of its expected natural gas output for the rest of the year.
For 2014, about 1.54 billion cubic feet per day of natural gas has been hedged at a price of $4.19 and for 2015, 825 million cubic feet has been hedged at $4.37.
Encana has also hedged 15,000 barrels per day of oil production for the rest of 2013 at $98.09 per barrel and 5,800 barrels per day next year at $93.80.
Encana shares fell about two per cent to $17.78 in late afternoon trading on the Toronto Stock Exchange.