EnCana will close four rigsSTAR-TELEGRAM STAFF WRITER
EnCana Oil & Gas, the third-largest producer of natural gas in the Barnett Shale last year, Wednesday became the first producer to announce a cutback in drilling because of rising expenses.
EnCana, which is based in Alberta, said it will pull four of its 12 rigs out of Barnett Shale production because of high costs. In 2005, EnCana produced 35 billion cubic feet of natural gas in the Barnett Shale, about 8 percent of the field's total production. It trailed only Devon Energy and XTO Energy among Barnett Shale producers.
"Rigs are costing between $20,000 and $22,000 per day," said Randy Eresman, EnCana's chief executive. "We think it is prudent for our shareholders to reduce our costs."
Rig rates have almost tripled in the past three years, and prices for natural gas slumped this spring and summer. But prices have rebounded recently; natural gas futures rose 60 cents per thousand cubic feet in trading Wednesday on the New York Mercantile Exchange, closing at $7.69.
Another independent producer, Chesapeake Energy of Oklahoma City, said last month it would shut down about 6 percent of its production in response to lower natural gas prices. But Chesapeake said it would continue full production in the Barnett Shale. XTO Energy said Tuesday it would proceed as planned next year with its 22 Barnett Shale rigs.
EnCana declined to say how much the pullback would affect its planned production in 2007. For 2006, EnCana had planned to drill at least 100 wells in the Barnett Shale, primarily in Denton and Tarrant counties.
EnCana's Barnett Shale monthly production peaked at 4.1 billion cubic feet in January but dropped to 3.5 billion cubic feet in August.
Eresman said that EnCana also will close rigs in natural gas fields in Colorado and Wyoming.
EnCana disclosed the cutback in the Barnett Shale as it reported third-quarter earnings of $1.36 billion for the quarter, or $1.65 per share. The net earnings included after-tax gains of $255 million on the sale of the company's interest in a Brazilian discovery and gains for a counting for commodity-price hedges. A year ago, EnCana earned $266 million, or 80 cents per share, in the third quarter