EnCana Sticks to Asset Sale Plan in Ecuador
Canadian oil company EnCana (NYSE: ECA) still plans to divest its Ecuadorian assets this year despite the recent ousting of former President Lucio Gutiérrez, EnCana's president and CEO Gwyn Morgan said in a conference call to discuss Q1 results on Wednesday.
Congress voted to remove Gutiérrez from power last week, accusing him of corruption and stacking the supreme court. Despite calls for his arrest, Gutiérrez managed to flee to Brazil over the weekend. His replacement, Alfredo Palacio, has yet to name a new energy minister or president of state oil firm Petroecuador.
Asked whether the change of President would affect EnCana's plans to divest its operations in the country this year, Morgan said it is "fairly normal" to see a mid-term change of President in Ecuador.
"We have been in Ecuador for five years and have seen nine Presidents," he added.
Although the cabinet changes could "stymie some of the issues there for a little while, we really think we'll be able to divest those assets this year," he said.
On December 31, 2004, EnCana decided to sell its Ecuador operations to focus on North America and such operations have been accounted for as discontinued operations.
EnCana posted a US$80mn net profit from its Ecuadorian operations in the first quarter compared to a US$31mn net loss in 1Q04, the company said in its Q1 earnings statement.
EnCana's revenues net of royalties from Ecuador operations more than doubled to US$191mn in 1Q05 from US$79mn in 1Q04.
However, EnCana saw its Ecuadorian crude production slip 0.8% to an average of 75,695 barrels a day (b/d) in 1Q05 compared to 76,320b/d in 1Q04, the company said in interim supplemental information for the period ended March 31, 2005.
Although sales fell 10.5% to 72,487b/d from 80,982b/d in the first quarter of 2004, EnCana's netback from oil sales in Ecuador increased to US$25.91/b from US$15.78/b in 1Q04, while the average royalty fell to 26.9% from 27.4%.
The company's Ecuador operations include a 100% working interest in the Tarapoa block, which produces 42,000b/d, and a 40% non-operated economic interest in block 15, which produces 31,000b/d. EnCana also has a 75% interest in block 14, a 70% interest in block 17 and a 100% interest in the Shiripuno block, which together produce approximately 5,000b/d.
EnCana is also divesting its 36.3% stake in the 500km OCP pipeline. The pipeline has the capacity to transport 450,000b/d of crude from the Amazon jungle region to the OCP Marine Terminal in Esmeraldas.
Globally, EnCana posted a US$45mn net loss in 1Q05 compared to a US$290mn profit in the same period last year. However, EnCana's operating earnings increased 34% to US$611mn, the statement said.
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