(Reuters) - Encana Corp topped analysts’ estimates for quarterly profit on Thursday as the Canadian company’s output rose 20 percent and it sold crude at higher prices, sending its U.S. shares up 6 percent.
The Calgary-based company increased its acreage in the SCOOP and STACK region, a fast-growing shale oil field in the Anadarko basin in Oklahoma, with the purchase of Newfield Exploration Co for $5.5 billion in November.
The company also forecast a higher production target for the year on the back of the Newfield deal. It now expects output to be between 560,000 boe/d and 600,000 boe/d, compared with around 555,000 boe/d last year.
Analysts on average had projected 571,700 boe/d for 2019, according to IBES data from Refinitiv.
With the Newfield deal, Encana’s focus has returned to its core assets in the Permian and Anadarko basins in the United States and Montney in Canada.
“(We) are on track to exceed the G&A savings we identified at the time of the transaction announcement. We have eliminated duplicative roles and streamlined the combined business,” Chief Executive Officer Doug Suttles said.
Well costs in the Anadarko basin is expected to go down by at least $1 million per well over time, he added.
The company forecast a capital budget of $2.7 billion to $2.9 billion and said more than 75 percent of that will be invested in these core basins.
Average realized prices for oil rose 6.8 percent to $56.54 per barrel in the quarter. Some oil producers were able to lock in favorable prices for the quarter using hedges as U.S. light crude fell 38 percent in the three months ended Dec. 31.
Encana said as of Feb. 15, it had hedged about 87,500 bbls/d of expected oil and condensate production at an average price of $59.92 per barrel. Light crude was trading at $56.80 on Thursday.
Encana’s oil production from the Permian Basin, which has been at the core of the shale boom in the United States, rose 22 percent to 63,800 barrels per day. Total production rose to 403,400 barrels of oil equivalent per day (boe/d) from 335,200 boe/d a year ago.
Encana posted net income of $1.03 billion for the fourth quarter ended Dec. 31, on a $941 million gain. Excluding one-time items, the company earned 32 cents per share, beating the average estimate of 16 cents.
Reporting by Shanti S Nair in Bengaluru; Editing by Shailesh Kuber and Saumyadeb Chakrabarty