Wednesday, December 12, 2007

Encana fails to follow through on threats

During the royalty debate Encana was threatening to cut 1 billion from their Alberta investment. Later on in the article one sees that investment in the oil sands will still go up considerably. You could say that Encana is investing 500 million more than one would expect given their yapping about royalties. They are increasing dividends as well. Having a competing province owned company would force the oil giants to settle for reasonable terms or find themselves losing more and more share of production and exploration to the provincially owned company. However, there is almost zero likelihood of this happening. It is much more common in Conservative Sheikdoms.

EnCana boosting spending, but Alberta will see less
Company plans to double its dividend in 2008
Last Updated: Wednesday, December 12, 2007 | 4:14 PM ET
CBC News
EnCana Corp. said Wednesday it is boosting its capital spending for next year, but will reduce the amount it spends in Alberta in the wake of the province's plan to increase royalties.

The Calgary-based oil and gas producer said it plans capital expenditure of about $6.9 billion US in 2008, up about 13 per cent from 2007, and will focus on growing its main projects, including the Deep Panuke gas field off the coast of Nova Scotia, and its Amoruso Field gas project in East Texas.

However, the company said it plans to cut about $500 million from expenditures in its home province.

The planned Alberta royalty increases starting in 2009 "have significantly diminished returns for deep gas well drilling and new and emerging resource plays," the company said.

In the heated run-up to Alberta Premier Ed Stelmach's decision to increase royalties, EnCana had threatened to cut its investments in the province by $1 billion in 2008 if the royalty plan went through as it was originally proposed. Stelmach's government eventually opted for a lower royalty rate.

EnCana said Wednesday that — in addition to the higher royalties — the rising Canadian dollar, increased labour rates, higher energy costs and increases in property taxes have all combined to make the company's Alberta projects less economic.

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