Rachel Notley reaching out to energy sector
Encana CEO Doug Suttles offers industry perspective after phone call from premier-designate
Alberta premier-designate Rachel Notley has taken the initiative to reach out to the energy sector since her election win last week.
Doug Suttles, CEO of Calgary-based oil and gas company Encana, said he took a phone call from Notley in recent days.
"The core of the conversation was, let's make sure we talk as you consider alternatives, and if we can support in any way with information or insights, we are happy to provide that," he said. "I've got to believe her biggest challenge at the moment is putting her government together, and it's a bit early to be speculating on policy changes."
You would almost have to be from another planet not to understand how important oil and gas is to Alberta and Albertans.— Encana CEO Doug Suttles
The NDP ran on a platform that included an increase in corporate taxes and a review of royalties paid by oil and gas companies. The party's victory has led to concern by the industry.
Some Encana shareholders aired their concerns at the company's annual general meeting in Calgary on Tuesday.
"Certainly what happens in the oil and gas sector is going to affect people like myself who are not part of the one per cent, but have held shares in Encana for several decades," said Irene Bruzga. She wants the company to do well because she depends on the dividend from her shares to supplement her income in retirement.
Energy sector CEOs have largely been diplomatic about potential changes from the new government.
"You would almost have to be from another planet not to understand how important oil and gas is to Alberta and Albertans," said Suttles. "You've got to be careful about speculating about what might happen. The important point here is I don't think it's lost on governments or new governments that it is a very competitive market out there."
Suttles said Encana can provide a perspective on operating not only in Alberta, but also in British Columbia and parts of the U.S. He said his conversation with Notley was brief and helped open the lines of communication between the energy sector and the new government.
"Since the election, our government affairs team have talked to members of the NDP … and essentially said if we can support in any way, such as policy issues, we would be happy to do that," said Suttles.
The company recorded a $1.7-billion US loss in the first quarter. The figure includes $1.2 billion US in asset impairments. Encana's operating earnings were $9 million US and its cash flow dropped to $495 million US.
Earlier this year, the company said it was assuming $50 US a barrel for the benchmark West Texas Intermediate (WTI) crude. WTI has risen and now sits at about $60 US a barrel.
"We didn't believe $100 oil was going to last forever and we don't believe $50 will last forever," said Suttles to shareholders.
Buying and selling
Suttles described 2014 as a "transformational year." The company racked up $18 billion US in transactions as it shifted away from being a purely natural gas producer.
"It's probably too soon to call it yet on whether or not this strategy is the right one for them," said Tricia Leadbeater, wealth management director with Richardson GMP.
Encana bought a Texas oilfield for $3.1 billion from Freeport-McMoRan. purchased Texas-based Athlon Energy for $7.1 billion and sold its Bighorn assets to Jupiter Resources for $1.8 billion, among other deals.