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Exco Resources Inc posted a lower-than-expected adjusted quarterly profit hurt by depressed natural gas prices, and said it plans to significantly reduce drilling during the year.

The Dallas-based company said it plans to operate an average of nine rigs in the Haynesville shale and three in Marcellus, down from 22 and four, respectively.

The company, which outlined a 2012 budget of $470 million, said it estimates net production to average about 500 million cubic feet of natural gas equivalent (mmcfe/d) per day, lower than the 552 mmcfe/d it produced last year.

Net loss widened to $166.6 million, or 78 cents a share, from $72.8 million, or 34 cents a share, a year ago.

On an adjusted basis, the company earned 9 cents a share.

Revenue rose about 30 percent to $179 million.

Analysts on average had expected the company to earn 17 cents a share, according to Thomson Reuters I/B/E/S.

Shares of the company closed at $7.27 on Thursday on the New York Stock Exchange. The stock was down 2 percent in extended trade.

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The United States is expected to be the world’s top oil and gas producer by 2020, provided the federal government restores access to exploration sites, permits the industry to expand technology and realize that oil and gas is the primary energy source and key provider for a strong economy.

That projection was made by Louisiana Oil and Gas Association President Don Briggs as he presented his State of the Industry address to fewer than 200 members of the South Central Industrial Association last Tuesday in Houma.

Briggs was critical of the Obama Administration for its reaction to the April 2010 BP Deepwater Horizon oil spill that resulted in a six month moratorium on deepwater drilling and a de-facto ban on all offshore activity with the stalling of permits and lease sales during the past 21 months. He assured his listeners that changes are on the way that could open the industry to new opportunities in the future.

“Today we are truly in an evolution in our industry,” Briggs said. “The whole industry is changing before our eyes around the world.”

Briggs said that technology such as lateral drilling, opportunities in shale sites and increased demand for natural gas with alternative uses will place domestic extraction and processing on a new level of operation.

The LOGA leader offered expected charts on daily oil and gas production and noted consumption levels around the world. He specifically listed Middle East tension and concern about future access to the Strait of Hormuz that could completely change the business of global crude oil production, including where top exploration takes place.

“If Iran does shut [the Strait of Hormuz] down it would have tremendous impact on prices and we could easily see oil climbing up to $240 a barrel,” Briggs said.

Energy consumption is expected to increase due to hydraulic fracking, which is essential for the production of natural gas and oil from shale formations thousands of feet into the earth.

“[Business] is coming back,” Briggs said. “North America holds the world’s largest combined oil and coal and natural gas resources in the world, enough to fuel our need for the next 250 years.”

Non-conventional energy is attracting companies from around the world, according to Briggs, and the expectation is that within the coming decades, the U.S. would be restored as an industrial powerhouse.

“Growth in our natural gas is changing everything for us,” Briggs said. He added that Louisiana is in competition for control of natural gas wanted to generate electrical power plants and other industries. “[Global countries] are starting to invest in the U.S. oil and gas non-conventional resources in the United States.”

During his State of the Union address in January, President Obama said he would not walk away from the promise of clean energy. Briggs played a clip of that speech and said wind, solar and bio-fuels do not compete with oil and gas and they promise what cannot be easily delivered and made cost effective. “Anyone who believes this administration cares about the oil and gas industry [is] truly confused,” he said while noting propaganda presented to the public by opponents to the industry.

The LOGA president said it is important that those in the business of oil and gas prepare themselves for the future, and added that a change in Washington could benefit the industry and future energy stability in America.

“We are an energy state,” Briggs added. “We care about the energy business.”

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Anadarko Petroleum Corp. anointed a former investment banker as its new chief executive officer as the company’s growth in U.S. shale fields and deep-water projects has secured its spot as the largest U.S. independent oil and natural-gas producer.

Chief Operating Officer Al Walker, a former investment banker at UBS AG who joined Anadarko six years ago, will succeed Jim Hackett as CEO on May 15. Hackett will become executive chairman and retire in 2013.

In the eight years since he took over in December 2003, Hackett oversaw Anadarko’s transformation from a producer that missed output targets three years in a row to one of the industry’s premier explorers charting discoveries off the coast of Africa, Brazil and in the Gulf of Mexico.

“Jim Hackett has done the major repositioning,” Jeb Armstrong, an analyst at Credit Agricole in New York, who rates the shares an “outperform” and owns none, said in an interview yesterday. “He’s re-shaped and re-worked the company. Now it’s about execution and blocking and tackling and making those projects come to life.”

Walker will assume leadership of a $42.7 billion company that’s more than tripled in market value as his predecessor bought and sold assets in more than 53 transactions, according to data compiled by Bloomberg. Hackett’s biggest day of deals came June 23, 2006, when Anadarko announced two separate acquisitions, buying Kerr-McGee Corp. and Western Gas Resources Inc. for a total of more than $21 billion.

‘Influential Factor’

Walker was an influential factor in those transactions, said Stephen Trauber, global head of energy investment banking at Citigroup Inc. in Houston. Trauber, who was then at UBS, hired Walker from Houston-based oil and gas producer 3Tec Energy Corp. to work as an investment banker before Walker left for Anadarko in 2005.

“He drove them to those deals, which turned out to be very, very successful for Anadarko,” Trauber said in an interview yesterday. Trauber advised Anadarko on both the Kerr- McGee and Western Gas acquisitions.

Hackett called Walker “integral to a lot of the big decisions we’ve made, both strategically and tactically,” during a conference call with reporters yesterday announcing the CEO change.

Hackett also led Anadarko through the aftermath of BP Plc’s 2010 oil spill in the Gulf of Mexico, in which Anadarko shared responsibility through its 25 percent ownership of the ill-fated Macondo well. Anadarko lost more than half its stock value after the well explosion. Shares closed yesterday at $85.74 in New York, 17 percent higher than the day before the spill.

BP Settlement

Anadarko agreed in October to pay BP $4 billion to settle a dispute over its share of the oil spill costs.

“Macondo was a very unfortunate speed bump,” said Subash Chandra, an analyst at Jefferies & Co. in New York, who rates the shares a “buy” and owns none. He called Anadarko, “pound for pound one of the best exploration and production companies in the world.”

Walker will take charge of a company now viewed as “the most attractive takeover target in the industry” because of its overseas assets and Gulf of Mexico holdings, said Fadel Gheit, a New York-based analyst for Oppenheimer & Co., who rates Anadarko “outperform” and owns none.

Takeover Appeal

The CEO change increases the potential for Anadarko to be viewed as a potential acquisition by one of the large, integrated oil companies, said Citigroup’s Trauber. Any sale might be more likely during the transition period than after Hackett leaves, he said.

“There’s been a little bit of change here, so that always gets people to re-think, ‘Is this a time to do something?’” Trauber said.

Exxon Mobil Corp. might be interested in looking at Anadarko for its Gulf holdings, Gheit said in an interview yesterday. Patrick McGinn, a spokesman for Exxon Mobil, didn’t respond to a phone call and e-mail requesting comment.

Anadarko may be more likely to merge with a like-sized independent such as Apache Corp. or ConocoPhillips after that company spins off its refining business this year, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas. Bill Mintz, a spokesman for Apache, and Aftab Ahmed, a spokesman for ConocoPhillips, declined to comment in telephone interviews.

Tripled Shares

Andarko shares more than tripled to an all-time high on Feb. 17 of $88.05 from $23.31 on Dec. 3, 2003, when Hackett’s hiring was announced. The shares have 22 “buy” ratings from analysts, 7 “hold” ratings and 1 “sell.”

“The assets continue to deliver great exploration results and they continue to build up the pipeline of big projects,” Andrew Coleman, a Houston-based analyst at Raymond James & Associates Inc., said in a interview yesterday.

That pipeline may also prove to be Walker’s biggest challenge as the company plunges further into expensive deep- water projects and costs rise, said Phil Weiss, an analyst at Argus Research in New York, who rates the shares a “hold” and owns none.

“I just worry about spending getting out of control,” Weiss said. “The more efficient you can be from a cost perspective, the less sensitive you are to changes in oil prices.”

Walker will stand for election to Anadarko’s board at the May 15 annual meeting, the company said.

“This is a good time for the transition to a long-planned succession, given the company’s strong exploration and operational success and robust portfolio for long-term growth,” Hackett said in the statement.

Anadarko is the largest U.S. independent producer by market value. Independent oil and gas producers don’t refine fuels or sell them at retail.

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Encana Corp. said Friday it plans to drill up to six more wells in the Tuscaloosa Marine Shale during the first half of the year after encouraging results from its first two in the oil-rich formation.

Encana’s announcement comes a day after Devon Energy, which has completed two wells in the Tuscaloosa Marine Shale, said it plans to have eight more by the end of the year.

The Tuscaloosa Marine Shale, which stretches across Louisiana’s midsection and lies 10,000 feet to 17,000 feet or so underground, may contain as many as 7 billion barrels of oil, as well as natural gas, according to a 1997 report by LSU’s Basin Research Institute. Technology is making drilling the shale possible.

Kirk A. Barrell, president of Amelia Resources, of Texas, has said that before the formation can be considered economically viable, 10 to 20 wells will have to be completed and the decline rate of production from the wells evaluated over 12 to 15 months.

Encana’s first two exploratory wells in the Tuscaloosa Marine Shale produced an average of 330 barrels and 700 barrels of light sweet crude in their first month of production, the company announced Friday.

“It is early days, but we are excited by our results to date, which show the Tuscaloosa to be a substantive oil system …,” Jeff Wojahn, executive vice president and president, USA division, said in a news release.

The company has about 290,000 acres leased in the formation, which stretches across the middle of Louisiana into Mississippi.

The announcement was part of Encana’s 2011 earnings report. Encana reported a profit of $128 million, or 17 cents per share.

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Encana Corp (ECA.TO) will sell a 40 percent stake in British Columbia gas assets to Japan’s Mitsubishi Corp (8058.T) in a C$2.9 billion ($2.9 billion) deal that will help the Canadian company shore up a balance sheet battered by weak gas prices.

The agreement to sell Mitsubishi a stake in the massive Cutbank Ridge field in the Western Canadian province, coming as Encana announced an 8 percent drop in fourth quarter operating profit, is the latest in a string of asset sales by the Calgary-based energy producer.

For Encana, Mitsubishi effectively replaces PetroChina (601857.SS) as the deep-pocketed Asian partner it has long sought. A more ambitious C$5.4 billlion joint-venture agreement between Canada’s No. 1 gas producer and the state-controlled Chinese company collapsed last June when the two sides broke off talks over final terms.

“(The Mitsubishi deal) provides them some wiggle room for 2012 and into 2013,” said Chris Feltin, an analyst at Macquarie Capital Markets. “It shores up the balance sheet and provides some visibility on the sustainability of the dividend… I wouldn’t mind seeing more asset sales or (joint ventures) but overall now Encana is in much better shape.”

Encana also said it is looking for deep-pocketed partners for some other holdings, and wants to plow money into developing high-value liquids-rich assets such its undeveloped Tuscaloosa Marine shale deposit in Louisiana. In addition, it said it will cut its output of low-value dry gas by about 15 percent this year as it holds out for higher natural gas prices.

Encana and its rivals are struggling to cope with weak gas prices, which are hovering near decade lows, as a mild winter throughout North America cuts into demand, while production rises. The weakness in gas prices is driving oil and gas companies to focus on liquids-rich deposits.

Mitsubishi has agreed to pay C$1.45 billion for the stake in Cutbank Ridge in a deal that will close later this month. The Japanese trading house will also invest a further C$1.45 billion in the project over five years, in addition to its 40 percent share of the project’s future capital investment.

“The investment by Mitsubishi reflects the value of a well-delineated world class resource play that is being developed in a highly efficient manner,” Randy Eresman, Encana’s chief executive, said on a conference call. “This partnership provides an excellent analog for what we expect to achieve in several other plays throughout our portfolio.”

The assets in the partnership will include 409,000 net acres of undeveloped Montney lands in British Columbia, in addition to development potential in the Cadomin and Doig formations. Encana will serve as managing partner and operator of the partnership.

The deal does not include any of Encana’s current Cutbank Ridge production of about 600 million cubic feet of natural gas per day, processing plants, gathering systems or any of Encana’s Alberta landholdings.

The Cutbank Ridge partnership lands have proved undeveloped reserves of roughly around 900 billion cubic feet of natural gas equivalent, the company said.

After the close of the Cutbank Ridge deal, the company expects to have more than $3 billion in cash and cash equivalents on its balance sheet.

Encana announced roughly $3.5 billion worth of asset sales in 2011, mostly involving gas-processing plants in Canada and the United States.

Encana shares rose as much as 4 percent to C$21.14 in early action on the Toronto Stock Exchange on Friday, but later fell back to trading almost unchanged at C$20.13.

ENCANA RESULTS

The company reported a fourth-quarter operating profit of $46 million, or 6 cents a share, down from $50 million, or 7 cents a share, a year earlier.

Encana’s net earnings were hurt by an after-tax noncash asset impairment charge of $854 million triggered by lower natural gas prices and a change in future development plans. That compared with a similar charge of $371 million in the same quarter in 2010

The results in the latest quarter benefited from a large unrealized hedging gains and gains from divestitures.

On a net basis, Encana reported a loss of $246 million, down from a year-earlier loss of $469 million, when hedging losses and losses from divestitures weighed.

Cash flow, a key indicator of its ability to pay for new projects and drilling, rose 6.4 percent to $976 million.

Quarterly natural gas production rose 7 percent in the fourth quarter to 3,459 million cubic feet of gas per day (mmcf/d), while liquids production rose 17 percent to 23,938 barrels of liquids per day.

Encana’s 2012 capital investment plan of $2.9 billion represents a decrease of about 37 percent from 2011 levels.

($1=$1.00 Canadian)

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