While many of its peers ratchet back spending, Encana is going against the grain with a 2015 budget that's expected to be higher than this year's — between US$2.7 and US$2.9 billion versus between US$2.5 billion and US$2.6 billion in 2014.
Encana said 80 per cent of next year's spending will go toward four main regions: the Duvernay and Montney in Western Canada and the Permian Basin and Eagle Ford in Texas.
The Permian and Eagle Ford crude deposits are relatively new additions to Encana's portfolio, which has been shifting more toward oil than its traditional natural gas focus.
"Commodity price volatility and the continued decoupling of oil and gas prices are challenges we expected to face at some point in the future. And that's why we have moved to diversify our portfolio," CEO Doug Suttles told a conference call with analysts.
"Built into our 2015 plan is the ability to respond to both the challenges and the opportunities as they unfold in this dynamic market."
Encana made its foray into the Eagle Ford in May with a US$3.1-billion deal with Freeport McMoRan. It followed it up with its US$7.1-billion acquisition of Permian player Athlon Energy Inc. in September.
Encana plans to invest between $650 million and $750 million in the Eagle Ford in 2015.
In the Permian, it expects to spend between $850 million and $950 million.
"The recent commodity price environment has in no way dampened our excitement about acquiring these assets," said Suttles.
Encana is basing its 2015 plans on U.S. benchmark crude averaging around US$70 a barrel, well above the US$55 the commodity is fetching now.
Its projected total cash flow will be substantially less next year, dropping to between US$2.5 billion and US$2.7 billion from an estimated US$3.2 billion to US$3.3 billion in 2014.
The company estimates average production for 2015 will the equivalent of between 405,000 and 440,000 barrels of oil per day — about 75 per cent from oil and liquids production.
If oil prices stay weak, Encana has the flexibility to "pull tighter and tighter back" to its four best areas in Canada and Texas, reducing spending on others such as Colorado, New Mexico and the southeastern U.S., said Suttles.
Encana shares closed up more than seven per cent at $14.53 Tuesday on the Toronto Stock Exchange.