NEW YORK Nucor Corp. is temporarily suspending drilling in its natural gas working interest drilling program with Encana Oil & Gas (USA) Inc., a subsidiary of Canadas Encana Corp., due to weak natural gas prices.
"This pause demonstrates the flexibility of our partnership with Encana to react to market conditions to the mutual benefit of both parties while still allowing us to better manage our exposure to natural gas pricing volatility at our operating divisions that consume natural gas," the Charlotte, N.C.-based steelmaker said Dec. 17 in its fourth-quarter earnings guidance.
Nucor was planning to spend about $700 million on drilling in 2014 and 2015 (amm.com, Oct. 18). The suspension is expected to reduce the companys 2014 capital outlays by about $400 million.
"The decision to suspend drilling in the Piceance (basin) for the time being was mutual. Last week we announced our plans for 2014 and Encana is focusing the majority of our capital on only five plays, and the Piceance is not one of those plays," a spokesman for Calgary, Alberta-based Encana told AMM in an e-mail. "Nucors announcement aligns with our plans for next year so there was no material impact on Encana."
The steelmaker had said previously that the drilling venture, which is expected to finish the year with about 240 to 250 wells drilled, has been a boon to the company as it is paying below-market prices for natural gas.