NEW YORK Nucor Corp. is reaping the benefits of its onshore natural gas drilling agreement with energy company Encana Oil & Gas (USA) Inc., according to president and chief executive officer John Ferriola.
"The performance of wells drilled over the past two years has exceeded the projections we used to justify this capital allocation. That, of course, translates into lower-than-expected gas costs. We also expect our natural gas investments to be cash-flow positive by late 2016," he said during the companys third-quarter conference call.
The Charlotte, N.C.-based steelmaker expects to finish the year with about 240 to 250 wells drilled, according to Keith Grass, executive vice president and president and chief executive officer of Cincinnati-based scrap subsidiary David J. Joseph Co.
Nucors natural gas costs "have been below the market price on average so far this year" due to its agreement with Encana, Grass said during the conference call.
The company will spend about $700 million on drilling in 2014 and 2015, according to Ferriola.
The Encana venture is expected to supply Nucors steelmaking and direct-reduced iron production needs for more than 20 years (amm.com, Nov. 6).