Perforating tools, used to create fractures in the rock, are lowered into one of six wells during a roughly two-week hydraulic fracturing operation at an Encana Corp. well pad near Mead, Colo. on March 25, 2014. THE CANADIAN PRESS/AP, Brennan Linsley

CALGARY - Encana Corp.'s (TSX:ECA) strategic overhaul is one or two years ahead of schedule, CEO Doug Suttles said Thursday as the energy giant hiked its cash flow and liquids production targets for the year.

But that rosy outlook came as Encana posted lower profits for the second quarter.

Since Suttles took the reins just over a year ago, Encana has pared down its portfolio, made an entry into the hot Eagle Ford shale in Texas and spun out Alberta properties in one of the largest initial public offerings in Canadian history.

"Clearly, we're getting there faster than we thought," said Suttles, adding a bevy of asset sales and the $3.1-billion Eagle Ford deal have sped things along.

"We generally think we're between one and two years ahead on our strategy delivery at this point," he told a conference call.

Encana, which keeps its books in U.S. dollars, said cash flow is now expected to range from $3.4 billion to $3.6 billion this year compared to $2.9 billion to $3 billion.

On a conference call with analysts, Suttles was peppered with questions about what Encana would do with its excess cash.

After quipping that CFO Sherri Brillon is "trying to find a bigger closet to put all the money in," Suttles said a number of options are on the table, including debt reduction, returning cash to shareholders and investing back into the business.

Suttles said it's too early to talk about changing the dividend, which had been slashed to seven cents from 20 cents when the new strategy was unveiled last November.

Production of valuable liquids is also expected to come in above previous targets at between 86,000 to 91,000 barrels per day from between 68,000 and 73,000 barrels per day. At the end of last year, Encana's five main core areas produced about 29,000 barrels of liquids per day.

Capital spending is expected to rise by about $300 million as activity ramps up in the Eagle Ford, a sixth core area Encana added through the acquisition earlier this year.

During the quarter, Encana reached a deal to sell its Bighorn assets in west-central Alberta for about $1.8 billion, closed the $1.6 billion sale of its Jonah natural gas properties in Wyoming, mostly closed the $530 million sale of East Texas lands and made a number of other divestitures.

"All in all, that transformation is really happening fast," said AltaCorp Capital analyst Dirk Lever.

"If you would have asked me a year ago if they could be as far along as they are now, I would never have thought it."

Some of the success has been due to aspects that are within Encana's control, like reducing costs and boosting production from wells, said Lever. But the company has also been lucky as far as asset sales and purchases are concerned.

Earlier Thursday, Encana said second-quarter net earnings attributable to shareholders were $271 million, or 37 cents per share, compared with a profit of $730 million, or 99 cents per share a year ago.

Operating earnings, which strip out the effects of unusual items, were $171 million, or 23 cents per share, versus $247 million, or 34 cents per share. The operating earnings missed the average analyst estimate by a penny.

Revenue, net of royalties, totalled $1.58 billion compared with $1.98 billion a year ago.

Encana shares were up about 1.7 per cent at $24.10 in midday trading on the Toronto Stock Exchange.

Follow @LaurenKrugel on Twitter

News from © The Canadian Press, 2014