Encana Corp. (NYSE:ECA) stunned investors last week by agreeing to acquire fellow shale driller Newfield Exploration (NYSE:NFX) in a $5.5 billion deal. Investors disapproved of the move, which was evident by the thrashing the stock took on the day of its announcement. Analysts, on the other hand, saw the strategic and financial rationale behind the deal, which they believe will eventually pay dividends for the company.

However, with all eyes on the Newfield acquisition, most investors overlooked the fact that Encana also reported excellent third-quarter results. That's evidenced by two key numbers that investors won't want to miss.

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A 40% increase in liquids production

Encana's drilling machine continues to deliver strong results, which was on full display again in the third quarter. The company's total output leaped 33% year over year to 378,200 barrels of oil equivalent per day (BOE/D), after adjusting for asset sales. More importantly, the production of higher-margin oil and natural gas liquids (NGLs) surged 40% from the year-ago period, and 15% from the second quarter, due to the company's focus on drilling in liquids-rich areas.

One of the growth drivers during the quarter was Encana's position in the Permian Basin, where output surged 54% year over year to 98,500 BOE/D, with higher-margin oil production rising at an even faster 60% year-over-year pace. Driving that growth was the strong performance of the company's cube development, which utilizes multi-well pads and advanced completion designs to maximize the recovery of oil and gas from an acreage section by focusing on efficiency both above and below ground.

Meanwhile, liquids production out of the Montney shale in Western Canada rocketed 151% year over year and 23% from the second quarter to an average of 44,200 barrels per day. Aside from continued strong drilling results, the other factor fueling liquids growth in the Montney shale was the recent completion of several midstream assets. Pembina Pipeline (NYSE:PBA), for example, has completed three natural gas processing plants in the last year, enabling Encana to extract more NGLs out of its production stream. In addition, both Pembina Pipeline and Keyera (TSX:KEY) recently completed construction of liquids-handling hubs. Keyara is also building another gas processing facility to handle additional volumes by Encana in the Montney, which should come on line in 2021.

An oil pump in a green field.

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$66 million in free cash flow

Encana's surging liquids production is coming at the perfect time since the price of oil has risen sharply in the past year, taking NGL prices up with it. Those dual fuels have helped drive a tremendous increase in the company's cash flow, which skyrocketed 148% versus last year's third quarter to $885 million. That provided the company with enough money to fully fund its capital budget with $66 million left over. That puts the company on pace to generate free cash flow for the full year, which is one year earlier than it expected.

Because of that, Encana is in the position to ramp up cash returns to shareholders after it closes the Newfield Exploration deal. The company believes that the combination will immediately boost cash flow per share, which is why Encana plans to increase its dividend 25% as well as bolster its share repurchase plan from $400 million up to $1.5 billion. The combined company appears well positioned to continue growing free cash flow as it expands its liquids output and benefits from the estimated $250 million in expected cost savings the merger should provide, which could fuel additional cash returns to shareholders in the coming years.

A liquids and cash flow growth machine

Investors weren't expecting Encana to make a splashy acquisition since the company has been trimming its portfolio in recent years to focus its attention on organically growing liquids output in the Permian and Montney. However, because of all the attention on that deal, most investors likely missed that those dual growth engines produced excellent results in the third quarter. In the meantime, the company hopes that the addition of Newfield will provide it with a third liquids growth engine, which could give it even more fuel to create value for its investors in the coming years.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.