Encana Beats on Q3 Earnings, Cuts Capex - Analyst Blog

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Calgary, Alberta-based exploration and production (E&P) company, Encana Corporation ( ECA ), reported better-than-expected third-quarter 2013 earnings. Substantial fall in total expenses along with significant hike in liquid output aided the results.

The company announced operating earnings per share (excluding one-time items) of 20 cents, comprehensively beating the Zacks Consensus Estimate of 15 cents.

However, comparing year over year, earnings decreased 44.4% from 36 cents per share (adjusted) owing to lower natural gas production.

Revenues (net of royalties) came in at $1,392.0 million, up 35.8% from the prior-year figure of $1,025.0 million. However, the results failed to beat the Zacks Consensus Estimate of $1,476.0 million due to reduced natural gas price realization.

Production & Prices

In the third quarter of 2013, natural gas production declined approximately 6.3% year over year to 2,723.0 million cubic feet per day (MMcf/d), primarily due to an 18.5% drop in volumes in the resource plays of the USA division. Encana's realized natural gas prices decreased approximately 18.5% year over year to $4.00 per thousand cubic feet (Mcf).

The company's oil and liquids production climbed 92.1% year over year to 58,200 barrels per day (Bbls/d), aided by a significant improvement in output from the resource plays of the USA and Canadian divisions. Encana sold oil at $90.42 per barrel, up 13.0% from the third quarter of 2012. However, realized price for natural gas liquids (NGL) was $46.35 per barrel, down 24.4% from the year-ago quarter.

Expenses

Encana reported total expenses of $1,253.0 million for this quarter, representing a year-over-year reduction of 56.1%.

Cash Flows and Drilling Statistics

Encana generated cash flows from operations of $660.0 million or 89 cents per share against $913.0 million or $1.24 per share during the third quarter of 2012. The company drilled 166 net wells against 188 in the prior-year quarter.

Capital Spending and Balance Sheet

Encana's capital investments during the quarter were $641.0 million (excluding acquisitions and divestitures). As of Sep 30, 2013, cash on hand was $3,258.0 million and long-term debt (including current portion) was $7,649.0 million, representing a debt-to-capitalization ratio of 58.6%.    

Guidance

The company has lowered its expectation for full-year 2013 natural gas production to 2.7-2.8 billion cubic feet per day. However, Encana maintained its expected full-year 2013 liquid output at 50,000-60,000 barrels per day.

Encana reduced its full-year 2013 capital investment expectation to $2.7-$2.9 billion.

Zacks Rating

Encana currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at E&P firms like Bonanza Creek Energy Inc. ( BCEI ), Stone Energy Corp. ( SGY ) and Berry Petroleum Co. ( BRY ) that offer better prospects. Bonanza Creek Energy and Stone Energy sport a Zacks Rank #1 (Strong Buy) while Berry Petroleum carries a Zacks Rank #2 (Buy).



BONANZA CREEK (BCEI): Free Stock Analysis Report

BERRY PETROLEUM (BRY): Free Stock Analysis Report

ENCANA CORP (ECA): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BCEI , BRY , ECA , NGL , SGY

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