Analyst Actions: Credit Suisse Lowers Estimates, TP on EnCana Corp

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Brent Price Forecast Unchanged But NYMEX Weakness Could Persist Near-term. "Credit Suisse has updated its commodity price view to reflect downward adjustment to NYMEX natural gas prices and a narrower differential between WTI and Brent. The Brent oil price forecast itself is unchanged. For NYMEX gas, Credit Suisse expects weakness to persist near-term as production takes time to fall in response to falling rig counts (mitigating factors include wells behind pipe, liquids drilling and efficiency gains). The long term view of the NYMEX gas price is unchanged at $5.50. The Brent forecast continues to reflect a 3.4% global GDP growth rate for 2012 with downside demand risk balanced by real supply risk across MENA and other significant producers (e.g., Venezuela, Russia, Nigeria)."

Initial Look at Q4. "We currently forecast production of 3,637 mmcfe/d in Q411. Our Q411 Operating EPS/CFPS forecasts of C$0.04/C$1.46 compare with the current Bloomberg consensus of C$0.20/C$1.39."

Revising EnCana Estimates After New Oil Price Forecasts. "Incorporating the price changes noted above and other operational updates we have made the following changes to full year estimates for Encana. Our 2011 EPS/CFPS go from C$0.53/C$5.81 to C$0.52/C$5.80, 2012 goes from C$0.56/C$5.60 to C$0.29/C$5.05 and 2013 goes from C$0.42/C$5.40 to C$0.14/C$4.88. Natural gas production is forecast to decline ~2% in 2012 relative to our 2011 forecast."

Lowering Target Price to $27 with 'Outperform' Rating. "Encana is trading at 4.8x 2012E EBIDAX. We apply 6.5x 2013E EBIDAX of C$3,978 million to derive our revised C$27.00 target price (was C$29.00). Our target is set at a ~10% discount to our US$30.40 'proven only' NAV and represents a ~30% discount to our "P1 + C1" NAV of US$40.10/share wherein we apply US$0.75/mcf to the 20 Tcfe of Encana's independently evaluated C1 economic contingent resources. Surfacing this value is central to our Outperform rating."

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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 Nasdaq, Inc.

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