Encana Beats on Q3 Earnings, Cuts Capex - Analyst Blog

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.


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%.


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 Nasdaq, Inc.

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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