Encana Q1 Results Top Estimates, But Production Drops

(RTTNews) - Canadian energy producer Encana Corp. (ECA.TO, ECA) reported Wednesday a hefty net loss in the first quarter compared to a profit last year, hurt by hefty impairment charges and foreign exchange loss. However, both operating earnings per share and quarterly revenues topped analysts' expectations.

"Through the continued advancement of our strategy, our first quarter results demonstrate the impact of our high quality portfolio, focused capital investment and prudent balance sheet management. Through innovation, execution improvements and teamwork, we continue to drive greater performance and efficiency throughout the company," President and CEO Doug Suttles said.

Calgary, Canada-based Encana reported a net loss attributable to common shareholders of $1.71 billion or $2.25 per share for the first quarter, compared to net income of $116 million or $0.16 per share in the prior-year quarter. The results for the latest quarter primarily include a non-cash, after-tax ceiling test impairment or $1.22 billion and a non-operating foreign exchange loss of $508 million.

Excluding items, operating earnings for the quarter was $9 million or $0.01 per share, compared to $515 million or $0.70 per share in the year-ago quarter.

On average, 21 analysts polled by Thomson Reuters expected the company to report a loss of $0.09 per share for the quarter. Analysts' estimates typically exclude one-time items.

During the quarter, Encana generated cash flow of about $495 million or $0.65 per share, compared to $1.09 billion or $1.48 per share, primarily due to sharp declines in oil and natural gas prices.

Revenues for the first quarter, net of royalties, decreased to $1.25 billion from $1.89 billion in the same quarter last year, but topped ten Wall Street analysts' consensus estimate of $1.21 billion.

The company generated revenues of $632 million from its Canadian operations, sharply lower than last year's $1.19 billion. Revenues from the U.S. operations declined to $588 million from $713 million a year ago.

Total production volumes for the quarter, after royalties, declined to 430.1 barrels of oil equivalent or MBOE per day from last year's 536.1 MBOE per day, reflecting the sale of lower margin assets and the company's shift to a higher margin, liquids-weighted production mix.

Liquids production surged 78 percent to 120.7 Mbbls/d from last year. Natural gas for the quarter decreased 34 percent to 1,856 Mmcf/d from a year ago.

"Our four most strategic assets are the growth engine of the company, currently generating better margins than the entire portfolio did in 2013 when both oil and natural gas prices were substantially higher," Suttles added.

NYMEX natural gas prices decreased to $2.98 per MMBtu from $4.94 MMBtu a year ago. Encana realized gas price declined to $4.78 per thousand cubic feet from $5.82 per thousand cubic feet.

Further, Encana said its board on Tuesday declared a dividend of $0.07 per share, payable on June 30 to common shareholders of record as of June 15, 2015.

Looking ahead for fiscal 2015, Encana said its first-quarter investment in Montney, Duvernay, Eagle Ford and Permian assets is expected to deliver a significant increase of liquids production in the second half of 2015.

The company added that the continued efficiencies has it on track to deliver the full-year capital savings of $300 million and direct operating cost savings of $75 million.

"Our team is doing a good job significantly improving well performance, lowering costs all across our operations and gaining line of sight to increased drilling inventory," Suttles stated.

ECA closed Monday's regular trading session at $13.87, down $0.26 on a volume of 10.03 million shares. ECA.TO closed on the TSX at C$16.82, down C$0.25 on a volume of 2.84 million shares.