Encana Q3 Operational Earnings Miss View, But Revenues Top

(RTTNews) - Canadian energy producer Encana Corp. (ECA.TO, ECA) reported Wednesday a profit in the third quarter that sored from last year, reflecting hefty gains from divestitures. Operating earnings per share missed analysts' expectations, while quarterly revenues topped their estimates.

"Our third quarter results highlight the tremendous momentum we have built executing our strategy and we are now a full two years ahead of the targets we originally set for 2017. The steps we have taken to transform our portfolio and drive cost efficiencies have delivered an over 50 percent increase in upstream operating cash flow against an eight percent decline in overall production, compared to the same period in 2013," President and CEO Doug Suttles said in a statement.

Calgary, Canada-based Encana reported net earnings of $2.81 billion or $3.79 per share for the third quarter, sharply higher than $188 million or $0.25 per share in the prior-year quarter.

The results for the latest quarter include an after tax gains on divestitures of $2.81 billion.

Excluding items, operating earnings for the quarter was $281 million or $0.38 per share, compared to $150 million or $0.20 per share in the year-ago quarter.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.46 per share for the quarter. Analysts' estimates typically exclude one-time items.

During the quarter, Encana generated cash flow of about $807 million or $1.09 per share, representing a 22 percent increase year-over-year.

Revenues for the third quarter, net of royalties, surged to $2.29 billion from $1.39 billion in the same quarter last year, and topped five Wall Street analysts' consensus estimate of $1.69 billion.

The company generated revenues of $759 million from its Canadian operations, higher than last year's $690 million. Revenues from the U.S. operations improved to $780 million from $693 million a year ago.

Total production volumes for the quarter, after royalties, declined to 2,823 MMcfe per day from last year's 3,072 MMcfe per day.

Encana achieved another major milestone during the third quarter by exceeding 100,000 barrels per day (bbls/d) of total liquids production. Liquids production surged 79 percent to 104.0 Mbbls/d from last year. Natural gas for the quarter decreased 19 percent to 2,199 Mmcf/d from a year ago.

Third quarter oil production of about 62,100 bbls/d was up 128 percent compared to the same period in 2013, driven in part by volumes from the recently acquired Eagle Ford position, which accounted for about 37,600 bbls/d of liquids production.

Natural gas liquids production during the quarter averaged about 41,900 bbls/d, an increase of 35 percent year-over-year.

NYMEX natural gas prices increased to $4.06 per MMBtu from $3.58 MMBtu a year ago. Encana realized gas price edged up to $4.03 per thousand cubic feet from $4.00 per thousand cubic feet.

Further, Encana said its board on Tuesday declared a dividend of $0.07 per share, payable on December 31 to common shareholders of record as of December 15, 2014.

Looking ahead for fiscal 2014, Encana has updated its guidance to reflect the impact of transactions completed during the third quarter.

The company expects total cash flow between $3.2 billion and $3.3 billion, or between $4.32 and $4.45 per share, down from the prior forecast of $3.4 billion and $3.6 billion.

Total capital investment for the year is projected to be in the range of $2.5 billion to $2.6 billion, up from the previous projection of $2.3 billion to $2.4 billion.

Total annual production is now expected to be 2,810 to 2,935 Mmcfe/d, with natural gas production in the range of 2,300 to 2,400 Mmcf/d.

ECA closed Tuesday's regular trading session at $18.47, down $0.01 on a volume of 5.13 million shares. ECA.TO closed on the TSX at C$21.05, down C$0.52 on a volume of 1.68 million shares.