Calgary, Alberta-based natural gas exploration and production (E&P) company, Encana Corporation (ECA - Analyst Report), reported strong first-quarter 2014 results backed by high natural gas prices during the harsh winter months. Lower operating expenses also aided the results.
The company reported its earnings before market on May 13, and opened at $23.84 per share. This reflects a 5.7% improvement from the closing price of the previous day.
The company announced operating earnings per share (excluding one-time items) of 70 cents, comfortably beating the Zacks Consensus Estimate of 53 cents. The bottom line also increased a whopping 191.7% from the year-ago adjusted profit of 24 cents per share.
Revenues (net of royalties) came in at $1,892.0 million, up 78.7% from the prior-year figure of $1,059.0 million. Moreover, the top line also beat the Zacks Consensus Estimate of $1,670.0 million.
Production & Prices
In the first quarter, natural gas production declined approximately 2.4% year over year to 2,809.0 million cubic feet per day, primarily due to drop in production volumes in resource plays of the USA division. Encana's realized natural gas prices improved approximately 50.8% year over year to $5.82 per thousand cubic feet.
The company's oil and liquids production climbed 56.1% year over year to 67,900 barrels per day, aided by a significant improvement in output from the resource plays of the USA and Canadian divisions. Encana sold oil at $69.19 per barrel, down marginally by 0.4% from the first quarter of 2013.
Encana reported operating costs of $189.0 million for this quarter, down 15.3% from the year-ago quarter.
Cash Flows and Drilling Statistics
Encana generated cash flows from operations of $1,094.0 million or $1.48 per share against $579.0 million or 79 cents per share during the first quarter of 2013. The company drilled 136 net wells against 174 in the prior-year quarter.
Capital Spending and Balance Sheet
Encana's capital investments during the quarter were $511.0 million. As of Mar 31, 2014, cash on hand was $2,162.0 million and long-term debt (including current portion) was $6,328.0 million, representing a debt-to-capitalization ratio of 54.7%.
The company expects to invest $2.4–$2.5 billion in 2014, higher than its previous forecast.
Encana lowered its 2014 total production to 2,850–3,100 million cubic feet equivalent per day.
On May 12, Encana closed the divestment of Jonah field based some natural gas resources. Encana sold the assets to TPG Capital – an equity investment company – for a consideration of roughly $1.8 billion.
Encana currently retains a Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.
One can also consider other Zacks Rank #1 players in the same industry like Athlon Energy Inc. , Callon Petroleum Company (CPE - Snapshot Report) and EPL Oil & Gas Inc. .