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Encana Corporation Message Board

  • margin321 margin321 Jul 21, 2014 2:44 PM Flag

    Q2 numbers

    I am not sure the market will be blown away by 2Q numbers, as some posters have suggested. Don't forget the huge Deep Panuke bonus in Q1 (300 million in cash flow) from selling 250 million cubic feet per day over $15. There will be huge drop from Deep Panuke for Q2. (Should be nice again next winter however).

    What I do hope to see are good results on a series of TMS wells from ECA and from HK which could clearly establish that area as the next high return shale play and that will lead shift to flat out development as occurred at Eagleford.

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    • Thinking about getting back in this one. I sold at 21.40, and missed the run to 24.I can correct that mistake now. Sold UPL @28.97, and should get it back too right here. NG ought to hang above 3.75

    • margin321, always insightful comments...

      You are perfectly on the mark when you say that Deep Panuke will contribute much much less this time around.

      I guess my view is that the consensus estimate is 27 cents (barely increased in the last three months from 21 cents). EPS for Q1 was 70 cents! That is a drop of 70% in earnings quarter to quarter. That tells me that the market is clearly factoring the fact that Deep Panuke will not have a repeat performance (at least until next winter).

      So what does 27 cents compare to? Well, let's see what they delivered in Q2 last year (2013). They earned 34 cents for Q2 2013. And that was in an environment with slightly lower NG prices (realized 4.17, NYMEX: 4.09) over the quarter. But more importantly, it was in an environment where they had just started cost cutting and they had just started gearing up towards liquids production with 47.6 Mbbls/d. Just the production from the EagleFord field alone gives about 53 Mbbls/d (and mostly oil, not NGLs!) according to the most recent investor presentation.

      What is hard to factor in is the lost production from the asset sales. A quick back of the envelope computation (using Q2 2013 numbers) and we get a reduction of 4.6 (50% of PrarieSky in Q2 2013) + 7.4 (Big Horn) + 4.9 (Jonah) + .9 (East Texas).

      That corresponds to 17.8 Mbbls/d of liquids (mostly NGL, not oil) of lost production from fields sold since Q2 2013. That is significantly less than the additional 53 Mbbls/d from the EagleFord. Furthermore, the other fields (Montney, DJ Basin, San Juan, TMS) are all producing significantly more liquids (at least as of Q1 2014) relative to Q2 2013. And again, pricing was just as good this quarter as it was last year for Q2.

      So in all, beyond all the (hopefully) exciting news from TMS and other emerging fields, I think the actual numbers of current ongoing operations will start reflecting what a different firm ECA is today relative to a year ago. GLTA, do your own D&D.

      Sentiment: Strong Buy

 
ECA
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