At $48 would be a good time to short. The euphoria will be gone by Monday
"Operating earnings were $948 million, or $1.26 per share - down 18 and 9 percent respectively on a per share basis compared to the first quarter of 2008"
ECA hedged 2/3 of production @ 9.13 to October 2009
2009Q1 Natural Gas prices ECA realized gas price 7.22 NYMEX average prices 4.89
- Cash flow decreased 18 percent per share to $2.59, or $1.9 billion
- Operating earnings were down 9 percent per share to $1.26, or $948 million - Net earnings increased to $1.28 per share, or $962 million, primarily due to an after-tax unrealized mark-to-market hedging gain of $89 million in the first quarter of 2009 compared to an after-tax loss of $737 million in the first quarter of 2008
- Capital investment, excluding acquisitions and divestitures, was down 18 percent to $1.5 billion
- Free cash flow was $436 million, down 19 percent (Free cash flow is defined in Note 1 on page 6)
- EnCana's integrated oil business venture with ConocoPhillips generated $116 million in operating cash flow, comprised of $57 million from the company's Foster Creek and Christina Lake upstream projects, and $59 million from the downstream business. Operating cash flow was down $54 million due largely to lower oil prices
- Realized natural gas prices were down 10 percent to $7.22 per Mcf and realized liquids prices decreased 51 percent to $34.24 per barrel (bbl). These prices include financial hedges - At the end of the quarter, debt to capitalization was 29 percent and debt to adjusted EBITDA was 0.7 times.
The numbers you are referring to are actually exceptional.
1. Cash flow is down 18% but at almost 2 billion is awesome. 2 billion cash flow in a quarter has only been achieved a handful of times by ANY canadian company in the history of the company, mostly by ECA (once by Telllabs in the heady tech bubble days of 1999). And last year was amamzingly different in terms of entire energy sector - it was flying with amazing pricing power - now it is in the pits with abysmal pricing. To be down only 18% from those 2008 Q1 levels is astounding. Nothing less.
2. decrease in drilling capex is in part because costs of drilling wells has decreased - that is a piece of it - production is actually UP
3. hedges are obviously crucial but they are in place for all of Q2 and all of Q3 and 1 month of Q3. By that time, pricing power may have increased and there may be opportunity for additional hedges at acceptable prices. Obviously if nat gas prices stay here forever, all nat gas companies will suffer. But ECA is NOT suffering so far.
4. debt to capitalization of 29% and debt to ebidta of 0.7 times are way BELOW their targets, which are 30-49% and 1.0 to 2.0 times. They have used those targets for years and are BELOW the bottom of their target range for both.