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.
4. debt to capitalization of 29% and debt to ebidta of 0.7 times are way BELOW their targets, which are 30-40% 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.