Encana Corporation ECA pleased investors by maintaining its beat streak for earnings in third-quarter 2019 on expanded production volumes in the Permian and Anadarko Basins. This Canadian oil and natural gas producer delivered operating earnings of 15 cents per share, outperforming the Zacks Consensus Estimate of 14 cents.
However, the reported figure was lower than the year-ago bottom line of 17 cents due to modest crude oil price realizations.
Meanwhile, total revenues came in at $1.9 billion, surpassing the Zacks Consensus Estimate of $1.7 million and also increasing from the year-ago level of $1.26 billion.
Recently, the company expressed its intention to redomicile in the United States under the new name, Ovintiv Inc. The transition will take place early next year after which, shares of the company will be dually traded on both the Toronto and New York stock exchanges under the ticker symbol OVV.
Production and Prices
A few years back, natural gas accounted for around 95% of Encana’s output. However, the company successfully repositioned its asset base and transitioned to the more profitable crude over a couple of years. This is evident from its natural gas output in the quarter under review, which contributed to around 45.6% of the total production.
Total third-quarter production (Encana plus Newfield combined) came in at 605,100 barrels of oil equivalent per day (BOE/d) compared with 580,300 BOE/d in the prior-year period. Natural gas production fell marginally year over year to 1,655 million cubic feet per day while liquids production rose 8.4% to 329,200 BOE/d. Production growth from the company’s core assets of Permian, Anadarko and Montney enabled it to deliver impressive year-over-year results.
Encana's realized natural gas production was $2.07 per thousand cubic feet compared with the year-ago level of $2.50. Moreover, realized oil price fell to $55.92 per barrel from $57.05 in the third quarter of 2018.
Costs, Capex and Balance Sheet
Total expenses increased to $1.6 billion from the year-ago figure of $1.1 billion. This rise is primarily attributed to higher depreciation, transportation and operating costs.
Encana’s cash from operating activities in the quarter under review came in at $756 million, down from the year-ago figure of $885 million. The company's capital investments were $566 million, up from $523 million in the year-ago period.
As of Sep 30, Encana had cash and cash equivalents of $138 million, and long-term debt of more than $7 billion. Its debt-to-capitalization ratio was 49.8%.
In the quarter under review, the company completed repurchasing 196.7 million common shares at an average price of $6.35 per share. Investment in the program totalled $1,250 million.
Encana Corporation Price, Consensus and EPS Surprise
Encana Corporation price-consensus-eps-surprise-chart | Encana Corporation Quote
Encana, which completed the acquisition of Newfield Exploration Company in February, maintains its 2019 capital expenditure guidance of $2.7-$2.9 billion.
Encana raised its full-year production guidance, prompted by a consistently strong performance at the Anadarko Basin and the integration of Newfield, which turned out to be exceptionally well.
Owing to better cost management, Encana now expects the metric to be at the lower end of the earlier guided range of $12.75-$13.25 per BOE.
The company is expected to generate significant free cash flow in the fourth quarter.
Zacks Rank & Key Picks
Encana has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Subsea 7 SA, Inc. SUBCY, Phillips 66 PSX and TC Energy TRP, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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