Encana (ECA) Q1 Loss Wider than Expected, Revenues Miss

Calgary, Alberta-based Encana Corp. ECA reported wider-than-expected first-quarter 2016 loss on lower natural gas volumes. The exploration and production company reported operating loss per share of 15 cents, wider than the Zacks Consensus Estimate of an operating loss of 11 cents per share. The bottom line also deteriorated as compared with the year-ago quarter earnings of 3 cents per share.

Quarterly revenues (net of royalties) came in at $753 million, below the Zacks Consensus Estimate of $892.17 million. Moreover, the top line plunged 39.7% from the prior-year figure of $1,249 million. Lower natural gas volumes and weak oil and gas prices hampered results.

Production and Prices

In the first quarter, natural gas production declined 18% year over year to 1,516 million cubic feet per day (MMcf/d). Encana's realized natural gas prices were $2.18 per thousand cubic feet, lower than the year-ago quarter level of $4.78.

The company's oil and liquids production climbed 8% year over year to 130,800 barrels per day. Encana sold liquids at $33.09 per barrel, down from $37.83 per barrel during first-quarter 2015.

Operating Expenses

Encana reported operating costs of $166 million for the reported quarter, 4% lower than the year-ago quarter level.

Cash Flows

Encana generated cash flows from operations of $157 million as against $482 million in the first quarter of 2015.

Capital Spending and Balance Sheet

Encana's capital investments during the quarter were $359 million. As of Mar 31, 2016, cash and cash equivalent was $222 million and long-term debt was $5,402 million. This represents a debt-to-capitalization ratio of 49.5%.

Guidance and Outlook

Encana has capital expenditure budget between $900 million and $1 billion for 2016.

For 2016, the company expects total natural gas output in the 1,300–1,400 MMcf/d band. Liquid production is anticipated to range between 120 MBbl/d and 130 MBbl/d. Total production is expected to range between 340 MBOE/d and 360 MBOE/d.

Encana is on track to deliver $550 million in annualized cost savings.

Zacks Rank and Key Stock Picks

Currently, Encana carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the energy sector are Bonanza Creek Energy, Inc. BCEI, Evolution Petroleum Corp. EPM and EXCO Resources Inc. XCO. Each of these stocks holds a Zacks Rank #2 (Buy).

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