Encana cuts back amid low gas prices
Calgary-based natural gas giant Encana Corp. announced Wednesday it is trimming its production and cash flow targets and reducing capital spending for the remainder of the year.
The move came as prices for natural gas remain weak. New technology to fracture rock has increased output from gas-bearing formations and caused an oversupply in North America.
Natural gas closed Wednesday at $3.54 US per million BTUs, up three cents.
"During this period of continued low prices, we remain focused on capital discipline and long-term value creation for every Encana share," CEO Randy Eresman said.
The move to cut back came as the company — which reports its financial statements in U.S. dollars — announced a third-quarter profit of $569 million US, or 77 cents a share.
A year earlier, Encana posted a $685-million hedging loss, which drove an overall quarterly net loss of $53 million in the third quarter of 2009.
Encana said it now expects production of 3.315 billion cubic feet of gas equivalent a day, down from the former target of 3.365 billion cubic feet.
Cash flow estimate lowered
Encana also lowered its cash flow estimate to a range of $5.95 US to $6.20 per share for all of 2010, compared with an earlier range of $5.95 to $6.50.
With reduced cash flow, Encana will also reduce capital investment — including in new drilling — by $200 million, to $4.8 billion.
Encana has insisted previously that it would remain aggressive in its production targets despite persistently low gas prices.
Investors will likely welcome Encana's more conservative approach, CIBC World Markets analyst Andrew Potter said in a research note.
"Investors have been concerned about [Encana's] high spending plans in a weak gas price environment, and this should help alleviate those fears," he wrote.
Encana shares closed at $29.13, down $1.03, on the Toronto Stock Exchange Wednesday.
With files from The Canadian Press