Encana posts $1.24B US quarterly loss
Loss linked to low natural gas prices
Encana Corp. had a $1.24-billion US net loss in the third quarter, primarily due to the impact of lower natural gas prices over the past year, but says it's still on track to meet its financial guidance for the full year.
Most of the quarterly loss was attributed to a non-cash impairment charge that the Calgary-based company says doesn't affect its operating earnings or cash flow — although they were down sharply from last year.
Encana's operating earnings totalled $263 million or 36 cents per share in the quarter. That was down from $389 million or 53 cents per share in operating earnings in the comparable period of 2011.
Encana's cash flow fell to $913 million or $1.24 per share — down from nearly $1.2 billion or $1.60 per share a year earlier.
The company's stock closed down 70 cents, or 3.1 per cent, at $21.86 on the Toronto Stock Exchange.
Encana and other producers have been grappling with a North American oversupply of natural gas and limited opportunities to export it to other regions — particularly the Asia-Pacific region.
Among other things, the Canadian producers have formed partnerships with foreign companies that help pay for the cost of drilling and development in return for minority ownership of the producing assets and a share of the output.
There's also been a shift to extracting natural gas liquids, which currently command a higher market price that dry gas.
Encana said Wednesday that its oil and natural gas liquids production average more than 30,000 barrels per day, up 6,000 from a year earlier.
Average natural gas production volumes were 2.9 billion cubic feet per day, were down about 460 million cubic feet per day — primarily due to voluntary capacity reductions.
"The strong quarter-over-quarter growth in our oil and NGLs volumes is the result of a focused effort by our teams to accelerate the development of our oil and liquids-rich plays," Encana president and CEO Randy Eresman said in a statement.
"We expect to see this trend continue as we progress our plans to diversify our commodity portfolio and achieve a more balanced stream of future cash flows."
Analysts were on average expecting adjusted earnings of 26 cents per share, net earnings of 21 cents per share and revenues of $1.47 billion, according to estimates compiled by Thomson Reuters.
Earlier this month, U.S. energy giant ExxonMobil Corp. announced plans to acquire Calgary based Celtic Exploration Ltd. for $3.1 billion.
Like Encana, Celtic is focused on extracting natural gas from shale and is active in the Montney and Duvernay regions of Alberta.
Encana focused on gas
Since it spun off its oil and refinery assets into Cenovus Energy Inc. in 2009, Encana has been focused exclusively on developing natural gas.
With prices of that commodity remaining dismally low, Encana's pure-play status has been particularly challenging.
Encana has been looking at partnership deals, drilling for more lucrative natural gas liquids, tapping export markets and asset sales in order to get by in the gloomy market.
It's also a partner in a project to build a liquefied natural gas export terminal in the northern West Coast port of Kitimat, B.C. U.S. firms Apache Corp. and EOG Resources are also involved.
At Kitimat, natural gas piped in from northeastern B.C. will be cooled into a liquid and loaded onto tankers for export to energy-hungry Asian markets. Natural gas fetches a drastically higher price overseas than it does in the oversupplied North American market. Shipments are targeted to begin in 2015.
Encana launched an internal probe in June after allegations surfaced that it and a U.S. rival colluded to suppress land prices in Michigan.
In September, Encana said its board of directors found no evidence the company and Chesapeake Energy discussed ways to avoid bidding against one another for land leases 2010.
Probes by the U.S. Department of Justice and Michigan's attorney general are ongoing and Encana says it's co-operating.