| Can Encana Beat Commodity Pricing Woes with Cost Cut? | |
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We issued an updated research report on Encana Corporation ECA on Aug 19, 2015. The company’s cost-reduction initiatives, as evident from its decreasing drilling and completion (D&C) cost, amid volatile market condition impressed us. However, the weak commodity prices still remains an overhang on the company’s future earnings.
The positives and negatives are reflected in Encana’s current Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Encana is one of the largest natural gas companies in North America with a diverse/high quality portfolio of natural gas assets spread over Canada and the U.S. This provides the company with a huge inventory of reserves and a resource base capable of robust production growth.
Moreover, to survive the weak commodity pricing environment, Encana has been focusing on reducing its costs related to operations. During second-quarter 2015, the company’s D&C cost per well in the Eagle Ford was down by 18% from the previous quarter. Most importantly, during the July to December period, Encana is expecting average D&C cost of $5.6 million, which is below the second-quarter figure of $6.2 million per well.
However, being a firm in the upstream industry, Encana’s profits are influenced by commodity price fluctuations. With the company deepening its focus on liquid production, low crude prices could significantly hamper its financials. Also, with natural gas prices remaining weak, we don’t foresee the company earning considerably in the coming months. The weak commodity prices were also reflected in the company’s weaker-than-expected second-quarter 2015 results.
Stocks to Consider
Some better-ranked players in the energy sector are Mitcham Industries Inc. MIND, Seadrill Partners LLC SDLP and Alon USA Energy Inc. ALJ. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ENCANA CORP (ECA): Free Stock Analysis Report ALON USA ENERGY (ALJ): Free Stock Analysis Report SEADRILL PTNRS (SDLP): Free Stock Analysis Report MITCHAM INDS (MIND): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
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Encana Corporation
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EXPLORATION STAGE |
CODE : ECA.TO |
ISIN : CA2925051047 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Encana is a oil and natural gas producing company based in Canada. Encana holds various exploration projects in Canada. Its main exploration property is BUFFALO HILLS in Canada. Encana is listed in Canada and in Germany. Its market capitalisation is CA$ 4.8 billions as of today (US$ 3.7 billions, € 3.3 billions). Its stock quote reached its highest recent level on November 23, 2018 at CA$ 9.99, and its lowest recent point on January 24, 2020 at CA$ 4.96. Encana has 973 120 000 shares outstanding. |