Calgary, Alberta-based Encana Corporation ECA reported weaker-than-expected second-quarter 2015 results on lower natural gas volumes and weak oil and gas prices. Shares of the company fell over 8% following the miss. This marks a 13-year low for the firm.
The exploration and production company reported operating loss per share of 20 cents, wider than the Zacks Consensus Estimate of a loss of 14 cents. It also compared unfavorably with the year-ago quarter earnings of 23 cents per share.
Quarterly revenues (net of royalties) came in at $830 million, which fell nearly 48% from the prior-year figure of $1,588 million. The top line also failed to meet our expectation of $1,156 million.
Production & Prices
In the second quarter, natural gas production declined over 38% year over year to 1,568 million cubic feet per day (Mmcf/d). The decline was primarily due to divestments. Encana's realized natural gas prices were $3.52 per thousand cubic feet, lower than the year-ago quarter level of $4.08.
The company's oil and liquids production surged 87% year over year to 127,300 barrels per day on strong contribution from the Montney, Duvernay, Eagle Ford and Permian shale plays. Encana sold oil at $43.78 per barrel, significantly down from $69.53 per barrel during second-quarter 2014.
Operating Expenses
Encana reported operating cost of $209 million for the reported quarter compared with $178 million in the year-ago quarter.
Cash Flows
Encana generated cash flows from operations of $181 million or 22 cents per share as against $656 million or 89 cents per share in the second quarter of 2014.
Capital Spending and Balance Sheet
Encana's capital investments during the quarter were $743 million. As of Jun 30, 2015, cash on hand was $496 million and long-term debt was $6,112 million, which represents a debt-to-capitalization ratio of 44%.
Guidance
Encana reiterated 2015 capital investment guidance of $2–$2.2 billion. The company also reaffirmed its full-year cash flow in the range of $1.4–$1.6 billion.
For 2015, the company expects total natural gas production in the 1,600–1,700 Mmcf/d range. Liquid production is expected to range between 130 Mbbls/d and 150 Mbbls/d.
Zacks Rank
Encana currently carries a Zacks Rank #3 (Hold).
Some better-ranked players from the broader energy sector are TC PipeLines, LP TCP, Linn Energy, LLC LINE and Cheniere Energy, Inc. LNG. All these stocks sport a Zacks Rank #1 (Strong Buy).
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