Encana Corp., Canada’s largest natural gas producer, reported first-quarter results that exceeded analysts’ estimates on higher-than-expected liquids production and pricing.
Per-share profit, excluding income tax adjustments and losses from hedging and foreign currencies, was 24 cents, beating the 7-cent average of 18 estimates compiled by Bloomberg. The Calgary-based company, which has four buy, 18 hold and five sell recommendations from analysts, fell 1.7 percent to C$18.96 at the close in Toronto.
The results were “positive,” Phil Skolnick, a New York-based analyst at Canaccord Genuity Corp., said in a note today. The company’s decision to add contracts to lock in gas prices in 2014 has reduced its exposure to potential additional upsides in the market, he said.
Encana sells some of its output forward to protect itself from falling prices. U.S. gas averaged $3.478 a million British thermal units in the quarter, 39 percent more than a year earlier as producers reduced drilling and demand was pushed higher by cold temperatures. The futures recovered from a decade-low last April on the New York Mercantile Exchange.
Encana had hedged about 1.52 billion cubic feet a day of expected April-to-December output as of March 31, locking in prices at $4.39 per thousand cubic feet. It hedged 1.5 billion cubic feet a day of 2014 production at $4.19 and 825 million cubic feet a day of 2015 output at $4.37, today’s filing shows.
The company reported a 48 percent increase in oil and natural gas liquids volumes, with average production rising to 43,500 barrels a day in the first quarter, from 29,500 barrels last year. Average gas volumes fell 12 percent to 2.88 billion cubic feet a day, from 3.27 billion cubic feet.
The results were also helped by lower-than-expected depreciation, depletion and amortization expenses and a recovery of cash taxes, Lanny Pendill, a St. Louis-based analyst at Edward Jones, said in a phone interview.
Quarterly sales fell 41 percent to $1.06 billion from $1.8 billion a year earlier. The company’s net loss was $431 million, or 59 cents a share, compared with net income of $12 million, or 2 cents, a year earlier, Encana said in a statement.
Chief Executive Officer Randall Eresman resigned in January after six years in the role and was replaced by board member Clayton Woitas until a permanent successor could be found. The selection committee has drawn up a short-list of candidates and plans to complete its search by the end of June, Encana said today.