Encana Corp., the Canadian natural gas producer switching its focus to oil, fell to a 13-year low after second-quarter earnings missed analysts’ estimates.
Encana slid 9.8 percent to C$10.12 at 1:48 p.m. in Toronto, after earlier dropping 11 percent to the lowest since July 2002. The company said it eliminated about 200 jobs in the past month because of the plunge in the price of crude, which slipped back into a bear market Thursday.
The additional cuts to employment signal the worst isn’t over for energy workers in a market slump that has U.S. crude trading at less than half its 2014 high. Encana’s stock has come under more pressure than its peers because investors have been skeptical that the company will meet production targets, according to GMP Securities LP.
“We believe investors will be disappointed with the results,” Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, wrote in a note Friday. Encana’s full-year production outlook in the Permian looks unachievable, he said.
Excluding one-time items, the per-share operating loss of 20 cents was more than the 13-cent average loss forecast by 17 analysts’ estimates compiled by Bloomberg. The net loss was $1.6 billion, or $1.91 per share. Production averaged 389,000 equivalent barrels of oil a day, compared with the 408,740 average of nine analysts’ estimates.
“We continue to reinforce that we expect to deliver on our guidance,” Chief Executive Officer Doug Suttles said on a call with reporters Friday. Production growth from oil is expected to ramp up in the second half of the year with wells coming online in the Permian and Eagle Ford areas, he said.
Encana is spending about $200 million, or 10 percent of its 2015 budget, on vertical drilling to hold land in the Permian after its purchase of Athlon Energy Inc. last year, Suttles said. The amount spent on drilling to maintain land is expected to fall in 2016.
The company has eliminated a total of 1,400 jobs, or about one-third of its workforce, since announcing a new strategy in late 2013, Suttles said.
Shares of the company are down 37 percent this year in Toronto, compared with a 16 percent decline for the Standard & Poor’s/TSX Energy Index.