Calgary, Alberta-based Encana Corporation (ECA) reported weaker-than-expected fourth-quarter 2014 earnings owing to lower natural gas volumes and reduced commodity realizations.
The natural gas exploration and production company announced operating earnings per share of 5 cents, substantially below the Zacks Consensus Estimate of 20 cents and the year-ago level of 31 cents.
However, quarterly revenues (net of royalties) came in at $2,254 million, surging 58.4% from the prior-year figure of $1,423 million. Moreover, the top line surpassed our expectation of $1,602 million.
For 2014, operating earnings per share came at $1.35, substantially higher than the 2013 level of $1.09 but below the Zacks Consensus Estimate of $1.59.
Full-year revenues (net of royalties) of $8,019 million increased about 37% from $5,858 million recorded in 2013.
Production & Prices
In the fourth quarter, natural gas production declined over 32% year over year to 1,861 million cubic feet per day. Encana's realized natural gas prices were $4.16 per thousand cubic feet, lower than the year-ago quarter level of $4.34.
The company's oil and liquids production climbed 61% year over year to 1,06,400 barrels per day, aided by a significant improvement in output from the Eagle Ford and Permian shale plays. Encana sold oil at $66.40 per barrel, down marginally from $67.01 per barrel during fourth-quarter 2013.
Operating Expenses
Encana reported operating cost of $178 million for this quarter, 19.5% less than the year-ago quarter.
Cash Flows
Encana generated cash flows from operations of $377 million or 51 cents per share against $677 million or 91 cents in the fourth quarter of 2013.
Capital Spending and Balance Sheet
Encana's capital investments during the quarter were $857 million. As of Dec 31, 2014, cash on hand was $338 million and long-term debt was $7,340 million, representing a debt-to-capitalization ratio of 43%.
Guidance
Encana lowered its 2015 capital investment guidance to $2–$2.2 billion from the previous projection of $2.7–$2.9 billion. Over 80% of the capex will likely be focused on the company’s four key assets – Permian, Eagle Ford, Montney and Duvernay.
The company expects full-year cash flow in the range of $1.4–$1.6 billion.
Zacks Rank
Encana currently carries a Zacks Rank #4 (Sell).
Better-ranked players from the industry include Golar LNG Partners LP (GMLP), Valero Energy Partners LP (VLP) and Western Gas Equity Partners, LP (WGP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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