Encana Corporation (TSX: ECA) reported strong second-quarter results recently, outperformed plan and updated 2017 guidance
SmallCapPower | July 26, 2017: Encana Corporation (TSX: ECA) (NYSE: ECA) recently reported outstanding second-quarter results, which has put the Company well ahead in the first year of its five-year plan. Driven by strong oil and condensate growth, an increasingly liquids-weighted portfolio and lower costs, Encana significantly expanded its net earnings. Core asset growth is ahead of schedule and the Company increased its type curves and premium return well inventory. Following the results, shares of Encana rose 1.4% to reach $12.34 on July 21, 2017.
Encana posted net earnings of US$331 million (34 cents per share) in the quarter, compared with a loss of US$601 million (71 cents per share) a year earlier when it took impairment and hedging charges of about $641 million. Encana delivered second-quarter total production of 316,000 BOE/d, including total liquids production of 124,900 bbls/d (80% was oil and condensate). Encana’s second-quarter liquids volumes accounted for ~40% of its total production mix, up from 35% in the first quarter. The Company’s core assets contributed 246,500 BOE/d, representing almost 80% of total production.
Its Balance Sheet continued to strengthen for the third consecutive year, and Encana expects its net debt to adjusted EBITDA ratio to come down to ~2x (currently 2.9x) with total liquidity of over $5 billion by the end of 2017.
Encana also updated its 2017 guidance due to its better-than-expected results. Reflecting its efficiency, the Company is maintaining its original capital investment guidance range while lowering expected costs and raising its 2017 core asset production growth forecast to between 25% and 30% from the more than 20% growth it had forecasted in May.
Encana President & CEO Doug Suttles said, “Our updated guidance reflects our strong performance, efficiency and confidence. We are generating significant momentum and are well positioned for 2018 when we expect to grow within cash flow, even if commodity prices remain at today’s levels.”
On July 20, 2017, the Board of Encana declared a dividend of US$0.015 per share payable on September 29, 2017, to common shareholders of record as of September 15, 2017.
In terms of valuation, Encana currently trades at price to TTM sales of 3.41x, price to book value of 1.84x and forward PE of 16.24x.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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