Cost cutting pays off as Encana Corp posts unexpected profit
Canadian oil and natural gas producer Encana Corp posted a quarterly profit, on an operating basis, as a steep fall in costs helped offset the impact of weak commodity prices.
Encana has responded to the 60 per cent drop in crude oil prices since June 2014 by slashing jobs, cutting spending and selling oil and gas assets.
The efforts seem to be paying off. The company said on Thursday expenses fell to US$600 million, from about US$3.14 billion a year earlier.
The company has also downsized operations to focus on four core North American plays: the Montney and Duvernay in Western Canada, and the Eagle Ford and Permian in the United States.
Encana posted an operating profit of 4 cents per share, compared with the average analyst estimate of a loss of 4 cents, according to Thomson Reuters I/B/E/S.
Revenue fell 25 per cent to US$979 million, but beat analysts’ expectation of US$718.3 million.
Encana’s oil and natural gas liquids production fell nearly 17 per cent to average 117,000 barrels per day in the three months ended Sept.30, while natural gas output declined by about 14 per cent to 1.33 billion cubic feet per day.
The company said on Thursday it expected to limit production decline from its core four assets to about four per cent in the fourth quarter, citing “continued improvements in capital efficiency and strong operational performance.”
Encana, which has cut over US$3.5 billion of debt since 2014-end, said it paid back US$2 billion of debt in the third quarter. The company had long-term debt of about US$4.2 billion as of Sept.30.
The company has sold its Gordondale assets in Alberta to Birchcliff Energy Ltd for CUS$625 million, and its Denver Julesburg basin oil and gas assets in Colorado for US$900 million.
Cash flow fell 32 per cent to US$252 million, from US$371 million.
Encana posted a net profit of US$317 million in the quarter, compared with a loss of US$1.24 billion a year earlier.