BLBG:Encana Posts Profit Below Estimates, Plans Gas Output Reduction
Encana Corp. (ECA), Canada’s biggest natural-gas producer, posted fourth-quarter profit that missed analyst estimates and said it will scale back output to adapt to slumping prices for the fuel.
Operating earnings dropped to 6 cents a share from 7 cents a year earlier, compared with the 10-cent average estimate of analysts surveyed by Bloomberg. A planned cut in gas production will reduce North American supply by as much as 600 million cubic feet a day, the company said in a statement.
Encana, which reported a collaboration with Mitsubishi Corp. earlier today, is bringing in partners and selling assets after gas prices collapsed 74 percent from a 2008 high. The company announced $3.5 billion in asset sales last year and sees investment of $1 billion to $2 billion annually by joint-venture partners, Executive Vice President Eric Marsh said at a Feb. 7 conference in Colorado.
“It is abundantly clear that a continued reduction of drilling activity will be required to restore market balance,” the Calgary-based company said in the statement. “For the industry as a whole, near-term natural-gas prices are at levels below what it costs to add most new production.”
Prices Slide
Average gas prices in New York fell 13 percent to $3.476 per million British thermal units in the fourth quarter from a year earlier. Prices reached a high of $13.577 in 2008. Encana’s 2012 capital investment plan totals $2.9 billion, a decline of about 37 percent from 2011 levels, it said.
Separately, Encana said Tokyo-based Mitsubishi agreed to invest about C$2.9 billion ($2.91 billion) for a 40 percent interest in its Cutbank Ridge Partnership, which holds land in northeastern British Columbia. Mitsubishi will pay C$1.45 billion on closing, expected this month, and will invest C$1.45 billion for a five-year commitment period, a statement shows.
Both statements were released before the start of regular trading in North America. Encana rose 4.3 percent to C$20.15 in Toronto yesterday. The stock has seven “buy,” three “sell” and 17 “hold” ratings from analysts.
To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
