EnCana Corporation (ECA) — Canada’s largest natural gas producer — reported strong first quarter results, helped by higher-than-expected volumes. Operating earnings per share, stripping out one-time items, came in at 56 cents, way ahead of the Zacks Consensus Estimate of 31 cents.

Year-Over-Year Comparisons Down

In the year-ago period, EnCana earned 72 cents. Revenues (net of royalties) were down 3.7% year-over-year to $3.5 billion. The negative comparisons were on account of low natural gas prices.

Production Summary

Production was up approximately 1.9% year-over-year to 3,265 million cubic feet equivalent per day (MMcfe/d), primarily due to a 3.2% rise in natural gas production (from 3,027 MMcf/d in the first quarter of 2009 to 3,123 MMcf/d). Volumes from key resource plays reached 2,705 MMcfe/d, up 2.4% year-over-year.

Gas volumes benefited from drilling and operational successes in Piceance, East Texas and the Haynesville shale play, as well as restarting production from natural gas wells that were previously shut in or curtailed because of lower natural gas prices. Realized natural gas prices during the quarter were down approximately 15.0% year-over-year to $6.14 per thousand cubic feet (Mcf).

Cash Flows & Drilling Statistics

EnCana generated cash flows from operations of $1.2 billion or $1.57 per share, down from $1.4 billion or $1.85 per share during the March quarter of 2009. The company drilled 448 net wells during the quarter, compared to 483 wells in the prior-year period.

Capital Spending & Balance Sheet
EnCana’s capital investments during the quarter were $1.0 billion (excluding acquisitions and divestitures). As of Mar. 31, 2010, EnCana had cash on hand of $2.0 billion and long-term debt (including current portion) of $7.8 billion, representing a debt-to-capitalization ratio of 30.5%.

Share Repurchase

During the quarter, EnCana purchased 9.9 million of its own shares at an average price of $32.36, or about $320 million.


The company said that it expects full-year 2010 production to be 3,300 MMcfe/d, while capital spending is likely to be $4.5 billion. EnCana also intends to divest $500 million of non-core assets and buy back about the same amount of shares this year.
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