Canaccord
EnCana* (ECA : TSX : $18.97), Net Change: -0.32, % Change: -1.66%, Volume: 3,187,743
If History Is To Repeat Itself. EnCana reported Q1/13 operating results on Tuesday. Versus consensus, the company had a significant beat on EPS and also a slight beat on CFPS. Canaccord Genuity Oil & Gas Analyst Phil Skolnick was estimating Q1/13 EPS/CFPS of US$0.10/US$0.71 and production of 3.11 Bcfe/d (92% natural gas). These compare to the Bloomberg consensus averages of US$0.07/US$0.74 and 3.16 Bcfe/d, respectively. ECA Q1 EPS/CFPS came in at $0.24/$0.79; and production averaged 3,138 MMcfe/d, with the oil & liquids component averaging 43.5 MBbl/d (vs. Skolnick’s 41 MBbl/d estimate) and the natural gas component averaging 2,877 MMcf/d (vs. Skolnick’s 2,866 MMcf/d estimate). ECA increased its 2014 hedge position to 1,498 MMcf/d at an average NYMEX fixed price of $4.19 from the previous 750 MMcf/d at an average $4.22/Mcf price. As a result, the company now has roughly 50% of its 2014E natural gas production hedged, thus further removing any torque to further natural gas price upside potential. While Canaccord Genuity remains bullish on natural gas prices (with the expectation that NYMEX averages $5.25/Mcf next year), ECA has historically at times been a very smart "hedger"; and if history is to repeat itself, then it could be a sign that there is a lack of any further upside to natural gas prices. Other notable items: 1) ECA provided no update on its continuing JV/asset sale process; 2) The CEO search is expected to be completed by the end of June. The company is interviewing a short list of both internal and external candidates; 3) ECA is seeing some momentum in its oil and liquids plays. Specifically, in the Duvernay, it started production from a liquids rich well that tested at a restricted 30-day rate of 1.4 MBbl/d and 4 MMcf/d; in the Peace River Arch Play, it completed a six well pad at Gordondale producing 7 MBbl/d of combined oil production during initial testing; also in Peace River, a three well pad was tested in the Pipestone area that flowed at 1 MBbl/d of condensate; and finally the company has deemed commerciality in the San Juan Basin, with production expected to average 8.7 MBbl/d in 2013. In total, ECA sees its oil and liquids production exiting the year at 70-75 MBbl/d. This compares to Skolnick’s average 2014 oil and liquids production forecast for ECA of ~86 MBbl/d; and 4) No changes were made to 2013 guidance.