EnCana Profit Drops 81% on Derivatives ContractsEnCana Profit Drops 81% on Derivatives Contracts (Update2)
By Ian McKinnon
April 22 (Bloomberg) -- EnCana Corp., Canada's largest natural-gas producer, said first-quarter profit fell 81 percent on losses from locking in prices below market rates.
Net income dropped to $93 million, or 12 cents a share, from $497 million, or 64 cents, a year earlier, the Calgary- based company said today in a statement. Revenue after royalties rose 20 percent to $5.34 billion.
Excluding losses of $737 million related to derivatives contracts used to lock in prices and $215 million on currency exchanges, EnCana earned $1.39 a share. The company was expected to earn $1.27 a share, the average of 8 analyst estimates compiled by Bloomberg.
A loss of $423 million on derivatives contracts also reduced EnCana's profit in the first quarter of 2007.
First-quarter gas production rose 9.8 percent to 3.73 billion cubic feet, EnCana said. Gas futures in New York gained 22 percent in the quarter as cold weather in North America reduced inventories.
The company said its gas, after hedging, sold for $7.75 per thousand cubic feet, a gain of 23 percent. The fuel is forecast to account for about 83 percent of daily output this year, according to the company's Web site.
Oil and gas-liquids production rose 5.1 percent to about 137,300 barrels a day and sold for $74.10 a barrel, up 89 percent from a year earlier.
A 17 percent rise in Canada's currency against the dollar contributed to operating costs increasing 21 percent to the equivalent of $1.15 per thousand cubic feet, the company said.
EnCana rose 32 cents to C$87 at 7:42 a.m. in pre-market trading on the Toronto Stock Exchange. The stock, which has 13 buy recommendations from analysts, 12 holds and one sell, has risen 44 percent in the past year.
(EnCana will hold an earnings conference call at 10 a.m. New York time, accessible on the company's Web site at https://www.encana.com.)
To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.
Last Updated: April 22, 2008 08:08 EDT