RE: Encana = gutlessDoubleman, I'm a little reluctant to reply to your post, which I set out below, because I am less than competely knowledgeable about the comments I make below. My comments attempt to summarize those of an analyst that I heard on ROB TV in an interview about Encana and its last set of financials. In particular, you ask the understandable, but I think, cynical question of what might Encana do in bad times, given its performance and its decision to raise the dividend in the last quarter. Your comments are based on the supposition (set out in your quote) that Encana suffered at $45 M U.S. loss and tried to sway shareholders by increasing the dividend. Here is your post:
......................
"I understand your reasoning however IMO this company really dropped the ball with their timing..
"don't be too disappointed over the $45M U.S. 1st Qtr loss because we are going to increase your dividend, we will approve a stock split, and we will sell off some property in Mexico..things will get better"
If management sees fit to do this when resources are at a high, what awaits the investor around the corner when these levels taper off."
..........................
I have to say that after reading the last set of financials, I just couldn't get my head around the notion that Encana, despite the hedging, actually suffered a $45 M U.S. loss in the last quarter. Afterall the prices of oil and gas was pretty darn high during the quarter and Encana had made very good money in previous quarters where the prices of the relevant commodities were significantly less. It took a U.S. analyst who, as I mentioned earlier, appeared on ROB TV, either the morning of the financial release, or perhaps the next day, to clarify things for me. He said Encana made a huge profit in the quarter, that the loss is an accounting entry required by law and that his firm was not in the slightest disappointed with Encana's performance. He elaborated, insofar as I could understant him as follows. If a company hedges at $40 per barrel and the price goes up to $55 per barrel, the company is required to record this as a loss of $15 per barrel. This is certainly how I understood his comments. He went on to say that Encana was making great money, even on its hedging price and that for a company the size of Encana it was very prudent, virtually incumbent on it, to hedge at a price which is highly profitable for part of its production, especially in a market that is as volatile as the current market is. He was very, very high on Encana but predicted a weakening of oil and gas prices over the spring/summer season. Nevertheless, he said Encana was a fabulous company and predicted a one year price of $100 Canadian.
If you or any other reader has a better, and perhaps more accurate understanding of the last set of financials, I'd appreciate correction or clarification.