Stock gains despite disappointing earnings
Last Updated: Thursday, February 10, 2011 | 11:48 AM ET Comments1Recommend0
CBC News
Shares in Calgary-based Encana Corp. rose six per cent Thursday, in the first trading after the company announced a $5.4 billion joint venture with state-owned PetroChina.
Its stock gained $1.82 to trade at $32.47 on the Toronto Stock Exchange late in the morning.
Encana 3-month chart The deal calls for PetroChina to take a half interest in Encana's Cutbank Ridge shale natural gas properties in northern B.C. and Alberta.
Raymond James analyst Andrew Bradford said the fact PetroChina is making such a major investment when natural gas prices are low suggests it expects Canada will eventually export gas from the west coast, beginning with a terminal proposed for Kitimat, B.C.
Unlike oil, North American natural gas is not a globally priced commodity and trades largely only within the continent.
"We think it's fair to assume that PetroChina's decision was based on some strategic premises," Bradford said in a commentary.
"We suspect that recent progress at the Kitimat (Liquefied Natural Gas) project … was a likely enabling factor in this transaction, and as such, it could have implications for future oilfield activity in Western Canada."
The deal also "puts a lot of cash in Encana's jeans to go and spend on development wherever it likes," he said.
Accounting rules require companies to recognize losses on hedging contracts at the time of reporting, even if those losses haven't been realized and will change before expiration.
Operating income was $68 million, down from $98 million a year earlier and below expectations.
Operating earnings were nine cents per share, below analyst estimates of 19 cents.
Revenue after paying royalties was $1.4 billion, down from $1.8 billion a year earlier as market prices for natural gas plunged due to a glut in supply.
Its stock gained $1.82 to trade at $32.47 on the Toronto Stock Exchange late in the morning.
Encana 3-month chart The deal calls for PetroChina to take a half interest in Encana's Cutbank Ridge shale natural gas properties in northern B.C. and Alberta.Raymond James analyst Andrew Bradford said the fact PetroChina is making such a major investment when natural gas prices are low suggests it expects Canada will eventually export gas from the west coast, beginning with a terminal proposed for Kitimat, B.C.
Unlike oil, North American natural gas is not a globally priced commodity and trades largely only within the continent.
"We think it's fair to assume that PetroChina's decision was based on some strategic premises," Bradford said in a commentary.
"We suspect that recent progress at the Kitimat (Liquefied Natural Gas) project … was a likely enabling factor in this transaction, and as such, it could have implications for future oilfield activity in Western Canada."
The deal also "puts a lot of cash in Encana's jeans to go and spend on development wherever it likes," he said.
Reports net loss
The rise in the shares came despite the company reporting a $42-million net loss for the fourth quarter, including $269 million in paper losses on hedging, about double the loss on hedges from a year earlier.Accounting rules require companies to recognize losses on hedging contracts at the time of reporting, even if those losses haven't been realized and will change before expiration.
Operating income was $68 million, down from $98 million a year earlier and below expectations.
Operating earnings were nine cents per share, below analyst estimates of 19 cents.
Revenue after paying royalties was $1.4 billion, down from $1.8 billion a year earlier as market prices for natural gas plunged due to a glut in supply.
Read more: http://www.cbc.ca/money/story/2011/02/10/encana-shares-rise.html#ixzz1DZyE5Iab
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