Encana Corp. (symbol ECA on Toronto) earned $665 million, or $0.90 a share, in 2010 (all amounts except share price in U.S. dollars).
The commodity stock’s latest earnings were down 62.4% from its 2009 earnings of $1.8 billion, or $2.35 per share. Cash flow per share fell to $6.00 from $6.68 in 2009. (Note: The 2009 figures assume that the breakup of the old EnCana Corp. into the new Encana and Cenovus Energy took place at the start of 2009 instead of December 1, 2009.)
Depressed natural gas prices were the main reason for lower earnings and cash flow. (Natural gas accounts for more than 95% of the commodity stock’s average daily production.) Encana’s average selling price for gas fell 22.0 % in 2010, to $5.48 per thousand cubic feet from $7.03 in 2009. The price decline offset a 12.0 % rise in the company’s total production.
Natural-gas producers are using new techniques, such as horizontal drilling, to extract more natural gas. That is increasing gas supplies, and keeping prices low.
Encana announced on February 10, 2011, that it will sell half of a British Columbia shale gas project to PetroChina for $5.4 billion (Canadian).
The company’s shares now trade at 5.5 times its projected 2011 cash flow of $5.73 a share.
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