Encana Corp (USA)(NYSE:ECA) reported that it closed the sales of Gordondale assets to Birch cliff Energy Ltd. The company’s subsidiary unit, Encana Oil & Gas (USA) Inc., also closed the sale of its Denver Julesburg Basin assets to Crestone Peak Resources. As stated earlier, the company plans to use a part of the cash proceeds to further reduce debt. Additionally, funds of $200 million can be deployed to finance the estimated increase in capex for 2016.
The market impact
With the recent surge in oil prices, the shares of Encana Corporation become attractive among investors. Since February, ECA share price gained more than 150%. In addition, 2Q2016 financial report is attracting significant attention from both the investors and the media, which again creates optimism around ECA stock. The biggest reason behind all this interest is the fact that company is in the midst of increasing its capex and production even in the prevailing uncertain environment.
The performance
The quarterly performance of Encana may have been given some green indications for the oil industry overall, but in respect to the firm’s own profile, the positive signals were muted. As per the latest update, the transportation, operating and processing costs are estimated at $100 million on a yearly basis, and it may drift even lower next year.
Completion costs and capital efficiency in drilling continued to miss the company’s guidance. With the cost decline and particularly with the better oil pricing for 2Q2016 as compared to the previous quarter, both operating margins and cash flow showed growth, although the financial report still had earnings loss of around $1.06 billion. An income tax recovery helped the firm to reduce the reported net loss to $601 million.
Encana reported that 2016 production can come in between 340,000-360,000 boe/d compared to average production of 405,900 boe/d in 2015. Natural gas production is likely to be around 65% for FY2016.
