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Understanding Encana’s 3Q17 Earnings

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Understanding Encana’s 3Q17 Earnings PART 1 OF 7

Encana’s Lower Profits in 3Q17

Encana’s 3Q17 adjusted net income

Encana (ECA) announced its 3Q17 earnings on November 8, 2017, before the market opened. It reported worse-than-expected profits of ~$24 million. Wall Street analysts were expecting much higher profits of ~$74 million. On a YoY (year-over-year) basis, ECA’s profits fell ~25%. In 3Q16, its profits were ~$32 million. Even on a sequential basis and excluding any one-time items, ECA’s profits fell ~87% compared to ~$180 million in 2Q17.

Encana&#8217;s Lower Profits in 3Q17

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Encana’s 3Q17 reported net income

Encana’s 3Q17 adjusted net income excludes the one-time benefits and charges totaling $270 million. Most of them are related to the gains on divestitures and non-operating foreign exchange gains. Including these one-time items, its reported net income on a GAAP (generally accepted accounting principles) basis was higher at $294 million, or $0.30 per share, in 3Q17 compared to $317 million, or $0.37 per share, in 3Q16.

How Encana’s quarterly net incomes are trending in fiscal 2017

In 1Q17, ECA reported profits of ~$104 million, which was ~243% better than the Wall Street analyst consensus of ~$30 million. On a YoY basis, ECA turned the year-ago loss into profit. In 1Q16, it reported a loss of ~$130 million. On a sequential basis and excluding any one-time items, it reported ~22% higher profits in 1Q17 compared to ~$85 million in 4Q16.

In 2Q17, ECA reported better-than-expected net income of ~$180 million. Wall Street analysts were expecting a lower net income of ~$33 million. On a YoY basis, its profits rose ~102%. In 2Q16, it reported profits of ~$89 million. Even on a sequential basis and excluding any one-time items, its profits rose ~73% compared to ~$104 million in 1Q17.

ECA’s peers ConocoPhillips (COP) and Occidental Petroleum (OXY), which are also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), reported adjusted net incomes of ~$198 million and ~$137 million, respectively, in 3Q17. COP and OXY turned the year-ago losses into profits in 3Q17.

In the next part, we’ll take a look at ECA’s revenues.

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