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Encana Posts Net Loss in 1Q15

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Net loss in 1Q15

Encana (ECA) released its earnings results for 1Q15 on May 12. This is an account of its quarterly income and revenues.

Encana’s (ECA) net profits were lower in 1Q15 compared to profits in 1Q14. In 1Q15, it recorded a $1.7 billion net loss as opposed to $116 million in net income a year earlier. The company’s net income margin also slumped to -136.7%, down from 6.1% for the same period last year.

The primary reason Encana witnessed such a huge drop in net profit was a $1.22 billion impairment charge it recorded in 1Q15. Lower crude oil and natural gas price realization also contributed to the decline in profit. The fall in income was partially offset by greater liquid production volumes and a reduction in transportation and processing costs. Read Part 4 of this series to discover how Encana still managed to remain profitable at an operating profit level.

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Revenues decreased

In 1Q15, Encana’s (ECA) net operating revenues dropped 34% to $1.25 billion, down from $1.89 billion recorded in 1Q14. Canadian and US operations respectively recorded a 47% and 17.5% fall in revenues in 1Q15 over the same quarter a year ago.

The company’s market optimization operation also recorded a 43% revenue drop during the same period. Encana’s market optimization function refers to the sale of upstream production to third-party customers.

In comparison, WPX Energy(WPX) revenues decreased 35% in 1Q15 over 1Q14, and Linn Energy (LINE) revenues decreased 50% during the same period. Ultra Petroleum (UPL) recorded a 22% decline in revenues in 1Q15 over the same quarter the previous year.

Ultra Petroleum makes up 1.3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Company background

Encana (ECA) is an independent oil and gas exploration and production company. The company produces oil and gas in resource plays located in the US and Canada:

  • Montney
  • Duvernay
  • DJ Basin
  • San Juan
  • Tuscaloosa Marine
  • Eagle Ford
  • Permian Basin

In the next part of this series, we’ll analyze Encana’s historical performance compared to analyst estimates.

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