Yahoo Finance How the Fall in Natural Gas Prices Affected Encana’s Earnings
All You Need to Know about Energy Producer Encana
Encana’s 1Q16 revenue
For 1Q16, Encana reported adjusted revenue of ~$753 million, slightly lower than Wall Street analysts’ consensus estimate of ~$755 million. Encana’s 1Q16 revenue was ~40% lower than its 1Q15 revenue of ~$1.3 billion. Even when compared sequentially with 4Q15, Encana’s 1Q16 revenue was ~27% lower.
Encana’s 1Q16 EBITDA
For 1Q16, Encana reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of ~$216 million, ~8% lower than Wall Street analysts’ consensus estimate of ~$234 million.
Encana’s 1Q16 adjusted EBITDA was ~66% lower than its 1Q15 adjusted EBITDA of ~$632 million. Even when compared sequentially with 4Q15, Encana’s 1Q16 adjusted EBITDA was ~56% lower.
Encana’s EBITDA and natural gas prices
The lower-for-longer trend in natural gas prices over the last two years has not only seen the values of natural gas and Encana’s stock fall by ~72% and ~87%, respectively, but also taken its toll on Encana’s earnings.
As seen in the above chart, in 1Q14, Encana’s adjusted EBITDA was ~$1.2 billion when natural gas prices averaged $4.72 per MMBtu (million British thermal units). However, as the natural gas downtrend progressed, Encana’s EBITDA was hit due to lower realized prices.
In 1Q16, Encana’s adjusted EBITDA was ~82% lower than it was in 1Q14. This was the direct result of an ~83% fall in average natural gas prices during the same period.
For 2Q16, Wall Street analysts estimate that Encana’s adjusted EBITDA will be ~$254 million, ~45% lower than it was in 2Q15.
Other upstream players
Due to the steep downward trend in energy prices, S&P 500 (SPY) upstream companies Devon Energy (DVN), Marathon Oil (MRO), and ConocoPhillips (COP) have reported year-over-year falls in their 1Q16 adjusted revenues of ~35%, ~52%, and ~37%, respectively.
In this series. . .
Having analyzed Encana’s 1Q16 earnings performance, throughout this series, we’ll study various events that have affected ECA’s stock. We’ll also study Encana’s fundamentals, including its production, production mix, hedges, cash flows, debt, and valuation based on its 1Q16 earnings.
We’ll also compare ECA with its peers to see where it stands. Finally, we’ll take a look at the key drivers of ECA’s stock price.
Let’s start with key takeaways from Encana’s 1Q16 earnings call.
Browse this series on Market Realist:
