In The News / Portfolio Stock - EnCana Corp.
Merger paying off for EnCana
Scott Haggett
Calgary Herald; With files from The Canadian Press
Friday, February 21, 2003
EnCana Corp. said Thursday its fourth-quarter profit surged as it boosted sales of natural gas and oil as prices jumped and began realizing savings from the oilpatch's largest-ever merger
Calgary-based EnCana, North America's largest independent producer, said it earned $429 million, or 88 cents a share, in the quarter, up from $90 million, or 34 cents, a year earlier.
Sales for the quarter rose to $3.39 billion, up from $944 million in the fourth quarter of 2001. Cash flow, a key measure of the company's ability to pay for new projects and drilling, rose to $1.47 billion, or $3.03 a share, from $386 million. or $1.47.
The year-earlier results come from PanCanadian Energy Corp., which acquired Alberta Energy Co. last April for $19.24 billion in shares and assumed debt.
That merger is now paying off, Gwyn Morgan, the company's chief executive, said.
EnCana should soon realize some $500 million in savings as it profits from economies of scale and cutting overlap.
"We have realized capital savings of more than $250 million already," Morgan told investors and analysts on a conference call. "And we believe that the $250 million in operating costs savings will be fully realized by the end of 2003."
EnCana cut 300 jobs from the two company's combined workforce of 3,900 soon after the merger.
It made further job cuts Thursday, when 90 contract staff at its Halifax office were let go after last week's postponement of the $1.1 billion Deep Panuke gas project offshore Nova Scotia.
EnCana said daily natural gas sales rose to 3.04 billion cubic feet a day in the quarter, up 21 per cent from the pro forma, combined output of the two companies a year earlier. Oil and natural gas liquids production rose 8 per cent to 271,000 barrels a day.
EnCana sold its gas for an average price of $5.11 per thousand cubic feet, a 42 per cent increase from last year, while the average oil price from its operations in Canada, the U.S., North Sea, Ecuador and elsewhere rose 26 per cent to $32.94 a barrel.
The current quarter is expected by analysts to be even more profitable for the company. Oil prices have risen to two-year highs on fears that war with Iraq will disrupt supplies from the Persian Gulf, while a strike in Venezuela disrupted its oil exports.
Natural gas is also near a two-year high, as frigid temperatures in Eastern Canada and the U.S. northeast boost demand while supply is dropping.
"This company generated a lot of cash in the fourth quarter and its only going to get better in (the first quarter)" said Brian Prokop, an analyst at Peters & Co. in Calgary.
The company has also been moving to sell off assets it doesn't consider central to its operations.
Last year it sold off its stake in two major pipeline systems for $1.6 billion. In January it agreed to sell a 10 per cent stake in the Syncrude Canada Ltd. joint venture to Canadian Oil Sands Trust for $1.07 billion and gave the trust an option to purchase its remaining 3.75 per cent share in the oilsands operation for $417 million.
Morgan said the company would use the $3.4 billion in proceeds to fund its $5-billion 2003 capital spending program, pay down debt and buy back shares. However he denied rumours EnCana was poised to acquire rival companies using cash freed up by asset sales.
"We have no need for acquisitions given our strong internal growth," he said. "I don't consider that we have a war chest, I consider that we just happen to have the strongest balance sheet in the sector."
For the year, EnCana's pro forma profit fell to $1.22 billion, or $2.87 a share, from PanCanadian's 2001 profit of $1.29 billion, or $4.90. Sales rose to $10.01 billion from $4.69 billion and cash flow rose to $3.78 billion, or $8.99 share, from $2.26 billion, or $8.81. |
