EnCana Profit Triples on Higher Output, Hedging Gain

By Joe Carroll

Oct. 23 (Bloomberg) -- EnCana Corp., Canada's largest natural-gas producer, said third-quarter profit more than tripled after output increased and energy prices surged.

Net income climbed to $3.55 billion, or $4.73 a share, from $934 million, or $1.24, a year earlier, the Calgary-based company said today in a statement. Excluding such items as a $2 billion gain in the value of hedging contracts that lock in prices, profit was $1.92 a share, 15 cents higher than the average of 15 analyst estimates compiled by Bloomberg.

EnCana was paid 18 percent more than a year earlier, on average, for gas, and its average oil price jumped 85 percent. Crude-oil futures in New York climbed to a record above $147 a barrel in July, and gas futures traded 44 percent higher than in last year's third quarter. EnCana reported a 6.1 percent gain in production. About 83 percent of the company's output is gas.

``Production was definitely higher than what the expectations were,'' said Richard Wyman, an analyst at Canaccord Adams in Calgary who has a ``buy'' rating on EnCana shares. ``The hedges they had in place helped as well.''

EnCana rose C$4.26, or 8.4 percent, to C$55 in Toronto Stock Exchange trading. Before today, the stock had dropped 25 percent this year.

Chief Executive Officer Randy Eresman is increasing gas output from British Columbia to Louisiana. Last month, EnCana began a $3.6 billion refinery expansion with ConocoPhillips to process heavy crude from Alberta's oil sands. A plan to split the company into separate gas and oil businesses was put on hold last week because of turmoil in financial markets.

Divestitures Delayed

EnCana boosted its 2008 capital budget by $900 million, to $7.4 billion, because the credit crisis will delay asset sales that will help fund gas-field acquisitions in Louisiana and Arkansas, according to the statement.

The company pre-sold about 60 percent of its gas production through October 2009 at an average price of $9.15 per thousand cubic feet.

Third-quarter revenue climbed 92 percent to $10.8 billion, EnCana said. Cash and cash equivalents rose to $622 million, a 12 percent increase from Dec. 31.

EnCana shut wells that pump 50 million cubic feet of daily output in Wyoming this month because of a surfeit of supply in the U.S. Rocky Mountains that triggered a drop in prices there, according to the statement. The idled capacity accounts for 1.3 percent of the company's total gas production.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.