NEW YORK (TheStreet) -- Shares of Encana Corp. (ECA) are up 4.25% to $23.54 after the company announced it would pay $3.1 billion to purchase the Eagle Ford Shale assets from Freeport-McMoRan Copper & Gold Inc. (FCX).
The Eagle Ford assets include all of FM O&G's interests on approximately 45,500 net acres with estimated net proved reserves totaling 59 million barrels of oil equivalents (BOE) and estimated net proved and probable reserves of 69 million BOE at year-end 2013.
TheStreet Ratings team rates ENCANA CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ENCANA CORP (ECA) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 43.71% is the gross profit margin for ENCANA CORP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -17.63% is in-line with the industry average.
- ENCANA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ENCANA CORP turned its bottom line around by earning $0.31 versus -$3.79 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 213.8% when compared to the same quarter one year ago, falling from -$80.00 million to -$251.00 million.
- Net operating cash flow has decreased to $462.00 million or 35.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: ECA Ratings Report