NEW YORK (TheStreet) -- Shares of Encana Corp. (ECA) are up 7.92% to $12.54 after the company announced plans to increase spending next year, even as it lowered its forecast for oil prices and cash flow, Bloomberg reports.
Capital investment for 2015 will be $2.7 billion to $2.9 billion, up from this year's $2.5 billion to $2.6 billion, Bloomberg said.
Encana said it is assuming West Texas Intermediate crude oil prices would average $70 a barrel next year, down from a $95 forecast issued last month, according to Bloomberg.
Total cash flow is expected to drop to $2.5 billion to $2.7 billion next year from a forecast of $3.2 billion to $3.3 billion in 2014, the company said.
Crude oil futures hit fresh five-year lows on Tuesday, extending a six-month selloff as slowing Chinese factory activity and weakening emerging-market currencies added to concerns about demand, CNBC reported.
Brent crude was down 3.36% to $59.01 a barrel at 10:04 a.m. in New York. Brent's low of the session was $58.50, a level it has not touched since June, 3, 2009, when it dipped to $58.41.
The five-year low for crude dragged Encana stock down to a 52-week low of $11.44 before it rebounded in early morning trading.
Separately, TheStreet Ratings team rates ENCANA CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ENCANA CORP (ECA) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ECA's very impressive revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues leaped by 64.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENCANA CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for ENCANA CORP is rather high; currently it is at 54.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 122.84% significantly outperformed against the industry average.
- You can view the full analysis from the report here: ECA Ratings Report