NEW YORK (TheStreet) -- Shares of Encana (ECA) are soaring, up 7.92% to $12.54 on heavy trading volume on Tuesday afternoon, following the company's announcement that it plans to increase spending in 2015, despite lowering its forecast for oil prices and cash flow, Bloomberg reports.
The company said capital investment for next year will be in a range of $2.7 billion to $2.9 billion, higher than this year's $2.5 billion to $2.6 billion, Bloomberg added.
The move comes as other oil producers cut back on spending as oil prices reach five-year lows.
Encana lowered its forecast for oil, saying it expects WTI crude to average $70 per barrel in 2015, lower than the $95 forecast issued last month, Bloomberg noted.
The company also revealed that its total cash flow is expected to fall to a range between $2.5 billion to $2.7 billion in 2015 from a forecast of between $3.2 billion to $3.3 billion in 2014.
Canada-based Encana is a North American energy producer with other operations including the transportation and marketing of natural gas, oil and natural gas liquids.
About 11.57 million shares of Encana have traded hands as of 3:10 p.m. today, compared to its average daily trading volume of about 7.07 million shares.
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