NEW YORK (TheStreet) -- Encana (ECA) shares are falling ahead of the release of the oil company's first quarter earnings report before the opening bell tomorrow as oil prices slide in trading today following comments from OPEC suggesting that a return to $100 per barrel oil is not feasible in the next 10 years.
Analysts are expecting Encana to report a first quarter net loss of 9 cents per share, a significant drop from the 70 cents per share it reported earning in the year ago period, on revenue of $1.2 billion.
Crude prices have rallied over 40% from its lows in recent weeks as the rise in global supplies have tapered over the past few months.
Analysts at Baker Hughes (BHI) recently noted that while oil rig counts continue to fall to multi-year lows, the pace of the decline has slowed as prices have recovered.
Separately, today OPEC said that it does not expect oil to trade above $100 a barrel anytime within the next decade and sees oil prices hovering around the $76 per barrel range by 2025, according to the Wall Street Journal.
Industry standard Brent crude for June delivery is down 0.63%, or 41 cents, to $64.98 per barrel, while U.S. West Texas crude is down 0.57%, or 34 cents, to $59.05 per barrel in trading today.
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 robust revenue growth, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and 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 37.8%. Since the same quarter one year prior, revenues leaped by 58.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.86 is somewhat weak and could be cause for future problems.
- ECA's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.88%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Net operating cash flow has decreased to $261.00 million or 43.50% when compared to the same quarter last year. Despite a decrease in cash flow of 43.50%, ENCANA CORP is in line with the industry average cash flow growth rate of -51.31%.
- You can view the full analysis from the report here: ECA Ratings Report