Given the widely reported troubles in the oil and gas space, it likely came as little surprise when Encana reported a fourth-quarter loss of $0.72 per share, down from earnings of $0.27 per share a year ago. Like other players in the space, the Canadian-based oil and gas company announced deep cuts to its capital spending, workforce reductions, and efforts to maintain its liquidity.
One thing the company said it will not do is issue equity to shore up its balance sheet.
"We have no work under way and no plans to issue equity," CEO Doug Suttles said on a call with analysts on Wednesday. "I know that some people have been speculating on this. I would probably stress that that seems to be raw speculation, but there are no plans under way at Encana to issue equity."
While that may be Encana's intent, real life may not play out that way.
"After what happened with Devon Energy (DVN), I don't know how anyone can say they have no plans to issue equity," Real Money's Jim Cramer said.
Last week, Oklahoma-based Devon Energy said during its earnings call that it had no plans to issue equity and touted the strength of its balance sheet and 2016 capital plan. However, hours after the call the company announced that it was going to be raising $1.3 billion in equity to bolster its liquidity position and reduce debt. During the call, management acknowledged that it was still undergoing a credit review by Moody's and said it was "really hard to tell where Moody's is going to shake out."
Like Devon Energy, Encana's credit rating with Standard & Poor's Ratings Services hovers above investment grade but it was downgraded below investment grade by Moody's last week. While companies may have no plans to issue equity, it is possible that they might face pressure to do so to prevent further downgrades.
To be sure, Encana outlined several reasons for the company to be confident about its financial position amid a challenging time. Its revised capital plan ranges between $900 million and $1 billion, representing a 55% decline from 2015. It has no debt coming due before 2019 and it has $4 billion in liquidity, consisting of $271 million in cash and $3.85 billion immediately available under $4.5 billion revolving facilities.
However, fortunes change quickly and recent history among energy companies shows fortunes dissipate quickly.
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