After delivering quarterly earnings that fell just below analyst estimates, shares of Encana (ECA) plunged more than 10% after Tuesday's market open.
The Canadian-based oil and gas company earned a spot on Real Money's Stressed Out list earlier this year due to its debt load and a weak outlook for oil and natural gas prices. The trouble in the energy sector was particularly acute in Canada where some energy companies were producing at a loss earlier this year, according to analysis from RBN Energy, an energy analytics and consulting firm.
As for Encana, the company delivered a first-quarter loss of $0.15 a share on revenue of $753 million. The results fell short of analyst targets of a $0.12 loss per share on $754 million in revenue. In the year-ago quarter, Encana reported earnings of $0.03 per share on $1.2 billion in revenue. Despite the miss, the company highlighted its cost-cutting measures in its earnings release.
"Our teams are drilling some of the fastest, highest performing and lowest cost wells in our core four assets and we continue to find greater efficiency in every part of the business," CEO Doug Suttles said in prepared remarks. "We are on track to deliver $550 million of year-over-year cost savings."
In a flash note released just after earnings, an analyst team at BMO Capital Markets viewed the first-quarter results as "slightly negative" but was encouraged by the company's better-than-expected well performance and lower-than-expected drilling and completion costs. BMO maintains an Outperform rating on Encana and a $7.50 price target.
Encana has $5.4 billion in long-term debt, which is rated BBB, or, investment grade, by Standard & Poor's. Its nearest maturity is a $500 million note that comes due in 2019 but much of its debt load comes due after 2030.
The company also executed a debt tender in the first quarter, which allowed it to retire $489 million of longer term notes at a cost of $400 million, reducing its interest expense by $30 million, management said on Tuesday's earnings call. The offer was completed with cash on hand and additional borrowings under its $4.5 billion revolving credit facility, which accounts for much of the $550 million increase in borrowed funds under the facility.
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