Saturday, September 29, 2007

EnCana Cash Flow up 55% to over $2.5B at June 2007

A quick check on Google Finance shows EnCana (ECA) reported in the 2ndQtr2007 it had a cash flow of $2.5B or $3.33 per share up 55%. At the same time it was enjoying a Net Profit Margin or 25.76%, an Operating Margin of 32.25% and an Average Return on Equity of 32.85% Very impressive. Third Qtr results are scheduled to be released on October 25. I can't wait how much more they are hurting that they can't take a mere 8% royalty increase on that 25.76% NET PROFIT MARGIN.

EnCana saber rattled this past week about reducing investment in Alberta by $1B in 2008 because of the “Our Fair Share” Royalty Review Report. Ironically the management at EnCana was telling a different story at a Peters and Co investor’s conference in Toronto a week earlier. Here is an EnCana quote from Mr. Graham president of EnCana's Foothills division in a September 11, 2007 National Post story:
"Our budget will probably be very similar to what it was in 2007, maybe a little bit higher…" "Costs have been moving down in Canada, probably flat or even better than that,"…"The rig fleet is probably only 40% busy today. We are happy to see where costs are going."

Now I wonder how EnCana can square that circle of impressive performance in the face of low gas prices and higher operating costs already in place and accounted for in their impressive results with the sudden need to cut $1B from their 2008 capital budget a week later. Can this threat be interpreted in any other way except to say it is posturing and intimidation.

The Editorial Board of the Calgary Herald from a city that is smack dab in the eye of the Alberta economic storm, is the voice or reason and responsibility today too. Slowing down Alberta a bit is a necessity and the marketplace is doing it but that is no reason not to increase the citizens fair share of their resource revenues now too.

Could it be the drilling contractors woes outlined in their recent news release on the “Our Fair Share Royalty Review” are self induced and market driven and not really about possible government policy at all?

For the record it was someone at Peters and Co. who sent an email to their client’s in response to the “Our Fair Share Royalty Review” suggesting Alberta was like Venezuela. A comment that was kindly considered as “over the top.”