Oil explorer's earnings hit a gusher--EnCana profits jump eight-fold due to high prices--$2.7 billion from sale of pipeline assets also helps

May. 9, 2003. 01:00 AM JEFFREY JONES <a href=www.thestar.com>Toronto Star-REUTERS NEWS AGENCY

CALGARY—EnCana Corp., North America's biggest oil explorer, says first-quarter profit surged nearly eight-fold due to sky-high oil and gas prices and hefty gains from the sale of pipeline assets.

"Strong growth in sales of conventional oil and natural gas combined with robust commodity prices produced exceptionally strong financial results," EnCana's president and CEO Gwyn Morgan said yesterday.

"With the outlook for a continuation of very strong gas pricing fundamentals, EnCana is extremely well positioned to capitalize on a production mix that is leveraged two-thirds to North American natural gas."

EnCana, created a year ago in the Canadian oil industry's largest merger, has garnered $2.7 billion in proceeds from the sale of pipelines and its stake in the Syncrude Canada oil sands venture, and investors are awaiting details on how the war chest will be used.

The company likely is sizing up acquisitions outside its biggest operating regions in Canada and the U.S. Rockies, Peters & Co. Ltd. analyst Brian Prokop said.

"I think they need to get some international assets, and safe international assets," Prokop said. "There's a lot of stuff coming up in the North Sea and they have a significant project there — that's a safe way to go."

EnCana, which also operates in Ecuador and explores in other regions, has already cut debt to well under one year's worth of cash flow and has bought back some stock.

In the quarter, it earned $1.3 billion, or $2.57 a share, up from a year-earlier $163 million, or 34 cents.

The prior-year figures are presented as if PanCanadian Energy's takeover of Alberta Energy, completed in April, 2002, to create EnCana, took place at the start of that year.

The most recent profit included an after-tax gain of $263 million from the sale of the Express and Cold Lake, Alberta, pipelines and another $193 million gain from the impact of the strong Canadian currency on U.S.-dollar denominated debt.

Excluding the one-time items, earnings were $790 million, or $1.63 a share, beating an average $1.54 a share forecast by analysts polled by Thomson First Call.

Cash flow, a glimpse into an oil company's ability to fund projects, more than doubled to $1.8 billion, or $3.80 a share, from $779 million, or $1.61 a share.

EnCana joined a long list of oil companies that have pumped out huge profits in the quarter after crude prices jumped 55 per cent as markets feared supply disruptions before the U.S.-led war in Iraq and during a protracted strike in Venezuela that crippled exports from the OPEC member.

As one of North America's biggest natural gas producers, EnCana also was buoyed by prices for that commodity, which more than doubled due to a cold winter and depleting inventories.

First-quarter conventional oil and gas sales increased 10 per cent, averaging the equivalent of 735,836 barrels of oil a day.

Of that, natural gas sales rose 11 per cent to more than 3 billion cubic feet a day.