EnCana’s 1st-Quarter Profit Triples on Hedging Gains (Update3)

(Updates gas price in fifth paragraph, share price in final paragraph.)

By Jim Polson

April 21 (Bloomberg) -- EnCana Corp., Canada’s largest natural-gas producer, said first-quarter profit tripled because of gains from hedging fuel prices.

Net income rose to $1.48 billion, or $1.97 a share, from $477 million, or 63 cents, a year earlier, Calgary-based EnCana said today in a statement. The results don’t include EnCana’s oil-production and refining unit, which was spun off as Cenovus Energy Inc. on Nov. 30.

Production rose 1.9 percent from a year earlier to the equivalent of 3.27 billion cubic feet of gas a day, near EnCana’s target for the full year of 3.3 billion cubic feet a day. EnCana said it may curtail output on low prices and affirmed a goal to double production in five years.

“There’s a continued question of how you fund the implied 15 percent growth a year,” Chris Theal, an analyst in Calgary for Macquarie Group Ltd., said in an interview before results were announced. He rates the shares “neutral” and says he owns none. “It’s doable with natural gas at $7 on the Nymex but it’s not doable at $4.”

Benchmark natural-gas prices on the New York Mercantile Exchange fell 2 cents to settle at $3.955 per million British thermal units. The average price this year is $4.815 per million British thermal units.

Per-share profit was 56 cents excluding $912 million of unrealized gains on contracts used to lock in prices in future periods and $147 million in currency gains as the value of the Canadian dollar rose against the U.S. dollar, according to the company. The expectation was 31 cents, the average of 15 analysts’ estimates compiled by Bloomberg.

Sales Fall

Theal said the per-share profit, production, and the price EnCana got for its gas beat his expectations. He’d estimated profit at 31 cents a share, production at 2.97 billion cubic feet per day and said EnCana sold gas for 30 cents more a thousand cubic feet than he’d expected.

Sales fell 3.7 percent to $3.55 billion on lower prices for natural gas. EnCana was paid 15 percent less, or $6.14 per thousand cubic feet on average, for its gas than in last year’s first quarter, according to the statement.

Per-share results benefited from repurchase of 9.9 million shares in the first quarter at an average price of $32.36, or about $320 million, EnCana said. The company reiterated its intent to sell $500 million of assets and buy back about the same amount of shares this year.

Haynesville Shale

EnCana allocated a quarter of this year’s $4.6 billion capital budget for drilling in the Haynesville Shale of Louisiana and Texas, a field it believes will prove to be its largest deposit. Haynesville output rose almost eightfold. The Haynesville holds an estimated 251 trillion cubic feet of gas in shale-rock formations, the U.S. Energy Department estimated last year.

The company reported net income of $962 million, or $1.28 a share, a year ago, before deciding to proceed with the spinoff of Cenovus. Cenovus is scheduled to report first-quarter financial results April 29.

EnCana, which has 11 buy and 13 hold ratings from analysts, fell 3 cents to C$31.74 at 4:10 p.m. in Toronto Stock Exchange composite trading yesterday. The stock has dropped 7 percent this year.

Buck