Todd Koral
Kudos to Encana Corp. for painting the best picture of its quarterly earnings possible.
For any unsuspecting investor, it would be easy to believe, reading Encana's press release, that natural gas liquids such as ethane and propane are quickly becoming the company's saviour in a market with such depressed prices for regular natural gas.
Encana does everything it can to point out that its oil and natural gas liquids production climbed 6,000 barrels per day to 30,000 barrels per day last quarter, and that its "solid liquids growth" is "building momentum for 2013."
But the company conveniently buries the price they are now paid for these liquids. Last quarter, Encana's realized liquids price was $72.17 per barrel. That's down 12 per cent from the year prior.
So while production is up, the price decrease offsets most of the rise. Daily revenue from liquids has barely climbed.
This problem isn't exclusive to Encana. As the Globe's Carrie Tait wrote last month, "the party didn't last long" for companies who set out to diversify their natural gas production. Liquids prices are dropping across the board, and it was only a matter of time before it showed up in quarterly earnings.
For its part, Encana said in the past that its strategy is long-term, and management is prepared to ride the ups and downs in the liquids market. But that doesn't offer much solace for investors right now.
Tim Kiladze