A huge profit boost has been experienced by EnCana Corp after its decision to lock in the price of its natural gas production before the recent collapse of energy commodities
A huge profit boost has been experienced by EnCana Corp after its decision to lock in the price of its natural gas production before the recent collapse of energy commodities.
The Calgary-based company booked profits of $3.55 billion US for the three months ended Sept. 30, up from $934 million in the third quarter of 2007, thanks largely to its hedging program.
EnCana said on Thursday that revenues were $10.8 billion, up from $5.6 billion in the third quarter of 2007. Total production rose six per cent.
Per-share profit rose to $4.72 compared to $1.24 a year earlier as EnCana recorded a $2-billion mark-to-market gain on hedging activities. A year earlier, it had hedging losses of $69 million.
Hedging is a form of risk management used by some resource companies to protect them from sudden declines in the commodities they sell. In a period of rising prices, hedging tends to result in losses while the reverse is true when prices fall.
EnCana took some heat for hedging so much of its production while oil and gas prices were rising, but the decision has paid off since the dramatic decline amid fears of a global recession.
"It is important to recognize that the main factor contributing to this number is the same factor that negatively impacted net earnings in the first two quarters of this year," chief financial officer Brian Ferguson said in a conference call with analysts Thursday.
"This is an indication of the strong hedging position we have in place for future quarters, providing increased certainty for future cash flow, our capital program and dividends."
EnCana shares were up $1.66 at $52.40 in afternoon trading on the Toronto Stock Exchange.