CALGARY, Alberta (Reuters) - Canadian oil and gas producer Encana Corp (ECA.TO) reported a bigger-than-expected quarterly loss on Tuesday, citing persistently low commodity prices that prompted a drop in production, and its shares fell nearly 12 percent.
The company’s total production fell by 11 percent to 383,400 barrels of oil equivalent per day in the first quarter as reduced drilling resulted in declining output from U.S. shale plays.
Like many of its peers, Calgary-based Encana has slashed spending, cut staff and sold off assets in response to the nearly two-year slump in oil and gas prices.
Chief Executive Officer Doug Suttles said the company was on track to deliver $550 million in cost savings in 2016. In its four core plays - the Montney, Duvernay, Permian and Eagle Ford basins - drilling and completion costs have come down 22 percent to 44 percent from 2015 averages.
“Reducing cost and capturing efficiencies remains a priority for the entire organization,” Suttles said on a call to discuss first-quarter earnings. “While the strengthening of the Canadian dollar will put pressure on some costs, we still expect to be within 2016 guidance ranges.”
The Canadian dollar CAD=D4 hit a 10-month high on Tuesday before paring gains. It remains closely correlated to oil prices, which dropped on concerns about global demand. [CAD/]
The company has also beefed up its hedge book. About 75 percent of oil and condensate production, and 85 percent of natural gas production, is hedged for the rest of 2016, well above usual levels of about 50 percent.
Encana said its first-quarter loss had narrowed to $379 million from $1.71 billion a year earlier, when it took a $1.22 billion impairment charge.
Excluding most special items, the loss was 15 cents a share, compared with a year-earlier profit of 3 cents.
Analysts on average had expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.
Cash flow, indicating the ability to pay for new projects and drilling, fell 79.4 percent to $102 million.
Encana shares were down 11.7 percent at C$8.48 on the Toronto Stock Exchange.
Additional reporting by Anet Josline Pinto in Bengaluru; Editing by Savio D'Souza, Shounak Dasgupta and Lisa Von Ahn