UBS Reiterates Neutral on Encana (ECA) Following Investor Day - PT to $11
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UBS reiterated a Neutral rating on EnCana Corp. (NYSE: ECA), and raised the price target to $11.00 (from $9.00), following the company's investor day. ECA disclosed a higher than expected 2017 capex budget of $1.4-$1.8bn (consensus ~$1.5bn) and guided to flattish pro-forma volume growth, below prior consensus estimates of +2%.
Analyst William Janela commented, "ECA outlined a revised 5-year strategy which calls for >60% companywide volume growth by 2021 (~10% CAGR), driven entirely by its Permian (>150 MBoed by 2021 vs. ~50 MBoed currently) & Montney developments while Eagle Ford & Duvernay volumes hold relatively flat. It estimates production from these "Core Four" plays will represent >90% of 2021E volumes (vs. 73% in 2016E) & result in a balanced commodity mix (vs. current ~35/65% liquids/gas mix), driving a significant improvement in cash margins. At a flat price deck of $55/Bbl WTI & $3/MMBtu NYMEX gas, ECA expects it can fully fund this program with cash flow by 2018+ which appears within grasp if somewhat optimistic: we estimate it needs a higher >$58/Bbl to reach FCF neutrality in 2018."
Shares of EnCana Corp. closed at $10.93 yesterday.
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