UPDATE 2-Encana posts profit as new CEO revamps businesses

Wed Oct 23, 2013 8:37pm BST

Quotes

   

* Reduces capital spending forecast

* New strategy to be released by year end

* Shares rise 2 pct

CALGARY, Alberta, Oct 23 (Reuters) - Encana Corp, Canada's largest natural gas producer, reported a third quarter net profit, after a year ago loss, and lowered its capital spending forecast as a part of its push to restructure operations under new Chief Executive Doug Suttles.

The company said it now expected capital spending to be between $2.7 billion and $2.9 billion this year, down from $3.0 billion to $3.2 billion.

Encana is restructuring its operations as prices for natural gas are expected to remain low due to abundant shale gas production.

Suttles, a former BP Plc executive, was appointed chief executive in June. He has already begun making changes, restructuring the company's senior management and promised last month to cut dry gas production and revamp Encana's businesses to cope with weak cash flow.

Suttles said on Wednesday that the final details of the restructuring and a revised strategy for the company will be released before the end of December.

"We are on track to announce the strategy and ensure 2014 plans are built around the new strategy before year end," Suttles said on a conference call.

Suttles said the release of the new strategy will include an announcement on Encana's dividend, which now costs the company $600 million annually. Some analysts speculate that a cut is looming as Encana looks to free up cash to boost production.

"I think a dividend cut is highly likely," said Lanny Pendill, an analyst with Edward Jones. "We've seen various indications from the management team since (Suttles) took over that that would be something they would consider."

The company's cash flow, a key measure of its ability to pay for new projects and drilling, fell 28 percent to $660 million, or 20 cents per share, in the third quarter.

Encana however, said it expected full-year cash flow to be near the high end of its current forecast range of $1.5 billion to $2 billion.

The company reported a net profit of $188 million, or 25 cents per share, for the third quarter ended Sept. 30. It reported a net loss of $1.24 billion for the year ago period.

Excluding most one-time items, the company posted operating income of $150 million, or 20 cents per share. Analysts on average had expected 17 cents per share, according to Thomson Reuters I/B/E/S.

Encana's oil and natural gas liquids volumes in the quarter nearly doubled to average about 58,200 barrels per day. Daily natural gas production averaged 2.7 billion cubic feet.

Encana shares were up 37 Canadian cents to C$19.16 by late afternoon on the Toronto Stock Exchange.