Encana Corp Net Income dropped on 252% in 2015 and EBITDA Margin dropped on 159 pp from 50.8% to -109%
24.02.2016 • About Encana Corp (
$ECA) • By InTwits
Encana Corp reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Encana Corp is a company in decline: 2015 revenue growth was -44.9%, 5 years revenue CAGR was -13.0%
- The company operates at negative EBITDA Margin: -108.5%
- Encana Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 50.0%. At the same time it's a lot of higher than industry average of 8.2%.
- CAPEX is quite volatile: 1,811 in 2015, 1,412 in 2014, 880 in 2013, 584 in 2012, 477 in 2011
- The company has unprofitable business model: ROIC is at -43.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Encana Corp ($ECA) key annual financial indicators
| mln. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 8,467 | 5,160 | 5,858 | 8,019 | 4,422 | -44.9% |
| Gross Profit | 3,293 | 725 | 1,383 | 2,710 | 492 | -81.8% |
| SG&A | 350 | 392 | 439 | 327 | 275 | -15.9% |
| EBITDA | 2,926 | -2,459 | 2,435 | 4,076 | -4,799 | -217.7% |
| Net Income | 5 | -2,794 | 236 | 3,392 | -5,165 | -252.3% |
Balance Sheet
|
|---|
| Cash | 800 | 3,179 | 2,566 | 338 | 271 | -19.8% |
| Short Term Debt | 492 | 500 | 1,000 | 59 | 54 | -8.5% |
| Long Term Debt | 7,658 | 7,175 | 6,124 | 7,340 | 5,333 | -27.3% |
Cash flow
|
|---|
| Capex | 4,610 | 3,476 | 2,712 | 2,526 | 2,232 | -11.6% |
Ratios
|
|---|
| Revenue growth | -4.5% | -39.1% | 13.5% | 36.9% | -44.9% | |
| EBITDA growth | -43.4% | -184.0% | -199.0% | 67.4% | -217.7% | |
| Gross Margin | 38.9% | 14.1% | 23.6% | 33.8% | 11.1% | -22.7% |
| EBITDA Margin | 34.6% | -47.7% | 41.6% | 50.8% | -108.5% | -159.4% |
| Net Income Margin | 0.1% | -54.1% | 4.0% | 42.3% | -116.8% | -159.1% |
| SG&A, % of revenue | 4.1% | 7.6% | 7.5% | 4.1% | 6.2% | 2.1% |
| CAPEX, % of revenue | 54.4% | 67.4% | 46.3% | 31.5% | 50.5% | 19.0% |
| ROIC | 2.8% | -29.9% | 7.5% | 15.5% | -43.0% | -58.4% |
| ROE | 0.0% | -40.3% | 4.5% | 45.7% | -65.2% | -110.9% |
| Net Debt/EBITDA | 2.5x | | 1.9x | 1.7x | | -1.7x |
Revenue and profitability
Encana Corp's Revenue dropped on 44.9% in 2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 159 pp from 50.8% to -109% in 2015.
Gross Margin dropped on 22.7 pp from 33.8% to 11.1% in 2015. SG&A as a % of Revenue increased on 2.1 pp from 4.1% to 6.2% in 2015.
Net Income marign dropped on 159 pp from 42.3% to -117% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 the company had CAPEX/Revenue of 50.5%. The company's CAPEX/Revenue dropped on 16.9 pp from 67.4% in 2012 to 50.5% in 2015. For the last three years the average CAPEX/Revenue was 42.8%.
Return on investment
The company operates at negative ROIC (-42.95%) and ROE (-65.17%). ROIC dropped on 58.4 pp from 15.5% to -43.0% in 2015. ROE dropped on 111 pp from 45.7% to -65.2% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.6x and Debt / EBITDA is . Net Debt / EBITDA dropped on 1.7x from 1.7x to in 2015. Debt dropped on 27.2% in 2015 while cash dropped on 19.8% in 2015.
Management team
Encana Corp's CEO is Douglas Suttles "Doug". Douglas Suttles "Doug" is a founder and has 5 years tenure at the company. The company's CFO Sherri A Brillon has spent 8 years at the company.
Appendix 1: Peers in Energy
Below we provide Encana Corp benchmarking against other companies in Energy industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Petro Rio SA ($PRJ) | -36.3% | -32.1% | -34.9% | 10,977.1% | |
| ONEnergy Inc ($OEG) | | | | 6,002.6% | |
| Sterling Resources Ltd ($SLG) | | -94.8% | 4,514.9% | 2,244.4% | |
| Ikkuma Resources Corp ($IKM) | 22.5% | 17.0% | -4.5% | 1,231.1% | |
| Spartan Energy Corp ($SPE) | -8.2% | 16.6% | 29.9% | 923.7% | |
| |
|---|
| Median (160 companies) | 38.0% | 10.4% | 17.1% | 17.6% | -24.5% |
|---|
| Encana Corp ($ECA) | | -39.1% | 13.5% | 36.9% | -44.9% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| TransAlta Renewables Inc ($RNW) | | | 94.4% | 94.5% | 94.5% |
| Advantage Oil & Gas Ltd ($AAV) | 70.5% | 62.0% | 84.5% | 92.5% | |
| Freehold Royalties Ltd ($FRU) | 91.7% | 90.4% | 89.0% | 90.2% | |
| MEG Energy Corp ($MEG) | 85.5% | 86.8% | 87.4% | 87.6% | 84.1% |
| NXT Energy Solutions Inc ($SFD) | -43.2% | 65.6% | 36.0% | 87.3% | |
| |
|---|
| Median (140 companies) | 33.3% | 29.3% | 31.6% | 29.6% | 37.2% |
|---|
| Encana Corp ($ECA) | 38.9% | 14.1% | 23.6% | 33.8% | 11.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Seven Generations Energy Ltd ($VII) | | 56.9% | 54.0% | 106.0% | |
| Tourmaline Oil Corp ($TOU) | 67.4% | 67.9% | 80.0% | 97.6% | |
| Bonavista Energy Corp ($BNP) | 63.8% | 64.6% | 62.6% | 91.6% | |
| Bellatrix Exploration Ltd ($BXE) | 42.7% | 58.6% | 83.6% | 89.6% | |
| Advantage Oil & Gas Ltd ($AAV) | -4.0% | 5.2% | 66.1% | 87.8% | |
| |
|---|
| Median (159 companies) | 24.7% | 25.7% | 30.5% | 28.9% | 5.2% |
|---|
| Encana Corp ($ECA) | 34.6% | -47.7% | 41.6% | 50.8% | -108.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | | 1,997.8% | |
| Petroshale Inc ($PSH) | 30.6% | | 346.6% | 865.9% | |
| Toro Oil & Gas Ltd ($TOO) | 192.4% | 139.0% | 39.2% | 808.7% | |
| Athabasca Oil Corp ($ATH) | 176.2% | 2,426.4% | 596.6% | 504.7% | |
| BNK Petroleum Inc ($BKX) | 139.2% | 195.8% | 789.1% | 316.6% | |
| |
|---|
| Median (162 companies) | 42.0% | 47.3% | 39.1% | 48.8% | 20.8% |
|---|
| Encana Corp ($ECA) | 54.4% | 67.4% | 46.3% | 31.5% | 50.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pason Systems Inc ($PSI) | 33.5% | 30.0% | 29.7% | 41.0% | |
| Sea Dragon Energy Inc ($SDX) | -10.1% | 8.1% | 21.8% | 32.9% | |
| Raging River Exploration Inc ($RRX) | | | | 29.1% | |
| High Arctic Energy Services Inc ($HWO) | 27.0% | 31.4% | 26.3% | 24.9% | |
| Rooster Energy Ltd ($COQ) | | | | 22.9% | |
| |
|---|
| Median (165 companies) | 4.5% | 3.5% | 4.5% | 5.0% | -6.5% |
|---|
| Encana Corp ($ECA) | 2.8% | -29.9% | 7.5% | 15.5% | -43.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Veresen Inc ($VSN) | 22.3x | 16.2x | 14.7x | 30.3x | |
| Lightstream Resources Ltd ($LTS) | | 2.0x | | 27.8x | |
| Petroshale Inc ($PSH) | 0.1x | | | 21.7x | |
| Connacher Oil and Gas Ltd ($CLC) | 9.7x | 16.7x | 8.8x | 17.1x | |
| Pengrowth Energy Corp ($PGF) | 1.5x | 2.9x | 2.1x | 16.8x | |
| |
|---|
| Median (136 companies) | 1.2x | 1.5x | 1.5x | 1.4x | 4.9x |
|---|
| Encana Corp ($ECA) | 2.5x | | 1.9x | 1.7x | |
