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Canada’s largest natural gas producer EnCana Corp. (NYSE:ECA) is scheduled to report its third quarter 2011 results on October 20, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter is a profit of 8 cents per share on revenue of $1.687 billion.

Second Quarter Recap

EnCana reported impressive second quarter results, reflecting strong natural gas and liquids output based on efficient operational activities and competent workforce.

The company’s operating earnings per share (excluding one-time items) of 22 cents breezed past the Zacks Consensus Estimate of 11 cents and were above the year-ago earnings of 9 cents.

Revenues (net of royalties) came in at $1.986 billion, up 35.2% year over year and 17.7% above our projection.

(Read our full coverage on this earnings report: EnCana Shines, Reaffirms Outlook)

Agreement of Analysts

The analysts project an optimistic sentiment on EnCana’s to-be-reported quarter, reflecting the company’s high-quality and low-cost asset base in some of the best gas plays in Canada and the U.S. The company’s continued focus on efficient operations in rich growth areas such as Haynesville, Horn River and Montney are expected to generate high volumes in the coming months.

Out of the 7 analysts covering the stock, 2 have revised their estimates upward for the third quarter of 2011, while the same number of analysts has gone in the opposite direction in the last 30 days.

In the last seven days, one analyst raised the estimate, while none decreased their projections.

Magnitude of Estimate Revisions

With effect from the earnings revisions by the analysts in the last 30 days, the Zacks Consensus Estimate for the quarter increased by a penny to 8 cents. For the past seven days, the estimate for the third quarter remained static.

Surprise History

EnCana exhibited a mixed earnings surprise trend over the last four quarters. The company recorded a minimum surprise of 31.25% in the first quarter 2011 while a maximum of 116.67% was in the second quarter 2011. On average, the earnings surprise was 25.03%.

Our Recommendation

Headquartered in Calgary, Alberta, EnCana is the second largest gas producer in North America, and holds a highly competitive land and resource position in a number of the region's most promising shale and tight gas resource plays. This provides the company with a low risk, long-life, and sustainable growth profile. Other positive attributes in the EnCana story include its active hedging policy, competitive cost structure, strong balance sheet and robust free cash flow.

The key negative, in our view, is the current unfavorable macro backdrop (weak natural gas prices), which is expected to continue drowning out the positives, at least in the near term. Another area of concern for us is the transfer of the high-quality and high-growth enhanced oil recovery and downstream assets (post split). As a result, the business risk profile of the reorganized EnCana is weaker than that of the predecessor company.

As such, we expect growth potential of the company to be restrained and maintain our long-term Neutral recommendation on the stock. EnCana, which competes with Cabot Oil & Gas Corporation (NYSE:COG) and Talisman Energy (NYSE:TLM), currently holds a Zacks #3 Rank (short-term Hold rating).

Source: Encana Earnings Preview

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