07.26
While volumes of 4.6 Bcfe/d were essentially in line with our 4.6 Bcfe/d
estimate, Q2 CFPS of $2.87 was ahead of our estimate of $2.40 and
consensus of $2.41 on lower operating costs, lower mineral taxes and better
downstream operations.
About 0.4 Bcf/d of gas has been shut-in with ~0.1 Bcf/d in East Texas and
with the near-term soft outlook for gas, ECA has widened its ‘09 guidance to
4.4-4.8 Bcfe/d (from 4.5-4.7 Bcfe/d) on lower capex of $5.5-$6 B (down
from $6.1 B). Our ‘09 estimates move to 4.5 Bcfe/d (from 4.6 Bcfe/d).
With high storage levels, we see gas prices remaining soft in Q3 and likely
most of Q4/09. However, the tightening supply/demand balance process
should be more prominent later this year with the US rig count declining
~60% from its peak, supporting a more balance gas market in 2010.
We favor ECA for its best-in-class low-cost operations, strong financial
position (‘09E D/CF at 1.2x), strong management team, attractive F&D
costs, and exposure to enormous gas and bitumen resources.
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