Critical Review: Encana (ECA) & California Resources (CRC)

Encana (NYSE: ECA) and California Resources (NYSE:CRC) are both energy companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, analyst recommendations, earnings and risk.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Encana and California Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encana 0 2 16 2 3.00
California Resources 0 3 1 0 2.25

Encana currently has a consensus target price of $15.00, suggesting a potential upside of 6.84%. California Resources has a consensus target price of $18.00, suggesting a potential downside of 16.47%. Given Encana’s stronger consensus rating and higher probable upside, research analysts plainly believe Encana is more favorable than California Resources.

Institutional and Insider Ownership

68.9% of Encana shares are owned by institutional investors. Comparatively, 75.2% of California Resources shares are owned by institutional investors. 0.1% of Encana shares are owned by company insiders. Comparatively, 0.9% of California Resources shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Encana and California Resources’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encana $2.92 billion 4.68 -$944.00 million $0.80 17.55
California Resources $1.55 billion 0.60 $279.00 million ($5.00) -4.31

California Resources has lower revenue, but higher earnings than Encana. California Resources is trading at a lower price-to-earnings ratio than Encana, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Encana has a beta of 2.15, meaning that its stock price is 115% more volatile than the S&P 500. Comparatively, California Resources has a beta of 6.63, meaning that its stock price is 563% more volatile than the S&P 500.

Dividends

Encana pays an annual dividend of $0.06 per share and has a dividend yield of 0.4%. California Resources does not pay a dividend. Encana pays out 7.5% of its earnings in the form of a dividend.

Profitability

This table compares Encana and California Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Encana 19.08% 5.95% 2.64%
California Resources -10.23% N/A -3.96%

Summary

Encana beats California Resources on 12 of the 17 factors compared between the two stocks.

About Encana

Encana Corporation is an energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and natural gas liquids (NGLs) producing plays. The Company’s operations also include the marketing of natural gas, oil and NGLs. All of its reserves and production are located in North America. It operates through three segments: Canadian Operations, USA Operations and Market optimization. Its Canadian Operations segment includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada. Its Canadian operations include Montney in northeast British Columbia and northwest Alberta and Duvernay in west central Alberta. The USA Operations include the exploration for, development of, and production of natural gas, oil and NGLs, and other related activities within the United States. The Market Optimization activities are primarily responsible for the sale of the Company’s production to third party customers.

About California Resources

California Resources Corporation is an independent oil and natural gas exploration and production company, with operating properties within the State of California. The Company produced approximately 140 thousand barrels of oil equivalent per day (MBoe/d), as of December 31, 2016. As of December 31, 2016, the Company had net proved reserves of 568 million barrels of oil equivalent (MMBoe). As of December 31, 2016, it drilled 42 development wells with 37 wells in the San Joaquin basin and five in the Los Angeles basin, which included over 30 steamflood and eight waterflood wells. As of December 31, 2016, the Company produced 36 billion barrels of oil equivalent (BBoe), including approximately 20 BBoe in the San Joaquin basin, 11 BBoe in the Los Angeles basin, three BBoe in the Ventura basin and 10 trillion cubic feet (Tcf) of natural gas in the Sacramento basin. Its operations included 135 fields with 8,837 gross active wellbores, as of December 31, 2016.

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