Source: The Canadian Press

As the oilpatch prepares for third-quarter earnings season, observers are expecting to see some good, some bad, but not nearly as much ugly as the sector has seen in the past.

“I think the tone out there is certainly more on the optimistic side than the pessimistic side, from what I’m seeing, feeling and hearing from both the companies’ perspective and investors’ perspective,” said Rob Laidlaw, with Acumen Capital Partners.

Laidlaw, who focuses mainly on junior and mid-sized firms, said oil-weighted names can expect to see better numbers, while natural gas-focused players are still in for a slog.

Spending, on both exploration and acquisitions, should pick up, and Laidlaw said he wouldn’t be surprised to see some equity offerings in the remainder of the year.

“They’re going to kind of pad their coffers, so to speak, and then I think that will bode well going into next year,” he said.

“I think a lot of people are thinking things are looking good, and to strike while the iron’s hot — get out and raise some money, spend some money and hopefully have some success.”

Andrew Potter, an oil and gas analyst with CIBC World Markets, said in a recent research note he was expecting “weak Q3 results across the board” when it comes to Canada’s large energy companies.

Earnings and cash flow growth have been strong since the second-quarter of 2009, when the financial crisis and dismal commodity prices hammered the sector. But the third quarter is expected to take a negative dip.

On average, cash flow per share for large companies is expected to be 10% lower than in the second quarter. However, Potter noted results will still be markedly better than the same time last year.

Encana Corp. (TSX:ECA) will be the first of Canada’s major energy players to report next Wednesday, and Potter said investors will want to hear about its production growth plans and potential joint-venture opportunities.

Encana has said it aims to grow production 12% per year. It has also said partnerships with other companies, namely deep-pocketed Asian players, will help speed projects that would have otherwise taken place at a slower pace.

“We view Encana as the best-positioned unconventional gas producer, and with Encana trading at near record-low valuations, we believe the risk/reward is stacked in Encana’s favour — even with a weak short-term gas outlook,” Potter said.

In a recent note to clients, RBC Capital Markets analyst Greg Pardy said he’s expecting a “funky” third quarter.

“Although the direction of crude oil prices is sure to serve as the trump card, third-quarter results in isolation are unlikely to provide a positive catalyst for (integrated and senior energy companies),” he wrote.

Earnings are expected to be 12% lower than the second quarter and cash flow 14% lower, he said.