Image source: Encana Corporation.

What: Shares of Encana (NYSE:OVV) are taking a beating on Tuesday, slumping more than 11% by 11:00 a.m. ET. The culprit was the company's poorly received first-quarter earnings report.

So what: Investors didn't like the fact that Encana reported an operating loss of $130 million, or $0.15 per share, which was $0.03 per share worse than the consensus estimate. They also weren't very pleased with the fact that cash flow plunged 79% over just the past quarter to a mere $102 million. That said, the results show just how deeply the drop in oil and gas prices is impacting the company.

That impact is something that Encana has been working hard to mute by focusing on cost reduction efforts. During the quarter, it was able to lower its general and administrative expenses by 20% over the prior quarter, putting it on pace to deliver $550 million in year-over-year cost savings by the end of this year. However, the company still has some work to do to hit that target. 

On a more positive note, it also remains on the path to hit, and possibly exceed, its full-year production target. That's due to strong production from its core assets, which have fueled an 8% increase in liquids production over the past year. 

Now what: Encana is doing what it can to take away some of the sting from lower oil prices. However, it still has more work to do in order to hit its cost reduction target. Investors aren't completely convinced, though, despite the fact that the company reaffirmed its commitment to hitting its 2016 guidance.

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