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Topic: Growth Stocks

ENCANA CORP. $20 – New York symbol ECA

ENCANA CORP. $20 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) has formed a joint venture with PetroChina International Investment Company Ltd., which is controlled by the Chinese government, to develop its Duvernay property in central Alberta. This field mainly contains natural gas liquids, such as butane.

Under the terms of the deal, Encana sold a 49.9% stake in Duvernay to PetroChina for $2.2 billion (Canadian). Encana will own the remaining 50.1% and will operate the project. PetroChina has already paid Encana $1.2 billion. It will pay the remaining $1.0 billion over the next four years.

Joint ventures like this help speed up the development of promising new fields. Moreover, as PetroChina is buying only a minority interest in this project, the deal complies with the federal government’s new foreign investment guidelines. Ottawa brought in these new rules in response to the takeover of oil-sands operator Nexen Inc. by another state-owned Chinese oil company.

Encana is a buy.

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