ENCANA CORP. $20 - Toronto symbol ECA

ENCANA CORP. $20 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $14.7 billion; Price-to-sales ratio: 2.7; Dividend yield: 4.1%; TSINetwork Rating: Average; www.encana.com) earned $997 million, or $1.35 a share (all amounts except share price and market cap in U.S. dollars) in 2012.

That’s down 16.3% from $1.2 billion, or $1.62 a share, in 2011. Cash flow per share fell 16.1%, to $4.80 from $5.72. Revenue declined 39.1%, to $5.2 billion from $8.5 billion. That’s partly because it sold $4.0 billion of assets in 2012, including stakes in its shale gas properties in B.C. and Alberta.

Encana benefits from its hedging program, which has shielded it from falling gas prices. In 2012, it sold its gas at an average of $4.82 per thousand cubic feet, compared to today’s price of $3.16. For 2013, Encana has hedged 52% of its forecast production at $4.39 per thousand cubic feet.

Even with low gas prices, Encana’s balance sheet remains sound. It ended 2012 with cash of $3.2 billion, or $4.32 a share. Its long-term debt of $7.2 billion is a manageable 49% of its market cap.

Encana is a buy.

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