ENCANA CORP. $18 - Toronto symbol ECA

ENCANA CORP. $18 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 740.1 million; Market cap: $13.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.encana.com) plans to spend $2.4 billion to $2.5 billion on its properties in 2014. That’s down from the $2.8 billion it will likely spend in 2013.

Encana will devote 75% of its 2014 spending to five properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and the Tuscaloosa Marine Shale (Louisiana).

These fields produce significant amounts of oil and natural gas liquids (NGLs), such as butane and propane. The company expects oil and NGLs to supply 75% of its cash flow by 2017, up from about 35% today.

Even with the lower spending, Encana expects to produce 3.1 billion cubic feet of gas equivalent a day (including oil and NGLs) in 2014, unchanged from 2013. A 30% rise in oil and NGL output will offset lower gas production.

To free up cash for its new projects, Encana recently cut its workforce by 20%. It also reduced its quarterly dividend by 65.0%, to $0.07 a share from $0.20. The shares now yield 1.6%. The stock trades at a low 5.3 times the company’s projected 2014 cash flow of $3.37 a share.

Encana is a buy.

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