ENCANA CORP. $20.83 - Toronto symbol ECA

ENCANA CORP. $20.83 (Toronto symbol ECA; Shares outstanding: 740.2 million; Market cap: $15.1 billion; TSINetwork Rating: Average; Dividend yield: 1.4%; www.encana.com) is one of North America’s largest natural gas producers.

In the three months ended September 30, 2013, Encana’s cash flow per share fell 28.2%, to $0.89 from $1.24 a year earlier (all amounts except share price and market cap in U.S. dollars). The decline mostly came from lower realized gas prices.

Encana now plans to cut its dependence on gas. This year, it will devote 75% of its $2.4 billion to $2.5 billion of capital spending to five properties that produce 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.

In addition, Encana has completed its previously announced plan to lay off 20% of its workforce. Severance payments and other related costs cut its earnings by $65 million in the fourth quarter of 2013.

The stock trades at a reasonable 6.2 times the company’s forecast 2014 cash flow of $3.38 a share. It yields 1.4%.

Encana is still a buy.

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