encana

Growth by acquisition can be risky, as newly purchased companies may develop unforeseen problems, especially in an unsettled economy. But Pembina lowered that risk with last year’s purchase of a rival in a business where it’s already a leader. Pembina will now focus on building its own projects....

Oil prices have soared from around $18 U.S. a barrel in 1993 to around $97 U.S. today. However, new drilling technologies have made it easier to extract oil from hard-to-reach deposits, such as oil sands and shale rock formations. Rising production from these sources could hurt oil prices in the same way the shale gas boom has depressed natural gas prices....

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) is cutting its reliance on natural gas, as rising shale gas production has cut prices from $11.50 U.S. per thousand cubic feet in 2008 to just $3.60 U.S. today.

Encana now plans to narrow its focus from around 30 properties to five: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and Tuscaloosa Marine Shale (Louisiana).

These five fields also produce significant amounts of oil and natural gas liquids (NGLs), such as butane and propane, and should last decades. Encana expects oil and NGLs to supply 75% of its cash flow by 2017, up from about 35% today.
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ENCANA CORP. (Toronto symbol ECA; www.encana.com) is one of North America’s largest natural gas producers. The company is now cutting its reliance on natural gas, as rising shale gas production has cut prices from $11.50 U.S. per thousand cubic feet in 2008 to just $3.60 U.S. today. Encana plans to narrow its focus from around 30 properties to five: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and Tuscaloosa Marine Shale (Louisiana)....

Top 20 Dividend Trust, $10.75, symbol TTY.UN on Toronto (Units outstanding: 8.0 million; Market cap: $86.0 million; www.scotiamanagedcompanies.com), invests in an equally weighted portfolio made up of the 20 highest-yielding stocks in the S&P/TSX 60 Index. The trust has an MER of 0.88% and yields 6.5%. Top 20 Dividend Trust first sold units to the public at $10 and began trading on the Toronto exchange in June 2012. Many of the top-yielding stocks in the S&P/TSX 60 Index are former oil and gas royalty trusts. Seven of the trust’s 20 holdings are oil and gas stocks, including ARC Resources, Canadian Oil Sands, Crescent Point Energy, Encana Corp., Enerplus Corp., Husky Energy and Penn West Petroleum. Together, they make up a high 35% of the trust’s portfolio....

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) is cutting its reliance on natural gas, as rising shale gas production has cut prices from $11.50 U.S....

Oil prices have soared from around $18 U.S. a barrel in 1993 to around $100 U.S. today. However, new drilling technologies have made it easier to extract oil from hard-to-reach deposits, such as oil sands and shale rock formations. Rising production from these sources could hurt oil prices in the same way the shale gas boom has depressed natural gas prices (see Encana on Page 111).

Even so, these three oil producers continue to expand their oil sands operations....

ENCANA CORP., $19.21, Toronto symbol ECA, rose 3% this week, even though it cut its dividend as part of a major new restructuring plan. Due to depressed natural gas prices, Encana plans to narrow its focus from around 30 properties to five: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and Tuscaloosa Marine Shale (Louisiana). These fields also produce significant amounts of oil and natural gas liquids (NGLs), such as butane and propane, and should last decades. Encana expects oil and NGLs to supply 75% of its cash flow by 2017, up from about 35% today....

ENCANA CORP. $18 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 737.7 million; Market cap: $13.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.6%; TSINetwork Rating: Average; www.encana.com) aims to cut its exposure to low natural gas prices by producing more oil and natural gas liquids (NGLs), like butane and propane.

In the three months ended June 30, 2013, Encana’s oil and NGL output rose 68.8%, to 47,600 barrels a day from 28,200 a year earlier. But that’s still just 9% of its overall production. Encana aims to raise its NGL and oil output to 70,000 to 75,000 barrels a day by the end of 2013.

In response to weak gas prices, the company continues to expand its hedging program. For the second half of 2013, it has hedged roughly 75% of its expected production at $4.37 U.S. per thousand cubic feet. That’s 22.8% higher than today’s price of $3.56 U.S. For 2014, Encana has hedged 55% of its forecast output at $4.19 U.S. per thousand cubic feet.
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H&R REIT $20.96 (Toronto symbol HR.UN; Units outstanding: 268.3 million; Market cap: $5.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.4%; www.hr-reit.com) owns stakes in 41 office buildings, 112 industrial properties and 165 shopping malls across Canada. The trust has a 98.7% occupancy rate.

In March 2013, H&R finished building The Bow, a $1.33-billion, two-million-square-foot office complex in Calgary. Encana Corp. has already leased the entire building for 25 years.

H&R recently completed the purchase of 27 properties from Primaris REIT for about $3.1 billion. These assets include the aging 567,000-square-foot Dufferin Mall in Toronto’s west end, which has huge redevelopment potential. As well, eight of the 27 properties will have Target stores as their main tenants by the end of this year.
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