encana

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.
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Rising production of shale gas continues to depress prices. However, new projects would let producers ship more of their surplus gas overseas, where prices can be two or more times higher than in North America. As well, many utilities are converting their plants to burn gas instead of coal....

Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new companies: the new Encana, which focuses on natural gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 36% since the split. Oil prices have weakened lately, but Cenovus’s stock is still up about 12%. Here is our latest report on these two energy stocks....

Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new companies: the new Encana, which focuses on natural gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 36% since the split....

BLACKBERRY INC., $15.09, Toronto symbol BB, rose 2% on Thursday after the company reported much better-than-expected earnings. In its 2013 fourth quarter, which ended March 2, 2013, BlackBerry earned $114 million, or $0.22 a share (all amounts except share price in U.S. dollars). These figures exclude charges related to a restructuring plan that includes cutting the company’s workforce and simplifying its product lines. On that basis, the latest results easily beat the consensus forecast of a $0.34-a-share loss. A year earlier, BlackBerry lost $118 million, or $0.23 a share. Revenue fell 35.9%, to $2.7 billion from $4.2 billion. That’s mainly because customers were waiting for the company to launch new smartphones that use its BlackBerry 10 software. The company began selling these devices in Canada, the U.K. and other markets in February 2013. It started selling them in the U.S. on March 22, 2013....

ENCANA CORPORATION $18.67 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $13.6 billion; TSINetwork Rating: A v e r a g e ; D i v i d e n d y i e l d : 4 . 3 % ; www.encana.com) had cash flow per share of $4.80 in 2012, down 16.1%, from $5.72 in 2011. Revenue declined 39.1%, to $5.2 billion from $8.5 billion. That’s partly because the company sold $4.0 billion of assets in 2012, including major stakes in its shale gas properties in B.C. and Alberta.

Encana continues to benefit from its hedging program, which has shielded it from falling natural gas prices. In 2012, the company sold its natural gas at an average price 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 natural 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 53% of its market cap.
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UNITED TECHNOLOGIES CORP. $93 (www.utc.com) could see its sales of jet engines and other aircraft equipment suffer due to budget cuts at the U.S. Department of Defense. Even so, it still expects to earn $5.85 to $6.15 a share in 2013; the stock trades at an attractive 15.5 times the midpoint of that range....

Here are some natural gas producers we recommend: Encana Corp., $20.18, symbol ECA on Toronto (Shares outstanding: 736.3 million; Market cap: $15.0 billion; www.encana.com), is a recommendation of The Successful Investor, our conservative-growth advisory. Encana is one of North America’s largest natural gas producers. The company was a pioneer in the development of unconventional gas reserves (also called “tight gas”). This is natural gas that is trapped in rock formations....

Natural gas stocks were slow to join in the 2007-2009 market decline. Most other stock groups hit a peak by the fall of 2007, then began to slump. Shares of natural gas producers kept rising until the spring of 2008, and only then turned downward. The broad market downtrend ended in the spring of 2009, and stocks generally began to rise. But natural gas stocks, latecomers to the decline, kept on moving sideways to downwards. They remain within that sideways-to-downward trend today. Most investors understand why these stocks went down and continue to fall. It’s because the natural gas industry developed techniques that cut its costs and let producers initiate or expand gas production into vast new areas. As a result, natural gas output shot up, without any matching rise in natural gas demand. In addition, we experienced a series of warm winters. This cut into gas used for winter heating, and that’s a major part of total gas use. As a result, gas in storage grew and natural gas prices fell. In response, the natural gas industry stepped up its efforts at winning approval for building new pipelines and expanding shipping facilities for liquid natural gas. These projects would let producers ship more of their surplus gas overseas, where natural gas prices can be two or more times higher than in North America....

ENCANA CORPORATION $18.67 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $13.6 billion; TSINetwork Rating: A v e r a g e ; D i v i d e n d y i e l d : 4 . 3 % ; www.encana.com) had cash flow per share of $4.80 in 2012, down 16.1%, from $5.72 in 2011....