EnCana Threatens to Cut Alberta Spending

Article Excerpt

ENCANA CORP. $62 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 752.8 million; Market cap: $46.7 billion; SI Rating: Average) will cut its 2008 capital spending plans in Alberta by 40% if the Alberta government adopts in full its proposals to raise oil and gas royalties. EnCana focuses on early-stage gas properties, so higher royalties would make some new projects uneconomical to develop. The company has already trimmed its capital spending plans for this year due to falling natural gas prices and shortages of labour and drilling equipment. Our view is that gas prices will eventually rebound, which should help offset higher royalties. Meanwhile, EnCana could speed up development of its projects outside of Alberta, like its proposed Deep Panuke offshore gas field south of Nova Scotia. That would help it maintain current production levels. EnCana is a buy. buy…

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