The Successful Investor Hotline – Friday, March 6, 2015

Article Excerpt

ENCANA CORP., $14.66, Toronto symbol ECA, fell 10% this week after the company issued 85.6 million common shares to a group of underwriters for $14.60 each. The company plans to use the $1.25 billion of proceeds to redeem $1.6 billion worth of notes. As of December 31, 2014, Encana’s long-term debt was $7.3 billion U.S., or a high 84% of its $10.9 billion (Canadian) market cap. If the underwriters exercise their option to buy an additional 12.8 million shares, Encana would receive $1.44 billion. Including this option, the extra shares would increase the total outstanding by roughly 13%. This dilution adds to Encana’s risk. However, paying down debt will cut its interest costs and help it conserve cash until oil and gas prices rebound. The company could also use the savings to make acquisitions at bargain prices. Encana is still a buy. Encana was recently covered in The Successful Investor Hotline for February 27, 2015. Click here to access it. Encana was recently covered in the…

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