The Successful Investor Hotline – Friday, March 19, 2010

Article Excerpt

ENCANA CORP., $31.37, Toronto symbol ECA, fell 8% this week, mainly because the company announced a plan to double its natural-gas production over five years. This announcement pushed down EnCana’s share price because the weak economy has hurt gas demand and depressed prices. Investors worry that adding to existing natural-gas inventories could push prices down further. However, EnCana’s new drilling and extracting technologies are lowering its production costs. That should give it an advantage over its competitors. The company is particularly interested in producing more gas at its Haynesville shale-gas property in Louisiana. (Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas.) To achieve its higher production goals, EnCana will spend $4.5 billion on exploration and capital upgrades in 2010 (all amounts except share price in U.S. dollars). That’s $750 million more than the company had previously estimated. To…

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