Uncertain Costs Hurt EnCana’s Prospects

Article Excerpt

ENCANA CORP. $54 (Toronto symbol ECA; Conservative Growth Portfolio; Resources sector; SI Rating: Average) aims to expand production at its oil sands projects in Alberta 10-fold in the next decade. As part of this strategy, EnCana is now thinking about building its own upgrading facility in Western Canada that would refine the tar-like oil sands output into various petroleum products. That makes sense, since EnCana would earn higher profits processing oil than simply selling the unrefined product. EnCana would like to cut its risk by bringing in partners. However, falling oil prices and rising costs for labour and equipment could hurt the feasibility of this project, and make it difficult to attract new investors. EnCana is a hold. hold…

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