Encana needs higher prices

Article Excerpt

ENCANA CORP. $11.13 (Toronto symbol ECA; Shares outstanding: 973.1 million; Market cap: $11.1 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.encana.com) has four key properties: Montney (B.C.), Duvernay (Alberta), and Eagle Ford and Permian (both in Texas). In addition to natural gas, these fields produce large amounts of oil and natural gas liquids such as propane and butane. Prices for these products remain depressed. As part of its plan to focus on its key properties, Encana has agreed to sell its Piceance gas operations in Colorado to Caerus Oil and Gas. It will receive $735 million U.S. when it completes the deal in the third quarter of 2017. The company will likely use the cash to pay down its long-term debt of $5.8 billion U.S. However, that debt is still a high 68% of Encana’s currently depressed $11.1 billion (Canadian) market cap. Asset sales, plus servicing that debt, could hold back production, at least for the rest of this year. Encana is now…

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