Tags: Encana | natural | gas | ECA

Encana: A Sleeping Natural Gas Giant

By    |   Tuesday, 29 Nov 2011 12:18 PM

Natural gas powers Encana (ECA). The Canadian company has one of the largest natural gas portfolios in North America. But rock-bottom gas prices have clobbered Encana’s stock performance so far this year, sending it down 33 percent. Encana may be a sleeping natural gas giant, say some analysts.

This pure-play company owns 11.7 million acres of resource-rich land stretching from northeast British Columbia to the southern United States.

Encana has kept on adding reserves, snapping up 430,000 acres in the Haynesville Shale region in East Texas and Louisiana. Encana’s key strategy is paying low prices for rich natural gas-yielding land and then using low-cost operations to develop it.

As for natural gas prices, they’ll likely rise again in 2012, according to analysts. Encana is already staking out new markets for its fuel like transportation and electric power, where coal can be replaced.

Volatile prices do roil Encana’s revenues, though. They sank 3 percent to $2.4 billion in the third quarter. But cash flow was $1.2 billion, easily powering Encana’s generous 4.1 percent dividend. Encana CEO Randy Eresman says that the aim is lowering operating costs and maximizing margins to enhance the long-term value of shares.

Giant reserves

Low natural gas worries analysts. Of the 21 analysts followed by Thomson/First Call, two have strong buy recommendations and five have buys, with 13 holds and one underperform.

S&P analysts agree. They have a hold rating on Encana, noting highly volatile natural gas prices. A history of conservative financial policies in a capital-intensive industry and low operating costs in key regions are core strengths, analysts add.

The company reports next in late Jan. 19.

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Natural gas powers Encana (ECA). The Canadian company has one of the largest natural gas portfolios in North America. But rock-bottom gas prices have clobbered Encana s stock performance so far this year, sending it down 33 percent. Encana may be a sleeping natural gas...
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2011-18-29
Tuesday, 29 Nov 2011 12:18 PM
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