Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new companies: the new Encana, which focuses on natural gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 36% since the split. Oil prices have weakened lately, but Cenovus’s stock is still up about 12%. Here is our latest report on these two energy stocks.
ENCANA CORP. (Toronto symbol ECA; www.encana.com) is one of North America’s largest natural gas producers. Its proven reserves should last over 11 years.
In the three months ended December 31, 2012, Encana’s cash flow per share fell 17.3%, to $1.10 from $1.33 a year earlier (all amounts except share price and market cap in U.S. dollars).
Natural gas accounts for 95% of Encana’s production. In response to lower gas prices, the company cut its output by 14.8% during the quarter, to 2.9 billion cubic feet per day from 3.5 billion; this was the main reason for the lower cash flow.
Partly due to colder winter weather, the price of natural gas has nearly than doubled in the past year, from around $2.00 U.S. per thousand cubic feet to today’s price of $3.90.
The company plans to spend between $3.0 billion and $3.2 billion on capital projects in 2013. About 80% of this will go toward its oil and NGL businesses. Encana’s goal is to increase its oil and NGL production to between 50,000 and 60,000 barrels per day in 2013, up from 31,000 barrels in 2012. Oil and NGLs accounted for 6% of Encana’s overall production in 2012.
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CENOVUS ENERGY (Toronto symbol CVE; www.cenovus.com) has three heavy oil projects in Alberta and one in Saskatchewan. The oil sands supply about half of its output. The other half is conventional oil and gas.
U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects. Cenovus ships the heavy bitumen from these assets to refineries in
Illinois and Texas, which are also 50% owned by ConocoPhillips.
In the quarter ended December 31, 2012, cash flow per share fell 17.8%, to $0.92 from $1.12 a year earlier. Expansion pushed up oil output by 23.1%, to 177,646 barrels a day from 144,273, but that was offset by lower prices.
In the latest issue of Canadian Wealth Advisor, we assess Encana’s plan to cut its heavy reliance on gas by increasing its production of higher-priced sources of energy. We also look at the long-term production outlook for Cenovus. We conclude with our clear buy-hold-sell advice on both of these stocks.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
Some commentators are claiming that the American government’s drive for self-sufficiency in energy, which one report predicts it could achieve by 2035, will have dire consequences for Canadian oil and gas producers. Others believe Canada will continue to be welcomed as an essential, and safe, supply of energy to the U.S. What do you think?
Comments
Brian
I think we are missing it in a serious way! As Canadians we seem to be more concerned about what the American markets are doing. Many think that the American independence from foriegn markets will automatically include Canada.
Time to wake up and reconsider. We have been in this position of the friendly neighbor of the north able to provide to the American market for how many years now and how has the american market treated our canadian businesses? Every time they sneeze we get the cold! Look at our oil prices compared to american price! We are not even close to fair market value. Now look at what is right in front of our noses. XL being held up by the president of the USA. We have jumped thru hoops rode a unicycle and even put on a red nose for this circus act. Ever thought that like it or not we are treated as a foriegn country by our trading partners in the USA controled by special interest groups? Remember the mad cow scare, how long did it take us to get back into those markets?
I am of the strong opinion that as Canadians it is our time to build OUR economy that is NOT dependent on what the USA wants from us. I believe that with strong federal and provincial government that this is the time for Canada to invest in our Economy. Stop trying to piggy back off the americans.
We have foreign countries interested in canadian resourses. Our government has said that foreign investors need to add positive input for Canada.
How about this idea for Canada! As part of Qualification for a foreign national country to invest in Canada they also have to invest in building Pipelines to the east coast, west coast and we also build refineries IN Canada.
This would open up Canadian markets to foreign countries! We would step UP from under the american shadow and american control of our markets. We can become the strong country that others will look to. We as Candians can show and stand proud of who we are and what we as a nation can do to benefit foreign markets with out the americans. We as Canadians can stand against the americans and tell them the terms of how WE do business. If they do not like it they can sit on the side lines waiting for hand outs from the Canadian people.
It is the Canadian technology and resourses that the world wants! Why should we not be smart about it and use this chance to grow OUR Canadian Interest, OUR Canadian Markets to foreign markets to benefit every one involved?
Now would be the time to build Canada as a strong nation the world will look to. We can and should have influence in the world economy. We should hold the torch that other countries will look towards for understanding of how to restructure their failed economies. This is what Canada can do for the world .
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I think we are missing it in a serious way! As Canadians we seem to be more concerned about what the American markets are doing. Many think that the American independence from foriegn markets will automatically include Canada.
Time to wake up and reconsider. We have been in this position of the friendly neighbor of the north able to provide to the American market for how many years now and how has the american market treated our canadian businesses? Every time they sneeze we get the cold! Look at our oil prices compared to american price! We are not even close to fair market value. Now look at what is right in front of our noses. XL being held up by the president of the USA. We have jumped thru hoops rode a unicycle and even put on a red nose for this circus act. Ever thought that like it or not we are treated as a foriegn country by our trading partners in the USA controled by special interest groups? Remember the mad cow scare, how long did it take us to get back into those markets?
I am of the strong opinion that as Canadians it is our time to build OUR economy that is NOT dependent on what the USA wants from us. I believe that with strong federal and provincial government that this is the time for Canada to invest in our Economy. Stop trying to piggy back off the americans.
We have foreign countries interested in canadian resourses. Our government has said that foreign investors need to add positive input for Canada.
How about this idea for Canada! As part of Qualification for a foreign national country to invest in Canada they also have to invest in building Pipelines to the east coast, west coast and we also build refineries IN Canada.
This would open up Canadian markets to foreign countries! We would step UP from under the american shadow and american control of our markets. We can become the strong country that others will look to. We as Candians can show and stand proud of who we are and what we as a nation can do to benefit foreign markets with out the americans. We as Canadians can stand against the americans and tell them the terms of how WE do business. If they do not like it they can sit on the side lines waiting for hand outs from the Canadian people.
It is the Canadian technology and resourses that the world wants! Why should we not be smart about it and use this chance to grow OUR Canadian Interest, OUR Canadian Markets to foreign markets to benefit every one involved?
Now would be the time to build Canada as a strong nation the world will look to. We can and should have influence in the world economy. We should hold the torch that other countries will look towards for understanding of how to restructure their failed economies. This is what Canada can do for the world .
You conclude with your “clear buy-hold-sell” What does that mean? Please take me off your email list. This is not useful!!
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