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 (Toronto symbol CVE), which specializes in oil sands.
Falling gas prices have pushed Encana’s shares down by about 34% since the split. Oil prices have weakened lately, but Cenovus’s stock is still up about 22%.
ENCANA CORP. (Toronto symbol ECA; www.encana.com) is one of North America’s largest natural gas producers. Its proven reserves should last over 14 years.
In the three months ended September 30, 2012, Encana’s cash flow per share fell 22.5%, to $1.24 from $1.60 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 falling gas prices, the company lowered its output during the quarter; this was the main reason for the lower cash flow.
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Energy stocks: Deal with Petro-China fits new foreign investment rules from Ottawa
Encana has formed a joint venture with Petro- China, which is controlled by the Chinese government, to develop its Duvernay property in Alberta.
Under the deal, Encana sold 49.9% of Duvernay to PetroChina for $2.2 billion (Canadian). Encana will own the remaining 50.1% and will operate the project. PetroChina has already paid Encana $1.2 billion. It will pay the remaining $1.0 billion over the next four years.
Since PetroChina is buying only a minority interest in this project, the deal complies with the federal government’s new foreign investment guidelines. Ottawa brought in these new rules in response to the takeover of oil sands operator Nexen Inc. by another state-owned Chinese oil company.
In the latest issue of Canadian Wealth Advisor, we look at whether joint ventures like the one with PetroChina can spur new growth for Encana despite the slump in gas prices and the cutbacks in production. We conclude with our clear buy-hold-sell advice on this stock.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca membe
Do you feel that the deals Canadian firms have made with Chinese oil companies are a threat to Canada’s economic integrity? Does the fact that the Chinese government has a strong hand in these firms affect your opinion of these deals? Let us know what you think.
Comments
roger
I believe gas is cleaner and cheaper to extract than oil. Gas might be cheaper but if it has big market it will make good profit and growth. Canadian resident should benefit with this cheap energy source and enough surplus considering our population. Surplus can be marketed at higher price to U.S. and China’s partnership is definitely a plus considering its market and with Canadian control. Oil dependency on the middle east in few years is coming to end. Gas and solar I believe, will be the new clean,cheap and abundant energy substitute to oil.
More and more i am of the belief that the Chinese do not play by the same rules as we do.In November 2012,there was a big stink about Chinese workers working in B.C. coal mines .Apparently we did not have the right experienced coal miners(yeah right). We have been mining coal in this country for over 300 years and lost many lives in the process!You would think that we would have learned a thing or two in that time. Yours truly
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Canadian Natural Resources Stock Guide: What to look for in Canadian Energy Stocks and more
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I believe gas is cleaner and cheaper to extract than oil. Gas might be cheaper but if it has big market it will make good profit and growth. Canadian resident should benefit with this cheap energy source and enough surplus considering our population. Surplus can be marketed at higher price to U.S. and China’s partnership is definitely a plus considering its market and with Canadian control. Oil dependency on the middle east in few years is coming to end. Gas and solar I believe, will be the new clean,cheap and abundant energy substitute to oil.
Thanks for your feedback.
More and more i am of the belief that the Chinese do not play by the same rules as we do.In November 2012,there was a big stink about Chinese workers working in B.C. coal mines .Apparently we did not have the right experienced coal miners(yeah right). We have been mining coal in this country for over 300 years and lost many lives in the process!You would think that we would have learned a thing or two in that time. Yours truly
Thanks for your feedback!