Last week, Encana (TSX:
ECA) announced the sale of its Bighorn natural
assets in Alberta to Jupiter Resources for $1.8 billion. Today, CEO
Doug Suttles said that Encana will be selling more assets in order
to further hone its focus on oil and gas.
Suttles said that the company will sell its interest in two
gas-fired power plants, The Canadian Press
reported. Encana wholly owns and operates one
of the plants and owns a 50-percent interest in the other.
The CEO told the news outlet, “[w]e’re not a power company.
We’re an oil and gas company and this is about focus and consistent
strategy. So it just made sense to do this and it was purchased by
a power company, which makes complete sense.”
Those sales are not the only strategic measures Encana has taken
of late. Suttles, who The Canadian Press describes as “a
third-generation Texas oilman and former BP executive,” has made
streamlining the company’s assets a key focus. Encana
sold its East Texas gas properties for $530
million at the end of April and
announced its new strategy in November of
last year, rolling out cost-cutting measures such job cuts and the
closure of the company’s Texas-based office.
To be sure, the Alberta asset spin off was definitely in line
with Encana’s strategy. ”This transaction advances our
strategy by unlocking value from our portfolio as we focus on
developing our core growth plays and extracting additional value
from our base assets,” Suttles said in the company’s June 27 press
What should investors look at?
A June 18 article from The Motley Fool
outlines the reasons Encana could be a
good play for investors, noting that the company was ranked
energy stocks with strong growth potential” by
The Globe and Mail. The article also cites Encana’s core assets,
robust cash flow and strong balance sheet as reasons it might be
worth a look, but the number one reason listed is Encana’s new
strategy. Additionally, Encana was a
top pick for Michael Bowman, executive
vice president and portfolio manager for Wickham Investment
Counsel, near the end of last month.
Following today’s news, both Tech Insider and the California
note of unusually high options trading for
Encana, with the Examiner stating that the company’s stock
currently has a consensus rating of “hold” and a price target of
$26. Encana plans to announce its second-quarter earnings on July
24, according to the Examiner.
So what’s next for Encana?
Suttles suggested that the company has its sights set south of
the US border on the back of signs that Mexico may become more
welcoming to foreign investment. He acknowledged that there are
challenges, but is optimistic that Mexican foreign investment
reforms will pass, according to The Canadian Press. “There are
some unique issues in Mexico beyond the political reforms, because
in many areas onshore where oil and gas potential exists, there are
significant security concerns still today and the ability to
operate and execute will be a challenge there. But it’s something
we monitor,” he told the news outlet.
At close of day on Wednesday, shares of Encana were down 0.12
percent, selling for $24.05 each.
Securities Disclosure: I, Teresa Matich, hold no investment
interest in any companies mentioned.