Thursday’s close: $21.25
52-week trading range: $17.25 - $23.86 a share
Annual dividend: 0.795 cents for a yield of 3.69 per cent
Analysts’ ratings: There were two buys, 16 holds and five sells, according to Bloomberg data. Target prices range from $19.05 to $27.82 a share.
Recent history: Shares of Canada’s largest natural gas producer have gained about 16 per cent this year amid a rebounding commodity price, and speculation about more takeovers in the oil patch. Encana’s stock has been in a free fall in recent years because of a gas glut after hitting a high of more than $50 a share in 2008. Encana has been paring back gas production and boosting its output of crude oil and natural-gas liquids. The debt-laden company struck a $2.9-billion deal earlier this year to sell a 40-per-cent stake in its B.C. Cutbank Ridge gas play to Japan’s Mitsubishi Corp.
Outlook: Encana told shareholders this fall at an Investors Day that is seeking more joint-venture partners for its U.S. shale gas plays, but is also open to partnerships in its Cutbank Ridge and Duvernay projects in Canada. Some investors are now betting that its Duvernay liquids-rich play in Alberta will be the next deal to breathe more life into Encana’s stock. “We believe it is going to be a joint venture,” said Rafi Tahmazian, an energy fund manger at Calgary-based Canoe Financial LP. “The Street here is starting to talk about the possibility of an imminent transaction happening.”
For a joint-venture deal to move Encana’s stock, however, it will have to total at least $1.5- to $2-billion, he said. Of that amount, there should be at least $1-billion upfront to the energy firm to help reduce its debt load that is now more than $6-billion, he added. “The company is currently so handcuffed in terms of its ability to spend because gas prices fell so dramatically and reduced their cash flows. They are kind of forced to do a deal.”
The Duvernay wet-gas play could attract a significant player because it will produce condensate that can often fetch a premium to West Texas Intermediate crude, Mr. Tahmazian added. Any deal could also help Trilogy Energy Corp. and Athabasca Oil Corp., which have stakes in the Duvernay play.
Mr. Tahmazian, who began buying Encana shares early last summer, added more in October. “We felt that we could buy the stock on speculation of a deal getting done, while it is also a very seasonal time of year to buy gas stocks,” he said.