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Eresman suspends a plan, announced in May, to split EnCana into two focused new companies: an oil sands producer, and another specializing in natural gas

What's the solution to low oil prices? That's easy: low oil prices. In the energy business, low prices inevitably heal themselves.

How? Consider the big picture first. The world consumes more than 80 million barrels of oil and petroleum liquids every day. Conventional oil fields are depleting rapidly, and the International Energy Agency estimates that by 2030, producers will have to replace 64 million barrels of daily output with oil from new sources to meet demand.

The trouble is, we aren't finding and developing enough new reserves, even with historically high prices as an incentive. Over the past four years, oil averaged more than $70 (U.S.) a barrel, yet non-OPEC supply actually fell.

So what's going to happen now that prices have dropped lately? Look back to 1998, when oil bottomed below $11 a barrel. Investment in new output slowed to a trickle, but that set the stage for the big bull run in oil prices-and oil company stocks-in the next decade. Renowned Texas oil analyst Henry Groppe says we are now witnessing the opportunity of a lifetime in energy producers' shares.

That's the macro view. What kind of company are we looking for? First, we want a big producer with lots of reserves, because finding new ones will be iffy and expensive, and it could take a long time for prices to recover. A diversity of sources of both oil and gas would help, too. Finally, we want good management. In short, we want EnCana.

Let's start with reserves. EnCana has 14 key resource plays covering 25 million acres of land. The company produces 4.6 billion cubic feet of natural gas equivalent a day. Yet it has proved reserves of 19 trillion cubic feet equivalent-about 10 years' supply-and possibly tens of trillions more.

You get diversification with EnCana, as well. The bulk of its assets are scattered across Canada, where it has unconventional natural gas and oil sands properties, and the U.S., where it has mainly natural gas.

Size counts, too. EnCana can defer spending on exploration, and it doesn't face the cash crunch smaller companies do when prices are low. It can also maintain a healthy dividend-at the recent share price of about $55, the dividend yield is 3.5%.

Finally, EnCana offers upside potential, in addition to safety. The company hedges to protect about half of its cash flow. The upside will come if and when oil prices recover. Meanwhile, management is cost-conscious: EnCana's latest expansion in the oil sands will cost about $50,000 per barrel-a-day of capacity-from extraction to refined products- well below what other producers are paying.

All that discipline means profits. BMO Capital Markets estimates that EnCana will earn discretionary cash flow of about $13 (U.S.) per share in 2009, and just over $12 (U.S.) in 2010. True, in October, EnCana delayed a plan to divide itself into two companies: one with the oil sands assets, the other a gas concern. But the split will likely happen eventually, and that should also boost the share price.

The solution to the next move in energy prices? Buy a cheap, solid energy stock.

January, 2002

Alberta Energy Corp. and PanCanadian Energy Corp. announce a "merger of equals" to create a $27-billion oil and gas giant

April, 2005

After selling its North Sea oil properties in 2004 for $2 billion (U.S.), EnCana sells its interests in the Gulf of Mexico for $2 billion (U.S.), part of CEO Gwyn Morgan's strategy of concentrating on North America

December, 2005

Morgan steps down after winning two accolades as that year's top CEO, and is succeeded by COO Randy Eresman

February, 2007

EnCana posts the biggest profit in Canadian history: $6.4 billion for 2006

October, 2008