Skip navigation

 Login or Register | Member Centre

EnCana's plan: Divide, then conquer

NORVAL SCOTT

From Monday's Globe and Mail

Latest comment posted at 9:40 AM EDT 12/05/08

CEO Randy Eresman says ‘it's the right time' to unlock the value of the massive oil and gas company ...Read the full article

This conversation is closed

  1. Rudy Krueger from High River, Canada writes: What a hoot - this truism "right time to unlock the value..." Please ... run that one past the writers again.

    The truth is inoffensive and easy to explain. Why didn't someone try?

    I would love to write a book on this kind of mist. Trouble is you have to have enough understanding of the subject to be able to understand the humor ... and if a person is that far into the corporate fabric, he probably doesn't have a sense of humor anyway.

    Oh well, all the best to everyone in the new companies.
  2. Dave C from Dirty Alberta, Canada writes: I thought those greedy SOB's were leaving Alberta? Weren't they pouting a month or 2 ago because Alberta asked them to give a few shiny beads back to the citizens to quiet us for awhile?
    Well I see they are building their massive shrine in downtown Calgary so they can't be all that upset. I'm sure they are still raking in billions of dollars every quarter because after all, the government in Alberta is far more concerned about looking after the Oil companies than it is it's citizens or for that matter, the rest of Canada. No wonder the Texans, and the Oil men from all over the world love to come to Alberta. We are the only Province that willingly gives away it's resources. You want to strip mine our boreal forests? Go for it, take as much as you want. You want to use our fresh water supplies to extract the oil? Again, go for it! Use as much as you need. You want to dot the landscape with massive Tailing pond lakes?? Our land is your land!!
  3. mighty conan from Calgary, Canada writes: More profits as a result I'm sure...
  4. Save our Planet from Toronto, Canada writes: Well said Dave C - this plan is nothing more than a sneaky way of rushing the ownership of our resources down to the US. That and the billions of profits
  5. globefan Eh from Canada writes: Dave C..the voters spoke and re-elected the Conservatives in Alberta..knowing full well how it was, with an increased majority no less. It must not be easy to swim upstream in Alberta.
  6. foo bar from Canada writes: Meh. Might as well buy some. I'm not too pleased about the duplication of executives and staff, but I guess something had to be done to "lean out" the company - ECA is a huge, lumbering beast that takes forever to make any sort of decision.
  7. Sol Veritas from Calgary, Canada writes: Talk about a hydra - going from one huge, lumbering beast to two!

    So if this is because the current stock is "undervalued", does this mean it's guaranteed to go up? The question here is, who's trying to unload what to who? Sounds like a flipper and a greater fool to me, only we're talking about stocks, not housing...

    Is ECA ringing the bell that the top is in?
  8. foo bar from Canada writes: Sol Vertias: Don't be surprised if one of these companies is scooped up within a matter of weeks. Hint: Not the oilsands one...
  9. Globe Insider subscriber content
    Godfried Wasser from Calgary, Canada writes: You guys are thinking way too local. First of all, Encana is very large and complex but compared to Shell and Exxon, it is very nimble and relatively simple. Reality is Canadians don't pay true value for their companies on the stock market. CP has shown that splitting up a company into smaller focussed chunks is easier to understand and valued much higher than the big parent. Traditionally Encana and its predecessor companies had a truly horrible sense of timing the purchase or sale of assets. This time it looks like timing is right. And, yes, if Canadians don't value the company then foreigners will come in and pick it up.
    Also, Encana is only doing well in Alberta regarding heavy oil Regarding Alberta Gas, it has already moved investments significantly out of the province, e.g. Texas. So yes Encana and other oil companies see Alberta gas still as a liability because most of the upside in the current gas prices is sucked up by Alberta's Treasury rather than kept in the companies for reinvestment. BC and Saskatchewan and Texas and where ever else, they are benefiting from a higher gas price but Alberta Gas will remain depressed until Stelmach truly addresses the issue.
  10. Antonio San from Canada writes: So Andrew Willis thinks they'll be a take over premium to those two smaller entities. Yes Encana as a whole was a difficult meal for take overs. So since Encana is a Canadian company and that it was planning to transform as a income trust -again to serve and also unlock the value for its Canadian shareholders-, Mr Willis suggests that the suitors will be well non canadians. So yes shareholders will enjoy the cash grab, not the least the management of course, but the assets will pass under foreign control if a TO occurs. A $64 billion company... oh but since it may happen after the panel supposed to review the leaking of canadian assets has folded and concluded Harper/Flaherty policies are good for Canada...
    Of course Encana taxes issue will be an interesting one: is Flaherty going to cry tax leakage? Somehow I bet not. Only when Canadian investors are fleeced by the government...
  11. Alistair McLaughlin from Canada writes: What a bunch of clueless posters. Everything is a conspiracy to "sell out to the Americans". If instead of splitting up, Encana had merged with another company, you all would be making the exact same arguments. It is absolutely mind-boggling how people so completely ignorant of reality can spit out these arguments as though they were obvious truths. Well here are a few obvious truths for you to chew on. First, companies exist only for their shareholders. Whatever maximizes shareholder value is the RIGHT decision. Some of you seem worried that somehow the shareholders are benefiting at the expense of the rest of us. Well duh. Why be a shareholder otherwise? You invest in a given company because you feel that's where you can realize the most benefits. That's the only reason the company exists. Second, even if both these newly split entities are taken over by foreigners, they STILL pay taxes in Canada. Yes, foreign companies with operations in Canada must pay taxes in Canada. So even if, horror of horrors, the greedy shareholders decided to sell to a foreigner, there wouldn't necessarily be any tax losses. Third, foreign takeovers are NOT EVIL. They represent a MASSIVE injection of investment capital into the country, without which we would be much poorer. And last, if the shareholders did indeed sell off these new entities to foreigners, what would they do with the cash? Why, they'd either spend it or reinvest it - much of it WITHIN CANADA. So many other companies, both domestic and foreign, would benefit from this new shareholder wealth. Shareholders don't burn their money after they've sold their shares. That money goes on benefiting the Canadian economy in one way or another. But go on believing that it's all just a conspiracy to steal Canada's resources, or to fulfill Harper's sinister plans to merge with the US, or whatever it is you believe. It's so much easier than actually thinking things through.
  12. Globe Insider subscriber content
    Jimmy K from Toronto, Canada writes: ECA already has a reasonable premium, they're just chasing after oilsands premiums. Either way, either integrated oil is priced too low or oilsands is priced too high. Time will tell!

    Godfried Wasser, this has nothing to do with Canadians not valuing assets correctly. The vast majority of EnCana shareholders are American, and the vast majority of EnCana shares are traded on the NYSE, not the TSX. The problem is the EnCana's, Nexen's, etc, just aren't given the premium valuation that the others are, so pulling out the pure plays would generate more value for shareholders. If the cost of equity for the pureplays is so much lower, it's probably hard for them to justify their current structure. Still, it's too bad to see Canada's largest corporation split rather than grow. Wouldn't surprise me if a hungry foreign firm is eagerly awaiting the chance to gobble up a much easier to digest half.
  13. C. M. from London, Canada writes: Thanks to the last two posters. Yes indeed ignorance abounds !! There is nothing stopping foreigners from buying our resource companies. They buy and sell massive chunks of them every day on the stock market. Who says Encana isn't already American or Latvian or held by Martian holding companies ? When headquarters move, it's just the senior exec's and Bay Street/ Calgary lawyers that end up looking for work. Nothing else changes. G&M said yesterday that the new gas company will likely go after Duvernay now to bulk up. It would be a good time for everyone to survey the producing juniors and start investing for yourselves.
  14. J Kooman from Canada writes:

    When a Canadian company is taken over by a foreign interest, the profit it generates from international operation will stop bringing the usual taxes, and profit /dividends to Canada.

    Some examples include previous Inco operation in Caledonia, Falconbridge operation in Tanzania. The profit goes directly to new owner companies in Brazil and Britain /Swizterland; note also both companies do not trade in Canada now.

    Each part of the divided EnCana is smaller and easier to be taken over; but
    a split also removes some of the bargaining strength the combined EnCana used to have.

    ...
  15. S M from Canada writes: Another near-retirement CEO wants futher enrichment of his stock options? This only means the end of another company. Everyone knows that unlocking value means available for purchase. Neither of the split entities will make it to their respective first birthdays...
  16. Rudy Krueger from High River, Canada writes: There are scores of reasons for EnCana to do what its board has directed. To speculate on the reasons is a waste of breath. This is a very unusual company with a very unusual history and asset base. The governors of the company have legal and ethical compulsion to ensure that it is structured and operated so as to make the very best long term use of the real and perceived value of the company. AEC and PCP (the founding companies) have a lot of expertise in shallow gas and heavy oils of the western Canadian basin varieties. They know where the stuff is, the challenges of producing it (generally) and what has or does not have economic value under various scenarios. There are hundreds of critical variables associated with each of these two fairly broad categories of production. The company also has a very complex land base and challenges associated with exploiting it. On the whole this is a daunting operation to run and it cannot be allowed an organization that makes governance and risk management any more complex than it is intrinsically. This move has a lot of good sense behind it. It must also front a lot of untold stories about runaway bureaucracy and corporate nonsense. A good housecleaning is necessary in situations like this every once in awhile. Those of us who have a heavy vested interest in the future of the company are grateful for the vitality that is shown by this move. It is also a vote of confidence in the western Canadian oil industry and the production basin. On the whole very good news. I just wish the anouncement was more explicit. Notwithstanding the funny postings that show up regularly on blogs like this one, a lot of people out here can make better use of "the straight goods" than the cropped and trimmed version.
  17. Colin U from Alberta, Canada writes: I find it interesting the this company wants to split up...yes to unlock shareholder value, but isn't it true most companies look at buying other companies to grow and to also gain value for shareholders? I almost think executives make deals for the sake of making a deal and making news headlines and to show the shareholders that they are doing something....Look at Penn west making a huge purchase only months ago, to get BIGGER....I'm not saying either way is the right way, but it seems like its "lets get bigger then split up and try to get bigger again" so is it bigger is better or just stay smaller and profitable, make money and call it a day....
  18. San Tomas from Kelowna, Canada writes: I get a laugh at how these Big Oil boys are falling over each other in their race to build Oil Sands plants, now that the price of oil is sky high. In the '80's when costs of labor and materials were fairly low (in comparison with today's cost) not one of these companies wanted to build. Many of them even pulled out during the engineering phase as they (the big boys) could not see the trees for the forest. Suncor and Syncrude were expanding during that time and are now reaping the rewards. What a bunch of moronic CEO's!!!
  19. Don Bryant from Calgary, Canada writes: Hey, Dave C, you don't like the way things are done in Alberta, then b*gger off. We neither need nor want your kind here.
  20. Globe Insider subscriber content
    Godfried Wasser from Calgary, Canada writes: San Tomas from Kelowna, Canada writes: I get a laugh at how these Big Oil boys are falling over each other in their race to build Oil Sands plants, now that the price of oil is sky high.

    San, don't you think that Syncrude is not an oil company? Did you check out their ownership?

    Suncor is a privitized crown company so you could argue slightly different.

    What about the others Shell, CNRL, Opti? Not really oil companies?
    When did you think those companies started their projects? In 2006?
    Duh!

Comments are closed

Thanks for your interest in commenting on this article, however we are no longer accepting submissions. If you would like, you may send a letter to the editor.

Report an abusive comment to our editorial staff

close

Alert us about this comment

Please let us know if this reader’s comment breaks the editor's rules and is obscene, abusive, threatening, unlawful, harassing, defamatory, profane or racially offensive by selecting the appropriate option to describe the problem.

Do not use this to complain about comments that don’t break the rules, for example those comments that you disagree with or contain spelling errors or multiple postings.

Back to top