Natural-gas giant Encana Corp. which needs to beef up its balance sheet to help keep investors on board, says it's on target to sell some assets.
The company wants to rake in between $1-billion and $2-billion by selling land and infrastructure this year, which would give its balance sheet the polishing many investors are looking for. With debt due dates around the corner, the sales would give Encana a financial cushion.
Interest in select assets in British Columbia and Texas is frothy and highly competitive, Encana chief executive officer Randy Eresman said Thursday.
"We are well-positioned to achieve our stated $1-billion to $2-billion worth of net divestiture target by around year-end," he said during the company's third-quarter conference call.
The market is also keeping a close eye on Encana's search for joint-venture partners. The company wants to strike what it calls "traditional" joint venture deals – cash-and-carry arrangements – for about half of its undeveloped land at its Cutbank Ridge natural-gas shale play in British Columbia.
Calgary-based Encana needs partners to share the massive cost of developing its bounty, and expects to evaluate bids at the end of November.
"If they can get any cash upfront payment as part a [joint-venture]agreement, then that helps them with their debt situation," said Kris Zack, an analyst at Raymond James. Encana will still have to spend cash after a partnership is created as the land is developed, but the market may reward Encana if the payment is meaningful, he said.
Encana's operating earnings, excluding unusual items such as its $414-million foreign exchange loss, clocked in at $171-million (U.S.) or 23 cents per share in the third quarter, compared with $85-million or 12 cents per share in the same quarter last year.
Its cash flow totalled $1.15-billion in the third quarter, up from $1.13-billion last year. Encana has pledged to keep its spending within the limits of its cash flow, and is to reveal its 2012 budget soon.
Analysts said the results held few surprises. "They are essentially performing in line with their Canadian peers and in line with their U.S. peers as well," FirstEnergy Capital analyst Michael Dunn said.
With weak natural-gas prices weighing on Encana's results, the company recently began to jack up its efforts on natural-gas liquids. It said its production of these commodities rose by 6 per cent per share compared with the same quarter last year.
With files from Reuters