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Doug Suttles of EnCana speaks to the media after the company announced him as the new president and CEO in Calgary, Alberta, June 11, 2013. Encana Corp named former BP Plc executive Suttles, who played a major role in responding to BP's disastrous 2010 Gulf oil spill, as its new chief executive on Tuesday as Canada's largest natural-gas producer searches for a new course following years of strategic missteps.

TODD KOROL/Reuters

Encana Corp. has started the formal process of spinning out its Western Canadian royalty oil and gas business – one that could be worth as much as $4-billion – by filing with regulators a preliminary prospectus for its much-anticipated initial public offering.

The document does not provide the number of shares to be offered or their price, but it gives previously unreleased data, including recent production, reserves and cash flow data for the business, which is to be named PrairieSky Royalty Ltd.

It also named Andrew Phillips as its president and CEO. Mr. Phillips was most recently head of Home Quarter Resources Ltd., a private oil and gas company.

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Encana has said it plans to hold on to a majority stake in the business, which generates fee and royalty income by offering other companies exploration and production rights on Alberta lands totalling 5.2 million acres.

The IPO is part of a sweeping reorganization under CEO Doug Suttles at Encana aimed at focusing operations on far fewer properties around the continent. The business generates income with minimal expenditures by the company.

In a recent research report, Canaccord Genuity analyst Phil Skolnick pegged the enterprise value at $2.8-billion to $4.2-billion, with $3.5-billion at the mid-point.

In 2013, the business generated funds from operations of $164-million, up 22 per cent from the year before, according to the prospectus.

TD Securities Inc. and CIBC World Markets Inc. are the joint book runners for the transaction. The offering is expected to close in late May or early June, pending regulatory approvals.

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