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New president and CEO of Encana Doug Suttles answers questions during a media round table in Calgary, Alberta, June 11, 2013.Todd Korol/The Globe and Mail

Encana Corp.'s new chief executive officer is shaking up the natural gas giant for the third time in as many years, surprising investors with a deeper-than-expected dividend cut and plans to create a new company expected to be a shareholder money-spinning machine.

Some four months after he took the helm, Doug Suttles is also cutting jobs and narrowing Encana's focus to oil and natural gas liquids.

Unveiling Encana's strategic plan Tuesday, Mr. Suttles outlined steps to make the energy giant smaller before it gets better, marking the third shift in strategy since 2010. Like rival Talisman Energy Inc., Encana is trying to recover from years of languishing as prices hammered the company, particularly as it focused on production growth.

The new plan involves putting the focus on just five plays, down from more than two dozen, cutting 20 per cent of the work force and spinning off an enormous swath of Encana's holdings in southern Alberta. It's also cutting its quarterly dividend by more than analysts had projected, to 7 cents from 20 cents.

Encana will concentrate its efforts on liquids-rich gas such as propane and butane, and on oil. Mr. Suttles' predecessor, Randy Eresman, initiated this shift, but only after abandoning his 2010 plan to double natural gas production over five years.

"This is about focusing on the best returns, about growing liquids in our portfolio, but at the same time, maintaining [natural] gas optionality should the gas price environment change," Mr. Suttles said.

That will see Encana spend 75 per cent of 2014's $2.5-billion budget on five oil and liquids-rich plays, which include the Montney, Duvernay, DJ basin in Colorado, San Juan oil play in northwest New Mexico, and Tuscaloosa marine shale in Mississippi and Louisiana.

The job cuts will wrap up by the end of the year, and offices in Calgary and Denver will be consolidated. A Texas office will be closed.

Encana plans to sell more assets – it did not disclose which ones – and put about 5 million acres of so-called mineral fee title land and associated royalties into a new company created through an initial public offering.

"This is shaking the company up as much as you can shake it up," said Mason Granger, a fund manager at Sentry Investments. "We have to see the fruits of today's strategy, but they are moving the right direction. I think this is a pretty bold step in the right direction."

Encana, Mr. Suttles said, will initially hold on to a majority stake in the new company.

Encana does not pay royalties to the government on its fee title lands – an unusual right it holds thanks to concessions the government made to one of its predecessor companies. Encana will generate cash when other companies pay leasing fees, bonuses, and royalties to Encana.

"We expect that most of the cash flow from the revenue … will be distributed to the shareholders," Mr. Suttles said.

The new company, expected to launch in 2014, will help lure dividend-hungry investors back to Alberta's natural gas fields.

"For us, we have a dividend focus in our fund so we'll be very anxious to take a look at that IPO," Mr. Granger said. "We're very excited because … I fully expect that entity is going to pay a dividend."

Encana will save about $380-million a year before its dividend dividend reinvestment program, Royal Bank of Canada calculates, because of its own dividend cut.

"We see the dividend as an important part of our total shareholder return, and it is important that we maintain a strong balance sheet in our investment-grade rating," Mr. Suttles said.

Investors are warming to the new CEO's plan.

"Overall, I'd say this is positive for the name," John Stephenson, a portfolio manager at FirstAsset, said. "They've lacked strategy for a couple of years now, but I think all of the things that I've seen from Suttles are pretty good and relatively impressive."

With files from reporter Jeffrey Jones in Calgary

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