It's been easy to knock Encana over the past three years. With natural gas prices in the gutter, the company's sprawling empire looked less and less attractive.
Even after Doug Suttles took over as chief executive officer, offering a fresh vision for the company, the skeptics could not be dissuaded. The root problem: No matter how much Encana talked about expanding in natural gas liquids, everyone knew the company would still be heavily tied to dry gas prices.
Undeterred, Mr. Suttles laid down the law, and last November made it clear the company would do what it could to diversify toward natural gas liquids while also scaling back its spread-out operations.
Not even six months since the strategic review was revealed, Mr. Suttles has shown he sticks to his word. In March, Encana announced the sale of its Jonah field operations in Wyoming for $1.8-billion (U.S.). A few weeks later the company filed the prospectus for an initial public offering of a royalty business Encana owns. That deal is expected to raise $700-million (Canadian).
On Tuesday, Encana announced another asset sale, this time unloading some East Texas properties for $530-million (U.S.). The assets' reserves were weighted 97 per cent toward dry gas.
There's no denying the company's gotten quite lucky at the same time. Natural gas prices have popped, benefiting the whole sector, and mergers and acquisitions are roaring back to life, unlocking the stalemate between buyers and sellers.
Yet most successful companies have had at least some luck along the way, and after Encana's drawn-out decline, the energy giant was certainly due for a break. Shareholders will sure take it. The company's stock is up 35 per cent since the start of the year.
With some fresh cash flowing into its coffers, Encana now has some flexibility. Even though the company has said asset sales weren't absolutely necessary and that it could maintain the dividend because it had $2.6-billion in cash on the balance sheet at the end of last year, the energy giant has a billion-dollar debt repayment next month which made the outlook less rosy.
Given the latest moves, Mr. Suttles has some extra wiggle room to decide whether he wants to acquire some liquids-rich land or increase spending on existing properties of this sort, again helping to diversify the business. Funny how fast things can change.