QUOTE AND NEWS
SeekingAlpha  44 min ago  Comment 
ByDaniel R Moore: In February of 2013, I published an article entitled "ECA Marcellus Trust is an Expensive Natural Gas Play - Income Investors Beware." At the time, the ECA Marcellus Trust (ECT) units were trading at $18.34. Today, the units...
DailyFinance  Mar 31  Comment 
PORTLAND, OR -- (Marketwired) -- 03/31/14 -- Northwest Natural Gas Company, dba NW Natural (NYSE: NWN), announced today that it has executed an amendment to its Carry and Earning Agreement with Encana Oil & Gas (USA) Inc. (Encana) in order to...
StreetInsider.com  Mar 31  Comment 
* Johnson & Johnson (NYSE: JNJ) announced that it has accepted the binding offer from The Carlyle Group (Nasdaq: CG), which was received and announced on January 16, 2014, to acquire its Ortho-Clinical Diagnostics business for approximately $4...
Wall Street Journal  Mar 31  Comment 
Canadian gas giant Encana Corp. said Monday it has agreed to sell its Jonah field natural-gas properties in Wyoming to an affiliate of TPG Capital for about $1.8 billion.
DailyFinance  Mar 28  Comment 
CALGARY, ALBERTA -- (Marketwired) -- 03/28/14 -- Encana Corporation (TSX:ECA)(NYSE:ECA) announced the expiration of the tender offer and consent solicitation, commenced by its wholly-owned subsidiary, Encana Acquisition ULC, relating to the 5.80%...
Benzinga  Mar 28  Comment 
NICE Systems (NASDAQ: NICE) shares touched a new 52-week high of $43.04 after UBS upgraded the stock from Neutral to Buy. Carrizo Oil & Gas (NASDAQ: CRZO) shares rose 3.51% to reach a new 52-week high of $54.79 after Mizuho Securities...
Resource Investor  Mar 20  Comment 
Chesapeake Energy and a unit of Encana pleaded not guilty to conspiring to avoid competing for leases in Michigan.
StreetInsider.com  Mar 17  Comment 
* Chesapeake Energy Corporation (NYSE: CHK) announced that Chesapeake Oilfield Operating, L.L.C. (COO), its wholly owned subsidiary, has filed a Registration Statement on Form 10 with the U.S. Securities and Exchange Commission. COO currently...
Wall Street Journal  Mar 17  Comment 
Encana in advanced talks to sell its Wyoming natural gas fields to private-equity firms Carlyle Group and NGP Energy Capital Management for about $2 billion.




 

Encana (NYSE:ECA) engages in the the production of natural gas from natural gas formations, including tight gas, shales and coal bed methane (CBM). [1] The companies segments are divided into two geographic regions: a Canadian Division and a USA Division. Relatively low natural gas prices have had a significant impact on earnings while also limiting EnCana's capital expenditures as will as its expansion plans.[2] In addition, the company engages in unconventional gas production, which is facing regulatory scrutiny in North America.[3]


Business Growth

Revenue growth can be partially attributed to acquisitions of various North American land and properties in 2010.[4] However, a weak natural gas pricing environment has partially offset Encana's expansions by reducing revenues, profitability, and overall return on production.[5] In 2010, Encana reported annual net income of $1.5 billion on $8.8 billion in revenues, representing a 19.4% decline on net income and a 20% decline in revenue.[6]

Trends and Forces

Weak natural gas prices and supply glut reduce Encana's return on production

Natural gas future prices have averaged approximately $4.2 per million BMU over the first months of 2011.[7] Since 2008, prices have declined by 52% due to high supply and relatively low demand in North America. Encana's operations are very concentrated on natural gas production, and its profitability and revenues have decline in a directionally consistent manner with natural gas prices.[8]

In response to a weak environment, Encana's management is curtailing capital expenditures in an effort to reduce costs.[9] To further support its growth, Encana has sought to engage in partnerships to develop and finance its properties.[10] However, these partnerships and other forms of external financing have the potential of making Encana dependent on these sources to fund acquisitions. In addition, partnerships and other asset sales have reduced the company's portfolio of natural gas properties significantly.[11]

Energy Demand from Overseas has of potential of driving future natural gas demand in North America

As several Asian and South America economies growth, their demand for energy in the form of coal, natural gas, and oil expand as well.[12] Because natural gas provides an environmentally "cleaner" alternative to coal, the economies of China, India, and Brazil are projected to require substantial amounts of natural gas in the future.[13] Many of these countries have substantial resources. The U.S. Energy Information Administration estimates that China has 1.28 quadrillion cubic feet of technically recoverable shale-gas resources, among the most in the world. While China is drafting plans to develop its shale-gas reserves, many Chinese energy companies like PetroChina Company (PTR) are seeking to partner with North American gas producers to secure future supplies.[14]

For producers like Encana, these partnerships have the potential of providing the financing necessary to grow their businesses and develop their currently owned fields. Other Asian companies like Petroliam Nasional Bhd, Barrick Gold Corp (TSE:ABX), and Korea Gas Corp (SEO:A036460) have also sought energy and mineral deals with North American companies.[15] However, these deals are not a sure thing, even after the partnership has been signed. In 2011, PetroChina Company (PTR) ended a $5.5 billion deal with Encana.[16]

Competition

Encana's competitors are independent oil and gas producers in North America. Because weak gas prices have reduced the revenues and capital expenditures of many of its competitors, several US and Canadian companies are seeking to strike deals with a limited number of Oil & Gas Majors or foreign companies in order to finance their expansions.[17]

In Canada, Encana competes with

In the US, Encana competes with

References

  1. Reuters: Encana Corp Company Profile as of June 2011
  2. Reuters: Encana Corp Company Profile as of June 2011
  3. Reuters: Encana Corp Company Profile as of June 2011
  4. Morningstar.com: Company Overview and Financials, June 2011
  5. Morningstar.com: Company Overview and Financials, June 2011
  6. Morningstar.com: Company Overview and Financials, June 2011
  7. Encana Investor Relations: 2010 Annual Report
  8. Encana Investor Relations: 2010 Annual Report
  9. Encana Investor Relations: 2010 Annual Report
  10. Encana Investor Relations: 2010 Annual Report
  11. Encana Investor Relations: 2010 Annual Report
  12. San Francisco Chronicle:Encana Faces Slower Growth Without Partner on Shale-Gas Output, June 2011
  13. San Francisco Chronicle:Encana Faces Slower Growth Without Partner on Shale-Gas Output, June 2011
  14. San Francisco Chronicle:Encana Faces Slower Growth Without Partner on Shale-Gas Output, June 2011
  15. San Francisco Chronicle:Encana Faces Slower Growth Without Partner on Shale-Gas Output, June 2011
  16. San Francisco Chronicle:Encana Faces Slower Growth Without Partner on Shale-Gas Output, June 2011
  17. Bloomberg: Canada's oil deal falling most since 2003 as crude rallies, June 2011
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