The Bull Case for EnCana

EnCana (ECA) is a large North American onshore producer of natural gas and crude oil, with major operations in Alberta, Canada (oil sands) and the United States. ECA's other operations include the transportation and marketing of crude oil, natural gas and natural gas liquids (NGLs), as well as the refining of crude oil and the marketing of petroleum by-products. ECA was the largest producer of natural gas in North America last year.

While divesting overseas operations, EnCana is still adding to assets through both acquisition of high-grade fossil fuel property and smart extraction techniques - all in the relative safety of North America. In short, the management team in place within EnCana is using, producing and expanding assets better than almost any other company within their sector. A Chesapeake Energy (CHK) it is not - and that is a good thing.

Trading at $50.99/share, ECA has popped up in the past few weeks, but I believe it is a great long term play on oil and natural gas. I would use any pullback into the mid-40's as a solid entry point.

Sporting a 3.12% yield, this $38.5b US company is trading at a PE of only 5.8. EnCana deserves strong consideration as a stand-alone stock representing the fossil fuel sector.

While I have been preaching ETFs, preferred stocks and inflation-protected securities over recent months, ECA has been traded in and out of my Speculative Portfolio over the past few years. It has made me good money. Recently, I have purchased it (cost basis around $42.) with the intention of holding ECA for the long term.

The market, despite the record run up the past two months is still frothy with uncertainty and potential setbacks. Holding a few quality holdings like EnCana, in addition to your safety net, is a worthwhile consideration.

Comments

[Mark Divy:]

Encana is a Canadian Company - not a U.S. company.

May 05 08:48 AM

[The Hammer:]

Actually your article is little more than a pump. Where is the detail?
The poster above beat me to the punch as ECA is Canadian company and also a great hedge vs the dollar since the Canadian currency took a beating the past 6 months and is soon rebounding.

May 05 08:58 AM

[prairiedog555:]

And being a Canadian company you will also get the currency bonus, if you subscribe to a falling $.

May 05 09:06 AM

[Quicksilver...:]

You are championing the company because of the diversification and integration (oilsands, nat. gas, downstream) yet the company is single-mindedly trying to 'split' itself (when the time is 'right'). It's greatest strength will be its weakness.

May 05 09:28 AM

[TAS:]

Of course Encana is Canadian company - the artcle did not state anything otherwise. The strength of this company, reserves and, is management. They are superb. Sorry if a few readers did not get the point of the post.

There is not hint that Encana is positioning itsellf for a takeover. Far from it. In my opinion, this is not a Canadian $ play. It is a bet on intelligent growth of assets brought about by very astute management.

May 05 10:29 AM

[badbernanke:]

Useless blog with not a whit of analysis.

May 05 12:47 PM

[somecatchyp...:]

I believe Encana is listed both on the NYSE and TSE. For a US investor, might make sense to purchase in Canadian dollars on the TSE for currency diversification.

May 05 01:30 PM

[Bull Run:]

Consider looking at UNG weekly, Natural gas prices, and then consider Encana, which dominates the NG, N. America market..The UNG weekly chart is UGLY, but I think it's a great buying opportunity, but you need strong nerves.

May 05 02:58 PM

[peterfk:]

So why is this company better than Suncor?

May 05 03:54 PM

[The Hammer:]

<Of course Encana is Canadian company - the artcle did not state anything otherwise. The strength of this company, reserves and, is management. They are superb. Sorry if a few readers did not get the point of the post.

There is not hint that Encana is positioning itsellf for a takeover. Far from it. In my opinion, this is not a Canadian $ play. It is a bet on intelligent growth of assets brought about by very astute management.>
<Sporting a 3.12% yield, this $38.5b US company is trading at a PE of only 5.8.>
Not looking to pick your article apart but you said it was US. read the sentence above.
I hope you would reverse your thumbs down.
You failed to mention first that the ECA wanted split its oil sands and gas business, but due to market conditions did not. Also they partnered with COP to combine their oil sands properties and 2 of COP's heavy oil refineries. Creative move. Also failed to mention that ECA is the 2nd largest NA nat gas producer in some of the best gas shale plays. There is alot more to this company than this brief comment and article.

May 05 04:24 PM

[The Hammer:]

And one last thing, I did not say it was only a Canadian currency play just another kicker to the investment as the dollar weakens vs canadian currency. From par to .80 and I expect this to reverse going forward. Big added returns due to currency.

May 05 04:27 PM

[E.D. Hart:]

"Sporting a 3.12% yield, this $38.5b US company is trading at a PE of only 5.8.>
Not looking to pick your article apart but you said it was US. read the sentence above."

The US after $38.5 in the article above references the US dollar, not US domiciled.

May 05 06:49 PM