EnCana wants to break up.
That is as clear a signal as you’ll ever get that credit markets are back.
EnCana’s strategically sound but poorly-timed decision to split its U.S. natural gas division away from its Canadian oil sands, gas and refining assets last year was delayed for one reason: Cenovus Energy, the new company which would be home to the heavy oil properties, was having trouble borrowing at competitive interest rates.
That was not a reflection of the company: The vision was to introduce Cenovus to the world as one of the best capitalized domestic energy plays, and parent EnCana (ECA) stayed true to that goal. Delaying the break up was simply a function of a credit market gone wild.
EnCana CEO Randy Eresman had the luxury of time on this transaction, and he opted to use it. Delaying the split was the right call. EnCana, the name that will stay with the natural gas-focused company, and Cenovus are now able to borrow at compelling rate – the corporate bond market is in the midst of a stunning rally.
Now, if only Mr. Eresman could do something to boost the price of natural gas…