Buy Encana On Maximum Pessimism

Jun. 22, 2017 2:58 AM ETOvintiv Inc. (OVV), OVV:CA19 Comments


  • Encana is beaten up on oil pessimism and is trading near book value.
  • Encana's core drilling locations include an up to 12,000 well position in the Permian Basin.
  • Encana also has a significant position in Canada's largest natural gas formation the Montney which is liquids rich.
  • Buy Encana before oil inventory starts to come down on expected or unexpected circumstances.

The narrative in the oil and gas markets is "lower for even longer." I think that narrative is driven with a backwards view of the oil and gas markets, not a forward looking one. Those jumping on the downtrend now are short-term traders who think they can somehow outmaneuver supercomputers, hedge funds, prop traders and the traders who were in on the trade early. No, late comers to the downtrend in oil and gas stocks will get run over soon - just like every other late comer to an almost every other fundamentally questionable trend.

As I have been touching upon, I don't believe the hype of lower for even longer on oil. OPEC production cuts, over estimation of what shale can really do and the very real likelihood of intermediate term oil supply disruptions in the Middle East tell me that now is the time to fire with effect and buy oil stocks. Energy companies with solid financials, assets in the Permian Basin, natural gas assets to develop over time and a management that understands oil's future is no longer long-term, are the companies to invest in. Encana is one such company.

Throw the Book at Encana

Encana (ECA) is an independent oil and gas producer formed in 2002 from the merger of PanCanadian Energy Corp and Alberta Energy Company. The most interesting part of its early history was a brush with Enron (yep, that Enron) as part of a round-trip trading scandal. Today, through a long series of transactions, culminating in a transformative acquisition of Permian Basin assets in 2014, the company operates in what it calls its "Core Four" assets.

Financially, the company has undergone a major transformation the past several years. Management has sold assets to bring its total liabilities down to $8.17b ( just under $4.2b debt and $4b obligations) from 14.85b to

This article was written by

Kirk Spano profile picture
Join MarketWatch Award Winner Kirk Spano For More Profits & Less Risk.

25+ years of beating markets with less risk.'s "The World's Next Great Investing Columnist" & publisher of Margin of Safety Investing.

Get my sought after Macro view, analysis of secular trends, ETF asset allocation, my top growth & dividend stocks, as well as, option selling for making more retirement income.

I own and operate Bluemound Asset Management, LLC - a boutique registered investment advisory that manages and consults on 9 figures of wealth. I was lucky to have several mentors who managed billions of dollars, including, one who literally helped write the book on option selling. I have now managed money since the 1990s through several major market cycles. 

In the past decade I was able to work on investment and real estate projects with several private equity firms, hedge funds and family offices. Since 2011, I have been widely syndicated and appear as an investing expert in the media. 

Follow my work, as I try to help you make great returns with less risk.

Disclosure: I am/we are long CHK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own a Registered Investment Advisor, however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk as all investments carry the potential for loss and should consult an investment advisor before proceeding on any trade or investment.

Recommended For You

Comments (19)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.