Back to top

Analyst Blog

Exploration and production (E&P) company, Encana Corporation declared the closure of 45,500 net acres of Eagle Ford properties’ acquisition from mineral explorer Freeport-McMoRan Copper & Gold Inc. . Encana paid roughly $3.1 billion in cash for the purchase.

Being Canada’s largest natural gas producer, Encana’s profits were impacted negatively by a fall in natural gas prices in the recent past that made the company restructure its asset base with a focus on oil-producing resources. The latest deal corroborates this shift.  

The acquired Eagle Ford assets − situated at Karnes, Wilson and Atascosa counties of south Texas – produced roughly 53,000 barrels of oil equivalent per day (boe/d) during the first-quarter 2014. Encana added that the contribution from the purchased resources has doubled its current crude oil output. Moreover, the company believes that the increase in production levels will in turn generate higher cash flows and shareholder return in the near term.

Separately, Encana announced that it has completed most of the previously declared sale of some non-core resources based in Leon and Robertson counties of East Texas. From the divestment, Encana got roughly $427.0 million out of the $530 million purchase price. The company will likely receive the remaining amount by the third quarter of 2014.

Encana is also planning to release its updated 2014 guidance, considering the effect of all the completed transactions till now.

Calgary, Alberta-based Encana holds a highly competitive land and resource position in a number of the region's most promising shale and tight gas resource plays. This provides the company with a low-risk, long-life and sustainable growth profile.

As a result, Encana currently holds a Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.

One can also consider players in the same industry like Ultra Petroleum Corp. and WPX Energy Inc. . Both stocks sport the same Zacks Rank.
 

Please login to Zacks.com or register to post a comment.