EnCana Shale Plays Bode Well

EnCana Corporation (ECA - Analyst Report) has recently said that a significant exposure to the Horn River shale play (in a remote corner of northern British Columbia) should add substantial value to the company in the future. This shale play could hold as much as 500 trillion cubic feet (Tcf) of natural gas.

The Horn River shale play ranks among the largest gas finds in North America as exploration in the region firms up its potential. It is the third largest shale play after Marcellus and Haynesville, having 1,500 Tcf and 717 Tcf of gas, respectively.

With partners such as Apache Corporation (APA - Analyst Report), EOG Resources (EOG - Analyst Report) and Devon Energy Corporation (DVN - Analyst Report), the Horn River shale play has revolutionized North America’s natural gas industry.

EnCana has built considerable land positions in different emerging shale plays, which add significant depth to its strong portfolio of natural gas assets across North America. As of year-end 2008, the company had approximately 260,000 net acres of producing acreage in the Horn River Basin and evaluated 15 wells, 9 of which have been placed on long-term production. Year-to-date, a total of 40 wells have been drilled in this shale play.

EnCana’s resource plays continue to provide excellent performance, driven by its industry-leading positions in plays such as the Deep Bossier formation of East Texas, the emerging Montney formation of Cutbank Ridge in northeast British Columbia and the Jonah formation in Wyoming.

With its industry-leading inventory of long-lived unconventional oil and gas assets and solid production hedging program at attractive price, EnCana remains focused on capital discipline and free cash flows. However, we believe that all these positives are already priced in, leaving little room for upside from current level. As such, we rate the company as Neutral.

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