Encana Corp (ECA.TO)

[Caller Asked About a Spin Off not yet trading] Prefers to buy the IPO. Encana is being brought into a focus on 5 plays. Part of this is spinning out of this entity that they call Prairie Sky. They want to build a company where they bring in companies that get royalty. It all comes down to the pricing of this IPO.

If you believe in natural gas, this is one of the really blue chip companies in Canada that participates. Recently spun off some of their more mature assets into a royalty type structure, which is part of the reason why the stock has been strong in addition to the weather we have had.

Has been acting very well. The IPO that is coming up for some of their assets is being anticipated by the market. The Nat Gas market has been a rocket ship in some ways. It could take a couple of years to recover from the current low inventories. Does not think you should trade out this stock right now. These stocks will not pull back this summer.

Prefers TOU for Nat Gas because of better growth potential.

Like many of the other energy producers this is performing much better. Prefers Canadian Natural Resources (CNQ-T). This will give you a “sector perform” and he would prefer other names.

Might be able to increase dividend. A good run lately on the gas price. Putin is helping a bit. The chart looks good. Prefers TOU-T.

Fundamentals are improving. EBV (Economic Book Value) +3 will probably be the major resistance on the stock. All the energy stocks are moving and this one is just following along. His model price calculation and the stock price have a positive trend.

The biggest direct play in Canada, have been doing a nice job. So much is contingent on getting LNG plants on the west coast and pipelines to get it there. If we don’t get them, there is a lot of excess supply. Thinks we will in fact get these plants but there are regulatory delays. Hesitant to get overly bullish on Nat Gas right now.

The spinoff of Clearwater will be a nice cash influx for the company. Stock has been trading right up against 2X BV so it needs something now to get going. It needs to employ that cash wisely. Hope they don’t pay it out in the form of dividends, but use it because they have a lot of stuff inside that could be developed.

Doesn’t know why this has gone up. Gas inventories have come down because it has been so cold in North America and all the natural gas companies got a bit of a headwind. This company famously sells a lot of its gas forward so it is unclear whether it makes a whole lot of money when the spot price goes up like this. The problem is, there is too much gas and until someone builds a world-class LNG facility to get rid of some of the gas, there is going to be a surplus in North America. Sold his holdings over 5 years ago. You are much better off with oil.

Has a few more dollars in it. Recent quarter showed some strength in it and quite a bounce in Nat Gas prices. On a seasonal basis it could pull back. They are good managers of their assets.

It is so big it is hard for it to be the average, which is not good enough. Expectation is that gas will go back down following our winter. ECA has a lot of gas, but its costs are relatively average. TOU is a preference.

He has quite liked the story. They are doing all the right things. He would not be too disturbed about bad news on one project. They are focusing on the right things and the street has come online and a believer. Longer term this is a good opportunity and he would buy on weakness. Buy in September. He sees the price of gas as Low $4s / High $3s for the summer.

CEO did the right thing in turning company around. Down from 27 plays to 5 that are the most impactful. There should be an IPO midyear. They hedged gas and took away a lot of the upside yet protected the 5 plays they are focusing on.

In general, this is a good company. It’s natural gas, so that’s what you have to look at. He likes what they are doing. You are going to have to be patient with this. They are doing all the good things that a good management team should be doing.