Encana Corp (ECA.TO)

Just reported and earnings were $0.31 versus the $0.18 consensus, which was a positive. The way natural gas has come, it’s going to push this stock. Over the last 10 years, this company has all its performance in the 1^st 6 months of the year. The back 6 months is red. He would look to Sell in May or June.

This is a classic of what a lot of the energy stocks are doing right now. Chart shows a base had formed at around $17.40 and finally broke above that and is now establishing an upward trend. Very encouraging and an indication that it should go significantly higher. In an upper trend, outperforming the TSX and trading above its 20 day moving average. Seasonality clicks in around the end of January through until the middle of April.

To him nothing has really changed in the gas market. He focuses on the supply dynamics and there are a lot of people drilling for natural gas in the US and getting it out of the ground very cheaply. He stays away from natural gas producers.

About a year ago, they decided to either joint venture or sell some of their non-core properties and focus on liquefied natural gas. The worst is probably past for natural gas. Pays a relatively decent dividend. Stock will probably be higher 12-24 months from now. Cold-weather has helped drive down inventory levels.

We got a break out in natural gas today. It is not a core name of his. Weather is doing what it can for this one. We can’t ship anything right now but when we can, it will be quite exciting. ECA has a massive land position. Stay with it and see if we can break out though the $22 mark.

(Market Call Minute.) The dividend cut was very disappointing and he didn’t think it was needed. He is holding it, but with the intention of looking somewhere else.

There are 2 dynamics in this story. They are IPOing Clearwater, which is royalty revenue. Also, you have a new CEO with a new strategy focusing more on liquids, targeting 50% in a couple of years. If it hit $20, he would exit.

Because of the cold, people are looking at natural gas again. There was a huge surplus of natural gas in the North American system, but a lot of it is getting burned up right now because it is so cold across North America. Thinks the long-term dynamics for natural gas are not very positive. There is simply too much of it around.

Highly dependent on the price of natural gas, but even more important is how capital has been invested. Found they were spending their money on 24 different projects, which should have been concentrated on only the best assets. That is now taking place. A bit of uncertainty with the new CEO, this explains why the stock has not moved much. One of the most interesting things is the promised mid-2014 spin out of the Clearwater royalties. (See Top Picks.)

If you own, he would be inclined to redeploy the money. Historically the producers go up and down following the commodity price and the commodity price is hard to predict. He would move to energy infrastructure such as a pipeline, because they have much steadier growth.

(Market Call Minute) Disappointing in 2014 outlook made it a good entry point last week, but prefers others.

Have a new CEO and a new focus. Great properties that they are getting no value for because of miss-execution. Have narrowed down where they are going to put their capital into 5 specific areas. Increasing liquids, natural gas and oil components to get a higher value. Going to spend less to produce the same. A “show me” story. Yield of 1.54%.

The setback today certainly provides a good buying opportunity. The 3^rd largest natural gas producer in North America. Today they announced they are going to diversify much more into liquids and do it fairly rapidly over the next few years. Maintaining credit rating is a priority for them as well as the integrity of the balance sheet.

Has been depressed for a couple of years but now you have a strategy going for you. Inexpensive valuation. Canada has been seen globally as an opportunity.

Natural gas and have been suffering over the last few years with gas prices dropping from $15 down to $3. Now with gas prices stabilizing and with a new president coming in, he expects this will show some signs of life and continue to fix the balance sheet making themselves more sustainable. If you are reasonably bullish on natural gas going up in the next 15-18 months, this can be a very good place to be. If you are pessimistic, you might have to wait some time yet.