Encana Corp (ECA.TO)

Thinks the stock is overvalued, and they are in really terrible shape right now. Relying on asset sales. They need at least $60 WTI a barrel to keep production flat. Thinks they are going to cut CapX. Not something he would own right now.

It is on the gas side and is a giant in North America. At less than $5 it is amazing. You can hold this as a matter of patience with the price of gas.

Short? This is in an area that we are in for a long haul on crude. Doesn’t see any upside to this. If they move it to “junk”, it could go lower.

It is a tough place to make money and the landscape will not get better. This name has been wiped off the map. They made a huge bet on getting out of natural gas and into oil at the wrong time. They are not doing a whole lot very well if you look at the dividend, the balance sheet and the market they are in. 8.1% yield. That is good until it is not.

Sometimes companies are forced to sell midstream assets to raise capital, but unfortunately the company that owns the midstream charges for that. Encana is having some issues in that they are having some really high costs on the transportation side, as well as having high operating costs. In this environment, you want the low cost operator, and this is not it.

This tends to closely track oil and gas, and the trend for those commodities is down. He would avoid this for the time being. Eventually oil will base and break out, but now is not that time.

Good solid gas, and an increasing oil producer now. On all commodity companies, you want to make a call on where you think the commodity is going forward. Made a big acquisition about a year ago, just before things started to turn down, which left them with a bit of a levered balance sheet. Given today’s prices and were he thinks they are going in the short term; he would hold off on buying this.

You have a lot going on with energy stocks. The juniors are the most down. He would prefer companies with a little more capitalization. Energy is not a renewable resource. It is not recyclable. These Nat gas and Oil prices are under a huge amount of pressure and at some point something has to click in. You will see a plateau somewhere. You don’t have to worry about ECA-T going out of business.

Still somewhat bearish on oil until he sees politics change in the far east. Once that happens, then companies like this can really start to get back into business. Doesn’t see them in any great financial difficulty. There is still a significant amount of risk in the energy sector. Prefers others.

For a long-term hold? Highly cyclical, very capital intensive, and tied to a price set by a whole bunch of world markets. He would encourage you to do a little homework and look at really good global companies with low volatility patterns. There are a lot of them.

If you own, he wouldn’t be selling it now. Thinks energy has gone down way too much. Hasn’t started adding yet. His company has a target of $8.50. He likes that they cut their dividend.

Good company and he likes them, but if you model $2.50 gas and $50 WTI for 2016, you are looking at a CapX to Cash Flow of 143% which is not good.

In the short term, this is messy because of the price of the oil/gas sector. The 2^nd largest gas reserve holder in the Western US and Canada. Basically you hold this in order to make a small killing with patience, when you get a recovery.

Supply will stay out of balance until the second half of this year. The market will figure that out ahead of time. This summer might be a time to edge into energy. This would be a better way to tip toe into the space.

There is probably value here for someone to come in and take it over, that he always finds it very, very difficult to invest or recommend based on the possibility of a takeover. This company has basically destroyed shareholder value for over 20 years and it doesn’t have any growth. Have cut their dividends at least once. If you want to buy the gas sector, he would rather buy a company that can deliver the goods, and has lower costs and a better profile. This could include Tourmaline (TOU-T) or Peyto (PEY-T).