This stock has been dead for the last five years and many investors got burned massively in the process. That never helps a stock to recover. But when I hear that people want to throw the towel now, it just does not compute with me.
There we have it: Since this summer there has been a complete overhaul at the firm, starting from the CEO and down the organization, there is definitely new life being put in this firm.
The hard decisions have been made: Dividend cut to a more appropriate level, which assets to keep, which ones to sell, where to allocate the precious capex, a clear signal towards the liquid rich plays...I now expect a significant turnaround for this firm.
Yes, the company is very "gassy"...we all know that and that is why they got killed in the last few years. But in terms of assets, they have some of the best liquid rich assets in North America. When people will wake up to what the Duvernay really is (a gem!) and when they will see Encana delivering massively on the liquid production, this stock will get marked up significantly. Bar any general upset in the market, I see the stock back to $30 within 18 months as all of those catalysts get triggered.
Basically I expect a rebound similar to the one CHK had recently; ECA has the advantage of not having to perform fire sales. It has however the disadvantage of having many Canadian assets and currently there is a lot of political uncertainties with regards to "take out" capacity (South with Keystone XL, East and West with political tensions with British Columbia and elsewhere). Those are negatives weighing on the entire Canadian oil and gas sector but they are also catalysts once investors perception changes (i.e. once we get closer to a resolution on those issues). Do your own D&D. GLTA!
In one of the recent conference call, the new CEO (who comes from a family of oil men) said that if there is one thing for sure in this business is that the future is very unpredictable in terms of commodity prices. Following that argument, he said that it was important to keep some optionality.
ECA has amazing gas assets. How I see it is that liquids will help bridge the period from now until NG gets priced back to worldwide prices (i.e. when all these liquefying stations will be up and running in five years or so). I believe gas will be higher than $3.5 in five years. Then Encana will be laughing...it's a long term play for sure but the rewards will be significant in my mind. Patience...GLTA!