NEW YORK, NY--(Marketwire - Feb 4, 2013) - Oil & Gas companies are exposed to a wide range of macroeconomic factors. Suppressed energy demand and subsequent muted pricing has affected the bottom-line of oil & gas companies. In such scenarios, all the major companies are looking to focus on their core competencies and trim superfluous assets. ConocoPhillips took a major step last year and spun off its refining business to set up a new entity, Phillips 66. Similarly, Canadian company EnCana Corporation sold its stake in quite a few of its major projects to generate cash and augment its core activities.
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The biggest news for EnCana Corp. this year has been about the abrupt departure of its CEO and President, Randall K. Eresman. However, as stated by its interim CEO, the departure does not signify any strategic change as far as the company policies and plans are concerned. However, given EnCana's below par performance on and off the stock market, it would have been a more welcoming announcement if the company actually had been contemplating rethinking its plans.
EnCana is mainly invested in natural gas production and holds stake in lucrative Duvernay JV with PetroChina. Though, Duvernay holds high potential, it is up to EnCana to harness it properly. Currently, PetroChina holds 49.9 percent interest in the property, which it acquired for $2.18 billion. Similarly, it sold 40 percent interest in Cutbank Ridge to Mitsubishi for $2.9 billion. However, despite these high profile transactions, EnCana stock failed to respond in the market.
EnCana is planning to focus on its core activities and has been divesting other assets. As a part of this strategy, it disposed of 30 percent of its stake in Kitimat Liquified natural gas project. The company sold the stake to Chevron Canada Limited. EnCana had initiated the project in 2011 along with EOG Resources Canada and Apache Canada Limited. The company has been witnessing downbeat growth when it comes to sales and margins. In order to provide any meaningful value, the company needs to work from scratch.
Elsewhere on the industry, ConocoPhillips announced its first annual results as an out and out upstream company last week. After hiving off its transportation and refining businesses in May, 2012, the stock has been gaining ground steadily. The company had been selling its assets and made quite a few high profile project exits in the fiscal fourth quarter. ConocoPhillips is looking to dispose of its non-core assets and generate enough resources to make investments in more lucrative areas. Fourth quarter profits were lower on account of asset sales, capacity decline and oil and gas prices. Oil prices remained under pressure for the fourth quarter as well, bringing no respite for the company. However, in the long-run, the company is likely to benefit from non-core asset sales.
ConocoPhillips offer healthy dividend yield of 4.49 percent. The company also exceeded its target for asset divestment. ConocoPhillips generated about $12 billion from asset sales last year. However, for maintaining its dividend yield, the company is banking on energy price increase.
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