BNN Market Call Tonight – Michael Sprung’s Top Picks and Outlook

Outlook:

Global markets were mixed in the second quarter of 2017. The US market recorded another positive quarter, albeit half as robust as the prior quarter. European markets managed to eke out a modestly positive quarter in spite of a large decline in June following the inconclusive UK election. Asian markets were very strong due to trade in information technology and a positive election result in South Korea. Resource heavy markets such as those of Latin America, Australia and Canada were not as fortunate and generally posted negative returns in the quarter.

Michael Sprung Top Picks AGT, AGT Food and Ingredients, ECA, Encana, Royal Bank, RY

Michael Sprung’s Top Picks: AGT Food and Ingredients, Encana, Royal Bank

Towards the end of the quarter, the Central Banks in Canada, Europe and the US were taking a more hawkish tone insofar as hinting that economic conditions have improved to the point where interest rates may be raised in the near future. It remains to be seen how the economies may react to rising rates. Recessions are more often than not predated by rising interest rates. 

As we enter the third quarter, investors are focusing on the the global trade dynamics. The US has made it clear that they are not happy with the current terms of trade worldwide. Europe is also facing negotiations with Britain on trade policies as their departure from the European Union nears. The recovery since the end of the last financial crisis ten years ago has been slow and tepid while the duration has been much longer than most. Markets have generally performed very well throughout the period without a major correction. In fact, it has been over a year since we have seen a 5% pullback. Given all of the dynamics of rising rates, trade policies and othe geopolitical issues, we would suggest that this is a time to be very cautious.

Top Picks:

Royal Bank of Canada, RY, Owned personally and by clients, Last purchase September 16, 2016, $74.45
The Royal Bank is Canada's largest financial institution that ranks within the largest twenty banks in the world with extensive domestic and wealth operations as well as global banking, capital markets, custody and brokerage networks. Highly profitable domestic operations are funding both domestic and global expansion as well as greater returns to shareholders. At current prices, the stock carries a yield of 3.7%

Encana Corp, ECA, Owned by clients, Last purchase September 15, 2016, $12.70 
Encana is a leading North American energy producer focused on a diverse portfolio of resource plays producing natural gas, oil and natural gas liquids. Over the past four years, Encana has improved operational efficiencies, focused on capital allocation and costs and carried out over $20 billion in acquisitions and divestitures. The asset base has been significantly upgraded and the balance shhet is stronger. Over the next five years, Encana has ambitious goals to increase production and profitability. Much has been accomplished to reposition the firm to compete in a lower pricing environment.

AGT Food and Ingredients, AGT, Owned personally and by clients, Last purchase December 12, 2014, $26.50
AGT is a leader in pulse processing for export and domestic markets.  The company has had notable success in diversifying into food ingredients, an area that is facing increasing global demand. AGT has been expanding its pulse handling and food ingredient production capability. India has extended, for the fifth time,  AGT's ability to import wheat/pulses to December 31. While pulse markets have been less robust than anticipated thus far in 2017, this is a short term issue. As the market normalizes and management exploits opportunities in bulk handling and food, we anticipate that the stock will recover and prosper.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.  

Encana Corp (TSE:ECA) to raise US$1bn for Permian expansion

Canadian oil and natural gas producer Encana Corp (TSE:ECA, Mkt cap 9.57B, Div/yield 0.02/0.65, EPS -4.41, Shares 849.89M) has announced a public offering of common shares which it hopes will raise gross proceeds of just over US$1bn.

Encana TSE:ECA Permian

Encana Corp (TSE:ECA) to raise US$1bn for Permian expansion

The Calgary-based company said late Monday that the offering of 107,000,000 shares, underwritten by Credit Suisse Securities (Canada), Inc. and J.P. Morgan, was priced at US$9.35 per share. An additional 16,050,000 shares are available as part of an over-allotment option.

Encana intends to use about half of the net proceeds to help fund its 2017 capital program, which is focused on growing its production in the Permian Basin in West Texas. The company hopes to double the number of wells it has in the oilfield in 2017 by increasing the number of drilling rigs operating there.

The remaining proceeds from the share sale will be used to repay debt.

Encana established its presence in the Permian Basin in 2014 with its acquisition of Athlon Energy Inc. for US$7.1bn, which gave the company a 140,000 net acre position.

The company says on its website that it “believes the Permian’s unconventional production potential will exceed the Eagle Ford and the Bakken combined”.

Bloomberg reported that Encana joins other producers including Crescent Point Energy Corp. in selling shares in recent weeks to fund drilling as oil prices rebound. U.S. crude is up 65% from its February low, the news provider said.

The offering is expected to close on or about September 23, 2016.

Encana Corp (TSE:ECA) is a Calgary, Alberta based company engaged in the exploration, development, production and marketing of natural gas, oil and natural gas liquids. Encana operates 3 business segments: Canadian Operations, which includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada; USA Operations, which includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within the United States and Market Optimization, which includes third-party purchases and sales of products that provide operational flexibility for transportation commitments, product type, delivery points and customer diversification. Market Optimization sells all of the Company’s upstream production to third-party customers. More from Reuters »

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Encana to sell its DJ Basin assets for US$900m

Encana Corporation (TSE:ECA, Mkt cap 9.25B, P/E – , Div/yield 0.09/3.36, EPS -0.14, Shares 842.50M) has announced the sale of all of its oil and gas assets in Colorado’s Denver Julesburg Basin to a joint venture owned by Canada Pension Plan Investment Board (CPPIB) and Denver-based private firm Broe Group.

Stock Encana Corporation sell DJ Basin assets

Encana Corporation will sell its DJ Basin assets for US$900m

The Calgary-based firm said the decision was taken in order to balance the books and “create greater flexibility in this market environment”.

The deal is said to be worth somewhere in the region of US$900 million, with 95% of the entity to be owned by CPPIB and the remaining 5% held by Broe Group.

The sale of the 51,000 net acres of the Denver Julesburg field, located in northeast Colorado, streamlines Encana’s oil and gas ventures to four regions.

“As we advance our strategy we continue to focus our portfolio and capital on our four most strategic assets, the Permian, Eagle Ford, Duvernay and Montney,” said Encana chief executive Doug Suttles.

“Our efforts to transform our portfolio, improve efficiency and grow margins are increasing returns and strengthening our balance sheet, positioning Encana for success throughout the commodity cycle. The new entity is acquiring a quality asset along with a highly talented team.”

Encana highlighted how it has netted a profit of approximately $2.7 billion this year from combined sales of assets, while it aims to have reduced its debt by around $3 billion by the end of the year.

This latest announcement comes only two months after Encana agreed to sell $850-million worth of its natural gas assets in northern Louisiana.

The deal is expected to close in the fourth quarter of 2015, subject to regulatory approvals.

Encana Corporation is a Calgary, Alberta based company engaged in the exploration, development, production and marketing of natural gas, oil and natural gas liquids. Encana operates 3 business segments: Canadian Operations, which includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within Canada; USA Operations, which includes the exploration for, development of, and production of natural gas oil and NGLs and other related activities within the United States and Market Optimization, which includes third-party purchases and sales of products that provide operational flexibility for transportation commitments, product type, delivery points and customer diversification. Market Optimization sells all of the Company’s upstream production to third-party customers. More from Reuters »

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Stockwatch – Encana pressing ahead with shift to oil with Athlon purchase

Canada’s largest natural-gas producer, Encana Corporation (TSE:ECA, Mkt cap 17.78B, P/E 48.95, Div/yield 0.08/1.29, EPS 0.49, Shares 740.96M) has announced it will spend US$5.93 to acquire Texas-based Athlon Energy Inc. The move is in line with plans to boost its output of lucrative oil and natural-gas liquids.

Stockwatch Encana Corp purchase Athlon Energy Inc

Stockwatch – Encana pressing ahead with shift to oil with Athlon purchase.

Reports suggest that the cash deal – which is expected to close before the end of 2014 – is the largest of the year in the Canadian energy sector. It will see Encana assume the oil-weighted producer’s US$1.15-billion debt.

The deal would give the Calgary-based company control of about 140,000 acres in the oil-rich Permian Basin, Texas, where Encana says it can increase liquids output by two thirds, to 50,000 barrels per day, within 12 months.

Encana’s announcement follows an agreement to sell its remaining 40% interest in PrairieSky, but president and CEO Doug Suttles said the timing of the two was “just fortuitous”.

The deal values Athlon shares at US$58.50 each, which is a premium of around 25% on the company’s closing share price from last week.

The purchase sees Encana add another core region to the six shale fields in Canada and the United States in which it focuses its spending. It also accelerates Encana’s transition from a gas-heavy company to a major oil producer – a move initiated by Suttles last year.

Suttles outlined in November 2013 the company’s aim to derive 75% of its operating cash flows from liquids production by 2017. The acquisition of Athlon’s assets will boost its production by 30,000 barrels of oil equivalent per day.

“We’ll hit that next year now,” Suttles said in a conference call following the announcement.

Encana’s net income grew by 63%, year over year, to $0.37 per share during the most recently completed quarter. This was among the highest growth seen by any company in the energy industry.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Stockwatch – Encana To Raise C$2.6bn From Sale Of Remaining Stake In PrairieSky

Calgary-based natural gas exploration and production company Encana Corporation (TSE:ECA, Mkt cap 18.35B, P/E 51.52, Div/yield 0.08/1.21, EPS 0.48, Shares 740.96M) has announced that it has signed a deal with a syndicate of underwriters to sell its stake in PrairieSky Royalty Ltd.

Stockwatch - Encana Sale Stake PrairieSky

Stockwatch – Encana To Raise C$2.6bn From Sale Of Remaining Stake In PrairieSky

The deal is said to be worth C$2.6 billion to Encana and the secondary offering is expected to close around 26 September, the company outlined in a statement.

The remaining 54% stake in PrairieSky is to be purchased by the underwriters, which will then be offered in shares to investors. The stake representing 70.2 million common shares, at C$36.50 per share, is approximately 30 percent higher than what investors paid in the initial public offering (IPO) in June.

Encana generated C$1.67 billion in the IPO, nearly twice as much as was originally anticipated. The shares sold at C$28 each and immediately spiked. The deal was the largest initial public offering in Canada in over a decade.

According to the latest data, Canadian energy companies sold roughly C$3.7 billion worth of equity in the second quarter of 2014. A figure that stands at more than three times higher than what companies raised in the same quarter in 2013.

PrairieSky operates by generating revenues through royalties obtained from other oil and gas exploration firms that function in its properties.

Encana did not give any clues as to how the proceeds will be used, but it is likely, given the company’s present strategy to move away from natural gas, that the funds will likely be used expand oil-driven operations.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Stockwatch – Canadian Gas Company Encana Reports Sharp Fall in Q2 Operating Profit

Stockwatch – Canadian gas producer Encana Corporation (TSE:ECA, Mkt cap 17.34B, P/E 20.49, Div/yield 0.08/1.30, EPS 1.14, Shares 740.90M) closed the second quarter of 2014 with a sharp drop in operating profit to $171 million, or $0.23 a share, down from $247 million, or $0.34 a share, in the corresponding period of the previous year.

Stockwatch Encana Bighorn

Stockwatch – Encana reports Q2 profit drop

The company, which is in the midst of a business overhaul aimed at ending its dependence on low-value natural gas, reported $271 million in net income attributable to common shareholders, or $0.37 per share. The company posted a net income of $730 million a year earlier

Encana said its cash flow came in at about $656 million in the period, or $0.89 per share, bringing the year-to-date figure to $1.8 billion.

Following a good first quarter, the second quarter saw the company making great progress when it came to targets, it said in a statement. Encana exceeded the business goals it set for itself as part of the new strategy it adopted eight months ago, the company’s president and CEO Doug Suttles added.

The company’s cash flow is now expected to reach between $3.4 billion and $3.6 billion for the entire 2014, up from its previous target of $2.9 billion to $3 billion, Suttles told a conference call. Production of liquids is also expected to outstrip previous forecasts, coming in at between 86,000 to 91,000 barrels per day as opposed to the 68,000 to 73,000 barrels per day projected previously.

During the second quarter, Encana managed to make its business model simpler and keep its undivided attention on opportunities expected to bring high value. The company enjoyed stable liquids growth from the five growth areas introduced by its new strategy. Oil production marked a 49% year-over-year increase, with the company producing 34,200 barrels per day in the three-month period. Natural gas liquids production showed growth of 38% to 34,000 barrels per day.

A key moment during the second quarter was the company’s acquisition of Eagle Ford assets for a sixth growth area. This has helped push the company’s liquids production growth further and as a result, the company’s current oil production is expected to double.

Successful execution of the company’s strategy and achieving key targets will continue to be the company’s course in future months, Suttles said.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

 

 

Stockwatch – Michael Sprung on BNN Market Call, July 28, 2014

Stockwatch – Michael Sprung’s Top Picks

Stockwatch – Encana Corporation: ECA-T, Owned by clients, Last Purchase December 16 2013 $19.19

Stockwatch - Encana sale Deep Panuke natural gas project lcoast Nova Scotia

Encana may sell its Deep Panuke natural gas project

Encana Corporation (TSE:ECA, Mkt cap 17.63B, P/E 20.69, Div/yield 0.08/1.26, EPS 1.15, Shares 741.00M) is successfully transitioning from a natural gas firm to a more liquids rich producer. Management has narrowed the focus of operations to five core areas. Acquisitions and divestitures have enriched the company beyond investors’ expectations.

The company is reportedly gearing up for the sale of its Deep Panuke natural gas project located off the coast of Nova Scotia. Encana has been divesting assets and buying new ones as it seeks to rebalance its portfolio. We continue to recommend ECA.

Stockwatch – Enercare Inc.: ECI-T, Owned by clients, Last Purchase March 13 2014 $10.23

Enercare Inc. (TSE:ECI, Mkt cap 802.19M, P/E 30.76, Div/yield 0.06/5.28, EPS 0.45, Shares 58.47M) owns and rents water heaters in Ontario and manages a cub-metering business in Ontario, Alberta and else where in Canada. Recently, management was disinclined to consider an offer in the $13.50 to $15.00 range from their largest shareholder just prior to announcing a complimentary and significant acquisition of Ontario Home Services from Direct Energy Marketing Limited. Concurrently, the Company issued $310 million in equity to finance the purchase. The market capitalization will increase to well over $1 billion and the acquisition will substantially increase cash flow.

Stockwatch – CAE, Inc.: CAE-T, Owned personally and by clients, Last Purchase March 19 2013 $10.20

CAE Inc contracts $110m global military aviation clients

CAE build flight simulators

CAE, Inc. (TSE:CAE, Mkt cap 3.74B, P/E 19.45, Div/yield 0.06/1.70, EPS 0.73, Shares 264.02M) provides simulation and modelling technologies primarily to the civil and military aviation industries. The Company also offers integrated pilot training services around the globe. The company continues to win contracts in both markets and the stock is reasonably valued at current levels.

CAE recently won contracts with an aggregate value of about $110m from global military aviation clients, including the air forces of Germany and New Zealand.

Stockwatch – Market Outlook

While economic conditions have improved in North America and more recently in the emerging markets, equities in North America have had a very strong run over the past few years. It is getting more difficult in the current market to identify stocks with great value characteristics. In this environment, taking some profits where securities have had large appreciation may be prudent. A larger weighting in cash can provide a good option to be deployed should any market setback occur.

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Mark Bunting:          We have the top picks now for Michael Sprung, the President of Sprung Investment Management. And we’re looking at EnerCare ECI, what’s going on with this company lately. Usually pretty sleepy as a utility, but there’s a lot happening. Why are you choosing this?

Michael Sprung:        Well, you know, it’s a company that certainly has been in the news little bit lately. Their larger shareholder that owns about 12% of them recently suggested that they’d like to have a data room, and they’d like to look at the company with the potential of buying it between $13.50 and $15. Management said, “Well, that’s not enough.” And then just a few days ago, they announced that they were buying the Consumer Services Division from Direct Energy which now gives them direct access to consumers in Ontario and so on.

So, this is a company that’s largely involved with water heaters and then they also run a submetering business which hits more provinces than just Ontario. And I think that this transaction that they’re making with Direct Energy is quite interesting. They’re issuing about $300 million worth of equity. So the market capitalization of this company I estimate is going to go from around $800 million to a billion one, a billion two which will put it on a lot more people’s radar screen. And in addition to that, it’s a very creative acquisition to cash flow. So I estimate per share, it’s going to be somewhere between 22% and 25% accrued to cash flow which also then puts the potential out there for dividend increases down the road.

So I think it’s an extremely well-managed company. And I think even though I did recommend it in January when it was at much lower levels than it is today, but I think the management has proved that the valuation metrics are in the company and so I wouldn’t be hesitant to still buy it today.

Mark Bunting:          Next up is a CAE, the flight simulator company. Why is this one standing out for you?

Michael Sprung:        Well, you know, again, it’s been doing better, but just recently, since their last quarter, they’ve actually announced about $120 million in new training contracts for training pilots and so on. But they also announced about $110 million contract for a military side of their business with New Zealand. So a lot of people, I think, think that over the last few years of military side particularly in the U.S. has been a little bit more constrained into what they would be purchasing. We’ve seen more activity in the civil aviation side. But going forward, it’s a company that continues to gain new business whether it would be in the military or the civil space. They’ve got a very small segment that’s diversified into other industries but it’s really not that material at this point in time.

Mark Bunting:          And just a quick thought, literally, 15 seconds on EnCana which was also a prospect.

Michael Sprung:        Sure. I think that the big thing here is that management over the last while, they’ve spun out the Prairie Sky. They’ve sold Bighorn to Jupiter. They acquired some property in Eagle Ford. It’s a company that’s got a good cash position of about 2.7 billion, I believe, and they’re soon going to have another couple of billion when the Jupiter transaction closes. So again, I think this is a company that has a good future going forward.

Mark Bunting:          In Toronto, we have David. Hello, sir.

David:                    Hello.

Mark Bunting:          All right, what’s your question?

David:                    I was asking about Fairfax Financial, which is the Canadian version of Berkshire Hathaway and has outperformed them every year for five years.

Mark Bunting:          All right, thanks, David.

Michael Sprung:        Well, I have a lot of respect for Prem Watsa and Fairfax. When I started in the business, Prem was a portfolio manager and I was an analyst at the same insurance company. He is certainly a person who is a value-oriented investor, and I think he has built quite a good company with Fairfax. Their last quarter, they had fairly significant investment gains.

It is an insurance company so I would really like to see them have a better combined ratio overall than what we see, but the lines of insurance that they’re participating in can be quite volatile as well. The company has done fairly well lately. It’s back over $500,000 a share. I think that at current levels, if I was a very long-term investor, I might consider stepping in, but quite frankly, you could see this company price can move fairly significantly.

I don’t believe they have any intentions of splitting the shares so you’ve got a much more limited, I guess, market too in terms of who can buy it and who can participate. Overall, longer term, well-managed company, and I think that you really have to ask what is it you’re buying it for because it has about a 2% dividend yield and that dividend could increase down the road. I think really, you’re buying it because it works on the formula like Berkshire Hathaway. Year after year you try to maintain a return on equity over a cycle. You try to increase book value and the share price should follow book value.

Mark Bunting:          David was talking about Fairfax outperforming Berkshire in the last five years. I’m assuming he was talking about the stock. I’m looking at Berkshire actually outperforming up about 99% over that time period, Fairfax, doing well too, up by 76% just by that measure. John is in North Bay with the next question. Hi, John!

John:                      Hi, my question through on Power Financial, two parts: buy, sell or hold, and secondly, the corporation description says they in fact are diversified and have holdings in Europe in builder supplies and concrete company. I’m wondering if you know anything about that alternate diversity that they have over in Europe. Thanks, bye.

Michael Sprung:        Well, certainly, in terms of Power Financial, its biggest holding in Europe is Pargesa, which is a European bank. Pargesa has been the one part that has really stumbled a bit of late. In addition, they have Great-West Life and within Great-West Life, I think, Putnam has had its problems too, but we’ve seen the stock come back here from pretty low levels to the point now where I’d say I don’t know if I would call it a hold or I wouldn’t be tempted to buy in around the $35 level.

I think if you could buy it in the low 30s, you’re getting a relatively good deal at this point in time, I mean going forward here. We think earnings are going to be in the neighborhood of $3 this year, maybe growing to $3.30 next year. Return on equity in the company is around 14% thereabout. So it’s one in 1.4 times book. It’s a fairer value.

Power Corp I think is the alternative that you could look at that does bring a bit more diversification in but at any point in time, it’s really what —

You look at these companies and sort of what is the discount to the parts that they are trading at because they are holding companies and from time to time, one can seem to be a better buy than the other. Right now, I think you’re just getting a little bit more yield if you buy Power Financial than you would if you are buying Power Corp. So maybe that’s the way I would go if I was comparing the two of them.

Mark Bunting:          All right then, a detailed answer there for you John. I hope you appreciate that. Next up is Henry who’s in Mississauga. Go ahead, Henry.

Henry:                    Yes. Thank you very much for taking my call. I’d highly appreciate it if you would — is to measure for Precision Drilling if he’s a buyer or seller. Thank you very much, good night.

Mark Bunting:          Okay, thanks Henry, Precision Drilling.

Michael Sprung:        Well, Precision Drilling, that’s a really good question. I think it’s very illustrative of what our position has been lately. I mean we’ve owned Precision Drilling for quite a long time. We’ve made a lot of money in it. Recently, we’ve taken profits around current levels and sold about half of our position. If we didn’t think that it still had scope going forward, we probably would have sold it all. So that tells you that A, we still like the company. We still think that they are going to prosper going forward. It’s just that, again, it was a case where we had such a big, big gain that we thought it was prudent to take some off the table at this point in time.

So they recently just announced an agreement with Schlumberger which is going to open up some new markets for them.

Mark Bunting:          Right.

Michael Sprung:        So I think that again, we’re dealing with a very well-managed company here. It’s come back from very low levels a year or two ago, and so I guess my view would be, we’re continuing to hold it. I don’t know if I would be jumping in at this point.

Mark Bunting:          Okay, one last question here before we get to top picks. Erick is in Toronto. Good evening.

Erick:                     Yeah, hi. I like to play the large-cap oil stocks and particularly CNQ, but I’ve noticed, every time it hits a certain point, it drops right back down. I’m wondering if that’s not the kind of stock to play, but I’ve noticed the same thing happens to Crescent Point Energy. Can you give me your comment on this? Thank you very much.

Michael Sprung:        Well, I think both of these companies are sort of companies that are really amongst the seniors within the oil and gas producers, and so they have a huge following. Canadian Natural Resources in particular, it’s always been extremely well-managed company. It’s really just a question of what do you pay for at any point in time. Lately, it’s had a very, very, very good run. I don’t think I would be running in to buy it right at these levels but certainly, it is a company that we don’t currently own but that at some point, we probably will own.

 

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Stockwatch – Encana Eyes Sale Of Deep Panuke Project

Stockwatch – Encana is reportedly gearing up for the sale of its Deep Panuke natural gas project located off the coast of Nova Scotia.

Stockwatch – Canadian gas major Encana Corporation (TSE:ECA, Mkt cap 17.34B, P/E 20.49, Div/yield 0.08/1.30, EPS 1.14, Shares 740.90M) is reportedly gearing up for the sale of its Deep Panuke natural gas project located off the coast of Nova Scotia, Bloomberg has reported, citing sources in the know.

Stockwatch - Encana sale Deep Panuke natural gas project lcoast Nova Scotia

Stockwatch – Encana is reportedly gearing up for the sale of its Deep Panuke natural gas project located off the coast of Nova Scotia.

The company has apparently hired financial advisers to help with the divestment and could start a formal process within months. A sale of the asset, which is expected to fetch between $1 billion and $2 billion, could be sealed by the end of the year, according to the insiders, who spoke on condition of anonymity as the information is private.

When contacted by the news agency, Encana spokesman Jay Averill said the company only comments on deals that have been confirmed, without elaborating.

Deep Panuke, located 250 kilometres southeast of Halifax, had an output of 253 million cubic feet of gas per day in the first quarter of the year. The project contributed over 30% of Encana’s operating cash flow and accounted for 9% of its total gas production in the quarter.

The January-March period was Deep Panuke’s first full quarter of operation after three years of delays. The project is managed by SBM Offshore NV on behalf of Encana, which started production at the field in December 2013. The gas extracted at Deep Panuke is processed offshore and pumped through a subsea pipeline to Goldboro, Nova Scotia, where it joins the Maritimes and Northeast Pipeline supplying the northeastern United States.

Encana has been divesting assets and buying new ones as it seeks to rebalance its portfolio. Since the start of 2014 the company has announced deals with an aggregate value of $7.3 billion.

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