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.

See Michael on BNN Market Call here>>

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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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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 Shed Bighorn Assets In $1.8bn Deal

Stockwatch – Encana plans to purchase 45,500 net acres of Eagle Ford properties located south of Texas.

Stockwatch – Calgary-based energy major Encana Corporation (TSE:ECA, Mkt cap 18.24B, P/E 21.70, Div/yield 0.08/1.24,EPS 1.13, Shares 740.90M) will offload its Bighorn assets to domestic oil and gas exploration services company Jupiter Resources in a $1.8 billion deal that will allow it to focus on its strategic assets, the company said on Friday.

Stockwatch Encana Bighorn

Stockwatch – Encana To Shed Bighorn Assets In $1.8bn Deal

The transaction includes the sale of around 360,000 net acres of land and the company’s working interests in all pipelines, facilities and service arrangements related to the assets. The properties, located in the Alberta Deep Basin, have proven reserves of some 1,100 billion cubic feet equivalent (Bcfe), with roughly 75% being natural gas.

The sale of the assets still requires regulatory clearance in order to go through, Encana said. The divestment is also subject to standard closing conditions but is expected to be completed by September 2014.

While Bighorn is a high-quality asset, it has not been funded significantly in 2014, Encana’s president and chief executive Doug Suttles commented. He believes that it will serve as “an excellent foundational asset” for its new owner going forward.

The news of the divestment came a week after Encana wrapped up the purchase of some 45,500 net acres of Eagle Ford properties located south of Texas. The company paid around $3.1bn for the assets, which were bought through its US subsidiary from mineral explorer Freeport McMoRan Copper & Gold Inc. The assets had an output of 53,000 barrels of oil equivalent per day (boe/d) in the first three months of this year and their addition will double Encana’s current crude oil production.

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains.

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Exchange Traded Funds Expose Investors to Unexpected Risks. Read more here>>

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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 – Five Stock Picks from Michael Sprung of Sprung Investment Management

    StockWatch – “We are still finding relatively good value in the energy sector,” says  Michael Sprung, President of Sprung Investment Management Inc., in an interview with SmallCapPower.com. Mr. Sprung provides some insight into corporate Merger & Acquisition activity and mentions five stocks that he likes currently, including two small-cap names.

    Mark Thorburn: Founded in 2005, Sprung Investment Management help clients moderate swings in market volatility through a “value investing” approach. Aimed at preserving wealth and providing a real rate of return after fees and inflation, they are known for employing philosophies that run contrary to current investment trends.

    Sprung is different from other investment management firms and that they make a deliberate attempt to minimize trading and transaction costs. They make decisions based on due diligence and staying in the course rather than reacting to market volatility.

    In June 2014, we asked Michael Sprung about his current view of the economy.

    StockWatch – See the interview at SmallCapPower here>>

    Michael Sprung: Well, I think right now we’re at a very interesting crossroads. Gwyn Morgan was writing the other day in the Globe and Mail, He noted that Der Spiegel had an article about a week or so ago and the headline was, “Troubled Times: Developing Economies Hit a BRICS Wall.” He’s referring of course to the BRICS, Brazil, Russia, India and China. The fact that those economies to some extent seem to have stalled. Particularly Brazil which we have seen their problems lately in getting the Olympics together, Russia of course facing all the sanctions, India primarily lots of potential bad loans there and corruption and China of course the slowdown in the economy and the overbuilding of infrastructure and so on of the last number of years some of it not in such great quality and so on.

    Where as what we’re seeing in the U.S., the economy is actually an expanding economy now. On an absolutely basis, the U.S. is likely to contribute more to global GDP this year than China. So, where the BRICs had a large surplus contribution before, now the sort of developed economies including Britain and Germany and the U.S. and so on, are actually going to have more of a contribution.

    So I think this is quite interesting because it affects Canada in a lot of ways. It affects Canada in terms of demand for resources. We’re seeing more manufacturing in the U.S. Now, the U.S. is still our largest export partner, but we are depending more and more upon the emerging economies. You wouldn’t know that to look at the stock markets today. To the end of last week, the total return on the TSX was still over 9%. Now, we’ve pulled back a little bit since then. Whereas the U.S. they have been closer to four and the emerging economies you are likely to see two.

    In terms of the stock market reaction, I think we’re in a very interesting time here. Our view is that particularly in Canada perhaps the stock markets are a little bit of ahead of the fundamentals. So we would not be surprised to see a pause. Now, if we did see a pause due to the fact that the U.S. is picking up to the extent that it is, we think that could be an opportunity for investors to step in.

    Mark Thorburn: What is your view on the new strategy at Rogers Communications Inc. (TSE:RCI.B)?

    Michael Sprung: I think Rogers faces a number of issues and problems to get over. One of them is the backbone of their infrastructure in terms of technological ability; it appears to have stalled out relative to some of the newer things that are available such as fiber. They do compete in the wireless world, but they’ve been having trouble. They’ve defined their new strategy in terms of trying to get back both business and retail confidence to try to reestablished themselves as technological leaders and to try to just regain some of the share that they’ve lost over the years.

    I think that they’re going to have a tough time achieving that. Now, they’re adapting a structure that is not unlikely see in other telcos, but they’re still going to have an awfully large executive suite. They’re not only going to have sort of consumer enterprise and media but with that, they’re going to have all of the other sort of corporate human resources, legal, accounting, and so on. So it ends up with about 12 or more people still in that executive suite. So I think it’s going to be a very difficult for them to achieve the turnaround that they’re looking for particularly in a short period of time.

    Mark Thorburn: There have been a number of Canadian banks that have reported strong earnings this quarter, are there any other banks that you think will surprise on the upside?

    Michael Sprung: Well, we’re certainly hoping that tomorrow this Canadian Imperial Bank of Commerce (TSE:CM) will surprise on the upside. Now, so far we’ve seen Bank of Nova Scotia, Royal, TD and National Report. Certainly, with the exception of the National, I think the results were far ahead of expectations and more of the real surprises came in.

    A lot of people have been talking about the head winds and credit and the debts of consumers and yet we’re seeing provisions for credit losses at least the ratios remained relatively low. So credit has been surprising on the upside.

    Net interest margins in this environment to a great extent have been expanding. We’re seeing great results out of international banking and capital markets have surprised more on the upside than the downside particularly with respect to trading and so on.

    Now, we own exposure to Royal Bank and Nova Scotia and CIBC. I think tomorrow when CIBC reports, people are going to be looking very closely not only at the credit situation but also the success of their new credit card programs since they lost Aerogold to the TD. Aerogold did contribute somewhat to TD’s results, but I think this new Aventura Visa card that CIBC has coming out is going to surprise people on the upside as well. So overall, we’re expecting to probably have fairly healthy results out of the CIBC tomorrow and we look forward to seeing that when it happens.

    Mark Thorburn: Do you anticipate that merger and acquisition activity is going to pick up in 2014?

    Michael Sprung: Yes, we do. We anticipate that M&A activities going to pick up for a number of reasons. We’re in a slower growth world than we were in previous cycles. In order for companies to grow, I think they’re going to depend more and more on M&A activity to achieve that incremental growth. I think we’re already seeing it in a number of areas, energy being one. But we’re also seeing it amongst pharmaceuticals and other companies today. In a world where GDP growth is going to be much slower around 2.5% to 3% in order to achieve that, and I think beyond organic growth we are going to see a much more dependence on mergers and acquisitions. So that should make the investment bankers quite happy.

    StockWatch Michael Sprung SmallCapPower.com

    StockWatch – “We are still finding relatively good value in the energy sector,” says Michael Sprung

    Mark Thorburn: What sectors do you currently like?

    Michael Sprung: Well, in terms of places where we continue to find value, I’d have to say that despite the fact that energy is been amongst the best performing sectors of the TSX so far this year, we’re still finding relatively good value. I mean energy as a whole has been up about 14% year-to-date. And despite the fact that we’ve seen natural gas prices increased by both 12% which I think has surprised people on the upside, however, West Texas Intermediate for instance is only up about 3.5% year-to-date. We’ve seen a lot of the stocks beginning to run. I think largely as a result of the production increases that we’re beginning to see particularly in the U.S. and that is also contributing to the efficiencies in the economy to some extent particularly on the manufacturing side.

    So in terms of exposure, we still today like in Canada for instance. Now, and Canada has really, really surprised people with some of these things that they have done in terms of the recent of issue of PrairieSky by Encana Corporation (TSE:ECA) at prices above what anybody thought that they might be able to sell that at. That’s been a great surprise spinning out of the royalty business in Clearwater. The purchase of the large chunk in Eagle Ford I think has also been particularly a positive surprise to the market. We expect going forward that that will continue to be reflected in positive results in the share price at least over the next number of years.

    We also think that the dependence on natural gas make it down on the next couple of years to both 75% of production from the 85% where it currently is.

    We also like Cenovus Energy Inc (TSE:CVE) because that’s a company where you have fairly predictable production increases over the next number of years. The capital goes again to it. Again, they manage to maintain the cost of that oil sands development to a great extent. It’s a very efficient company, a very efficient management and they do have a both upstream and some downstream assets as well.

    Finally, of course, Suncor Energy Inc. (TSE:SU) which has been a long-term holding of ours which is more of a fully integrated play but again good balance sheet, great management, and again expanding production over the next number of years. So we like all three of those and we’ll continue to hold them.

    Mark Thorburn: Do you have any favorite small cap companies you’d like to mention?

    Michael Sprung: Yes, occasionally we do go down into the smaller cap and in fact what people might even consider almost micro cap. One exposure we have is Temple Hotels Inc. (TSE:TPH). Now, eight of the twenty-one hotels that Temple owns are in the Fort McMurray area. Given the limited expansion available there, they have quite a lock on the market. They also have been very aggressive acquirers of hotels in other areas primarily in the west.

    We see this is a company that, today you can buy for roughly eight times available funds from operations that used to be a unit trust, so we still tend to look at it that way. Yet, it carries a very healthy yield around 8.5% which reflects a payout ratio of about 75%, so I think that’s quite sustainable. So there is a company that we’ve done very well on that I think we will continue to hold unless it appreciates quite dramatically from here.

    Another example would be Alaris Royalty Corp. (TSE:AD) which is a more recent purchase of ours. This is almost like a private equity firm but rather than take equity interest directly in companies, they issue preferred shares which escalate in terms of their payouts provided certain benchmarks are made and if they don’t, then it can convert into real equity.

    So they have had an expanding dividend over the last five years and we suspect that that will continue to expand. They currently have 12 investment partners, the largest of which represents both 17% of their funds coming in. They plan to reduce that to about 10% into not too distant future. So we’re seeing a diversification amongst health care, industrial, retail other areas, they tend only to invest into private companies which have good long-term tenure track records at least. So I think it’s been so a very, very smart management team that is designed to this company which is very, very lean at head office.

    So again, it’s currently selling under $29 I think. Anything under that level it certainly could represent a good longer term purchase.

    Mark Thorburn: Thank you for taking the time for the interview today, Michael.

    Michael Sprung: Thank you.

      Stock Watch > Encana Corporation operating profit doubles on higher gas prices and rising natural gas liquids output

      Stock Watch > Encana cash flow increased by 87% to $1.09 billion, or $1.48 per share.

      Encana Corporation (TSE:ECA, Mkt cap 18.98B, P/E 73.06, Div/yield 0.08/1.22, EPS 0.35, Shares 740.90M), Canada’s largest natural-gas producer, said its first-quarter operating profit more than doubled, to $515 million, or 70 cents per share, from $179 million, or 24 cents per share, a year earlier.

      The company is restructuring its operations to reduce its reliance on low-value natural gas. Output of oil and natural gas liquids averaged 67,900 barrels per day in the quarter ended March 31, up 56 percent from a year earlier. Natural gas production fell 2 percent to 2.81 billion cubic feet per day.

      Stock Watch Encana Corporation operating profit doubles higher gas prices rising natural gas liquids output

      Stock Watch > Encana Corporation operating profit doubles on higher gas prices and rising natural gas liquids output

      Encana reported net profits of $116 million compared with a loss of $431 million in the year-ago quarter, which included an income tax adjustment of $243 million. The company’s cash flow, a key indicator of its ability to pay for new projects and drilling, increased by 87% to $1.09 billion, or $1.48 per share.

      Encana recently agreed to pay $3.1 billion for properties in the south Texas Eagle Ford shale-oil field owned by Freeport-McMoran Copper & Gold Inc‘s (FCX.N). The company is paying for this and other oil acquisitions by selling gas fields as it concentrates its operations on six, oil and natural-gas liquids rich regions including the Eagle Ford.

      Encana closed the $1.8 billion sale of much of its Jonah gas field in Wyoming this week and reports that other sales are pending.

      It is also moving ahead with an IPO of a new company called PrairieSky Royalty Ltd. The new entity will own about 5.2 million acres of fee simple mineral title lands in Alberta. PrairieSky will not be involved in any exploration, development or production activities on this land. It will focus on securing investment from third parties, generating revenues from fees paid by companies producing oil and gas on the properties. The preliminary prospectus states that Encana will hold 75 per cent of the new company after the initial public offering.

      Free Portfolio Review – Markets were up in 2013. Are you at risk in 2014? Sprung Investment Management Is Pleased To Offer Qualified Investors A Free Portfolio Review—Without Cost or Obligation. Learn more here>>

      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.

      Stock Watch – Encana Corp Prepares for Property Assets Spin-Off

      Stock Watch > Encana Corp to spin off oil and gas assets in central and southern Alberta though an IPO of PrairieSky Royalty Ltd.

      Calgary-based energy major Encana Corporation (TSE:ECA, Mkt cap 18.91B, P/E 71.95, Div/yield 0.08/1.22, EPS 0.35, Shares 740.85M) is preparing to spin off its oil and gas assets in central and southern Alberta though an initial public offering. PrairieSky Royalty Ltd, the company that will be created through this move, has filed a preliminary prospectus with the relevant authorities across Canada and expects to complete the secondary offering late in May or early June.

      Stock Watch Encana Corp spin off oil gas assets Alberta IPO PrairieSky

      Stock Watch > Encana Corp > to spin off oil and gas assets in Alberta though an IPO of PrairieSky.

      When Encana announced its strategy last November, it said that PrairieSky would be set up with the aim of creating opportunities for direct investment in a royalty business. The new entity, which will own about 5.2 million acres of fee simple mineral title lands, will make it possible for Encana to boost its royalty business, the energy producer said.

      PrairieSky will not be involved in any exploration, development or production activities on its land. It will instead focus on securing investment from third parties, generating its revenues from fees paid by companies producing oil and gas from the properties.

      Encana expects to end up with a majority stake in PrairieSky when the spin-off is finalised. It will remain engaged in daily administrative services during the transition period, which should last until the end of this year. However, Encana does not intend to assume any managerial responsibilities in PrairieSky and will only be involved in the business as an investor.

      The timeframe and the transaction itself are subject to the receipt of regulatory and all other necessary approvals, Encana said. PrairieSky’s board will be led by James M. Estey as chairman.

      Encana did not reveal how many PrairieSky shares it plans to issue, nor did it reveal the selling price. The company will hold a majority stake in PrairieSky. At some point it could distribute the remaining shares to shareholders in the form of a special dividend.

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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 Nears $2bn Sale Of Jonah Gas Field

      Encana  shifting away from natural gas to liquids-rich natural gas and oil

      Encana Corporation (TSE:ECA, Mkt cap 16.91B, P/E 63.70, Div/yield 0.08/1.36, EPS 0.36, Shares 740.85M) is gearing up for the divestment of its Jonah natural gas field in Wyoming in a deal expected to fetch some $2 billion, the Wall Street Journal reported, citing sources in the know.

      Encana Bighorn operating area, Grande Cache region west central Alberta.

      Encana is shifting away from natural gas to liquids-rich natural gas and oil.

      According to the insiders, the company is in advanced talks with private equity firms Carlyle Group LP and NGP Energy Capital Management LLC over the sale of the asset, which is one of the largest natural gas fields in the United States. Last year Encana extracted 323 million cubic feet of gas and 4,700 barrels of gas liquids a day after royalties. The volumes, however, were less than those reported the previous year as the company curtailed spending on drilling activities at the field.

      The sale is part of the company’s plan to move its focus away from natural gas to liquids-rich natural gas and oil, which have been generating higher value. When announcing its shake-up plan in 2013, Encana said it would concentrate on five major regions in Canada and the US, down from around 20 previously. The company has already announced plans to allocate 75% of its 2014 budget, pegged at between $2.4 billion and $2.5 billion, on the Montney and Duvernay liquids-rich gas plays in Canada, the DJ basin, San Juan basin and the Tuscaloosa marine shale in the US, the Globe and Mail said.

      When contacted by the Wall Street Journal, Encana spokesman Jay Averill said that the company was “testing the market in different areas,” suggesting that divestments could be among the options considered.

      Encana is currently close to completing the spin-off of its Clearwater royalty arm in Western Canada, which collects fees and royalties on Encana land used by other companies.

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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 May Re-evaluated Planned Asset Sales in the Wake of Declining Gas Prices

      Encana Reportedly Picks RBC To Help With Sale Of Bighorn Assets

      Encana Corporation (TSE:ECA, Mkt cap 15.66B, P/E 34.43, Div/yield 0.08/1.46, EPS 0.61, Shares 740.85M) is said to have approached Royal Bank of Canada (TSE:RY) to help it with the sale of its Bighorn assets in west-central Alberta. Encana is Canada’s biggest natural gas producer.

      Encana Bighorn operating area, Grande Cache region west central Alberta.

      Encana may reconsider its plan to sell the Bighorn operating area, located within the Grande Cache region in west central Alberta.

      Encana is looking for a buyer for properties spanning approximately 480,000 gross acres (194,250 hectares) which have the capacity to produce the equivalent of around 61,500 barrels of oil per day, 79% of which is gas, the sources said on condition of anonymity. Encana’s website says that the main producing properties in the Bighorn operating area are Kakwa, Resthaven and Red Rock, located within the Grande Cache region.

      The reason behind Encana’s decision to divest the assets is the steep increase in gas prices, which hit a five-year record of $6.40 per million British thermal units on the New York Mercantile Exchange last week as a result of the extremely severe weather in eastern United States, according to Bloomberg. Earlier, Encana’s chief executive Doug Suttles stated that his company was examining the possibility of shedding assets located outside the five main regions on which the producer is currently concentrating.

      In a conference call in January, Suttles hinted that Bighorn was “not a growth area” at present and Encana would seek to ensure operating efficiencies in the area where it has already slashed investment. In an interview with Bloomberg earlier this month, the CEO said that the company was gauging market mood on several assets and was already seeing investors with capital willing to invest, without naming the assets it was seeking to sell.

      According to market experts, the assets could draw offers of between C$2 billion and C$2.5 billion and could be valued at as much as C$4 billion if Encana decides to sell the properties separately. Exxon Mobil Corp is seen as one of the possible bidders following the sale of Celtic Exploration Ltd in 2013.

      Gas for next-month delivery surged as much as 42 percent to $6.493 per million British thermal units on Feb. 24. This was the highest price since Dec. 2, 2008, up from a low of $4.563 on Feb. 10. However, prices are poised to end February 8.7 percent lower for the month at $4.511 per million BTU. Given these declines, Encana management may be re-evaluating their position and expected price.

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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.