EnCana Corp. set to split in two

The Toronto stock market will see the debut this week of a brand newoilsands player and a more streamlined version of one of thecontinent’s top natural gas names.
Published : November 30, 2009

The Toronto stock market will see the debut this week of a brand new oilsands player and a more streamlined version of one of the continent’s top natural gas names.

Shareholders in EnCana Corp. gave virtually unanimous support last week to the plan to divide the Calgary-based energy giant into two distinct companies.

With that major milestone, and the blessing of an Alberta court, out of the way, EnCana and its oil-centred spinoff Cenovus Energy Inc. will start operating independent of one another tomorrow.

Regular trading in both companies — under the stock symbols of ECA and CVE respectively — begins Thursday on Canadian markets and Dec. 9 on the New York Stock Exchange.

“It’s giving investors ways to play both commodities,” said John Stephenson, portfolio manager with First Asset Investment Management in Toronto.

The key rationale behind the split was to make the value of each distinct business segment easier for investors to get their heads around.

Both companies began trading on an “if, as and when-issued” basis on Nov. 2.

If that early activity is any indication, investors seem to like Cenovus better than the new EnCana — likely because oil prices are currently so much more robust than natural gas prices, Stephenson said.

Cenovus will include steam-assisted gravity drainage oilsands projects at Christina Lake and Foster Creek, as well as stakes in two of two U.S. refineries operated by U.S. joint-venture partner ConocoPhillips.

“From the moment of its creation, we expect Cenovus will be an industry leader,” Brian Ferguson, EnCana’s chief financial officer and soon-to-be Cenovus chief executive, told reporters last week.

He said production is expected to grow 15 to 20 per cent next year.

In a research note coinciding with the start of when-issued trading, UBS analyst Andrew Potter pegged Cenovus’ value at between $25 and $27.50 per share, predicting the new firm will be a “free cash machine.”

Ferguson said Cenovus’ main competition will likely be major Canadian oilsands names like Suncor Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and Canadian Oil Sands Trust.

 
 
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