Calgary, Alberta-based exploration and production (E&P) company, Encana Corporation (ECA) is adopting certain business strategies to counter the effects of the consistently low natural gas price. Additionally, to aggravate matters, the price of natural gas is expected to remain low in the near future.
Encana expects to expend roughly 75% of its planned 2014 capital expenditure of $2.5 billion in five North American oil and liquid rich assets. This outlay would lower the company’s predominant natural gas exposure. Moreover the resources are expected to provide high return in the coming years.
Encana added that by mid-2014, it is planning to spin off a major part of its Southern Alberta-based oil and gas property into a separate public entity through an IPO. Encana is expected to hold substantial stakes in the newly-formed firm.
Owing to a weak natural gas pricing environment, Encana has also made a 65.0% reduction in its quarterly dividend payment, bringing the figure to 7 cents per share from 20 cent per share. The dividend will be paid on Dec 31, 2013 to the shareholders of record as of Dec 13, 2013.
Moreover, Encana plans to lower its total work force by roughly 20.0% by 2014 to right-size its total cost structure. The cost reduction initiative of the company is reflected in its third-quarter 2013 results. Total expenses during the quarter came in $1,253.0 million, representing a significant fall of 56.1% from the year-ago period. Additionally, Encana is going to close its Plano, Texas based office.
Encana currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at E&P firms like Matador Resources Co. (MTDR), Northern Oil and Gas Inc. (NOG) and SM Energy Co. (SM) that offer better prospects. All the stocks sport a Zacks Rank #1 (Strong Buy).
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