Encana: May Spin Off Oil Sands Division
EnCana Hikes Dividend After Earnings Jump on Accounting Gain
By Bill Graveland
26 Apr 2006 at 04:47 PM EDT
resourceinvestor.com
CALGARY (CP) -- "Oil and gas giant EnCana Corp. [TSX:ECA; NYSE:ECA] may spin off its oilsands division into a separate entity when it gets a deal to refine the planned 500,000 barrel a day of heavy oil it expects from its northern Alberta operations over the next decade.
While the company won't make a decision until it negotiates a larger partnership on its oilsands business, EnCana's CEO said Wednesday it makes sense to consider a spinoff in the wake of huge investor demand for pure-play oilsands operations.
''Pure play oilsands companies today are getting tremendous valuations in the market place, so there is a compelling argument if on a tax-effects basis you can move those assets into pure play that you should do it to the extent that you can still maintain organizational efficiency that you have in a bigger company,'' Randy Eresman told a conference call after the company reported a huge profit gain in the first quarter profits and raised its dividend.
EnCana, North America's largest natural gas producer, sold its minority stake in the Syncrude oilsands partnership a few years ago to focus on other oilsands projects in northern Alberta.
EnCana, which is expecting to increase its oilsands production more than tenfold to 500,000 barrels per day over the next decade, is looking for partners who could give the company access to a North American refinery upgrader in exchange for some of the bitumen production.
Last December, Texas-based Valero Energy [NYSE:VLO] balked at a $2-billion plan with EnCana to convert its refinery in Ohio to process Canadian heavy oil.
However, other U.S. companies, including Marathon Oil Corp., are said to be interested in getting involved in the oilsands business and may be potential partners for EnCana.
Earlier Wednesday, EnCana boosted its quarterly dividend after first-quarter net profit jumped to $1.47 billion on a huge accounting gain, while operating profit rose 14% to $694 million.
The company said it is increasing its quarterly dividend 33% to 10 cents a share, payable June 30 to common shareholders of record as of June 15.
Cash flow increased about 26% to $1.7 billion, or $1.96 a share, compared with the first quarter of 2005, as total natural gas, oil and natural-gas liquids sales per share rose 7%.
Earnings for the quarter ended March 31 amounted to $1.70 a share and compared with a loss of $45 million or five cents per share a year earlier, the Calgary-based company reported. EnCana reports in U.S. dollars.
EnCana credited an $830-million after-tax gain ''due to mark-to-market accounting of commodity price hedges.''
''EnCana's North American natural gas and oil sales continue to grow at a steady pace, increasing 6% in the past year,'' Eresman said in a release.
''We are on track to achieve 2006 guidance, growing North American sales by about 7% from 2005.''
He said the company its winter program by drilling 1,282 wells, about 30% of the plan for the year.
''With about $3.5 billion of sales proceeds from completed and pending midstream and international asset sales in 2006, EnCana continues to focus on North American unconventional resource plays,'' Eresman said.
In the first quarter, EnCana bought back about 21.3 million shares for cancellation, resulting in a net reduction of outstanding shares of 2.2%.
In Wednesday trading on the TSX, EnCana shares rose 58 cents to C$58.18, a gain of just over 1%."
© The Canadian Press 2006 |
