EnCana is merging with former Sweet 16 member Newfield Exploration (NFX). They are selling some non-core assets to shore up the balance sheet. After the merger with NFX, the company will have production of approximately 570,000 BOE per day (approximately 30% crude oil, 22% NGLs and 48% natural gas). ECA is a former Sweet 16 company and a strong candidate to move back into the group. I am working on the post-merger forecast/valuation model now and should have it posted to the EPG website tomorrow.
The merger was announced on 11/1/2018. Since December 1, 2018 six Wall Street Firms have submitted new reports on ECA to Reuters. All six firms rate ECA a BUY with price targets ranging from $10.00 to $12.50. ECA closed at $6.75 today.
On December 27th Encana Corporation (Encana) announced that its wholly-owned subsidiary, Encana Oil & Gas (USA) Inc., has completed the previously announced sale of its San Juan asset in New Mexico to Denver-based DJR Energy.
"This transaction continues our track record of unlocking value from non-core assets," said Doug Suttles, Encana President & CEO. "The proceeds from this sale add to our financial strength and strongly support our commitment to our $1.25 billion share buyback and 25 percent increase to the dividend in 2019."
Following the expected close of its announced strategic combination with Newfield Exploration Company (Newfield), Encana is committed to completing a $1.25 billion share buyback in 2019. Encana's planned share buyback and previously announced 25 percent increase to its dividend following closing of the transaction with Newfield, highlight the quality of its business and commitment to return capital to shareholders.
The sale of Encana's non-core San Juan asset includes approximately 182,000 net acres and represents the company's total land position in the play. In 2017, the asset delivered average production of approximately 5,400 barrels of oil equivalent per day including 3,900 barrels per day of liquids. The transaction has an effective date of April 1, 2018.
Encana's planned share buyback is subject to receipt of regulatory approvals, stock exchange rules and securities laws and may be made through purchases in the open market or other permitted means.
Encana Corporation
Encana is a leading North American energy producer that is focused on developing its strong portfolio of resource plays, held directly and indirectly through its subsidiaries, producing oil, natural gas liquids (NGLs) and natural gas. By partnering with employees, community organizations and other businesses, Encana contributes to the strength and sustainability of the communities where it operates. Encana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.
EnCana Corp (ECA) Update - Jan 22
EnCana Corp (ECA) Update - Jan 22
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EnCana Corp (ECA) Update - Jan 22
EnCana is obviously a company "in transition" and it will take several quarters of post-merger results before the Wall Street Gang fully grasps the size and strength of what EnCana will be post-merger.
> In 2018 ECA generated approximately 14.5% YOY production growth and $2.16 Billion of cash flow from operations $2.25/share.
> Post-merger, the Company should generate $3.3 to $3.5 Billion cash flow from operations ($2.30/share at the midpoint), based on what I believe is a conservative commodity price deck
> EnCana has very good technical teams and they believe they can significantly reduce completed well costs in STACK using their "Cube Development Model"
First Call's estimates for 2019 are $0.77 EPS and $2.57 operating cash flow per share. < Definitely numbers that justify a much higher share price than where ECA is trading today.
My forecast/valuation model has been posted to the EPG website. My initial valuation is $12.50, which compares to First Call's price target of $12.35. If 1H 2019 results confirm my forecast model, my valuation will be going a lot higher.
PS: ECA does pay a dividend and they have announced an aggressive stock buyback program.
Your first step should be to go to the ECA website and go through the presentation where they discuss the impact of the merger. They have also recently posted a new presentation to their website. Then go though my forecast/valuation model; it is in US dollars. For a company of this size, it is actually a rather simple model to understand.
> In 2018 ECA generated approximately 14.5% YOY production growth and $2.16 Billion of cash flow from operations $2.25/share.
> Post-merger, the Company should generate $3.3 to $3.5 Billion cash flow from operations ($2.30/share at the midpoint), based on what I believe is a conservative commodity price deck
> EnCana has very good technical teams and they believe they can significantly reduce completed well costs in STACK using their "Cube Development Model"
First Call's estimates for 2019 are $0.77 EPS and $2.57 operating cash flow per share. < Definitely numbers that justify a much higher share price than where ECA is trading today.
My forecast/valuation model has been posted to the EPG website. My initial valuation is $12.50, which compares to First Call's price target of $12.35. If 1H 2019 results confirm my forecast model, my valuation will be going a lot higher.
PS: ECA does pay a dividend and they have announced an aggressive stock buyback program.
Your first step should be to go to the ECA website and go through the presentation where they discuss the impact of the merger. They have also recently posted a new presentation to their website. Then go though my forecast/valuation model; it is in US dollars. For a company of this size, it is actually a rather simple model to understand.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group