Encana (ECA) Update - Jan 2

[dan_s]

On Dec. 11, 2019 Encana Corporation (ECA) filed its definitive Proxy Statement/Prospectus with the U.S. Securities and Exchange Commission and Canadian securities regulatory authorities related to its intention to establish corporate domicile in the United States.

Encana is one of the largest companies in our Sweet 16 (production today of ~607,000 Boe per day), but it gets almost no coverage. The name change and moving the official domicile to the U.S. might draw more attention to this grossly oversold stock.
ECA is trading for $4.72 today, which makes no sense for a company with numbers like this:
2018A: $1.11 earnings per share, $2.21 operating cash flow per share & 12.8% YOY production growth.
2019E: $0.34 EPS, $2.20 operating CFPS & 60.8% YOY production growth thanks to merger with Newfield Exploration. < My EPS & CFPS estimate are very close to First Call's estimates
2020E: $0.80 EPS, $2.56 operating CFPS & 11.8% YOY production growth. < First Call's estimates for 2020 are $0.55 EPS and $2.37 operating CFPS.
PLUS: Encana's $2.9 Billion operating cash flow in 2019 covers more than 100% of their D&C spending and FCF should increase in 2020.

The Special Meeting of Securityholders is planned for January 14, 2020 at 8 a.m. MT . Encana shareholders and incentive award holders as of the close of business on December 9, 2019 will be entitled to notice of and vote at the meeting.

The single reorganization resolution, as further outlined in the definitive Proxy Statement/Prospectus, must be approved by at least two-thirds of votes cast. The resolution will accomplish three initiatives:

1. To establish the Company's corporate domicile in the U.S. The migration to the U.S. from Canada is expected to expose the Company to increasingly larger pools of investment in U.S. index funds and passively managed accounts. Today, the majority of Encana's assets, people and production are in the U.S. The migration to the U.S. from Canada will better align our business operations with the corporate domicile, as well as our U.S.-based peers. Additional details can be found in the definitive Proxy Statement/Prospectus.

2. To rebrand under the name Ovintiv Inc. The new corporate name reflects the significant and recent transformation of the Company. Pending securityholder, stock exchange and court approvals, Ovintiv will begin trading on both the New York and Toronto stock exchanges under the ticker symbol "OVV."

3. To complete a consolidation and share exchange for effectively one share of common stock of Ovintiv for every five common shares of Encana.


The Encana Board unanimously recommends that Encana securityholders vote FOR the reorganization resolution.

The strategic initiatives above are being implemented to further create shareholder value and to recognize the Company's significant transformation over the last five-plus years. Key highlights of this transformation include:

The Company has created a high-quality, liquids-rich, multi-basin portfolio with nearly 1.3 million net acres in North America's premier resource plays – the Permian, Anadarko and Montney . In 2019, more than 80% of total capital investments are being allocated to development plays in the U.S.

Oil and condensate production has grown seven-fold since 2013. Average net daily production in the most recent quarter was approximately 605 MBOE/d, including 237 MBOE/d of oil and condensate.

In 2018 and 2019 (estimated through year-end), Encana has delivered competitive liquids growth, significant free cash flow and returned more than $1.5 billion to shareholders through its stock buyback initiative and quarterly dividends.