Canada's Encana to cut workforce, payout as gas prices stay low
By Scott Haggett and Sayantani Ghosh
CALGARY, Alberta (Reuters) - Encana Corp (ECA.TO: Quote), Canada's largest natural gas producer, said on Tuesday it will cut about 20 percent of its workforce, slash its dividend, and focus future spending on just five regions rich in oil and gas liquids as it looks to move away from low-value natural gas production.
The new plan, which includes the spin off of its historic Alberta freehold lands into a separate company, is part of new Chief Executive Doug Suttles' push to boost earnings and raise cash flow as the company faces the prospect that natural gas prices will remain weak for years to come.
The strategy comes on the heels of a series of failed attempts to boost profits under former chief executive Randy Eresman, who left last year. Eresman spun off the company's profitable oil sands operations in 2009 in order to become a pure natural-gas producer just as a wave of new shale-gas production caused prices to plunge.
"The company has been a total disappointment for a long time," said John Stephenson, a portfolio manager at First Asset Investment Management, which owns Encana shares.
"But I think where they're going with things under Suttles is considerably better than where they were going under Eresman ... So far what I've heard from the new management has been encouraging."
Encana shares were up 91 Canadian cents to C$19.50 ($18.73)by mid-morning on the Toronto Stock Exchange, despite the company's decision to cut its 21-Canadian-cent quarterly dividend to 7 Canadian cents.
The dividend cut had been widely expected, with analysts saying the company needed to raise cash in order to boost drilling on liquids-rich fields.
"It's more in line with what their peers (are paying)" said Dirk Lever, an analyst with AltaCorp Capital. Continued...