(Reuters) - Encana Corp (ECA.TO), Canada’s largest natural gas producer, said it will cut about 20 percent of its workforce, slash its dividend and invest nearly three-quarters of its 2014 capital spending budget in more lucrative oil and liquid gas assets.
The strategy is part of new Chief Executive Doug Suttles’ push to boost earnings as the company faces the prospect that natural gas prices will remain weak for years to come.
Encana, which had 4,193 employees on December 31, said it will cut its dividend to 7 cents per share from 20 cents.
The company, which is attempting to recover for a series of strategic missteps, forecast a capital spending program of about $2.5 billion for 2014, down from an expected $2.7 billion-$2.9 billion this year.
Encana said it will also sell some assets and spin off its oil and natural gas royalty interests in the Clearwater field in southern Alberta by mid 2014.
Encana said it will retain a “significant” stake in the new company that will manage the leasing activities in the area, allowing it to get more out of an undervalued business and generate higher cash flow in the longer term.
Encana signaled in August that it was considering selling dry natural gas assets.
Dry natural gas does not contain the hydrocarbon liquids such as propane and butane that makes “wet” gas more valuable.
“The restructuring that is underway reflects our shift from funding about 30 different plays to focusing our resources on five key areas,” Suttles, a former BP Plc (BP.L) executive who became CEO in June, said in a statement on Tuesday.
The company can average more than a 10 percent compound annual growth rate in cash flow per share through 2017 after the new strategy is implemented, he said.
Encana, which has already consolidated senior management, said it will close its Plano, Texas office and consolidate office locations to Calgary and Denver.
Encana shares have fallen about 19 percent in the past 12 months, closing at C$18.59 on the Toronto Stock Exchange on Monday. The exchange’s main energy index rose 3.4 percent in the same period.
Reporting by Sayantani Ghosh in Bangalore and Scott Haggett in Calgary; Editing by Kirti Pandey and Ted Kerr