July 21, 2011 / 9:49 PM / in 6 years

Encana says mulling international expansion

* Encana mulling international opportunities

* Says any venture must be of size

* Expects further joint venture deals

* Shares down 0.6 pct (In U.S. dollars unless noted.)

By Scott Haggett

CALGARY, Alberta, July 21 (Reuters) - Encana Corp ECA.TO said on Thursday it is eyeing a return to the international arena after spending much of the last decade winnowing its widespread oil and gas businesses into a tightly focused North American natural-gas producer.

Randy Eresman, chief executive of Canada’s largest natural gas producer, said on a conference call that his company is in the early stages of looking abroad for shale gas deposits where it can apply technologies it has honed in North America.

But any international investment would have to be sizable enough to have a significant impact on profitability of the company, which on Thursday reported a second-quarter operating profit of $166 million on revenue of $1.99 billion. [ID:nL3E7IL24C]

“We have a real expertise developed in our company,” Eresman said. “Before we go to transfer that expertise to other parts of the world it’s going to have to be meaningful for us.”

An international move would be an about face for a company which for most of the past decade been narrowing its focus to concentrate on producing unconventional natural gas in North America.

Encana, once Canada’s largest oil and producer, sold off its oil production in the North Sea, its Gulf of Mexico operations, exploration and producing properties in South America and in 2009, completed its transformation into a gas-focused producer by spinning its North American oil and oil sands properties off into Cenovus Inc CVE.TO.

However the time of the split could not have been worse. With North American markets oversupplied because of the huge quantities of gas from the shale deposits that Encana and rivals were tapping, prices sagged and have only rarely topped $5 per thousand cubic feet over the past two years.

That has left the company looking for ways to boost profits after investors balked at plans to double output by 2015.

A C$5.4 billion ($5.7 billion) joint venture with PetroChina 601857.SS to speed development of its massive Cutbank Ridge field in northeastern British Columbia collapsed last month, but Encana is seeking similar though smaller deals. Eresman said a further announcement could come by October.

With Encana shares down 12 percent, analysts said there is a perception that the company has lost its focus. The promise of a return to international operations will do little to allay that.

“It’s almost like they are scrambling to do anything they can to evolve out of a strategy that they created after the spin out (of Cenovus)” said Phil Skolnick, an analyst with Canaccord Genuity. “It’s a little confusing for people.”

Still Eresman said the skills the company has gained in exploiting shale gas deposits at home will give Encana an edge should it again venture overseas.

“We pulled back from international because we didn’t really have a lot to offer ... outside of waving the Canadian flag,” he said. As we go to look at places in the world where we may be able to transfer our expertise, it is truly expertise we are carrying ... that’s the reason we’ll go there.

Encana shares fell 18 Canadian cents to C$29.65 on Thursday on the Toronto Stock Exchange. ($1=$0.94 Canadian) (Editing by Janet Guttsman)

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