Realizing the error of its ways — i.e. spinning off its oil division as Cenovus (CVE) in 2009 — EnCana (ECA) has been spending much of the past year reinventing itself as a more balanced energy play rather than a strictly natural gas one. That has meant adding more liquids and shale oil back into its production mix.
And those efforts are finally beginning to pay off.
ECA reported a net profit of $188 million — or 25 cents per share — for the third quarter, compared to a $1.24 billion loss for the same period a year ago. The key for that profit has been higher average dry natural gas prices, as well as rising NGL and shale production. According to Reuters, EnCana saw its oil and NGL volumes nearly double during the quarter, averaging about 58,200 barrels per day. That should continue to grow as Canada’s largest natural gas producer is spending about 80% of its capex budget on boosting production of liquids.
For investors, the beaten-down name has real potential to be one of the best turnarounds in the industry as these efforts pay off. Meanwhile, ECA’s 4.5% dividend provides a nice cushion.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.