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The Starship EnCana With Captain Morgan at the helm, it’s going where no Canadian energy company has gone before, but does it face seizure by aliens? Gary Park Petroleum News Canadian Correspondent
EnCana ascended to the top of another peak Sept. 1 when it shouldered aside Canada’s leading bank and insurance company to become the top dog on the Toronto Stock Exchange.
With its market capitalization topping C$50 billion, it gained the largest weighting on the benchmark stock index, accounting for 4.89 percent of the 221 members in the S&P/TSX index, with the Royal Bank of Canada dropping to 4.88 percent.
How long the big Canadian independent can remain No. 1 hangs largely on the outlook for energy prices and its own ability to convince investors that its North American resource-play strategy will succeed, but its growth since it was formed in early 2002 as a C$28 billion company has been stunning.
Whether it does is a matter of limited interest to Chief Executive Officer Gwyn Morgan, who has said that being Canada’s largest company by market-cap is not a corporate goal, even though it is a milestone.
He is more interested in retaining the title of North America’s largest, strongest and fastest-growing gas producer in what he has described as a “sustainable, realistic long-term way.”
That means achieving 10 percent annual per share sales growth for at least five years.
Proved gas reserves alone are estimated at 10.5 trillion cubic feet and 19 tcf of unbooked reserves are positioned for eventual promotion, with 18 million net undeveloped acres on the exploration agenda for onshore North America.
Not that EnCana is averse to symbols.
It is currenty working on a new head office in Calgary that could cost C$50 million and soar to 60 storeys, making it the tallest in Canada’s oil capital. Beyond that, Morgan, like his peers, has carefully dodged questions about the company’s prospects as a takeover target. Rumors Shell might bid for EnCana But that speculation is getting a fresh airing, with the rumors concentrated on the chances of Royal Dutch Shell making a bid to climb from sixth place to first among North America’s gas producers and gaining a badly needed reserves boost in the process.
Fadel Gheit, an analyst at Oppenheimer & Co., told the Globe and Mail EnCana would “fit like a glove” in Shell’s stable.
He believes Shell could pay US$10 billion in cash and US$40 billion in stock, comfortably ahead of EnCana’s current market-cap.
The two companies were linked three months ago in rumblings that Shell might be ready to buy EnCana’s 935 billion cubic feet of gas reserves offshore Nova Scotia.
The Deep Panuke field would be a natural fit with Shell’s one-third stake in the nearby Sable field, where dramatic reserve writedowns have seen Shell’s holding shrink to 1.35 trillion cubic feet from 3.6 Tcf.
EnCana, meanwhile, has been both searching for more gas in Deep Panuke and exploring ways of sharing infrastructure with Sable’s owners, while Morgan has openly conceded that his company may not be the owner even if the field does come on stream.
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