Update Encana (ECA)
EnCana (ECA) formalized its split into two companies when it began trading as EnCana (ECA) and Cenovus Energy (CVE) on the New York Stock Exchange on December 9.
Shareholders in EnCana received one share of the new EnCana and one share of Cenovus for each share of the old EnCana they held before the split.
The transaction split the company’s oil and natural gas holdings with the new Cenovus getting the old EnCana’s oil projects and its established natural gas and crude oil production assets in Alberta and Saskatchewan. In addition Cenovus becomes the owner of the old company’s two oil refineries in Illinois and Texas.
The new EnCana, stripped of those oil assets, becomes a pure play natural gas company with production and development focused in unconventional natural gas shale formations in British Columbia, and in the United States in the Barnett, Montney, Horn River and Haynesville natural gas shale regions.
EnCana was lucky or smart enough to have hedged about two-thirds of its 2009 natural gas production at $9 per thousand cubic feet. Not too shabby when natural gas spent much of 2009 under $5 per thousand cubic feet.
What will the company do with that cash? Plus the $3.5 billion the new EnCana gets from Cenovus as part of the split up?
ExxonMobil buys U.S. natural gas for $31 billion–I told you this was a big trend
ExxonMobil (XOM) will buy XTO Energy (XTO) for $31 billion in stock. (ExxonMobil will also assume $10 billion in XTO Energy debt.)
This acquisition is just the latest example of a shift among the international energy majors from exploration and development for oil in risky new geologies and tough climates to a concentration on predictable, low-production cost assets such as onshore U.S. reserves of natural gas locked up in shale formations such as the Barnett shale formation of Texas.
I flagged that trend for you in two posts earlier this month. You’ll find links to those columns later in this post.
Natural gas prices to stay low into 2010: good news for consumers; bad news for producers
Just when you think it can’t get any worse in the natural gas industry, it does.
A glut of gas in the United States as a result of lower demand because of the Great Recession and greater than projected production from the gas shales of Texas and Oklahoma has driven natural gas prices below $5 per million British thermal units (BTUs). Natural gas closed at $4.85 on November 30.
Commodity traders, though, have started to get optimistic that a recovery economy would need more natural gas. Enough more to push up prices in 2010. Wall Street projects that natural gas prices will hit $6.09 per million BTUs in 2010.
But that optimism arrives just in time to get killed by a surge of natural gas imports from countries such as Qatar and Algeria.
Sell Oneok Partners (OKS)
Sell Oneok Partners (OKS)
Master limited partnership units of Oneok Partners (OKS) have run through my target price of $54 a share by March 2010 and just kept on going. I still like this natural gas pipeline play for its yield of 7.5% (as of November 9, 2009) so I’m keeping it in my Dividend Income Portfolio. But I just can’t see more than a couple of bucks more in price appreciation in the next year and that limits the total return on these units. So I’m selling them out of my 12-18 month Jubak’s Picks portfolio with this post.
On November 3, the master limited partnership reported third quarter earnings of $1.00 a unit, beating Wall Street estimates by 13 cents a unit. Revenues, however, fell 30% from the third quarter of 2008 to $1.56 billion. That was significantly short of the $1.86 billion expected by Wall Street.
The natural gas glut in the U.S. shows no signs of slowing production
Doesn’t anybody know that there’s a natural gas glut in the United States?
In a glut low prices are supposed to force producers to shut wells and reduce production so that demand has a chance to catch up with supply and prices can start to rise.
It just doesn’t seem to be happening that way right now, however.
