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Saturday, March 20, 2010

EnCana Corporation (ECA): the benefits of investing in green natural gas energy

This last Friday, for our RSP, we invested in 100 stocks of EnCana Corporation (ECA). I wanted to explain the reason why I decide to invest in EnCana Corporation (ECA). Part of the reason why I decide to invest in EnCana Corporation (ECA) is that the one and only Derek Foster hold some stocks of EnCana Corporation (ECA) in his very own investment portfolio. So of course, everything that Derek Foster hold, we hold too. At this point, we do not hold all of Derek Foster companies, but it should be soon! But other reasons other than Derek Foster motivate our investment in EnCana Corporation (ECA).

What’s EnCana Corporation (ECA)?

EnCana Corporation (ECA) is a Canadian corporation. The headquarters of EnCana Corporation (ECA) are located in Calgary, in the province of Alberta. EnCana Corporation (ECA) had been created only in 2002, but it’s already a huge player in the natural gas industry. Actually, in 2010, EnCana Corporation (ECA) is the largest North America's largest natural gas producer. In Canada, EnCana Corporation (ECA) operated in Alberta, northeast British Columbia and southeast Saskatchewan and in Nova Scotia. In the United States, EnCana Corporation have activities in Colorado, Wyoming, Texas and Louisiana. Over 8 000 employees work for EnCana Corporation.

EnCana Corporation (ECA) is a well-establish company, even if the company had been around only since 2002. EnCana Corporation (ECA) is one of those perfect investments for RSP. Why? EnCana Corporation had good long-term perspectives when it comes to its natural gas assets. On March 16, 2010, EnCana Corporation (ECA) declared, to repeat the worlds: “Encana’s enormous inventory of natural gas resources more than sufficient to double production in five years”. This is a major announcement. EnCana Corporation (ECA) is ALREADY North America’s largest natural gas producer. And now, the largest natural gas producer announced that its gas resources are more than sufficient to double production within the next 5 years! Competitors in the same sector will probably never be able to become larger than EnCana Corporation (ECA) since EnCana announced that they will double its productivity. This is something significant. It’s announced a lot of grow to EnCana for the years to come. We can easily suppose that EnCana will probably later on increase its dividend.

While conducting search for our RSP investment, we had to think twice about EnCana Corporation. Fact is, EnCana Corporation is only paying 0.80$ per stock in annual dividend. We are saying only because we are used to invest in companies who actually are paying much more in dividend. Examples would be: Just Energy Income Fund (JE.UN) distributed 1.44$ per unit in annual dividend, Fortis Inc. (FTS) distributed 1.12$ per stock in annual dividend, and so on. Since we hold EnCana Corporation (ECA) in a registered broker account, its low-paying dividend does not affect us as much as if we would hold the company in a non registered broker account. But no matter what, EnCana Corporation represents a great investment and we are very proud to own now 100 of its stock. EnCana Corporation trade on both TSX and NYSE under the ticket ECA.

Need other reasons to invest in EnCana Corporation, either your living north or south of the border?

Well, EnCana Corporation regularly publish note about its cash flow. Until recently, I didn’t know about cash flow, until a reader explain to me that Jean-François Tardif, the glamorous ex-hedge fund manager (who might come back who knows), was picking stocks considering the cash flow of companies. On date of today, I am still note quite familiar with cash flow, but what I can say is that EnCana Corporation (ECA) may not pay a very huge dividend, but the company has a nice cash flow and regularly publish data about its cash flow. Need examples?

On a new release publish on date of March 16, 2010, EnCana publish the following data:

EnCana 2010 Corporate Guidance
Cash flow: 4.40$-4.80$
Cash flow per share ($ per share diluted): 5.85$-6.40$

The last sentence since to mean that for each stocks that EnCana Corporation has on the stock market, a cash flow of 5.85$ to 6.40$ is associated to the value of the stock. Which could mean – always from my understanding – that the real stock value of EnCana Corporation is of 37.77$ per stock! EnCana Corporation (ECA-T) close on Friday at 31.37$, loosing 2.33% of its value. But no worries, all stocks have it’s up and down, and its sometimes follow the market. This last Friday, the TSX closes at 11 947.98 points, loosing 92.04 points.

Also regarding cash flow, on March 20, 2010, EnCana Corporation (ECA) had been ranked on the 163 position on 1 000 companies, on a Top U.S. Stocks with Highest Cash Flow per Share article.

Another reason to invest in EnCana Corporation (ECA)

We personally really appreciate green energy investments. We really appreciate our late Creststreet Alternative Energy Fund for that reason. EnCana Corporation is a company that cares about the environment. The company had received awards for environmental initiatives. In 2008, EnCana Corporation invested $50 million on new technologies in order to increase the company energy efficiency. Currently, EnCana Corporation facilities located in Haynesville Shale (Louisiana, USA) use alternate water sources wherever it’s possible. EnCana Corporation is looking for ways to reduce the amount of water use for its activities.

Last Friday, I invested in 100 stocks of EnCana Corporation (ECA) at per stock. Even we lost some money in this investment, we don’t regret, for all the reasons mention above. We will follow the progression of EnCana Corporation (ECA) and we are very excited with this newest acquisition.

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