Encana Stock Outperforms Crude Oil and Natural Gas



Crude oil and natural gas prices

In the week ended July 14, crude oil (USO) prices reversed losses from the previous week. Crude oil prices rose from $44.23 per barrel to $46.54 per barrel, an increase of more than 5%. Currently, crude oil prices are resisted by their 50-day moving average, which stands at $46.58. Natural gas (UNG) prices were up by ~4% last week, from $2.86 per mmBtu (million British thermal units) to $2.98 per mmBtu.

Encana’s (ECA) production volume mix contains ~66% natural gas, ~21% crude oil, and ~13% natural gas liquids. However, more than ~57% of Encana’s operating revenue came from crude oil and natural gas liquids sales in 1Q17.

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Due to rising crude oil (USO) and natural gas (UNG) prices last week, Encana’s stock price rose ~13% from $8.39 to $9.45. It outperformed crude oil and natural gas by a wide margin. On Monday, Encana’s stock moved up ~4% and continued with that momentum throughout the week. In fact, Encana closed all sessions positively and closed the week with a very strong gain.

Recent divestiture

At the start of June 2017, Encana announced an agreement with Caerus Oil and Gas to sell its Piceance natural gas assets in Colorado for $735 million in cash. This asset sale is part of Encana’s production mix strategy to increase liquids’ percentage of its production mix. Encana’s Piceance assets had a production mix of ~95% natural gas (UNG) and 5% liquids in 1Q17. Encana plans to use these proceeds to strengthen its balance sheet.


Due to rising crude oil and natural gas prices last week, the Energy Select Sector SPDR ETF (XLE) outperformed the SPDR S&P 500 (SPY). SPY was up ~1.4%, whereas XLE was up by more than 2%. Peers ConocoPhillips (COP) and Devon Energy (DVN) rose ~1% and ~7%, respectively, last week. Just like Encana, ConocoPhillips has operations in Montney, Canada.

XLE generally invests at least 95% of its total assets in oil and gas companies. In the next part, we’ll take a look at Encana’s net income trends.


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