Encana Corporation (USA) (NYSE:ECA) like many other natural gas producers has been a victim of declining oil prices. However, the company has been making efforts to increase the rate of cash flow in the company. Recently, Encana corp. announced that it would be selling its Haynesville assets at a price of $850 million. Additionally, the deal would also entitle ECA to a fee for marketing gas services from the buyer.
It is important to note here that these assets were responsible for an outflow of $480 million, in gathering and midstream expenses until 2020. Furthermore, the agreement also marks a significant increase in focus by the company towards oil. The reduced operating expenses would also mean higher margins per barrel for the company. Encana corp. had drilled around 300-wells on its Haynesville property, which accounted for around 9% of the company’s daily gas production. ECA has hinted that the funds from the sale would be directed towards reducing the company debt, which would in turn improve the stock’s share value.
The company has also experienced a severe loss to its share value over the past year, losing around 68.15% of the share price. Furthermore, the stock hit its 52-week low on August 24, when it finished the day’s session at a closing price of $5.55. With the sale of the Haynesville assets, ECA is planning to improve its balance sheet and as well as improve its per barrel margins.
Haynesville was never regarded as one of the core company assets, since it only contributed 2.5% to the company’s income. Whereas, the three core assets, the Permian, Duvernay and Eagle Ford are responsible for over 50% of the company’s cash flows. Furthermore, the company has also decided to invest around 80% of its budget for the current year in these three core assets to maximize oil production and improve efficiency.
Encana Corporation (USA) (NYSE:ECA) reported a decline of 1.66% in its share value, despite trading 10.01 million shares during the September 14 session to close at $7.10.
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