Shareholders and equity analysts rejoiced when EnCana Corp. (ECA) unveiled plans to chop itself into two companies — one for gas, the other for oilsands and refineries. The bond rating agencies? Not so sure.

Standard & Poor’s put EnCana under review for a possible downgrade, while Moody’s took its outlook from positive to stable, pending further disclosure of the nitty-gritty financial details. Gimme Credit is being a bit more gentle.

In a note Tuesday, analyst Philip Adams said:

We didn’t think anything needed fixin’ but EnCana believed otherwise. Our instinctive reaction to the EnCana headline was one of concern, as our perception has been that cash flow from oil and natural gas production offset the risk of the oilsands business.

However, EnCana is backing its pledge to maintain “strong investment grade ratings” in a number of ways, Mr. Adams notes. Share buybacks are on hold and free cash flow is being diverted to paying down debt, as well as about C$1-billion of accelerated cash taxes from the deal. Furthermore, the same net debt/captialization and net debt/adjusted EBITDA target ratios are to be maintained at both the gas company and the oilsands entity.

While EnCana said about 67% of its existing debt will fall to the gas company and about 33% will go to the oilsands concern, it hasn’t been disclosed which bonds will go there. Stay tuned for the information circular this fall.

Mr. Adams also picked through the companies’ projected cash flow numbers, as well as its capital investment expectations. Put it all together, and in his mind, bondholders can sleep easy at night.

He said:

As these levels are comparable to lesser-rated (but still highly-esteemed) XTO Energy (XTO), we’re repeating our outperform call on EnCana.

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