Encana: Largest North American Natural Gas Producer
In what seems to be a pattern, stock price of buy-recommended Encana (ECA) has met and exceeded estimated net present value [NPV] of $75 a share. That must mean it is near time to raise oil price and natural gas price from $80 a barrel and $11 a million btu for NPV purposes. First quarter results released today continue the trend that has taken the company past joint venture partner, buy-recommended ConocoPhillips (COP), to become number one in natural gas production in North America.
Projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda). NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P).
Setting a new record of $118 a barrel today, oil price is unusually strong in a short-term context, but reasonable in the long-term context we see. The stage is set for a potential double in natural gas price to the oil equivalent apparently being paid by China in the international market for liquefied natural gas. Investors can control the risk of unexpected negative surprise by limiting position size that we put at an unlevered weight of 3.8% in a diversified energy portfolio of 27 buy recommendations, for example.
Originally published on April 22, 2008.
Related Articles
|
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Trading Center
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright