EnCana Divides to Conquer

The Canadians are so considerate. To give market participants time to consider the consequences, EnCana (NYSE: ECA  ) held an analyst call on Sunday to discuss its proposed split into two companies -- one focused on integrated oil sands, the other on natural gas.

I, for one, appreciated the extra time, because this one's a doozy.

EnCana, in case you didn't know, is one of Canada's biggest companies. That's what big energy companies tend to do -- get bigger. Look at the past decade of deals: Exxon and Mobil got together to form the creatively named ExxonMobil (NYSE: XOM  ) . Chevron (NYSE: CVX  ) bought Texaco, and then Unocal. ConocoPhillips (NYSE: COP  ) resulted from the merger of -- you guessed it -- Conoco and Phillips, and it also bought Burlington Resources.

EnCana is breaking the mold by breaking itself up, and I couldn't be happier.

Though admittedly late to the EnCana story, I've been marveling at the merits of this profit factory for months now. The integrated oil joint venture with Conoco is a major success, and as with Suncor (NYSE: SU  ) , EnCana's oil sands resources will lead to many years of double-digit production growth. Meanwhile, the natural gas side of the business has no shortage of emerging resource plays worth getting excited about.

It's a lot to keep track of, and even harder to value. For the sake of our frail human brains, EnCana is making the story simpler.

The spinoff, scheduled for early 2009, will help not only investors, but the company itself. More focused management teams, with independent financial flexibility, should enable the two sides of EnCana's business to allocate capital most optimally. At the same time, both organizations promise to bear the mark of their predecessor, with a strong focus on disciplined investment, dividends, and buybacks.

I think the most important question on yesterday's call was "why is this going to take so long?" There are simply a lot of approvals pending -- from courts to regulatory bodies to, of course, the shareholders. But this is all to your advantage, Fool. You don't have to chase the pop in share price today to reap the benefits of this value-creating event. In all likelihood, you'll get a better entry point some time in the next eight months or so.

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