A Tough 2011 for Encana

As the final days of 2011 tick off the calendar, it's a great time to dust off our portfolios and take a look at how our favorite stocks performed this year. You've likely suffered through some lows and enjoyed some highs following your companies for 12 months, but now it's time to evaluate the whole picture and decide whether your stocks are still the right investments for your portfolio.

Today we consider Encana (NYSE: ECA  ) , a Calgary-based exploration and production company that focuses on natural gas production in the U.S. and Canada. The current U.S. energy boom has got a lot of investors thinking about Encana.

Encana by the numbers

Year-to-date Stock Return (37.35)%
Market Cap $13.79 billion
Revenue (ttm) $7.44 billion
Debt/Equity (mrq) 52.18
Dividend Yield 4.30%
CAPS Rating *****

Source: Yahoo! Finance and Motley Fool CAPS.

What happened to Encana this year?
Encana began the year trading near a 52-week low, and, unfortunately for investors, things did not pick up from there. The stock will likely close out 2011 down more than 30%.

One could argue that Encana's woes actually began two years ago when it spun off its oil business to Cenovus Energy in order to focus on natural gas. The price of natural gas tanked around the same time and Encana has more or less been suffering since.

To combat a weakening balance sheet, Encana began to rapidly divest assets early in 2011, agreeing in January to sell a natural gas plant in Colorado for $330 million. The trend continued all year, culminating last week when the company announced that it had closed on a sale of its North Texas assets in a deal worth $860 million. All told, the company expects to reap $3.5 billion from its asset sales initiative.

Though natural gas prices are depressed in the U.S. and Canada, they are much higher in Europe and Asia. In an effort to cash in on lucrative exports, Encana established a joint-venture deal on a liquid natural gas export facility in British Columbia. The project is one of the most advanced in North America; it needs just one more permit from the Canadian government before construction can begin.

An increased emphasis on natural gas liquids, or NGL, production helped Encana to a stronger showing in the third quarter. Though it got dinged on currency losses, the company beat analysts' earnings estimates, generating strong cash flow and increasing NGL production by 6% over the same period in 2010.

Finally, Encana was forced to finish out the year defending itself against an Environmental Protection Agency report linking hydraulic fracturing to ground water pollution in Wyoming, specifically in a region where Encana fracked many wells.

The price of oil and natural gas liquids must remain high if the company expects to rebound in 2012. But Encana isn't the only stock that wins with high prices -- consider three more stocks Fool analysts also expect to benefit handsomely.

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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