EnCana Is Staying in One Piece

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You can take the title of this article both figuratively and literally, my Foolish friends.

Despite the death-defying dips in its share price of late, EnCana (NYSE: ECA) is built to last. Yes, natural gas prices have fallen below the $8 to $8.50 sweet spot identified by the company last quarter. That means we can expect EnCana to trim its 2009 budget when it announces results next week. Chesapeake Energy (NYSE: CHK) kicked things off with its cautionary cut in late September. Companies like Petrohawk Energy (NYSE: HK) followed. This is Self-Preservation 101.

Fortunately for EnCana, the company has serious cash production prowess. A moderate cut in capital expenditures isn't going to make the wheels come off. As I've noted, the company's economic breakeven point lies far below today's gas price levels. Growth will moderate, but that's a foregone conclusion for most companies today.

Given the frazzled funding markets, EnCana's taking the prudent path and delaying its proposed division into two stand-alone firms. Thus the ConocoPhillips (NYSE: COP)-allied oil operation and the unconventional gas business will remain under one roof. Because new debt facilities would need to be put in place, the split requires much more cooperative capital markets than the ones we've got today. I assume Marathon Oil's (NYSE: MRO) breakup notions have been nipped in the bud as well.

There's a major upshot here. In preparation for the split, EnCana had suspended its share buyback program. Now that the schism has been pushed off into the indefinite future, I believe there's nothing to stop EnCana from mirroring Anadarko Petroleum (NYSE: APC) and raking in shares at today's extraordinary prices. In this Fool's view, a well-executed buyback program has the potential to create significantly more value for shareholders than a breakup ever could.