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Bleak Earnings Behind, Encana Focuses on Bright Liquids Future

Aimee Duffy
February 21, 2012

There wasn't too much surprise when Encana (NYSE: ECA  ) released earnings last week. We were all waiting to hear how badly the company, one of the top five natural gas producers in the U.S., had been crushed by bottom-dwelling methane prices in 2011. Earnings weren't great, but Encana did make a few important announcements that should bode well for the future.

2011 recap
Encana's total production was up 5% over last year, to 3.5 billion cubic feet per day, but given the price of natural gas last year, this isn't necessarily great news. The company had a rough fourth quarter, reporting a net loss of $246 million. Net earnings for the year came in at an abysmal $128 million, a painful number to acknowledge when compared to last year's earnings of $1.2 billion.

But, there were some positive signs, too. The fourth-quarter loss wasn't as bad as last year's fourth-quarter loss of $469 million. The company also made an important $515 million investment in liquids-rich properties, and divested $2.1 billion worth of assets. The move towards liquids is crucial if Encana plans to make any money in 2012. With that, let's take a look at the company's plan for the coming months.

Strategy: 2012
First and foremost, Encana is cutting its North American natural gas supply. We've already seen a fair bit of this industry-wide, with Chesapeake Ene