Now that 2011 is almost in the rearview mirror, many investors start to mull over their portfolios and ask what comes next. It's a fair question, and the answers we find are the crux of great investing. The ability to identify value before the market has already baked expectations into the stock price is what distinguishes the successful investor.

With that, let's take a look at Encana (NYSE: ECA). The Calgary-based company is one of North America's top natural gas producers.

Stats for Encana

Year-to-Date Stock Return (35.0)%
Market Cap $13.8 billion
Price/Earnings Ratio 51.7
Estimated 5-Year Growth Rate 5%
Dividend Yield 4.3%
CAPS Rating (out of 5) *****

Sources: Yahoo! Finance and Motley Fool CAPS.

A look backward
Encana's share price spent much of the year mired in mediocrity before falling off with everyone else in August.

Encana Corporation Stock Chart

Encana Corporation Stock Chart by YCharts

But although many stocks recovered from their August plunge, Encana did not. The company fell even further and is now down 35%.

In an effort to fend off debt and establish the foundation for a profitable future, the company responded with an asset fire sale and a renewed focus on liquids production.

An eye on the future
First and foremost, Encana is going to adopt the U.S. GAAP standards for financial reporting beginning in 2012, which means it will be easier to compare numbers against all of your favorite American energy companies.

Shareholders hope those numbers look better next year than they did in 2011, and Encana is taking steps to make that happen. The company has announced that in an effort to reduce debt, capital expenditures will be down, potentially more than $1 billion, from 2011.

Encana will direct most of its 2012 spending on oil and natural gas liquids-rich plays. The return on these investments is higher than its natural gas properties, and the company has 2 million acres in liquids-rich plays to exploit. As of third-quarter reporting, Encana has drilled a dozen different exploration wells across five different liquids plays, the results of which will help to specifically determine its 2012 capital program allocations.

In another step toward paying short-term debt, Encana issued a $1 billion debt offering in mid-November to cover notes maturing between the end of this year and the first quarter of 2012. The majority of the debt issued matures in 10 years, while the rest of it matures in 2041.

Bottom line
This was the year of scrambling to stay afloat for Encana, but I expect its strong focus on liquids to pay off next year. The company is on a short list of stocks I'm following closely in 2012 with intentions to buy, but investors who are still on the fence about its potential might want to check out what Fool analysts call "The Only Energy Stock You'll Ever Need" instead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.