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Pinedale Online > News > May 2008 > EnCana to split into two energy companies
EnCana to split into two energy companies
May 15, 2008

In an announcement made on Sunday, May 11, the Board of Directors of Canada-based EnCana Corporation (ECA) unanimously approved a proposal to split EnCana into two highly focused energy companies. One would be a natural gas company and the other a fully integrated oil company.

“This transaction is designed to enhance long-term value for EnCana shareholders by creating two highly sustainable, independent entities, each with an ability to pursue and achieve greater success by employing operational strategies best suited to its unique assets and business plans,” stated the EnCana media release.
“The proposed corporate reorganization would be implemented through a court-approved Plan of Arrangement.

This transaction will create a publicly-traded integrated oil company with oilsands as the growth driver. This company, which has a working name of IntegratedOilCo (IOCo), will focus on the development of EnCana’s Canadian oilsands assets and refinery interests in the United States, underpinned by a well-established natural gas and oil production base in Alberta and Saskatchewan. IOCo assets, which encompass EnCana’s Integrated Oil and Canadian Plains divisions, represent about one-third of EnCana’s current production and proved reserves.”

“EnCana’s other major operating divisions, Canadian Foothills and USA, will form a pure-play natural gas company, aimed at growing existing high-potential resource plays in Canada and the United States. With a working name of GasCo, it will represent about two-thirds of EnCana’s current production and proved reserves. It is expected that GasCo will retain the name EnCana Corporation. The permanent name of IOCo will be determined before the transaction closes,” the release stated.

EnCana shareholders to receive one share in each of the two companies
Under the proposed transaction, which is expected to be completed in early 2009, EnCana common shareholders will receive one share in each of GasCo and IOCo in exchange for each EnCana share held. The transaction is generally expected to be tax free to shareholders. EnCana intends that the initial combined dividends of the two companies will be equivalent to EnCana’s current dividend of US$1.60 per share annually. Dividends will be at the discretion of the respective boards of directors of each company. EnCana expects to continue recommending to its Board of Directors that the company pay a 40 cent per share quarterly dividend until the transaction is complete.

Randy Eresman, EnCana’s President & Chief Executive Officer, said, “Our natural gas business is very strong. We have delivered consistent production increases and cost improvements and our existing and emerging plays hold great potential. We have become North America’s largest natural gas producer in one of the world’s lowest-risk regions and largest energy markets. Our integrated oilsands business is into its second year of our 50-50 joint venture with ConocoPhillips. This successful partnership strategically and financially links premier in-situ oilsands assets with industry-leading refinery assets, creating one of the industry’s lowest cost integrated oilsands developments,” Eresman said.

Concurrent with this announcement, EnCana has updated its estimates of 2008 pre-transaction cash flow to a range of between $9.6 billion and $10.0 billion to primarily reflect increases in forecasted commodity prices. Updated 2008 EnCana guidance, pro forma guidance for GasCo and IOCo and supplemental information about the proposed transaction will be posted on the company’s website

Pinedale Online > News > May 2008 > EnCana to split into two energy companies

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