By Christopher Mason in Ottawa
Published: November 26 2009 02:00 | Last updated: November 26 2009 02:00
Shareholders in EnCanayesterday voted to split the Canadian energy group into two publicly traded companies, one focused on natural gas, the other on the Alberta oilsands.
Once the move receives court approval, EnCana will focus exclusively on gas, while oil and refinery assets will be spun off into a separate company, Cenovus Energy, valued at C$21bn (US$19.8bn).
The company had planned the move last year until the world recession saw it halt the proposed split in October, citing uncertainty in the global debt and equity markets.
When the plan was first announced in early 2008, the company's shares were trading above C$85. On Tuesday, it stood at C$55.95.
The move was revived in September when EnCana, one of North America's largest independent energy producers, saw global markets begin to stabilise.
Since its formation in 2002, EnCana has struggled to differentiate its two core assets because of divergent oil and natural gas prices, and differing risks in the two businesses. That struggle has especially hurt its oilsands interests, and has resulted in a share price that underperformed rivals.
The division is designed to boost the market value of EnCana's oilsands assets while forming two definable profiles divided by oil and natural gas.
Critics say the split makes both companies vulnerable to takeover, especially the natural gas assets. Some investors expressed concerns over the prospect of a foreign takeover, though 99 per cent voted for the deal.
Foreign takeovers have long been an issue in Canada, and fears of takeover risks may stem from the fact EnCana emerged as a result of the 2001 split of Canadian Pacific Railway into several companies. One of those, CPR's oil-and-gas unit, became part of the newly formed EnCana the following year.
EnCana estimates the combined value of the two companies could be worth 15 per cent more than if they remained together.
David O'Brien, EnCana chairman, said the split "should over time result in a much better share price for each of the constituent parts . . . And if that is indeed the case, there's no better protection against a takeover than a fully valued share".
Under the plan, owners of each EnCana share will receive one share in each of the two companies. If court approved, the deal is expected to close on Monday and the companies will begin operating a day later.
Cenovus will be headed by Brian Ferguson, EnCana's current chief financial officer. The natural gas assets will be run by Randy Eresman, EnCana chief executive.
Natural gas makes up the bulk of EnCana's output, and Mr Eresman hopes to increase production by as much as 10 per cent annually.
Cenovus has an estimated 40 billion barrels of oil in the Canadian oilsands.
EnCana shares closed up 2.5 per cent at C$57.36 in Toronto.
Published: November 26 2009 02:00 | Last updated: November 26 2009 02:00
Shareholders in EnCanayesterday voted to split the Canadian energy group into two publicly traded companies, one focused on natural gas, the other on the Alberta oilsands.
Once the move receives court approval, EnCana will focus exclusively on gas, while oil and refinery assets will be spun off into a separate company, Cenovus Energy, valued at C$21bn (US$19.8bn).
The company had planned the move last year until the world recession saw it halt the proposed split in October, citing uncertainty in the global debt and equity markets.
When the plan was first announced in early 2008, the company's shares were trading above C$85. On Tuesday, it stood at C$55.95.
The move was revived in September when EnCana, one of North America's largest independent energy producers, saw global markets begin to stabilise.
Since its formation in 2002, EnCana has struggled to differentiate its two core assets because of divergent oil and natural gas prices, and differing risks in the two businesses. That struggle has especially hurt its oilsands interests, and has resulted in a share price that underperformed rivals.
The division is designed to boost the market value of EnCana's oilsands assets while forming two definable profiles divided by oil and natural gas.
Critics say the split makes both companies vulnerable to takeover, especially the natural gas assets. Some investors expressed concerns over the prospect of a foreign takeover, though 99 per cent voted for the deal.
Foreign takeovers have long been an issue in Canada, and fears of takeover risks may stem from the fact EnCana emerged as a result of the 2001 split of Canadian Pacific Railway into several companies. One of those, CPR's oil-and-gas unit, became part of the newly formed EnCana the following year.
EnCana estimates the combined value of the two companies could be worth 15 per cent more than if they remained together.
David O'Brien, EnCana chairman, said the split "should over time result in a much better share price for each of the constituent parts . . . And if that is indeed the case, there's no better protection against a takeover than a fully valued share".
Under the plan, owners of each EnCana share will receive one share in each of the two companies. If court approved, the deal is expected to close on Monday and the companies will begin operating a day later.
Cenovus will be headed by Brian Ferguson, EnCana's current chief financial officer. The natural gas assets will be run by Randy Eresman, EnCana chief executive.
Natural gas makes up the bulk of EnCana's output, and Mr Eresman hopes to increase production by as much as 10 per cent annually.
Cenovus has an estimated 40 billion barrels of oil in the Canadian oilsands.
EnCana shares closed up 2.5 per cent at C$57.36 in Toronto.
Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Source: http://www.ft.com/cms/s/0/d9228cd2-da2b-11de-b2d5-00144feabdc0.html?
Comments
Post a Comment