Encana Shares Soar After PetroChina Agrees to Buy Gas Assets

Expect European gas pump prices in America soon.

http://www.bloomberg.com/news/2011-02-09/encana-sells-5-44-billion-...

 

Encana Corp., Canada’s biggest natural gas producer, rose the most in 14 months after PetroChina Co. agreed to buy a 50 percent stake in gas assets in western Canada for C$5.44 billion ($5.46 billion).

Encana, based in Calgary, gained C$2, or 6.5 percent, to C$32.83 on the Toronto Stock Exchange at 1:34 p.m. Shares earlier rose as much as 7.5 percent, the most since Dec. 14, 2009. The shares have risen 12 percent this year, compared with a 2.8 percent rise for the Standard and Poor’s Toronto Stock Exchange Index, and more than twice the 2.8 percent increase for the Canadian energy index.

State-controlled PetroChina is paying about 20 percent more than the U.S. benchmark gas price, said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. The acquisition value equates to a long-term price of $4.80 per million cubic feet, compared with the $4 prevailing contract price for delivery at Henry Hub in Louisiana, he said.

“While some might view this valuation as rich, we believe the premium is justifiable given the asset quality,” said Kwan.

Before today, Encana’s stock gained 5.4 percent on speculation of potential ventures with Chinese competitors that could shelter the Canadian company from the slump in gas prices, said Daniel Pratt, director of oil and gas equity research at Ticonderoga Securities in New York.

Encana today reported fourth-quarter operating profit of $68 million, or 9 cents a share, compared with an average of 11 cents estimated by six analysts surveyed by Bloomberg.

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