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Discussion Starter #1 (Edited)
Hey everyone,
So I just read the news about Encanas retreat into gas exploration etc. Now I will say I do own some EnCana stock. Although I am interested to know if anyone is thinking like news articles ive seen.

I guess the big question is.... should I immediately get out of my EnCana position because of retreating prices? Today it went down by almost 3.5% and Encana said it is prepared to retreat even more from its growth plan even further if gas prices remain low.

Now I am still new to this, should I be following the wave and get out of my Encana position, my father also has a position in this company and has double the amount of shares I have, would it be a good idea to get out before I lose too much money? Any idea how long it would take to rebound? Anyone have any suggestions for me.

I know that Encana is one of the biggest gas producers in North America and they are a massive company but if their stock price is going to fall because of this "gas price fall" would that be good reason to get out or should I hold out?

The stock does pay nice dividends but it may just not be worth it if the price is gonna hit the floor.

EDIT: I know its not a good idea to ride the fear of other investors although I figure it would be nice to get others opinions aswell.

Here is the Globe/Mail article:
http://www.theglobeandmail.com/globe-investor/encana-retreating-from-growth-plan/article1764731/
 

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Nat gas prices have been down for a long time and continue to go down slowly. It's prudent for Encana to do this. A lot of other companies have done the same since the price of gas is down. Companies have found too many large deposits of gas and cheap ways of getting it.

If supply dwindles because of use or because of companies shutting down their natural gas operations, then prices may slowly increase.

I'm hoping the Obama administration will announce a move towards natural gas because they have so much of it in the States but that doesn't seem to be happening any time soon.

If I had Encana, I don't think I'd sell it because it does pay the dividend and the gas prices have already dropped so low. The yield is pretty low though. How low the stock will go ? I don't know.
 

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Discussion Starter #3
Yea the dividend isnt the greatest, but I may keep it depending on performance in the next little while. I really cannot decide though.
 

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Gas prices have been low for a while now so the gas companies won't be renewing their hedges at these prices. That means the higher cost producers are going to have to shut-in production until prices recover. Also, exploration drilling is finally slowing down. How is natural gas going to plunge further if exploration is slowing/stopping? The low nat gas prices have done their job.

Don't follow encana too closely but I believe they're among the lowest cost producers in the space so they shouldn't have any problems.

Demand for nat gas is steady and has plenty of upside with any push for clean energy. The oil to gas ratio is getting a bit out of whack and if it continues then we could see liquified/compressed nat gas used in vehicles here like the millions already in use around the world. Or it could eventually become exported.

I'm bullish on nat gas and believe the bottom is near. The stocks themselves look like they may already have bottomed. Maybe I'll have to wait but the risk is low. Quotes like the one from your article make me even more confident:

“If you are not already walking away from the natural gas space, you probably should start, and if you are already walking, you might want to start thinking about running away,” Mr. King advised investors in a report this month.
 

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They say the cure for low prices are low prices. Lower prices cause less exploration to occur which naturally will raise prices. Encana has massive CapEx budgets over the next five years. Cabin Lake up near Fort Nelson is a $4B gas plant project. There is an enormous amount of gas up in that area. The time to invest in a sector is when it has fallen completely out of favor and I believe Nat Gas is at that point + typically you get a bounce in Nat Gas prices this time of year. Also, ECA at these levels is a juicy takeover target. The dividend yield has historically been low on this stock, but with the price drop it now exceeds 3% so abit of a dividend play here now.

As someone else mentioned the ratio of oil/gas prices is at an extreme and historical imbalance. Lastly, a few months ago Obama mentioned the need for US to adopt more nat gas vehicles and ECA on that day was up 7 or 8% or something ridiculous based on just one comment. Another comment like that and you will see the same bounce. So yea I own ECA and will likely add substantially if it drops another 5% or so.
 

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As someone else mentioned the ratio of oil/gas prices is at an extreme and historical imbalance. Lastly, a few months ago Obama mentioned the need for US to adopt more nat gas vehicles and ECA on that day was up 7 or 8% or something ridiculous based on just one comment. Another comment like that and you will see the same bounce. So yea I own ECA and will likely add substantially if it drops another 5% or so.
I don't believe the ratio of oil/gas really comes into play in this case. Nat gas does not really have a useful price history because so many things have changed:
-technology
-nat gas discoveries in North America
-transportability
-ability to store

In fact, natural gas prices outside of North America are at higher prices based on demand and supply.

IMHO, any ratios between ratios between nat gas and oil are irrelevant. If one was to compare different precious metals, those price ratios may have a bit more meaning.
 
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