CALGARY — EnCana Corp.’s (TSX:ECA) plans to split itself into two separate companies received such overwhelming support from shareholders Wednesday that even the company’s chief executive was caught a bit off guard.
Randy Eresman, who is to head up the natural gas-focused company that will emerge from the split, told reporters he knew major shareholders supported the transaction.
What he didn’t expect was a near-unanimous vote — at least 99 per cent — in favour of the split at a special shareholder meeting in Calgary Wednesday.
“It’s kind of unheard of in any transaction,” Eresman said after the meeting. EnCana first announced its plan in May 2008, but in the depths of the recession decided to put the transaction on hold.
The plan were revived in September, when the company began to see some signs of stability returning to the global market.
Also Wednesday, EnCana said it had received the approval of Alberta’s Court of Queen’s Bench, another requirement for the deal to go ahead.
The split is expected to become official Nov. 30.
Regular trading of both companies’ stock is set to begin on the Toronto Stock Exchange Dec. 3 and on the New York Stock Exchange Dec. 9.
“Out of the starting gate, both of these companies we believe will be in the top tier of their peer group,” said Eresman.
EnCana will continue on as a pure play natural gas player focused on the prolific, but technically challenging, unconventional reservoirs throughout North America.
It has formidable land positions in plays like the Horn River Basin in northeastern British Columbia and the Haynesville shale, which straddles Texas and Louisiana.
Crude oil assets will be spun off into a new publicly traded company called Cenovus Energy Inc., to be headed up by EnCana chief financial officer Brian Ferguson.
Cenovus will encompass a joint-venture with U.S. energy giant ConocoPhillips linking oilsands production with refineries in Illinois and Texas, as well as its oil pool in Weyburn, Sask.
“From the moment of its creation, we expect Cenovus will be an industry leader,” said Ferguson, who said production is expected to grow 15 to 20 per cent next year.
“We have some of the best oil assets in North America and we’ve developed techniques to produce those resources at one of the very lowest costs in the industry, lower than the vast majority of our competitors.”
The split had a handful of detractors.
Prior to voting, two shareholders raised concerns that either of the smaller companies could be more easily picked off in a takeover.
Chairman David O’Brien said the value of each of the spinoffs will be more clearly reflected as separate entities than if they were part of the same company, boosting their respective share prices.
“And if that is indeed the case, then there’s no better protection against a takeover than a fully valued share,” he said.
Another shareholder said the meeting amounted to a “rubber stamp” of a plan management had already decided to move ahead with.
“I’m a little concerned that we have one strong corporation that we’ve now decided to make two weak ones,” he said.
Another often-cited drawback is each firm’s increased exposure to commodity price fluctuations.
On the natural gas side, prices have been lower than what most producers need to make conventional drilling economically viable and many forecasters see no end in sight to the slump.
“Fortunately we’re launching EnCana as one of the very lowest cost natural gas producers in North America,” Eresman said.
“I think over time it will clear itself out. The best producers, the lowest cost, will be the ones that survive in this new environment.”
The two businesses are expected to start operating independently as soon as Dec. 1, though work on tasks like dividing up their computer and phone systems is expected to take place throughout the holiday period.
EnCana shares rose 2.5 per cent to $57.36 on the Toronto Stock Exchange Wednesday.