CALGARY — Oilpatch giant EnCana Corp. (TSX:ECA) is reviving its plans to split into two distinct oil and gas companies now that some optimism appears to be returning to the global economy.
Chief executive Randy Eresman said the market conditions “are now favourable to proceed” a statement Thursday after the close markets.
“Equity and debt markets have improved significantly with debt financing available at reasonable cost,” Eresman said.
“Global and national economic indicators suggest that the world’s economies are showing promising signs of recovery. As well, the strategic rationale for creating two leading energy companies remains as sound as ever.”
One of the spinoffs will be an unconventional gas producer, which will keep the EnCana name and be headed up by Eresman. It will include the company’s potentially enormous shale gas resource plays in northeastern B.C. and Louisiana.
EnCana’s oil production and refining operations are to be part of a new integrated oil player called Cenovus, which will be headed up by current chief financial officer Brian Ferguson.
EnCana, one of North America’s pre-eminent natural gas producers, announced in May of last year that it planned to divide its business along two distinct lines in order to better reflect the value in both businesses.
However, just as world markets began to crater last October, EnCana decided to put its plans to split on hold until some stability returned.
As recently as April, Eresman said there was no reason to believe the transaction would happen any time soon.
“I think you should forget about it in the current environment,” told reporters in April.
EnCana’s board of directors unanimously approved going ahead with the transaction.
A shareholder meeting is set for Nov. 25 to vote on the split with the deal expected to close on Nov. 30.
The split is expected to have a minimal impact on employees, operations, suppliers, business partners and stakeholders, since the company completed an internal reorganization in 2007.
“Through this transition period, we will work diligently to make these changes as seamless as possible, Eresman said, noting no layoffs are expected.”
“In fact, with the promising potential of these two companies, we expect continued employment opportunities ahead in both companies.”
Under the proposed transaction, EnCana common shareholders will keep their EnCana shares and receive one Cenovus common share for each EnCana share held.
The company said it intends that the initial combined dividends of the two companies will be approximately equal to EnCana’s current dividend of US$1.60 per share annually.
EnCana shares were up $1.50 at $59.34 on the Toronto Stock Exchange on Thursday.