Reuters: EnCana stock surges on Shell takeover bid rumor: "It does make sense. Shell wants to be the dominant North American gas player like it is in the rest of the world with the exception of Russia, where Gazprom eclipses the size and breadth of Shell.": Posted Thursday 20 October 2005
By Jeffrey Jones
CALGARY, Alberta, Oct 19 (Reuters) - Shares in EnCana Corp. (ECA.TO: Quote, Profile, Research), North America's top independent oil and gas company, surged near the end of the session on Wednesday amid speculation it could be the target of a takeover bid from oil major Royal Dutch Shell (RDSa.L: Quote, Profile, Research).
EnCana jumped C$5.34, or 9.5 percent, to finish at C$61.50 on the Toronto Stock Exchange after being sharply lower for most of the day. EnCana rose $4.67 to $52.56 in New York.
Rumors about Shell's interest in EnCana's extensive Canadian and U.S. natural gas assets have intensified since the Calgary-based company announced a deal in September to sell its Ecuador unit, the last of its major international holdings.
"(The rumor) turned around the whole market in 45 minutes," analyst Martin Molyneaux of FirstEnergy Capital Corp. said.
"It does make sense. Shell wants to be the dominant North American gas player like it is in the rest of the world with the exception of Russia, where Gazprom eclipses the size and breadth of Shell."
A big question is whether the Anglo-Dutch oil major thinks gas prices are going to go high enough to make it worthwhile to pay the high price of EnCana's stock, Molyneaux said. Encana's stock price has propelled it at various times recently into the position of most-valuable Canadian corporation.
EnCana's market capitalization is currently more than $43 billion, having nearly doubled since the start of the year. Shell's market value is just under $210 billion.
"(Shell) is arguably somewhat underrepresented in North America. They're not the dominant player that EnCana is," Molyneaux said. "If Shell wanted to become the dominant North American gas player, they've got to go after EnCana, Devon (DVN.N: Quote, Profile, Research) or EOG (EOG.N: Quote, Profile, Research)."
An EnCana spokesman acknowledged market talk about Shell's possible interest and the jump in the stock, but declined to comment on it.
"We have made no corporate announcements, and we are working toward our quarterly report next Wednesday," EnCana's Alan Boras said.
A U.S. spokeswoman for Royal Dutch Shell Plc (RDSb.L: Quote, Profile, Research) declined to comment, citing the company's quiet period. A Shell Canada official also declined comment.
The rumors spread to the U.S. options market, where more than 52,000 calls, which give the right to buy the stock at a preset price within a specified time, changed hands. That far outpaced Wednesday's EnCana put turnover of 13,314 contracts, according to market research firm Track Data.
"EnCana has been discussed as having attractive assets for Royal Dutch and British Petroleum," said Paul Foster, market strategist at Web financial-information site theflyonthewall.
EnCana's gas output averaged 3.2 billion cubic feet a day in the second quarter, making it one of the largest gas producers on the continent.
Chief Executive Gwyn Morgan has transformed EnCana over the last 13 months by selling assets in the North Sea, Gulf of Mexico, Canada and Ecuador to concentrate on what he terms "resource plays".
They include properties with gas or oil sands reserves that are large, but require busy drilling and high-tech methods to keep production steady.
Its gas production assets stretch from northeastern British Columbia to Texas. The company is also developing a number of oil sands properties in northeastern Alberta.
Shell Canada Ltd. (SHC.TO: Quote, Profile, Research) is one of the country's biggest oil sands players and is well known for its deep natural gas exploration and production along the Rocky Mountain foothills. It is 78-percent owned by Royal Dutch Shell.
(Additional reporting by Doris Frankel in Chicago)
($1=$1.18 Canadian)
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