David Fried has developed an industry-leading reputation by focusing on companies buying back their shares. Here, his Buyback Letter looks at EnCana Corp. (NYSE: ECA).
"Canadian oil producer EnCana is among the largest holders of oil and gas resource lands in onshore North America, has an extensive drilling inventory with some 40,000 well locations, strong production and reserves growth, and robust project returns. It is focused on natural gas and in-situ oil sands.
"As the dangers of global warming have become more apparent, major energy companies are attempting to capture carbon dioxide and lock it away where it won't trap more heat. Industry leader EnCana has embarked on a pilot project to improve recovery rates from mature oil wells by using carbon dioxide.
"EnCana buys carbon dioxide produced by a power plant and ships it via pipeline to its Weyburn field in southern Saskatchewan. EnCana injects the gas into its oil field, where it reduces the viscosity of the oil, allowing the company to increase its recovery from the field.
"EnCana says the CO2 injections have raised output from the field by 60%. Burning coal to generate power produces a lot of CO2, which can be used to enhance oil recovery. EnCana announced strong second quarter financial results in July.
"Cash flow exceeded $2.5 billion, or $3.33 per share (up 55%), paired with a substantial increase in operating earnings. The company has reduced shares outstanding by 11.4% in the past 12 months. We have added the stock to our Buyback portfolio."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.
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