TSX Commentary

With its corporate split moving into the rear view mirror, RBC CM is reaffirming a bullish outlook for EnCana, predicated upon impressive production growth visibility over the next few years. The new EnCana will begin trading on the TSX on Dec 3 and on the NYSE on Dec 9. In RBC CM’ mind, EnCana possesses the best real estate on the block, with 10.6 million acres of net undeveloped land. RBC CM believes that EnCana has established blue water on its rivals, with its secure lock on the Deep Bossier, coupled with the Montney and emerging Haynesville and Horn River shale plays. In spite of a large production base of 3.2 bcfe/d, RBC CM is comfortable with EnCana’s targeted production growth of circa 10% over the next few years. With 500 mmcf/d of natural gas production shut-in that will return to market combined with 200 – 300 mmcf/d of gas production from Deep Panuke by late2010, EnCana should have little trouble in delivering low cost growth. In RBC CM’ view, EnCana’s relative multiple (based on its ‘if, as and when issued’ market price in Canada of approximately US$28.15) is attractive, particularly given its impressive track record of growth and superior management execution over the years. RBC CM is reaffirming an Outperform, Average Risk rating on EnCana with a revised one-year target price of US$39 per share (vs. US$70 per share previously).