It's time to buy EnCana (ECA).
I've been slow to name this natural gas company because it has had nothing but adherents, and for very good reason. I haven't been able to find a value price for the stock and I very much wanted to because this is another dedicated natural gas company in a natural gas environment that has been less than strong.
Wow, there are two big understatements. First, we know about the weakness of natural gas and I won't go into any more detail here. But suffice to say that the price of natural gas, even if the lows have already been seen, still portend for incredible weakness, at least through the next two quarters. There are still indications that we may run out of storage completely by October, barring a very hot summer.
But natural gas is without question my best long-term play in the energy space, an energy space that has been trampled and pummeled without remorse this year. Indeed, if you are looking for a fast trade EnCana is hardly a place you'd look.
But there's the second of my deep understatements about EnCana. It is not just another dedicated natural gas company, it is by far the BEST. I could again bore you with assets and their far-more-sustainable balance sheet as well as their strong leadership. But here's the bottom line: EnCana is to Canada as Chesapeake (CHK) is to the United States. Both are their country's flagship natural gas company. And in this parallel analogy, there is no comparison. EnCana is a far, far better company than Chesapeake.
That's why the latest scandal of possible land lease fixing between EnCana and Chesapeake reported today bothers me so little. Again, while this is another nail in the coffin of the Chesapeake CEO Aubrey McClendon and his shaky company, it is presenting as an opportunity to get into EnCana at a real value price.
That's because the Michigan land grab has been such a disappointment for both companies and very little has been found to directly tie EnCana into any concrete collusion, if there was any at all. I would be surprised to see EnCana the main target of any DoJ investigation if there is one and it is much more likely to find our friend McClendon with a much larger target painted on his back.
EnCana shares are down more than 17% in the last four trading sessions and now sport a greater-than-4% dividend, a dividend I think they are more than capable of paying no matter how much worse the natural gas price action gets going into the fall.
So here's your chance to grab the last great independent natural gas company on the cheap put it away and forget about it.
And get paid to wait.