M&A

27 November, 2009

CORRECTED-UPDATE 2-EnCana shareholders approve company split

* Shareholders approve oil-natural gas split

* Transaction complete on Nov. 30

* Company sees split as takeover defense

* Shares rise 2.6 percent (Corrects trading symbol for Cenovus to CVE.TO in final paragraph from CEN.TO)

CALGARY, Alberta, Nov 25 (Reuters) - EnCana Corp's (ECA.TO) investors on Wednesday approved a plan to split Canada's No. 2 independent petroleum producer into independent oil and natural gas businesses, completing a move first mulled more than a year ago but delayed by the financial crisis.

Shareholders voted 99 percent in favor of the transaction, through which EnCana will spin off its oil sands operations into a new company called Cenovus Energy Inc and retain its natural gas production business, the largest in Canada.

The vote means EnCana can proceed with a transaction first proposed in May 2008, but delayed when the credit crunch made it too expensive for the oil sands business to raise capital.

EnCana will emerge from the split, final on November 30 pending court approvals expected later on Wednesday, focused on its natural gas holdings.

The company has built large positions in some of the most promising shale-gas regions in North America, including the Haynesville region in the U.S. southeast and the Horn River region in northern British Columbia.

To be sure, natural gas prices have floundered as new supplies from the shale regions entered the market while the recession cut demand, pushing the excess gas into storage.

But Chief Executive Randy Eresman said EnCana is somewhat protected from the price squeeze because it has kept costs low. He said that many in the industry may find it tough to make a profit unless prices improve.

"I expect there will be some difficulty is showing bottom line earnings ... for corporations that are exposed to natural gas," he said.

Cenovus will take control of EnCana's oil sands joint venture with ConocoPhillips (COP.N), which includes oil producing properties in northern Alberta, a half share in two Conoco refineries in the United States and some conventional oil and natural gas properties in Western Canada.

"We expect Cenovus will be an industry leader," said Brian Ferguson, EnCana's chief financial officer and slated to be the oil producer's chief executive. "We have some of the best oil assets in North America ... and produce those resources at one of the very lowest costs in the industry, lower than the vast majority of our competitors."

Some commentators have fretted that splitting EnCana into two may make the parts appealing for would-be acquirers. But Eresman said neither company was likely to be taken over.

"Both of these companies are roughly C$20 billion in size," he said. "The same handful of companies that could have acquired EnCana are ... the potential acquirers of the individual parts. We've always believed that the split of the company is the best defense against a hostile (offer) as a way to reflect the full valuation of the individual companies."

EnCana shares rose C$1.50, to 2.6 percent to C$57.54 late afternoon on the Toronto Stock Exchange. Cenovus will list with the Toronto ticker symbol CVE.TO. (Reporting by Scott Haggett; editing by Janet Guttsman) ((scott.haggett@thomsonreuters.com; Reuters Messaging: scott.haggett.reuters.com@reuters.net; +1 403 531-1622))

Source: http://www.reuters.com