Encana reviews dry gas assets, signals big changes

(Reuters) - Encana Corp , Canada's largest gas producer, signaled a potential sale of dry natural gas assets as it focuses on more-lucrative oil and gas liquids. Encana was hurt by low natural gas prices for much of last year, leading the company to write down the value of its gas assets by about $2.89 billion. "Encana has more inventory in its portfolio of plays, particularly dry natural gas, than can be optimally developed," the company said in a statement on Thursday. The company has been spending a bulk of its budget on developing oil and liquid gas, a strategy that paid off in the last quarter. An internal assessment, initiated by Chief Executive Doug Suttles in July, found that Encana was good at developing large scale and complex resource reservoirs but it needed to align its organizational structure with its new strategy. Encana said it had identified several areas where "significant changes" were required. "... Maintaining the status quo is not an option," Suttles said in the statement. Suttles, a former BP Plc executive, took the helm in June, instilling hope that he would steer the company toward a new course after years of strategic missteps. The company was criticized for spinning off its oil operations in 2009 at a time when oil prices were strengthening and stepping up natural gas production even as shale-gas supplies flooded the market and pushed prices down. The company's stock, raised to "outperform" by RBC Capital on Thursday, has lost a fifth of its value since the beginning of this year. Encana shares are worth $28.01 as measured by Thomson Reuters StarMine's intrinsic value model, well above Wednesday's close of $17.93. The model is a measure of a stock's current value when considering analysts' growth estimates for five years, and then modeling the growth trajectory over a longer period of time. "We believe that Encana has some of the best real estate on the block when it comes to natural gas resources and possesses solid execution capability," RBC analysts said in a note. "The missing element in the equation has largely revolved around strategic direction," RBC said, adding that it expects the new management to put the company back on the right track. Encana shares were up about 1 percent in early trading on the Toronto Stock Exchange. (Reporting by Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty)