Here's Why Encana Corporation's Stock is Rallying Today
In addition to announcing operational and financial results, Encana detailed additional spending cuts to better manage through this downturn. The company is reducing its workforce by 20%, cutting its dividend from $0.07 per share to $0.015 per share, and reducing capex spending by 55%. The spending cuts are expected to save the company $550 million in 2016, while the capex cut will cause its production to decline from the 405,000 barrels of oil equivalent per day, or BOE/d, it produced in 2015 to 340,000 to 360,000 BOE/d in 2016. However, much of that decline is coming from assets outside its core, which is where its spending the bulk of its capex.
Now what: Investors like that Encana's cash flow is staying steady even though commodity prices are weakening. Further, they like the company's conservative plan for 2016, which will see additional spending cuts. This is giving them the confidence that Encana is making the necessary moves to manage through the downturn.
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