Canada's energy capital will have to make room for another huge player

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CALGARY - Canada's energy capital will have to make room for another huge player, as EnCana Corp. (TSX:ECA), one of the country's most prominent oil and gas producers, splits itself off into two separate Calgary-based companies.

The proposed corporate overhaul would create a publicly traded integrated oil company -- with a working name of IntegratedOilCo (IOCo) -- that would focus on developing EnCana's oilsands assets and linking production to U.S. refineries.

The second company -- tentatively named GasCo, but expected to keep the EnCana name -- will be aimed at growing the enormous Canadian and U.S. unconventional gas plays in which EnCana already has a huge stake.

"Today's announcement represents a logical next step in the evolution of EnCana," Randy Eresman, the company's chief executive officer, told reporters yesterday.

"With this restructuring, we will form two highly focused energy companies -- each built on a foundation of premier assets, each focused on what they do best."

Eresman will run GasCo and the company's current chief financial officer, Brian Ferguson, will run IOCo.

"This is an exciting time for EnCana, for its shareholders, its employees and for me personally," Ferguson said at the news conference. "I'm proud to be part of this new high growth integrated oil company.

"We plan to deliver superior, sustainable growth for our integrated oilsands business."

The transaction is expected to be completed in early 2009.

The two businesses will share an office tower currently under construction in downtown Calgary, which is set to be completed in 2011.

"We might have to fight over who gets the top floor," Eresman said with a chuckle.

EnCana, which has an enterprise value of about US$75 billion, employs about 6,500 people -- 500 of whom work at its Calgary headquarters.

Dividing up the staff between the gas and oil companies will be complicated, but Eresman said he isn't too concerned about finding enough people in Calgary's strapped labour market to fill the vacancies the restructuring will create.

Based on expected market values, both companies would be amongst Canada's top 20 corporations and among the top six energy companies in Canada, Eresman said.

"Individually, these companies have the potential to shine even brighter when contrasted against their industry peer groups," Eresman said.

Under the company's new organization, investors and analysts can more easily gauge how well each side of the business is doing, he added.