iTulip High Commissioner, Select Premium Member, Canada and Persian Gulf
Re: Encana Loses $737 Million on Hedges
Originally Posted by metalman
"$737M hedging loss"
baaah! they weren't hedged... they were short. woops!
For those doing year-over-year comparisons don't forget that Encana's hedges lost $423 million for its shareholders in the first quarter of last year.
Interviewed today, Encana CEO Randy Eresman's explanation for hedging is they were protecting their capital investment program from potential downside in price. Later in a print interview he was quoted as saying additional cash from rising natural gas prices would be used to retire debt or repurchase shares.
1. The company is being run for the benefit of management and employees. Shareholders can go screw themselves.
2. Any company that really believes the price of its product is about to decline should be cutting back on the capital being invested to create that product. Capping potential shareholder returns in order to keep on spending, on something it does not even believe in, is completely illogical. Unfortunately it's also all too common in the resource business. Run from any company that behaves this way. They do not deserve the use of your money.
3. You can bet that a management team that thinks like this, is also rewarding itself for its brilliance by granting stock options like crazy. Using whatever is left of shareholder returns to buy back the stock is mostly a cover to avoid the dilution of overly-generous compensation from becoming too apparent.
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