Encana Corp. (ECA) Chief Executive Officer Randall Eresman resigned yesterday after six years in the role and will be replaced by board member Clayton Woitas until a permanent successor is named.
Eresman, 54, will be an adviser of Canada’s largest natural gas producer until Feb. 28, according to a statement from the Calgary-based company yesterday. Woitas has been a company director since 2002 and is CEO of Range Royalty Management Ltd.
“Now is the right time for me to step down and to turn over leadership of Encana,” said Eresman in the statement. His departure will allow a new leader to focus on the company’s “transition to a more balanced commodity portfolio,” he said.
Eresman engineered Encana’s transformation into a producer focused on gas by spinning off its oil assets into a new company, Cenovus Energy Inc. (CVE), in November 2009. Cenovus is now valued at C$25.3 billion ($25.7 billion), or 43 percent more than its former parent.
The split was first announced in May 2008 and then shelved as the financial crisis caused commodity prices to sink. U.S. gas futures had dropped 42 percent through Sept. 11, 2009, when Eresman said the company would go ahead with the Cenovus spin off. Dividing the company was necessary because of diverging production technology, Eresman said at the time.
During Eresman’s tenure, Encana pursued a strategy of asset sales to fund an expansion of its holdings in unconventional shale gas formations in regions such as northeastern British Columbia. As prices for the heating fuel sank to a decade low in April, Eresman was forced to pursue joint-venture agreements with companies including PetroChina Co. to boost cash flow while helping lower production costs.
Eresman, who was born in the southeastern Alberta town of Medicine Hat, had been CEO since Jan. 1, 2006. In 2011, Eresman earned a total of $9.25 million, including salary, stock and bonus awards, according to data compiled by Bloomberg.
Last month, Eresman announced a deal to sell a 49.9 percent stake in the company’s Duvernay shale formation in Alberta to PetroChina for C$1.18 billion. PetroChina, (857) Asia’s biggest oil producer, also agreed to pay C$1 billion over four years to fund development of the project.
The PetroChina agreement brought Encana’s net proceeds from joint ventures and asset sales to C$3 billion last year, up from an annual target announced at the company’s June investor day of C$2 billion to C$2.5 billion.
Mitsubishi Corp. (8058) agreed to pay C$1.46 billion for a 40 percent stake in development of Encana’s Cutbank Ridge shale gas acreage in British Columbia and Alberta on Feb. 17. The deal came eight months after PetroChina walked away from an agreement to take a 50 percent stake in a larger position in Cutbank Ridge that also included existing production.
The company also announced in December that it was exiting its partnership to jointly produce liquefied natural gas with Apache Corp. (APA) and EOG Resources Inc. (EOG) at the port of Kitimat, British Columbia. The project, which has Canadian regulatory approval to produce and ship the fuel to Asia, has yet to announce any customers.
Some shareholders were speculating a CEO change was possible given the performance of the shares in recent years, Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, said in a telephone interview.
Encana has fallen 43 percent to C$19.50 yesterday in Toronto trading, from C$34.11 at the end of 2009.
The company has reported six quarters of losses over the past two and a half years, according to data compiled by Bloomberg. Encana is expected to post net income before one-time items of $249.75 million in the fourth quarter, according to the average of four analysts surveyed by Bloomberg. That compares with a loss of $246 million in the year-earlier period.
Encana has the lowest total return, including dividend payouts and share price growth, of the 10 largest Canadian energy companies valued at more than C$10 billion, according to data compiled by Bloomberg. Encana, along with Husky Energy Inc. and Nexen Inc. (NXY), has a negative total return.
Eresman helped to create the notion of amassing large resource positions in unconventional tight and shale gas formations, then moving to tap the reserves in a manufacturing mode, said Ollenberger, who has an outperform rating on Encana shares and owns none.
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