Encana Shares Drop on Report of Collusion with Chesapeake

Date : 06/25/2012 @ 12:24PM
Source : Dow Jones News
Stock : Chesapeake Energy Corp. (CHK)
Quote : 5.3  -0.17 (-3.11%) @ 10:38AM

Encana Shares Drop on Report of Collusion with Chesapeake

Encana (NYSE:ECA)
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     By Edward Welsch 
 

Encana Corp. (ECA) shares slid more than 5% Monday following a report alleging the Canadian company colluded with a rival to lower the price of U.S. shale-gas lands up for auction.

Shares of the Calgary-based natural-gas producer, the second largest in North America after Exxon Mobil Corp. (XOM), dropped as low as 5.4% on the New York Stock Exchange after Reuters reported that, in email exchanges, executives at Encana and rival Chesapeake Energy Corp. (CHK) discussed ways to avoid competing against each other for shale-gas land in Michigan.

The report alleged that Encana and Chesapeake agreed to split up shale-gas lands between them before a public auction to avoid creating a bidding war that would drive up the price. If the allegations are true, the report suggested Encana and Chesapeake could be in violation of U.S. anti-trust laws.

An Encana spokesman said the company is working on a response to the report and didn't have an immediate comment.

The report comes at an inconvenient time for Encana, which is trying to rapidly expand its liquids-rich natural-gas production and offset the low price of natural gas by selling partnership stakes in its shale-gas plays.

"To have one of the major plays that is in your [partnership] package to now be scrutinized, that obviously reduces the marketability of those assets," Morningstar analyst Robert Bellinski said.

Encana shares were down 4.9% to $18.88 in recent trading. Shares of Chesapeake Energy, the third-largest natural gas producer in North America, fell 7.7% to $17.17.

Write to Edward Welsch at edward.welsch@dowjones.com




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