EnCana Corp. mentioned in releasing its first quarter results that it plans to discontinue energy marketing and trading operations to focus on core exploration and production activities in the United States and Canada. A company spokesman said last week that EnCana, which was formed by the merger of PanCanadian Energy and Alberta Energy Co., already has received some offers for the marketing unit, which includes 100 Houston employees and 2.3-2.7 Bcf/d of gas sales.

PanCanadian has been a large and growing presence in the energy marketing business for five years. “When we looked at a review of all corners of our business with the merger, EnCana determined that it wasn’t core to the upstream exploration and production,” said spokesman Alan Boras. “This business has its own character and specialization and given what we do and where our core competencies are, we determined that we wanted to exit that business, We’re looking to sell it as a going concern.”

Boras noted that it was a difficult quarter because prices were down and there was increased scrutiny of the business because of the Enron bankruptcy. “But we had extraordinary prices a year ago,” he noted. “For us it was a very good quarter operationally; gas production was up over 20% and our costs were managed well. [Marketing] income was down year over year; it earned $2 million versus $19 million a year ago. Last year revenues were twice what they were this year.”

EnCana reported 1,347 MMcf/d of gas sales in the first quarter compared to 1,158 MMcf/d in 1Q2001. It also sold 137,000 MWh of power, 194,000 b/d of crude oil and 70,000 b/d of gas liquids. Consolidated marketing revenues were down 41% to $976 million and the marketing margin declined to $23 million from $28 million, according to the company’s financial statement.

“While there’s no bottom line impact, this is an example of top-line distortions, which come from a consolidation of a high gross revenue, low margin merchant trading business with our fundamental business of exploration, production, transportation, gas storage,” CEO Gwyn Morgan said, regarding the sale of the company’s marketing business. “We’ll continue third party gas purchases, but it will be focused on our existing asset base, such as gas storage optimization.”

While there is no deadline for the sale, the company already has exited its May positions and is not doing any forward trading. A source said it is likely the company will cease all operations in preparation for a sale by the end of May.

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