Encana Crash and Borrow Dividend Burn $ECA Integrity When You Borrow. Yeah Right!


Encana (Photo credit: Wikipedia)

Encana (NYSE:ECA) what’s to think about. Big gas play with about a 4.5% dividend for a pay to wait. If you believe in heating your home your onside right. Well its like this. Price of gas is declining big time. That means cash flow is hurtin but the overheads still need tending.

The shareholder is expecting a dividend on account of some smooth talk from the executive suite. But here it the thing. To pay the dividend; Encana is borrowing big time. That means the vig is turned  on and climbing. So do something to get the monkey off your back.

The suits borrowed and promised something sweet and juicy for tomorrow. Probably your foreskin but maybe something else. One thing is for sure. They have borrowed to keep the dividend going. Always a suspect move need a certain Je né se quoi non.

So are you feeling lucky or is the French sounding good?

So you have a dividend yield and growing bank loans. Bust a move. The bank loans are problems.

George Gutowski writes from a caveat emptor perspective.

Marcellus Shale Conspiracy Theory Obama is brilliant maybe? #natgas #marcellusshale #fracking

Cropped portion of image from USGS report show...

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The government scaled back their estimates of volume reserves in the Marcellus Shale. Anyone who has ever read geologist reports knows they need to be taken with a grain of salt. Proven, probable and then economically exploitable are difficult issues.

The environmentalists without regard to energy self-sufficiency concerns have cranked up the bogey man of “Fracking”. Many claims about unsafe and environmentally unsound techniques. It’s all been a war of “J’accuse” in the mean time valuable US currency flows off shore and ends up financing terrorism and anti-western sentiment.

The environmentalists were winning the propaganda war. Obama who somehow understands you have to drill needed to trick his own side. so just tone down the rhetoric and pretend the Marcellus Shale is not as important. Therefore the controversy over the Marcellus Shale is also not important. Therefore the environmentalists call off some of their attack dogs. Then the drillers sneak back in and help America become energy self-sufficient.

Drillers will create jobs and tax revenues. Pentagon costs will go down as energy self sufficiency goes up.

I just wonder if Obama is that brilliant. Something to think about.

Disclosure: George Gutowski writes from a caveat emptor perspective. I believe that leaders sometimes need to trick their followers. I have no positions in any stocks or commodities mentioned in this post. I have no plans to initiate new positions within the next 72 hours. I do heat my home with Natural Gas.

Dynegy Spark Spread Blues

Dynegy Logo

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Dynegy (DYN) issued some wording that makes an investor stop and think. Under liquidity and debt in the last earnings release they announced this snippet “During the second quarter, the company added a $150 million contingent letter of credit facility that, while currently unavailable, will provide additional liquidity for 2012 commercial activity in the event of widened spark spreads.”

OK so you look up “spark spread” you get “The spark spread is the theoretical gross margin of a gas-fired power plant from selling a unit of electricity, having bought the fuel required to produce this unit of electricity.”

So if the spreads are increasing that should be good. But Dynegy needs to post letters of credit to back itself up. Definitely needs more explaining. Was this backdoor 2012 guidance?

Disclosure: No position in any stocks mentioned in this post.