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Workers install a 5 inch natural gas collector pipeline to a coalbed methane gas well, owned by Encana, near Lyalta, Alberta .LARRY MACDOUGAL/The Canadian Press

The $1.5-billion (U.S.) second-quarter loss at Encana Corp. on the writedown of assets is another setback in the struggling company's attempts to find the winning formula that will offset the impact of low natural gas prices.

But president and chief executive officer Randy Eresman is putting his faith in a corporate strategy to shift development from so-called dry natural gas to natural gas liquids (NGL) to diversify the company's portfolio away from an over-dependence on conventional natural gas plays.

Mr. Eresman made the comments after Calgary-based Encana reported the second-quarter loss as it booked a $1.7-billion non-cash impairment charge related to the slump in natural gas prices. The $1.5-billion loss compares to a profit of $383-million in the year-earlier period.

Encana warned there will likely be more impairment charges on further declines in natural gas prices.

Encana has been trying to cope with the impact of low natural gas prices after spinning off its oil refinery assets into Cenovus Energy Inc. in 2009.

Mr. Eresman said Wednesday that a more-balanced portfolio means the company will only invest in high-quality natural gas plays, as well as light oil and NGL assets.

"Our goal for Encana is to transition the company to a more-diversified portfolio of production and more-balanced cash flow generation," he said on a conference call for analysts.

Addressing concerns that Encana faces a major challenge next year when its natural gas hedges come off, he said that lower cash flow from natural gas will be largely offset by cash flow from growth in light oil and NGL. The latter includes more lucrative gas-related commodities such as butane and propane.

(Hedges are sales of anticipated production that have been made at higher prices.)

Robert Bellinski of Morningstar Research Inc. said in an interview that Encana could be facing a tough year. "They're just in a very difficult spot. They don't want to explicitly say that, but that's what it is," he said.

Encana is beefing up its investments in NGL just as dozens of other companies do the same.

"When everybody's rushing to produce (NGL), prices go down," he said.

Canaccord Genuity analyst Phil Skolnick said his concern is what happens if Encana doesn't get the joint-venture or asset-sale proceeds it needs to execute the accelerated capital expenditure program it has laid out.

Mr. Eresman reiterated on Wednesday he wants to boost the pace at which Encana develops its liquids-rich natural gas and oil plays while at the same time "investing nominally in dry gas, natural gas plays to preserve their value."

But he stressed that the company will only spend its projected 2013 capital once it has the money from cash flow or completed joint ventures or asset sales to do it.

On another front, he said he could not comment on an ongoing internal investigation into allegations Encana colluded with Chesapeake Energy Corp. to lower the price of exploration lands in Michigan.

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