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Incoming Encana CEO Doug SuttlesTODD KOROL/Reuters

Doug Suttles was front man for BP PLC's efforts to control the disasterous Gulf of Mexico oil spill in 2010, contributing such phrases to the popular lexicon as "junk shot" and "top kill."

Those were the names of two failed stop-gap attempts at plugging the ill-fated Macondo well, which was eventually killed.

Now, as chief executive officer of Encana Corp., Mr. Suttles' solutions for putting Canada's largest natural gas producer back on solid footing will have to be much more long-term and well-defined than what was needed during the frenzied early days of the oil spill.

Investors, who have suffered through weak commodity prices and frequent changes in strategy to cope with them, are probably prepared to give former chief operating officer of BP's exploration and production unit, a third-generation Texas oil man, a period of grace to plot the way forward. But not forever.

If it doesn't work, what has been Encana's virtual political protection from takeover – too Canadian to fail – could fade away, perhaps making it a plum buy for a supermajor anxious to bulk up on massive gas assets in expectation of a price resurgence.

"If you think of an Exxon or somebody like an Exxon, they've got deeper pockets and longer time horizons than Encana is allowed to have," said FirstEnergy Capital Corp. analyst Michael Dunn, stressing he is not speculating that Exxon Mobil is interested in such a takeover.

However, such a U.S. company may be able to demonstrate that a deal could meet Ottawa's net benefit tests, Mr. Dunn said.

Others are not so sure, with the Harper government having closed the door in recent years on a foreign takeover of Potash Corp. and future bids by state-owned enterprises for controlling stakes in the oil sands.

"[It] doesn't mean he gets forever to get it on track, but it does mean that an outright sale is probably off the table. At least that's my thinking as of right now," said Jim Hall, chairman and chief investment officer at Mawer Investment Management Ltd.

Certaintly, investors have had a rough ride, with shares in the company down more than 40 per cent in three years.

To recap: In 2009, Encana split off its oil sands operations as Cenovus Energy Inc., and gas prices went south as the shale revolution and slow economic recovery threw supply and demand out of whack. Meanwhile, the oil market remained buoyant. Former boss Randy Eresman announced a massive joint venture with PetroChina to develop B.C. acreage. It fell through. Encana did several other Canadian and U.S. joint ventures to bolster its balance sheet, and tried a late-game shift to more valuable natural gas liquids and oil.

The company also got caught up in a scandal over allegations of collusion in Michigan land deals with Chesapeake Energy Corp., as part of a Reuters investigation last year. The U.S. Department of Justice is probing the case.

The one constant has been the understanding that Encana's resource plays, which stretch across a huge part of North America, have among the richest potential in the industry. That's one of the things that Mr. Suttles said attracted him to the position, which was announced on Tuesday.

Job One for him will be setting priorities for allocating capital while protecting Encana's dividend, said Phil Skolnick, analyst at Canaccord Genuity, who thinks investors will afford Mr. Suttles about a year to put his strategy into working order.

"Asset sales are the first thing that helps to protect the dividend. If that kind of dries up a bit then the next thing is to cut capex," he said.

For his part, Encana's soon-to-be chairman Clayton Woitas said he does not believe the company is insulated from a takeover should Mr. Suttles be unable to get investors excited again.

"If you look at Encana's asset base, half of our assets are in the United States and half of our assets are in Canada. Our shareholding is, I would estimate, roughly half in the United States and half in Canada. So we truly are a North American international player," Mr. Woitas said.

"Are we susceptible to takeover? If the price is right, of course the shareholders will vote with their feet. But I don't think we are different from any other company that is listed in Canada."

(Jeffrey Jones is a Globe and Mail Business Reporter.)

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 8:58am EDT.

SymbolName% changeLast
BP-N
BP Plc ADR
+0.43%37.62
CVE-N
Cenovus Energy Inc
+0.6%19.96
CVE-T
Cenovus Energy Inc
+0.63%27.1
XOM-N
Exxon Mobil Corp
+0.46%115.5

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