An article today titled ‘EnCana hedges about 35 per cent of natural gas production in 2010 gas year’ says “Natural gas giant EnCana Corp. (TSX: ECA) has entered into fixed price hedge contracts on about 35 per cent of the its expected natural gas production and remains pessimistic about prices for the commodity in the short run”.  The hedge applies to about 1.39 billion cubic feet per day of its 2010 natural gas production as is reported to be at an average price of US$6.21 per thousand cubic feet for the 12 month period ended Oct. 31, 2010.  Encana is North America’s largest natural gas producer.

I think this is a transaction that investors ought to pay attention to.  I have always found in my business valuation consulting practice that ‘business operators’ know a lot more about the intricacies of their respective businesses than do consultants (me included), analysts, economists, and pundits.  Considering the NYMEX natural gas future is quoted at U.S.$4.26 this morning as I write this, the fact that Encana’s internal experts have decided to hedge at U.S.$6.21 I think is encouraging for anyone with a vested interest in a prospective increase in natural gas prices – particularly where the referenced article quotes Encana’s President and Chief Executive Randy Eresman as saying “We expect the prices to be between $4 and $8. We will continue looking at adding to our 2010 gas hedge positions as the year unfolds and as opportunities arrive until they are about in the 50 per cent range”.  Encana issued a Press Release with respect to its hedge position yesterday – for full text see StockResearchPortal.com → Company Research → Encana → Press Releases → June 15 – “EnCana extends risk management measures by hedging about 35 percent of natural gas production in 2010 gas year”.

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