Encana Shares Drop on Report of Collusion with Chesapeake



CALGARY - Encana Corp. shares slid more than 5% Monday following a report alleging the Canadian company colluded with a rival to lower the price of U.S. shale-gas lands up for auction.

Shares of the Calgary-based natural-gas producer, the second- largest in North America after Exxon Mobil Corp., dropped as much as 5.5% on the New York Stock Exchange after Reuters reported that, in email exchanges, executives at Encana and rival Chesapeake Energy Corp. discussed ways to avoid competing against each other for shale-gas land in Michigan.

The report alleged that Encana and Chesapeake agreed to split up shale-gas lands between them before a public auction to avoid creating a bidding war that would drive up the price. If the allegations are true, the report suggested Encana and Chesapeake could be in violation of U.S. anti-trust laws.

"An investigation of this matter was immediately initiated," Encana Chairman David O'Brien said in a statement. "Encana therefore will not provide any further information at this time."

The report comes at an inconvenient time for Encana, which is trying to rapidly expand its liquids-rich natural-gas production and offset the low price of natural gas by selling partnership stakes in its shale-gas plays.

"To have one of the major plays that is in your [partnership] package to now be scrutinized, that obviously reduces the marketability of those assets," Morningstar analyst Robert Bellinski said.

Encana shares were down 4.6% to $18.94 in recent trading. Shares of Chesapeake Energy, the third-largest natural gas producer in North America, were down 8.4% to $17.04.



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