Profit lifts stock of Encana spinoff PrairieSky

Shares in Encana Corp. spinoff PrairieSky Royalty Ltd. rose almost 5 per cent Tuesday following the release of its first financial report, which included a profit of nearly $24 million.

The stock closed at $40.04 in Toronto, up $1.86 or 4.9 per cent above Monday’s close. PrairieSky has consistently traded well above the $28 price of its initial public offering in late May, which raised $1.67 billion for Encana.

As part of a sweeping new strategy unveiled last fall, Calgary-based energy producer Encana decided to separate a big chunk of its royalty lands into a new publicly traded company, PrairieSky. Encana retains a 54 per cent stake in the spinoff.

PrairieSky makes money by allowing other energy companies to develop oil and gas on its land, which spans 5.2 million acres in southern and central Alberta.

The majority of drilling taking place on PrairieSky land is not coming from Encana right now, CEO Andrew Phillips said on a conference call Tuesday.

There’s a bit of Encana shallow-gas activity taking place on a property that’s part of a joint-venture with Japan’s Toyota Tsusho.

“But aside from that, there’s very little out of Encana. They’ve got renewed focus elsewhere, but third-party activities have been making up the slack for their lack of activity this year,” said Phillips, without specifying the companies involved.

In some liquids-rich areas, activity is strengthening after a “muted” period between 2011 and 2013, said Phillips.

On Monday afternoon, PrairieSky posted its financial results for the period between its May 27 start up and June 30. During that period, it posted net earnings of $23.9 million, or 18 cents per share on an adjusted basis, and revenues of $37.2 million.

Funds from operations were $31 million. At the end of June, PrairieSky had working capital of $57.4 million.