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9B07N002

ENCANA CORPORATION: THE COST OF CAPITAL

Ken Mark wrote this case under the supervision of Professors James E. Hatch and Larry Wynant solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.
Copyright © 2007, Richard Ivey School of Business Foundation

Version: (A) 2010-06-18

OVERVIEW

Barb Williams and Steven Lau, two managers from service firms, were attending a week-long executive education course at a well-known business school in February 2006. In preparation for the next day’s classroom session, both had read an article dealing with the cost of capital. As they vigorously discussed the concept, it became clear they had several differences of opinion. Their assignment was to calculate the cost of capital for EnCana Corporation (EnCana). EnCana was a leading oil and gas producer in North
America focusing on developing ‘resource plays’1 and the in situ recovery of oilsands bitumen. The data they gathered are presented in Exhibits 1 to 5.
EnCana was created in 2002 through the merger of Pan Canadian Energy Corporation and Alberta Energy
Company. The focus of the newly amalgamated company was on the discovery and development