Investment dealer Raymond James updated its rating of gas producer EnCana Corporation to OUTPERFORM based on the potential of a higher return for its stock. This update happens as the company has announced plans to divest in its gas-producing assets that exist in Texas. This intended sale is part of a larger divestiture program that intends to raise proceeds of $1 billion to $2 billion in 2011. The company's stock has dropped 15 percent since EnCana released 2Q results on July 21 and a recovery to the new target price of C$31 will translate to a 26 percent return.

The new target price of C$31 is based on estimated NAV for 2011 and a 5.0x multiple of 2012 estimated cash flow. The cash flow multiple has been reduced to accommodate expected changes in gas prices for 2012. Since the stock is now trading at a 4.0x multiple of market consensus for 2012 estimated cash flow per share, the investment dealer states that the stock price already takes the lower gas prices into consideration.

EnCana Corporation opened at C$25.00 on Thursday, August 25 after closing at C$24.89 the previous day. In the last 52 weeks, the company has hit a low point of C$22.92 and reached a high of C$34.25.