Speculation and rumours are rampant following the sudden announcement of the coming departure of energy giant EnCana Corp.'s top executive and what it spells for the company's future and the Alberta oilpatch.

The much-vaunted Gwyn Morgan, who as CEO helped merge his former Alberta Energy Co. (AEC) with PanCanadian Petroleum in 2002, last week announced his departure from the cockpit of Canada's largest independent oil and gas firm.

Randy Eresman, the company's chief operating officer, will take the helm on Jan. 1, with Morgan staying on in an advisory role for one year.

"There was no indication that this would happen now, so that was a bit of a surprise," says Bob Schulz, a professor of strategic marketing at the University of Calgary's Haskayne School of Business.

Dave Olecko, Business Edge
Retiring EnCana CEO Gwyn Morgan and soon-to-be head man Randy Eresman reflect on the oil and gas company's future.

Schulz says the timing of the announcement caught him a bit off guard, but not the fact that it was coming. "The fact that it did finally happen, though, and that Randy Eresman would succeed (Morgan), that's been expected all along," says Schulz.

This is because EnCana had been grooming Eresman - a Medicine Hat boy who joined AEC in 1980 right out of university - since he was appointed COO two years ago, Schulz says.

"First of all, EnCana has strong corporate governance, so they had a succession plan in place for years and Randy Eresman was the logical successor. Had it been anyone else, that would have caused major concerns, but the fact that it is Eresman means a smooth transition."

The move has also fuelled talk among many analysts that EnCana is readying itself for a takeover bid.

Merrill Lynch analyst John Herrlin says he wouldn't be surprised to see EnCana stock rise amid such rumours, although the company's focus on North American resources is at odds with many other companies that want to diversify into foreign markets.

A year ago this week, EnCana sold its North Sea assets and recently sold oil assets in Ecuador to a consortium led by China's two biggest oil companies for more than $1.4 billion US.

EnCana has vehemently denied any knowledge of a takeover bid by Royal Dutch Shell, an assertion that Morgan reiterated last week when questioned closely by reporters.

But Schulz says he doesn't believe Morgan's departure is a signal the energy giant is on the block.

He says that after the company repositioned itself to focus on North America, the CEO faced a tough decision: Carry on for another five years to guide the company through the transition, or retire now and turn it over to a person well suited for the task.

"There was the putting together of AEC and PanCanadian ... and then (Morgan) made some major expansions in the international properties, but when the international properties were sold off - partially to pay for the Tom Brown (Inc.) acquisition in the U.S., and also to refocus back in the gas markets - that's a whole different strategy for EnCana," he says. "And Randy Eresman has a lot of strength in those areas."

FirstEnergy Financial analyst Steven Paget also says he does not think the retirement is linked to any merger or takeover buzz, but adds that in Canada's oil industry, anything can occur at any moment.

"It's always a possibility, but certainly less likely with this ... I think if Gwyn Morgan saw a merger or a takeover as the best option, he would likely see it through," Paget says.

At a press conference last week Morgan, who turns 60 on Nov. 4, said he was leaving the energy giant exactly how he wants - fully focused on its North American resource-play roots.

"That process has largely been accomplished now; the last piece was the deal with the Chinese and Ecuador," he said. "We're positioned in the lowest political risk ... part of the world and we've got what I think is the best asset base."

The soon-to-be CEO, meanwhile, last week assured the investment community that the company has no plans to change the course it has been setting for the past few years.

"We will remain focused on creating long-term value from our portfolio of unconventional resources and EnCana will continue its pursuit of industry leadership in all aspects of resource-place capture and development," Eresman told analysts during a conference call the day after Morgan's announcement.

"There will be clear continuity in our strategic direction and a strong commitment to long-term value creation."

Eresman added EnCana expects 2006 natural gas equivalent production to increase by five to nine per cent over 2005 numbers.

He noted the company's well performance and production decline is "so predictable that we can have a great deal of comfort in our forecast," but acknowledged that factors such as the heavy rains experienced in southern and central Alberta this past year can throw a wet blanket on the company's numbers.

EnCana released the company's third-quarter results last week, which saw its profit sink by 32 per cent in the three-month period to $266 million US after an after-tax loss of $604 million for accounting of energy price hedging contracts.

About 60 per cent of the fixed-price hedging loss relates to EnCana's 2004 acquisition of Tom Brown, a gas-rich company in the U.S. Rocky Mountains. All of the Tom Brown hedge positions expire at the end of 2006.

The firm said third-quarter cashflow reached $1.93 billion US, an increase of 51 per cent, and natural gas sales increased three per cent to 3.2 billion cubic feet per day.

Meanwhile, Canadian Association of Petroleum Producers (CAPP) president and CEO Pierre Alvarez says the Carstairs native will be missed.

"He (Morgan) was a tremendous ambassador for the industry in terms of talking about its role in the economy in Canada and the U.S., about its potential for kids to go through school and have careers," Alvarez says. "It was a tremendously positive outlook that was infectious."

Alvarez says he knows Eresman as an "outstanding technical guy who brings a tremendous amount to EnCana."

Another major industry leader who made the transition from corporate to civilian life seven years ago is giving Morgan a friendly piece of advice.

"I saw Gwyn and (wife Pat Trottier) last night at an event and I told him, 'Gwyn, never, ever, ever use the term retirement - use renewal or something like that, but not retirement because you're going to be busier than ever,' " says former CEO of Canadian Hunter Exploration Jim Gray, who after stepping down in 1998 has remained active in numerous business ventures and philanthropic causes.

"My day starts at 5:30 a.m. at the Y and I'm as busy now as I was as a CEO ... Gwyn has a huge number of opportunities in business, in philanthropy and even in politics."

When asked by reporters, Morgan quickly nixed the idea about launching a political career. But he did vow to continue to "sound off" on a variety of issues close to his heart, including energy conservation, adding that he and his wife plan on being very active.

"This has been 12 years of being a CEO," Morgan said. "The next 12 years we expect will be equally fulfilling in a different way."

- with files from The Canadian Press