To followers of Encana, the abrupt announcement Friday that chief executive Randy Eresman was retiring from the company shouldn't have come as a big surprise.
Under Eresman's watch, Encana has gone from market darling to market goat - with continuing questions about the decision to spin off the company's oilsands assets into a separate entity, which is how Cenovus came to be.
A look at the market valuations of both companies as of Friday's close tells a big part of that story. Encana was worth $14.4 billion while Cenovus closed the day valued at $25.3 billion.
At the time of the spinoff, there were as many observers who said having a pure play natural gas company was too risky - because there was no offset if natural gas prices fell - as there were those who said it would garner a better valuation if it was a pure play on one commodity.
When Encana was created through the merger of AEC and PanCanadian in 2002, there were two individuals vying for the chief operating officer spot: Eresman from AEC and Dave Boone of PanCanadian.
Eresman was then Encana CEO Gwyn Morgan's choice to succeed him and thus was appointed to the COO slot. Eresman was seen as being very strong from an operating perspective, although not everyone was convinced it was the right move - and Boone left.
The next step for Eresman was CEO. From his first public speech, Eresman didn't appear comfortable in a role as public as that of CEO, which he assumed when Morgan retired in October 2005.
He wasn't the guy, as someone said recently, to be selling Encana to a group larger than one that could fit around a boardroom table.
And whereas Morgan made himself accessible to the media, Eresman was more reticent to follow suit. That may not seem important, but a company that doesn't build credibility when times are good gets penalized when things go sideways. And that's what happened at Encana.
Someone who knows Eresman said he was an "extraordinary value creation guy because his strength on the operating side translated into an ability to fine-tune businesses, boost the company's competitiveness that fed to the bottom line."
There is no question he was among the visionaries in the development of shale gas plays in Canada and the United States.
At the same time, there is a question of why he didn't react more quickly to the fact other companies were essentially copying Encana's natural gas strategy.
The application of horizontal drilling techniques to the shale plays worked better than anyone thought possible. When Encana had more natural gas than its competitors, life was good.
But as other companies caught up, with the result that today's natural gas prices in the middle of winter are in the low end of the $3 range per thousand cubic feet, Encana's competitive advantage waned and the company began to look at ways at increasing its liquids production.
It appeared Eresman was second-guessing his own pure play natural gas strategy.
There is no question that if North America was part of the global natural gas market, things would look different, yet that remains years away.
With Encana's lucrative hedges long expired, the company increasingly needs to look at the joint venture model as a way to access capital for development.
The risk with joint ventures is that while they might give a company the cash it needs to accelerate development of certain assets, it also means being beholden to the agenda of the joint venture partner; the two interests are not always aligned.
In parachuting energy industry veteran Clayton Woitas as interim CEO - just as Talisman Energy chose Hal Kvisle to step in last September when John Manzoni left the c-suite - Encana's board has chosen wisely.
Woitas led Renaissance Energy to great heights through his strategy of having full control over assets and production. After its sale to Husky Energy in 2000, Woitas created Profico Energy Management Ltd., which was sold to Focus Energy Trust in 2006.
Markets and joint venture partners will be watching carefully for who the board chooses as Eresman's successor as it will signal what direction they want the company to take.
For now, however, one thing is clear. Retirement announcements don't generally happen on a Friday afternoon at 4 p.m., without a succession plan in place and include the CEO stepping down from the board effective immediately.
This state of affairs doesn't fall under the best practice definition of board governance and in light of this, investors might want to ask Encana's board a few questions of their own.
Deborah Yedlin is a Calgary Herald columnist dyedlin@calgaryherald.com
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