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* Workforce to be reduced by 20 percent
* Dividend cut to 7 cents/shr from 20
* Sees 2014 capex falling to about $2.5 bln
* Shares end higher
By Scott Haggett and Sayantani Ghosh
CALGARY, Alberta, Nov 5 (Reuters) - Encana Corp,Canada's largest natural gas producer, said on Tuesday it willcut about 20 percent of its workforce, slash its dividend, andfocus future spending on just five regions rich in oil and gasliquids as it looks to move away from low-value natural gasproduction.
The new plan, which includes the spin off of its historicAlberta freehold lands into a separate company, is part of newChief Executive Doug Suttles' push to boost earnings and raisecash flow as the company faces the prospect that natural gasprices will remain weak for years to come.
The strategy comes on the heels of a series of failedattempts to boost profits under former chief executive RandyEresman, who left last year. Eresman spun off the company'sprofitable oil sands operations in 2009 in order to become apure natural-gas producer just as a wave of new shale-gasproduction caused prices to plunge.
"The company has been a total disappointment for a longtime," said John Stephenson, a portfolio manager at First AssetInvestment Management, which owns Encana shares.
"But I think where they're going with things under Suttlesis considerably better than where they were going under Eresman... So far what I've heard from the new management has beenencouraging."
Encana shares closed 3.34 percent higher at C$19.21 on theToronto Stock Exchange, despite the company's decision to cutits 21-Canadian-cent quarterly dividend to 7 Canadian cents. Onthe New York Stock Exchange, the stock rose 2.75 percent to$18.34.
The dividend cut had been widely expected, with analystssaying the company needed to raise cash in order to boostdrilling on liquids-rich fields.
"It's more in line with what their peers (are paying)" saidDirk Lever, an analyst with AltaCorp Capital.
Suttles said Encana will concentrate its drilling efforts onfive key regions beginning next year, from about thirty now.Three are in the United States and two in Canada. All five arerich in liquids, offering valuable oil, or ethane, propane andother gas liquids along with natural gas production.
"We had more gas options in the portfolio than we couldreasonably develop," Suttles said on a conference call.
Encana said it will also sell some now-surplus properties,though it did not set targets for any sales. It will also spinoff its freehold oil and natural gas royalty interests inAlberta next year.
The new company, now dubbed Clearwater Royalty, will havemore than 5 million acres of land originally granted to itspredecessor more than a century ago.
Encana said it will retain a "significant" stake in the newcompany that will manage the leasing activities in the area,allowing it to get more out of an undervalued business andgenerate higher cash flow in the longer term.
Encana, which had 4,193 employees on Dec. 31, said it willlay off 20 percent of staff by year end and close itsDallas-area office, concentrating management in Calgary andDenver.
Encana also forecast a capital spending program of about$2.5 billion for 2014, down from an expected $2.7 billion-$2.9billion this year.
The company can average more than a 10 percent compoundannual growth rate in cash flow per share through 2017 after thenew strategy is implemented, Suttles said.
