Encana Corporation (TSX:ECA)(NYSE:ECA) is trading near its 12-month high, and investors want to know if more upside could be on the way.

Let’s take a look at the former oil and gas giant to see if it deserves to be in your portfolio.

Tough times

Investors who bought Encana earlier this year have doubled their money, but long-term holders of the stock are still upset.

Encana was once Canada’s largest company by market capitalization. That was way back before the Great Recession when it was still an integrated energy giant.

What happened?

In the wake of the oil rout triggered by the financial crisis, Encana decided to spin off its oil sands and refining operations into a new company called Cenovus and kept the natural gas assets.

The idea to focus on natural gas looked like a reasonable one at the time. Oil still hadn’t recovered from the recession, and natural gas prices appeared to be the better bet.

As it turns out, that wasn’t the right play. Oil surged on the back of a global surge in government stimulus, and North American natural gas prices plummeted amid a wave of new production from shale formations.

Encana’s board put a new gang in charge, and the company decided to reverse course. Gas assets went on the selling block, and the company dove back into the oil game.

Once again, the decision seemed reasonable when it was made. WTI oil was above US$100 per barrel, and most pundits thought it would head higher. Unfortunately, Encana made two large oil acquisitions at the peak of the market, and the results have been a disaster for shareholders.

For the past two years Encana has been in survival mode, dumping more gas assets and cutting expenses in an effort to keep its head above water.

A recovery in the works?

Oil staged a recovery though the second quarter of this year, and that helped lift most of the oil sector off its lows. Encana’s numbers are getting better, but the company still isn’t out of the woods.

Encana reported Q2 cash flow of US$182 million and operating earnings of US$89 million.

For the first six months of the year the company generated US$284 million in cash flow and reported an operating loss of US$41 million. That’s better than the operating loss of US$148 million for the first half of 2015.

Free cash flow was negative US$33 million for Q2 2016 and negative US$209 million for the first six months of 2016.

Long-term debt at the end of June was US$5.69 billion. That’s a lot lower than it was at the beginning of last year, but the debt load is still a concern, even after the big rally in the stock since February.

Should you buy?

If oil can muster an extended recovery, Encana will likely survive and investors could see the stock continue to rise.

However, the balance sheet remains under pressure and the company continues to burn through cash. Oil has pulled back from its spring high, so the Q3 results might not be as rosy as the Q2 numbers, and I think there is a good chance oil could repeat the second-half crash that occurred last year.

If that happens, Encana could quickly give back its 2016 gains. The company is making progress on its turnaround efforts, but the overall situation at Encana still isn’t good. It’s just less bad.

I would look elsewhere for investment opportunities.

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Fool contributor Andrew Walker has no position in any stocks mentioned.