Encana (TSX: ECA)(NYSE: ECA) will release its quarterly report on Wednesday. Like rival producers Talisman Energy and Chesapeake Energy, Encana has emphasized production of oil and liquids over natural gas in recent years. In the company’s upcoming report, shareholders will be eager to see how well management is executing on its turnaround strategy.

Stats on Encana

Source: Yahoo! Finance

Can Encana get back to winning?

Encana’s new chief executive has promised drastic action to revive what was once Canada’s hottest energy producer. Last year, Doug Suttles outlined his plan to get the company back to “winning”, which includes investing in fewer plays, transitioning towards a more profitable production mix, and spinning off low-returning properties. The changes signal a new era of discipline for a company whose past was all about expansion and growing production.

Investors seem to be warming up to Suttles’ turnaround strategy. Analysts have ratcheted up their views on Encana’s earnings in recent months, adding $0.32 per share to their consensus fourth-quarter estimates and increasing their full-year 2014 outlook by more than 30%. The stock has rocketed higher in lockstep, up 35% since the start of the year.

Encana’s fourth quarter results confirmed the turnaround is taking shape. Output of higher margin products like oil and natural gas liquids, collectively called liquids by management, increased 82% from a year earlier, averaging 66,000 barrels a day in the fourth quarter. Excluding one-time items, the company’s $0.31 per share profit handily exceeded the street’s estimates.

To keep that momentum going, Encana needs to continue ramping up its liquids production. Today, liquids account for roughly 10% of Encana’s production while natural gas production accounts for the remaining 90%.

However, the company hopes that those numbers will look much different in the coming years. By 2017, Encana is targeting a more balanced production mix, and expects one-third of its production will come from natural gas, one-third from other natural gas liquids, and the remaining third from oil and condensate.

The second part of Suttles’ plan is to trim the company’s unwieldy asset portfolio. Over the past few months, Encana has sold its stake in an Alberta liquefied natural gas plant and certain natural gas properties in the Jonah field in Wyoming. And just last week the firm agreed to sell about 90,000 net acres in east Texas for about U.S. $530 million to an undisclosed buyer.

Its biggest asset sale may be yet to come. Again last week Encana released a preliminary prospectus of a new company called PrairieSky. The spin-off will consist of Encana’s so-called mineral fee title land covering 5.2 million acres across Alberta. The new company is designed to collect cash from other energy drillers operating on the land, then distribute a large amount of that to its own shareholders.

Encana hopes to garner between $747 million and $861 million for PrairieSky after the initial public offering later this month. Given investors’ insatiable demand for income, the offering is expected to be a hit and could be a hidden catalyst for Encana shares.

Watch this space

Encana’s turnaround hinges on transitioning from low-priced dry gas to higher margin liquids and oil. In 2014, the street is looking for the company to produce between 70,000 and 75,000 barrels a day of oil, condensate and natural gas liquids such as propane and butane. In Encana’s upcoming report, watch to see how well the company is ramping up production of these products.