Encana Reports Solid Third Quarter Supported by Liquids Growth and Progress on Cost Improvements

Encana Reports Solid Third Quarter Supported by Liquids Growth and Progress on 
Cost Improvements 
CALGARY, ALBERTA -- (Marketwired) -- 10/23/13 -- Encana Corporation
(TSX:ECA)(NYSE:ECA) recorded a second consecutive profitable quarter
with third quarter 2013 net earnings of $188 million or $0.25 per
share, cash flow of $660 million or $0.89 per share and operating
earnings of $150 million or $0.20 per share. Year to date, the
Company has generated net earnings of $487 million or $0.66 per
share, cash flow of $1.9 billion or $2.58 per share and operating
earnings of $576 million or $0.78 per share. 
Oil and natural gas liquids (NGLs) production volumes in the quarter
averaged approximately 58,200 barrels per day (bbls/d), a 92 percent
year-over-year increase compared to the third quarter of 2012. The
company remains on track to achieve total liquids production of
50,000 bbls/d to 60,000 bbls/d for the year, compared to an average
of 31,000 bbls/d in 2012, and expects to exit the year with liquids
production in the 70,000 bbls/d to 75,000 bbls/d range. Year-to-date,
64 percent of Encana's liquids production is comprised of
higher-value condensate and light oil. 
Third quarter natural gas production volumes averaged approximately
2.7 billion cubic feet per day (Bcf/d). Encana has revised its
guidance for expected 2013 natural gas production to be between 2.7
Bcf/d and 2.8 Bcf/d, an adjustment which reflects asset divestitures
and delays associated with ongoing work to ramp up the Deep Panuke
offshore project to its full production capacity. 
Cost improvement initiatives starting to show results 
Earlier in the year, Encana set a target to achieve cost savings and
capital efficiency gains of $100 million to $150 million over 18
months relative to budgeted plans; by year-end, the Company expects
to realize about $110 million of that total. The Company expects full
year cash flow to be near the high end of its current guidance range
and has lowered its capital spending guidance to reflect a planned
spend in the range of $2.7 billion to $2.9 billion. Encana finished
the quarter with a period end balance of about $3.3 billion in cash
and cash equivalents. 
"The effort our staff has made in reducing costs has contributed to
improved cash flow. Our disciplined capital focus through the year
along with our stronger cash balance, positions us well as we prepare
to make changes to align the business with our future strategic
direction," says Doug Suttles, Encana President & CEO. "In addition,
we are on track to hit our year-end exit rate liquids production
target of 70,000 bbls/d to 75,000 bbls/d." 
Encana has today posted its revised Corporate Guidance on its
website, www.encana.com. 
Strategy review process making rapid progress 
"We are making rapid progress in the development of our strategy and
reached a major milestone with the recent announcement of our new
organizational structure and Senior Management team," says Suttles.
"We're focusing our energy on finalizing our strategy which will
inform our capital allocation decisions for 2014 and beyond." 
"Our goal is to make Encana a more focused, dynamic and efficient
organization," adds Suttles. "The changes we've made to date and the
changes we will be making in the near term are positioning Encana to
generate high quality returns for our shareholders." 
The Company plans to announce its long-term strategic plan and fourth
quarter dividend before the end of the year. 
Operational highlights 


 
--  Sales gas production started offshore at Deep Panuke during the third
    quarter on August 11. All four wells are cumulatively producing at a
    restricted rate of approximately 175 MMcf/d to 200 MMcf/d as final work
    continues on the platform's processing systems to bring the platform to
    its full capacity of 300 million cubic feet per day (MMcf/d). 
--  In the Duvernay play of west-central Alberta, the Company's 8-5 well,
    which had an initial production rate of 1400 bbls/d of field condensate
    and 4 MMcf/d of natural gas over its first 30 days, continues to exceed
    expectations producing at a rate of 350 bbls/d of condensate and 2
    MMcf/d of natural gas after more than 160 days. To date, the well has
    produced over 100 thousand barrels of field condensate and 400 million
    cubic feet of natural gas. Overall, 12 horizontal wells have been
    completed in the play with 10 on production and two currently being tied
    in. Free condensate yield results remain strong with a range of 45 to
    300 barrels per million cubic feet (bbls/MMcf). 
--  In Gordondale, two recent oil wells produced 1,100 bbls/d per well for
    the first four days. Two seven-well oil pads, each capable of producing
    between 4,000 to 5,000 bbls/d of oil, are expected to be brought online
    in the fourth quarter. 
--  The Company had more strong results in the Bighorn area with three wells
    in the Falher F/Wilrich formation testing above 19 MMcf/d each, with
    liquids production at 950 bbls/d per well and a Dunvegan well is
    currently producing 8 MMcf/d and 170 bbls/d of field condensate.
    Improvements in operations have also resulted in a 30 percent decrease
    in completions costs. 
--  In the San Juan Basin, the most recent four wells had initial production
    rates between 400 bbls/d and 500 bbls/d of oil over the first 30 days.
    Well costs continue to decrease and the newer wells have been drilled
    twice as fast as the original wells, some with total well costs under
    $4.0 million per well. Encana drilled nine wells in the San Juan Basin
    during the third quarter and currently has 23 wells on production in the
    play. 
--  The company is pleased to confirm that its operations experienced no
    reportable spills or major environmental issues as a result of the
    severe flooding that affected the DJ Basin in Colorado. The annual
    production impact is estimated to be minimal at a reduction of less than
    250 bbls/d of oil and NGLs. 

 
Encana delivers on cash flow with risk management program in place 
At September 30, 2013, Encana has hedged approximately 2,255 MMcf/d
of expected October to December 2013 natural gas production using
NYMEX fixed price contracts at an average price of $4.37 per thousand
cubic feet (Mcf), approximately 1,538 MMcf/d of expected 2014
production at an average price of $4.19 per Mcf and approximately 825
MMcf/d of expected 2015 production at an average price of $4.37 per
Mcf. 
In addition, Encana has hedged approximately 16,890 bbls/d of
expected October to December 2013 oil production using a WTI
equivalent price of $100.00 per barrel and approximately 9,470
barrels per day of expected 2014 oil production at a WTI equivalent
price of $94.19 per bbl. 


 
                          Third Quarter Highlights                          
                                                                            
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                             Financial Summary                              
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(for the period ended September 30)                      Q3              Q3 
($ millions, except per share amounts)                 2013            2012 
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Cash flow(1)                                            660             913 
  Per share diluted                                    0.89            1.24 
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Operating earnings(1)                                   150             263 
  Per share diluted                                    0.20            0.36 
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Earnings Reconciliation Summary                                             
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Net earnings (loss)                                     188          (1,244)
After tax (addition) deduction:                                             
  Unrealized hedging gain (loss)                        (89)           (428)
  Impairments                                           (16)         (1,193)
  Non-operating foreign exchange gain (loss)            105             162 
  Income tax adjustments                                 38             (48)
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Operating earnings(1)                                   150             263 
  Per share diluted                                    0.20            0.36 
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(1)   Cash flow and operating earnings are non-GAAP measures as defined in  
      Note 1 on page 3.                                                     
                                                                            
                                                                            
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                     Production Summary (Third Quarter)                     
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(For the period ended September 30)               Q3          Q3            
(After royalties) (Average production)          2013        2012     % delta
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Natural gas (MMcf/d)                           2,723       2,905          -6
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Liquids (Mbbls/d)                               58.2        30.3          92
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                  Liquids Production Volumes (Year-to-date)                 
                     (For the period ended September 30)                    
                     (After royalties) (Average Mbbls/d)                    
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                                                        2013      % of Total
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Oil                                                     23.4              47
Plant Condensate                                         8.3              17
Butane                                                   4.2               8
Propane                                                  6.6              13
Ethane                                                   7.3              15
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                                                        49.8             100
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                Third Quarter Natural Gas and Liquids Prices                
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                                                     Q3 2013         Q3 2012
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Natural gas                                                                 
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NYMEX ($/MMBtu)                                         3.58            2.81
Encana realized gas price(1)($/Mcf)                     4.00            4.91
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Oil and Natural Gas Liquids($/bbl)                                          
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WTI                                                   105.81           92.20
Encana realized NGLs price                             46.35           61.34
Encana realized oil price(1)                           90.42           80.04
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(1)   Realized prices include the impact of financial hedging.              

 
Encana will host a conference call today Wednesday, October 23, 2013
starting at 11:00 a.m. MT (1:00 p.m. ET). To participate, please dial
(888) 231-8191 (toll-free in North America) or (647) 427-7450
approximately 10 minutes prior to the conference call. An archived
recording of the call will be available from approximately 4:00 p.m.
ET on October 23 until midnight October 30, 2013 by dialing (855)
859-2056 or (416) 849-0833 and entering passcode 27733290. A live
audio webcast of the conference call will also be available at
www.encana.com, in the Invest in Us section under Presentations &
Events. The webcast will be archived for approximately 90 days. 
Media are invited to participate in the call in a listen only mode. 
Follow Encana on Twitter @encana for updates during the company's
third-quarter 2013 conference call. 
The unaudited interim Condensed Consolidated Financial Statements for
the period ended September 30, 2013 are available at www.encana.com
and will be filed on SEDAR (www.sedar.com) and EDGAR (www.sec.gov). 
Encana Corporation 
Encana is a leading North American energy producer that is focused on
growing its strong portfolio of diverse resource plays producing
natural gas, oil and natural gas liquids. By partnering with
employees, community organizations and other businesses, Encana
contributes to the strength and sustainability of the communities
where it operates. Encana common shares trade on the Toronto and New
York stock exchanges under the symbol ECA. 
Important Information 
Encana reports in U.S. dollars unless otherwise noted. Production,
sales and reserves estimates are reported on an after-royalties
basis, unless otherwise noted. Per share amounts for cash flow and
earnings are on a diluted basis. The term liquids is used to
represent oil, NGLs and condensate. The term liquids-rich is used to
represent natural gas streams with associated liquids volumes. Unless
otherwise specified or the context otherwise requires, reference to
Encana or to the company includes reference to subsidiaries of and
partnership interests held by Encana Corporation and its
subsidiaries. 
NOTE 1: Non-GAAP measures 
This news release contains references to non-GAAP measures as
follows: 


 
--  Cash flow is a non-GAAP measure defined as cash from operating
    activities excluding net change in other assets and liabilities, net
    change in non-cash working capital and cash tax on sale of assets. 
--  Operating earnings is a non-GAAP measure defined as net earnings
    excluding non-recurring or non-cash items that management believes
    reduces the comparability of the company's financial performance between
    periods. These after-tax items may include, but are not limited to,
    unrealized hedging gains/losses, impairments, foreign exchange
    gains/losses, income taxes related to divestitures and adjustments to
    normalize the effect of income taxes calculated using the estimated
    annual effective tax rate. 

 
These measures have been described and presented in this news release
in order to provide shareholders and potential investors with
additional information regarding Encana's liquidity and its ability
to generate funds to finance its operations. 
ADVISORY REGARDING OIL AND GAS INFORMATION - Encana uses the term
resource play. Resource play is a term used by Encana to describe an
accumulation of hydrocarbons known to exist over a large areal
expanse and/or thick vertical section, which when compared to a
conventional play, typically has a lower geological and/or commercial
development risk and lower average decline rate. 
Initial production and short-term rates are not necessarily
indicative of long-term performance or of ultimate recovery. 
In this news release, certain oil and NGLs volumes have been
converted to cubic feet equivalent (cfe) on the basis of one barrel
(bbl) to six thousand cubic feet (Mcf). Cfe may be misleading,
particularly if used in isolation. A conversion ratio of one bbl to
six Mcf is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent value equivalency
at the well head. Given that the value ratio based on the current
price of oil as compared to natural gas is significantly different
from the energy equivalency of 6:1, utilizing a conversion on a 6:1
basis may be misleading as an indication of value. 
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests of
providing Encana shareholders and potential investors with
information regarding Encana, including management's assessment of
Encana's and its subsidiaries' future plans and operations, certain
statements contained in this news release are forward-looking
statements or information within the meaning of applicable securities
legislation, collectively referred to herein as "forward-looking
statements." Forward-looking statements in this news release include,
but are not limited to: 2013 total liquids and natural gas
production; the composition of the company's liquids production;
anticipated drilling and the success thereof; anticipated production
from wells, including in the Deep Panuke, Duvernay, Gordondale,
Bighorn, San Juan Basin and DJ Basin areas; anticipated capital
investment; expected adherence to the company's 2013 capital spending
plan; expected amounts of cash, cash equivalents and cash flow by
year end; achieving 2013 Corporate Guidance; anticipated cost savings
and improved capital and operating efficiencies; anticipated natural
gas prices over the next few years; anticipated timing for the
development and implementation of the company's strategy; anticipated
returns for shareholders; anticipated divestitures and the proceeds
therefrom; and the volume and timing of production capacity from Deep
Panuke. 
Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties, both general and specific,
that contribute to the possibility that the predictions, forecasts,
projections and other forward-looking statements will not occur,
which may cause the company's actual performance and financial
results in future periods to differ materially from any estimates or
projections of future performance or results expressed or implied by
such forward-looking statements. 
These assumptions, risks and uncertainties include, among other
things: volatility of, and assumptions regarding natural gas and
liquids prices, including substantial or extended decline of the same
and their adverse effect on the company's operations and financial
condition and the value and amount of its reserves; assumptions based
upon the company's current guidance; fluctuations in currency and
interest rates; risk that the company may not conclude divestitures
of certain assets or other transactions or receive amounts
contemplated under the transaction agreements (such transactions may
include third-party capital investments, farm-outs or partnerships,
which Encana may refer to from time to time as "partnerships" or
"joint ventures" and the funds received in respect thereof which
Encana may refer to from time to time as "proceeds", "deferred
purchase price" and/or "carry capital", regardless of the legal form)
as a result of various conditions not being met; product supply and
demand; market competition; risks inherent in the company's and its
subsidiaries' marketing operations, including credit risks;
imprecision of reserves estimates and estimates of recoverable
quantities of natural gas and liquids from resource plays and other
sources not currently classified as proved, probable or possible
reserves or economic contingent resources, including future net
revenue estimates; marketing margins; potential disruption or
unexpected technical difficulties in developing new facilities;
unexpected cost increases or technical difficulties in constructing
or modifying processing facilities; risks associated with technology;
the company's ability to acquire or find additional reserves; hedging
activities resulting in realized and unrealized losses; business
interruption and casualty losses; risk of the company not operating
all of its properties and assets;
counterparty risk; risk of downgrade in credit rating and its adverse
effects; liability for indemnification obligations to third parties;
variability of dividends to be paid; its ability to generate
sufficient cash flow from operations to meet its current and future
obligations; its ability to access external sources of debt and
equity capital; the timing and the costs of well and pipeline
construction; the company's ability to secure adequate product
transportation; changes in royalty, tax, environmental, greenhouse
gas, carbon, accounting and other laws or regulations or the
interpretations of such laws or regulations; political and economic
conditions in the countries in which the company operates; terrorist
threats; risks associated with existing and potential future lawsuits
and regulatory actions made against the company; risk arising from
price basis differential; risk arising from inability to enter into
attractive hedges to protect the company's capital program; and other
risks and uncertainties described from time to time in the reports
and filings made with securities regulatory authorities by Encana.
Although Encana believes that the expectations represented by such
forward-looking statements are reasonable, there can be no assurance
that such expectations will prove to be correct. Readers are
cautioned that the foregoing list of important factors is not
exhaustive. In addition, assumptions relating to such forward-looking
statements generally include Encana's current expectations and
projections made in light of, and generally consistent with, its
historical experience and its perception of historical trends,
including the conversion of resources into reserves and production as
well as expectations regarding rates of advancement and innovation,
generally consistent with and informed by its past experience, all of
which are subject to the risk factors identified elsewhere in this
news release. 
Assumptions with respect to forward-looking information regarding
expanding Encana's oil and NGLs production and extraction volumes are
based on existing expansion of natural gas processing facilities in
areas where Encana operates and the continued expansion and
development of oil and NGL production from existing properties within
its asset portfolio. 
Forward-looking information respecting anticipated 2013 cash flow for
Encana is based upon, among other things, achieving average
production for 2013 of between 2.7 Bcf/d and 2.8 Bcf/d of natural gas
and 50,000 bbls/d to 60,000 bbls/d of liquids, commodity prices for
natural gas and liquids based on NYMEX $3.75 per Mcf and WTI of $95
per bbl, an estimated U.S./Canadian dollar foreign exchange rate of
$1.00 and a weighted average number of outstanding shares for Encana
of approximately 736 million. 
Furthermore, the forward-looking statements contained in this news
release are made as of the date hereof and, except as required by
law, Encana undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements contained
in this news release are expressly qualified by this cautionary
statement. 
Further information on Encana Corporation is available on the
company's website, www.encana.com. 
SOURCE: Encana Corporation
Contacts:
Encana Corporation - Investor Contact
Lorna Klose
Manager, Investor Relations
(403) 645-6977 
Encana Corporation - Investor Contact
Patti Posadowski
Advisor, Investor Relations
(403) 645-2252 
Encana Corporation - Media Contact
Jay Averill
Media Relations
(403) 645-4747
www.encana.com