Encana Announces Joint Venture to Develop Duvernay Lands

Thu Dec 13, 2012 12:20pm EST

* Reuters is not responsible for the content in this press release.

Encana Corporation (TSX:ECA) (NYSE:ECA) (Encana) has entered into a joint
venture arrangement with Phoenix Duvernay Gas (Phoenix), a wholly owned
subsidiary of PetroChina, to explore and develop Encana's extensive
undeveloped Duvernay land holdings in west-central Alberta. Under the
terms of the agreement, Phoenix will gain a non-controlling 49.9%
interest in Encana's approximately 445,000 acres in the Duvernay play for
total consideration of C$2.18 billion.

    At closing C$1.18 billion was paid to Encana and C$1.0 billion is payable
over the next four years in the form of a carry of half of Encana's share
of development capital. During this period, the joint venture partners
plan to invest a total of C$4.0 billion in new drilling, completion and
processing facilities. Encana estimates that the Duvernay joint venture
lands contain about 9 billion barrels of oil equivalent petroleum
initially-in-place. Encana remains the operator of the joint venture with
its 50.1% working interest.

    "Phoenix's investment demonstrates the tremendous value that Encana has
created in this early life liquids rich play, and enables us to
accelerate the pace at which the full production potential of our
Duvernay lands can be achieved," says Randy Eresman, Encana President &
CEO. "A transaction of this magnitude keeps us on track to create a more
diversified commodity portfolio and maintain our balance sheet strength.
It is a strong endorsement of Encana's position as a reliable long term

    Encana has drilled nine wells into the Duvernay, has five producing wells
and currently has two rigs actively drilling additional wells. With the
formation of this joint venture, Encana expects to more than double its
planned pace of development in the Duvernay play beginning early in 2013.

    "The Duvernay project will combine Phoenix's integrated upstream and
downstream capabilities and financial resources with Encana's proven
resource play hub expertise. This joint venture will build a foundation
for the successful development of the Duvernay play and help to diversify
our business portfolio. Encana is our ideal long term partner for the
development of our future natural gas business," says Mr. Zhiming Li,
Phoenix's President & Chief Executive Officer.

    Having entered into several joint venture transactions in 2012, these
types of arrangements have become an important part of Encana's business
model. Joint ventures help the Company to achieve a highly efficient
deployment of capital throughout its vast exploration and development
asset base as Encana transitions to a more diversified portfolio of

    These relationships have the potential to increase natural gas demand as
a number of Encana's partners are actively exploring opportunities to
export liquefied natural gas (LNG), while some are industrial consumers
looking to transition to natural gas as fuel for their operations. An
example is a recent agreement with Nucor Energy Holdings (Nucor) which is
designed to support Nucor's increased use of natural gas for its
facilities, such as its direct reduced iron facility currently under
construction in Convent, Louisiana.

    For more information on Encana's recent joint venture agreements visit

    Balance Sheet Strength

    Including the proceeds from the transaction with Phoenix, Encana expects
to end the year with cash balances in excess of US$3.0 billion, well
ahead of the targeted US$2.5 billion the Company projected in June 2012.
In addition, confirmed carry capital committed to Encana from joint
ventures and other third party agreements for 2013 is now approximately
US$750 million, and covers about half of Encana's projected costs in
those areas.

    To date, Encana has increased its hedge position for 2013 to
approximately 1.5 billion cubic feet per day (Bcf/d) at an average price
of US$4.39 per million cubic feet (Mcf).

    "Our enhanced risk management position combined with our significant
expected cash balance for the end of the year puts us in a solid position
to execute on our plans for 2013. We expect these joint venture
arrangements will help us achieve higher capital efficiencies which will
enable us to reduce the amount of capital that we initially projected to
spend next year," adds Eresman.

    Financial and Legal Advisors

    RBC Capital Markets acted as financial advisor and Burnet, Duckworth &
Palmer LLP acted as legal advisor to Encana for this transaction.

    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

providing Encana Corporation ("Encana" or the "Company") 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: expected amount of carried
capital to be paid to Encana over the next four years under the joint
venture; projected amount of investments in new drilling, completion and
processing facilities by the joint venture partners; estimated petroleum
initially-in-place in Duvernay lands; expectation for the transaction to
help Encana create a more diversified commodity portfolio and maintain
balance sheet strength; projection to double pace of development in the
Duvernay play in 2013; expectation for Encana's joint ventures to help
maintain a highly efficient capital deployment throughout the Company's
exploration and development portfolio and increase for natural gas demand
including opportunities for the export of LNG; expected cash and cash
equivalents at year-end 2012 and estimated amount of confirmed carry
capital committed from joint venture and other third-party agreements for
2013; anticipated capital investment for 2013; and expectation to be in a
solid position to execute on the Company's plans for 2013.

    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 (including third-party capital
investments, farm-outs or partnerships, which Encana may refer to from
time to time as "partnerships" or "joint ventures", 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.

    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.

("NI") 51-101 of the Canadian Securities Administrators imposes oil and
gas disclosure standards for Canadian public companies such as Encana
engaged in oil and gas activities. Encana complies with the NI 51-101
annual disclosure requirements in its annual information form, most
recently dated February 23, 2012 ("AIF"). The Canadian protocol
disclosure is contained in Appendix A and under "Narrative Description of
the Business" in the AIF. Encana has obtained an exemption dated January
4, 2011 from certain requirements of NI 51-101 to permit it to provide
certain disclosure prepared in accordance with U.S. disclosure
requirements, in addition to the Canadian protocol disclosure. That
disclosure is primarily set forth in Appendix D of the AIF.

    Encana uses the terms resource play and total petroleum
initially-in-place. 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. Total petroleum initially-in-place
("PIIP") is defined by the Society of Petroleum Engineers - Petroleum
Resources Management System ("SPE-PRMS") and in the Canadian Oil & Gas
Evaluation Handbook ("COGEH") as that quantity of petroleum that is
estimated to exist originally in naturally occurring accumulations. It
includes that quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations prior to production plus
those estimated quantities in accumulations yet to be discovered
(equivalent to "total resources").

    Due to the early life nature of the Duvernay play, PIIP is the most
relevant specific assignable category of estimated resources. Estimates
by engineering and geo-technical practitioners may vary and the
differences may be significant. There is no certainty that it will be
commercially viable to produce any portion of the estimated PIIP.

    In this news release, certain natural gas volumes have been converted to
barrel of oil equivalent (BOE) on the basis of six thousand cubic feet
(Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in
isolation. A conversion ratio of six Mcf to one bbl 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 natural gas as compared to oil
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.

Encana Corporation - Investor contact:
Ryder McRitchie
Vice-President, Investor Relations
(403) 645-2007

Encana Corporation - Investor contact:
Lorna Klose
Manager, Investor Relations
(403) 645-6977

Encana Corporation - Media contact:
Jay Averill
Media Relations
(403) 645-4747

Copyright 2012, Market Wire, All rights reserved.

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