EnCana's 1Q06 Cash Flow Nearly US$1.7 Billion

EnCana Corporation's (TSX & NYSE: ECA) first quarter 2006 cash flow per share diluted increased 26 percent to US$1.96, or about $1.7 billion, compared to the first quarter of 2005. Cash flow and operating earnings rose due to increased sales and higher natural gas and liquids prices. Total operating earnings per share increased 19 percent to 80 cents, or $694 million, compared to the first quarter of 2005. First quarter sales of natural gas, oil and natural gas liquids (NGLs) from total operations were 4.62 billion cubic feet of gas equivalent (Bcfe) per day, which is an increase of 7 percent per share compared to the first quarter of 2005. EnCana's first quarter net earnings of $1.70 per share, or $1.47 billion, were positively impacted by an unrealized $830 million after-tax gain due to mark-to-market accounting of commodity price hedges.

"EnCana's North American natural gas and oil sales continue to grow at a steady pace, increasing 6 percent in the past year. We are on track to achieve 2006 guidance, growing North American sales by about 7 percent from 2005. Despite record industry field activity in the first quarter, we successfully completed our winter program drilling 1,282 wells - about 30 percent of our plan for the year," said Randy Eresman, EnCana's President & Chief Executive Officer. "With about $3.5 billion of sales proceeds from completed and pending midstream and international asset sales in 2006, EnCana continues to focus on North American unconventional resource plays. In the first quarter, EnCana purchased about 21.3 million shares for cancellation, resulting in a net reduction of outstanding shares of 2.2 percent."

EnCana increases quarterly dividend 33 percent to 10 cents per share

Given EnCana's strong financial and operating performance, the company's board of directors has increased the quarterly dividend 33 percent from 7.5 to 10 cents per share, which is payable on June 30, 2006 to common shareholders of record as of June 15, 2006.

Two new key resource plays added to unconventional portfolio

"EnCana's productive capacity continues to grow with the addition of two new key resource plays - a natural gas play at Bighorn in west central Alberta and the Christina Lake oilsands development in northeast Alberta, which has the potential to be our largest in-situ project. We have been assembling the land and evaluating the potential of Bighorn and Christina Lake for the past number of years, and we believe that each play now holds sufficient identified resources to be a significant contributor to long-term value creation," Eresman said.

IMPORTANT NOTE: EnCana reports in U.S. dollars unless otherwise noted and follows U.S. protocols, which report sales and reserves on an after- royalties basis. EnCana's Ecuador assets and its natural gas liquids business were sold and are discontinued. The company is reporting its natural gas storage business as discontinued because EnCana is in the process of selling it. Total results, which include results from natural gas liquids business, Ecuador and natural gas storage, are reported in the company's financial statements included in this news release and in supplementary documents posted on its website. The company's financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP).

    First Quarter 2006 Highlights

    -  Cash flow per share diluted increased 26 percent to $1.96
    -  Net earnings per share diluted were $1.70, compared to a 5 cent loss
       one year earlier
    -  Operating earnings per share diluted up 19 percent to 80 cents
    -  Return on capital employed of 23 percent
    -  Purchased 21.3 million EnCana shares at an average share price of
       US$46.03 under the Normal Course Issuer Bid
    -  Reduced shares outstanding by 2.2 percent since December 31, 2005

    -  Natural gas sales of 3.34 billion cubic feet per day (Bcf/d), up
       6 percent
    -  Oil and NGLs sales from continuing operations up 4 percent to 162,791
       barrels per day (bbls/d)
    -  Total gas and liquids sales from continuing operations increased
       6 percent to 4.32 billion cubic feet equivalent per day (Bcfe/d)
    -  Total gas and liquids sales of 4.62 Bcfe/d, up 2 percent. This
       includes sales from Ecuador, which was sold February 28, 2006
    -  Key resource play production up 17 percent
    -  Operating costs of 80 cents per thousand cubic feet equivalent (Mcfe)
    -  Upstream capital investment in continuing operations of $1.9 billion

    Strategic events
    -  Added two new key resource plays, natural gas at Bighorn and in-situ
       oilsands at Christina Lake
    -  Completed sale of Ecuador interests for $1.4 billion
    -  Completed sale of Entrega Pipeline for $244 million
    -  Reached agreement to sell natural gas storage business for
       approximately $1.5 billion
    -  Jonah natural gas resource play set to grow following receipt of
       Record of Decision by U.S. Bureau of Land Management

    Unbooked Resource Potential estimate updated to year-end 2005
    -  Estimated unbooked resource potential for natural gas was about
       19 trillion cubic feet, essentially unchanged from the year-end 2004
    -  Estimated unbooked resource potential for oil up more than 250 percent
       to 3.3 billion barrels
    -  Estimated total unbooked resource potential up 60 percent to about
       39 trillion cubic feet of gas equivalent
    -  Estimated drilling inventory up 16 percent to about 43,000 well

                   Financial Summary - Total Consolidated
     (for the three months ended March 31)           Q1        Q1        %
     ($ millions, except per share amounts)         2006      2005     Change
    Cash flow                                      1,691     1,413      + 20
      Per share diluted                             1.96      1.55      + 26
    Net earnings                                   1,474       (45)      n/a
      Per share diluted                             1.70     (0.05)      n/a
    Operating earnings                               694       611      + 14
      Per share diluted                             0.80      0.67      + 19
            Earnings Reconciliation Summary - Total Consolidated
    Net earnings (loss) from continuing
     operations                                    1,472      (162)      n/a
    Net earnings from discontinued operations          2       117       n/a
    Net earnings (loss)                            1,474       (45)
    (Add back losses & deduct gains)
    Unrealized mark-to-market hedging gain
     (loss), after-tax                               830      (641)

    Unrealized foreign exchange gain (loss) on
     translation of U.S. dollar debt issued in
     Canada, after-tax                                (3)      (15)

    Gain (loss) on sale of discontinued operations   (47)        -
    Operating earnings                               694       611      + 14
      Per share diluted                             0.80      0.67      + 19

                          Sales & Drilling Summary
                             Total Consolidated
    (for the three months ended March 31)            Q1        Q1        %
    (After royalties)                               2006      2005     Change
    Natural Gas sales (MMcf/d)                     3,343     3,146       + 6
      Natural gas sales per 1,000 shares (Mcf)       355       318      + 12
    Oil and NGLs sales (bbls/d)                  212,941   229,671       - 7
      Oil and NGLs sales per 1,000 shares (Mcfe)     136       139       - 2
    Total sales (MMcfe/d)                          4,621     4,524       + 2
      Total sales per 1,000 shares (Mcfe)            491       457       + 7
    Net wells drilled                              1,289     1,358       - 5
                            Continuing Operations
    North America Natural Gas sales (MMcf/d)       3,343     3,146       + 6
    North America Oil and NGLs (bbls/d)          162,791   157,184       + 4
    Total sales (MMcfe/d)                          4,320     4,089       + 6
    Net wells drilled                              1,282     1,352       - 5

    EnCana's estimated unbooked resource potential up 60 percent, driven by
    oilsands assets

EnCana's inventory of natural gas and oil resources is estimated in two categories, proved reserves and unbooked resource potential. In 2005, EnCana's proved reserves from continuing operations, which are evaluated by independent qualified reserve evaluators, grew by 20 percent to 17.7 trillion cubic feet equivalent. Beyond proved reserves, the company holds unbooked resource potential, which is an inventory of resources that the company believes may become proved reserves and be produced in the future. EnCana recently completed its annual internal assessment of its unbooked resource potential. As of December 31, 2005, EnCana estimates its unbooked resource potential has increased by 60 percent to about 39 trillion cubic feet of gas equivalent, comprised of 19 trillion cubic feet of gas and 3.3 billion barrels of oil. This year-over-year gain was primarily due to additions at Christina Lake and Foster Creek, reflecting the attractiveness of the company's oilsands opportunities. The company's estimate of unbooked resource potential is based on internal estimates of recoverable resources, prices and costs.

"Our confidence in our long term growth potential continues to be underpinned by the size and quality of our undeveloped reserves and our unbooked resource potential. Associated with this potential, EnCana's estimated drilling inventory has increased by 16 percent to about 43,000 well locations. We expect to develop our unbooked resource potential at a cost of less than $2 per thousand cubic feet for natural gas and less than $5 per barrel for oilsands," Eresman said.

EnCana adds two new key resource plays, gas at Bighorn and oil at

Christina Lake

Two of EnCana's newest resource play developments have grown large enough to be added to the company's key resource play list. EnCana's threshold for key resource play status is a property containing estimated recoverable resources in excess of approximately 1 trillion cubic feet of gas equivalent and an expected capability of reaching daily production of more than 200 million cubic feet of gas equivalent.


In west central Alberta, EnCana's Bighorn resource play covers about 448,000 net acres of land. First quarter production from this deep basin play was 72 million cubic feet of gas per day, up from an average of 55 million cubic feet per day in 2005. For 2006, the company expects Bighorn to produce between 80 million and 90 million cubic feet per day. With about eight rigs working year round, Bighorn produces from Cretaceous-aged reservoirs within Western Canada's deep basin. EnCana estimates original gas in place of between 15 billion and 35 billion cubic feet per square mile, with expected drilling density of one well per 160 or 320 acres. The average well is expected to recover between 2 billion and 5 billion cubic feet of gas, with initial production rates averaging 2 million to 5 million cubic feet of gas per day. The company estimates that the Bighorn resource play has an unbooked resource potential of about 2 trillion cubic feet of gas.

Christina Lake

Located in northeast Alberta about 120 kilometers south of Fort McMurray, Christina Lake has the potential to be EnCana's largest oilsands project. Pilot project work over the past five years has taken steam-assisted gravity drainage production, from six well pairs drilled into the McMurray formation, to a level that is expected to average 6,000 barrels of bitumen per day in 2006. A current expansion is expected to take production to about 18,000 barrels per day in 2008 and the project is targeted to grow to more than 250,000 barrels per day over the next decade. With a reservoir thickness of up to 150 feet of oil-bearing sands, Christina Lake is estimated by EnCana to have an unbooked resource potential of about 1.8 billion barrels of oil.

Key resource play growth in first quarter up 17 percent in past year

First quarter 2006 oil and gas production from key North American resource plays increased 17 percent compared to the first quarter of 2005. This was driven mainly by increases in gas production on coalbed methane projects in central and southern Alberta, Cutbank Ridge in northeast British Columbia and the Barnett Shale play in the Fort Worth basin. EnCana's newest gas resource play, Bighorn, has grown by close to 30 percent in the past year.

                Growth from key North American resource plays
                                             Daily Production
    Resource Play             2006                  2005                2004
    (After royalties)                 Full                              Full
                                Q1    Year    Q4     Q3     Q2     Q1   Year
    Natural Gas (MMcf/d)
      Jonah                    461    435    454    440    416    431    389
      Piceance                 316    307    326    302    302    300    261
      East Texas                99     90     98     94     85     82     50
      Fort Worth                93     70     88     66     63     61     27
      Greater Sierra           208    219    226    225    228    195    230
      Cutbank Ridge            140     92    125    105     80     56     40
      Bighorn                   72     55     56     57     53     56     42
      CBM                      104     57     77     62     51     38     17
      Shallow Gas              615    625    625    616    633    625    592
    Oil (Mbbls/d)
      Foster Creek              36     29     35     27     24     30     29
      Christina Lake             6      5      5      6      7      4      4
      Pelican Lake              29     26     28     27     27     21     19
    Total (MMcfe/d)          2,536  2,311  2,479  2,326  2,259  2,176  1,960
    % change from Q1 2005     16.5
    % change from prior
     period                    2.3   17.9    6.6    3.0    3.8    7.0

           Drilling activity in key North American resource plays
                                             Net Wells Drilled
    Resource Play             2006                  2005                2004
                                      Full                              Full
                                Q1    Year    Q4     Q3     Q2     Q1   Year
    Natural Gas
      Jonah                     26    104     21     25     30     28     70
      Piceance                  63    266     55     69     65     77    250
      East Texas                19     84     20     21     22     21     50
      Fort Worth                29     59     20     18     12      9     36
      Greater Sierra            60    164     25     33     47     59    187
      Cutbank Ridge             26    135     34     40     38     23     50
      Bighorn                   20     51     20     10     10     11     20
      CBM                      333  1,084    327    216    219    322    760
      Shallow Gas              197  1,267    288    341    365    273  1,552
      Foster Creek              10     39     13     14      2     10     11
      Christina Lake             2      -      -      -      -      -      2
      Pelican Lake               -     52      -      3     33     16     92
    Total                      785  3,305    823    790    843    849  3,080

    First quarter North American natural gas prices up 32 percent from one
    year earlier

EnCana's North American realized natural gas prices, excluding financial hedging, averaged $7.68 per thousand cubic feet, up 32 percent in the first quarter of 2006 from an average of $5.81 per thousand cubic feet in the same 2005 period. Including hedging, EnCana's average first quarter realized gas price was $7.15 per thousand cubic feet. Natural gas prices have retreated from record levels last winter which followed devastating hurricanes that caused extensive damage in the Gulf of Mexico in late summer of 2005. Following a warmer than normal North American winter, gas storage levels are above long-term averages for this time of year, a market condition that is expected to put downward pressure on short-term gas prices. The average first quarter benchmark NYMEX index gas price was $8.98 per thousand cubic feet, up 43 percent from $6.27 per thousand cubic feet in the first quarter of 2005.

About 95 percent of 2006 gas sales has floor price protection

To help provide downside price protection, EnCana has entered into financial contracts, primarily put options, on about 95 percent of 2006 forecast natural gas sales, which helps assure cash flow for the company's capital programs. At this time, EnCana has not entered into any significant hedging arrangements for 2007.

First quarter world oil prices remain strong; EnCana's realized liquids

price up 25 percent

World oil prices continued to be strong through the first quarter of 2006 due to heightened geopolitical concerns impacting world oil supplies and continued increases in world oil demand despite high prices. During the first quarter of 2006, the average benchmark West Texas Intermediate (WTI) crude oil price was $63.48 per barrel, up 27 percent from the first quarter 2005 average of $50.03 per barrel. During the first quarter of 2006, the substantially higher level of WTI prices combined with refinery maintenance shut downs and transportation constraints on Canadian crude resulted in a significant widening of light/heavy crude oil price differentials. In the first quarter, the WTI/Western Canada Select differential averaged $28.76 per barrel, up 53 percent from $18.81 per barrel in the same 2005 period. However, with the advent of the summer paving season and the recent expansion of pipelines to deliver Canadian heavy oil to some new southern U.S. markets, differentials have narrowed. In the first quarter, EnCana's average realized oil and NGLs price, excluding hedging, was $33.87 per barrel, up 14 percent; including hedging it was $30.75 per barrel, up 25 percent compared to the same period in 2005.

Risk management strategy

Detailed risk management positions at March 31, 2006 are presented in Note 14 to the unaudited first quarter consolidated financial statements. In the first quarter of 2006, EnCana's financial price risk management measures resulted in realized losses of approximately $136 million, comprised of a $105 million loss on gas hedges and a $31 million loss on oil hedges. The company's hedging strategy currently employs primarily put options to help protect against downside risk without limiting upside in a rising price environment.

    Corporate developments

    Quarterly dividend increased 33 percent to 10 cents per share

EnCana's board of directors has increased the company's quarterly dividend 33 percent to 10 cents per share, which is payable on June 30, 2006 to common shareholders of record as of June 15, 2006.

Normal Course Issuer Bid purchases

To April 26, 2006, EnCana has purchased for cancellation approximately 23.3 million of its shares at an average price of US$46.21 per share under its current Normal Course Issuer Bid, which allows the company to purchase up to 10 percent of the company's public float at the time of the approval of the bid - October, 2005. The company had 836 million shares outstanding at March 31, 2006. EnCana's 2006 capital program is expected to be funded by cash flow. An estimated $3.3 billion of after-tax proceeds from the company's asset divestitures in 2006 are expected to be directed to share purchases and debt repayment.

    Financial strength

EnCana maintains a strong balance sheet. At March 31, 2006 the company's net debt-to-capitalization ratio was 26:74. EnCana's net debt-to-EBITDA multiple, on a trailing 12-month basis, was 0.6 times. These ratios are below the company's targeted range for net debt-to-capitalization of between 30 and 40 percent and 1.0 to 2.0 times for net debt-to-EBITDA. The company expects these ratios to remain at the lower end of their ranges for the rest of 2006.

In the first quarter of 2006, EnCana invested $1,946 million of capital in continuing operations. Net divestitures were $240 million, resulting in net capital investment in continuing operations of $1,706 million.

With an enterprise value of approximately US$50 billion, EnCana is one of North America's leading natural gas producers, the largest holder of gas and oil resource lands onshore North America and is a technical and cost leader in the in-situ recovery of oilsands bitumen. EnCana delivers predictable, reliable, profitable growth from its portfolio of long-life resource plays situated in Canada and the United States. Contained in unconventional reservoirs, resource plays are large contiguous accumulations of hydrocarbons, located in thick or areally extensive deposits, that typically have lower geological and commercial development risk, lower average decline rates and longer producing lives than conventional plays. EnCana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.


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