EnCana to Lower Capex in 2007

EnCana Corporation plans to invest capital of approximately US$5.9 billion in 2007, a 6 percent decrease from the prior year, to grow natural gas and oilsands production and expand the company's downstream heavy oil processing capacity. The company expects to fully fund its capital investment with internally generated cash flow, which is supported by hedges on more than half of its forecasted 2007 production volumes. In 2007, EnCana expects that cash flow will exceed total capital expenditures resulting in free cash flow of approximately $1.7 billion, at the midpoint of cash flow guidance. With the company's 2006 and 2007 planned share purchases, it is expected that 2007 natural gas production per share will grow by 9 percent and total oil and gas production will grow by 4 percent per share.

"In this period of high industry activity and continued high inflation, we have tempered our planned natural gas and oil production growth rate in order to minimize the impact of rising costs and operating inefficiencies and to maximize project returns. Overall, we believe this approach will generate significant free cash flow that can be directed to continued share purchases and increased dividends. As always, our efforts will be focused on increasing the underlying value of every EnCana share," said Randy Eresman, EnCana's President & Chief Executive Officer.

Natural gas production, which represents more than 80 percent of EnCana's production, is expected to increase about 3 percent, while oil and natural gas liquids (NGLs) production (excluding volumes from the oilsands partnership) is expected to decrease about 5 percent, mostly due to natural decline in mature properties. Total production in 2007, prior to the allocation of oilsands volumes to ConocoPhillips as part of the heavy oil integration partnership, was expected to be up 4 percent. With the establishment of the partnership planned for early in 2007, EnCana expects 2007 total production to be about the same as in 2006.

EnCana and ConocoPhillips are on track to close their agreement to create an integrated heavy oil business on January 2, 2007, generating immediate downstream revenue and cash flow for EnCana. The partnership will ultimately result in EnCana owning a 50 percent interest in the Wood River and Borger refineries. ConocoPhillips will own a 50 percent interest in the Foster Creek and Christina Lake oilsands projects. Average daily production from the upstream partnership is expected to grow about 44 percent in 2007 to about 62,000 barrels per day (bbls/d) (about 31,000 bbls/d net to EnCana). The company expects this integrated business will generate pre-tax cash flow in the range of $550 million to $650 million net to EnCana in 2007.

Share purchases continue

"In 2006, our target is to purchase a total of 10 percent of our outstanding shares and to date we have purchased 9.4 percent. We expect to complete the program by year-end. During 2007, we plan to purchase between 3 and 5 percent of the shares outstanding (approximately 24 million to 40 million shares) with divestiture proceeds and free cash flow," Eresman said.

To date in 2006, EnCana has purchased approximately 81 million common shares at an average price of approximately US$49.36 per share.

EnCana plans dividend increase

Consistent with the company's focus on shareholder value creation, EnCana's board of directors intends to double the quarterly dividend in 2007. Approval of the increase would result in an annual dividend of $0.80 per common share.

More than half of expected 2007 natural gas and liquids production hedged with downside price protection

In 2007 EnCana has about 1.75 billion cubic feet per day (Bcf/d) of expected gas production with downside price protection, comprised of 1.515 Bcf/d under fixed price contracts at an average price of $8.49 per Mcf and 240 million cubic feet per day with put options at a strike price of $6.00 per Mcf. In oil, EnCana has about 126,000 bbls/d of expected 2007 oil production with downside price protection, comprised of 34,500 bbls/d under fixed price contracts at an average price of $64.40 per bbl, plus put options on 48,500 bbls/d at a strike price of $65.00 per bbl and 43,000 bbls/d at an average strike price of $44.44 per bbl. This price hedging strategy helps reduce uncertainty in cash flow during periods of commodity price volatility.