ENCANA CORPORATION. Market Access & Risk Mitigation. Renee Zemljak Executive Vice President, Midstream, Marketing & Fundamentals

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1 ENCANA CORPORATION Market Access & Risk Mitigation Renee Zemljak Executive Vice President, Midstream, Marketing & Fundamentals

2 ENCANA Delivering Quality Corporate Returns North American leader in: Generating free cash flow Ŧ ~$1.5 billion cumulative over plan Cash flow Ŧ growth ~ 25% CAGR Corporate returns ROCE Ŧ climbs to 10-15% Execution efficiency ~$9,000 per flowing BOE Disciplined capital allocation 99% of capital to core assets Multi-basin advantage World class premium inventory in Texas oil and Canadian condensate Strong balance sheet Innovation company Focus on environmental, health, and safety performance Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-gaap measures see the Company s website. TOP TIER RESOURCE OPERATIONAL EXCELLENCE BALANCE SHEET STRENGTH MARKET ACCESS CAPITAL ALLOCATION 2

3 EXPANDING MARGINS & INCREASING RESILIENCE Commercial Innovation Integrated approach Focused Risk Management Innovative commercial approach Tightly connected with operations Execution tied directly to strategy Anticipate risks Diversify markets & mitigate exposure to uncertainty Manage price and flow risk Capture optionality to increase flexibility Maximize margins Adding confidence to 5-year plan Significantly reduced exposure to AECO price uncertainty Secured just-in-time firm capacity aligned to growth projections Access to a portfolio of diverse markets Expanding margins by optimizing realized prices and reducing cash costs Securing third party midstream services to free Encana capital for higher return drilling projects Minimizing take or pay commitments to complement our short cycle capital strategy 3

4 EXPANDING MARGINS & INCREASING RESILIENCE Addressing Key Market Risks WCSB and Permian Encana s Montney is a condensate play Canadian condensate demand over 1.5x higher than domestic production Canadian condensate price set by cost of condensate imports from Gulf Coast YTD 2017 Canadian condensate has averaged 97% of WTI Combination of physical transport to diverse gas sales markets and basis hedging insulates Encana from AECO price weakness through five-year-plan Permian market dynamics Interplay of supply growth and development of market access infrastructure (oil and gas) Firm transport capacity from Midland to Sealy starting Q No volume commitments Robust basis hedging position for Midland oil 4

5 WESTERN CANADIAN MARKET FUNDAMENTALS Premium Condensate Market & Natural Gas Export Basin Natural Gas Export Pipeline Condensate Import Pipeline ~97% YTD WTI Price Realization Condensate is a premium product in Western Canada ~4% 2018F total revenue exposed to AECO Combination of physical transportation and basis hedges 100% Natural Gas Export Pipeline Condensate Import Pipeline Firm transport for expected growth Limited production curtailment risk Source: Encana Fundamentals, RBC Capital Markets, Various Pipeline Postings; *Net Effective Capacity (Bakken Access) 5

6 AGREEMENT WITH VERESEN MIDSTREAM Fee-for-Service Structure Tower and Sunrise plants on-stream Facilities came on ahead of schedule and under budget Encana designed, built and operates the facilities Innovative risk-sharing arrangement No up-front capital spend by Encana No traditional take-or-pay Competitive fee structure Canadian margins are improving Q Condensate growth New plants expected to reduce Canadian per unit T&P expense Tower & Sunrise Plants On-Stream 6

7 REVIEW: MAY 2016 MESSAGING VS TODAY Montney Cost Advantage to Northeast Markets 2016: Montney continues to compete in Western markets, capturing demand growth and offsetting declines in the region 2016: Existing capacity will outcompete new-build economics to Eastern Canadian markets by ~$0.15-$0.30/MMBtu 2017 New Contracting: TCPL LTFP (1.45 Bcf/d) GTN (0.6 Bcf/d) 1-Year TCPL (0.015 Bcf/d) Existing Infrastructure Greenfield Infrastructure Additional Contracting Dawn LTFP: ECA: 316 MMcf/d ~$0.92/Mcf Additional Marcellus expansions include the expected Rover and Nexus pipelines and southbound expansions (backhaul on Gulf pipelines). Further northeast projects have been limited. Source: Encana Fundamentals, Various Pipeline Websites 7

8 WESTERN CANADIAN CONDENSATE FUNDAMENTALS Premium Condensate Market Condensate demand in western Canada is expected to outstrip domestic supply with imports bridging the gap Source: RBC Capital Markets and Government Data 8

9 WCSB RISK MANAGEMENT PROGRAM Market Access & Price Risk Management* 2018F 2019F F ~ 20% Less than 1/2 316 MMcf/d to Dawn 475 MMcf/d ($0.87)/Mcf ± < 33% 500 MMcf/d ($0.88)/Mcf ± 46 MMcf/d to Chicago 120 MMcf/d to Sumas/Malin 316 MMcf/d to Dawn 88 MMcf/d to Chicago 114 MMcf/d to Malin AECO Exposure Physical Export Transport** AECO Basis Hedges *Charts represent expected Western Canadian Sedimentary Basin natural gas production only. Positions as at September 30, Hedged and transport volumes are converted to Mcf at a 1:1 ratio from MMBtu. **Includes fixed transport to West Coast (Malin), Chicago & Eastern Canada (Dawn). ± Price stated is the differential versus NYMEX pricing. 9

10 Permian Basin Market Fundamentals Infrastructure Development Continues to Pace Production Growth Strong oil production growth & proactive infrastructure development Market access has kept pace with volume growth Proximity to market reduces infrastructure cost >700 Mbbls/day oil export pipelines in place or under construction Improved intra-basin connectivity Midland price differential remains connected to benchmarks Associated gas growth has weakened local differentials Midstream service market is competitive and has been responsive to basin growth Downstream gas infrastructure is currently sufficient, with proposed projects targeting 2019 time frame (>3 Bcf/d) 10

11 Crude Oil Production / Takeaway Capacity (Mbbls/d) Q1'12A Q3'12A Q1'13A Q3'13A Q1'14A Q3'14A Q1'15A Q3'15A Q1'16A Q3'16A Q1'17E Q3'17E Q1'18E Q3'18E Q1'19E Q3'19E Q1'20E Q3'20E Q1'21E Q3'21E Q1'22E Q3'22E PERMIAN BASIN FUNDAMENTALS Past & Future Pipeline Capacity Expansions Align with Growth 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Periods of temporary dramatic weakness in local price Potential price risk (timing of future projects) Current oil export infrastructure >2.7 MMbbls/d ~300 Mbbls/d additional capacity put in place in 2017 Enterprise Midland-Sealy pipeline expected to be in service Q Proposed projects targeting 2018/2019 in-service dates Production growth and timing of pipeline projects creates potential for temporary Midland differential weakness Local Refineries Pipelines Under Construction Permian Supply Existing Pipelines Identified Pipeline Projects Source: Wells Fargo Securities, Encana 11

12 PERMIAN RISK MANAGEMENT PROGRAM Market Access & Price Risk Management 2018F 2019F F ~10% 10 Mbbls/d ($1.09)/bbl 19 Mbbls/d to Houston 37 Mbbls/d ($0.78)/bbl ~40% 39 Mbbls/d to Houston Midland Exposure EPD* Midland to Houston WTI-Midland Differential Hedges Positions as at September 30, * Enterprise Products Partners L.P 12

13 DRIVING VALUE, EXPANDING MARGINS & DE-RISKING GROWTH Summary of Midstream and Marketing Activities Integrated approach to market risk mitigation Proactively assessing market risk, integrating market intelligence with strategy Market access and price optimization Creating flexible and reliable midstream strategies and transactions (Medallion, Veresen) Maintaining a diversified sales portfolio varied, high-quality counterparties Assuring physical flow of production (NGTL, TCPL, Medallion, Enterprise) Supporting growth objectives, maintaining capital flexibility Reducing cash flow volatility and managing balance sheet risk through financial hedging activities 13