ENCANA CORPORATION 2016 Corporate Guidance December 14, 2015
2016 GUIDANCE Driving Margin Expansion & Quality Corporate Returns TOP TIER RESOURCE 95% of 2016F capital allocated to core four 2016 program focused on core acreage in each asset MARKET FUNDAMENTALS Maximizing realized prices Informs capital allocation Actively managing volatility OPERATIONAL EXCELLENCE 10-15% D&C cost efficiencies Rapid application of innovations across portfolio RPH* model unlocks value BALANCE SHEET STRENGTH CAPITAL ALLOCATION Driven from the top Significant flexibility to scale capital based on commodity prices *Resource Play Hub: Encana s development model using repeatable, transferable operations techniques to reduce costs and improve safety and environmental performance. 2
2016 STRATEGIC OBJECTIVE Disciplined Focus on Profitable Growth Significant flexibility to adjust capital in 2016 Over 90% of capex is discretionary with minimal supply chain commitments Continuing to drive efficiencies across portfolio 2016F capital down ~$600 million 2016F production efficiency to improve by ~15% Montney Liquids rich Duvernay High value condensate Generating margin expansion and quality corporate returns Normalized 2016F operating margin expected to increase by over 10%* Corporate costs expected to continue to drop by over 10%** Continued cash flow growth at low prices Maintain scale in core four at 2015F Q4 production Sets up opportunity to grow 2017 operating cash flow by over 10% Proactively managing the balance sheet Permian Dividend reset to align with cash flow and recognize high quality investment options Oil Committed to maintaining investment grade credit rating Eagle Ford Oil *Operating margins based on flat commodity price assumptions of $50/bbl WTI and $2.75/MMBtu NYMEX **Corporate costs include interest and administrative expenses and exclude one-time items and long-term incentives. 3
2016: FOCUS ON THE CORE FOUR Generating Quality Returns Expect core four to maintain scale at ~270 MBOE/d ~12% y-o-y growth 2016F program is load-leveled throughout the year Core four to generate over 75% of 2016 production Up from 33% in 2014 Key drivers: 10-15% reduction in 2016F D&C costs ECA operating margin expected to increase by over 10% in 2016* Increased production contribution from the core four 50 Realized price gains & LOE reductions drive core four operating margins up by ~7%* 0 Production MBOE/d 300 250 200 150 100 Core Four Total Production (Permian, Eagle Ford, Duvernay & Montney) 2015F Montney plant turnarounds ~8 MBOE/d impact in Q2 2016F *Operating margins based on flat commodity prices of $50/bbl WTI and $2.75/MMBtu NYMEX 4
2016 ASSET HIGHLIGHTS Focus On Highest Margin Assets PERMIAN EAGLE FORD Growing today and in the future Longer laterals and more wells per pad to drive efficiency Reduced land retention vertical program Maintaining scale for long term value Delineating Upper Eagle Ford potential D&C target: $5.9 MM/well Capital: ~$800 MM D&C target: $5.2 MM/well Capital: ~$425 MM DUVERNAY Production grows to fill new plant in early 2016 Increasingly material to production and cash flow D&C target: $9.5 MM/well Capital: ~$140 MM MONTNEY Fill existing infrastructure to maintain production Q2 facility turnarounds (estimated quarterly impact of ~8 MBOE/d) D&C target: $7.7 MM/well Capital: ~$175 MM BASE ASSETS Seasonal operating strategy at Panuke (~40 MMcf/d annualized) Base optimization to continue 2016F corporate decline rate of 30% Capital: ~$80 MM D&C cost normalized to lateral length: Permian (7,500 ), Eagle Ford (5,000 ), Duvernay (7,200 ), Montney (9,500 ) 5
SUSTAINABLE BUSINESS MODEL THROUGH THE CYCLE 2016 program funding Combination of expected cash flow & existing credit facilities Committed to maintaining investment grade credit rating Mid-BBB ratings from Moody s, S&P and DBRS Actively managing balance sheet Dividend reset to align with cash flow and recognize high quality investment options No long-term debt maturities until 2019 Corporate costs* down 40% since prior to launch of strategy in 2013 2016 fixed, three-way option & costless collar options** 66 Mbbls/d WTI 730 MMcf/d NYMEX 2016F Total Cash Flow ($B) 1.0 1.2 Capital Investment ($B) 1.5 1.7 Natural Gas (MMcf/d) 1,300 1,400 Total Liquids (Mbbls/d) 120 140 Total Production (MBOE/d) 340 370 Core Four Production (MBOE/d) 260 280 Transportation & Processing ($/BOE) 7.90 8.15 Operating ($/BOE)*** 4.70 5.00 * Corporate costs include interest and administrative expenses and exclude one-time items and long-term incentives. ** As at December 14, 2015, excludes swaptions *** Excludes LTI and operating one time charges. 6
2016 GUIDANCE ALIGNED WITH STRATEGY Capital allocated to deliver quality returns Continue to expand margins Continue to drive corporate and operating efficiencies Significant flexibility Proactively managing the balance sheet One. Agile. Driven. A culture of success
ADVISORY REGARDING FUTURE ORIENTED AND OIL AND GAS INFORMATION This presentation contains certain forward-looking statements or information (collectively, FLS ) within the meaning of applicable securities legislation. FLS include: Encana s 2016 capital program, including the amount allocated to its core four assets and the source of funding expected production, number of wells and drilling program anticipated operating margins, returns and netbacks ability to scale or redirect the capital program sustainability of cost efficiencies including drilling and completion, operating and corporate costs growth in long-term shareholder value expected cash flow projected capital efficiency and operating performance projected decline rate management of Encana s balance sheet, credit rating and debt levels anticipated hedging and outcomes of risk management program anticipated proceeds from divestitures, use of proceeds therefrom, satisfaction of closing conditions and timing of closing investment in high margin opportunities planned annualized 2016 dividend and associated cash and cash equivalent outlay declaration and payment of future dividends, if any potential dilution relating to shareholder participation in Encana s dividend reinvestment plan Readers are cautioned upon unduly relying on FLS as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, these statements involve numerous assumptions, known and unknown risks and uncertainties and other factors, which can contribute to the possibility that such statements will not occur or which may cause the actual performance and financial results of the Company to differ materially from those expressed or implied by such statements. These assumptions include: assumptions regarding commodity prices and foreign exchange rates availability of attractive hedges results from innovations expectation that counterparties will fulfill their obligations under gathering and midstream commitments access to transportation and processing facilities where Encana operates effectiveness of Encana s resource play hub model to drive productivity and efficiencies expectations and projections made in light of, and generally consistent with, Encana s historical experience and its perception of historical trends, including with respect to the pace of technological development, the benefits achieved and general industry expectations Risks and uncertainties that may affect these business outcomes include: commodity price volatility; timing and costs of well, facilities and pipeline construction; ability to secure adequate product transportation and potential pipeline curtailments; business interruption and casualty losses or unexpected technical difficulties; counterparty and credit risk; fluctuations in currency and interest rates; risk and effect of a downgrade in credit rating, including access to capital markets; variability and discretion of Encana s Board to declare and pay dividends, if any; the ability to generate sufficient cash flow to meet Encana s obligations; failure to achieve anticipated results from cost and efficiency initiatives; risks associated with technology; Encana s ability to acquire or find additional reserves; changes in or interpretation of royalty, tax, environmental, accounting and other laws; announced divestitures not closing on a timely basis or at all and adjustments that reduce the proceeds to Encana; risks associated with past and future 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; and other risks and uncertainties impacting Encana's business, as described in its most recent MD&A, financial statements, Annual Information Form and Form 40-F, as filed on SEDAR and EDGAR. Although Encana believes the expectations represented by such FLS are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions, risks and uncertainties referenced above are not exhaustive. FLS are made as of the date of this document and, except as required by law, Encana undertakes no obligation to update publicly or revise any FLS. The FLS contained in this document are expressly qualified by these cautionary statements. Certain future oriented financial information or financial outlook information is included in this document to communicate current expectations as to Encana s performance. Readers are cautioned that it may not be appropriate for other purposes. The conversion of natural gas volumes to barrels of oil equivalent ( BOE ) is on the basis of six thousand cubic feet to one barrel. BOE is based on a generic energy equivalency conversion method primarily applicable at the burner tip and does not represent economic value equivalency at the wellhead. Readers are cautioned that BOE may be misleading, particularly if used in isolation. For convenience, references in this presentation to Encana, the Company, we, us and our may, where applicable, refer only to or include any relevant direct and indirect subsidiary corporations and partnerships ( Subsidiaries ) of Encana Corporation, and the assets, activities and initiatives of such Subsidiaries. 8
INVESTOR RELATIONS CONTACTS Brendan McCracken Vice President, Investor Relations 403.645.2978 brendan.mccracken@encana.com Brian Dutton 403.645.2285 brian.dutton@encana.com Patti Posadowski 403.645.2252 patti.posadowski@encana.com 9