Encana on track to maximize value from Montney

Encana  (TSX: ECA) (NYSE: ECA) continues to advance its five-year plan to deliver cash flow growth and returns, with its Montney asset playing an integral part in the plan, contributing high-value condensate, non-GAAP cash flow and margin growth. The company has made significant recent progress adding further value to this asset by improving capital efficiency, increasing returns and managing risk.

"Our world-class, condensate-rich Montney asset keeps getting better and we believe there is opportunity for significant upside to our five-year plan," said Doug Suttles, Encana President & CEO. "We are making our Montney asset more valuable by operating efficiently at scale and continuously delivering leading well performance and cost efficiencies. We have secured access to infrastructure to support our growth plan and are actively managing price risk to maximize value from the Montney."

Encana is managing Western Canadian natural gas price risk by focusing on high-margin, condensate-rich wells and has secured a combination of commercial arrangements that protect cash flow and returns, provide firm access to multiple markets and maintain flexibility. These arrangements include physical access to four major North American gas markets, a strong financial basis hedge position and firm midstream and downstream transportation capacity for all of the company's expected liquids and natural gas growth.

Continued leading returns with focus on condensate
By 2019, Encana expects its Montney asset will produce approximately 70,000 barrels per day (bbls/d) of liquids, of which the majority will be high-margin condensate. Throughout the growth period the plan is fully self-funding. Over the course of its five-year plan, at flat $55 WTI and $3 NYMEX prices, Encana expects its drilling program will generate non-GAAP operating margins of approximately $14.00 per barrel of oil equivalent (BOE).

Across Encana's condensate-rich areas of the Montney, the company's latest completion designs are delivering 60-day initial production rates of between 500 bbls/d to 1,200 bbls/d of condensate. Encana now has four wells in Pipestone which have each produced over 100,000 barrels of condensate in under 100 days.

New infrastructure ahead of schedule and aligned with growth plan
Beginning in the fourth quarter of 2017 and continuing into 2018, new midstream infrastructure and downstream capacity is expected to unlock significant cash flow growth. In the Cutbank Ridge part of the play, two Veresen Midstream Limited Partnership facilities, Tower and Sunrise, remain ahead of schedule to be operational in the fourth quarter of 2017. A third facility, Saturn, is expected to be operational in early 2018. Encana has secured firm downstream transportation capacity for its expected gas and liquids growth, including service on the Nova Gas Transmission Ltd. system.

The company expects that its total net Montney production by 2019 will be over 70,000 bbls/d of liquids and 1.2 billion cubic feet per day (Bcf/d) of natural gas.

Reduced AECO exposure
Encana has actively managed regional price risk through a combination of pipeline transportation and term financial basis hedging which has resulted in significant price diversification of the company's Western Canadian natural gas production. Encana expects that less than a third of its 2018-2020 Western Canadian natural gas production will be exposed to the AECO benchmark. The remainder is expected to be physically exported to other markets or basis hedged relative to NYMEX.

The company's physical transportation portfolio includes approximately 100 million cubic feet per day (MMcf/d) to Malin and Sumas (Pacific Northwest), approximately 80 MMcf/d to Chicago and 316 MMcf/d to Dawn, Ontario, with the latter being the result of the most recent TransCanada Mainline open season (and subject to Canadian National Energy Board approval). On a delivered basis, Encana's Western Canadian natural gas will arrive at Dawn, Ontario, at significantly less cost than competing U.S. natural gas. On average, from 2018 to 2020 the company expects to sell approximately 500 MMcf/d of its physical gas in the Pacific Northwest, Chicago or Dawn.

Encana's long-term financial basis hedge programs further contribute to diversification away from the AECO market. The company has hedged about 475 MMcf/d of AECO basis for the 2018 to 2020 period at approximately NYMEX less $0.87 per thousand cubic feet (Mcf), a level strongly supportive of the company's development plans in Western Canada.

Focused on creating further upside to its five-year plan
Encana is actively working to create further upside to its five-year plan.

Within its Montney asset, the company is working to unlock additional growth opportunities in the Cutbank Ridge area beyond 2018 and evaluate further oil and condensate growth in Pipestone as well as the stacked pay potential of the Montney zone within the Duvernay.

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