natural-gas-fundamentals.pdf

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The New Encana:the clear energy choice

Renee Zemljak | Executive Vice-President, Midstream, Marketing & Fundamentals

Natural Gas Fundamentals

Calgary | March 16, 2010New York | March 18, 2010

www.encana.com

What Has Happened?• Shale-gas mega plays are transforming global energy markets

• The full-cycle cost of supply continues to drop while the resource potential continues to grow

• High cost plays will be displaced

• New infrastructure additions are allowing low-cost supplies to grow

The Outcome:• Producers with high cost portfolios are likely to be squeezed out

and those companies that remain will be focused on margin

• North American natural gas is abundant, clean, reliable, and affordable

• Natural gas is well-positioned to serve a larger share of global energy demand

North American Natural Gas Resource PotentialA New Era

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www.encana.com

0

20

40

60

80

100

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020Other Tight Gas Sands Shale Gas Mega Plays

Actual Projection

Supply can grow substantially while maintaining affordable costs for consumers

Bcf/d

Productive Capacity in the U.S. and CanadaSupply Potential at $6.50 NYMEX

Source: Encana, IHS Energy

Shale gas share grows from 16% in 2009 to 50% by 2020Shale gas share grows from 16% in 2009 to 50% by 2020

www.encana.com

Regional Market Highlights

• Massive infrastructure additions have caused price spreads to collapse across the North American continent

• Encana’s portfolio has benefited greatly from the levelizing of price spreads

• The Rockies Region is not expected to become export-constrained over the next few years

• Western Canada prices are expected to remain well-connected to neighboring markets

• The Gulf Region is very well-piped and is expected to pose relatively little flow and price risk

• The Northeast Region should still provide premium pricing, even with significant growth from the Marcellus Shale play

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www.encana.comSource: Encana, FERC, EIANote: Includes projects built between 2007-2009 and committed projects to be built by 2012.

The Connected GridNew Infrastructure Has Changed the North American Gas Market

Bison: 0.48 Bcf/d

Intra-Gulf capacity additions: ~30 Bcf/d

West Storage Additions: 54 Bcf Producing Region Storage

Additions: 523 Bcf

Consuming Region Storage Additions: 172 Bcf

Ruby: 1.5 Bcf/d

REX: 1.8 Bcf/d

Supply Aggregation Points

Shale Supply RegionsPipeline Infrastructure

Shale Core Bubble

Marcellus Shale

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Encana’s Regional Price ExposureHistorical & Forward Relationships to NYMEX*

Encana’s portfolio benefits from tightening West-to-East spreads

Source: Encana, NYMEX Clearport, Platts Gas Daily*Historical prices: Average Platts Gas Daily prices from 2004-2008.*Forward prices as of market close on March 1, 2010. Average prices from 2010-2012.

MidCon

Rockies

SoCal

Sumas

AECO

San Juan

Gulf

HSCWaha

Chicago Appalachia

Dracut

86%

94%90%

99%

Malin91%

101%

90%

101%

85%

96%

111%

111%

105%

103%

98%

102%76%

95%

87%

96%

89%

98% 95%

99%

96%

98%Old Basis World (2004‐2008)

New Basis World (2010+)

Average Price

(Percent of NYMEX)

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Unhedged40.9%

Fixed Price Swap $6.01

59.1%

1,368 BBtu/d

Encana Natural Gas Production

April-December 2010F Pro Forma Net Revenue Interest

3,342 BBtu/d

1,974 BBtu/d

2010F Natural Gas Price Exposure As of March 9, 2010

Note: April-December 2010 NYMEX Price: $4.88 on March 9, 2010.Encana has approximately 1,000 BBtu/d hedged in each of calendar years 2011 and 2012 at an average price of about $6.50/Mcf.

www.encana.com

Concluding Remarks

• Encana has long relied on industry-leading fundamentals analysis to enhance our netbacks and shareholder returns

• Encana’s size, geographical diversity, and upstream institutional knowledge provide a competitive advantage in understanding market fundamentals

• We study market fundamentals to mitigate market price risk and optimize our upstream portfolio of assets

• Our dedication to studying market fundamentals and approach to taking action has resulted in:• Making key infrastructure investments that have provided

significant uplift to Encana’s upstream portfolio• Realized hedging gains (NYMEX and basis) of over $6 billion*

*Before tax natural gas hedge gains realized since 2002.

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The New Encana:the clear energy choice

Supplemental

www.encana.com

Rockies Region

Source: Encana *Assumes the Rockies rig count remains at the current level (~115 rigs). Note that this is not Encana’s outlook – it is only for reference purposes.

The Rockies Region should not be export-constrained over the next few years

0

2

4

6

8

10

12

14

2008 2009 2010 2011 2012 2013 2014 2015

Available Export CapacitySupply*Demand + Export Capacity

Bcf/d

BisonRuby

supply is currently declining

constrained period

there is plenty of available export capacity

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WCSB Export Capacity

Western Canada TOTAL

Available Capacity = 4.3Exports = 10.1Export Capacity = 14.4

Western Canada

Western Canadian supply is declining and plenty of export capacity is available

Source: Encana, Bentek*All values are in Bcf/d and are 2009 averages.

Export Capacity = 6.5

Exports = 4.3

Available Capacity = 2.2

TransCanada Mainline

Export Capacity = 1.6

Exports = 1.6

Available Capacity = 0

Alliance

Export Capacity = 2.2

Exports = 1.4

Available Capacity = 0.8

McNeill

Export Capacity = 2.8

Exports = 2.0

Available Capacity = 0.8

KingsgateExport Capacity = 1.3

Exports = 0.8

Available Capacity = 0.5

Sumas

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Canad

ian Im

ports

Northeast Region

Source: Encana, Platts POWERmap Note: Values in table are averages from 2006-2009.

ME

MA

ON

MI

PA

NY

RI

MD

WV

VAKY

NHVT

CT

NJ

DE

OH

REX

Easter

n Gulf S

upply

Canadian Imports

Canadian Imports

LNG

LNG

Cent

ral G

ulf S

uppl

y

Midwest Supply

Marcellus fairway

The Northeast Region should still provide premium pricing

Even with significant Marcellus growth, the Northeast Region will need to rely heavily on imports to

serve its large demand

Even with significant Marcellus growth, the Northeast Region will need to rely heavily on imports to

serve its large demand

5.6Gulf

10.5Imports

Volume (Bcf/d)Variable

2.3Canada

12.2Demand

0.8

1.8

1.7

LNG

REX & Midwest

Local Supply

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Gulf Region

Source: Encana, Platts POWERmap *Approximate.

The Gulf Region is very well-piped, and thus, posesrelatively little flow and price risk

Henry HubHoustonShip Channel

Carthage Hub

Woodford

Fayetteville

Haynesville

Barnett 6 Bcf/d

9 Bc

f/d

7 Bc

f/d

There is adequate takeaway

capacity from Haynesville

and Perryville

There is adequate takeaway

capacity from Haynesville

and Perryville

Key Pricing PointX Bcf/d Capacity At Year End 2011*

SHALE CORE

SHALE CORE

SHAL

E CO

RE

Bossier

Perryville

15 Bcf/d