Restructuring to create two senior energy companies focused on
unconventional resources: An integrated oil company and a pure-play natural
gas company
CALGARY, May 11 /PRNewswire-FirstCall/ - The Board of Directors of
EnCana Corporation (TSX, NYSE: ECA) has unanimously approved a proposal to
split EnCana into two highly focused energy companies - one a natural gas
company with an outstanding portfolio of early life, North American,
natural gas resource plays and the other a fully integrated oil company
with industry-leading in-situ oilsands properties and top-performing
refineries, as well as an underlying foundation of reliable oil and gas
resource plays. This transaction is designed to enhance long-term value for
EnCana shareholders by creating two highly sustainable, independent
entities, each with an ability to pursue and achieve greater success by
employing operational strategies best suited to its unique assets and
business plans.
The proposed corporate reorganization would be implemented through a
court-approved Plan of Arrangement. This transaction will create a
publicly-traded integrated oil company with oilsands as the growth driver.
This company, which has a working name of IntegratedOilCo (IOCo), will
focus on the development of EnCana's Canadian oilsands assets and refinery
interests in the United States, underpinned by a well-established natural
gas and oil production base in Alberta and Saskatchewan. IOCo assets, which
encompass EnCana's Integrated Oil and Canadian Plains divisions, represent
about one-third of EnCana's current production and proved reserves.
EnCana's other major operating divisions, Canadian Foothills and USA, will
form a pure-play natural gas company, aimed at growing existing
high-potential resource plays in Canada and the United States. With a
working name of GasCo, it will represent about two-thirds of EnCana's
current production and proved reserves. It is expected that GasCo will
retain the name EnCana Corporation. The permanent name of IOCo will be
determined before the transaction closes.
EnCana shareholders to receive one share in each of the two companies
Under the proposed transaction, which is expected to be completed in
early 2009, EnCana common shareholders will receive one share in each of
GasCo and IOCo in exchange for each EnCana share held. The transaction is
generally expected to be tax free to shareholders. EnCana intends that the
initial combined dividends of the two companies will be equivalent to
EnCana's current dividend of US$1.60 per share annually. Dividends will be
at the discretion of the respective boards of directors of each company.
EnCana expects to continue recommending to its Board of Directors that the
company pay a 40 cent per share quarterly dividend until the transaction is
complete.
A tradition of shareholder value creation to continue in distinct
energy
pursuits
"Since its creation in 2002, EnCana has evolved into a leading producer
of unconventional resources, achieving excellent financial and operating
performance. Over the past five years, total shareholder return has been
exceptional, providing a compound annual return of 24 percent on the TSX
and 35 percent on the NYSE," said David O'Brien, EnCana Chairman. "Going
forward, one outstanding energy company is dividing into two exciting
energy enterprises, each highly specialized, each with the objective of
being a leader in its specific business and both resolutely focused on
continuing a tradition of sustainable shareholder value creation."
EnCana running strong, very well positioned for value creation
"We are initiating this process from a position of unprecedented
strength. In the past few years, we have transformed EnCana into a leading
producer of North American unconventional natural gas and integrated
in-situ oil - a company with a unique, low-risk, sustainable growth
profile. We have assembled an outstanding portfolio of unconventional
natural gas, oil and in-situ oilsands assets. Our strong operational and
financial performance has shown that our resource play model is working
extremely well and we are ideally positioned for the future," said Randy
Eresman, EnCana's President & Chief Executive Officer.
"Our natural gas business is very strong. We have delivered consistent
production increases and cost improvements and our existing and emerging
plays hold great potential. We have become North America's largest natural
gas producer in one of the world's lowest-risk regions and largest energy
markets. Our integrated oilsands business is into its second year of our
50-50 joint venture with ConocoPhillips. This successful partnership
strategically and financially links premier in-situ oilsands assets with
industry-leading refinery assets, creating one of the industry's lowest
cost integrated oilsands developments," Eresman said.
Division into distinct businesses will focus expertise to enhance value
and capture opportunities
"It is from this strong base that we take this next step along the path
of enhancing value for our shareholders. We strongly believe that companies
need to have disciplined focus on their expertise and core strengths in
order to achieve full value from their assets, to capture opportunities and
to effectively respond to changing markets. With the creation of these two
companies, each management team will focus more directly on the critical
success factors in its respective businesses. They will be better equipped
to direct their strategies and operations towards building value by
tailoring practices and execution to fit the unique nature of their assets.
As well, with greater transparency and focus, the investment community will
be able to more easily follow and more accurately assess and value these
companies," Eresman said.
Updated EnCana guidance and supplemental transaction information posted
on website
Concurrent with this announcement, EnCana has updated its estimates of
2008 pre-transaction cash flow to a range of between $9.6 billion and $10.0
billion to primarily reflect increases in forecasted commodity prices.
Updated 2008 EnCana guidance, pro forma guidance for GasCo and IOCo and
supplemental information about the proposed transaction will be posted on
the company's website http://www.encana.com.
Benefits of the transaction
This transaction is aimed at continuing to build on current success by
offering a number of significant benefits which are expected to include:
- Two pure-play onshore North American energy companies
- a premier natural gas company that is almost exclusively focused
on natural gas exploration and development of resource plays
- a premier integrated oilsands business anchored by stable
production and cash flow from well-established oil and gas
resource plays
- Mandate to pursue tailored strategies
- provides each company with a clear mandate to pursue short and
long-term strategies best suited to its unique assets and
business plans
- Expanded growth opportunities
- improves and expands the strategic positioning and growth
opportunities of each company
- Two high-potential investments
- existing shareholders can retain ownership in both companies
- Experienced leadership
- each company to be led by experienced directors and executives
who have demonstrated success building EnCana
- Sharpened focus, greater value transparency
- greater clarity on specific strategies employed and increased
financial transparency
- Better valuation
- investors and analysts will be able to more accurately compare
and evaluate the stand-alone companies against peers,
competitors, benchmarks and performance criteria
IOCo to focus on growing integrated oilsands business
Upon completion of this transaction, it is anticipated that IOCo will
be positioned to deliver sustained growth from industry-leading oilsands
properties that contain resources sufficient to fuel significant oilsands
growth for decades ahead. IOCo will also capture the benefits of the full
value chain through EnCana's integration of two producing upstream Alberta
oilsands assets - Foster Creek and Christina Lake, and two top-performing
refineries at Wood River in Illinois and Borger in Texas. Upstream,
construction is underway to increase production capacity more than 200
percent to an estimated average of about 110,000 net barrels of oil per day
(bbls/d) by 2012. Current production is about 30,000 net bbls/d.
"I am excited to be part of this new high-growth integrated oil company
and working with the people who will continue their history of ingenuity
and success as we build even greater shareholder value from the company's
strong asset base. From the moment of its creation, we expect this company
will be an industry leader in sustainable growth - reliably pursuing
economic, environmental and socially responsive behaviour," said Brian
Ferguson, IOCo's designated President and Chief Executive Officer and
currently EnCana's Chief Financial Officer. "IOCo will be a company that
its 2,000 employees can be proud of."
"We estimate that IOCo's integrated oilsands assets are capable of
achieving double-digit growth between now and 2016. We believe that its
reservoirs are among the best in the oilsands business. Our oilsands teams
have more than a decade of innovative technical and development experience
in achieving industry-leading production and capital efficiencies. They
have set the pace in reducing environmental impact and have consistently
increased the energy efficiencies of daily production. In Saskatchewan, the
Weyburn oil field is home to the world's largest carbon sequestration
project. It has garnered global attention as a potential way to help reduce
greenhouse gas emissions, and we see a natural opportunity for transferring
its technology to our oilsands projects. In addition, our well-established
gas and oil resource plays, where we have identified an inventory of 9,500
future well locations, are positioned to deliver highly predictable and
reliable production. These are ideal characteristics for building a
financially strong, sustainable, integrated oil company that builds net
asset value per share," Ferguson said.
Large IOCo resource base
In October, 2006 EnCana announced that it had entered into an agreement
with ConocoPhillips to create an integrated oil business. At that time,
independently determined best estimates of recoverable bitumen for Foster
Creek and Christina Lake were disclosed at more than 6.5 billion barrels
and more than 2.5 billion barrels for Borealis, which is not part of the
joint venture with ConocoPhillips. These estimates have not been updated
and are not current. As a result of today's announcement, the greater focus
on the in-situ oilsands assets of IOCo and given that IOCo will have all of
its upstream operations in Western Canada, it is anticipated that EnCana
will be reviewing the need to report the in-situ resources and other assets
to be held by IOCo under the standards required by Canadian securities
regulatory authorities.
Planning for a decade of strong growth ahead
Over the next decade, IOCo's target as part of the integrated oilsands
joint venture with ConocoPhillips is to increase gross upstream bitumen
production from Foster Creek and Christina Lake to approximately 400,000
bbls/d (200,000 bbls/d net to IOCo) and downstream refining capacity to
about 510,000 bbls/d (255,000 bbls/d net to IOCo). IOCo's well-established
shallow gas resource plays in Alberta are capable of providing strong cash
flow to help grow production from its high-quality oilsands resources.
Natural gas is the source fuel for oilsands steam generation and IOCo's gas
production also serves as a natural hedge against volatile gas prices.
IOCo's assets will also include successful enhanced oil developments at
Pelican Lake in northern Alberta. Future in-situ potential opportunities
include SAGD development of the Borealis oilsands assets. During the first
quarter of 2008, IOCo's designated assets were producing about 100,000
bbls/d of oil and natural gas liquids (NGLs) and about 925 million cubic
feet per day (MMcf/d) of natural gas, while the refinery assets were
processing about 225,000 bbls of net oil per day.
"Complementing these upstream resources are two established refineries
in Illinois and Texas, operated by Conoco-Phillips, which has a wealth of
refining expertise. These industry-leading refineries allow us to capture
the full value chain, from the oil well to transportation fuel markets. The
Borger Refinery recently completed an expansion to process growing volumes
of Canadian heavy oil and the coker and refinery expansion project at the
Wood River Refinery is well defined and expected to proceed shortly. We
expect that the future expansions of the upstream and downstream segments
of our integrated oil business will be achieved at about one-half of the
capital cost of similar and recently announced projects in Alberta,"
Ferguson said.
"One of our fundamental objectives is to continue to build net asset
value per share while also returning capital to shareholders. The company
will target an annual production growth rate of 4 to 6 percent and is
expected to deliver sufficient free cash flow to pay an attractive dividend
and conduct a share buyback program," Ferguson said. Dividends will be at
the discretion of the IOCo board of directors.
GasCo to develop natural gas resource plays
Under the proposed transaction, GasCo will be a pure-play, natural gas
company focused on growing its gas resource plays across North America.
GasCo is expected to be the second largest gas producer in North America.
The unconventional gas producer is expected to deliver long-term, low-risk
growth from a strong portfolio of current and emerging resource plays in
key basins in Alberta, British Columbia, Wyoming, Colorado, Texas,
Louisiana and offshore Nova Scotia. GasCo will hold the company's portfolio
of prolific gas resource plays: CBM (coalbed methane) and Bighorn in
Alberta, Cutbank Ridge and Greater Sierra in British Columbia, Jonah in
Wyoming, Piceance in Colorado and Fort Worth and East Texas in Texas. GasCo
is well positioned in most of the lowest supply cost basins in North
America and continues to demonstrate one the lowest cost structures in the
industry. In addition to these established plays, operating teams recently
achieved some promising exploration results in a number of North American
shale plays, such as Horn River in British Columbia and the Haynesville
shale in Louisiana, plus the Mannville CBM play in central Alberta, and
these plays have the potential to add significant depth to the company's
strong portfolio of natural gas assets. GasCo will also hold EnCana's
remaining international interests and midstream assets. It will target an
annual production growth rate of 7 to 9 percent, and is expected to deliver
sufficient free cash flow to pay an attractive dividend and conduct an
active share buyback program. Dividends will be at the discretion of the
GasCo board of directors.
"We will continue to pursue increasing shareholder value through the
specialized pursuit of sustainable production growth from our strong
portfolio of unconventional natural gas assets. We will remain focused on
capital discipline generating strong free cash flow to be available to
return to shareholders through share purchases and dividends as we build a
company that acts in a conscientious, reliable manner in producing natural
gas, the cleanest burning of fossil fuels, for people's homes and
workplaces," said Eresman, GasCo's designated President and Chief Executive
Officer.
"GasCo will continue to build upon the engineering innovation and
intellectual enthusiasm that our people have demonstrated by establishing
our strong foothold in North American unconventional natural gas - built
largely over the past five years. In the years ahead, our resource play
development leaders will have many new opportunities to demonstrate their
expertise in growing our large resource base and capturing the potential of
our new and emerging plays," Eresman said.
Two large energy firms to emerge
Both of these companies will be large, Calgary-headquartered
enterprises with strong, visible growth profiles, competitive cost
structures and solid financial positions. Based on expected market values,
both companies would be among Canada's 20 largest corporations and among
the top six energy companies in Canada.
"Both companies intend to continue the tradition that created EnCana's
success, applying the principles of strong business leadership that are
focused on the objectives of enhancing the value of every share,
disciplined capital investment and cost management. They will operate in a
principled and ethical manner, pursue energy efficiency in all operations,
strive to be employers of choice and actively participate in helping to
build the communities where they operate. These companies will strive to
maintain the same corporate responsibility principles that EnCana has been
proud of," Eresman said.
Experienced leadership running each company from day one
From the first day of operations, both GasCo and IOCo will benefit from
strong leadership - experienced energy industry directors and executives
who have demonstrated success building EnCana. David O'Brien is designated
Chairman of the Board of Directors of GasCo and Randy Eresman is a
designated director of IOCo.
The designated executives of the two companies are:
IOCo:
- Brian Ferguson, EnCana's Chief Financial Officer, is designated
President and Chief Executive Officer
- Ivor Ruste, EnCana's Chief Risk Officer, is designated Chief
Financial Officer
- John Brannan, President, Integrated Oil, will continue to lead this
division
- Don Swystun, President, Canadian Plains, will continue to lead this
division
GasCo:
- Randy Eresman is designated President & Chief Executive Officer
- Sherri Brillon, EnCana's Executive Vice-President, Strategic
Planning & Portfolio Management, is designated Chief Financial
Officer
- Mike Graham, President, Canadian Foothills, will continue to lead
this division
- Jeff Wojahn, President, USA, will continue to lead this division
EnCana's other corporate officers, Sheila McIntosh, Executive
Vice-President, Corporate Communications; Bill Oliver, Executive
Vice-President Corporate Development and President, Midstream & Marketing;
Gerry Protti, Executive Vice-President, Corporate Relations and President,
Offshore & International Division and Hayward Walls, Executive
Vice-President, Corporate Services, will also have executive roles in one
of the two companies.
IMPORTANT NOTE: EnCana reports in U.S. dollars unless otherwise noted
and follows U.S. protocols, which report production and reserves on an
after-royalties basis. The company's financial statements are prepared in
accordance with Canadian generally accepted accounting principles (GAAP).
-------------------------------------------------------------------------
Pro forma IOCo and GasCo information(1)
-------------------------------------------------------------------------
IOCo GasCo
-------------------------------------------------------------------------
North American production
(after royalties, 2008F)
Natural gas (MMcf/d) 860 2,920
Oil and NGLs (Mbbls/d) 102 30
-------------------------------------------------------------------------
Total (MMcfe/d) 1,470 3,100
-------------------------------------------------------------------------
Total (MBOE/d) 245 515
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Proved reserves (year-end 2007)
Natural gas (Bcf) 2,020 11,280
Oil and NGLs (MMbbls) 827 100
-------------------------------------------------------------------------
Total (Bcfe) 6,980 11,880
-------------------------------------------------------------------------
Total (MMBOE) 1,165 1,980
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Land (year-end 2007, millions net acres)
Developed 4.5 5.1
Undeveloped 3.9 11.3
-------------------------------------------------------------------------
Total(2) 8.4 16.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating cash flow(3)
(2008F, US$ billions) 4.2 - 4.6 7.9 - 8.2
Upstream operating costs
(2008F, US$/Mcfe) 1.45 0.90
Number of employees (estimated) approx. 2,000 approx. 3,500
-------------------------------------------------------------------------
Divisions Integrated Oil Canadian Foothills
Canadian Plains USA
-------------------------------------------------------------------------
Resource Plays Foster Creek CBM
Christina Lake Bighorn
Borealis Greater Sierra
Shallow Gas Cutbank Ridge
Weyburn Jonah
Pelican Lake Piceance
East Texas
Fort Worth
-------------------------------------------------------------------------
Refineries - Wood River - 153,000
net capacity (bbls/d) Borger - 73,000
-------------------------------------------------------------------------
Refining total -
net capacity (bbls/d) 226,000
-------------------------------------------------------------------------
(1) This table is based on an update of EnCana's guidance, which has been
posted on the company's website http://www.encana.com, and has been
apportioned to provide indicative figures for GasCo and IOCo. Final
asset allocations for GasCo and IOCo may affect the above. Relevant
assumptions and qualifications are contained in the note regarding
Non-GAAP measures and the legal advisories starting on page 9 of this
news release.
(2) Includes land onshore North America only
(3) Operating cash flow is defined as revenue, net of royalties less
production and mineral taxes, transportation and selling costs,
operating expenses and purchased product.
Financial Strategy
At inception, IOCo and GasCo intend to initially pursue the same
financial strategy and use the same credit metrics that EnCana has
employed. A target net debt-to-capitalization ratio of between 30 and 40
percent and a net debt to adjusted EBITDA of 1.0 to 2.0 times has been
established for each entity. Management intends to capitalize each entity
with a financing strategy that aligns with its business model and growth
plans. Both companies will be targeting to maintain strong investment grade
credit ratings. EnCana has been in discussions with the credit ratings
agencies prior to this announcement.
At March 31, 2008 EnCana had long-term debt outstanding of about $10.1
billion, including approximately $8.2 billion in bonds and medium term
notes. EnCana is working with its financial advisors to examine
alternatives to provide an orderly and cost effective transition of debt
between the entities. EnCana has suspended purchases under its Normal
Course Issuer Bid program and intends to use free cash flow to reduce net
debt levels prior to year-end. EnCana expects to have a net
debt-to-capitalization ratio at the end of 2008 of approximately 30
percent. EnCana intends that the initial combined dividends of the two
companies will be equivalent to EnCana's current dividend of US$1.60 per
share annually. Dividends will be at the discretion of the respective
boards of directors of each company.
IOCo intends to arrange committed bank credit facilities to facilitate
the closing of the transaction and assist with the orderly transition of
debt between entities. These facilities are expected to be partially repaid
from the subsequent issuance of long-term debt by IOCo.
Dividing the company along operational lines means business as usual
This transaction is expected to have minimal impact on EnCana's
employees, operations, suppliers, business partners and stakeholders.
EnCana completed an internal reorganization into operating divisions in
early 2007 to increase focus on specific aspects of each core asset, with
many corporate functions embedded directly into each division. A high
priority will be to place employees in EnCana's corporate groups in
appropriate positions in the two companies. Under the proposed transaction,
EnCana's Integrated Oil Division and Canadian Plains Division will become
IOCo. GasCo will encompass the Canadian Foothills Division, the USA
Division, the Offshore & International Division and the midstream assets.
Each company will maintain its own energy marketing operations. During the
reorganization, EnCana will conduct its business as usual honouring all
business relationships, commitments and obligations, including its
obligations with respect to The BOW office project, currently under
construction, as each company expects to occupy a portion of the building.
EnCana will provide further information for stakeholders as future
developments warrant.
"We recognize change may cause uncertainty for employees and
contractors, as well as our business partners, suppliers and our
stakeholders in the communities where we operate. Through this transition
period, we will work diligently to make these changes as seamless as
possible. We are not contemplating any layoffs. In fact, with the strong
growth potential of these two companies, we expect continued employment
growth ahead in both companies. In past periods of organizational change,
our staff has displayed strength and dedication while creating thriving new
organizations and we are confident GasCo and IOCo will continue that
practice," Eresman said.
Reorganization to be completed through Plan of Arrangement
The proposed reorganization will be carried out pursuant to a
court-approved Plan of Arrangement under the Canada Business Corporations
Act and is subject to receipt of favourable rulings from Canadian and U.S.
tax authorities, shareholder approval, approval of the Court of Queen's
Bench of Alberta, receipt of appropriate regulatory approvals and
satisfaction of other customary closing conditions. The restructuring of
the Canadian businesses will cause an acceleration of future taxes that
will be recognized in 2008. The impact on 2008 cash taxes is expected to be
an increase of approximately $1 billion. This is offset by a U.S. tax
benefit which will accrue to GasCo in 2010 and subsequent years as a result
of returning to independent producer status. The expected net present value
of the tax cost of the restructuring is approximately $250 million.
A proxy circular setting out the details of the Plan of Arrangement is
expected to be mailed to EnCana shareholders in the fall of 2008. EnCana
expects, subject to the satisfaction of conditions and receipt of
approvals, to complete the transaction in early 2009.
Costs of the transaction
Expenses of the transaction are expected to be less than $300 million
after-tax, in the aggregate, and will be recorded as incurred and disclosed
in each quarter for the appropriate company.
Financial and Legal Advisors
Merrill Lynch and RBC Capital Markets are acting as financial advisors
to EnCana. CIBC World Markets is acting as financial advisor to the Board
of Directors of EnCana, and has provided a verbal opinion that the
consideration to be received pursuant to the transaction is fair, from a
financial point of view, to EnCana common shareholders. Scotia Waterous
Inc. and Lehman Brothers Inc. have been retained as strategic advisors by
EnCana. Bennett Jones LLP, Felesky Flynn LLP, Paul, Weiss, Rifkind, Wharton
& Garrison LLP and Dewey & LeBoeuf LLP are acting as legal advisors to
EnCana. McCarthy Tetrault is acting as legal advisor to the Board of
Directors of EnCana.
-------------------------------------------------------------------------
NEWS MEDIA BRIEFING TODAY
1 p.m. Mountain Time (3:00 p.m. Eastern Time)
EnCana Corporation will host a news media briefing today, Sunday May 11,
2008, to discuss today's announcement. The media briefing is at 1 p.m. MT
at Calgary's Telus Convention Centre, in the McLeod E1 room on the lower
level of the centre's south building, 120-9th Avenue S.E., Calgary,
Alberta
News media representatives can also participate by dialing
(800) 733-7571 (toll-free in North America) or (416) 644-3414
approximately 10 minutes prior to the start of the briefing. An archived
recording of the briefing will be available from approximately 3:30 p.m.
MT on May 11, 2008 until midnight May 18, 2008 by dialling (877) 289-8525
or (416) 640-1917 and entering access code 21271661.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONFERENCE CALL TODAY
2:30 p.m. Mountain Time (4:30 p.m. Eastern Time)
EnCana will hold a conference call and webcast for the investment
community today, Sunday, May 11, 2008, beginning at 2:30 p.m. MT
(4:30 p.m. ET). To participate, please dial (800) 930-1353 (toll-free in
North America) or (913) 312-1487 approximately 10 minutes prior to the
conference call and quote confirmation code 6177234. An archived
recording of the call will be available from approximately 6:30 p.m. MT
on May 11, 2008 until 6:30 p.m. on May 16, 2008 by dialing (888) 203-1112
or (719) 457-0820 and entering access code 6177234. Presentation slides
to accompany this call are posted on EnCana's website.
A live audio webcast of the conference call will also be available via
EnCana's website, http://www.encana.com, under Investor Relations. The webcast
will be archived for approximately 90 days.
-------------------------------------------------------------------------
NOTE: Non-GAAP measures
This news release contains references to cash flow, free cash flow, net
debt, capitalization and adjusted earnings before interest, tax,
depreciation and amortization (EBITDA).
- Cash flow is a non-GAAP measure defined as cash from operating
activities excluding net change in other assets and liabilities, net
change in non-cash working capital from continuing operations and net
change in non-cash working capital from discontinued operations.
- Free cash flow is a non-GAAP measure that EnCana defines as cash flow
in excess of capital investment, excluding net acquisitions and
divestitures, and is used to determine the funds available for other
investing and/or financing activities.
- Net debt is a non-GAAP measure defined as long-term debt plus current
liabilities less current assets. Capitalization is a non-GAAP measure
defined as net debt plus shareholders' equity. Net debt to
capitalization and net debt to adjusted EBITDA are two ratios
management uses to steward the company's overall debt position as
measures of the company's overall financial strength.
- Adjusted EBITDA is a non-GAAP measure defined as net earnings from
continuing operations before gain on divestitures, income taxes,
foreign exchange gains or losses, interest net, accretion of asset
retirement obligation, and depreciation, depletion and amortization.
These measures have been described and presented in this news release
in order to provide shareholders and potential investors with additional
information regarding EnCana's liquidity and its ability to generate funds
to finance its operations.
EnCana Corporation
With an enterprise value of approximately $75 billion, EnCana is a
leading North American unconventional natural gas and integrated oil
company. By partnering with employees, community organizations and other
businesses, EnCana contributes to the strength and sustainability of the
communities where it operates. EnCana common shares trade on the Toronto
and New York stock exchanges under the symbol ECA.
ADVISORY REGARDING RESERVES DATA AND OTHER OIL AND GAS INFORMATION -
EnCana's disclosure of reserves data and other oil and gas information is
made in reliance on an exemption granted to EnCana by Canadian securities
regulatory authorities, which permits it to provide such disclosure in
accordance with U.S. disclosure requirements. The information provided by
EnCana may differ from the corresponding information prepared in accordance
with Canadian disclosure standards under National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities (NI 51-101). EnCana's
reserves quantities represent net proved reserves calculated using the
standards contained in Regulation S-X of the U.S. Securities and Exchange
Commission. Further information about the differences between the U.S.
requirements and the NI 51-101 requirements is set forth under the heading
"Note Regarding Reserves Data and Other Oil and Gas Information" on page 2
in EnCana's Annual Information Form, which is incorporated herein by
reference.
In this news release, certain crude oil and NGLs volumes have been
converted to cubic feet equivalent (cfe) on the basis of one barrel (bbl)
to six thousand cubic feet (Mcf). Also, certain natural gas volumes have
been converted to barrels of oil equivalent (BOE) on the same basis. BOE
and cfe may be misleading, particularly if used in isolation. A conversion
ratio of one bbl to six Mcf is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent value
equivalency at the well head.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests of
providing EnCana shareholders and potential investors with information
regarding EnCana and the proposed transaction described above in this news
release, including management's assessment of future plans and operations
relating to GasCo and IOCo, EnCana has included in this news release
certain statements and information that are forward-looking statements or
information within the meaning of applicable securities legislation, and
which are collectively referred to herein as "forward-looking statements."
The forward-looking statements in this news release include, but are not
limited to, statements and tables with respect to: the proposed transaction
and expected future attributes of each of GasCo and IOCo following such
transaction; the anticipated benefits of the transaction; future production
growth; projections that IOCo will be an industry leader in sustainable
growth; estimates of IOCo's potential compound annual growth rate through
2012; estimates of future shallow gas drilling locations and the
predictability of production and cash flow therefrom; projections of future
refinery expansions and capacities (including the anticipated capital costs
thereof and comparisons of such capital costs to the projected capital
costs of Alberta based projects); the future development potential for the
Borealis asset; GasCo's expected ranking as a gas producer (including
potential future production growth rates, free cash flow, dividends, and
normal course issuer bid share purchases); estimates of EnCana's 2008 cash
flow; the expected size and ranking of GasCo and IOCo as compared to other
companies in Canada and industry peers; the expected pro-forma
characteristics of GasCo and IOCo (including estimated 2008 natural gas,
oil and NGLs production, proved reserves, developed and undeveloped land
holdings, operating cash flow, operating costs, employees, divisions,
resource plays, refineries and refining capacities); the expected impact of
the transaction on EnCana's employees, operations, suppliers, business
partners and stakeholders; statements respecting future pre-transaction and
post-transaction financial metrics (including net debt to capitalization);
estimated capitalization and adequacy thereof for each of GasCo and IOCo;
expected credit ratings for each of GasCo and IOCo; the financing plans and
initiatives that may be undertaken by IOCo; the projected tax consequences
of the transactions, including the acceleration of future taxes and
increase in cash taxes in 2008, and the tax impact on shareholders; the
impact of the transactions on employment and employment growth; the
expected date for mailing a proxy circular and completing the transactions;
and the estimated costs of the transaction.
Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the future circumstances,
outcomes or results anticipated in or implied by such forward-looking
statements will occur or that plans, intentions or expectations upon which
the forward-looking statements are based will occur. By their nature,
forward-looking statements involve numerous assumptions, known and unknown
risks and uncertainties, both general and specific, that contribute to the
possibility that circumstances, events or outcomes anticipated or implied
by forward-looking statements will not occur, which may cause the actual
performance and financial results in future periods to differ materially
from the performance or results anticipated or implied by any such
forward-looking statements. These risks and uncertainties include, among
other things: risks associated with the ability to obtain any necessary
approvals, waivers, consents, court orders and other requirements necessary
or desirable to permit or facilitate the proposed transaction (including,
regulatory and shareholder approvals); the risk that any applicable
conditions of the proposed transaction may not be satisfied; volatility of
and assumptions regarding oil and gas prices; assumptions contained in or
relevant to the company's current corporate guidance; fluctuations in
currency and interest rates; product supply and demand; market competition;
risks inherent in marketing operations (including credit risks);
imprecision of reserves estimates and estimates of recoverable quantities
of oil, bitumen, natural gas and liquids from resource plays and other
sources not currently classified as proved reserves; the ability to
successfully manage and operate the integrated North American oilsands
business with ConocoPhillips; refining and marketing margins; potential
disruption or unexpected technical difficulties in developing new products
and manufacturing processes; potential failure of new products to achieve
acceptance in the market; unexpected cost increases or technical
difficulties in constructing or modifying manufacturing or refining
facilities; unexpected difficulties in manufacturing, transporting or
refining synthetic crude oil; risks associated with technology and the
application thereof to the business of GasCo and IOCo; the ability to
replace and expand oil and gas reserves; the ability to generate sufficient
cash flow from operations to meet current and future obligations; the
ability to access external sources of debt and equity capital; the timing
and the costs of well and pipeline construction; the ability to secure
adequate product transportation; changes in royalty, tax, environmental and
other laws or regulations or the interpretations of such laws or
regulations; applicable political and economic conditions; the risk of war,
hostilities, civil insurrection, political instability and terrorist
threats; risks associated with existing and potential future lawsuits and
regulatory actions; and other risks and uncertainties described from time
to time in the reports and filings made with securities regulatory
authorities by EnCana. Although EnCana believes that the expectations
represented by such forward-looking statements are reasonable, there can be
no assurance that such expectations will prove to be correct. Readers are
cautioned that the foregoing list of important factors is not exhaustive.
Forward-looking information respecting anticipated 2008 cash flow,
operating cash flow and pre-tax cash flow for EnCana, and for GasCo and
IOCo pro-forma the proposed reorganization transaction, is based upon
achieving average production of oil and gas for 2008 as set out above,
average commodity prices for 2008 based on actual results for the first
quarter of 2008, and for the balance of 2008, a WTI price of $100/bbl for
oil, a NYMEX price of $10.25/Mcf for natural gas, an average U.S./Canadian
dollar foreign exchange rate of $0.97, an average Chicago crack spread for
2008 of $12.00/bbl for refining margins, and an average number of
outstanding shares for EnCana of approximately 750 million. Assumptions
relating to forward looking statements generally include EnCana's current
expectations and projections made by the company in light of, and generally
consistent with, its historical experience and its perception of historical
trends, as well as expectations regarding rates of advancement and
innovation, generally consistent with and informed by its past experience,
all of which are subject to the risk factors identified elsewhere in this
document.
Furthermore, the forward-looking statements contained in this news
release are made as of the date of this news release, and, except as
required by law, EnCana does not undertake any obligation to update
publicly or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise. The
forward-looking statements contained in this news release are expressly
qualified by this cautionary statement.
SOURCE EnCana Corporation
 back to top
CONTACT:
Further information on EnCana Corporation is
available on the company's website, http://www.encana.com, or by
contacting: EnCana Corporate Communications, Investor contact:
Paul Gagne, Vice-President, Investor Relations, (403) 645-4737;
Ryder McRitchie, Manager, Investor Relations, (403) 645-2007;
Susan Grey, Manager, Investor Relations, (403) 645-4751; Media
Contact: Alan Boras, Manager, Media Relations, (403) 645-4747
|
