Encana Annual Report Summary
SUCCESS OBVIOUS BELONGS TO THOSE TO BELONGS BEFORE IT BECOMES BEFORE WHO SEE THE FUTUREWHO SEE
ENCANA CORPORATION annual report 2008 WHY OWN ENCANA?
We are a leading North American unconventional natural gas and integrated oil company headquartered in Calgary, Alberta. More than 80 percent of our production is clean burning natural gas. We are also a technical and cost leader in the recovery of oil through steam-assisted gravity drainage (SAGD). One hundred percent of our oil production is fully integrated with our two refineries in the United States.
EnCana represents a unique investment opportunity built upon predictable, low-risk, low-cost production growth from resource plays. Our value-driven and innovative business strategy is underpinned by our high-quality assets and reinforced by our strong financial position, which is guided by prudent risk management practices. This approach provides us with the flexibility to adapt to changing circumstances in these uncertain times. Natural gas and oil resource plays are our strategic focus. With nine key natural gas and four key oil resource plays in Canada and the United States we are able to invest for the long term and apply continuous improvements to all areas of our business.
CONTENTS
MESSAGES 2 CEO 6 CFO 17 Chairman
8 ENCANA SEES POSSIBILITIES BEFORE THEY BECOME OBVIOUS 10 Seeing the possibilities 11 Acting on the possibilities 13 2008 execution excellence
18 FINANCIAL AND OPERATING HIGHLIGHTS 19 MANAGEMENT’S DISCUSSION AND ANALYSIS 67 ADVISORY 71 FINANCIAL STATEMENTS ENCANA CORPORATION ANNUAL REPORT 2008 1
FOCUSED ON CREATING SUSTAINABLE VAST LAND POSITION VALUE FOR SHAREHOLDERS
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2008 will be remembered as a financial and economic rollercoaster. Oil prices shot from $100 per barrel to record highs above $145 then fell below $35. Natural gas prices climbed above $13 by mid-year before sliding well below $6 per thousand cubic feet. The stock market tumbled by one-third. Companies everywhere faced unforeseen challenges. Rarely has so much changed so quickly. Through the volatility of 2008, EnCana achieved exceptional operational and financial performance, meeting or exceeding targets for production growth, cash flow and capital spending. We continued to achieve sustainable value creation in the development of unconventional natural gas and oil resources in North America. And of vital importance today, we are very well positioned to withstand the financial and economic challenges in 2009 and beyond.
NATURAL GAS GROWTH AVERAGES 8%
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SHALE GAS EMERGES
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Randy Eresman % 1SFTJEFOU$IJFG&YFDVUJWF0GmDFS .BSDI 10 EnCana is ranked in the top 10% of companies on the Dow Jones Sustainability Index. 6 ENCANA CORPORATION ANNUAL REPORT 2008 CFO’S Q&A
Maintaining financial strength; Managing risk in a volatile environment
HOW IS ENCANA POSITIONED TO HANDLE THE ECONOMIC UNCERTAINTY?
EnCana is facing the current economic climate from a very solid financial position. We have been building our North American portfolio of low-cost, low-risk, predictable assets, fine-tuning our approach to resource development and establishing strength and flexibility in our balance sheet for years. That discipline is paying off now more than ever. We have deliberately chosen a more measured approach to our 2009 capital program with a continued emphasis on generating free cash flow. With our disciplined approach to capital spending and a strong hedging program to support our cash flow requirements, we have the flexibility in both our development program and balance sheet to help us deal with the turbulent conditions ahead.
At EnCana we are confident that we have prepared ourselves to emerge from this environment operationally strong, with the integrity of our balance sheet intact and we expect to be well positioned to respond quickly when the business environment improves. AS CFO, WHAT METRICS DO YOU FOCUS ON TO MANAGE ENCANA’S FINANCIAL HEALTH?
We use several metrics to test the resiliency of our balance sheet. They include debt to capitalization, which measures the percentage of total invested capital funded by debt. We target this metric to be in the range of 30 to 40 percent. At the end of 2008, we achieved a lower debt leveraged result with a ratio of 28 percent. We look at debt to adjusted EBITDA ratio as a measure to indicate, on an annualized basis, how long it would take if we applied our most recent year’s EBITDA to repay our current level of debt. Our debt to adjusted EBITDA ratio at year end was 0.7 years. Lastly, we target our expected after-tax cash flow to exceed our forecast capital investment, which we refer to as free cash flow. Generating free cash flow improves financial liquidity.
HOW DOES ENCANA FUND ITS CAPITAL PROGRAM IN THIS VOLATILE ENVIRONMENT?
One of EnCana’s business objectives is to have a capital investment program that is self-funding using cash flow from existing operations. Between 2002 and 2008, EnCana has been able to grow its cash flow per share at a compound annual growth rate of approximately 29 percent. Cash flow has been driven largely by our growing production base with a low per unit cost structure and, until recently, strong commodity pricing. Commodity prices are always a risk. ENCANA CORPORATION ANNUAL REPORT 2008 7
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IS ENCANA CONSIDERING LOWERING ITS DIVIDEND IN THIS ENVIRONMENT?
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GIVEN TIGHT DEBT MARKETS DOES ENCANA HAVE ANY DEBT MATURING IN THE NEAR FUTURE?
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Brian C. Ferguson &YFDVUJWF7JDF1SFTJEFOU $IJFG'JOBODJBM0GmDFS 8 ENCANA CORPORATION ANNUAL REPORT 2008 ENCANA SEES POSSIBILITIES BEFORE THEY BECOME OBVIOUS
We recognized several years ago that conventional production in North America was in steady decline, and that our future relied on our ability to unlock vast unconventional reservoirs on this continent, home to some of the largest known accumulations of natural gas and oil in the world. In 2004, we determined that North America would become the focus of our growth.
"TPUIFSTDPOUJOVFEUPFYQBOEHMPCBMMZ XFXFSFTFMMJOHPVS “You can pin that whole concept of resource JOUFSOBUJPOBMBTTFUTBOEFYBNJOJOHUIFSFTPVSDFQPUFOUJBMPGFWFSZ plays on Randy Eresman specifically.” NBKPSCBTJOPOUIFDPOUJOFOU8FJODSFBTFEPVSBMSFBEZFYUFOTJWF o$ISJT5IFBM 5SJTUPOF$BQJUBM IZESPDBSCPOSJDIMBOECBTFJO/PSUI"NFSJDB DPOmEFOUJOPVS Report on BusinessNBHB[JOF /PWFNCFS BCJMJUZUPBEWBODFUIFUFDIOPMPHZSFRVJSFEUPVOMPDLUIFWBMVF
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NJMMJPOIPNFTGPSPOFZFBS 5IFIVHFQPUFOUJBMPGVODPOWFOUJPOBMSFTFSWPJSTJTOPXXJEFMZ 1.4 VOEFSTUPPE/BUVSBMHBTBOEPJMSFTPVSDFQMBZTBSFFYQFDUFE trillion cubic feet UPCFUIFNPTUTJHOJmDBOUTPVSDFPG/PSUI"NFSJDBOQSPEVDUJPO natural gas we produced in 2008 – enough HSPXUIGPSUIFJOEVTUSZ to heat almost 11 million homes for one year. GREATER SIERRA 220 MMcf/d
OUR KEY RESOURCE PLAYS PELICAN LAKE 22 Mbbls/d SPAN OUR VAST NORTH CHRISTINA LAKE 4 Mbbls/d AMERICAN LAND HOLDINGS CUTBANK RIDGE 296 MMcf/d FOSTER CREEK 26 Mbbls/d BIGHORN 167 MMcf/d EnCana coined the term “resource
CBM play.” The term is now widely used by 304 MMcf/d industry to describe unconventional
SHALLOW GAS natural gas and oil development. 700 MMcf/d
WEYBURN 14 Mbbls/d
JONAH 603 MMcf/d
PICEANCE 385 MMcf/d WOOD RIVER REFINERY net acres
BORGER EnCana’s vast North American land position, which is about REFINERY the size of 11.5 million Canadian football fields.
FORT WORTH 142 MMcf/d
EAST TEXAS 334 MMcf/d ENCANA KEY RESOURCE PLAYS 2008 AVERAGE DAILY PRODUCTION
NATURAL GAS OIL 10 ENCANA CORPORATION ANNUAL REPORT 2008 OUR CULTURE IS ONE THAT UNLOCKS POTENTIAL – BOTH BELOW THE GROUND, AND FROM WITHIN OUR PEOPLE
Our people are critical to our success. Since this industry is one of the most sophisticated and technology-intensive in the world, EnCana has built a high-performing workforce that excels in this environment.
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DPNQBOZUPHSFBUSFTVMUT
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XFSFBCMFUPEFDSFBTFDPTUT JODSFBTFQSPEVDUJPO
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DBTFT BDSPTTBMMPVSPQFSBUJPOT ENCANA CORPORATION ANNUAL REPORT 2008 11
0VSJOOPWBUJWFUFBNTBCJMJUZ UPEFWFMPQ UFTUBOEJNQMFNFOU UFDIOPMPHJFTJTLFZUPVOMPDLJOH UIFWBMVFGSPNPVSSFTPVSDFQMBZT
NATURAL GAS EVOLVING TECHNOLOGIES
"TBSFTVMUPGTIBSJOHLOPXMFEHFCFUXFFOPVSUFBNTJO/PSUI"NFSJDBXFIBWFJNQMFNFOUFEPS JO NBOZDBTFT FWPMWFEBOVNCFSPGUFDIOPMPHJFT*OPVSOBUVSBMHBTPQFSBUJPOT XFWFTVCTUBOUJBMMZ SFEVDFEUIFOVNCFSPGESJMMJOHMPDBUJPOTBOEUIFTVSGBDFBSFBPGPVSPQFSBUJPOTCZVTJOHIPSJ[POUBM XFMMBEWBODFNFOUTUPFNQMPZMPOHFSSFBDIJOHXFMMT5IJTBMMPXTGPSBOJODSFBTFEOVNCFSPG GSBDUVSFTUJNVMBUJPOT GSBDT BMPOHUIFIPSJ[POUBMMFHPGUIFXFMM SFTVMUJOHJOUJNFBOEDPTUTBWJOHT "EEJUJPOBMMZ XFWFJODSFBTFEQSPEVDUJPOGSPNXFMMTCZDIBOHJOHUIFGSBDJOHnVJE BOESFEVDFE nBSJOHUISPVHIUIFVTFPGQPSUBCMFnPXCBDLUFTUVOJUT*O XFCFHBOVTJOHJOGSBSFEDBNFSBT BDSPTTPVSOBUVSBMHBTPQFSBUJPOTUPEFUFDUMFBLTUIBUBSFUPPTNBMMUPCFTFFOCZUIFIVNBOFZF PSTFOTFECZHBTEFUFDUJPOJOTUSVNFOUBUJPO5IJTIBTJODSFBTFEUIFTBGFUZPGPVSPQFSBUJPOTBOE annual savings in fuel costs per rig from converting diesel- IFMQFEFMJNJOBUFXBTUFBOEJOFGmDJFODZ powered rigs to natural gas.
INDUSTRY PARTNER GAINING EXPOSURE TO FULL VALUE CHAIN
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FIT-FOR-PURPOSE RIGS The driller’s control cabin pictured here INCREASING SAFETY is part of an automated rig AND EFFICIENCY built specifically for EnCana. 0WFSUIFQBTUUXPZFBST XFIBWFXPSLFEXJUIESJMMJOHDPNQBOJFT JO/PSUI"NFSJDBUPDVTUPNJ[FSJHTUPNFFUPVSTQFDJmDBOEWBSJFE QSPKFDUOFFETXJUITBGFUZ FOWJSPONFOUBMJNQBDUBOEFGmDJFODZBT GPSFNPTUQSJPSJUJFT5PEBUF XFIBWFmUGPSQVSQPTFSJHTJOVTF BDSPTTPVSPQFSBUJPOT 12 ENCANA CORPORATION ANNUAL REPORT 2008
SAGD TECHNOLOGY LEADING THE WAY
0VSEFWFMPQNFOUPGPJMQSPQFSUJFTJOUIF"UIBCBTDBBOE$PME -BLFSFHJPOTJO"MCFSUBCFHBOJOUIFNJETXJUIBQJMPU QSPHSBN 'PTUFS$SFFL"TFDPOEQJMPU $ISJTUJOB-BLF GPMMPXFE JO0VSFYQFSJFODFEUFBNIBTBEWBODFEUIFUFDIOPMPHZ UPCFUUFSFYUSBDUUIFBCVOEBOUCJUVNFOUISPVHIUIFBQQMJDBUJPO PG4"(%UFDIOPMPHZ8FCVJMUBOEDPNNJTTJPOFEUIFXPSMET mSTUDPNNFSDJBM4"(%QSPKFDUJOBU'PTUFS$SFFL8JUI BCPVUøQSPEVDJOHXFMMT 'PTUFS$SFFLTHSPTTQSPEVDUJPOIBT HSPXOTUFBEJMZUPBQQSPYJNBUFMZ øCBSSFMTQFSEBZBUUIF FOEPG5IF$ISJTUJOB-BLFQSPKFDUJTJOBOFBSMJFSTUBHFPG EFWFMPQNFOUXJUIXFMMT BOEIBEHSPTTQSPEVDUJPOPGBCPVU øCBSSFMTQFSEBZBUUIFFOEPG
"LFZNFBTVSFPGFGmDJFODZGPS4"(%PQFSBUJPOTJTUIFBNPVOU PGTUFBNOFFEFEUPQSPEVDFFWFSZCBSSFMPGCJUVNFO*UTUIBOLTUP UIFRVBMJUZPGPVSBTTFUTBOEPVSUFBNTEFEJDBUJPOUPDPOUJOVPVTMZ JNQSPWFPQFSBUJPOBMQFSGPSNBODFUIBUPVS4"(%QSPKFDUTIBWF A drilling site at Christina Lake. BDIJFWFEBTUFBNUPPJMSBUJPPGBQQSPYJNBUFMZ XIJDIJT BNPOHUIFMPXFTUJOUIFJOEVTUSZ#ZVTJOHUFDIOPMPHJFTTVDI BTFMFDUSJDTVCNFSTJCMFQVNQT BOETPMWFOUBJEFEQSPDFTTFT Foster Creek’s gross production has grown XIJDIDPNCJOFBTPMWFOU TVDIBTCVUBOF XJUITUFBNUPIFMQ steadily to approximately 60,000 barrels NPCJMJ[FUIFCJUVNFO XFDPOUJOVFUPEFDSFBTFUIFBNPVOUPG per day at the end of 2008. TUFBNSFRVJSFEBOEUIFSFCZNJOJNJ[FFNJTTJPOTCZSFEVDJOH UIFBNPVOUPGFOFSHZVTFE
WEYBURN OILFIELD WORLD’S LARGEST CARBON CAPTURE PROJECT
0VSFOIBODFEPJMSFDPWFSZGBDJMJUZBUUIF8FZCVSOmFMEJO
4BTLBUDIFXBOJTUIFTJUFPGUIFMBSHFTU$0TFRVFTUSBUJPOQSPKFDU The cumulative reduction in greenhouse JOUIFXPSME5IJTUFDIOPMPHZIFMQTNBYJNJ[FUIFSFDPWFSZPG gas emissions at Weyburn is equal to PJMSFTFSWFTXIJMFEFDSFBTJOHHSFFOIPVTFHBTFTSFMFBTFEJOUP taking about 6.7 million cars off the road UIFBUNPTQIFSF.PSFUIBONJMMJPOUPOOFTPG$0IBWFCFFO TFRVFTUFSFEBU8FZCVSOUPEBUF XJUINJMMJPOUPOOFTQSPKFDUFE for an entire year. PWFSUIFMJGFPGUIFmFME ENCANA CORPORATION ANNUAL REPORT 2008 13
During a year that saw extreme volatility in natural gas and oil prices and a challenging operating environment, our continued concentration on our resource play strategy delivered strong operational and financial performance. Once again, our operating focus in 2008 was on finding efficiencies and on excellence in execution in all facets of our business: from growing our resource base, to implementing new technologies, to sharing ideas, to introducing new employee programs. All the while we continued our commitment to working safely and being a trusted, thoughtful neighbour.
)JHIMJHIUT
SHALE PLAYS AN EMERGING UNCONVENTIONAL NATURAL GAS RESOURCE
5IFSFXBTBMPUPGBUUFOUJPOPOTIBMFHBTBTBOFNFSHJOHSFTPVSDF JO3FBMJ[JOHUIFQPUFOUJBMPGUIJTSFTPVSDFBTFBSMZBT Shale plays have the potential to be XFCFHBOBDRVJSJOHUIFMBOEBOEESJMMJOHSJHIUTUPFYQMPSFQMBZT among the largest sources of natural JOUIF)BZOFTWJMMF4IBMFJO-PVJTJBOBBOE5FYBT BOEUIF)PSO 3JWFS4IBMFJO#SJUJTI$PMVNCJB3FDFOUFYQMPSBUJPOXFMMTESJMMFE gas growth in North America. CZ&O$BOB PVSQBSUOFSTBOEJOEVTUSZ JOEJDBUFUIFTFOBUVSBMHBT SFTFSWPJSTIPMEUIFQPUFOUJBMUPCFBNPOHUIFMBSHFTUTPVSDFTPG OBUVSBMHBTHSPXUIJO/PSUI"NFSJDB&BDIPGUIFTFQMBZTIBTCFFODPNQBSFEJOTJ[FBOETDPQFUPUIFQSPMJmD#BSOFUU4IBMF JO5FYBT XIJDIDVSSFOUMZQSPEVDFTBCPVUCJMMJPODVCJDGFFUQFSEBZBOEDPOUJOVFTUPHSPX8FIBWFBTTFNCMFEWBTUMBOE QPTJUJPOTJOFBDIPGUIFTFFNFSHJOHQMBZTo øOFUBDSFTJOUIFIFBSUPGUIF)PSO3JWFS4IBMFBOE OFUBDSFT JODMVEJOH OFUBDSFTPGNJOFSBMSJHIUT JOUIF)BZOFTWJMMF4IBMF
CORE STRENGTH EXPANDING UPSTREAM AND DOWNSTREAM TOGETHER
8FCFHBODPOTUSVDUJPOPOBDPLFSBOESFmOFSZFYQBOTJPO $03& QSPKFDUBUUIF8PPE3JWFS3FmOFSZ XIJDIXJMMNPSFUIBOEPVCMF JUTIFBWZPJMSFmOJOHDBQBDJUZ5IFFYQBOTJPOXJMMDPTUBOFTUJNBUFEøCJMMJPOOFUUP&O$BOB CJMMJPOHSPTT BOEJTFYQFDUFE UPCFJOGVMMPQFSBUJPOJO$PNCJOFE UIF8PPE3JWFS3FmOFSZJO*MMJOPJTBOEUIF#PSHFS3FmOFSZJO5FYBTXJMMIBWFBUPUBMIFBWZ PJMSFmOJOHDBQBDJUZPGBCPVU CBSSFMTQFSEBZ QMBDJOHVTBNPOHUIFMFBEJOHIFBWZPJMSFmOFSTJOUIF64*OQBSBMMFMXJUIUIF 8PPE3JWFS3FmOFSZFYQBOTJPO UIFJOUFHSBUFEPJMWFOUVSFCFUXFFO&O$BOBBOE$POPDP1IJMMJQTIBTBQQSPWFEVQTUSFBNFYQBOTJPOT BU'PTUFS$SFFLBOE$ISJTUJOB-BLFJOOPSUIFSO"MCFSUB XIFSFXFFYQFDUHSPTTCJUVNFOQSPEVDUJPODBQBDJUZXJMMHSPXGSPNUIF DVSSFOUMFWFMPG CBSSFMTQFSEBZUPBCPVU øCBSSFMTQFSEBZJO 14 ENCANA CORPORATION ANNUAL REPORT 2008
&O$BOBFYQFDUTNPSFUIBOKVTUIBSEXPSLGSPN JUTFNQMPZFFTBOEDPOUSBDUPST*UTBDPNQBOZ UIBUFYQFDUTUIFNUPCFJOOPWBUJWFBOENBLF UIFNPTUPGUIFJSJEFBT
TIME SAVER ADVANCES IN HORIZONTAL WELL COMPLETIONS
*O XFJNQMFNFOUFEUIFVTFPGMPOHSFBDIIPSJ[POUBMXFMMTBOENVMUJTUBHFIZESBVMJD % GSBDUVSJOHUFDIOPMPHZNPSFCSPBEMZBDSPTTPVSOBUVSBMHBTSFTPVSDFQMBZT JODMVEJOHUIF.POUOFZ BOE)PSO3JWFSQMBZTJO#SJUJTI$PMVNCJBBOEUIF)BZOFTWJMMFQMBZJO-PVJTJBOBBOE5FYBT5IJT BQQSPBDIIBTSFTVMUFEJOJNQSPWFEFDPOPNJDTBOESFEVDFEFOWJSPONFOUBMGPPUQSJOUGPSPVS QMBZT5IFIPSJ[POUBMMFHPGFBDIXFMMDBOFYUFOEBTGBSBTUXPLJMPNFUSFTJOMFOHUIBOETVQQPSU BTNBOZBTGSBDTUBHFT6TJOHUIJTNVMUJTUBHFDPNQMFUJPOTBQQSPBDIIBTNVMUJQMFCFOFmUT 90 *UEFDSFBTFTUIFOVNCFSPGXFMMTUIBUXFIBWFUPESJMMUPBDDFTTUIFSFTPVSDF NJOJNJ[FTUIF demonstrated reduction in OVNCFSPGEBZTJUUBLFTUPGSBDUVSFBXFMMoGSPNBTNBOZBTEPXOUPBTGFXBTUXPPSUISFF deep natural gas frac time. JOTPNFDBTFToBOEFOBCMFTVTUPDFOUSBMJ[FPVSHBUIFSJOHBOEQSPDFTTJOHGBDJMJUJFTBMMPXJOH NBOVGBDUVSJOHUZQFPQFSBUJPOTUPCFDPOEVDUFE5PHFUIFS UIFTFJNQSPWFNFOUTDBOSFEVDF PVSPWFSBMMTVSGBDFGPPUQSJOU BOEHFOFSBUFTJHOJmDBOUDPTUTBWJOHT
GETTING THE LAST DROP WEDGE WELLS
8FEFWFMPQFEBOEQSPWFEUIFDPODFQUPGXFEHFXFMMT BOFXBQQSPBDIUIBUFOBCMFTVTUPFYUSBDUNPSFCJUVNFOGSPNPVS4"(% PQFSBUJPOT%VSJOHUIF4"(%QSPDFTT BDPOTJEFSBCMFBNPVOUPGIFBUFECJUVNFOTJUTVOESBJOFECFUXFFOBEKBDFOUTUFBNDIBNCFST 6TJOHXFEHFXFMMT TJOHMFIPSJ[POUBMXFMMTESJMMFECFUXFFOUXP 4"(%XFMMQBJST XFDBOOPXFYUSBDUNVDIPGUIFCJUVNFOUIBU “EnCana’s wedge well innovation will XBTQSFWJPVTMZVOSFDPWFSFE4JODFXFEHFXFMMTSFRVJSFNJOJNBM TUFBNUPFYUSBDUUIFSFNBJOJOHCJUVNFO XFIBWFCFFOBCMFUP radically alter perceptions on SAGD JODSFBTFPVSCJUVNFOQSPEVDUJPOCZBCPVUCBSSFMTQFSEBZQFS economics and recovery factor limitations.” XFEHFXFMMXIJMFBUUIFTBNFUJNFSFEVDJOHPVSQFSCBSSFMPQFSBUJOH o5%/FXDSFTU +BOVBSZ DPTUT XBUFSVTFBOEFOWJSPONFOUBMJNQBDU"QBUFOUPOUIJT UFDIOPMPHZJTQFOEJOH
WASTE NOT ENHANCED WATER RECYCLING
8FEFWFMPQFEBOFOIBODFETUFBNHFOFSBUJPOQSPDFTTUIBUTJHOJmDBOUMZJNQSPWFTXBUFSSFDZDMJOH"GUFSB CPJMFSDPOWFSUTNPTUPGJUTXBUFSJOUPTUFBN BCPVUPOFRVBSUFSPGUIFXBUFSJTMFGUPWFS5PNJOJNJ[FXBTUF XFEFWFMPQFEBQSPDFTTUPSFCPJMUIJTCMPXEPXOXBUFSJOBTFDPOECPJMFSUPNBLFNPSFTUFBN5IJTFOFSHZ FGmDJFOUQSPDFTTIFMQTJODSFBTFPVSXBUFSSFDZDMJOHSBUFUPNPSFUIBOQFSDFOUBU'PTUFS$SFFLoBTJHOJmDBOU NJMFTUPOFJOUIFFWPMVUJPOPGPVS4"(%UFDIOPMPHZ8FIBWFUFTUFEUIFQSPDFTTFYUFOTJWFMZJOUIFmFMEBOE IBWFmMFEGPSBQBUFOU ENCANA CORPORATION ANNUAL REPORT 2008 15
SHARING KNOWLEDGE GENERATING NEW IDEAS
.PSFUIBO &O$BOBTUBGGGSPNBMMPVSEJTDJQMJOFTBDSPTT /PSUI"NFSJDBHBUIFSFEJO$BMHBSZJO.BZGPSPVSUIJSE “I FOUND THE INFORMATION EXCHANGE TO CJFOOJBMH&OFSBUF4VNNJU5IFHPBMPGUIF4VNNJUJTUPJNQBSU BE EXTREMELY EXCITING AND EYE-OPENING. MFBSOJOHTBOEFOIBODFPVSFYFDVUJPOFYDFMMFODFCZTIBSJOH I AM THRILLED TO BE A PART OF A COMPANY THAT IS FORWARD-THINKING.” JOGPSNBUJPOPOOFXUFDIOPMPHJFTBOEJOOPWBUJPOT BOEMFBSOJOH o&O$BOBFNQMPZFF H&OFSBUFFNQMPZFFTVSWFZ GSPNPVSDIBMMFOHFTBOETVDDFTTFT$POTJTUJOHPGQPTUFSTFTTJPOT QBOFMEJTDVTTJPOT BOEGFBUVSFQSFTFOUBUJPOT UIF4VNNJUJTPVS MBSHFTUTUBGGOFUXPSLJOHBOELOPXMFEHFTIBSJOHPQQPSUVOJUZ
INVESTING IN FUTURE SOLUTIONS ENVIRONMENTAL INNOVATION FUND
-BTUZFBS UISPVHIPVS&OWJSPONFOUBM*OOPWBUJPO'VOE XFFOUFSFEJOUPBOBHSFFNFOUUP DPOUSJCVUF$NJMMJPOPWFSBUISFFZFBSQFSJPEUPBUFDIOPMPHZUIBUHJWFTFOEVTFSTUIF QPUFOUJBMUPSFEVDFFNJTTJPOTBOEJNQSPWFUIFJSFGmDJFODZ"UMBOUJD)ZESPHFOT$BSCPO4BWFS %FNPOTUSBUJPO1SPKFDUDBQUVSFTDBSCPOBTBTPMJEoXIJDIIBTUIFQPUFOUJBMUPCFTPME C$ GPSVTFJOQSPEVDUTTVDIBTUJSFT JOLT BOEQMBTUJDToXIJMFUIFFYUSBDUJPOQSPDFTTMFBWFT CFIJOEBIZESPHFOFOSJDIFEOBUVSBMHBTMPXFNJTTJPOTGVFM"OJOEVTUSZmSTUPGJUTLJOE PVS &OWJSPONFOUBM*OOPWBUJPO'VOEJOWFTUTJOQFPQMFBOEJEFBTUIBUBEESFTTGVUVSFTPMVUJPOT*U 27million GPDVTFTPOBEWBODJOHUFDIOPMPHJFTUIBUBJNUPSFEVDFFNJTTJPOT JODSFBTFFOFSHZFGmDJFODZ JNQSPWFXBUFSDPOTFSWBUJPO FOIBODFXBTUFNBOBHFNFOU BOEEFWFMPQOFXSFOFXBCMF committed to 17 projects to date in North America. FOFSHZ8FDPOUJOVPVTMZSFWJFXPQQPSUVOJUJFTUPTVQQPSUOFXDMFBOFOFSHZUFDIOPMPHJFT
COURTESY MATTERS PUTTING COMMUNITY NEEDS FIRST
0VS$PVSUFTZ.BUUFSTQSPHSBN XIJDIXFPSJHJOBMMZDSFBUFE JOUPBEESFTTDPNNVOJUZDPODFSOTJOPVSPQFSBUJOHBSFBT “PSAC members have been pleased to JTBUUSBDUJOHBUUFOUJPOGSPNPUIFSDPNQBOJFTJOUIFJOEVTUSZ*O work with EnCana on the Courtesy MattersTM UIF1FUSPMFVN4FSWJDFT"TTPDJBUJPOPG$BOBEBFOEPSTFE UIFNFSJUTPGPVSQSPHSBNXJUIJUTNFNCFSDPNQBOJFT$PVSUFTZ program because it provides innovative .BUUFSTBEESFTTFTOVJTBODFJTTVFTTPNFUJNFTBTTPDJBUFE solutions to issues in communities where XJUIUIFPJMBOEHBTJOEVTUSZ TVDIBTOPJTF EVTU HBSCBHF BOE we work and makes a genuine difference.” JODSFBTFEUSBGmD5IFQSPHSBNGPDVTFTPOQVUUJOHUIFOFFETPG UIFDPNNVOJUZmSTUBOEEPJOHXIBUXFDBOUPFOTVSFBMPOHMBTUJOH o3PC(SBZ .BOBHFS $PNNVOJDBUJPOT.FNCFS3FMBUJPOT 1FUSPMFVN4FSWJDFT"TTPDJBUJPOPG$BOBEB 14"$ NVUVBMSFTQFDU 16 ENCANA CORPORATION ANNUAL REPORT 2008
SAM AWARD INTERNATIONAL RECOGNITION
*OBEEJUJPOUPUISFFTUSBJHIUZFBSTPOUIF%PX+POFT4VTUBJOBCJMJUZ*OEFY XFIBWFBMTPCFFO BXBSEFEB4VTUBJOBCMF"TTFU.BOBHFNFOU 4". EJTUJODUJPOGPSEFNPOTUSBUJOHMFBEFSTIJQJO TVTUBJOBCJMJUZGPSUIFTFDPOEZFBSJOBSPX8FBSFUIFPOMZ/PSUI"NFSJDBODPNQBOZUPCF SFDPHOJ[FEXJUIBDMBTTEJTUJODUJPOGPSPVSPQFSBUJPOTVOEFSUIFDBUFHPSZPGA0JM (BT1SPEVDFSTJOUIF4VTUBJOBCJMJUZ:FBSCPPL
MORE CASH FOR NON-PROFIT ORGANIZATIONS C$ EMPLOYEES GIVING TIME *OSFDPHOJUJPOPGUIFJSUJNFWPMVOUFFSFE XFJOUSPEVDFEBQSPHSBNJOUIBUTVQQPSUT BMMPVSFNQMPZFFTBOEUIFJSGBNJMJFTJONBLJOHBEJGGFSFODFJOUIFJSDPNNVOJUJFT8IBUT EJGGFSFOUBCPVUPVSQSPHSBNJTUIBUJUHJWFTFNQMPZFFTBOEUIFJSJNNFEJBUFGBNJMJFTUIF 36 PQQPSUVOJUZUPWPMVOUFFSUPHFUIFSBOEBQQMZGPSBEPOBUJPOGSPN&O$BOBUPUIFOPOQSPmU million PSHBOJ[BUJPOTXIFSFUIFZHJWFUIFJSUJNF5IFEPOBUJPOJTCBTFEPOUIFUPUBMWPMVOUFFS IPVSTPGFBDIGBNJMZNFNCFS*O XFSFDFJWFEUIF(FOFSPTJUZPG4QJSJU"XBSE GSPNUIF"TTPDJBUJPOPG'VOESBJTJOH1SPGFTTJPOBMT/PNJOBUFECZ*NBHJOF$BOBEB invested in 2008 in community programs – from sports, recreation and wellness, XFXFSFJEFOUJmFEBTBDPNQBOZUIBUQMBZTBTJHOJmDBOUSPMFJOJNQSPWJOH$BOBEJBO to education, science and technology. DPNNVOJUJFTUISPVHImOBODJBM TVQQPSUBOEEPOBUJPOT JOLJOE BTXFMMBTGPS FODPVSBHJOHFNQMPZFF WPMVOUFFSJTNBOE C$ NBUDIJOHFNQMPZFF EPOBUJPOTEPMMBS 3.1 GPSEPMMBS million given by employees across North America to non-profit organizations of their choice. The company match increased that total to more than C$6.2 million. ENCANA CORPORATION ANNUAL REPORT 2008 17 CHAIRMAN’S MESSAGE
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5IF TUSFOHUI PG &O$BOBT DPSQPSBUF HPWFSOBODF XBT FWFO NPSF FWJEFOU JO BT UIF #PBSE QSPWJEFE PWFSTJHIU GPSTUSBUFHJDBDUJPOTUBLFOEVSJOHBUJNFPGFYUSFNFNBSLFUUVSCVMFODF*OBEEJUJPO &O$BOBDPOUJOVFTUP GVMMZDPNQMZXJUIUIFBQQMJDBCMFDPSQPSBUFHPWFSOBODFSFRVJSFNFOUT JODMVEJOHCFTUQSBDUJDFTHVJEFMJOFT QVCMJTIFECZUIF$BOBEJBOTFDVSJUJFTSFHVMBUPSZBVUIPSJUJFT UIFQSPWJTJPOTPGUIF4BSCBOFT0YMFZ"DU PG BOE UIF SVMFT BEPQUFE CZ UIF 64 4FDVSJUJFT BOE &YDIBOHF $PNNJTTJPO QVSTVBOU UP UIBU "DU 5IF DPNQBOZ JT BMTP JO DPNQMJBODF XJUI BMM BQQMJDBCMF /FX :PSL 4UPDL &YDIBOHF SFRVJSFNFOUT BOE JT DPNNJUUFE UP IJHI TUBOEBSET PG USBOTQBSFOU SFQPSUJOH BOE BDDPVOUBCJMJUZ
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*U IBT CFFO B QSJWJMFHF GPS NF UP TFSWF BOPUIFS ZFBS BT &O$BOBT $IBJSNBO BOE * XBOU UP UIBOL BMM #PBSE NFNCFST GPS UIFJS EFEJDBUJPO BOE MFBEFSTIJQ UISPVHIPVU * BMTP XBOU UP PGGFS TQFDJBM UIBOLT UP &O$BOBT FYFDVUJWF UFBN BOE BMM FNQMPZFFT BOE DPOUSBDUPST 5IFZ QVU JO BO FYUSBPSEJOBSZFGGPSUUIJTZFBSBTUIFZEFBMUXJUIUIFDIBMMFOHFTQSFTFOUFECZUIF EZOBNJD CVTJOFTT FOWJSPONFOU &O$BOB IBT B TUSPOH mOBODJBM BOE BTTFU CBTF XIJDI XJMM FOBCMF VT UP TVDDFTTGVMMZ OBWJHBUF UIF DIBMMFOHJOH UJNFT JO
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David P. O’Brien $IBJSNBOPGUIF#PBSE 18 ENCANA CORPORATION ANNUAL REPORT 2008
FINANCIAL HIGHLIGHTS 12.48 11.06 US$ millions, except per share amounts 2008 $IBOHF
8.35 8.56 3FWFOVFT /FUPG3PZBMUJFT 30,064 $BTI'MPX 9,386 1FS4IBSFo%JMVUFE 12.48 /FU&BSOJOHT 5,944 1FS4IBSFo%JMVUFE 7.91 0QFSBUJOH&BSOJOHT 4,405 05 06 07 1FS4IBSFo%JMVUFE 5.86 08 cash flow per share 5PUBM$BQJUBM*OWFTUNFOU 7,080 ($/share) /FU"DRVJTJUJPO%JWFTUJUVSF"DUJWJUZ 270 /FU$BQJUBM*OWFTUNFOU 7,350 1.60 %JWJEFOET1FS$PNNPO4IBSF TIBSF 1.60 %JWJEFOE:JFME 3.4 %FCUUP$BQJUBMJ[BUJPO 28 %FCUUP&#*5%" UJNFT 0.7 0.80 %FCU UP1SPWFE%FWFMPQFE3FTFSWFT .DGF 0.83
/PO(""1NFBTVSFTBTSFGFSFODFEJOUIF"EWJTPSZPOQBHF 0.375 0.275 #BTFEPO/:4&DMPTJOHTIBSFQSJDFBUZFBSFOE
05 06 07 08 OPERATING HIGHLIGHTS dividends per share ($/share) After royalties 2008 $IBOHF
Production 2.26 /BUVSBM(BT ..DGE 2.11 1.89 1.89 $BOBEB 2,205 64" 1,633 5PUBM/BUVSBM(BT ..DGE 3,838 0JM/(-T CCMTE 'PTUFS$SFFL$ISJTUJOB-BLF 30,183 /PSUI"NFSJDB 0UIFS 103,397 5PUBM0JM/(-T CCMTE 133,580 o
5PUBM1SPEVDUJPO ..DGFE 4,639 05 06 07 08 production per share Refinery Operations (Mcfe/share) $SVEF0JM$BQBDJUZ .CCMTE 452 o $SVEF0JM3VOT .CCMTE 423 26.28 24.92 Reserves 23.44 21.31 :FBS&OE3FTFSWFT #DGF 19,712 /FU3FTFSWF"EEJUJPOT #DGF 2,547 1SPEVDUJPO3FQMBDFNFOU 150 'JOEJOH%FWFMPQNFOU$PTU .DGF 2.50 3FDZDMF3BUJP 2.6 3FTFSWF-JGF*OEFY ZFBST 11.6
3FQSFTFOUTPGUIF8PPE3JWFSBOE#PSHFSSFmOFSZPQFSBUJPOT 05 06 07 08 1SPWFESFTFSWFTPOMZ reserves per share FYDMVEFT'PTUFS$SFFLBOE$ISJTUJOB-BLFSFTFSWFTDPOUSJCVUFEUPBVQTUSFBNQBSUOFSTIJQ (Mcfe/share) XJUI$POPDP1IJMMJQT