ENCANA CORPORATION ANNUAL REPORT 2002 ANNUAL REPORT ENCANA CORPORATION 2002 ANNUAL REPORT EnCana Corporation 2 1800, 855 – 2nd Street S.W. P.O. Box 2850 Calgary, Alberta, Canada T2P 2S5 Phone: (403) 645-2000 www.encana.com EnCanaBUILDING A BEST-IN-CLASS ENTERPRISE 1 Highlights 20 Building an 46 Entering a New Era 100 Supplementary Oil In the interest of providing EnCana Corporation (“EnCana” or the “Company”) shareholders and potential investors with information 2 Letter to Shareholders Entrepreneurial 47 EnCana Financial and Gas Information regarding the Company, certain statements throughout this Annual Report constitute forward-looking statements within the meaning of Organization (unaudited) 11 Chairman’s Message Performance the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as 22 Onshore North America 48 Management’s 105 Supplemental Information “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target” or similar words suggesting future outcomes or statements regarding 13 An Extraordinary (unaudited) Foundation 30 Offshore & International Discussion and Analysis an outlook. Forward-looking statements in this Annual Report include, but are not limited to, statements with respect to: the Company’s 118 Corporate Information operating costs and reserves replacement costs for 2003 and beyond; oil and gas prices for 2003; reserves and resource potential for various 16 Enhancing a 36 Midstream & Marketing 65 Management Report geographic regions; increases in the Company’s crude oil, natural gas liquids and natural gas production for 2003 and beyond; increases Competitive Advantage 38 Statement of Corporate 66 Auditors’ Report Inside Back Cover Special Note Regarding in sales of gas and oil in 2003 and beyond; increases in oil extraction rates; the Company’s reserves levels; the impact of the Company’s 18 Ensuring Momentum: Governance Practices 67 Consolidated Financial Forward-Looking risk management program; the Company’s capital investment levels and the capital investment levels of the Company’s divisions; the sources Goals and Strategies 40 Corporate Responsibility Statements Information and adequacy of funding for capital investments, future growth prospects and current and expected financial requirements of the Company; & Environment 70 Notes to Consolidated the development of new natural gas storage facilities and increases in the Company’s gas storage capacity, injection and withdrawal rates; Financial Statements the targeted minimum growth rate per share for 2003 and beyond; targeted return rates on oil and natural gas exploration and exploitation; the Company’s ability to grow production through acquisitions; the results and timing of exploration success; reductions in CO2 emissions resulting from the Company’s CO2 miscible flood project; the Company’s contributions to charitable, environmental, educational and non- governmental organizations; the execution of share purchases under the Company’s Normal Course Issuer Bid program; the volatility of world energy prices including crude oil prices; the anticipated timing for the assessment of goodwill impairment and the charging of any impairment to income; the anticipated timing and results of discontinuing the Houston-based merchant energy operation; the proposed use of proceeds from the disposition of the Express and Cold Lake pipeline interests; the timing for completing the OCP pipeline, the expected capacity of the OCP pipeline and the Company’s expected final investment in the OCP pipeline; the cost of future dismantlement and site restoration; anticipated geographic regions targeted for production growth, the number of wells and potential wells which may be drilled and potential wellsites available for drilling; the anticipated effect of changes in commodity prices and the U.S./Canadian dollar exchange rate; the impact of legal claims on the financial position and results of operations of the Company; the Company’s oilsands strategy and the expected closing date of the sale of a portion of the Company’s interest in the Syncrude project; the results of inquiries by U.S. governmental agencies; the Company’s ability to extend its debt on an ongoing basis; and future operating results and various components thereof. SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION Readers are cautioned not to place undue reliance on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Although the Company 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. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this Annual ENTERING ENHANCING ENSURING ENTREPRENEURIAL Report include, but are not limited to: volatility of crude oil and natural gas prices, fluctuations in currency and interest rates, product supply and demand, market competition, risks inherent in the Company’s North American and foreign oil and gas and midstream operations, A new era A competitive advantage Momentum Organization risks inherent in the Company’s marketing operations, imprecision of reserves estimates and resource potential, the Company’s ability to replace and expand oil and gas reserves, the Company’s ability to either generate sufficient cash flow from operations to meet its current and future obligations or obtain external sources of debt and equity capital, general economic and business conditions, the Company’s HIGHLIGHTS – 2002 (PRO FORMA) ability to enter into or renew leases, the timing and costs of well and pipeline construction, the Company’s ability to make capital investments and the amounts of capital investments, imprecision in estimating the timing, costs and levels of production and drilling, the results of Completed merger of equals to create one of the world’s leading independent oil and gas companies exploration and development drilling, imprecision in estimates of future production capacity, the Company’s ability to secure adequate Increased gas sales by 16% to 2.76 billion cubic feet per day product transportation, uncertainty in the amounts and timing of royalty payments, imprecision in estimates of product sales, changes in environmental and other regulations, political and economic conditions in the countries in which the Company operates including Ecuador; Increased conventional oil and natural gas liquids (NGLs) sales by 5% to 231,300 barrels per day the risk of international war, hostilities, civil insurrection and instability affecting countries in which the Company operates and international terrorist threats, and such other risks and uncertainties described from time to time in the Company’s reports and filings with the Canadian Increased year-end conventional proved reserves by 10% to 2.5 billion barrels of oil equivalent securities authorities and the U.S. Securities and Exchange Commission. Accordingly, the Company cautions that events or circumstances could cause actual results to differ materially from those predicted. Statements relating to “reserves” or “resources” are deemed to be Exploration success at Tahiti in the Gulf of Mexico and successful appraisal drilling at Buzzard in the U.K. central North Sea forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and Divested $700 million in non-core properties and assets reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future. Readers are cautioned that the foregoing list of important factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking Achieved a total shareholder return of 19% statements contained in this Annual Report, which are made as of the date hereof, and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this Annual Report are expressly qualified by this cautionary statement. ADVISORY: Certain information regarding the Company and its subsidiaries set forth in this document, including management’s assessment of the Company’s future plans and operations, may constitute “forward-looking statements” under applicable securities laws and necessarily involve risks and uncertainties associated with future events. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. See Inside Back Cover for a more detailed Advisory. CORPORATE PROFILE EnCana is one of the world’s leading independent oil and gas companies, driven to be the industry’s best-in-class benchmark in per-share growth, production cost and value creation. The merger of two leading North American oil and gas explorers and producers, Alberta Energy Company Ltd. (AEC) and PanCanadian Energy Corporation (PanCanadian), has created a flagship, Canadian-headquartered, world-class independent oil and gas company.