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EnCana's Second Quarter Cash Flow Exceeds US$1.5 Billion, or $1.76 Per Share - Up 45 Percent

Posted on: Thursday, 28 July 2005, 06:00 CDT

CALGARY, July 28 /PRNewswire-FirstCall/ -- EnCana Corporation's (TSX & NYSE: ECA) second quarter 2005 total cash flow per share increased 45 percent to US$1.76 per share diluted, or $1.57 billion, compared to the second quarter of 2004. Total operating earnings per share increased 78 percent to 73 cents per share diluted, or $655 million, compared to the second quarter of 2004. Cash flow and operating earnings increased due to higher sales, stronger natural gas and liquids prices and improved netbacks related to asset portfolio upgrading. EnCana's total second quarter net earnings per share increased 248 percent to 94 cents per share diluted, or $839 million, which includes an unrealized mark-to-market after-tax gain of $222 million due to changes in the value of commodity hedging positions at quarter-end compared to the previous quarter and an unrealized foreign exchange loss on translation of Canadian issued U.S. dollar debt of $38 million. Total second quarter revenues net of royalties were $3.82 billion. NOTE: All prior-period share and per- share references have been adjusted to reflect the two-for-one common share split which occurred in May 2005.

Second quarter sales of natural gas, oil and natural gas liquids (NGLs) from total operations were 4.59 billion cubic feet of gas equivalent (Bcfe) per day, down 1 percent from the same period in 2004. Total natural gas sales increased 6 percent to 3.2 billion cubic feet per day. Oil and NGLs sales were 230,300 barrels per day, down 15 percent mainly due to divestitures of conventional oil properties in Canada and the U.K. North Sea.

"EnCana continues to achieve strong operating and financial performance. Production and profitability from our portfolio of long-life North American resource plays continue to distinguish the EnCana story. Second quarter production from our 10 key resource plays increased 16 percent compared to the same period one year earlier. We closed the $2.1 billion sale of our Gulf of Mexico assets, divested of additional mature conventional production in Western Canada and announced plans to divest of our natural gas storage and natural gas liquids businesses - strategic initiatives that continue to sharpen our focus on North American resource plays - assets where we can apply our competitive advantage in pursuit of strong, profitable growth and returns. In the first half of 2005, we have redeployed about $1.3 billion of divestiture proceeds to buy EnCana shares under our Normal Course Issuer Bid, reducing the shares outstanding by close to 4 percent. Each share now represents a higher proportion of the company's more focused asset base, which includes the upside opportunity in our Unbooked Resource Potential," said Gwyn Morgan, EnCana President & Chief Executive Officer.

First half cash flow up 45 percent per share

First half total cash flow per share increased 45 percent to $3.31 per share diluted, or $2.99 billion, compared to the first half of 2004. Total first half operating earnings per share increased 57 percent to $1.41 per share diluted, or $1.27 billion, compared to the first half of 2004. EnCana's total first half net earnings per share increased 52 percent to 88 cents per share diluted, or $794 million, which includes an unrealized mark-to-market after-tax loss of $419 million due to changes in the value of commodity hedging positions at June 30, 2005 and an unrealized foreign exchange loss on translation of Canadian issued U.S. dollar debt of $53 million.

First half sales of natural gas, oil and NGLs from total operations were 4.56 Bcfe per day, up 2 percent from the same period in 2004. Total natural gas sales increased 11 percent to 3.18 billion cubic feet per day. Total oil and NGLs sales were 230,000 barrels per day, down 14 percent mainly due to divestitures of conventional oil properties in Canada and the U.K. North Sea.

IMPORTANT NOTE: EnCana reports in U.S. dollars and follows U.S. protocols, which report sales and reserves on an after-royalties basis. All dollar figures are U.S. dollars unless otherwise noted. EnCana is treating its Ecuador operations as discontinued because EnCana plans to sell its Ecuador assets. Total results, which include results from Ecuador, are reported in the company's financial statements included in this news release and in supplementary documents posted on its Web site - http://www.encana.com/. All references in the remaining text of this news release are on a continuing operations basis. Continuing operations: Cash flow up 48 percent; Operating earnings up 72 percent

Second quarter 2005 cash flow from continuing operations increased 48 percent to $1.51 billion compared to the same period in 2004. Second quarter cash flow from continuing operations includes cash taxes of $83 million. Operating earnings from continuing operations increased 72 percent to $623 million compared to the second quarter of 2004. EnCana's second quarter net earnings from continuing operations increased 197 percent to $786 million, which included $201 million in after-tax unrealized mark-to-market gains as a result of changes in the value of commodity hedging positions at quarter-end compared to the previous quarter and an after-tax unrealized loss of $38 million due to translation of U.S. dollar denominated debt issued in Canada.

Sales from continuing operations up 3 percent, natural gas sales up 7 percent

Second quarter sales of natural gas, oil and NGLs from continuing operations were 4.16 Bcfe per day, up 3 percent from the second quarter of 2004. Second quarter natural gas sales from continuing operations rose 7 percent to 3.21 billion cubic feet per day compared with the second quarter of 2004. Oil and NGLs sales from continuing operations were 157,100 barrels per day, down 8 percent from the second quarter one year earlier due primarily to the divestiture of conventional oil properties.

Capital and operating costs impacted by inflation and a depreciating U.S. dollar

Operating costs from continuing operations in the second quarter of 2005 were 66 cents per thousand cubic feet of gas equivalent (Mcfe), which is slightly higher than the company's full year forecast range due mainly to industry inflation, the impact of a depreciating U.S. dollar and weather delays in the timing of planned production additions. While EnCana expects full year operating costs to be near the higher end of its guidance of 55 to 60 cents per Mcfe, the company continues to be amongst the lowest cost operators in the industry. EnCana drilled 1,017 net wells during the second quarter. Second quarter core capital investment was $1.4 billion. The company previously stated that supply and service cost increases have been higher than expected, and with the impacts of the depreciating U.S. dollar, full-year core upstream capital is now expected to be between $5.1 billion and $5.4 billion, up $600 million of which $100 million relates to the depreciating U.S. dollar. The company's corporate guidance has been updated on http://www.encana.com/.

"EnCana's costs are about 10 percent higher than we had forecasted when we established our budgets last fall. While some cost increases are due to execution delays caused by weather, they are primarily driven by higher service sector pricing, higher steel pricing and the overall shortage of completion services -- all three directly related to the robust commodity price environment we are currently benefiting from. In our effort to continually find ways to manage costs, we have reached a number of long-term arrangements with established drilling companies to supply 27 additional rigs, many built new to fit EnCana's purpose and utilizing the latest technology. These will expand the industry's overall fleet and should help EnCana mitigate the inflationary impact of high industry activity levels by reducing drilling days on its large suite of North American resource plays," said Randy Eresman, EnCana's Chief Operating Officer.

"Employing fit-for-purpose rigs under long-term contracts is one example of how we have adapted to higher input costs through optimizing the components of the manufacturing line. Although costs are higher, so are commodity futures prices. Future strip prices for natural gas and oil are about 30 percent higher than were forecast at this time in 2004, resulting in stronger returns for all of EnCana's development projects," Eresman said.

First half operating earnings from continuing operations up 38 percent

First half 2005 operating earnings increased 38 percent to $1.14 billion compared to the first half of 2004. First half 2005 cash flow from continuing operations increased 47 percent to $2.82 billion compared to the first half of 2004. EnCana's first half net earnings from continuing operations were up 12 percent to $661 million, which includes two non-cash items: an after-tax unrealized mark-to-market hedge loss of $427 million and an after-tax unrealized mark-to-market loss on foreign exchange on US$ denominated debt issued in Canada of $53 million. First half 2005 revenues net of royalties were $6.24 billion. EnCana drilled 2,370 net wells in the first half, close to half of the company's 2005 forecast of between 5,000 and 5,500 net wells.

2005 gas production build delayed

Given the shorter than usual winter operating season, wet spring conditions in many operating areas, and shortages of industry services, EnCana experienced delays in bringing wells on stream. About 150 million cubic feet per day of additional gas production is available from wells that will be tied in as soon as services become available. The company expects fourth quarter production to build strongly to exit the year between 3.6 billion and 3.7 billion cubic feet per day. The annualized impact of these delays is expected to result in total 2005 natural gas production to be towards the lower end of the 2005 guidance range. Oil and liquids sales, which were not as affected by the weather, are expected to be at the midpoint of the guidance range.

North American natural gas prices remain strong in the second quarter of 2005

The average second quarter benchmark NYMEX index gas price was $6.73 per thousand cubic feet, up 12 percent from $5.99 per thousand cubic feet in the second quarter of 2004. EnCana's North American realized natural gas prices averaged $6.25 per thousand cubic feet, up 17 percent from an average of $5.34 per thousand cubic feet in the second quarter of 2004. Natural gas prices have continued to increase due primarily to high world oil prices, continued strength in the economy and a lack of growth in domestic natural gas production.

Second quarter world oil prices remain strong; Canadian heavy oil price differentials widen

Oil and NGLs continued to trade at strong prices during the second quarter of 2005 due to strong global demand and concern over lack of spare production capacity. During the second quarter of 2005, the average benchmark West Texas Intermediate (WTI) crude oil price was $53.22 per barrel, up 39 percent from the second quarter 2004 average of $38.28 per barrel. The substantially higher level of WTI, combined with limited worldwide upgrading capacity for heavy crude oils, resulted in a significant widening of light/heavy crude oil price differentials. In the second quarter, the WTI/Bow River differential increased 83 percent to $20.17 per barrel compared to the same 2004 period. In the second quarter, EnCana's average realized oil and NGLs price was $31.80 per barrel, up 16 percent; including hedging it was $26.92 per barrel, up 29 percent compared to the same period in 2004.

Price risk management

EnCana's price risk mitigation strategy is intended to provide downside protection delivering greater certainty of cash flows and returns on its investments. Detailed risk management positions at June 30, 2005 are presented in Note 12 to the unaudited second quarter consolidated financial statements. In the second quarter of 2005, EnCana's financial price risk management measures resulted in after-tax realized losses of approximately $71 million, comprised of a $47 million loss on oil hedges, a $26 million loss on gas hedges and a $2 million gain on other hedges. A review of the company's hedging strategy in 2004 resulted in more frequent use of price hedging instruments which provide downside protection, but do not limit upside in a rising price environment.

As of June 30, 2005, about 74 percent of 2005 forecast gas sales is exposed to price upside, while about 60 percent has downside price protection. For oil, at current price levels, about 98 percent of 2005 forecast oil sales is exposed to price upside, while about 32 percent has downside protection. Overall, on a Mcfe basis, at current price levels about 82 percent of EnCana's forecast 2005 sales are exposed to market price upside. Beyond 2005, fixed price hedges are in place for approximately 808 million cubic feet per day of forecast 2006 gas production, 13,700 barrels per day of forecast 2006 oil production and 29 million cubic feet per day of forecast 2007 gas production.

EnCana Continuing Operations Highlights --------------------------------------- US$ and U.S. protocols ---------------------- ------------------------------------------------------------------------- Financial Highlights (as at and for the period ended 6 6 June 30) Q2 Q2 % months months % ($ millions) 2005 2004 change 2005 2004 change ------------------------------------------------------------------------- Revenues, net of royalties 3,581 2,552 + 40 6,242 5,282 +18 Pre-tax cash flow 1,595 1,204 + 32 3,128 2,325 + 35 Less: Cash tax 83 183 - 55 308 408 - 25 Cash flow 1,512 1,021 + 48 2,820 1,917 + 47 Net acquisitions & divestitures (1,789)(x) 2,234 - 180 (1,830)(x) 1,935 - 195 Core capital 1,426 1,030 + 38 2,933 2,287 + 28 Net capital investment (363) 3,264 - 111 1,103 4,222 - 74 Net earnings 786 265 + 197 661 591 + 12 Add (Deduct): Unrealized mark-to-market hedging (gain) loss, after-tax (201) 72 - 379 427 285 + 50 Unrealized foreign exchange loss on transl- ation of U.S. dollar debt issued in Canada, after-tax 38 25 + 52 53 57 - 7 Future tax (recovery) due to tax rate change - - n/a - (109) n/a Operating earnings 623 362 + 72 1,141 824 + 38 ------------------------------------------------------------------------- (x) Includes proceeds from Gulf of Mexico sale of $2.1 billion, minus tax of $591 million EnCana financial results in U.S. dollars and operating results according to U.S. protocols

EnCana reports in U.S. dollars and according to U.S. protocols in order to facilitate a more direct comparison to other North American upstream oil and natural gas exploration and development companies. Reserves and production are reported on an after-royalty basis.

------------------------------------------------------------------------- Operating Highlights (for the period ended June 30) 6 6 (After Q2 Q2 % months months % royalties) 2005 2004 change 2005 2004 change ------------------------------------------------------------------------- North America Natural Gas (MMcf/d) Production 3,212 3,001 + 7 3,166 2,843 + 11 Inventory withdrawal - - n/a 13 - n/a ------------------------------------------------------------------------- Natural gas sales (MMcf/d) 3,212 3,001 + 7 3,179 2,843 + 12 ------------------------------------------------------------------------- North America Oil and NGLs (bbls/d) 157,108 170,687 - 8 157,145 168,283 - 7 ------------------------------------------------------------------------- Total sales (MMcfe/d) 4,155 4,025 + 3 4,122 3,853 + 7 ------------------------------------------------------------------------- Key resource play production growth up about 16 percent across EnCana's portfolio

Development capital continues to be focused on turning EnCana's Unbooked Resource Potential into production and reserves. Second quarter gas and oil production from key North American resource plays has increased approximately 16 percent since the second quarter of 2004. Gas production growth is driven mainly by the Piceance basin in Colorado, the impact of the Tom Brown, Inc. acquisition, shallow gas and coalbed methane (CBM) on legacy Suffield and Palliser Blocks in Alberta, Cutbank Ridge in northeast British Columbia and the acquisition of the Fort Worth property. Oil production grew at Pelican Lake in northeast Alberta while Foster Creek production decreased temporarily in the second quarter due to scheduled maintenance and work required to prepare for a 30,000 barrel per day facility expansion, of which 10,000 barrels per day is planned to come on production late in the fourth quarter of 2005.

Growth from key North American resource plays ------------------------------------------------------------------------- Daily Production ------------------------------------------------------------ Resource Play 2005 2004 2003 ------------------------------------------------------------ (After Full Full royalties) YTD Q2 Q1 Year Q4 Q3 Q2 Q1 Year ------------------------------------------------------------------------- Natural Gas (MMcf/d) Jonah 424 416 431 389 404 373 387 394 374 Piceance 300 302 300 261 291 282 251 218 151 East Texas 83 85 82 50 83 81 36 - - Fort Worth 62 63 61 27 34 31 23 21 7 Greater Sierra 213 228 195 230 211 244 247 216 143 Cutbank Ridge 68 80 56 40 50 45 41 22 3 CBM 41 46 36 17 27 19 11 10 4 Shallow Gas 629 633 625 592 629 595 590 554 507 ------------------------------------------------------------------------- Oil (Mbbls/d) Foster Creek 27 24 30 29 28 29 30 28 22 Pelican Lake 24 27 21 19 23 22 15 15 16 ------------------------------------------------------------------------- Total (MMcfe/d) 2,128 2,161 2,094 1,892 2,034 1,976 1,858 1,696 1,416 ------------------------------------------------------------------------- % change from prior year's quarter 16.3 23.5 ------------------------------------------------------------------------- % change from prior period 3.2 2.9 33.6 2.9 6.4 9.6 7.1 ------------------------------------------------------------------------- Drilling activity in key North American resource play ------------------------------------------------------------------------- Net Wells Drilled ------------------------------------------------------------ 2005 2004 2003 ------------------------------------------------------------ Resource Full Full Play YTD Q2 Q1 Year Q4 Q3 Q2 Q1 Year ------------------------------------------------------------------------- Natural Gas Jonah 58 30 28 70 21 17 21 11 59 Piceance 142 65 77 250 47 66 66 71 284 East Texas 43 22 21 50 23 20 7 - - Fort Worth 21 12 9 36 8 10 10 8 5 Greater Sierra 106 47 59 187 18 13 21 135 199 Cutbank Ridge 61 38 23 50 17 12 4 17 20 CBM 486 202 284 760 234 347 98 81 267 Shallow Gas 638 365 273 1,552 222 384 416 530 2,366 ------------------------------------------------------------------------- Oil Foster Creek 12 2 10 11 7 - - 4 8 Pelican Lake 53 34 19 92 - 33 30 29 134 ------------------------------------------------------------------------- Total net wells 1,620 817 803 3,058 597 902 673 886 3,342 ------------------------------------------------------------------------- Corporate developments ---------------------- Quarterly dividend of 7.5 cents per share declared

EnCana's board of directors has declared a quarterly dividend of 7.5 cents per share which is payable on September 30, 2005 to common shareholders of record as of September 15, 2005.

Normal Course Issuer Bid purchases

In the first half of 2005, EnCana has purchased for cancellation approximately 44.7 million of its shares at an average price of $32.86 per share under its current Normal Course Issuer Bid (Bid), which commenced October 29, 2004. Under the Bid, which was amended in February 2005 to allow for the purchase of up to 10 percent of EnCana's public float, the company has purchased about 8.5 percent of the public float since October 2004. Share option exercises during the same period resulted in the issue of approximately 1.5 percent of the public float. The company had approximately 860.2 million shares outstanding at June 30, 2005.

------------------------------------------------------------------------- First six Full Changes in Share Capital months Year % (millions of shares) 2005 2004 change ------------------------------------------------------------------------- Common shares outstanding, beginning of period 900.6 921.2 - 2.2 ------------------------------------------------------------------------- Shares issued under option plan 9.8 19.4 ------------------------------------------------------------------------- Shares purchased under Normal Course Issuer Bid (44.7) (40.0) ------------------------------------------------------------------------- Subtotal 865.7 900.6 - 3.9 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Shares purchased for Performance Share Unit plan (5.5) - ------------------------------------------------------------------------- Common shares outstanding, end of period 860.2 900.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Two-for-one share split

On April 27, 2005, EnCana's shareholders approved the split of EnCana's outstanding common shares on a two-for-one basis. The common shares began trading on a sub-divided basis on the Toronto Stock Exchange on May 10, 2005 and on the New York Stock Exchange on May 23, 2005.

Financial strength ------------------

EnCana maintains a strong balance sheet. At June 30, 2005 the company's net debt-to-capitalization ratio was 36:64. Completion of planned asset divestitures is expected to further reduce debt levels. Proceeds of these proposed divestitures are also expected to be directed to purchase the company's shares under its Normal Course Issuer Bid and debt repayment. EnCana's net debt-to-EBITDA multiple, on a trailing 12-month basis, was 1.3 times. In the second quarter of 2005, EnCana invested $1,426 million of core capital. Acquisitions and divestitures resulted in net proceeds of $1,789 million, after deducting $591 million of tax on sale of Gulf of Mexico assets. Overall, divestiture proceeds were $363 million in excess of core capital investment during the second quarter.

------------------------------------------------------------------------- CONFERENCE CALL TODAY 11 a.m. Mountain Time (1 p.m. Eastern Time) EnCana Corporation will host a conference call today, Thursday, July 28, 2005 starting at 11:00 a.m., Mountain Time (1 p.m. Eastern Time), to discuss EnCana's second quarter 2005 financial and operating results. To participate, please dial (913) 981-4915 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 3 p.m. MT on July 28 until midnight August 3, 2005 by dialing (888) 203-1112 or (719) 457-0820 and entering access code 7545271. A live audio Web cast of the conference call will also be available via EnCana's Web site, http://www.encana.com/, under Investor Relations. The Web cast will be archived for approximately 90 days. ------------------------------------------------------------------------- EnCana Corporation

With an enterprise value of approximately US$44 billion, EnCana is one of North America's leading natural gas producers, is among the largest holders of gas and oil resource lands onshore North America and is a technical and cost leader in the in-situ recovery of oilsands bitumen. EnCana delivers predictable, reliable, profitable growth from its portfolio of long-life resource plays situated in Canada and the United States. Contained in unconventional reservoirs, resource plays are large contiguous accumulations of hydrocarbons, located in thick or areally extensive deposits, that typically have low geological and commercial development risk, low average decline rates and very long producing lives. The application of technology to unlock the huge resource potential of these plays typically results in continuous increases in production and reserves and decreases in costs over multiple decades of resource play life. EnCana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.

NOTE 1: Non-GAAP measures

This news release contains references to cash flow, pre-tax cash flow, cash flow from continuing operations, operating earnings from continuing operations, total operating earnings and EBITDA. Total operating earnings is a non-GAAP measure that shows net earnings excluding non-operating items such as the after-tax impacts of a gain on the sale of discontinued operations, the after-tax gain/loss of unrealized mark-to-market accounting for derivative instruments, the after-tax gain/loss on translation of U.S. dollar denominated debt issued in Canada and the effect of the reduction in income tax rates. Management believes these items reduce the comparability of the company's underlying financial performance between periods. The majority of the unrealized gains/losses that relate to U.S. dollar debt issued in Canada are for debt with maturity dates in excess of five years. EBIDTA is a non-GAAP measure that shows net earnings from continuing operations before gain on disposition, income taxes, foreign exchange gains or losses, interest net, accretion of asset retirement obligation and depletion, depreciation 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.

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 (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" in EnCana's Annual Information Form.

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 necessarily 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, including management's assessment of EnCana's and its subsidiaries' future plans and operations, certain statements contained in this news release are forward-looking statements within the meaning of the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements in this news release include, but are not limited to: future economic and operating performance; anticipated growth and success of resource plays and the expected characteristics of resource plays; the planned sale of interests in Ecuador, the midstream NGLs business unit and the natural gas storage business and the timing of such potential transactions; the expected proceeds from planned divestitures and the use of proceeds from divestitures for share purchases under the company's Normal Course Issuer Bid program and debt repayment; projections with respect to the company's unbooked resource potential and projected production growth over the next five years; expected debt levels and debt to capitalization ratios; anticipated effect of EnCana's market risk mitigation strategy and EnCana's ability to participate in commodity price upside; anticipated purchases pursuant to the Normal Course Issuer Bid; anticipated production in 2005 and beyond; anticipated drilling; the capacity of the company's SAGD expansion project and the timing thereof; potential capital expenditures and investment and the impact of inflation; potential oil, natural gas and NGLs sales in 2005 and beyond; anticipated ability to meet production, operating cost, cash tax and sales guidance targets; anticipated costs and the ability to mitigate against drilling costs increases; anticipated commodity prices; projections relating to project returns from EnCana's North American resource plays and potential risks associated with drilling and references to potential exploration. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they 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 the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause the company's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: volatility of oil and gas prices; fluctuations in currency and interest rates; product supply and demand; market competition; risks inherent in the company's marketing operations, including credit risks; imprecision of reserves estimates and estimates of recoverable quantities of oil, natural gas and liquids from resource plays and other sources not currently classified as proved reserves; the company's ability to replace and expand oil and gas reserves; its ability to generate sufficient cash flow from operations to meet its current and future obligations; its ability to access external sources of debt and equity capital; the timing and the costs of well and pipeline construction; the company's ability to secure adequate product transportation; changes in environmental and other regulations or the interpretations of such regulations; political and economic conditions in the countries in which the company operates, including Ecuador; the risk of war, hostilities, civil insurrection and instability affecting countries in which the company operates and terrorist threats; risks associated with existing and potential future lawsuits and regulatory actions made against the company; 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.

Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release, and 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.

Further information on EnCana Corporation is available on the company's Web site, http://www.encana.com/.

Interim Consolidated Financial Statements (unaudited) For the period ended June 30, 2005 EnCana Corporation U.S. DOLLARS CONSOLIDATED STATEMENT OF EARNINGS (unaudited) Three Months Ended Six Months Ended June 30, June 30, ($ millions, except ------------------------------------------------- per share amounts) 2005 2004 2005 2004 ------------------------------------------------------------------------- REVENUES, NET OF ROYALTIES Upstream (Note 2) $ 2,227 $ 1,763 $ 4,333 $ 3,392 Midstream & Market Optimiza- tion (Note 2) 1,039 898 2,566 2,317 Corporate - Unrealized gain (loss) on risk management (Note 2) 315 (109) (657) (429) - Other (Note 2) - - - 2 ------------------------------------------------------------------------- 3,581 2,552 6,242 5,282 EXPENSES (Note 2) Production and mineral taxes 97 83 184 137 Transportation and selling 131 137 267 272 Operating 373 303 745 620 Purchased product 933 822 2,296 2,109 Depreciation, depletion and amortization 675 630 1,361 1,156 Administrative 66 44 127 93 Interest, net 101 99 201 178 Accretion of asset retirement obligation (Note 8) 9 3 18 9 Foreign exchange loss (Note 5) 119 18 150 77 Stock-based compensation 4 4 8 9 Gain on divesti- tures (Note 4) - (1) - (35) ------------------------------------------------------------------------- 2,508 2,142 5,357 4,625 ------------------------------------------------------------------------- NET EARNINGS BEFORE INCOME TAX 1,073 410 885 657 Income tax expense (Note 6) 287 145 224 66 ------------------------------------------------------------------------- NET EARNINGS FROM CONTINUING OPERATIONS 786 265 661 591 NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (Note 3) 53 (15) 133 (51) ------------------------------------------------------------------------- NET EARNINGS $ 839 $ 250 $ 794 $ 540 ------------------------------------------------------------------------- NET EARNINGS FROM CONTINUING OPERATIONS PER COMMON SHARE (Note 11) Basic $ 0.90 $ 0.29 $ 0.75 $ 0.64 Diluted $ 0.88 $ 0.28 $ 0.73 $ 0.63 ------------------------------------------------------------------------- NET EARNINGS PER COMMON SHARE (Note 11) Basic $ 0.96 $ 0.27 $ 0.90 $ 0.59 Diluted $ 0.94 $ 0.27 $ 0.88 $ 0.58 ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF RETAINED EARNINGS (unaudited) Six Months Ended June 30, ----------------------- ($ millions) 2005 2004 ------------------------------------------------------------------------- RETAINED EARNINGS, BEGINNING OF YEAR $ 7,935 $ 5,276 Net Earnings 794 540 Dividends on Common Shares (110) (92) Charges for Normal Course Issuer Bid (Note 9) (1,124) (126) Charges for Shares Repurchased and Held (Note 9) (147) - ------------------------------------------------------------------------- RETAINED EARNINGS, END OF PERIOD $ 7,348 $ 5,598 ------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED BALANCE SHEET (unaudited) As at As at June 30, December 31, ($ millions) 2005 2004 ------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 325 $ 602 Accounts receivable and accrued revenues 2,140 1,898 Risk management (Note 12) 160 336 Inventories 424 513 Assets of discontinued operations (Note 3) 165 156 ------------------------------------------------------------------------- 3,214 3,505 Property, Plant and Equipment, net (Note 2) 22,051 23,140 Investments and Other Assets 379 334 Risk Management (Note 12) 106 87 Assets of Discontinued Operations (Note 3) 1,735 1,623 Goodwill 2,488 2,524 ------------------------------------------------------------------------- (Note 2) $ 29,973 $ 31,213 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 1,884 $ 1,879 Income tax payable 779 359 Risk management (Note 12) 690 241 Liabilities of discontinued operations (Note 3) 321 280 Current portion of long-term debt (Note 7) 309 188 ------------------------------------------------------------------------- 3,983 2,947 Long-Term Debt (Note 7) 6,851 7,742 Other Liabilities 86 118 Risk Management (Note 12) 269 192 Asset Retirement Obligation (Note 8) 640 611 Liabilities of Discontinued Operations (Note 3) 144 102 Future Income Taxes 4,459 5,193 ------------------------------------------------------------------------- 16,432 16,905 ------------------------------------------------------------------------- Shareholders' Equity Share capital (Note 9) 5,102 5,299 Share options, net - 10 Paid in surplus 90 28 Retained earnings 7,348 7,935 Foreign currency translation adjustment 1,001 1,036 ------------------------------------------------------------------------- 13,541 14,308 ------------------------------------------------------------------------- $ 29,973 $ 31,213 ------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three Months Ended Six Months Ended June 30, June 30, ($ millions) 2005 2004 2005 2004 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings from continuing operations $ 786 $ 265 $ 661 $ 591 Depreciation, depletion and amortization 675 630 1,361 1,156 Future income taxes (Note 6) (387) (38) (675) (342) Cash tax on sale of assets (Note 4) 591 - 591 - Unrealized (gain) loss on risk management (Note 12) (314) 109 655 426 Unrealized foreign exchange loss 105 32 123 71 Accretion of asset retirement obligation (Note 8) 9 3 18 9 Gain on divesti- tures (Note 4) - (1) - (35) Other 47 21 86 41 ------------------------------------------------------------------------- Cash flow from continuing operations 1,512 1,021 2,820 1,917 Cash flow from discontinued operations 60 110 165 209 ------------------------------------------------------------------------- Cash flow 1,572 1,131 2,985 2,126 Net change in other assets and liabilities (16) (41) (14) (46) Net change in non-cash working capital from continuing operations (682) (254) (116) (15) Net change in non-cash working capital from discontinued operations (2) 17 (57) 170 ------------------------------------------------------------------------- 872 853 2,798 2,235 ------------------------------------------------------------------------- INVESTING ACTIVITIES Business combination with Tom Brown, Inc. - (2,335) - (2,335) Capital expendi- tures (Note 2) (1,452) (1,035) (2,971) (2,306) Proceeds on disposal of assets (Note 4) 2,406 110 2,459 463 Cash tax on sale of assets (Note 4) (591) - (591) - Net change in investments and other (27) (28) (8) (17) Net change in non-cash working capital from continuing operations 293 (173) 448 (112) Discontinued operations (50) (126) (107) (378) ------------------------------------------------------------------------- 579 (3,587) (770) (4,685) ------------------------------------------------------------------------- FINANCING ACTIVITIES Net repayment of revolving long-term debt (682) 455 (715) 447 Issuance of long-term debt - 2,761 - 2,761 Repayment of long-term debt - (454) (1) (549) Issuance of common shares (Note 9) 83 43 184 154 Purchase of common shares (Note 9) (902) (12) (1,662) (230) Dividends on common shares (66) (46) (110) (92) Other (1) (4) (3) (5) ------------------------------------------------------------------------- (1,568) 2,743 (2,307) 2,486 ------------------------------------------------------------------------- DEDUCT: FOREIGN EXCHANGE GAIN ON CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCY (1) - (2) - ------------------------------------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (116) 9 (277) 36 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 441 140 602 113 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 325 $ 149 $ 325 $ 149 ------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.

FIRST AND FINAL ADD TO FOLLOW

EnCana Corporation

CONTACT: EnCana Corporate Development, Sheila McIntosh, Vice-President,Investor Relations, (403) 645-2194; Paul Gagne, Manager, Investor Relations,(403) 645-4737; Ryder McRitchie, Manager, Investor Relations, (403) 645-2007;Media contact: Alan Boras, Manager, Media Relations, (403) 645-4747

Source: PRNewswire-FirstCall

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