British Columbia’s Key Natural Gas Plays:

Horn River and Montney

Presentation to Prince George Resources Expo

Lara Conrad
Group Lead, Engineering
Regulatory & Government Relations

Prince George | June 4 | 2010

Agenda

• Horn River and Montney

• Introduction to Encana
• North American Shale Gas
• Canadian Natural Gas Competitiveness
• Environment
The New Encana
Leading North American Natural Gas Resource Plays

Land – MM net acres*

• North America 12.7

*Land as at December 31, 2009.

Encana – A Pure Play Natural Gas Company
Q1 2010 Gas Production

MMcf/d
4,500

4,000

3,500 US Production Cdn Production

3,000

2,500

2,000

1,500

1,000

500

0
XOM & ECA COP DVN BP APC CHK RDS CVX EOG
XTO

Source: Company Data, Energy eTrack Estimates

The New Encana
Forecast Growth Profile – 2011 to 2014

• Capital: ~ $6 billion per

year
• Drill: ~ 2,500 wells per
year
• Haynesville reaches over
1.2 Bcfe/d
• Montney reaches over
600 MMcef/d
• Horn River reaches over
500 MMcfe/d
• Panuke on stream
Canadian Division
Strategic Focus
• Operate safely with minimal
environmental impact while
securing license to operate
• Deliver high return growth
• Actively manage portfolio to
maximize value
• Leverage technology
advancements and
operational efficiencies to
lower capital costs
Horn River
2010F: 55 MMcfe/d
Greater Sierra*
2010F: 245 MMcfe/d
Montney
2010F: 285 MMcfe/d
Cutbank Ridge**
2010F: 400 MMcfe/d
Bighorn
2010F: 205 MMcfe/d
CBM
2010F: 325 MMcfe/d
Key Resource Play
Emerging Play
Encana Land (Dec. 31, 2009)
Total Canadian Division Net Acres: 9.3 MM
The New Encana
The Game Has Changed

• Fundamental change to North

American natural gas supply
• Abundant supply with
emergence of shale gas
• Supply outpacing demand
• Lower long-term price
expectations The game has changed!
• Need to play the game differently At Encana, we are positioned to win

• Increased focus on lowering

cost structures & maximizing
margins
• Optimizing efficiencies,
leveraging technology,
manufacturing approach
Shale Technology / NG Supply Outlook
 The Resource Triangle

Resource Triangle
Increased operating challenges

Conventional
resources

Improved technology
Small volumes that Conventional

Increased cost
are easy to develop

Unconventional Tight gas

resources sands
Large volumes
that are difficult Coal bed methane
to develop

Shale Gas

Gas hydrates
Shale Basin Development

Shore Open Ocean

Algae Algae
Clay from Bloom
Bloom
Shore

Sediments
from Land

Carbonate & Organic

Rich Sediments

More clay Less

Less organics organics
Drill Depth Increasing
Maturity Increasing Too mature
Pressure Increasing

X X
 Types of Rock Oil and Gas is
produced from

Slide courtesy of CAPP

Oil and Gas Reservoir Rocks

• The permeability of shale is less than

0.1% of conventional reservoir rock.

• To access the gas in shale, wells are

drilled horizontally to access more
reservoir and the rock must be
“stimulated” using hydraulic fracturing
techniques

• Because the permeability is so low, very

large hydraulic “fracs” are required.

• Hydraulic fracturing has been used by

industry for more than 60 years

Slide courtesy of CAPP

 North American Unconventional NG Potential
• Growing recognition of vast
natural gas resource

• Driven by recent technical

advancements in shale gas

• Implications to NA’s energy

supply are profound

• In the U.S. alone, natural gas

resource can provide 116 years
of supply at current production

• Recent CSUG analysis

suggests Canadian NG
resource (700 – 1,300 tcf) may
exceed 150 years of supply at
current production levels
Unconventional Gas Enabling Technologies

• Fit-for-purpose rigs

• Long reach
horizontal drilling

• Multi-stage
massive hydraulic
fracturing

• Multi-well drilling
pads

• Manufacturing
style approach to
all operations (gas
factories)

Schematic courtesy of CAPP

Unconventional Gas Enabling Technologies
Pad wells, horizontal drilling, multi-stage fracturing
Lighter environmental footprint
 Manufacturing Approach - Fracturing Operations

Upper
Mnty

Lower
Mnty

Halliburton: Swell Packers

 North American Gas Production
Significant growth from shale gas
Total production grows from 70 Bcf/d in 2010 to 85 Bcf/d in 2020—or 20%.
Bcf/d
90

80

70

60 43 Bcf/d
> 50%
50

40

30

20

10

0
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20

Other Tight Gas CBM Shale

Source: Encana, IHS Energy

 WCSB Supply Forecast
Key Resource Plays

We expect supply to continue falling for the next three years, then a recovery begins as
significant volumes of production are reached by new unconventional plays.
18
Forecast
16

14

12
Bcf/d

10

4
05

06

07

08

09

10

11

12

13

14

15

16

17

18
n-

n-

n-

n-

n-

n-

n-

n-

n-

n-

n-

n-

n-

n-
Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja
Conventional Montney Horn River Deep Basin CBM

Source: EnCana, IHS

 North American Gas Demand
Supply can meet virtually any demand case
Driven primarily by growth from the electric power sector total gas demand is
Bcf/d expected to grow 12 Bcf/d by 2020.
90
Business-as-Usual 2010-20: 1.5% CAGR 1
80
0
70
28
60 20

50

40 21 23

30
10 10
20
15 15
10

0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Other Residential Commercial Industrial Power Vehicle Fuel

Source: Encana, EIA, Statistics Canada

 Natural Gas Future Has Changed
Reserve and Resource Estimates

North American
Resource Estimates
Years of
Supply Tcf
120 3300
91 95
100 2750
82 85
79
80 2200
56
60 1650

40 1100

20 550
Gas Shale Plays
0 0
are Industry Changing PGC EIA/NEB Navigant ICF EIA/NEB PGC
Breakthrough 2006 2007 2008 2008 2009 2009

• 2,600 Tcf of Total Resource Reserves Resource Estimate

• 95+ Year Supply at 75 Bcf/d
• 71+ Year Supply at 100 Bcf/d
(+ 25 Bcf/d for increased usage) • ANGA Supply Study due Q1 2010
expecting ~10-15% uplift in resource estimate
Source: EIA, CSUG, IHS Energy
The Challenge
Modest Commodity Prices for the Foreseeable Future

AECO Strip (as of 2010-06-03)

Historic Forward strip
12.00
11.00
10.00
9.00
$ C / GJ

8.00
7.00
6.00
5.00
4.00
3.00
2.00
Jan-2007 Jun-2008 Oct-2009 Feb-2011 Jul-2012
Encana’s Future Vision
The natural gas economy / demand side management

Abundance of Natural Gas enables an energy plan that

will include…
• Natural gas as preferred fuel for power generation
• Clean, price competitive and improved health benefits
• Addresses large component of emission targets

• Creation of Natural Gas Highways

• New industry creates jobs, government revenue, economic
growth
Competitiveness
Lower 48 States NG Production vs. WCSB
Canada losing ground to US
60 18

17

55 16

15

50 14

13

45 12

EIA WCSB 11

40 10
Ja 5

Ja 6

Ja 7

Ja 8

Ja 9
M 05

M 06

M 07

M 08

M 09

10
Se 5

Se 6

Se 7

Se 8

Se 9
-0

-0

-0

-0

-0
0

0
p-

p-

p-

p-

p-
n-

n-

n-

n-

n-

n-
ay

ay

ay

ay

ay
Ja

Source: Lower 48 is EIA wet gross production, WCSB is IHS Energy

Competitiveness Challenges – Commodity Price Impacts
- Distance from markets
- Increased strength of Canadian dollar
Competitiveness Challenges
Remoteness / limited existing infrastructure
Northwest Territories

Major infrastructure projects

include
ECA c-67-K Field
• Cabin Gas Plant Compressor
Station

• Encana operated
• 800 MMcf/d capacity Kiwigana JV
• Onstream Q3 2012F
• Spectra Fort Nelson
• Reactivation to 1 Bcf/d
• FN North (250 mmscfd)
• Onstream Q2 2012F
• TCPL system extension
Competitiveness Challenges
Remote / challenging environment – Impact on capital costs

Horn River Pad Completion Operation

Industry Addressing the Competitiveness Challenge
Access to Alternative Markets

BC has been proactive in

working with 19 First
Nations along corridor to
gain their support and
provide them with
Economic Development
Opportunities associated
with the project
Industry Addressing the Competitiveness Challenge
Gas factories – optimizing efficiency
Concentrated resource Pad drilling Manufacturing practices Gas factory

• Innovative
• Simultaneous
operations
• Reduce costs
• Improve
efficiencies
• Reduce
environmental
footprint
• Transferable
learnings
across portfolio
Industry Addressing the Competitiveness Challenge
Continuous cost improvements

Well Cost Evolution ($C)

Montney - Per Interval Horn River – Per Interval

$MM/Frac
$MM/Frac
1.50
2.0

0.95
0.79
0.65 0.61 1.0
0.6
2006 2007 2008 2009 2010F 2008 2009 2010F
Industry Addressing the Competitiveness Challenge
Continuous productivity improvements

30 Day Average Initial Production

(MMcfe/d) Montney
MMcfe/d

• Increased frac stages 4.7

5.3

3.9
• Increased stimulation size 3.7

2.1
• Enhanced pay selection
2006 2007 2008* 2009 2010F
*Decrease due to stepping out of core

Horn River

MMcfe/d 11.7
9.1

4.6

2008 2009 2010F

 BC Addressing the Competitiveness Challenge
BC’s aggressive plan is working

• Comprehensive Plan
• Continued strong investment
• Royalties & growth of existing plays
• Net Profit Regime
• Targeted royalty
programs • Emergence of new world class
• Stimulus programs unconventional plays
• Infrastructure support
• Regulatory reform "The Steeprock gas plant
has benefited from
comprehensive B.C.
• Stakeholder engagement programs that have
encouraged investment,
proving yet again that we
have a plan, and that plan is
working to bring jobs and
prosperity to British
Columbia."
British Columbia Premier Gordon Campbell
Environment
 Recognizing the Opportunity
Potential to Gain Market Share

Emissions Level by Fuel Type (lbs/BBtu)

CO2 SO2
250,000 3,000

2,500
200,000
CO2 SO2
2,000
150,000 CO2
1,500
100,000 CO2
SO2 1,000

50,000
500
SO2
0 0
Coal Oil Natural Gas

Source: EIA
 Canada’s Natural Gas Highways
Cleaner, Affordable, Create Jobs, Economic Growth

• Proposed World Leading Clean Energy Transportation Corridors

• East: Quebec City, QC to Windsor, ON and West: Edmonton, AB to
Vancouver, BC
• Industry Partners, Federal and Provincial Governments
Will need Government Assistance to Kick-Start
NRCan Roadmap Process Commenced

Source: Encana Estimates

The Natural Gas Renaissance
Opportunities For Market Growth

• Abundant – 100 years of

supply!

• Affordable - long term price

expected to be in the range of
$6.00-7.00/Mcf

• Clean – reduces greenhouse

gas and toxic emissions!

• Reliable – 100 year history of

widespread societal use

• Domestic Energy Solution –

significant economic
contributions
Thank You!
 Horn River Basin
Emerging Shale Gas Opportunity

ECA Play Statistics

NGIP on EnCana lands: 70-100 Tcf
Frac interval specifics:
• Targeting C$500,000 – C$600,000 cost
• Up to 20 intervals per well
Drill depth: 9,000 feet
Recent well IPs (30-day):
• 8 - 10 MMcf/d
2008 & prior: 16 gross wells (8 net)
2009F: 37 gross wells (18.5 net)
Facilities:
• Compression & dehydration facility commissioned in
Q2 2009
• Cabin Gas Plant – initial phase expected 2012

Horn River Basin Outline

 Horn River 2010 Type Curve
From Infinite to Development Spacing
Gas Rate (gross raw/stage)
1.20
d-D70-J/94-O-8 d-E70-J/94-O-8
d-J70-J/94-O-8 d-F70-J/94-O-8
1.00 b-C76-K/94-O-8 Average 2009 Well
2010 PAR Average TC

0.80
B-C76-K

0.60

0.40

0.20 2009 Average Well 2010 Type Curve

0.00
0 20 40 60 80 100 120 140 160
Cumulative Flow Time (Days)

EUR Per Well Gross Raw

# Fracs/Well EUR Per Frac Gross Raw Bcf/frac
Bcf/well

B-C76-K (10 stage – infinite spacing) 10 1.05 10.5

2009 Average 13.5 avg. 0.81 10.8

2010 TC 21.4 0.75 - 0.89 16 - 19

Horn River Devonian Shale
Decline Rates
100%

80%
% of 1st 30 Day Average

60%

40%

20%

0%
1 4 7 10 13 16 19 22 25 28 31 34
Months On (Month = 30d)

21.4 Stage HRDS Average RSEG Barnett

Steadily Improving Frac Efficiencies
Horn River Basin
2nd 30 Day Average to Fluid Volume and Stages

MMcf/d
Horn River Key Technical Advancements
• Vertical Hz placement staggering
• Longer Hz laterals
• Increased frac stages/well
• Subsurface frac water source
• Debolt:
• Significant non-potable water source
• 2010 water treatment plant
14-Stages / Well (2009) 21+Stages / Well (2010)
16 m

22 m
00

00
Montney
Exciting Development Opportunity

ECA Play Statistics

NGIP on ECA lands: ~70 Tcf
Frac interval specifics:
• ~C$650,000 cost
• Average 8 intervals per well
• As many as 14 intervals per well
Drill depth: 9,000 feet
Well IPs (30-day):
• Up to10 MMcf/d
2010: 40 gross wells
Wells/section: 4 - 8
Facility updates:
• Steeprock gas plant current capacity of 140
MMcf/d, acquired additional 200 MMcf/d
capacity for 2009 – 2011
Type Curve - Dawson Creek Montney
Per Frac Type Curve
Mcfe/d MMcfe
800 Production Rate (Mcfe/d) 400
Cumulative Production (MMcfe)

600 300

400 200

200 100

0 0
0 5 10 15 20 25 30 35 40

Months

Cost: $6.1 MM/well (2010 DCT) EUR: 4-8 Bcfe/well

Expected drilling inventory: 1,200 (P1+C1) Initial rate: 5-10 MMcfe/d (30 day)
*10 Fracs/HZ

All values quoted on a net before royalty basis

 Typical Unconventional Well Production Profile
Core Montney Well Performance
12

10

8
Gas Rate (MMcf/d)

0
0 100 200 300 400 500 600 700
Days on Production

2009 Core Area Type Curve d-A17-H Actual

EnCana Shale Gas Plays
Key Statistics

Haynesville Horn River Montney

ECA Basin Entry Year 2005 2003 2003

ECA Acres (Net) 430,000 220,000 540,000+

Basin Natural Gas in Place

175-225 150-270 50-200
(Bcf/Section)

Average Drill Depth (ft) 12,000 9,000 9,000

Net Pay Thickness (ft) 600 500 100-350

2010 Forecast Wells (Gross) 220 41 40

IP (MMcf/d) 15.0 5.3-8.8 5-10

Supply Cost ($US) 3.27* 3.75 - 4.25 3.25 - 3.75

* - Mean SC from Haynesville Core – November 2009 NARA

The New Encana
Focused on Lowest Supply Costs

Rates of Return at Various NYMEX Gas Prices • Lower long-term natural gas
$/MMBtu price in the $6-7/MMBtu
9.00
range based on 2010F input
costs
8.00
• Price range to rise and
fall with input costs
7.00 Potential
Expected range of movement • Attractive returns due to
natural gas price due to
external optimization and economies
6.00
factors of scale even with lower
long-term price expectations
5.00
Potential impact of future
• Focused on maximizing
portfolio high grading and gas margins (recycle ratio)
4.00 factory evolution
• Expect portfolio high grading
to improve supply costs over
3.00
9% 20% 40% 60% time
After-Tax Rate of Return

Illustrative, based on weighted average of portfolio.