UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 40-F

(Check One)

[  ] Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

[X] Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2011

Commission file number 1-15226

ENCANA CORPORATION

(Exact name of registrant as specified in its charter)

1800-855 2nd Street, S.W., P.O. Box 2850, Calgary, Alberta, Canada  T2P 2S5
(403) 645-2000
(Address and Telephone Number of Registrant’s Principal Executive Offices)

CT Corporation System, 111 8th Avenue, New York, NY  10011
(212) 894-8940
(Name, Address (Including Zip Code) and Telephone Number
(Including Area Code) of Agent For Service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.     None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.     Debt Securities

For annual reports, indicate by check mark the information filed with this Form:

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:  736,327,987

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes  X                        No    

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes                           No    

The Annual Report on Form 40-F shall be incorporated by reference into or as an exhibit to, as applicable, each of the registrant’s Registration Statements under the Securities Act of 1933:  Form F-3 (File No. 333-150453), Form S-8 (File Nos. 333-124218, 333-85598 and 333-140856) and Form F-9 (File No. 333-165626).

FORM 40-F

Principal Documents

The following documents have been filed as part of this Annual Report on Form 40-F, beginning on the following page:

(a)                             Annual Information Form for the fiscal year ended December 31, 2011;

(b)                             Management’s Discussion and Analysis for the fiscal year ended December 31, 2011; and

(c)                              Consolidated Financial Statements for the fiscal year ended December 31, 2011 (Note 27 to the Consolidated Financial Statements contains a reconciliation of those financial statements to United States Generally Accepting Accounting Principles (U.S. GAAP)).

40-F1

Encana Corporation

Annual Information Form

February 23, 2012

This is the annual information form of Encana Corporation (“Encana” or the “Company”) for the year ended December 31, 2011. In this annual information form, unless otherwise specified or the context otherwise requires, reference to “Encana” or to the “Company” includes reference to subsidiaries of and partnership interests held by Encana Corporation and its subsidiaries.

In this annual information form, daily natural gas volumes are referenced in either thousands of cubic feet (“Mcf”) per day (“Mcf/d”), millions of cubic feet (“MMcf”) per day (“MMcf/d”), or billions of cubic feet (“Bcf”) per day (“Bcf/d”).  The term “liquids” is used to represent oil, natural gas liquids (“NGLs”) and condensate.  Daily liquids volumes are referenced in either barrels (“bbls”) per day (“bbls/d”), thousands of barrels (“Mbbls”) per day (“Mbbls/d”) or millions of barrels (“MMbbls”) per day (“MMbbls/d”).

Certain liquids volumes have been converted to thousands of cubic feet equivalent (“Mcfe”), millions of cubic feet equivalent (“MMcfe”) or billions of cubic feet equivalent (“Bcfe”) on the basis of one barrel (“bbl”) to six Mcf. Also, certain natural gas volumes have been converted to barrels of oil equivalent (“BOE”) on the same basis. Mcfe, MMcfe, Bcfe and BOE may be misleading, particularly if used in isolation. An Mcfe, MMcfe or Bcfe 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 wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

On January 1, 2011, Encana adopted International Financial Reporting Standards (“IFRS”) for financial reporting purposes, using a transition date of January 1, 2010. The Company’s annual audited Consolidated Financial Statements for the year ended December 31, 2011, including 2010 required comparative information, have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”). Prior to 2011, the Company prepared its consolidated financial statements in accordance with Canadian generally accepted accounting principles (“previous GAAP”).

Unless otherwise indicated, all financial information included in this annual information form is determined using IFRS, which differ from U.S. generally accepted accounting principles (“U.S. GAAP”). Note 27 to Encana’s annual audited Consolidated Financial Statements for the year ended December 31, 2011 contains a discussion of the principal differences between Encana’s financial results calculated under IFRS and U.S. GAAP.

Readers are directed to the sections titled “Note Regarding Forward-Looking Statements” and “Note Regarding Reserves Data and Other Oil and Gas Information”.

Unless otherwise specified, all dollar amounts are expressed in United States (“U.S.”) dollars, all references to “dollars”, “$” or to “US$” are to U.S. dollars and all references to “C$” are to Canadian dollars.  All proceeds from divestitures are provided on a before-tax basis.

Encana Corporation is incorporated under the Canada Business Corporations Act (“CBCA”). Its executive and registered office is located at 1800, 855 - 2nd Street S.W., Calgary, Alberta, Canada T2P 2S5.

On November 30, 2009, Encana completed a corporate reorganization (the “Split Transaction”) to split into two independent publicly traded energy companies – Encana and Cenovus Energy Inc. (“Cenovus”). In conjunction with the Split Transaction, Encana’s articles were amended to make certain changes to its share capital. Further information on the Company’s share capital is disclosed under “Description of Share Capital”.

The following table presents the name, the percentage of voting securities owned and the jurisdiction of incorporation, continuance or formation of Encana’s principal subsidiaries and partnerships as at December 31, 2011. Each of these subsidiaries and partnerships had total assets that exceeded 10 percent of Encana’s total consolidated assets or annual revenues that exceeded 10 percent of Encana’s total consolidated annual revenues as at December 31, 2011.

The above table does not include all of the subsidiaries and partnerships of Encana. The assets and annual revenues of unnamed subsidiaries and partnerships in the aggregate did not exceed 20 percent of Encana’s total consolidated assets or total consolidated annual revenues as at December 31, 2011.

As a general matter, Encana reorganizes its subsidiaries as required to maintain proper alignment of its business, operating and management structures.

Encana was formed in 2002 through the business combination of Alberta Energy Company Ltd. (“AEC”) and PanCanadian Energy Corporation (“PanCanadian”). On November 30, 2009, Encana completed the Split Transaction which resulted in two independent publicly traded energy companies – Encana and Cenovus.

Encana is a leading North American energy producer that is focused on growing its strong portfolio of diverse resource plays producing natural gas, oil and NGLs. Encana’s other operations include the transportation and marketing of natural gas, oil and NGLs.  All of Encana’s reserves and production are located in North America.

Encana employs a decentralized decision making structure and is currently divided into two operating divisions. The operating divisions are:

·             Canadian Division includes the exploration for, development of, and production of natural gas, oil and NGLs and other related activities within Canada. Four key resource plays are located in the Division: (i) Greater Sierra in northeast British Columbia, including Horn River; (ii) Cutbank Ridge in Alberta and British Columbia, including Montney; (iii) Bighorn in west central Alberta; and (iv) Coalbed Methane (“CBM”) in southern Alberta. The Canadian Division also includes the Deep Panuke natural gas project offshore Nova Scotia.

·             USA Division includes the exploration for, development of, and production of natural gas, oil and NGLs and other related activities within the U.S. Four key resource plays are located in the Division: (i) Jonah in southwest Wyoming; (ii) Piceance in northwest Colorado; (iii) Haynesville in Louisiana; and (iv) Texas, including East Texas and North Texas.

Encana’s proprietary production is substantially sold by the Midstream, Marketing & Fundamentals team, which is focused on enhancing the Company’s netback price. Midstream, Marketing & Fundamentals manages Encana’s market optimization activities, which include third-party purchases and sales of product to provide operational flexibility for transportation commitments, product type, delivery points and customer diversification.

Encana’s Natural Gas Economy team focuses on pursuing the development of expanded natural gas markets in North America, particularly within the areas of power generation, transportation and industrial applications. Due to the technical breakthroughs which have enhanced natural gas extraction, the commercial resource in North America has grown to a historical high. This abundance improves the longer term affordability and reliability of natural gas for these potential markets. In addition, increased use of natural gas has the potential to yield lower greenhouse gas and volatile organic compound emissions as compared to other fossil fuel use.

For 2011 financial reporting purposes, Encana’s reportable segments were: (i) Canada; (ii) USA; (iii) Market Optimization; and (iv) Corporate and Other. Corporate and Other is not an operating segment and mainly includes unrealized gains or losses recognized on derivative financial instruments. Once the instruments are settled, the realized gains and losses are recognized in the operating segment to which the derivative instruments relate.

Significant events which contributed to the development of Encana’s business over the last three years included the following:

2011

·             Acquired various strategic exploration and evaluation lands and properties which complement existing assets within Encana’s portfolio, totaling $515 million. Land capture included additional acreage with potential oil and natural gas streams with associated liquids.

·           Completed planned divestitures for total proceeds of $891 million of Encana’s interest in the Cabin natural gas processing plant in British Columbia, the Fort Lupton natural gas processing plant in Colorado and the South Piceance natural gas gathering assets in Colorado.

·           Closed the majority of the sale of its North Texas natural gas producing assets for proceeds of $836 million. On February 7, 2012, Encana received additional proceeds of $91 million. The remainder of the sale, for proceeds of approximately $24 million, is subject to completion of additional closing conditions and is expected to close in the first quarter of 2012.

·             Agreed to sell two natural gas processing plants in the Cutbank Ridge area of British Columbia for approximately C$920 million. The sale closed on February 9, 2012 and the proceeds were received.

·            Entered into negotiations with Mitsubishi Corporation (“Mitsubishi”) to jointly develop certain undeveloped lands owned by Encana. On February 17, 2012, Encana announced that the Company and Mitsubishi had entered into a partnership agreement for the development of Cutbank Ridge lands in British Columbia. Under the agreement, Mitsubishi will invest approximately C$2.9 billion for a 40 percent interest in the partnership. The transaction is expected to close by the end of February 2012.

·            Entered into deep cut processing arrangements, which will allow the Company to extract additional NGL volumes from its natural gas streams starting in 2012 at the Musreau and Gordondale plants in the Alberta Deep Basin.

·             Acquired a 30 percent interest in the planned Kitimat liquefied natural gas (“LNG”) export terminal in British Columbia.

·            Entered into an agreement to be the sole LNG fueling supplier to a fleet of 200 LNG heavy-duty trucks in Louisiana through its mobile and permanent LNG fueling stations and opened four compressed natural gas fueling stations.

·            Ended negotiations with PetroChina International Investment Company, a subsidiary of PetroChina Company Limited (“PetroChina”), for a proposed joint venture concerning a 50 percent interest in Encana’s Cutbank Ridge business assets after the parties were unable to achieve substantial alignment with respect to key elements of the proposed transaction. Negotiations with PetroChina commenced in 2010.

2010

·            Entered into farm-out agreements with Kogas Canada Ltd., a subsidiary of Korea Gas Corporation (“Kogas”), which agreed to invest approximately C$565 million over three years to earn a 50 percent interest in approximately 154,000 acres of land in Horn River and Montney in the Greater Sierra and Cutbank Ridge key resource plays. In 2011, Encana extended a farm-out agreement with Kogas for an additional investment of C$185 million for approximately 20,000 additional acres.

·             Acquired various strategic lands and properties that complement existing assets within Encana’s portfolio. In 2010, acquisitions were $592 million in the Canadian Division and $141 million in the USA Division.

·             Completed the divestiture of non-core assets for proceeds of approximately $288 million in the Canadian Division and $595 million in the USA Division.

2009

·             Completed the Split Transaction on November 30, 2009, resulting in Encana and Cenovus. The Split Transaction was initially proposed in May 2008 and was designed to enhance long-term value for shareholders by creating two independent and sustainable companies. In October 2008, due to an unusually high level of uncertainty and volatility in the global debt and equity markets, Encana delayed seeking shareholder and court approval for the Split Transaction until there were clear signs that the global financial markets had stabilized. In September 2009, Encana announced plans to proceed with the split.

In connection with the Split Transaction, Encana entered into an Arrangement Agreement with Cenovus and another subsidiary of Encana dated October 20, 2009 and a Separation and Transition Agreement with Cenovus dated November 20, 2009. The Arrangement Agreement set out the terms and conditions to the arrangement, including the plan of arrangement. The Separation and Transition Agreement set out the mechanics for the separation of the businesses including the dividing of assets, assumption of liabilities and matters governing certain ongoing relationships between Encana and Cenovus, including reciprocal indemnities with respect to the assets and liabilities kept by Encana or transferred to Cenovus.

·             Completed the divestiture of mature conventional oil and natural gas assets for proceeds of approximately $1,000 million in the Canadian Division, $73 million in the USA Division and $17 million related to the Canadian upstream assets transferred to Cenovus.

The following map outlines the location of Encana’s North American landholdings and key resource plays as at December 31, 2011.

Encana’s operations are focused on exploiting North American long-life natural gas and oil formations. Encana attempts to identify early-stage, geographically expansive hydrocarbon-charged basins and then assembles a large land position to try to capture core resource opportunities. Encana then focuses on determining cost efficient means for extracting natural gas, oil, and NGLs through a combination of detailed reservoir studies and pilot testing available and emerging drilling and completions technologies. Encana’s manufacturing-style development approach extends over many years. Capital and operating efficiencies are pursued on an ongoing basis and applied across Encana’s expansive portfolio.

Encana’s operations are primarily located in Canada and the U.S. All of Encana’s reserves and production are located in North America.

The Canadian Division includes the exploration for, development of, and production of, natural gas, oil and NGLs and other related activities within Canada. Four key resource plays are located in the Division: (i) Greater Sierra in northeast British Columbia, including Horn River; (ii) Cutbank Ridge in Alberta and British Columbia, including Montney; (iii) Bighorn in west central Alberta; and (iv) CBM in southern Alberta. The Canadian Division also includes the Deep Panuke natural gas project offshore Nova Scotia.

In 2011, the Canadian Division had total capital investment in Canada of approximately $2,022 million and drilled approximately 727 net wells. As at December 31, 2011, the Canadian Division had an established land position in Canada of approximately 10.1 million gross acres (8.5 million net acres), including approximately 5.2 million gross undeveloped acres (4.4 million net acres). The mineral rights on approximately 42 percent of the total net acreage are owned in fee title by Encana, which means that the mineral rights are held by Encana in perpetuity and production is subject to a mineral tax that is generally less than the Crown royalty imposed on production from land where the government owns the mineral rights.

The Canadian Division’s 2011 natural gas production after royalties averaged approximately 1,454 MMcf/d, an increase over 2010 of approximately 131 MMcf/d, or 10 percent.  Oil and NGL production after royalties averaged approximately 14.5 Mbbls/d for 2011, an increase over 2010 of approximately 1.3 Mbbls/d, or 10 percent.  The increase in natural gas, oil and NGL production was primarily due to successful drilling programs across all key resource plays.

The following tables summarize the Canadian Division landholdings, producing wells and daily production as at and for the periods indicated.  In 2011, Encana realigned the producing assets contained in some of its key resource plays.

Notes:

(1)       Figures exclude wells capable of producing, but not producing.

Note:

(1)       Key resource play areas were realigned in 2011, with comparative information restated.

Note:

(1)          Key resource play areas were realigned in 2011, with comparative information restated.

Key Resource Plays and Activities in the Canadian Division

Greater Sierra

Greater Sierra is a key resource play located in northeast British Columbia. The primary focus is on the continued development of the Devonian Jean Marie formation and the Horn River Devonian shale formation. In 2011, Encana drilled approximately 34 net wells in the area and production after royalties averaged approximately 260 MMcf/d of natural gas and approximately 0.8 Mbbls/d of oil and NGLs.

At December 31, 2011, Encana controlled approximately 373,000 gross undeveloped acres (272,000 net acres) in the Devonian shale formation of Horn River in northeast British Columbia. Horn River formation shales (Muskwa, Otter Park and Evie) within Encana’s focus area are upwards of 500 feet thick. At December 31, 2011, these shales have been evaluated with approximately 112 gross wells (11 vertical and 101 horizontal), 70 of which have been placed on long-term production (1 vertical and 69 horizontal). At December 31, 2011, Encana held an average 76 percent working interest in 10 production facilities in the area that were capable of processing approximately 726 MMcf/d of natural gas.

In November 2011, Encana sold its working interest in the Ekwan pipeline to TransCanada Pipelines Limited (“TCPL”) following the National Energy Board’s approval of TCPL’s pipeline in the Horn River area. TCPL’s pipeline will interconnect the Horn River area to its Alberta pipeline system. As part of the transfer agreement with TCPL, Encana will continue to have gathering capacity on the Ekwan pipeline.

In December 2011, Encana completed the sale of the majority of its interest in the Cabin natural gas processing plant in the Horn River area for proceeds of approximately $48 million, net of amounts recovered for capital expenditures incurred prior to the sale of the plant. Encana remains the operator of the Cabin plant. As part of the sale agreement, Encana will have processing capacity at the Cabin plant.

Cutbank Ridge

Cutbank Ridge is a key resource play located in the Canadian Rocky Mountain foothills, southwest of Dawson Creek, British Columbia. Key producing horizons in Cutbank Ridge include the Montney, Cadomin and Doig formations. Montney and Cadomin are almost exclusively being developed with horizontal well technology. Significant improvements have been achieved with respect to horizontal well completions with the application of multi-stage hydraulic fracturing. In 2011, Encana drilled approximately 55 net wells in the area and production after royalties averaged approximately 529 MMcf/d of natural gas and approximately 3.2 Mbbls/d of oil and NGLs.

At December 31, 2011, Encana controlled approximately 724,000 net acres covering the deep basin Montney formation, with approximately 252,000 net acres located within Encana’s core development area near Dawson Creek, British Columbia. Encana has tested Montney extensively over the last several years and by applying advanced technology has reduced overall development costs significantly, achieving a greater than 65 percent reduction in costs on a completed interval basis over the past five years.

Encana holds a 60 percent working interest in the Sexsmith gas plant, which has sour gas processing capacity of approximately 125 MMcf/d and an additional 50 MMcf/d of sweet gas processing capacity.

In December 2011, Encana announced the sale of its interest in the Hythe and Steeprock natural gas processing plants, including compression and associated gathering pipelines, for proceeds of approximately C$920 million. The natural gas plants had sour gas processing capacity of approximately 374 MMcf/d with an additional 142 MMcf/d of sweet gas processing capacity. The sale of the natural gas processing plants closed on February 9, 2012 and the proceeds were received. As part of the sale, Encana has entered into an agreement for firm gathering and processing services in the Cutbank Ridge area.

During 2011, Encana entered into negotiations with Mitsubishi to jointly develop certain undeveloped lands owned by Encana. On February 17, 2012, Encana announced that the Company and Mitsubishi had entered into a partnership agreement for the development of Cutbank Ridge lands in British Columbia. Under the agreement, Encana will own 60 percent and Mitsubishi will own 40 percent of the partnership. Mitsubishi will pay approximately C$1.45 billion on closing and will invest approximately C$1.45 billion in addition to its 40 percent of the partnership’s future capital investment for a commitment period, which is expected to be about five years, thereby reducing Encana’s capital funding commitments to 30 percent of the total expected capital investment over that period. The transaction does not include any of Encana’s current Cutbank Ridge production, processing plants, gathering systems or the Company’s Alberta landholdings. The transaction is expected to close by the end of February 2012.

In 2010, Encana signed a deep cut processing agreement securing approximately 90 MMcf/d of firm processing capacity at Gordondale. The agreement allows the Company to extract NGLs from its natural gas stream.  The addition of deep cut facilities in Gordondale, expected to come on-stream in 2012, will provide additional capacity for Encana’s NGL extraction initiative.

Bighorn

Bighorn is a key resource play in west central Alberta. The primary focus is on exploiting multi-zone stacked Cretaceous sands in the Deep Basin. The primary properties in Bighorn are Resthaven, Kakwa, Redrock and Berland. In 2011, Encana drilled approximately 40 net wells in the area and production after royalties averaged approximately 230 MMcf/d of natural gas and approximately 3.5 Mbbls/d of oil and NGLs. At December 31, 2011, Encana controlled approximately 514,000 gross acres (384,000 net acres) in the resource play.

Encana has a working interest in a number of natural gas plants within Bighorn. The Resthaven plant, in which Encana has an approximately 70 percent working interest, has a capacity of approximately 100 MMcf/d. In October 2011, Encana signed an agreement that is expected to result in an unrelated third-party investing approximately $230 million to expand the Resthaven plant’s processing and NGL extraction capacity. The expansion is scheduled to come on-stream in late 2013.

Encana owns 50 percent of the Kakwa gas plant and has firm processing capacity for the remaining 50 percent. The plant has a capacity of approximately 60 MMcf/d. Encana also holds a 24 percent working interest in the Berland River plant, which has a capacity of approximately 165 MMcf/d.

In 2010, Encana signed a deep cut processing agreement securing approximately 144 MMcf/d of firm processing capacity at Musreau. The agreement allows the Company to extract NGLs from its natural gas stream. In 2011, Encana expanded its deep cut facilities at Musreau, which are expected to come on-stream in the first quarter of 2012.

CBM

CBM is a key resource play that extends from the U.S. border to central Alberta. The primary focus of Encana’s CBM key resource play is the development of the Horseshoe Canyon coals integrated with shallower sands, as well as exploiting deeper targets using an integrated wellbore strategy.  Additionally, multiple oil horizons are also being tested on fee title lands through farm-outs with third parties. In 2011, Encana drilled approximately 596 net wells in the area and production after royalties averaged approximately 433 MMcf/d of natural gas and 7.0 Mbbls/d of oil and NGLs.

At December 31, 2011, Encana controlled approximately 4.6 million net acres with approximately 2.1 million net acres on the Horseshoe Canyon trend. Approximately 77 percent of the total net acreage landholdings are owned in fee title.

Atlantic Canada

Encana is the owner and operator of the Deep Panuke gas field, located offshore Nova Scotia. The Deep Panuke natural gas project involves the installation of the facilities required to produce natural gas from the field, located approximately 250 kilometres southeast of Halifax (on the Scotian shelf). Produced gas will be transported to shore by subsea pipeline and Encana will transport this natural gas via the Maritimes & Northeast Pipeline to a delivery point in eastern Canada. Work has been progressing in anticipation of first production in mid-2012.

At December 31, 2011, Encana held an interest in approximately 76,000 gross acres (32,000 net acres) in Atlantic Canada, which includes Nova Scotia and Newfoundland and Labrador. Encana operates six of its nine licenses in these areas and has an average working interest of approximately 42 percent.

Other

At December 31, 2011, Encana held an interest in approximately 513,000 gross acres (373,000 net acres) in the Duvernay Shale play in Alberta, consisting of potential natural gas streams with associated liquids.  In 2012, the Company plans to drill five net evaluation wells in the area.

The USA Division includes the exploration for, development of, and production of, natural gas, oil and NGLs and other related activities within the U.S. Four key resource plays are located in the Division: (i) Jonah in southwest Wyoming; (ii) Piceance in northwest Colorado; (iii) Haynesville in Louisiana; and (iv) Texas, including East Texas and North Texas.

In 2011, the USA Division had total capital investment of approximately $2,423 million and drilled approximately 402 net wells. As at December 31, 2011, the USA Division had an established land position of approximately 2.8 million gross acres (2.4 million net acres), including approximately 2.2 million gross undeveloped acres (1.9 million net acres).

The USA Division’s 2011 natural gas production after royalties averaged approximately 1,879 MMcf/d, an increase over 2010 of approximately 18 MMcf/d. The increase was due to operational success in Haynesville, partially offset by net divestitures and natural declines. The USA Division’s 2011 oil and NGL production after royalties averaged approximately 9.5 Mbbls/d, consistent with 2010 volumes.

The following tables summarize the USA Division landholdings, producing wells and daily production as at and for the periods indicated.  In 2011, Encana realigned the producing assets contained in some of its key resource plays.

Producing Wells

Notes:

(1)          Figures exclude wells capable of producing, but not producing.

Note:

(1)          Key resource play areas were realigned in 2011, with comparative information restated.

Note:

(1)          Key resource play areas were realigned in 2011, with comparative information restated.

Key Resource Plays and Activities in the USA Division

Jonah

Jonah is a key resource play located in the Green River Basin in southwest Wyoming. Production is from the Lance formation, which contains vertically stacked sands that exist at depths between 8,500 and 13,000 feet. In 2011, Encana drilled approximately 71 net wells within the core area and production after royalties averaged approximately 471 MMcf/d of natural gas and approximately 4.3 Mbbls/d of oil and NGLs.

In 2011, Encana finalized a joint venture agreement under which Encana has drilled approximately 19 net wells utilizing third-party funds. For the period of 2012 to 2015, Encana expects to drill approximately 59 net wells, which will be partially funded by third parties under existing agreements.

At December 31, 2011, Encana controlled approximately 117,000 gross undeveloped acres (104,000 net acres). Historically, Encana’s operations have been conducted in the over-pressured core portion of the field. Development in the adjacent normally pressured lands began in 2008 and has continued through 2011. Within the over-pressured area, Encana plans to drill the field to ten acre spacing with higher densities in some areas. Outside of the over-pressured area, Encana owns approximately 114,000 gross undeveloped acres, where 40 acre and possibly 20 acre drilling potential exists.

Piceance

Piceance is a key resource play located in northwest Colorado. The basin is characterized by thick natural gas accumulations primarily in the Williams Fork formation. In addition to Williams Fork, Encana has begun exploration drilling in the Niobrara formation, a thick shale predominant throughout the basin. In 2011, Encana drilled approximately 141 net wells and production after royalties averaged approximately 435 MMcf/d of natural gas and approximately 1.9 Mbbls/d of oil and NGLs. At December 31, 2011, Encana controlled approximately 638,000 gross undeveloped acres (589,000 net acres).

Between 2006 and 2011, Encana finalized 11 agreements to jointly develop portions of Piceance. During 2011, Encana drilled approximately 120 net wells primarily utilizing third-party funds. For the period of 2012 to 2017, it is expected that Encana will drill approximately 703 net wells which will be partially funded by third parties under existing agreements.

During 2011, Encana completed the sale of the South Piceance natural gas gathering assets for proceeds of approximately $547 million. Under the sale agreement, Encana will continue to have access to gathering services. The Company’s remaining compression and processing facilities in Piceance include approximately 1,444 kilometres of pipelines and a processing facility with a capacity of approximately 60 MMcf/d. In addition, Encana has access to third-party processing facilities within Piceance.

Texas

Texas is a key resource play with current operations primarily located in East Texas. Operations in East Texas are characterized as a gas play containing tight gas with multi-zone targets in the Bossier and Cotton Valley zones, as well as shale gas in the Haynesville and Mid-Bossier horizons.

In December 2011, Encana closed the majority of the sale of its North Texas natural gas producing assets from the Barnett shale in the Forth Worth Basin for proceeds of $836 million.  On February 7, 2012, Encana received additional proceeds of $91 million. The remainder of the sale, for proceeds of approximately $24 million, is subject to completion of additional closing conditions and is expected to close in the first quarter of 2012.

In 2011, Encana drilled approximately 41 net wells in Texas and production after royalties averaged approximately 376 MMcf/d of natural gas and approximately 0.3 Mbbls/d of oil and NGLs.  In 2011, production after royalties for the North Texas producing assets disposed of totaled approximately 90 MMcf/d of natural gas and approximately 0.2 Mbbls/d of oil and NGLs. At December 31, 2011, Encana controlled approximately 238,000 gross undeveloped acres (171,000 net acres).

Haynesville

The Haynesville shale is a key resource play located in Louisiana. Encana drilled its first wells in 2006 and has continued to develop the lands using a multi-well pad approach in key areas. Encana has entered into joint venture agreements with unrelated third parties to explore and develop the assets in this area.

In 2011, Encana drilled approximately 87 net wells in the area and production after royalties averaged approximately 508 MMcf/d of natural gas. The majority of the development activity in the area focuses on the maximization of gas recovery in Haynesville and Mid-Bossier horizons.

At December 31, 2011, Encana controlled approximately 201,000 gross undeveloped acres (121,000 net acres), with the majority of the leaseholds in North Louisiana being located in the DeSoto and Red River parishes. Certain Haynesville undeveloped acreage is subject to leases that will expire over the next several years unless production is established on the acreage held.

Other Activity

Encana has established a significant land position in the Collingwood/Utica shale play located in Michigan. At December 31, 2011, Encana controlled approximately 430,000 net undeveloped acres. Encana successfully drilled and completed two net horizontal wells in 2011, with an effective horizontal length ranging between 5,300 feet and 7,500 feet.

In 2011, Encana established a significant land position in the Tuscaloosa Marine Shale oil play located in Louisiana and Mississippi, and holds approximately 212,000 net acres in this play as at December 31, 2011. Encana successfully completed two horizontal wells, with effective horizontal lengths of approximately 5,000 feet and 7,500 feet, respectively. In 2012, the Company plans to drill six gross evaluation wells in the area.

Encana holds approximately 48,000 net acres in the DJ Basin located in Northern Colorado.  The primary formation targets in the basin are the Codell, J-Sand and the Niobrara, the latter consisting of potential natural gas streams with associated liquids.  In 2011, Encana successfully drilled and completed five horizontal wells in the Niobrara to test the economic feasibility of the formation.  Additional wells are planned for 2012 to help define lateral orientation and length. In 2012, the Company plans to drill 10 gross evaluation wells in the area.

Market Optimization activities are managed by Encana’s Midstream, Marketing & Fundamentals team, which is responsible for the sale of, and is focused on enhancing the netback price of, the Company’s proprietary production. Market Optimization activities include third-party purchases and sales of product to provide operational flexibility for transportation commitments, product type, delivery points and customer diversification.

Natural Gas Marketing

Encana’s produced natural gas is primarily marketed to local distribution companies, industrials, other producers and energy marketing companies. Prices received by Encana are based primarily upon prevailing index prices for natural gas in the region in which it is sold. Prices are impacted by regional supply and demand for natural gas and by competing fuels in such markets.

Encana seeks to mitigate the market risk associated with future cash flows by entering into various risk management contracts relating to produced natural gas.  Details of those contracts related to Encana’s various risk management positions are found in Note 22 to Encana’s audited Consolidated Financial Statements for the year ended December 31, 2011 which are available via the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) at www.sec.gov.

Other Marketing Activities

Encana sells its oil, NGLs and condensate to markets in Canada and the U.S.  Sales are normally executed under spot, monthly evergreen and term contracts with delivery to major pipeline/sales hubs at current market prices. In addition, Encana holds interests in two power assets, the Cavalier and Balzac Power Stations, to optimize its electricity costs, particularly in Alberta.

Delivery Commitments

As part of ordinary business operations, Encana has a number of delivery commitments to provide natural gas under existing contracts and agreements. The majority of Encana’s production is sold under short term contracts at the relevant market price at the time that the product is sold. As at December 31, 2011, Encana had no material long term physical sales contracts or delivery contracts.

Former operations include the Canadian upstream assets and the U.S. downstream refining assets that were transferred to Cenovus as part of the Split Transaction on November 30, 2009.

The Canadian upstream assets transferred to Cenovus included established natural gas development and production activities in southern Alberta and southern Saskatchewan, oil development and production activities in Alberta and Saskatchewan as well as exploration for, and development and production of bitumen using enhanced oil recovery methods in Alberta.  The five key resource plays included in these assets were: (i) Shallow Gas in southeast Alberta and Saskatchewan; (ii) Pelican Lake in northeast Alberta; (iii) Weyburn in Saskatchewan; (iv) Foster Creek in northeast Alberta; and (v) Christina Lake in northeast Alberta. The Foster Creek and Christina Lake enhanced oil recovery projects were part of an integrated oil business with ConocoPhillips.

During 2009 and prior to the Split Transaction, Encana drilled approximately 639 net wells on the Canadian upstream properties transferred to Cenovus.  Natural gas production after royalties was approximately 762 MMcf/d and oil and NGL production after royalties was approximately 99.9 Mbbls/d.

The U.S. downstream refining assets transferred to Cenovus focused on the refining of oil into petroleum and chemical products at the Borger refinery located in Borger, Texas and the Wood River refinery located in Roxana, Illinois. The refineries were part of an integrated oil business with ConocoPhillips. The refineries were 50 percent owned by Encana and operated by ConocoPhillips.

In 2009, under previous GAAP, the Canadian upstream assets transferred to Cenovus were reported as continuing operations under full cost accounting, while the U.S. downstream refining results were reported as discontinued operations.

Encana is required to provide reserves data prepared in accordance with Canadian securities regulatory requirements, specifically National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).  Certain reserves and oil and gas information in accordance with Canadian disclosure requirements are contained in Appendix A – Canadian Protocol Disclosure of Reserves Data and Other Oil and Gas Information. Additional disclosure required by NI 51-101 is included in the preceding sections of this annual information form, and referenced accordingly herein.  Select supplemental reserves and other oil and gas information disclosure is provided in accordance with U.S. disclosure requirements in Appendix D – U.S. Protocol Disclosure of Reserves Data and Other Oil and Gas Information. See “Note Regarding Reserves Data and Other Oil and Gas Information”.

The practice of preparing production and reserve quantities data under Canadian disclosure requirements (NI 51-101) differs from the U.S. reporting requirements. The primary differences between the two reporting requirements include:

Since its formation in 2002, Encana has retained independent qualified reserves evaluators (“IQREs”) to evaluate and prepare reports on 100 percent of Encana’s natural gas, oil and NGL reserves annually. In 2011, Encana’s Canadian reserves were evaluated by McDaniel & Associates Consultants Ltd. and GLJ Petroleum Consultants Ltd., and its U.S. reserves were evaluated by Netherland, Sewell & Associates, Inc. and DeGolyer and MacNaughton.

Encana’s Vice-President, Corporate Reserves & Competitor Analysis and six other staff under this individual’s direction oversee the preparation of the reserves estimates by the IQREs. Currently this internal staff of four professional engineers, an engineering technologist and two business analysts have combined relevant experience of over 100 years. The Vice-President and other engineering staff are all members of the appropriate provincial or state professional associations and are members of various industry associations such as the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers.

Encana has a Reserves Committee of independent board members which reviews the qualifications and appointment of the IQREs. The Reserves Committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon annual evaluations by the IQREs. Annually, the Reserves Committee recommends the selection of IQREs to the Board of Directors for its approval.

The evaluations by the IQREs are conducted from the fundamental petrophysical, geological, engineering, financial and accounting data. Processes and procedures are in place to ensure that the IQREs are in receipt of all relevant information. Reserves are estimated based on material balance analysis, decline analysis, volumetric calculations or a combination of these methods, in all cases having regard to economic considerations. In the case of producing reserves, the emphasis is on decline analysis where volumetric analysis is considered to limit forecasts to reasonable levels. Non-producing reserves are estimated by analogy to producing offsets, with consideration of volumetric estimates of in place quantities.

Encana’s growth in recent years has been achieved through a combination of internal growth and acquisitions. Encana has a large inventory of internal growth opportunities and also continues to examine select acquisition opportunities to develop and expand its key resource plays. The acquisition opportunities may include corporate or asset acquisitions. Encana may finance any such acquisitions with debt, equity, cash generated from operations, proceeds from asset divestitures or a combination of any of these sources.

The following table summarizes Encana’s net capital investment for 2011 and 2010.  Proceeds from divestitures that remain subject to additional closing conditions as at December 31, 2011 are not included.

Capital investment during 2011 was focused on continued development of Encana’s key resource plays. Acquisitions primarily included the purchase of various strategic exploration and evaluation lands and properties that complement existing assets within Encana’s portfolio.

Divestitures for 2011 in the Canadian Division included the proceeds from the sale of the Company’s interest in the Cabin natural gas processing plant. Divestiture proceeds in the USA Division resulted primarily from the sale of the Company’s interest in the Fort Lupton natural gas processing plant, the South Piceance natural gas gathering assets and the North Texas natural gas producing properties.

All aspects of the oil and gas industry are highly competitive and Encana actively competes with upstream natural gas and other companies, particularly in the following areas:

·     Exploration for and development of new sources of natural gas, oil and NGL reserves;

·     Reserves and property acquisitions;

·     Transportation and marketing of natural gas, oil, NGLs, diluents and electricity;

·     Access to services and equipment to carry out exploration, development and operating activities; and

·     Attracting and retaining experienced industry personnel.

The oil and gas industry also competes with other industries focused on providing alternative forms of energy to consumers. Competitive forces can lead to cost increases or result in an oversupply of natural gas, oil or NGLs, each of which could have a negative impact on Encana’s financial results.

Encana’s operations are subject to laws and regulations concerning pollution, protection of the environment and the handling and transportation of hazardous materials. These laws and regulations generally require Encana to remove or remedy the effect of its activities on the environment at present and former operating sites, including dismantling production facilities and remediating damage caused by the use or release of specified substances.

The Corporate Responsibility, Environment, Health and Safety Committee of Encana’s Board of Directors reviews and recommends environmental policy to the Board of Directors for approval and oversees compliance with government laws and regulations. Monitoring and reporting programs for environmental, health and safety (“EH&S”) performance in day-to-day operations, as well as inspections and assessments, are designed to provide assurance that environmental and regulatory standards are met. Contingency plans are in place for a timely response to an environmental event and remediation/reclamation programs are in place and utilized to restore the environment.

Encana monitors developments in emerging climate change policy and legislation, and considers the associated costs of carbon in its strategic planning. The Corporate Responsibility, Environment, Health and Safety Committee of Encana’s Board of Directors reviews the impact of a variety of carbon constrained scenarios on Encana’s strategy with a current price range from approximately $10 to $50 per tonne of emissions, applied to a range of emissions coverage levels.

Encana expects to incur abandonment and site reclamation costs as existing oil and gas properties are abandoned and reclaimed. In 2011, expenditures for normal compliance with environmental regulations as well as expenditures beyond normal compliance were not material. Based on Encana’s current estimate, the total anticipated undiscounted future cost of abandonment and reclamation costs to be incurred over the life of the reserves is estimated at approximately $4.4 billion. As at December 31, 2011, Encana has recorded an asset retirement obligation of $1,043 million.

Encana has a Corporate Responsibility Policy, an Environment Policy and a Health & Safety Policy (the “Policies”) that articulate Encana’s commitment to responsible development. The Policies apply to any activity undertaken by or on behalf of Encana, anywhere in the world, associated with the finding, development, production, transmission and storage of the Company’s products including decommissioning of facilities, marketing and other business and administrative functions. The Corporate Responsibility Policy articulates Encana’s commitment to conducting its business ethically, legally and in a manner that is fiscally, environmentally and socially responsible, while delivering strong financial performance. The Corporate Responsibility Policy has specific requirements in areas related to governance, people, environment, health and safety, engagement, and community involvement.

With respect to Encana’s relationship with the communities in which it does business, the Corporate Responsibility Policy states that Encana will: strive to be a good neighbour by contributing to the well-being of the communities where it operates, recognizing their differing priorities and needs; engaging, listening and working with stakeholders in a timely, respectful and meaningful way; and aligning its community investments with its business strategy and seek to provide mutually beneficial relationships with the community and non-governmental organizations.

With respect to human rights, the Corporate Responsibility Policy states that Encana will abide by all applicable workplace, employment, privacy and human rights legislation.  In addition, Encana will provide a respectful, inclusive workplace free from harassment, discrimination and intimidation.

The Environment Policy recognizes that responsible environmental practices contribute to long-term shareholder value creation and articulates Encana’s commitment to environmental stewardship. The Environment Policy outlines specific requirements in areas related to: compliance with environmental laws and regulations; environmental risk assessment and mitigation; air emissions management; water sourcing, handling and disposal; pollution prevention and waste minimization; and habitat, plant and wildlife disturbance.

The Health & Safety Policy recognizes that all occupational injuries and illnesses are preventable and states Encana’s goal of achieving a workplace free of recognized hazards, occupational injuries and illnesses.

The Policies and any revisions are approved by Encana’s Executive Team and its Board of Directors. Accountability for implementation of the Policies is at the operational level within Encana’s business units. Business units have established processes to evaluate risks and programs have been implemented to minimize those risks. Coordination and oversight of the Policies resides with the EH&S, Security and Corporate Responsibility Group within Corporate Development, EH&S and Reserves.

Some of the steps that Encana has taken to embed the corporate responsibility approach throughout the organization include:

In addition, Encana’s Board of Directors approves such policies, and is advised of significant contraventions thereof, and receives updates on trends, issues or events which could have a significant impact on the Company.

At December 31, 2011, Encana employed 4,276 full time equivalent employees (“FTE”) as set forth in the following table.

The Company also engages a number of contractors and service providers.

As at December 31, 2011, all of Encana’s reserves and production were located in North America, which limits Encana’s exposure to risks and uncertainties in countries considered politically and economically unstable. Any operations and related assets outside North America may be adversely affected by changes in governmental policy, social instability or other political or economic developments which are not within the control of Encana, including the expropriation of property, the cancellation or modification of contract rights and restrictions on repatriation of cash.

The following information is provided for each director and executive officer of Encana as at the date of this annual information form.

Notes:

(1)          Denotes the year each individual became a director of Encana or one of its predecessor companies (AEC or PanCanadian).

(2)          Member of Audit Committee.

(3)          Member of Corporate Responsibility, Environment, Health and Safety Committee.

(4)          Member of Human Resources and Compensation Committee.

(5)          Member of Nominating and Corporate Governance Committee.

(6)          Member of Reserves Committee.

(7)          Ex officio non-voting member of all other committees. As an ex officio non-voting member, Mr. O’Brien attends as his schedule permits and may vote when necessary to achieve a quorum.

(8)          As an officer of Encana and a non-independent director, Mr. Eresman is not a member of any Board committees.

(9)          Mr. Harrison was a director of Gauntlet Energy Corporation in June 2003 when it filed for and was granted an order pursuant to the Companies’ Creditors Arrangement Act (Canada). A plan of arrangement for that company received court confirmation later that year.

(10)    Mr. O’Brien resigned as a director of Air Canada on November 26, 2003. On April 1, 2003, Air Canada obtained an order from the Ontario Superior Court of Justice providing creditor protection under the Companies’ Creditors Arrangement Act (Canada). Air Canada also made a concurrent petition under Section 304 of the U.S. Bankruptcy Code. On September 30, 2004, Air Canada announced that it had successfully completed its restructuring process and implemented its Plan of Arrangement.

Encana does not have an Executive Committee of its Board of Directors.

At the date of this annual information form, there are 11 directors of the Company. All of the current directors were elected at the last annual meeting of shareholders held on April 20, 2011. At the next annual meeting, shareholders will be asked to elect as directors each of the individuals listed in the above table, with the exception of Barry W. Harrison, who has reached the Company’s mandatory retirement age restrictions for directors. The Company’s mandatory retirement age restrictions, which have been established by the Board of Directors, stipulate that a director may not stand for re-election after reaching the age of 71.