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Encana Establish Joint Venture with PetroChina

Encana logo Encana Corporation has signed a Co-operation Agreement with PetroChina International Investment Company Limited, a subsidiary of PetroChina Company Limited, that would see PetroChina pay C$5.4 billion to acquire a 50 percent interest in Encana's Cutbank Ridge business assets in British Columbia and Alberta. Under the Co-operation Agreement, the two companies would establish a 50/50 joint venture that would ambitiously grow natural gas production from the Cutbank Ridge lands for years ahead.

"This agreement is the culmination of more than nine months of discussions between PetroChina and Encana and represents both a significant achievement and major milestone in the developing relationship of our two companies. By combining resources with PetroChina in this joint venture, we would expect to recognize additional value through accelerating our pace of development and by leveraging increased capital and operating efficiencies through further technical advancements and through greater certainty of the long-term development plan for the business assets," said Randy Eresman, Encana's President & Chief Executive Officer.

Accelerating value creation from Encana's large undeveloped resource potential
"This transaction is an important step forward in the plan that we announced last spring - to accelerate recognition of the value inherent in our vast natural gas resource portfolio. Over the past number of years Encana has assembled a very large portfolio of some of the best natural gas resource plays in North America by focusing on high-quality resources and building the expertise to capture and develop them at some of the lowest costs in the industry. This agreement provides further evidence of the tremendous value that our teams have created in our Cutbank Ridge key resource play, just one of the many large resource plays we have in our company," Eresman said.

Under the agreement, PetroChina would pay C$5.4 billion to acquire a 50 percent interest in the Cutbank Ridge business assets, an interest that represents current daily production of about 255 million cubic feet equivalent per day (MMcfe/d), proved reserves of about 1.0 trillion cubic feet of natural gas equivalent (Tcfe), as at the end of 2010, and about 635,000 net acres of land straddling the British Columbia and Alberta boundary. The planned joint venture infrastructure, on a 100 percent basis, includes about 700 million cubic feet (MMcf) per day of processing capacity, about 3,400 kilometres of pipelines and the Hythe natural gas storage facility. The business assets in this planned joint venture include the majority of Encana's Montney, Cadomin and other natural gas assets on a portion of the company's British Columbia and Alberta lands. Under the planned joint venture, each company would contribute 50/50 to future development capital requirements. Encana will initially operate the joint venture's assets and market the production. Following the completion of the transaction, the joint venture would operate under the direction of a joint management committee.

Transaction subject to completing additional agreements and regulatory approvals
The transaction is subject to regulatory approval by Canadian and Chinese authorities, due diligence and the negotiation and execution of various transaction agreements, including the joint venture agreement. The economic adjustment date for the transaction is expected to be January 1, 2011 with the closing date dependent on the various government and regulatory approvals.

Balanced reinvestment aimed at preserving financial strength and flexibility
"With the transaction's anticipated proceeds, Encana will continue to pursue a balanced approach to disciplined capital investment, maintaining financial flexibility and liquidity, and strong investment grade ratings, while providing strong returns to shareholders through dividends and share purchases under our normal course issuer bid," Eresman said.

Responsible natural gas growth
The joint venture is expected to develop existing Encana lands at a rate that would be faster than would be achieved without the additional investment. As Encana pursues its long-term growth strategy, the company remains committed to demonstrating reliability and trustworthiness as it continually pursues safe, energy-efficient, sustainable development. Consistent with its long-standing operating and corporate responsibility practices, Encana is committed to advancing this planned joint venture with consideration and respect for the people, communities and environments where the company operates.

Financial and Legal Advisors
RBC Capital Markets and Jefferies & Company, Inc. are acting as financial advisors to Encana. Burnet, Duckworth & Palmer LLP is acting as legal advisor to Encana.

Published 09/02/2011

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EnCana Corporation (TSX, NYSE: ECA) is a leading North American natural gas producer that is focused on growing its strong portfolio of natural gas resource plays in key basins from northeast British Columbia to east Texas and Louisiana. By partnering with employees, community organizations and other businesses, Encana contributes to the strength and sustainability of the communities where it operates.

PetroChina Company Limited (SEHK: 0857, SSE: 601857, NYSE: PTR) is one of the largest oil and gas companies in the world. PetroChina engages in a wide range of activities related to oil and natural gas, including: exploration, development, production and marketing of crude oil and natural gas; refining, transportation, storage and marketing of crude oil and oil products; the production and marketing of primary petrochemical products, derivative chemicals and other chemicals; transportation of natural gas, crude oil and refined oil, and marketing of natural gas. China National Petroleum Corporation (CNPC) is the controlling shareholder of PetroChina.

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