DBRS Comments on Encana’s Public Equity Offering for Gross Proceeds of Approximately USD 1.0 billion

DBRS Limited (DBRS) today notes that after the equity markets closed on September 19, 2016, Encana Corporation (Encana or the Company) announced an agreement to sell, by way of prospectus, 107.0 million common shares to the public at an offering price of USD 9.35 per share, for total gross proceeds of approximately USD 1.0 billion. The Company has granted an over-allotment option to the underwriters of the equity offering to purchase up to an additional 16.05 million shares. If the option is fully exercised, the total gross proceeds of the offering are estimated at approximately USD 1.15 billion.

Encana intends to use approximately half of the net proceeds of the offering to fund a portion of the company’s 2017 capital program. The remaining net proceeds will be used to repay indebtedness under the Company’s credit facilities. The majority of the Company’s 2017 capital program is expected to be allocated to growing Encana’s Permian production through increasing the number of rigs in the play. The increased number of rigs is expected to result in two times the number of Permian wells to come on stream in 2017 compared to 2016.

DBRS notes that the Company’s most recent capex guidance (July 21, 2016) is $1.1 billion to $1.2 billion in 2016. The Company has not publicly disclosed capex guidance for 2017. DBRS views the equity offering as positive for the Company’s credit profile, as it (1) strengthens the balance sheet and (2) provides funds to accelerate production growth from the Permian and add to future cash flow. DBRS’s Issuer Rating, Unsecured Senior Notes and Medium Term Notes & Debentures ratings of Encana are currently BBB (low), all with Negative trends.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Companies in the Oil and Gas Industry, which can be found on our website under Methodologies.

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