Items 1 and 2. Business and Properties

GENERAL

Encana is a leading North American energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and NGL producing plays. Encana’s operations also include the marketing of natural gas, oil and NGLs. All of Encana’s reserves and production are located in North America.

Encana’s registered and principal office is located at 4400, 500 Centre Street S.E., Calgary, Alberta T2P 2S5, Canada. Encana’s common shares are listed and posted for trading on the TSX and on the NYSE under the symbol “ECA”. Encana is incorporated under the Canada Business Corporations Act (the “CBCA”) and was formed in 2002 through the business combination of two predecessor companies.

Available Information

Encana is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, in accordance with the Exchange Act, it also files reports with and furnishes other information to the SEC. Effective January 1, 2017, Encana was required to comply with the reporting requirements applicable to U.S. domestic issuers. Previously, under the multijurisdictional disclosure system adopted by Canada and the United States, reports and other information (including financial information) were prepared, in part, in accordance with the disclosure requirements of Canada, which differ from those in the United States. The public may read any document Encana files with or furnishes to the SEC at the SEC’s public reference room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Readers may also obtain copies of the same documents from the public reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549 by paying a fee. Please call the SEC at 1-800-SEC-0330 or contact them at www.sec.gov for further information on the public reference room. Encana’s filings are also electronically available from the SEC’s Electronic Document Gathering, Analysis, and Retrieval system (“EDGAR”), which can be accessed at www.sec.gov, or via the System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed at www.sedar.com , as well as from commercial document retrieval services.

Copies of this Annual Report on Form 10-K and the documents incorporated herein by reference may be obtained on request without charge from Encana’s Corporate Secretary, 4400, 500 Centre Street S.E., P.O. Box 2850, Calgary, Alberta T2P 2S5, Canada, telephone: (403) 645-2000. Encana also provides access without charge to all of the Company’s SEC filings, including copies of this Annual Report on Form 10-K and the documents incorporated herein by reference, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after filing or furnishing, on Encana’s website located at www.encana.com .

Enforceability of Civil Liabilities

Encana is a corporation incorporated under and governed by the CBCA. Some of Encana’s officers and directors, and some of the experts named in this Annual Report on Form 10-K, are Canadian residents, and many of Encana’s assets or the assets of its officers and directors and the experts are located outside the United States. Encana has appointed an agent for service of process in the United States, but it may be difficult for holders of common shares who reside in the United States to effect service within the United States upon those directors, officers and experts who are not residents of the United States. It may also be difficult for holders of common shares who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our officers and directors and experts under the United States federal securities laws.

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STRATEGY

The Company is committed to growing long-term shareholder value through a disciplined focus on generating profitable growth. The Company’s key objectives include:

The Company has a history of identifying and entering into strategic plays that can be developed with industry leading horizontal drilling and completions methods and leveraging technology to profitably develop the oil and gas resources within the plays. Encana continually strives to improve operating efficiencies, foster technological innovation and lower its cost structures while reducing its environmental footprint through play optimization. Capital and operating efficiencies are achieved across Encana’s multi-basin portfolio through the rapid deployment of successful operating practices that are repeated across the Company’s operations, optimizing equipment and processes and by applying continuous improvement techniques.

Encana’s capital investment strategy is focused on quality growth from a limited number of core, high margin and scalable projects, while balancing the commodity portfolio and optimizing performance from the remainder of the Company’s resource base.

During 2016, the oil and natural gas industry continued to experience low commodity prices driven by supply and demand imbalances. In spite of this trend, Encana has continued to execute on its strategy focusing on lowering operational and capital cost structures, enhancing operating efficiencies, and reducing debt to maintain appropriate liquidity and financial flexibility. Encana also emphasized financial discipline by further focusing capital investment to a limited number of core assets with high growth and return potential, reducing activity levels in non-strategic assets and bringing costs into alignment with the current commodity price environment. The Company believes that continued execution of its strategy will ensure Encana is well positioned for the current price environment and ready to accelerate activity levels if commodity prices improve in the future. For additional discussion on the Company’s results, see Item 7 of this Annual Report on Form 10-K.

REPORTING SEGMENTS

Encana’s predominant operations are focused on the finding and development of natural gas and oil reserves. The Company is also focused on creating and capturing additional value through its market optimization segment. The Company conducts substantially all of its business through subsidiaries. Encana’s operating and reportable segments are: (i) Canadian Operations; (ii) USA Operations; and (iii) Market Optimization.

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For additional information regarding Encana’s reporting segments, see Note 2 of Encana’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.

OIL AND GAS PROPERTIES AND ACTIVITIES

The following map outlines the location of Encana’s North American landholdings and assets as at December 31, 2016.

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The term ‘Core Asset’ in the map above reflects plays identified with high growth and return potential and are the focus of the Company’s current capital investment and development plan. The term ‘Other’ in the map above reflects base and option value plays. Base plays are allocated funds to target efficiency programs that include enhancing operational efficiency and cost reductions rather than development programs. Option value plays are emerging plays that may receive funding for development based on strategic fit, play profitability driven by price and energy fundamentals and portfolio diversity.

Canadian Operations

Overview: In 2016, the Canadian Operations had total capital investment of approximately $256 million and drilled approximately 44 net wells all of which were in Montney and Duvernay. Production averaged approximately 966 MMcf/d of natural gas, approximately 2.0 Mbbls/d of oil, and approximately 25.2 Mbbls/d of NGLs. At December 31, 2016, the Canadian Operations had an established land position in Canada of approximately 2.4 million net acres including approximately 1.2 million net undeveloped acres. In addition, the Canadian Operations accounted for 39% of production sales during 2016 and 50% of total proved reserves as at December 31, 2016.

During 2016, Encana divested of approximately 54,200 net acres related to the Gordondale assets in Montney located in northwestern Alberta for proceeds of approximately $455 million, after closing adjustments.

The following tables summarize the Canadian Operations landholdings, producing wells and daily production as at and for the periods indicated.

(1) Other Upstream Operations includes Wheatland, Horn River and Deep Panuke.

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Montney

Montney is primarily a condensate rich natural gas play located in northeast British Columbia and northwest Alberta. Although the Montney landholdings include additional producing horizons, that being the Cadomin, Doig and Granite Wash formations, the current focus of development is on the Montney formation within the play. In 2016, total production from the play averaged approximately 735 MMcf/d of natural gas and approximately 18.5 Mbbls/d of oil and NGLs. As at December 31, 2016, Encana controlled approximately 890,000 net acres in the play.

Encana is currently targeting the development of natural gas and condensate rich locations in the Montney formation within the play, of which Encana controlled approximately 483,000 net acres, including 282,000 net undeveloped acres at December 31, 2016. The Montney formation has up to six stacked horizons spanning over 1,000 feet of stratigraphy and is being developed exclusively with horizontal well technology. In 2016, Encana continued to focus on drilling higher liquids content wells, drilling approximately 24 net horizontal wells and production averaged approximately 639 MMcf/d of natural gas and approximately 18.5 Mbbls/d of oil and NGLs in the Montney formation. Significant improvements have been achieved with respect to horizontal well completions with the application of multi-stage hydraulic fracturing. During 2016, Encana has continued to optimize completion designs and apply advanced technologies, reducing total development costs by approximately 26 percent, on a completed interval basis. During 2016, Encana also drilled wells with lateral lengths ranging from approximately 6,600 to 11,700 feet and tighter inter-well spacing ranging from approximately 650 to 1,000 feet. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change.

Encana has a partnership agreement with a subsidiary of Mitsubishi Corporation (“Mitsubishi”), the Cutbank Ridge Partnership (“CRP”), to jointly develop certain lands predominately in Montney. Under the agreement, Mitsubishi agreed to invest approximately C$2.9 billion for its 40 percent partnership interest in the CRP, of which approximately C$2.2 billion has been received as of December 31, 2016. In addition to its 40 percent of the CRP’s future capital funding investment, Mitsubishi is expected to invest the remaining amount of approximately C$0.7 billion under an agreed upon five-year development plan of the area, thereby reducing Encana’s capital funding commitment to 30 percent of the total expected capital investment over that development plan.

As at December 31, 2016, Encana has access to natural gas processing capacity of approximately 820 MMcf/d, of which approximately 600 MMcf/d is under contract with third parties under varying terms and duration and approximately 215 MMcf/d is owned by the Company. Encana also has access to gathering and compression capacity of approximately 895 MMcf/d, of which approximately 780 MMcf/d is under contract with third parties under varying terms and duration and approximately 110 MMcf/d is owned by the Company. In addition, Encana expects to have access to additional compression and processing facilities with capacity of approximately 480 MMcf/d and liquids handling of 49.1 Mbbls/d that are currently under construction and are expected to be completed in late 2017 to 2018.

Duvernay

Duvernay is an emerging liquids rich shale gas play located in west central Alberta and includes properties that are primarily located in the Duvernay formation, but also holds potential in other formations such as the Montney. As at December 31, 2016, Encana controlled approximately 369,000 net acres in the play.

The Duvernay formation within the play primarily comprises approximately 335,000 net acres, including 295,000 net undeveloped acres, and extends across the Simonette, Pinto, Edson and Willesden Green properties. Encana is currently targeting the development of condensate rich locations in the north and south Simonette areas of the formation using horizontal well technology and pad drilling. Encana is currently achieving significant improvements in drilling costs and cycle times through innovation and continuing to develop long-term take-away capacity. In 2016, Encana drilled approximately 20 net wells in the area and production averaged approximately 54 MMcf/d of natural gas and approximately 8.3 Mbbls/d of oil and NGLs. During 2016, Encana

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drilled wells with lateral lengths ranging from approximately 5,200 to 10,200 feet with tighter inter-well spacing ranging from approximately 490 to 1,300 feet. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change.

Encana has an agreement with a subsidiary of PetroChina Company Limited (“PetroChina”) to jointly explore and develop certain Duvernay lands. Under the agreement, PetroChina agreed to invest approximately C$2.18 billion for a 49.9 percent working interest in the lands. PetroChina has invested approximately C$2.08 billion as of December 31, 2016 and is expected to further invest approximately C$96.6 million over the remaining commitment period that expires in 2020, which will be used to fund half of Encana’s capital commitment.

Encana holds an approximate 50.1 percent ownership in three Simonette natural gas processing plants and the associated gathering and compression, of which Encana’s share of natural gas processing capacity is 78 MMcf/d with NGLs production capacity of 19.2 Mbbls/d. During 2016, natural gas processing capacity increased by 25 MMcf/d with the addition of a new plant in Simonette to support the Duvernay growth profile.

Other Upstream Operations:

Wheatland

Wheatland is located in southern Alberta and includes producing horizons such as the Lethbridge and Horseshoe Canyon formations, shallow sands formations including the Belly River, Medicine Hat and deeper natural gas formations including the Glauconitic and Mannville formations. Production averaged approximately 76 MMcf/d of natural gas and approximately 0.4 Mbbls/d of oil and NGLs. As at December 31, 2016, Encana had approximately 5,164 gross producing wells (5,059 net producing wells) and controlled approximately 757,000 net acres in the play, which includes 109,000 net undeveloped acres. Historically, Encana has used an integrated wellbore strategy with development focused on natural gas along the eastern edge of the Horseshoe Canyon Fairway. In 2016, Encana focused on play optimization, reducing production declines and lowering operating costs. At December 31, 2016, Encana controlled approximately 484,000 net acres in the Horseshoe Canyon Fairway.

Horn River

Horn River is located in northeast British Columbia, where development was historically in the Horn River Basin shales (Muskwa, Otter Park and Evie), which are upwards of 500 feet thick. In 2016, Encana’s natural gas production averaged approximately 58 MMcf/d. As at December 31, 2016, Encana had approximately 97 gross producing horizontal wells (49 net producing horizontal wells) and controlled approximately 168,000 net acres, which includes 147,000 net undeveloped acres in the Horn River Basin shales. Encana owns interest in natural gas compression capacity in Horn River of approximately 285 MMcf/d at various facilities in the area. Encana has a processing arrangement with a third party related to a previously planned expansion of the Cabin natural gas processing plant, for which commissioning and expansion was suspended in 2012.

Deep Panuke

Encana is the owner and operator of the Deep Panuke gas field located offshore Nova Scotia, which is approximately 250 kilometres southeast of Halifax on the Scotian shelf. Natural gas from Deep Panuke is produced and processed by an offshore Production Field Centre (“PFC”). The PFC is under a lease arrangement which has an initial term that expires in 2021, with the option to extend the lease for 12 successive one-year terms at fixed prices after the initial lease term. Produced gas is transported to Goldboro, Nova Scotia, via subsea pipeline which interconnects with the Maritimes & Northeast Pipeline, where the natural gas is ultimately transported to markets in eastern Canada and northeastern U.S.

In 2016, natural gas production averaged approximately 52 MMcf/d. Encana sells all natural gas produced from Deep Panuke under a long-term physical sales contract at the prevailing market prices in that region. At December 31, 2016, Encana had approximately 4 gross producing wells (4 net producing wells) and controlled approximately 30,000 net acres offshore Nova Scotia. Encana operates five of its six licenses in these areas.

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USA Operations

Overview:   In 2016, the USA Operations had total capital investment of approximately $873 million and drilled approximately 116 net wells all of which were in Eagle Ford and Permian. Production averaged approximately 417 MMcf/d of natural gas, approximately 71.7 Mbbls/d of oil, and approximately 23.2 Mbbls/d of NGLs. At December 31, 2016, the USA Operations had an established land position of approximately 1.2 million net acres including approximately 0.8 million net undeveloped acres. In addition, the USA Operations accounted for 61% of production sales during 2016 and 50% of total proved reserves as at December 31, 2016.

During 2016, Encana divested of approximately 51,000 net acres in DJ Basin located in northern Colorado for proceeds of approximately $633 million, after closing adjustments.

The following tables summarize the USA Operations landholdings, producing wells and daily production as at and for the periods indicated.

Eagle Ford

Eagle Ford is a tight oil play located in south Texas in the Karnes, Wilson and Atascosa counties. The focus is on the development of the thickest portion of the Eagle Ford shale in the Karnes Trough, where Encana holds a largely contiguous position. At December 31, 2016, Encana controlled approximately 42,000 net acres in the play. In 2016, Encana drilled approximately 28 net wells in the area and production averaged approximately 32.4 Mbbls/d of oil, approximately 48 MMcf/d of natural gas and approximately 7.2 Mbbls/d of NGLs.

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While Encana is focused on developing the lower Eagle Ford exclusively using horizontal drilling, in 2016, Encana also began optimizing upper Eagle Ford targets. In 2016, Encana drilled lateral lengths ranging from approximately 2,000 to 8,800 feet with an average measured total depth of approximately 16,500 feet and optimized other development parameters such as completions designs. The new completions designs utilize thin fluid combined with tighter cluster spacing of less than 25 feet, to create a complex fracture system to increase well productivity. Since acquiring the play in 2014, Encana has reduced drilling costs by approximately 40 percent as a result of the Company’s focus on well design optimization activities. As Encana continues to optimize well and completion designs, lateral lengths drilled, cluster spacing and well spacing may change. During 2016, Encana began delineating the Austin Chalk, drilling two wells in September with lateral lengths averaging approximately 3,400 feet and a third well in late December, with a lateral length of approximately 4,200 feet.

Oil and natural gas production is gathered at various production facilities. The majority of the oil is subsequently transported to sales points by pipeline or trucked from facilities depending on the sales contract. Encana also has access to firm natural gas gathering capacity of up to approximately 35 MMcf/d and processing capacity of up to approximately 70 MMcf/d with third parties under varying terms and duration. Encana also has access to interruptible capacity for the excess production and during 2016, Encana utilized total firm and interruptible capacity of approximately 100 MMcf/d.

Permian

Permian is a tight oil play located in west Texas in the Midland, Martin, Howard, Glasscock and Upton counties. The primary focus is on the development of the Spraberry and Wolfcamp formations, in the Midland basin, where Encana holds a large position. At December 31, 2016, Encana controlled approximately 127,000 net acres in the play. The properties are characterized by an extensive production history from vertical drilling and development and mature infrastructure, with multiple producing horizons spanning approximately 4,000 feet of stratigraphy (also referred to as “stacked pay zones”). In 2016, Encana drilled 78 horizontal net wells and 10 vertical net wells in the area. In 2016, production averaged approximately 29.8 Mbbls/d of oil, approximately 50 MMcf/d of natural gas and approximately 10.0 Mbbls/d of NGLs.

With exposure to 11 potential productive horizons, Encana has focused development using multi-well horizontal pad drilling in order to maximize resource recovery and minimize the development footprint. During 2016, Encana focused on optimizing completion design by using 3D stratigraphic models to land the well bore in the desired drilling zone, minimizing interference between wells and maximizing drainage through well spacing and better fluid and sand utilization. In addition, Encana continued drilling longer horizontal wells with lateral lengths ranging from approximately 5,000 to 10,000 feet at a measured average total depth of approximately 17,300 feet in 2016. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change. During 2016, Encana’s multi-well horizontal drilling strategy has reduced drilling costs by approximately 15 percent.

Oil and natural gas facilities include field gathering systems, storage batteries, saltwater disposal systems, separation equipment and pumping units. The majority of Encana’s acreage and associated oil production is dedicated to a pipeline gathering agreement signed in 2015, which has an initial term of seven years, with an option to extend the term an additional seven years. In the event of pipeline capacity constraints, Encana’s oil production is trucked by a third party. Natural gas is gathered by Encana and transported to the purchaser’s meter and pipeline interconnection point.

Other Upstream Operations:

San Juan

San Juan is a light sweet oil play located in the San Juan Basin in northwest New Mexico where Encana has a significant land position. Development historically focused on the liquids in Tocito and El Valdo formations

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within the play. In 2016, production averaged approximately 3.9 Mbbls/d of oil and NGLs and approximately 9 MMcf/d of natural gas. At December 31, 2016, Encana had approximately 204 gross producing wells (109 net producing wells) and controlled approximately 203,000 net acres in the play, which includes 164,000 net undeveloped acres. In 2016, Encana focused on play optimization reducing production declines and lowering operating costs. Encana has access to natural gas processing capacity of up to approximately 50 MMcf/d under a dedication agreement with a third party.

Piceance

Piceance is a play located in northwest Colorado where Encana historically focused development on natural gas in the Williams Fork, Iles, Mancos and Niobrara formations within the play. Wells targeting the Williams Fork and Iles formations produce from tight gas sands while the Mancos and Niobrara produce from marine shales. In 2016, production averaged approximately 271 MMcf/d of natural gas, approximately 2.8 Mbbls/d of oil and NGLs. At December 31, 2016, Encana had approximately 3,967 gross producing natural gas wells (3,236 net producing natural gas wells) and controlled approximately 693,000 net acres in the play, which includes 447,000 net undeveloped acres.

In 2016, Encana and a subsidiary of Nucor Corporation (“Nucor”) terminated the long-term joint venture agreement related to development of natural gas in the North Piceance Basin. In conjunction with the terminated joint development agreement, Nucor acquired a working interest in certain acreage located in the South Piceance Basin from Encana, and in exchange Encana acquired remaining interests in natural gas gathering and water handling assets located in the North Piceance Basin from an affiliated entity that was jointly owned by Encana and Nucor.

Encana has access to natural gas processing capacity of approximately 715 MMcf/d, of which approximately 650 MMcf/d is under contract with third parties under varying terms and duration and approximately 65 MMcf/d is owned by the Company. Encana also has access to high pressure natural gas gathering capacity of approximately 850 MMcf/d and low pressure natural gas gathering and compression of approximately 500 MMcf/d with third parties under varying terms and duration. Encana owns approximately 500 MMcf/d of low pressure natural gas gathering and compression capacity, of which approximately 420 MMcf/d is primarily tying into a high pressure third party gathering system. Encana also has access to NGLs transportation of approximately 30.0 Mbbls/d with a third party for production from San Juan and Piceance with a remaining term of eight years.

Tuscaloosa Marine Shale

The Tuscaloosa Marine Shale is an emerging oil play located in east Louisiana and west Mississippi. As an emerging play, the potential for future development is primarily dependent on play profitability driven by price and energy fundamentals. Encana has established a significant land position in the core of the play and is focused on maximizing oil recovery in the Tuscaloosa Marine Shale formation. In 2016, Encana focused on play optimization reducing production declines and lowering operating costs. Production averaged approximately 2.4 Mbbls/d of oil. At December 31, 2016, Encana had approximately 48 gross producing oil wells (32 net producing oil wells) and controlled approximately 144,000 net acres, which includes 117,000 net undeveloped acres.

PROVED RESERVES AND OTHER OIL AND GAS INFORMATION

The process of estimating oil, gas and NGL reserves is complex and requires significant judgment. Encana’s estimates of proved reserves and associated future net cash flows were evaluated by the Company’s engineers and are the responsibility of management. As a result, Encana has developed internal policies for estimating and recording reserves. Such policies require proved reserves to be in compliance with the SEC definitions and regulations. Encana’s policies assign responsibilities for compliance in reserves bookings and require that reserve estimates be made by qualified reserves evaluators (“QREs”). QRE is defined as a registered professional licensed to practice engineering, geology, geophysics and has a minimum of five years practical experience, with at least three recent years of experience in the evaluation of reserves.

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Encana’s Vice-President, Corporate Reserves and Chief Reservoir Engineering and nine other staff (collectively, the “Corporate Reserves Group”) under this individual’s direction, oversee the internal preparation, review and approval of the reserves estimates. The Corporate Reserves Group reports to the Executive Vice-President, Exploration and Business Development and is separate and independent from the preparation of reserves estimates which are within operations who report to Encana’s Executive Vice-President & Chief Operating Officer. The Corporate Reserves Group maintains internal policies that prescribe procedures and standards to be followed for preparing, estimating and recording reserves in compliance with applicable SEC definitions and guidance. All QREs receive ongoing education on the fundamentals of SEC definitions and reserves reporting through the Company’s reserves manual and internal training programs administered by the Corporate Reserves Group.

The Company’s Director, Corporate Reserves reports to Encana’s Vice-President, Corporate Reserves and Chief Reservoir Engineering and is primarily responsible for overseeing the preparation of proved reserves estimates. The Director, Corporate Reserves has a Bachelor of Science with a degree in Petroleum Engineering from the University of Alberta and is a member of the Calgary Chapter of the Society of Petroleum Evaluation Engineers. In addition, the Corporate Reserves Group comprises a total of seven engineers, four of whom have professional designations, with a combined relevant experience of over 130 years.

Encana’s Reserves Committee of the Board of Directors comprises directors that are independent and familiar with estimating oil and gas reserves and disclosure requirements. The Reserves Committee provides additional oversight to the Company’s reserves process, meeting with management periodically to review the reserves process, the portfolio of properties results and related disclosures. The Reserves Committee is also responsible for reviewing the qualifications and appointment of the independent qualified reserves auditors (“IQRAs”) retained by the Company. Annually, the Reserves Committee recommends the selection of IQRAs to the Board of Directors for its approval and meets with the IQRAs to review their reports.

Encana’s QREs prepare the Company’s reserves estimates. Annually, each play is reviewed in detail by the QREs, the Company’s Corporate Reserves Group, the Company’s executive officers and an internal Reserves Review Committee, as appropriate. In addition, the Corporate Reserves Group conducts a separate review to ensure the effectiveness of the disclosure controls and that the reserves estimates are free from material misstatement. The final reserves estimates are reviewed by Encana’s executive leadership and the Reserves Committee of the Board of Directors, for approval by the Board of Directors.

In 2016, Encana retained IQRAs to audit the Company’s reserves estimates. McDaniel & Associates Consultants Ltd. audited 98 percent of Encana’s estimated Canadian proved reserves volumes and Netherland, Sewell & Associates, Inc. audited 100 percent of Encana’s estimated U.S. proved reserves volumes. An audit of reserves is an examination of a company’s oil and gas reserves and future net cash flow by an independent petroleum consultant that is conducted for the purpose of expressing an opinion as to whether such estimates, in aggregate, are reasonable and have been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures. For the 2015 and 2014 periods presented, Encana retained independent qualified reserves evaluators to evaluate and prepare reports on 100 percent of Encana’s natural gas, oil and NGLs reserves volumes.

Proved oil and gas reserves are those quantities of oil, gas and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from known reservoirs under existing economic conditions, operating methods and government regulations. To be considered proved, oil and gas reserves must be economically producible before contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Also, the project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years.

The Company’s reserve estimates are conducted from fundamental petrophysical, geological, engineering, financial and accounting data. Reserves are estimated based on production decline analysis, analogy to producing

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offsets, detailed reservoir modeling, volumetric calculations or a combination of these methods, in all cases having regard to economic considerations and using technologies that have been demonstrated in the field to yield repeatable and consistent results as defined in the SEC regulations. Data used in assessments include information obtained directly from the subsurface through wellbores such as well logs, reservoir core samples, fluid samples, static and dynamic pressure information, production test data, and surveillance and performance information. 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. All locations to which proved undeveloped reserves have been assigned are subject to a development plan adopted by Encana’s management. The tools used to interpret the data included proprietary and commercially available reservoir modeling and simulation software. Reservoir parameters from analogous reservoirs were used to increase the quality of and confidence in the reserves estimates when available. The method or combination of methods used to estimate the reserves of each reservoir are based on the unique circumstances of each reservoir and the dataset available at the time of the estimate.

In general, estimates of economically recoverable reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of crude oil and natural gas, royalty rates, the effects of regulation by governmental agencies, and operating costs, all of which may vary materially from actual results. The actual production, revenues, taxes and development, and operating expenditures with respect to the reserves associated with the Company’s properties may vary, from the information presented herein.

The SEC regulations require that proved reserves be estimated using existing economic conditions (constant pricing). Based on this methodology, Encana’s reserves have been calculated utilizing the 12-month average trailing historical price for each of the years presented prior to the effective date of the report. The 12-month average is calculated as an unweighted average of the first-day-of-the-month price for each month. The reserves estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.

Encana does not file any estimates of total net proved reserves with any U.S. federal authority or agency other than the SEC and the Department of Energy (“DOE”). Reserve estimates filed with the SEC correspond with the estimates of the Company’s reserves contained in this report. Reserve estimates filed with the DOE are based upon the same underlying technical and economic assumptions as the estimates of Encana’s reserves that are filed with the SEC, however, the DOE requires reports to include the interests of all owners in wells that Encana operates and to exclude all interests in wells that Encana does not operate. Encana is also 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”) which is filed concurrently on SEDAR at www.sedar.com under Encana’s issuer profile. The primary differences between NI 51-101 reporting requirements and SEC requirements include the disclosure of proved and probable reserves estimated using forecast prices and costs, presentation of reserves and production before royalties and granular product type disclosures. The reserves data prepared in accordance in NI 51-101 do not form part of this Annual Report on Form 10-K.

The reserves and other oil and gas information set forth below has an effective date of December 31, 2016 and was prepared as of January 16, 2017. The audit reports prepared by the IQRA’s are attached in Exhibits 99.1 and 99.2 of this Annual Report on Form 10-K.

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The following table is a summary of the Company’s proved reserves and estimates of future net cash flows and discounted future net cash flows from proved reserves information relating to proved reserves which can also be found in Note 27 of Encana’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.

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Changes to the Company’s proved reserves during 2016 are summarized in the table below:

* Numbers may not add due to rounding.

In 2016, Encana’s proved natural gas reserves of approximately 2,902 Bcf decreased 162 Bcf from 2015 primarily due to sales of reserves in place of 313 Bcf resulting from the Company’s strategy to focus development on a limited number of core assets. Revisions and improved recovery of natural gas included a reduction of 462 Bcf due to lower 12-month average trailing natural gas prices, partially offset by technical revisions other than price of 218 Bcf. Extensions and discoveries of 887 Bcf were due to successful drilling and delineation of the Montney, Duvernay, Permian and Eagle Ford assets.

In 2016, Encana’s proved oil and NGLs reserves of 306.0 MMbbls increased 17.2 MMbbls from 2015 primarily due to extensions and discoveries of 128.0 MMbbls, offset by sale of reserves of 54.4 MMbbls and negative revisions and improved recovery of 23.9 MMbbls. Revisions and improved recovery of oil and NGLs included reductions of 6.5 MMbbls and 6.6 MMbbls, respectively, due to lower 12-month average trailing oil and NGL prices.

Proved reserves are estimated based on the average beginning-of-month prices during the 12-month period for the respective year. The average prices used to compute proved reserves at December 31, 2016 were WTI: $42.75 per Bbl for oil, Edmonton Light Sweet: C$52.21 per Bbl for oil, Henry Hub: $2.49 per MMBtu for natural gas, and AECO: C$2.17 per MMBtu for natural gas. Prices for natural gas, oil and NGLs can fluctuate widely.

* Numbers may not add due to rounding.

As of December 31, 2016, there were no material proved undeveloped reserves that had remained undeveloped for five years or more after disclosure as proved undeveloped reserves.

Revisions of prior estimates were revised down by 80.8 MMBOE primarily due to lower 12-month average trailing prices. Extensions and discoveries of 218.6 MMBOE were achieved through the extension of proved acreage, primarily as a result of successful drilling in Montney, Duvernay and Permian.

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Conversions of proved undeveloped reserves to proved developed status were 29.7 MMBOE, equating to 11 percent of the total prior year-end proved undeveloped reserves. Approximately 52 percent of proved undeveloped reserves conversions occurred in Canada primarily in Montney and Duvernay and 48 percent occurred in the U.S. primarily in Permian and Eagle Ford. Encana spent $173 million to develop proved undeveloped reserves in 2016, of which approximately 31 percent related to the Canadian properties and 69 percent related to the U.S. properties.

Sales of reserves in place of 41.2 MMBOE relate to the Company’s divestitures of the DJ Basin and Gordondale assets in Montney. Purchases of proved undeveloped reserves of 11.3 MMBOE relate to acquisitions in the Eagle Ford and Permian.

The following table summarizes the Company’s revenues by product sold and by geographic area for each of the last three years:

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Drilling and other exploratory and development activities ^{(1, 2)}

The following tables summarize Encana’s gross participation and net interest in wells drilled for the periods indicated by geographic area.

Drilling and other exploratory and development activities ^{(1, 2)}

The following table summarizes the number of wells in the process of drilling or in active completion stages and the number of wells suspended or waiting on completion by geographic area at December 31, 2016.

Oil and gas properties, wells, operations, and acreage

The following table summarizes the number of producing wells and wells mechanically capable of production by geographic area at December 31, 2016.

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The following table summarizes Encana’s developed, undeveloped and total landholdings by geographic area as at December 31, 2016.

Of the total 3.6 million net acres, approximately 1.6 million net acres is held by production. The table above includes the acreage subject to leases that will expire over the next three years: 2017 – approximately 196,000 net acres; 2018 – approximately 100,000 net acres; and 2019 – approximately 230,000 net acres, if the Company does not establish production or take any other action to extend the terms. For acreage that the Company intends to further develop, Encana will perform operational and administrative actions to continue the lease terms that are set to expire. As a result, it is not expected that a significant portion of the Company’s net acreage will expire before such actions occur.

Title to Properties

As is customary in the oil and natural gas industry, a preliminary review of title records, which may include opinions or reports of appropriate professionals or counsel, is made at the time Encana acquires properties. The Company believes that title to all of the various interests set forth in the above table is satisfactory and consistent with the standards generally accepted in the oil and gas industry, subject only to immaterial exceptions that do not detract substantially from the value of the interests or materially interfere with their use in Encana’s operations. The interests owned by Encana may be subject to one or more royalty, overriding royalty, or other outstanding interests (including disputes related to such interests) customary in the industry. The interests may additionally be subject to obligations or duties under applicable laws, ordinances, rules, regulations, and orders of arbitral or governmental authorities. In addition, the interests may be subject to burdens such as production

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payments, net profits interests, liens incident to operating agreements and current taxes, development obligations under oil and gas leases, and other encumbrances, easements, and restrictions, none of which detract substantially from the value of the interests or materially interfere with their use in the Company’s operations.

MARKETING ACTIVITIES

Market Optimization activities are managed by Encana’s Midstream, Marketing & Fundamentals team, which is responsible for the sale of the Company’s proprietary production and enhancing the associated netback price. In marketing production, Encana looks to minimize market related shut-ins, maximize realized prices and manage concentration of credit-risk exposure. Market Optimization activities include third party purchases and sales of product to provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. In conjunction with certain divestitures, Encana has also agreed to market and transport certain portions of the acquirer’s production with remaining terms of less than five years.

Encana’s produced natural gas, oil and NGLs are primarily marketed to refiners, local distributing companies, energy marketing companies and electronic exchanges. Prices received by Encana are based primarily upon prevailing market index prices in the region in which it is sold. Prices are impacted by regional and global supply and demand and by competing fuels in such markets.

The majority of Encana’s natural gas production is sold under short-term delivery contracts less than 12 months in duration, at the relevant monthly or daily market price at the time the product is sold. Encana has dedicated natural gas produced from Deep Panuke under a long-term physical sales contract at prevailing market prices in that region. Encana’s oil production is sold under short term and long term contracts that range up to four years. Prices received by Encana are based primarily upon the prevailing index prices in the relevant region where the product is sold. Encana’s NGLs production is sold under short term and long term contracts that range up to 12 years, or under dedication arrangements at the relevant market price at the time the product is sold.

Encana also seeks to mitigate the market risk associated with future cash flows by entering into various financial risk management contracts relating to produced natural gas, oil and NGLs. Details of contracts related to Encana’s various financial risk management positions are found in Note 24 of Encana’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.

The Company enters into various contractual agreements to sell natural gas, oil and NGLs, some of which require the delivery of fixed and determinable quantities. As of December 31, 2016, Encana was committed to deliver 64,000 MMcf of natural gas and 179 Mbbls of oil and NGLs in the Canadian Operations and 29,000 MMcf of natural gas in the USA Operations with terms under one year. The Company had no commitments to deliver fixed quantities of production with terms exceeding one year.

Certain delivery commitments result in the following financial commitments associated with transportation and processing:

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In general, Encana expects to fulfill delivery commitments with production from proved developed reserves, with longer term delivery commitments to be filled from the Company’s proved undeveloped reserves. Where proved reserves are not sufficient to satisfy the Company’s delivery commitments, Encana can and may use spot market purchases to satisfy the respective commitments. In addition, for the Company’s long-term transportation and processing agreements, Encana also expects to fulfill delivery commitments from the future development of resources not yet characterized as proved reserves. Likewise, where delivery commitments are not transferred along with property divestitures, Encana may market and transport certain portions of the acquirer’s production to meet the delivery requirements.

In addition, production from the Company’s reserves are not subject to any priorities or curtailments that may affect quantities delivered to its customers or any priority allocations or price limitations imposed by federal or state regulatory agencies, or any other factors beyond the Company’s control that may affect Encana’s ability to meet contractual obligations other than those discussed in Item 1A. Risk Factors of this Annual Report on Form 10-K.

MAJOR CUSTOMERS

In connection with the marketing and sale of Encana’s production and purchased natural gas and liquids for the year ended December 31, 2016, the Company had two customers, Royal Dutch Shell Group and Flint Hills Resources, which individually accounted for more than 10 percent of Encana’s consolidated revenues (2015–two customers, Royal Dutch Shell Group and Flint Hills Resources, 2014 – one customer, BP Energy Company). Encana does not believe that the loss of any single customer would have a material adverse effect on the Company’s financial condition or results of operations. Further information on Encana’s major customers are found in Note 2 of Encana’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.

COMPETITION

The Company’s competitors include national, integrated and independent oil and gas companies, as well as oil and gas marketers and other participants in other industries supplying energy and fuel to industrial, commercial and individual consumers. All aspects of the oil and gas industry are highly competitive and Encana actively competes with other companies in the industry, particularly in the following areas:

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.

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

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ENVIRONMENTAL AND REGULATORY MATTERS

As Encana is an owner or lessee and operator of oil and gas properties and facilities in Canada and the United States, the Company is subject to numerous federal, provincial, state, local, tribal and foreign country laws and regulations relating to pollution, protection of the environment and the handling 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, remediating damage caused by the use or release of specified substances, and require suspension or cessation of operations in affected areas. The following are significant areas of government control and regulation affecting Encana’s operations:

Exploration and Development Activities:

Our operations are subject to federal, tribal, state, provincial and local laws and regulations. These laws and regulations relate to matters that include: acquisition of seismic data; location, drilling and casing of wells; well design; hydraulic fracturing; well production; use, transportation, storage and disposal of fluids and materials incidental to oil and gas operations; surface usage and the restoration of properties upon which wells have been drilled and facilities have been constructed; plugging and abandoning of wells; transportation of production; and calculation and disbursement of royalty payments and production and other taxes.

The Company’s operations also are subject to conservation regulations, including the regulation of the size of drilling and spacing units or proration units; the number of wells that may be drilled in a unit; the rate of production allowable from oil and gas wells; and the unitization or pooling of oil and gas properties. In addition, conservation laws generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratable purchase of production. These regulations limit the amounts of oil and gas that can produce from the Company’s wells and the number of wells or the locations that can be drilled.

Environmental and Occupational Regulations:

The Company is subject to many federal, state, provincial, local and tribal laws and regulations concerning occupational health and safety as well as the discharge of materials into, and the protection of, the environment. Environmental laws and regulations relate to:

Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil, and criminal penalties; the imposition of investigatory, remedial, and corrective action obligations or the incurrence of capital expenditures; the occurrence of delays in the permitting, development or expansion of projects; and the issuance of injunctions restricting or prohibiting some or all of the Company’s activities in a particular area. Although environmental requirements have a substantial impact upon the energy industry as a whole, Encana does not believe that these requirements affect us differently, to any material degree, as compared to other companies in the oil and natural gas industry. For further information regarding regulations relating to environmental protection, see Item 1A. Risk Factors of this Annual Report on Form 10-K.

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Operating and capital costs incurred to comply with the requirements of these laws and regulations are necessary business costs in the oil and gas industry. As a result, Encana has established policies for continuing compliance with environmental laws and regulations. The Corporate Responsibility, Environment, Health and Safety Committee of the 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 performance in day-to-day operations, as well as inspections and assessments, are designed to provide assurance that environmental and regulatory standards are met. The Company has established operating procedures and training programs designed to limit the environmental impact of the Company’s field facilities and identify, communicate and comply with changes in existing laws and regulations. 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. In addition, the Board of Directors is advised of significant contraventions thereof, and receives updates on trends, issues or events which could have a significant impact on the Company.

The Company believes that it is in material compliance with existing environmental and occupational health and safety regulations. Further, the Company believes that the cost of maintaining compliance with these existing laws and regulations will not have a material adverse effect on its business, financial condition or results of operations. In addition, Encana maintains insurance coverage for insurable risks against certain environmental and occupational health and safety risks that is consistent with insurance coverage held by other similarly situated industry participants, but the Company is not fully insured against all such risks. However, it is possible that developments, such as new or more stringently applied existing laws and regulations as well as claims for damages to property or persons resulting from the Company’s operations, could result in substantial costs and liabilities to the Company. As a result, Encana is unable to predict with any reasonable degree of certainty future exposures concerning such matters.

Mr. Suttles was appointed President & Chief Executive Officer in June 2013. Prior to that, Mr. Suttles was an independent businessman performing consulting services in the oil and gas industry and serving on the boards of Ceres, Inc. (a public energy crop company) and NEOS GeoSolutions (a privately held geosciences company) from March 2011 until June 2013. Mr. Suttles was also Chief Operating Officer at BP Exploration & Production from January 2009 until March 2011.

Ms. Alexander was appointed Executive Vice-President, General Counsel & Corporate Secretary in January 2015. Prior to that, Ms. Alexander was Senior Vice President, General Counsel and Corporate Secretary of Precision Drilling Corporation (a public oil and gas services company) from April 2008 to December 2014 and General Counsel of Marathon Oil Canada Corporation (an oil and gas company) from 2007 to 2008.

Ms. Brillon was appointed Executive Vice-President & Chief Financial Officer in November 2009. Ms. Brillon joined one of Encana’s predecessor companies in 1985 and assumed a variety of leadership roles, including her

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previous position as Executive Vice-President, Strategic Planning and Portfolio Management in January 2007. Ms. Brillon served as a director of the Canadian Chamber of Commerce (a not-for-profit company) from 2007 to 2009, as a director of PrairieSky Royalty Ltd. (a public oil and gas royalty company) from April 2014 to September 2014 and as a director of Tim Horton’s Inc. (a public restaurant company) from November 2013 to December 2014.

Mr. Hill was appointed Executive Vice-President, Exploration & Business Development in November 2013. Mr. Hill joined Encana in November 2002 and assumed a variety of leadership roles, including his previous position as Vice-President, Natural Gas Economy Operations. Prior to these positions, Mr. Hill was President of TICORA Geosciences (a privately held geosciences company) from 2000 to 2002.

Mr. McAllister was appointed Executive Vice-President & Chief Operating Officer in November 2013. Mr. McAllister joined one of Encana’s predecessor companies in June 2000 and assumed a variety of leadership roles, including his previous position as Executive Vice-President & Senior Vice-President, Canadian Division in February 2011. Before joining Encana, Mr. McAllister worked in various technical and leadership roles for Texaco Canada and Imperial Oil Resources (both are oil and gas companies).

Mr. Williams was appointed Executive Vice-President, Corporate Services in March 2014. Prior to that, Mr. Williams was Executive Vice-President of Corporate Services with Tervita Corporation (a private energy services company) from 2011 to 2014 and Chief Administration Officer for TransAlta Corporation (a public power company) from 2002 to 2011.

Ms. Zemljak was appointed Executive Vice-President, Midstream, Marketing & Fundamentals in November 2009. Ms. Zemljak joined one of Encana’s predecessor companies in November 2000 and assumed a variety of leadership roles, including her previous position as Vice-President of USA Marketing in May 2002. Prior to joining Encana, Ms. Zemljak worked in various roles for Montana Power (formerly a public power company).

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