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 oil, NGL and natural gas producing plays. Encana’s operations also include the marketing of oil, NGLs and natural gas. 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. The public may read any document Encana files with or furnishes to the SEC at the SEC’s public reference room at 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.

STRATEGY

Encana’s vision is to be a leading North American resource play company that is committed to growing long-term shareholder value through a disciplined focus on generating profitable growth. Objectives that support the execution of the Company’s strategy 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 oil and natural gas resources within the plays. Encana continually strives to lower costs and improve efficiencies to achieve competitive advantage through

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technology and innovation. Capital and operating efficiencies are achieved by repeating and deploying successful practices across the Company’s multi-basin portfolio.

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. In addition, Encana leverages its market fundamentals expertise by actively monitoring and managing market volatility and diversifying price and market access risks to enhance the Company’s margins.

During 2017, the oil and natural gas industry continued to experience commodity price volatility. In spite of this trend, Encana has continued to execute on its strategy by focusing capital investment to core assets with high margin liquids and future growth potential and divesting of non-strategic assets. Moreover, the Company focused on lowering overhead costs and enhancing capital and operating efficiencies by leveraging technology and innovation to maximize efficiencies and results. Encana also focused on reducing costs by leveraging its integrated supply chain model by self-sourcing key drilling and completions consumables to obtain scale advantages from negotiating better contract pricing as well as security of supply services. Through continued execution of its strategy, Encana is well positioned for growth in the current price environment. 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 oil, NGL and natural gas reserves. The Company is also focused on creating and capturing additional value through its market optimization segment. The Company conducts a substantial portion of its business through subsidiaries. Encana’s operating and reportable segments are: (i) Canadian Operations; (ii) USA Operations; and (iii) Market Optimization.

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.

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OIL AND GAS PROPERTIES AND ACTIVITIES

The following map outlines the location of Encana’s North American landholdings and assets as at December 31, 2017.

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 that are not part of Encana’s current strategic focus. Base plays are managed to generate cash flows and focus on enhancing operational efficiency and cost reductions rather than development programs. Option value plays may receive funding for exploration or development based on strategic fit, play profitability driven by price and energy fundamentals and portfolio diversity.

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Canadian Operations

Overview:  In 2017, the Canadian Operations had total capital investment of approximately $426 million and drilled approximately 117 net wells all of which were in Montney and Duvernay. Production averaged approximately 29.5 Mbbls/d of oil and NGLs and approximately 838 MMcf/d of natural gas. At December 31, 2017, the Canadian Operations had an established land position in Canada of approximately 1.7 million net acres including approximately 1.2 million net undeveloped acres. In addition, the Canadian Operations accounted for 38% of production sales during 2017 and 59% of total proved reserves as at December 31, 2017.

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.

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

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

Montney

Montney is primarily a condensate rich natural gas play located in northeast British Columbia and northwest Alberta. While Encana is currently targeting the development of condensate rich locations in the Montney formation, the acreage comprising the Montney play also includes landholdings with incremental producing formations such as Cadomin and Doig. In 2017, total production from the play averaged approximately 19.3 Mbbls/d of oil and NGLs and approximately 644 MMcf/d of natural gas. As at December 31, 2017, Encana controlled approximately 808,000 net acres in the play.

During 2017, Encana continued to focus development in the Montney formation, which is characterized by up to six stacked horizons spanning over 1,000 feet of stratigraphy and is being developed exclusively with horizontal well technology. At December 31, 2017, Encana held a large position in the Montney formation of approximately 475,000 net acres, including 259,000 net undeveloped acres and production averaged approximately 19.1 Mbbls/d of oil and NGLs and approximately 567 MMcf/d of natural gas.

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Significant efficiency improvements with respect to Montney drilling and completions have been achieved using the cube development approach. In addition to utilizing larger multi-well pads and simultaneous use of multiple drilling rigs, Encana also focused on tighter well spacing, increased completions intensity and reducing costs. In 2017, Encana drilled approximately 108 net horizontal wells with lateral lengths ranging from approximately 3,200 to 12,800 feet and tighter inter-well spacing ranging from approximately 490 to 880 feet. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change. The Company also continued to focus on reducing water costs through its centralized water hub by re-using produced water from drilling operations and utilizing otherwise unusable saline water from a subsurface water aquifer.

As at December 31, 2017, Encana has access to natural gas processing capacity of approximately 1,200 MMcf/d, of which approximately 1,000 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 1,300 MMcf/d, of which approximately 1,200 MMcf/d is under contract with third parties under varying terms and duration and approximately 100 MMcf/d is owned by the Company. During the fourth quarter of 2017, access to liquids handling capacity increased due to three new facilities that provide compression and processing under contract with third parties.

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$2.5 billion has been received as of December 31, 2017. 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$0.4 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 until the remaining investment commitment is satisfied.

Duvernay

Duvernay is a 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 overlapping formations such as the Montney. As at December 31, 2017, Encana controlled approximately 374,000 net acres in the play.

The Duvernay formation within the play primarily comprises approximately 332,000 net acres, including 290,000 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 multi-well pad horizontal drilling technology. During 2017, Encana focused on efficient development to fill existing processing capacity, reducing drilling days and leveraging successful advanced completions designs to maximize well productivity. Encana also drilled approximately 9 net wells during the year with lateral lengths ranging from approximately 6,400 to 10,800 feet with inter-well spacing averaging approximately 1,000 feet. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change. In 2017, production averaged approximately 9.8 Mbbls/d of oil and NGLs and approximately 64 MMcf/d of natural gas. In addition, Encana focused on reducing operating costs by approximately 15 percent since 2016 primarily from the automation and centralized monitoring of wells and facilities and lowering of water handling costs by utilizing existing infrastructure to dispose of water to plant site disposal wells, eliminating costs to truck disposal water to third party disposal sites.

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 approximately 90 MMcf/d with NGLs production capacity of approximately 18.0 Mbbls/d.

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, of which the investment was substantially received as of December 31, 2017. In February 2018, Encana received the final investment from PetroChina, satisfying the commitment under the agreement.

Other Upstream Operations:

Wheatland

Wheatland is located in southern Alberta and includes producing horizons primarily in the coals and sands of the Cretaceous Edmonton and Belly River Groups. In the fourth quarter of 2017, Encana divested of approximately 511,000 net acres and approximately 4,720 net wells in the play. As at December 31, 2017, Encana had approximately 525 gross producing wells (approximately 464 net producing wells) and controlled approximately 207,000 net acres in the play. During 2017, Encana

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focused on play optimization, reducing production declines and lowering operating costs. In 2017, natural gas production from the remaining properties averaged approximately 6 MMcf/d.

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 2017, Encana’s natural gas production averaged approximately 49 MMcf/d. As at December 31, 2017, Encana had approximately 97 gross producing horizontal wells (49 net producing horizontal wells) and controlled approximately 164,000 net acres, which includes 143,000 net undeveloped acres in the Horn River Basin shales. Encana owns an 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 2017, natural gas production averaged approximately 19 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, under a seasonal operating strategy. At December 31, 2017, 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 2017, the USA Operations had total capital investment of approximately $1,358 million and drilled approximately 168 net wells. Production averaged approximately 75.9 Mbbls/d of oil, approximately 23.7 Mbbls/d of NGLs and approximately 266 MMcf/d of natural gas. At December 31, 2017, the USA Operations had an established land position of approximately 399,000 net acres including approximately 119,000 net undeveloped acres. In addition, the USA Operations accounted for 62% of production sales during 2017 and 41% of total proved reserves as at December 31, 2017.

During 2017, Encana divested of approximately 550,000 net acres in Piceance located in northwestern Colorado for proceeds of approximately $605 million, after closing adjustments and the sale of approximately 144,000 net acres in Tuscaloosa Marine Shale (“TMS”) located in east Louisiana and west Mississippi.

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

(1) Other Upstream Operations primarily includes San Juan.

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

(2) Other Upstream Operations primarily includes San Juan.

(1) Other Upstream Operations primarily includes San Juan.

(2) Other Upstream Operations includes production from Piceance and TMS which were divested in 2017 and from DJ Basin which was divested in 2016.

Eagle Ford

Eagle Ford is a tight oil play located in south Texas in the Karnes 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, 2017, Encana controlled approximately 43,000 net acres in the play. Encana is focused on developing the lower Eagle Ford exclusively using horizontal drilling, as well as optimizing upper Eagle Ford and Austin Chalk targets. During 2017, Encana drilled approximately 37 net wells in the area with lateral lengths ranging from approximately 2,600 to 6,800 feet with an average measured total depth of approximately 16,700 feet. Production averaged approximately 30.8 Mbbls/d of oil, approximately 8.2 Mbbls/d of NGLs and approximately 51 MMcf/d of natural gas during the year.

During 2017, Encana continued to focus on precision well targeting, spacing and stacking optimization and improving completions designs. Performance improvements were achieved from optimizing fracture complexity by driving down stage spacing and cluster spacing to less than 20 feet, while optimizing cluster efficiency through thin fluids design, resulting in

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increased well productivity and optimized capital efficiency. In addition, Encana expanded development activity in the Austin Chalk, drilling 12 net horizontal wells in 2017. As Encana continues to optimize development and apply advanced completions designs, lateral lengths drilled, cluster spacing and well spacing may change. Encana also focused on reducing operating costs by negotiating better contract pricing, optimizing artificial lift systems and streamlining well interventions.

The play is located within close proximity to markets and has a well-developed infrastructure. Oil and natural gas production is gathered at various production facilities, with the majority of the oil subsequently transported to sales points by pipeline or trucked from facilities depending on the sales contract. Encana has access to firm natural gas gathering capacity of up to approximately 52 MMcf/d and firm processing capacity of up to approximately 72 MMcf/d with third parties under varying terms and duration. Encana utilizes interruptible capacity arrangements for excess production.

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, 2017, Encana controlled approximately 118,000 net acres in the play. The properties are characterized by exposure of up to 11 potential producing horizons spanning approximately 4,000 feet of stratigraphy (also referred to as “stacked pay”), an extensive production history and mature infrastructure. In 2017, production averaged approximately 41.4 Mbbls/d of oil, approximately 13.6 Mbbls/d of NGLs and approximately 67 MMcf/d of natural gas.

During 2017, Encana focused on maximizing efficiency improvements at an industrial scale and maximizing resource recovery by accessing layers of the stacked pay simultaneously using the cube development approach. This approach utilizes large multi-well pads, multi- rig spreads and frac spreads running in parallel to optimize cycle times, increase capital efficiency and reduce costs through economies of scale from higher utilization of services and consumable supplies, while minimizing the development or surface footprint. Encana also reduced capital costs through centralized wellsite facilities and water infrastructure. Encana also focused on increasing well productivity by optimizing completions designs, with precision targeting of the wells drilled, tighter cluster spacing and using cleaner and thinner fluids to maximize fracture complexity. During 2017, Encana drilled 126 horizontal net wells with lateral lengths ranging from approximately 4,200 to 11,000 feet at a measured average total depth of approximately 17,300 feet with well spacing ranging from approximately 360 to 660 feet. As Encana continues to optimize well and completion designs, lateral lengths drilled, stage and well spacing may change.

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, which has a total remaining term of 12 years including optional renewal terms. In the event of pipeline capacity constraints, Encana’s oil production is trucked by a third party. Natural gas is delivered by Encana to the purchaser’s meter and pipeline interconnection point in the field.

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 its land position almost exclusively in the oil window of the play. Development is focused on the liquids in Tocito and El Vado formations within the play. At December 31, 2017, Encana controlled approximately 198,000 net acres in the play, which includes 69,000 net undeveloped acres. During 2017, Encana drilled 3 horizontal net wells in the Tocito and 1 horizontal net wells in El Vado with lateral lengths ranging from approximately 3,600 to 7,900 feet at a measured average total depth of approximately 12,300 feet. In 2017, Encana applied successful drilling and completions strategies from its other plays, drilling the wells in a transverse orientation utilizing thinner fluids and tighter cluster spacing to optimize fracture complexity. Encana is currently evaluating the stacked pay potential and future well inventory of the play from the well spacing trial. Production averaged approximately 3.9 Mbbls/d of oil and NGLs and approximately 9 MMcf/d of natural gas during the year. Encana has access to natural gas processing capacity of up to approximately 50 MMcf/d under a dedication agreement with a third party.

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PROVED RESERVES AND OTHER OIL AND GAS INFORMATION

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

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 Encana’s internal policies that prescribe procedures and standards to be followed for preparing, estimating and recording reserves, which includes updating the Company’s reserves manual, and also conducts periodic internal audits of the procedures, records and controls relating to the preparation of reserves estimates. Encana’s QREs receive ongoing education on the fundamentals of SEC definitions and reserves reporting through the review of the Company’s reserves manual and internal training programs administered by the Corporate Reserves Group. The Corporate Reserves Group also oversees the engagement of independent qualified reserves evaluators (“IQREs”) or independent qualified reserves auditors (“IQRAs”), if any, retained by the Company.

As a member of 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, is a member of the Association of Professional Engineers and Geoscientists of Alberta (APEGA) and the Society of Petroleum Evaluation Engineers (Calgary Chapter).

Annually, each play is reviewed in detail by the QREs, the Corporate Reserves Group, the Company’s executive officers and an internal Reserves Review Committee, as appropriate. The Corporate Reserves Group also 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 Reserves Committee of the Board of Directors (the “Reserves Committee”), for approval by the Board of Directors. The Reserves Committee 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 IQREs or IQRAs, if any, retained by the Company, including recommending the selection of such IQREs or IQRAs to the Board of Directors for its approval, and will meet with such IQREs or IQRAs to review their reports.

For year-ended December 31, 2017, Encana involved IQRAs to audit and review the processes relating to the Company’s internal oil and gas reserve estimates for certain properties. In 2017, McDaniel & Associates Consultants Ltd. audited 75 percent of Encana’s estimated Canadian proved reserves volumes and Netherland, Sewell & Associates, Inc. audited 80 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 flows 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.

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.

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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 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 assumed effects of regulation by governmental agencies, and future operating costs, all of which may vary materially from actual results. For those reasons, among others, estimates of the economically recoverable crude oil and natural gas reserves attributable to any particular group of properties and estimates of future net revenues associated with reserves may vary and such variations may be material. 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, and such variations could be material.

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 its reports. 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, 2017 and was prepared as of January 15, 2018. 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.

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 25 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 2017 are summarized in the table below:

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In 2017, Encana’s proved oil and NGLs reserves of 375.0 MMbbls increased 69.0 MMbbls from 2016 primarily due to extensions and discoveries of 158.0 MMbbls in the Permian, Montney, and Eagle Ford and purchase of reserves in place of 1.2 MMbbls, partly offset by production of 47.1 MMbbls, negative revisions and improved recovery of 33.9 MMbbls and by sale of reserves of 9.2 MMbbls. Revisions and improved recovery of oil and NGLs were negative primarily due to negative revisions resulting from changes in the approved development plan of 40.3 MMbbls and forecast changes resulting from well performance of 7.7 MMbbls, partly offset by positive revisions of 14.0 MMbbls from higher 12-month average trailing oil and NGL prices.

In 2017, Encana’s proved natural gas reserves of approximately 2,519 Bcf decreased 383 Bcf from 2016 primarily due to sales of reserves in place of 795 Bcf resulting from the divestiture of the Piceance natural gas play and production of 403 Bcf. Revisions and improved recovery of natural gas were negative primarily due to negative revisions of 258 Bcf resulting from changes in the approved development plan, partly offset by positive revisions of 111 Bcf from higher 12-month average trailing natural gas prices and by positive forecast changes other than price of 89 Bcf. Extensions and discoveries of 871 Bcf were due to successful drilling and delineation of Permian, Montney and Eagle Ford assets.

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, 2017 were WTI: $51.34 per bbl, Edmonton Condensate: C$67.65 per bbl, Henry Hub: $2.98 per MMBtu, and AECO: C$2.32 per MMBtu. Prices for natural gas, oil and NGLs can fluctuate widely.

   * Numbers may not add due to rounding.

As of December 31, 2017, there were no proved undeveloped reserves that will remain undeveloped for five years or more.

Revisions of previous estimates of proved undeveloped reserves were revised down by 98.7 MMBOE primarily due to the removal of proved undeveloped locations of 83.3 MMBOE resulting from changes in the development plan related to Montney, Permian, Eagle Ford, and San Juan where specific locations previously planned to be drilled within five years were shifted to a later development timeframe and replaced with different locations that are included in extensions and discoveries. In addition, revisions of previous estimates also included a negative revision of 17.4 MMBOE from decreased well performance, offset by a positive revision of 2.0 MMBOE due to higher commodity prices.

Conversions of proved undeveloped reserves to proved developed status were 82.4 MMBOE, equating to 24 percent of the total prior year-end proved undeveloped reserves. Approximately 70 percent of proved undeveloped reserves conversions occurred in Canada in Montney and Duvernay and 30 percent occurred in the U.S. in Permian and Eagle Ford. Encana spent approximately $427 million to develop proved undeveloped reserves in 2017, of which approximately 40 percent related to the Canadian properties and 60 percent related to the U.S. properties.

Purchases of proved undeveloped reserves of 1.5 MMBOE relate to acquisitions in the Eagle Ford and Permian.

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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, 2017.

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, 2017.

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The following table summarizes Encana’s developed, undeveloped and total landholdings by geographic area as at December 31, 2017.

Of the total 2.2 million net acres, approximately 0.8 million net acres is held by production. The table above includes acreage subject to leases that will expire over the next three years: 2018 – approximately 78,000 net acres; 2019 – approximately 201,000 net acres; and 2020 – approximately 192,000 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 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.

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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 oil, NGLs and natural gas, 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.

Encana’s oil production is sold under short term and evergreen contracts or under dedication agreements, for which 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 11 years, or under dedication arrangements at the relevant market price at the time the product is sold. Encana’s natural gas production is sold under short-term delivery contracts with terms less than 2 years in duration, at the relevant monthly or daily market price at the time the product is sold. Natural gas production from Deep Panuke is sold under a dedication agreement with a third party for prevailing market prices in that region.

Encana also seeks to mitigate the market risk associated with future cash flows by entering into various financial risk management contracts relating to produced oil, NGLs and natural gas. Details of contracts related to Encana’s various financial risk management positions are found in Note 22 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 oil, NGLs and natural gas, some of which require the delivery of fixed and determinable quantities. As of December 31, 2017, Encana was committed to deliver approximately 3,600 Mbbls of oil and NGLs and approximately 180,000 MMcf of natural gas in the Canadian Operations and approximately 44,000 MMcf of natural gas in the USA Operations with terms under two years.

Certain transportation and processing commitments result in the following financial commitments:

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.

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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 oil, NGLs and natural gas for the year ended December 31, 2017, 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 (2016 and 2015 – two customers, Royal Dutch Shell Group and Flint Hills Resources). 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 oil, NGLs or natural gas.

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

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

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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 the Company 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.

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

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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.

(1) As of February 26, 2018

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 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 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.

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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