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EnCana Expects to Book 19 Tcf of North American Reserves Over Next 5 Years

With thousands of acres of unconventional natural gas plays across the United States and western Canada, EnCana Corp. expects to book about 19 Tcf in proved reserves over the next five years, CEO Gwyn Morgan said Wednesday.

Speaking to executives at the Canadian Association of Petroleum Producers' 17th Annual Oil and Gas Investment Symposium in Calgary, Morgan said the company's strategic shift to unconventional gas exploration in the past three years has paid off, and EnCana now has a backlog of properties to develop.

EnCana's core focus is onshore in North America, and its gas production has doubled in the past three years. In the next five years, 75% of its output in continuing operations will come from unconventional resources, said Morgan.

"The net effect of this is a continuous leveling out of our average decline rate. It's a little over 20% now, and we see that falling each year over the next five years," he said.

EnCana also has seen declining costs because of its move toward smaller, unconventional resources, such as coalbed methane and tight sands, he said. Its current reserve replacement cost is about $1.42/Mcfe, and reserves were 13% higher in 2004.

"North America isn't running out of natural gas," Morgan said. "But it is running out of conventional gas. The Hubbard peak occurred three decades ago, and now unconventional gas represents one-third of the new gas growth. The only gas growth is unconventional."

EnCana now is "moving decisively" to sell its mature, conventional assets, both in North America and globally. "By removing the impact of conventional asset dispositions, we see the underlying growth of our unconventional assets. We've been growing our North American resource play about 25% a year over the last three years, and we see that this is building a competitive advantage," he said.

EnCana's strategy now is not to focus on size, but rather on value. "This drives our project selection," Morgan said. "Every project must meet multiple economic thresholds, which favor longlife projects. We stress test our projects and then we select only the most robust projects."

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