Exhibit 99.1

Encana Corporation

Interim Consolidated Financial Statements
(unaudited)

For the period ended September 30, 2010

(U.S. Dollars)

Third quarter report
for the period ended September 30, 2010

Consolidated Statement of Earnings (unaudited)

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
($ millions, except per share amounts)		2010			2009			2010			2009
Revenues, Net of Royalties	(Note 3)	$	2,425		$	2,271		$	7,439		$	8,402
Expenses	(Note 3)
Production and mineral taxes			49			29			170			122
Transportation and selling			217			355			642			969
Operating			272			411			778			1,246
Purchased product			189			322			560			1,120
Depreciation, depletion and amortization			810			943			2,424			2,809
Administrative			72			139			261			332
Interest, net	(Note 6)		119			111			380			252
Accretion of asset retirement obligation	(Note 10)		12			20			35			55
Foreign exchange (gain) loss, net	(Note 7)		(154	)		(114	)		(32	)		(117	)
(Gain) loss on divestitures			(1	)		(1	)		(1	)		1
			1,585			2,215			5,217			6,789
Net Earnings Before Income Tax			840			56			2,222			1,613
Income tax expense	(Note 8)		271			17			681			372
Net Earnings From Continuing Operations			569			39			1,541			1,241
Net Earnings (Loss) From Discontinued Operations	(Note 4)		—			(14	)		—			(15	)
Net Earnings		$	569		$	25		$	1,541		$	1,226
Net Earnings From Continuing Operations per Common Share	(Note 12)
Basic		$	0.77		$	0.05		$	2.08		$	1.65
Diluted		$	0.77		$	0.05		$	2.08		$	1.65
Net Earnings per Common Share	(Note 12)
Basic		$	0.77		$	0.03		$	2.08		$	1.63
Diluted		$	0.77		$	0.03		$	2.08		$	1.63

Consolidated Statement of Comprehensive Income (unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ millions)	2010		2009		2010		2009
Net Earnings	$	569	$	25	$	1,541	$	1,226
Other Comprehensive Income, Net of Tax
Foreign Currency Translation Adjustment		148		985		130		1,630
Comprehensive Income	$	717	$	1,010	$	1,671	$	2,856

See accompanying Notes to Consolidated Financial Statements.

Encana Corporation 1

Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Consolidated Balance Sheet (unaudited)

		As at		As at
		September 30,		December 31,
($ millions)		2010		2009
Assets
Current Assets
Cash and cash equivalents		$	1,397	$	4,275
Accounts receivable and accrued revenues			1,012		1,180
Risk management	(Note 14)		993		328
Income tax receivable			369		—
Inventories			6		12
			3,777		5,795
Property, Plant and Equipment, net	(Note 3)		27,368		26,173
Investments and Other Assets			259		164
Risk Management	(Note 14)		692		32
Goodwill			1,683		1,663
	(Note 3)	$	33,779	$	33,827
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities		$	2,142	$	2,143
Income tax payable			—		1,776
Risk management	(Note 14)		95		126
Current portion of long-term debt	(Note 9)		—		200
			2,237		4,245
Long-Term Debt	(Note 9)		7,586		7,568
Other Liabilities	(Note 3)		1,544		1,185
Risk Management	(Note 14)		14		42
Asset Retirement Obligation	(Note 10)		771		787
Future Income Taxes			4,277		3,386
			16,429		17,213
Shareholders’ Equity
Share capital	(Note 12)		2,319		2,360
Paid in surplus	(Note 12)		—		6
Retained earnings			14,146		13,493
Accumulated other comprehensive income			885		755
Total Shareholders’ Equity			17,350		16,614
		$	33,779	$	33,827

See accompanying Notes to Consolidated Financial Statements.

Encana Corporation 2

Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Consolidated Statement of Shareholders’ Equity (unaudited)

		Nine Months Ended
		September 30,
($ millions)		2010			2009
Share Capital
Balance, Beginning of Year		$	2,360		$	4,557
Common Shares Issued under Option Plans	(Note 12)		5			4
Common Shares Issued from PSU Trust	(Note 12)		—			19
Stock-Based Compensation	(Note 12)		2			1
Common Shares Purchased	(Note 12)		(48	)		—
Balance, End of Period		$	2,319		$	4,581
Paid in Surplus
Balance, Beginning of Year		$	6		$	—
Common Shares Issued from PSU Trust			—			6
Common Shares Purchased	(Note 12)		(6	)		—
Balance, End of Period		$	—		$	6
Retained Earnings
Balance, Beginning of Year		$	13,493		$	17,584
Net Earnings			1,541			1,226
Dividends on Common Shares			(443	)		(901	)
Charges for Normal Course Issuer Bid	(Note 12)		(445	)		—
Balance, End of Period		$	14,146		$	17,909
Accumulated Other Comprehensive Income
Balance, Beginning of Year		$	755		$	833
Foreign Currency Translation Adjustment			130			1,630
Balance, End of Period		$	885		$	2,463
Total Shareholders’ Equity		$	17,350		$	24,959

See accompanying Notes to Consolidated Financial Statements.

Encana Corporation 3

Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Consolidated Statement of Cash Flows (unaudited)

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
($ millions)		2010			2009			2010			2009
Operating Activities
Net earnings from continuing operations		$	569		$	39		$	1,541		$	1,241
Depreciation, depletion and amortization			810			943			2,424			2,809
Future income taxes	(Note 8)		367			(306	)		869			(518	)
Unrealized (gain) loss on risk management	(Note 14)		(491	)		1,384			(1,343	)		2,391
Unrealized foreign exchange (gain) loss			(160	)		(100	)		(87	)		(149	)
Accretion of asset retirement obligation	(Note 10)		12			20			35			55
(Gain) loss on divestitures			(1	)		(1	)		(1	)		1
Other			26			53			84			184
Cash flow from discontinued operations			—			47			—			162
Net change in other assets and liabilities			(16	)		10			(85	)		36
Net change in non-cash working capital from continuing operations			209			278			(1,991	)		(557	)
Net change in non-cash working capital from discontinued operations			—			283			—			747
Cash From (Used in) Operating Activities			1,325			2,650			1,446			6,402
Investing Activities
Capital expenditures	(Note 3)		(1,416	)		(1,017	)		(3,687	)		(3,454	)
Proceeds from divestitures	(Note 5)		220			977			574			1,030
Corporate acquisition			—			—			—			(24	)
Restricted cash	(Note 1)		—			(3,619	)		—			(3,619	)
Net change in investments and other			117			77			(100	)		232
Net change in non-cash working capital from continuing operations			11			51			32			(216	)
Discontinued operations			—			(329	)		—			(910	)
Cash From (Used in) Investing Activities			(1,068	)		(3,860	)		(3,181	)		(6,961	)
Financing Activities
Net issuance (repayment) of revolving long-term debt			—			(726	)		—			(1,391	)
Issuance of long-term debt			—			—			—			496
Issuance of Cenovus Notes	(Note 1)		—			3,468			—			3,468
Repayment of long-term debt			(200	)		(250	)		(200	)		(250	)
Issuance of common shares	(Note 12)		—			2			5			23
Purchase of common shares	(Note 12)		—			—			(499	)		—
Dividends on common shares			(147	)		(300	)		(443	)		(901	)
Cash From (Used in) Financing Activities			(347	)		2,194			(1,137	)		1,445
Foreign Exchange Gain (Loss) on Cash and Cash
Equivalents Held in Foreign Currency			6			6			(6	)		11
Increase (Decrease) in Cash and Cash Equivalents			(84	)		990			(2,878	)		897
Cash and Cash Equivalents, Beginning of Period			1,481			261			4,275			354
Cash and Cash Equivalents, End of Period		$	1,397		$	1,251		$	1,397		$	1,251
Cash (Bank Overdraft), End of Period		$	(22	)	$	57		$	(22	)	$	57
Cash Equivalents, End of Period			1,419			1,194			1,419			1,194
Cash and Cash Equivalents, End of Period		$	1,397		$	1,251		$	1,397		$	1,251

See accompanying Notes to Consolidated Financial Statements.

Encana Corporation 4

Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

1. Basis of Presentation

The interim Consolidated Financial Statements include the accounts of Encana Corporation and its subsidiaries (“Encana” or the “Company”), and are presented in accordance with Canadian generally accepted accounting principles (“GAAP”). Encana’s operations are in the business of the exploration for, the development of, and the production and marketing of natural gas and crude oil and natural gas liquids (“NGLs”).

The interim Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the annual audited Consolidated Financial Statements for the year ended December 31, 2009, except as noted below. The disclosures provided below are incremental to those included with the annual audited Consolidated Financial Statements. Certain information and disclosures normally required to be included in the notes to the annual audited Consolidated Financial Statements have been condensed or have been disclosed on an annual basis only. Accordingly, the interim Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2009.

On November 30, 2009, Encana completed a corporate reorganization (the “Split Transaction”) to split into two independent publicly traded energy companies — Encana Corporation, a natural gas company, and Cenovus Energy Inc. (“Cenovus”), an integrated oil company.

In conjunction with the Split Transaction, on September 18, 2009, Cenovus completed a private offering of senior unsecured notes for net proceeds of $3,468 million. The net proceeds from the private offering, together with amounts on deposit, were held in escrow as restricted cash for the benefit of the note holders until the Split Transaction was completed.

Encana’s 2009 comparative results in the Consolidated Statement of Earnings and Consolidated Statement of Cash Flows include Cenovus’s upstream operations prior to the November 30, 2009 Split Transaction in continuing operations, while the U.S. Downstream Refining results are reported as discontinued operations.

2. Changes in Accounting Policies and Practices

On January 1, 2010, Encana adopted the following Canadian Institute of Chartered Accountants (“CICA”) Handbook sections:

• “Business Combinations”, Section 1582, which replaces the previous business combinations standard. The standard requires assets and liabilities acquired in a business combination, contingent consideration and certain acquired contingencies to be measured at their fair values as of the date of acquisition. In addition, acquisition-related and restructuring costs are to be recognized separately from the business combination and included in the statement of earnings. The adoption of this standard will impact the accounting treatment of future business combinations entered into after January 1, 2010.

• “Consolidated Financial Statements”, Section 1601, which, together with Section 1602 below, replace the former consolidated financial statements standard. Section 1601 establishes the requirements for the preparation of consolidated financial statements. The adoption of this standard had no material impact on Encana’s Consolidated Financial Statements.

• “Non-controlling Interests”, Section 1602, which establishes the accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The standard requires a non-controlling interest in a subsidiary to be classified as a separate component of equity. In addition, net earnings and components of other comprehensive income are attributed to both the parent and non-controlling interest. The adoption of this standard has had no material impact on Encana’s Consolidated Financial Statements.

The above CICA Handbook sections are converged with International Financial Reporting Standards (“IFRS”). Encana will be required to report its results in accordance with IFRS beginning in 2011. The Company is currently assessing the impact of the convergence of Canadian GAAP with IFRS on Encana’s financial results of operations, financial position and disclosures.

Encana Corporation 5

Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information

The Company’s operating and reportable segments are as follows:

• Canada includes the Company’s exploration for, and development and production of natural gas, crude oil and NGLs and other related activities within the Canadian cost centre.

• USA includes the Company’s exploration for, and development and production of natural gas, NGLs and other related activities within the U.S. cost centre.

• Market Optimization is primarily responsible for the sale of the Company’s proprietary production. These results are included in the Canada and USA segments. Market optimization activities include third-party purchases and sales of product that provide operational flexibility for transportation commitments, product type, delivery points and customer diversification. These activities are reflected in the Market Optimization segment.

• Corporate and Other mainly includes unrealized gains or losses recorded on derivative financial instruments. Once amounts are settled, the realized gains and losses are recorded in the operating segment to which the derivative instrument relates.

Market Optimization sells substantially all of the Company’s upstream production to third-party customers. Transactions between segments are based on market values and eliminated on consolidation. The tables in this note present financial information on an after eliminations basis.

In conjunction with the Split Transaction, the assets formerly included in Encana’s Canadian Plains Division and Integrated Oil Division were transferred to Cenovus. As a result, the former Canadian Foothills Division is reported as the Canadian Division and the Canadian Plains Division and Integrated Oil — Canada are presented as Canada — Other. Prior periods have been restated to reflect this presentation.

Encana has a decentralized decision-making and reporting structure. Accordingly, the Company reports its divisional results as follows:

• Canadian Division, formerly the Canadian Foothills Division, which includes natural gas development and production assets located in British Columbia and Alberta, as well as the Deep Panuke natural gas project offshore Nova Scotia. Four key resource plays are located in the Division: (i) Greater Sierra in northeast British Columbia, including Horn River; (ii) Cutbank Ridge on the Alberta and British Columbia border, including Montney; (iii) Bighorn in west central Alberta; and (iv) Coalbed Methane in southern Alberta.

• USA Division, which includes the natural gas development and production assets located in the U.S. Five key resource plays are located in the Division: (i) Jonah in southwest Wyoming; (ii) Piceance in northwest Colorado; (iii) East Texas in Texas; (iv) Haynesville in Louisiana and Texas; and (v) Fort Worth in Texas.

• Canada — Other includes the combined results from the former Canadian Plains Division and Integrated Oil — Canada.

Operations that have been discontinued are disclosed in Note 4.

Encana Corporation 6

Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information (continued)

Results of Operations (For the three months ended September 30)

Segment and Geographic Information

	Canada					USA				Market Optimization
	2010		2009			2010		2009		2010		2009
Revenues, Net of Royalties	$	692	$	2,101		$	1,028	$	1,161	$	205	$	381
Expenses
Production and mineral taxes		3		12			46		17		—		—
Transportation and selling		52		216			165		139		—		—
Operating		131		289			120		100		11		11
Purchased product		—		(41	)		—		—		189		363
		506		1,625			697		905		5		7
Depreciation, depletion and amortization		318		537			463		373		2		6
Segment Income (Loss)	$	188	$	1,088		$	234	$	532	$	3	$	1

	Corporate & Other					Consolidated
	2010		2009			2010			2009
Revenues, Net of Royalties	$	500	$	(1,372	)	$	2,425		$	2,271
Expenses
Production and mineral taxes		—		—			49			29
Transportation and selling		—		—			217			355
Operating		10		11			272			411
Purchased product		—		—			189			322
		490		(1,383	)		1,698			1,154
Depreciation, depletion and amortization		27		27			810			943
Segment Income (Loss)	$	463	$	(1,410	)		888			211
Administrative							72			139
Interest, net							119			111
Accretion of asset retirement obligation							12			20
Foreign exchange (gain) loss, net							(154	)		(114	)
(Gain) loss on divestitures							(1	)		(1	)
							48			155
Net Earnings Before Income Tax							840			56
Income tax expense							271			17
Net Earnings from Continuing Operations						$	569		$	39

	7
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information (continued)

Results of Operations (For the three months ended September 30)

Product and Divisional Information

	Canada Segment
	Canadian Division				Canada - Other					Total
	2010		2009		2010		2009			2010		2009
Revenues, Net of Royalties	$	692	$	849	$	—	$	1,252		$	692	$	2,101
Expenses
Production and mineral taxes		3		2		—		10			3		12
Transportation and selling		52		40		—		176			52		216
Operating		131		126		—		163			131		289
Purchased product		—		—		—		(41	)		—		(41	)
Operating Cash Flow	$	506	$	681	$	—	$	944		$	506	$	1,625

	Canadian Division *
	Gas				Oil & NGLs				Other				Total
	2010		2009		2010		2009		2010		2009		2010		2009
Revenues, Net of Royalties	$	603	$	761	$	78	$	77	$	11	$	11	$	692	$	849
Expenses
Production and mineral taxes		3		2		—		—		—		—		3		2
Transportation and selling		51		38		1		2		—		—		52		40
Operating		123		118		4		5		4		3		131		126
Operating Cash Flow	$	426	$	603	$	73	$	70	$	7	$	8	$	506	$	681

	USA Division
	Gas				Oil & NGLs				Other				Total
	2010		2009		2010		2009		2010		2009		2010		2009
Revenues, Net of Royalties	$	941	$	1,084	$	56	$	53	$	31	$	24	$	1,028	$	1,161
Expenses
Production and mineral taxes		41		12		5		5		—		—		46		17
Transportation and selling		165		139		—		—		—		—		165		139
Operating		103		78		—		—		17		22		120		100
Operating Cash Flow	$	632	$	855	$	51	$	48	$	14	$	2	$	697	$	905

	Canada - Other **
	Gas				Oil & NGLs				Other					Total
	2010		2009		2010		2009		2010		2009			2010		2009
Revenues, Net of Royalties	$	—	$	487	$	—	$	730	$	—	$	35		$	—	$	1,252
Expenses
Production and mineral taxes		—		3		—		6		—		1			—		10
Transportation and selling		—		10		—		158		—		8			—		176
Operating		—		56		—		100		—		7			—		163
Purchased product		—		—		—		—		—		(41	)		—		(41	)
Operating Cash Flow	$	—	$	418	$	—	$	466	$	—	$	60		$	—	$	944

*	Formerly known as the Canadian Foothills Division.
**	Includes the operations formerly known as the Canadian Plains Division and Integrated Oil — Canada.

	8
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information (continued)

Results of Operations (For the nine months ended September 30)

Segment and Geographic Information

	Canada					USA				Market Optimization
	2010		2009			2010		2009		2010		2009
Revenues, Net of Royalties	$	2,136	$	6,054		$	3,314	$	3,461	$	603	$	1,239
Expenses
Production and mineral taxes		8		44			162		78		—		—
Transportation and selling		145		582			497		387		—		—
Operating		399		866			350		314		25		26
Purchased product		—		(72	)		—		—		560		1,192
		1,584		4,634			2,305		2,682		18		21
Depreciation, depletion and amortization		918		1,544			1,439		1,168		8		15
Segment Income (Loss)	$	666	$	3,090		$	866	$	1,514	$	10	$	6

	Corporate & Other					Consolidated
	2010		2009			2010			2009
Revenues, Net of Royalties	$	1,386	$	(2,352	)	$	7,439		$	8,402
Expenses
Production and mineral taxes		—		—			170			122
Transportation and selling		—		—			642			969
Operating		4		40			778			1,246
Purchased product		—		—			560			1,120
		1,382		(2,392	)		5,289			4,945
Depreciation, depletion and amortization		59		82			2,424			2,809
Segment Income (Loss)	$	1,323	$	(2,474	)		2,865			2,136
Administrative							261			332
Interest, net							380			252
Accretion of asset retirement obligation							35			55
Foreign exchange (gain) loss, net							(32	)		(117	)
(Gain) loss on divestitures							(1	)		1
							643			523
Net Earnings Before Income Tax							2,222			1,613
Income tax expense							681			372
Net Earnings from Continuing Operations						$	1,541		$	1,241

	9
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information (continued)

Results of Operations (For the nine months ended September 30)

Product and Divisional Information

	Canada Segment
	Canadian Division				Canada - Other					Total
	2010		2009		2010		2009			2010		2009
Revenues, Net of Royalties	$	2,136	$	2,671	$	—	$	3,383		$	2,136	$	6,054
Expenses
Production and mineral taxes		8		13		—		31			8		44
Transportation and selling		145		115		—		467			145		582
Operating		399		389		—		477			399		866
Purchased product		—		—		—		(72	)		—		(72	)
Operating Cash Flow	$	1,584	$	2,154	$	—	$	2,480		$	1,584	$	4,634

	Canadian Division *
	Gas				Oil & NGLs				Other				Total
	2010		2009		2010		2009		2010		2009		2010		2009
Revenues, Net of Royalties	$	1,859	$	2,432	$	238	$	208	$	39	$	31	$	2,136	$	2,671
Expenses
Production and mineral taxes		7		11		1		2		—		—		8		13
Transportation and selling		143		109		2		6		—		—		145		115
Operating		376		362		12		17		11		10		399		389
Operating Cash Flow	$	1,333	$	1,950	$	223	$	183	$	28	$	21	$	1,584	$	2,154

	USA Division
	Gas				Oil & NGLs				Other				Total
	2010		2009		2010		2009		2010		2009		2010		2009
Revenues, Net of Royalties	$	3,036	$	3,246	$	182	$	132	$	96	$	83	$	3,314	$	3,461
Expenses
Production and mineral taxes		145		66		17		12		—		—		162		78
Transportation and selling		497		387		—		—		—		—		497		387
Operating		293		237		—		—		57		77		350		314
Operating Cash Flow	$	2,101	$	2,556	$	165	$	120	$	39	$	6	$	2,305	$	2,682

	Canada - Other **
	Gas				Oil & NGLs				Other					Total
	2010		2009		2010		2009		2010		2009			2010		2009
Revenues, Net of Royalties	$	—	$	1,483	$	—	$	1,763	$	—	$	137		$	—	$	3,383
Expenses
Production and mineral taxes		—		11		—		19		—		1			—		31
Transportation and selling		—		31		—		418		—		18			—		467
Operating		—		158		—		284		—		35			—		477
Purchased product		—		—		—		—		—		(72	)		—		(72	)
Operating Cash Flow	$	—	$	1,283	$	—	$	1,042	$	—	$	155		$	—	$	2,480

*	Formerly known as the Canadian Foothills Division.
**	Includes the operations formerly known as the Canadian Plains Division and Integrated Oil — Canada.

	10
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

3. Segmented Information (continued)

Capital Expenditures (Continuing Operations)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2010		2009		2010		2009
Capital
Canadian Division	$	529	$	432	$	1,562	$	1,294
Canada — Other		—		206		—		714
Canada		529		638		1,562		2,008
USA		681		358		1,749		1,306
Market Optimization		—		1		1		(2	)
Corporate & Other		17		5		34		38
		1,227		1,002		3,346		3,350
Acquisition Capital
Canada		175		8		234		83
USA		14		7		107		21
		189		15		341		104
Total	$	1,416	$	1,017	$	3,687	$	3,454

Property, Plant and Equipment and Total Assets by Segment

	Property, Plant and Equipment				Total Assets
	As at				As at
	September 30,		December 31,		September 30,		December 31,
	2010		2009		2010		2009
Canada	$	12,085	$	11,162	$	13,677	$	12,748
USA		13,929		13,929		15,078		14,962
Market Optimization		119		124		170		303
Corporate & Other		1,235		958		4,854		5,814
Total	$	27,368	$	26,173	$	33,779	$	33,827

In January 2008, Encana signed the contract for the design and construction of the Production Field Centre (“PFC”) for the Deep Panuke project. As at September 30, 2010, Canada Property, Plant, and Equipment and Total Assets includes Encana’s accrual to date of $508 million ($427 million at December 31, 2009) related to this offshore facility as an asset under construction.

In February 2007, Encana announced that it had entered into a 25 year lease agreement with a third party developer for The Bow office project. As at September 30, 2010, Corporate and Other Property, Plant and Equipment and Total Assets includes Encana’s accrual to date of $926 million ($649 million at December 31, 2009) related to this office project as an asset under construction.

Corresponding liabilities for these projects are included in Other Liabilities in the Consolidated Balance Sheet. There is no effect on the Company’s net earnings or cash flows related to the capitalization of The Bow office project or the Deep Panuke PFC.

	11
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

4. Discontinued Operations

As a result of the Split Transaction on November 30, 2009, Encana transferred its Downstream Refining operations to Cenovus. These operations have been accounted for as discontinued operations.

Consolidated Statement of Earnings

The following table presents the effect of discontinued operations in the Consolidated Statement of Earnings:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2010		2009			2010		2009
Revenues, Net of Royalties	$	—	$	1,610		$	—	$	3,849
Expenses
Operating		—		99			—		329
Purchased product		—		1,425			—		3,221
Depreciation, depletion and amortization		—		49			—		146
Administrative		—		6			—		18
Interest, net		—		44			—		136
Accretion of asset retirement obligation		—		—			—		1
Foreign exchange (gain) loss, net		—		—			—		1
		—		1,623			—		3,852
Net Earnings (Loss) Before Income Tax		—		(13	)		—		(3	)
Income tax expense		—		1			—		12
Net Earnings (Loss) From Discontinued Operations	$	—	$	(14	)	$	—	$	(15	)
Net Earnings (Loss) From Discontinued Operations per Common Share
Basic	$	—	$	(0.02	)	$	—	$	(0.02	)
Diluted	$	—	$	(0.02	)	$	—	$	(0.02	)

5. Acquisitions and Divestitures

Acquisitions

On May 5, 2009, the Company acquired the common shares of Kerogen Resources Canada, ULC for net cash consideration of $24 million. The acquisition included $37 million of property, plant and equipment and the assumption of $6 million of current liabilities and $7 million of future income taxes. The operations are included in the Canadian Division.

Divestitures

Total year-to-date proceeds received on the sale of assets were $574 million (2009 — $1,030 million). The significant items are described below:

Canada and USA

In 2010, the Company completed the divestiture of non-core oil and natural gas assets for proceeds of $200 million (2009 — $957 million) in the Canadian Division and $374 million (2009 — $70 million) in the USA Division.

6. Interest, Net

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Interest Expense — Long-Term Debt	$	123		$	125		$	365		$	366
Interest Expense — Other		3			28			26			25
Interest Income *		(7	)		(42	)		(11	)		(139	)
	$	119		$	111		$	380		$	252

* In 2009, Interest Income is primarily due to the Partnership Contribution Receivable which was transferred to Cenovus under the Split Transaction on November 30, 2009.

	12
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

7. Foreign Exchange (Gain) Loss, Net

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Unrealized Foreign Exchange (Gain) Loss on:
Translation of U.S. dollar debt issued from Canada	$	(162	)	$	(485	)	$	(88	)	$	(774	)
Translation of U.S. dollar partnership contribution receivable issued from Canada *		—			254			—			414
Other Foreign Exchange (Gain) Loss on:
Monetary revaluations and settlements		8			117			56			243
	$	(154	)	$	(114	)	$	(32	)	$	(117	)

* The Partnership Contribution Receivable was transferred to Cenovus under the Split Transaction on November 30, 2009.

8. Income Taxes

The provision (recovery) for income taxes is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Current
Canada	$	(61	)	$	238		$	(163	)	$	678
United States		(38	)		86			(31	)		207
Other Countries		3			(1	)		6			5
Total Current Tax		(96	)		323			(188	)		890
Future		367			(306	)		869			(518	)
	$	271		$	17		$	681		$	372

9. Long-Term Debt

	As at			As at
	September 30,			December 31,
	2010			2009
Canadian Dollar Denominated Debt
Unsecured notes	$	1,214		$	1,194
U.S. Dollar Denominated Debt
Unsecured notes		6,400			6,600
Increase in Value of Debt Acquired		49			52
Debt Discounts and Financing Costs		(77	)		(78	)
Current Portion of Long-Term Debt		—			(200	)
	$	7,586		$	7,568

	13
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

10. Asset Retirement Obligation

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of oil and gas assets:

	As at			As at
	September 30,			December 31,
	2010			2009
Asset Retirement Obligation, Beginning of Year	$	787		$	1,230
Liabilities Incurred		29			21
Liabilities Settled		(19	)		(52	)
Liabilities Divested		(70	)		(26	)
Liabilities Transferred to Cenovus		—			(692	)
Change in Estimated Future Cash Outflows		1			74
Accretion Expense		35			71
Foreign Currency Translation		8			161
Asset Retirement Obligation, End of Period	$	771		$	787

11. Capital Structure

The Company’s capital structure consists of Shareholders’ Equity plus Debt, defined as Long-term Debt including the current portion. The Company’s objectives when managing its capital structure are to:

i)	maintain financial flexibility to preserve Encana’s access to capital markets and its ability to meet its financial obligations; and
ii)	finance internally generated growth, as well as potential acquisitions.

The Company monitors its capital structure and short-term financing requirements using non-GAAP financial metrics consisting of Debt to Capitalization and Debt to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”). These metrics are measures of the Company’s overall financial strength and are used to steward the Company’s overall debt position.

Encana targets a Debt to Capitalization ratio of less than 40 percent. At September 30, 2010, Encana’s Debt to Capitalization ratio was 30 percent (December 31, 2009 — 32 percent) calculated as follows:

	As at			As at
	September 30,			December 31,
	2010			2009
Debt	$	7,586		$	7,768
Shareholders’ Equity		17,350			16,614
Capitalization	$	24,936		$	24,382
Debt to Capitalization Ratio		30	%		32	%

	14
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

11. Capital Structure (continued)

Encana targets a Debt to Adjusted EBITDA of less than 2.0 times. At September 30, 2010, Debt to Adjusted EBITDA was 1.2x (December 31, 2009 — 1.3x) calculated on a trailing 12-month basis as follows:

	As at		As at
	September 30,		December 31,
	2010		2009
Debt	$	7,586	$	7,768
Net Earnings from Continuing Operations	$	2,130	$	1,830
Add (deduct):
Interest, net		533		405
Income tax expense		418		109
Depreciation, depletion and amortization		3,319		3,704
Accretion of asset retirement obligation		51		71
Foreign exchange (gain) loss, net		63		(22	)
(Gain) loss on divestitures		—		2
Adjusted EBITDA	$	6,514	$	6,099
Debt to Adjusted EBITDA		1.2x		1.3x

Encana has a long-standing practice of maintaining capital discipline, managing its capital structure and adjusting its capital structure according to market conditions to maintain flexibility while achieving the objectives stated above. To manage the capital structure, the Company may adjust capital spending, adjust dividends paid to shareholders, purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, issue new debt or repay existing debt.

The Company’s capital management objectives, evaluation measures, definitions and targets have remained unchanged over the periods presented. Encana is subject to certain financial covenants in its credit facility agreements and is in compliance with all financial covenants.

12. Share Capital

	September 30, 2010						December 31, 2009
(millions)	Number			Amount			Number			Amount
Common Shares Outstanding, Beginning of Year		751.3		$	2,360			750.4		$	4,557
Common Shares Issued under Option Plans		0.4			5			0.4			5
Common Shares Issued from PSU Trust		—			—			0.5			19
Stock-Based Compensation		—			2			—			1
Common Shares Purchased		(15.4	)		(48	)		—			—
Common Shares Cancelled		—			—			(751.3	)		(4,582	)
New Encana Common Shares Issued		—			—			751.3			2,360
Encana Special Shares Issued		—			—			751.3			2,222
Encana Special Shares Cancelled		—			—			(751.3	)		(2,222	)
Common Shares Outstanding, End of Period		736.3		$	2,319			751.3		$	2,360

Normal Course Issuer Bid

Encana has received regulatory approval each year under Canadian securities laws to purchase Common Shares under eight consecutive Normal Course Issuer Bids (“NCIB”). Encana is entitled to purchase, for cancellation, up to 37.5 million Common Shares under the renewed NCIB which commenced on December 14, 2009 and terminates on December 13, 2010. To September 30, 2010, the Company purchased 15.4 million Common Shares for total consideration of approximately $499 million. Of the amount paid, $6 million was charged to Paid in surplus, $48 million was charged to Share capital and $445 million was charged to Retained earnings. During 2009, there were no purchases under the current or prior NCIB.

	15
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

12. Share Capital (continued)

Stock Options

Encana has stock-based compensation plans that allow employees to purchase Common Shares of the Company. Option exercise prices approximate the market price for the Common Shares on the date the options were granted. Options granted under the plans are generally fully exercisable after three years and expire five years after the date granted. Options granted under predecessor and/or related company replacement plans expire up to 10 years from the date the options were granted.

As at September 30, 2010, Encana had no stock options outstanding and exercisable (2009 — 256,294 outstanding and exercisable with a weighted average exercise price of C$11.84 per stock option). These stock options do not have Tandem Share Appreciation Rights (“TSARs”) attached.

Encana Share Units Held by Cenovus Employees

As part of the Split Transaction on November 30, 2009, each holder of Encana share units disposed of their right in exchange for the grant of new Encana share units and Cenovus share units. The terms and conditions of the new share units are similar to the terms and conditions of the original share units. Additional information is contained in Note 17 of the Company’s annual audited Consolidated Financial Statements for the year ended December 31, 2009.

Refer to Note 13 for information regarding share units held by Encana employees.

With respect to the Encana share units held by Cenovus employees and the Cenovus share units held by Encana employees, both Encana and Cenovus have agreed to reimburse each other for share units exercised for cash by their respective employees. Accordingly, for Encana share units held by Cenovus employees, Encana has recorded a payable to Cenovus employees and a receivable due from Cenovus. The payable to Cenovus employees and the receivable due from Cenovus is based on the fair value of the Encana share units determined using the Black-Scholes-Merton model (See Note 14). There is no material impact on Encana’s net earnings for these share units held by Cenovus employees. No further Encana share units will be granted to Cenovus employees.

As Cenovus employees may exercise Encana TSARs and Encana Performance TSARs in exchange for Encana Common Shares, the following table is provided as at September 30, 2010:

	Number of		Weighted
	Encana		Average
	Share Units		Exercise
Canadian Dollar Denominated (C$)	(millions)		Price
Encana TSARs held by Cenovus Employees
Outstanding, September 30, 2010		6.9		30.48
Exercisable, September 30, 2010		4.8		29.86
Encana Performance TSARs held by Cenovus Employees
Outstanding, September 30, 2010		7.2		31.62
Exercisable, September 30, 2010		3.6		31.76

Per Share Amounts

The following table summarizes the Common Shares used in calculating Net Earnings per Common Share:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(millions)	2010		2009		2010		2009
Weighted Average Common Shares Outstanding — Basic		736.3		751.2		740.8		750.9
Effect of Dilutive Securities		—		0.2		0.1		0.5
Weighted Average Common Shares Outstanding — Diluted		736.3		751.4		740.9		751.4

	16
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

13. Compensation Plans

The following tables outline certain information related to Encana’s compensation plans at September 30, 2010.

As part of the Split Transaction on November 30, 2009, each holder of Encana share units disposed of their right in exchange for the grant of new Encana share units and Cenovus share units. The terms and conditions of the new share units are similar to the terms and conditions of the original share units. Share units include TSARs, Performance TSARs, Share Appreciation Rights (“SARs”) and Performance SARs. Additional information is contained in Note 19 of the Company’s annual audited Consolidated Financial Statements for the year ended December 31, 2009.

Refer to Note 12 for information regarding new Encana share units held by Cenovus employees.

A) Tandem Share Appreciation Rights

The following table summarizes information related to the Encana and Cenovus TSARs held by Encana employees at September 30, 2010:

	Encana TSARs					Cenovus TSARs
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
Canadian Dollar Denominated (C$)	Outstanding			Price		Outstanding			Price
Outstanding, Beginning of Year		12,473,214			28.85		12,482,694			26.08
Granted		4,562,495			32.75		—			—
Exercised — SARs		(2,037,124	)		23.55		(2,415,028	)		21.47
Exercised — Options		(94,976	)		20.77		(101,634	)		19.17
Forfeited		(306,394	)		32.82		(259,305	)		29.53
Outstanding, End of Period		14,597,215			30.77		9,706,727			27.20
Exercisable, End of Period		7,755,552			29.25		7,373,370			26.64

For the period ended September 30, 2010, Encana recorded a reduction of compensation costs of $21 million related to the Encana TSARs and compensation costs of $12 million related to the Cenovus TSARs (2009 — compensation costs of $71 million related to the outstanding TSARs prior to the November 30, 2009 Split Transaction).

B) Performance Tandem Share Appreciation Rights

The following table summarizes information related to the Encana and Cenovus Performance TSARs held by Encana employees at September 30, 2010:

	Encana Performance					Cenovus Performance
	TSARs					TSARs
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
Canadian Dollar Denominated (C$)	Outstanding			Price		Outstanding			Price
Outstanding, Beginning of Year		10,461,901			31.42		10,462,643			28.42
Exercised — SARs		(234,247	)		29.37		(268,564	)		26.53
Exercised — Options		(171	)		29.04		(171	)		26.27
Forfeited		(1,052,234	)		31.48		(1,063,559	)		28.45
Outstanding, End of Period		9,175,249			31.46		9,130,349			28.47
Exercisable, End of Period		5,027,399			31.42		4,982,501			28.44

For the period ended September 30, 2010, Encana recorded a reduction of compensation costs of $9 million related to the Encana Performance TSARs and compensation costs of $8 million related to the Cenovus Performance TSARs (2009 — compensation costs of $36 million related to the outstanding Performance TSARs prior to the November 30, 2009 Split Transaction).

	17
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

13. Compensation Plans (continued)

C) Share Appreciation Rights

Beginning in January 2010, U.S. dollar denominated SARs were granted to eligible employees. The terms and conditions are similar to the Canadian dollar denominated SARs.

The following table summarizes information related to the Encana and Cenovus SARs held by Encana employees at September 30, 2010:

	Encana SARs					Cenovus SARs
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
Canadian Dollar Denominated (C$)	Outstanding			Price		Outstanding			Price
Outstanding, Beginning of Year		2,343,485			33.75		2,323,960			30.55
Exercised		(32,032	)		29.06		(31,568	)		26.31
Forfeited		(82,181	)		32.62		(82,181	)		29.51
Outstanding, End of Period		2,229,272			33.86		2,210,211			30.65
Exercisable, End of Period		986,294			35.54		986,758			32.14

	Encana SARs
				Weighted
				Average
				Exercise
U.S. Dollar Denominated (US$)	Outstanding			Price
Outstanding, Beginning of Year		—			—
Granted		4,560,090			30.87
Forfeited		(70,925	)		30.68
Outstanding, End of Period		4,489,165			30.87
Exercisable, End of Period		5,050			30.68

For the period ended September 30, 2010, Encana recorded a reduction of compensation costs of $1 million related to the Encana SARs and compensation costs of $2 million related to the Cenovus SARs (2009 — compensation costs of $3 million related to the outstanding SARs prior to the November 30, 2009 Split Transaction).

D) Performance Share Appreciation Rights

The following table summarizes information related to the Encana and Cenovus Performance SARs held by Encana employees at September 30, 2010:

	Encana Performance SARs					Cenovus Performance SARs
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
Canadian Dollar Denominated (C$)	Outstanding			Price		Outstanding			Price
Outstanding, Beginning of Year		3,471,998			32.00		3,471,998			28.94
Exercised		(48,660	)		29.04		(47,871	)		26.27
Forfeited		(357,648	)		32.30		(357,168	)		29.22
Outstanding, End of Period		3,065,690			32.01		3,066,959			28.95
Exercisable, End of Period		1,075,674			33.41		1,076,943			30.22

For the period ended September 30, 2010, Encana recorded a reduction of compensation costs of $2 million related to the Encana Performance SARs and compensation costs of $3 million related to the Cenovus Performance SARs (2009 — compensation costs of $4 million related to the outstanding Performance SARs prior to the November 30, 2009 Split Transaction).

	18
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

13. Compensation Plans (continued)

E) Performance Share Units (“PSUs”)

In February 2010, PSUs were granted to eligible employees which entitle the employee to receive, upon vesting, a cash payment equal to the value of one Common Share of Encana for each PSU held, depending upon the terms of the amended PSU plan. PSUs vest three years from the date of grant, provided the employee remains actively employed with Encana on the vesting date.

The ultimate value of the PSUs will depend upon Encana’s performance measured over the three year period. Each year, Encana’s performance will be assessed by the Board of Directors (the “Board”) to determine whether the performance criteria have been met. Based on this assessment, up to a maximum of two times the original PSU grant may be awarded. The respective proportion of the original PSU grant for each year will be valued, based on an average share price, and the notional cash value deposited to a PSU account, with payout deferred to the final vesting date. The following table summarizes information related to the PSUs at September 30, 2010:

	Outstanding
Canadian Dollar Denominated	PSUs
Outstanding, Beginning of Year		—
Granted		880,735
Units, in Lieu of Dividends		16,998
Forfeited		(22,187	)
Outstanding, End of Period		875,546

	Outstanding
U.S. Dollar Denominated	PSUs
Outstanding, Beginning of Year		—
Granted		810,910
Units, in Lieu of Dividends		15,678
Forfeited		(30,485	)
Outstanding, End of Period		796,103

For the period ended September 30, 2010, Encana recorded compensation costs of $11 million related to the outstanding PSUs (2009 — nil).

F) Deferred Share Units (“DSUs”)

The following table summarizes information related to the DSUs at September 30, 2010:

	Outstanding
Canadian Dollar Denominated	DSUs
Outstanding, Beginning of Year		672,147
Granted		103,021
Converted from HPR awards		21,732
Units, in Lieu of Dividends		15,435
Redeemed		(896	)
Outstanding, End of Period		811,439

For the period ended September 30, 2010, Encana recorded compensation costs of $2 million related to the outstanding DSUs (2009 — $8 million).

G) Pensions

Encana’s net benefit plan expense for the three months ended September 30, 2010 was $15 million (2009 — $20 million) and for the nine months ended September 30, 2010 was $45 million (2009 — $58 million). Encana’s contribution to the defined benefit pension plans for the nine months ended September 30, 2010 was $8 million (2009 — $6 million).

	19
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

14. Financial Instruments and Risk Management

Encana’s financial assets and liabilities include cash and cash equivalents, accounts receivable and accrued revenues, investments and other assets, accounts payable and accrued liabilities, risk management assets and liabilities and long-term debt. Risk management assets and liabilities arise from the use of derivative financial instruments. Fair values of financial assets and liabilities, summarized information related to risk management positions, and discussion of risks associated with financial assets and liabilities are presented as follows:

A) Fair Value of Financial Assets and Liabilities

The fair values of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable and accrued liabilities approximate their carrying amount due to the short-term maturity of those instruments except for the amounts associated with new share units issued as part of the November 30, 2009 Split Transaction as discussed in Notes 12 and 13.

Risk management assets and liabilities are recorded at their estimated fair value based on the mark-to-market method of accounting, using quoted market prices or, in their absence, third-party market indications and forecasts.

The fair value of investments and other assets approximate their carrying amount due to the nature of the instruments held.

Long-term debt is carried at amortized cost using the effective interest method of amortization. The estimated fair values of long-term borrowings have been determined based on market information where available, or by discounting future payments of interest and principal at estimated interest rates expected to be available to the Company at period end.

The fair value of financial assets and liabilities were as follows:

	As at				As at
	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial Assets
Held-for-Trading:
Cash and cash equivalents	$	1,397	$	1,397	$	4,275	$	4,275
Accounts receivable and accrued revenues (1)		34		34		75		75
Risk management assets (2)		1,685		1,685		360		360
Investments and other assets		106		106		—		—
Loans and Receivables:
Accounts receivable and accrued revenues		978		978		1,105		1,105
Financial Liabilities
Held-for-Trading:
Accounts payable and accrued liabilities (3, 4)	$	87	$	87	$	155	$	155
Risk management liabilities (2)		109		109		168		168
Other Financial Liabilities:
Accounts payable and accrued liabilities		2,055		2,055		1,988		1,988
Long-term debt (2)		7,586		8,743		7,768		8,527

(1)	Represents amounts due from Cenovus for Encana share units held by Cenovus employees (See Note 12).
(2)	Including current portion.
(3)	Includes amounts due to Cenovus employees for Encana share units held (See Note 12).
(4)	Includes amounts due to Cenovus for Cenovus share units held by Encana employees (See Notes 12 and 13).

	20
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

14. Financial Instruments and Risk Management (continued)

B) Risk Management Assets and Liabilities

Net Risk Management Position

	As at		As at
	September 30,		December 31,
	2010		2009
Risk Management
Current asset	$	993	$	328
Long-term asset		692		32
		1,685		360
Risk Management
Current liability		95		126
Long-term liability		14		42
		109		168
Net Risk Management Asset	$	1,576	$	192

Summary of Unrealized Risk Management Positions

	As at September 30, 2010							As at December 31, 2009
	Risk Management							Risk Management
	Asset		Liability		Net			Asset		Liability		Net
Commodity Prices
Natural gas	$	1,676	$	86		1,590		$	298	$	88	$	210
Crude oil		9		11		(2	)		62		72		(10	)
Power		—		12		(12	)		—		8		(8	)
Total Fair Value	$	1,685	$	109	$	1,576		$	360	$	168	$	192

Net Fair Value Methodologies Used to Calculate Unrealized Risk Management Positions

The total net fair value of Encana’s unrealized risk management positions is $1,576 million as at September 30, 2010 ($192 million as at December 31, 2009) and has been calculated using both quoted prices in active markets and observable market-corroborated data.

Net Fair Value of Commodity Price Positions at September 30, 2010

	Notional Volumes	Term	Average Price	Fair Value
Natural Gas Contracts
Fixed Price Contracts
NYMEX Fixed Price	1,527 MMcf/d	2010	6.19 US$/Mcf	$	319
NYMEX Fixed Price	1,158 MMcf/d	2011	6.33 US$/Mcf		790
NYMEX Fixed Price	1,040 MMcf/d	2012	6.46 US$/Mcf		525
Basis Contracts *
Canada		2010			(2	)
United States		2010			(5	)
Canada and United States		2011-2013			(37	)
Natural Gas Fair Value Position				$	1,590

* Encana has entered into swaps to protect against widening natural gas price differentials between production areas, including Canada, the U.S. Rockies and Texas, and various sales points. These basis swaps are priced using both fixed prices and basis prices determined as a percentage of NYMEX.

	21
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

14. Financial Instruments and Risk Management (continued)

B) Risk Management Assets and Liabilities (continued)

Net Fair Value of Commodity Price Positions at September 30, 2010 (continued)

	Notional Volumes	Term		Average Price	Fair Value
Crude Oil Contracts
Fixed Price Contracts     WTI NYMEX Fixed Price	5,400 bbls/d		2010	76.99 US$/bbl	$	(2	)
Crude Oil Fair Value Position					$	(2	)

	Fair Value
Power Purchase Contracts
Power Fair Value Position	$	(12	)

Earnings Impact of Realized and Unrealized Gains (Losses) on Risk Management Positions

	Realized Gain (Loss)						Realized Gain (Loss)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Revenues, Net of Royalties	$	318		$	1,362		$	895		$	3,776
Operating Expenses and Other		(2	)		(4	)		(3	)		(33	)
Gain (Loss) on Risk Management	$	316		$	1,358		$	892		$	3,743

	Unrealized Gain (Loss)						Unrealized Gain (Loss)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Revenues, Net of Royalties	$	498		$	(1,373	)	$	1,347		$	(2,354	)
Operating Expenses and Other		(7	)		(11	)		(4	)		(37	)
Gain (Loss) on Risk Management	$	491		$	(1,384	)	$	1,343		$	(2,391	)

Reconciliation of Unrealized Risk Management Positions from January 1 to September 30, 2010

	2010						2009
				Total			Total
				Unrealized			Unrealized
	Fair Value			Gain (Loss)			Gain (Loss)
Fair Value of Contracts, Beginning of Year	$	192
Change in Fair Value of Contracts in Place at Beginning of Year and Contracts Entered into During the Period		2,235		$	2,235		$	1,352
Settlement of Contracts Transferred to Cenovus		41			—			—
Fair Value of Contracts Realized During the Period		(892	)		(892	)		(3,743	)
Fair Value of Contracts, End of Period	$	1,576		$	1,343		$	(2,391	)

Commodity Price Sensitivities

The following table summarizes the sensitivity of the fair value of the Company’s risk management positions to fluctuations in commodity prices, with all other variables held constant. The Company has used a 10 percent variability to assess the potential impact of commodity price changes. Fluctuations in commodity prices could have resulted in unrealized gains (losses) impacting pre-tax net earnings as at September 30, 2010 as follows:

	10% Price			10% Price
	Increase			Decrease
Natural gas price	$	(430	)	$	430
Crude oil price		(4	)		4
Power price		6			(6	)

	22
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

14. Financial Instruments and Risk Management (continued)

C) Risks Associated with Financial Assets and Liabilities

The Company is exposed to financial risks arising from its financial assets and liabilities. Financial risks include market risks (such as commodity prices, foreign exchange and interest rates), credit risk and liquidity risk. The fair value or future cash flows of financial assets or liabilities may fluctuate due to movement in market prices and the exposure to credit and liquidity risks.

Commodity Price Risk

Commodity price risk arises from the effect that fluctuations of future commodity prices may have on the fair value or future cash flows of financial assets and liabilities. To partially mitigate exposure to commodity price risk, the Company has entered into various financial derivative instruments. The use of these derivative instruments is governed under formal policies and is subject to limits established by the Board. The Company’s policy is to not use derivative financial instruments for speculative purposes.

Natural Gas — To partially mitigate the natural gas commodity price risk, the Company has entered into swaps which fix the NYMEX prices. To help protect against widening natural gas price differentials in various production areas, Encana has entered into swaps to manage the price differentials between these production areas and various sales points.

Crude Oil — The Company has partially mitigated its commodity price risk on crude oil with swaps which fix WTI NYMEX prices.

Power — The Company has in place two Canadian dollar denominated derivative contracts, which commenced January 1, 2007 for a period of 11 years, to manage its electricity consumption costs.

Credit Risk

Credit risk arises from the potential that the Company may incur a loss if a counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. This credit risk exposure is mitigated through the use of Board-approved credit policies governing the Company’s credit portfolio and with credit practices that limit transactions according to counterparties’ credit quality. At September 30, 2010, cash equivalents include high-grade, short-term securities, placed primarily with Governments and financial institutions with strong investment grade ratings. Any foreign currency agreements entered into are with major financial institutions in Canada and the United States or with counterparties having investment grade credit ratings. A substantial portion of the Company’s accounts receivable are with customers in the oil and gas industry and are subject to normal industry credit risks. As at September 30, 2010, approximately 97 percent (93 percent at December 31, 2009) of Encana’s accounts receivable and financial derivative credit exposures are with investment grade counterparties.

At September 30, 2010, Encana had three counterparties (2009 — four counterparties) whose net settlement position individually account for more than 10 percent of the fair value of the outstanding in-the-money net financial instrument contracts by counterparty. The maximum credit risk exposure associated with accounts receivable and accrued revenues and risk management assets is the total carrying value.

Liquidity Risk

Liquidity risk is the risk the Company will encounter difficulties in meeting a demand to fund its financial liabilities as they come due. The Company manages its liquidity risk through cash and debt management. As disclosed in Note 11, Encana targets a Debt to Capitalization ratio of less than 40 percent and a Debt to Adjusted EBITDA of less than 2.0 times to steward the Company’s overall debt position.

In managing liquidity risk, the Company has access to cash equivalents and a wide range of funding at competitive rates through commercial paper, capital markets and banks. As at September 30, 2010, Encana had available unused committed bank credit facilities totaling $4.9 billion which include a C$4.5 billion ($4.3 billion) revolving bank credit facility and a U.S. subsidiary revolving bank credit facility for $565 million that remain committed through October 2012 and February 2013, respectively.

	23
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)

Third quarter report
for the period ended September 30, 2010

Notes to Consolidated Financial Statements (unaudited)
(All amounts in $ millions unless otherwise specified)

14. Financial Instruments and Risk Management (continued)

C) Risks Associated with Financial Assets and Liabilities (continued)

Encana also had unused capacity under two shelf prospectuses for up to $6.0 billion, the availability of which is dependent on market conditions, to issue up to C$2.0 billion ($2.0 billion) of debt securities in Canada and up to $4.0 billion of debt securities in the United States. These shelf prospectuses expire in June 2011 and May 2012, respectively. The Company believes it has sufficient funding through the use of these facilities to meet foreseeable borrowing requirements.

The timing of cash outflows relating to financial liabilities are outlined in the table below:

	Less Than 1 Year		1 - 3 Years		4 - 5 Years		Thereafter		Total
Accounts Payable and Accrued Liabilities	$	2,142	$	—	$	—	$	—	$	2,142
Risk Management Liabilities		95		14		—		—		109
Long-Term Debt *		470		1,848		2,243		9,682		14,243

* Principal and interest, including current portion.

Encana’s total long-term debt obligations were $14.2 billion at September 30, 2010. Further information on Long-Term Debt is contained in Note 9.

Foreign Exchange Risk

Foreign exchange risk arises from changes in foreign exchange rates that may affect the fair value or future cash flows of the Company’s financial assets or liabilities. As Encana operates primarily in North America, fluctuations in the exchange rate between the U.S./Canadian dollar can have a significant effect on the Company’s reported results. Encana’s functional currency is Canadian dollars; however, the Company reports its results in U.S. dollars as most of its revenue is closely tied to the U.S. dollar and to facilitate a more direct comparison to other North American oil and gas companies. As the effects of foreign exchange fluctuations are embedded in the Company’s results, the total effect of foreign exchange fluctuations are not separately identifiable.

To mitigate the exposure to the fluctuating U.S./Canadian exchange rate, Encana maintains a mix of both U.S. dollar and Canadian dollar debt. At September 30, 2010, Encana had $5.4 billion in U.S. dollar debt issued from Canada ($5.6 billion at December 31, 2009) subject to foreign exchange exposure.

Encana’s foreign exchange (gain) loss primarily includes foreign exchange gains and losses on U.S. dollar cash and short-term investments held in Canada, unrealized foreign exchange gains and losses on the translation of U.S. dollar debt issued from Canada, unrealized foreign exchange gains and losses on the translation of U.S. dollar denominated risk management assets and liabilities held in Canada and, in the prior year, foreign exchange gains and losses on the translation of the U.S. dollar partnership contribution receivable issued from Canada. A $0.01 change in the U.S. to Canadian dollar exchange rate would have resulted in a $46 million change in foreign exchange (gain) loss at September 30, 2010 (2009 — $22 million).

Interest Rate Risk

Interest rate risk arises from changes in market interest rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. Typically, the Company partially mitigates its exposure to interest rate changes by maintaining a mix of both fixed and floating rate debt.

At September 30, 2010, the Company had no floating rate debt. Therefore, the increase or decrease in net earnings for each one percent change in interest rates on floating rate debt was nil (2009 — $3 million).

15. Contingencies

Legal Proceedings

The Company is involved in various legal claims associated with the normal course of operations. The Company believes it has made adequate provision for such legal claims.

16. Reclassification

Certain information provided for prior periods has been reclassified to conform to the presentation adopted in 2010.

	24
Encana Corporation	Notes to Consolidated Financial Statements (prepared in US$)