Encana generates first quarter cash flow of US$1.0 billion, or $1.39 per share

Encana Corporation (TSX, NYSE: ECA) delivered strong financial results
and operational performance in the first quarter of 2012 despite further
downward pressure on natural gas prices. Cash flow of US$1.0 billion, or
$1.39 per share, was up 6 percent from the first quarter of 2011
supported by the company′s commodity price hedging program, which
contributed $358 million in realized after-tax gains, or 49 cents per
share. Operating earnings were $240 million, or 33 cents per share, up
10 percent year over year.

Increased liquids production from key resource plays

Encana
is aggressively expanding its exploration and development of oil and
natural gas liquids (NGLs) throughout the company's extensive North
American asset base, increasing first quarter production 26 percent over
the first quarter of 2011 to about 29,000 barrels per day (bbls/d).

'Over the past year, Encana′s teams have been very successful in
advancing multiple oil and liquids-rich natural gas plays towards
commerciality. Our tremendous depth and breadth of experience, and focus
on highly efficient development programs, have greatly accelerated the
speed at which our teams have been able to transition operating
expertise from natural gas to oil and natural gas liquids resource
plays,? said Randy Eresman, President & CEO of Encana Corporation.

Financial discipline fortifies balance sheet

Encana has
fortified its balance sheet, building a cash position of approximately
$2.4 billion as of the end of the first quarter 2012. This healthy
financial position was created through an effective commodity hedging
program, operational efficiencies, and recent dispositions and joint
venture transactions, including:

• 
  the disposition of Cutbank Ridge natural gas processing assets (C$920
  million);
  
• 
  the Cutbank Ridge Partnership with Mitsubishi Corporation (C$2.9
  billion);
  
• 
  a joint earning agreement with Exaro Energy III LLC in the Jonah field
  ($380 million); and
  
• 
  an agreement with a subsidiary of Toyota Tsusho for coalbed methane
  development in Alberta (C$600 million).
  

Encana is currently targeting to have approximately $3 billion in cash
and cash equivalents on its balance sheet by the end of 2012. This
target will be reviewed throughout the year and is dependant on a number
of factors including commodity prices, success of the company′s oil and
natural gas liquids program, and additional potential joint ventures or
asset divestitures.

'We continue to seek and develop partnership opportunities for the
exploration and development of oil and liquids-rich assets throughout
our land base, and for dry natural gas plays that could be linked to
liquefied natural gas (LNG) projects,? Eresman said. 'Our target is to
maintain financial strength and flexibility by balancing capital
investment with cash flow. By accelerating investment in prospective oil
and liquids-rich natural gas plays we expect to diversify our commodity
mix and sources of cash flow.?

In well-delineated, low-cost, operationally efficient assets, the
company uses third-party capital to accelerate value recognition while
significantly reducing its capital requirements. In early-life plays
these arrangements reduce Encana's capital risk and accelerate
evaluation and potential commercialization of the assets. Additionally,
third-party capital is often employed in more mature assets to maintain
an activity level that preserves capital and operational efficiencies.

Commitment to reduced pace of natural gas production

Natural
gas production was approximately 3.27 billion cubic feet per day
(Bcf/d), 2 percent higher than the first quarter of 2011 and 5 percent
lower than the fourth quarter of 2011. Encana is targeting capacity
reductions totalling approximately 600 million cubic feet per day
(MMcf/d) gross before royalties compared to 2011. Half of this reduction
is attributable to declining production through a reduced capital
program and the other half is attributable to physical shut-ins or
otherwise curtailed volumes. There is a current weakness in market
fundamentals due to an oversupply of natural gas and it is clear that a
continued reduction of drilling activity will be required to restore
market balance.

Recent developments cause for optimism

Despite the current
weakness in North American natural gas market fundamentals, recent
industry developments and announcements related to the increased use of
natural gas and potential future LNG export projects may also contribute
to a price correction.

Over the past five to six months, lower natural gas prices have resulted
in 7 Bcf/d of fuel switching from coal to natural gas for electrical
generation in North America.

Encana and its partners continue to advance negotiations related to the
planned Kitimat LNG export terminal with potential off-take customers
and are expecting to reach a final investment decision by year-end.

'We continue to see cause for optimism for higher natural gas prices in
the approval of natural gas exports and export facilities, coal plant
retirements, increased industrial demand for ethane and other NGLs, and
gas-to-liquids projects,? Eresman said.

Emerging resource play updates

Exploration of Encana′s oil
and liquids-rich plays to date has shown encouraging initial results. A
preliminary update is provided below, with more detailed information to
be presented at the company′s Investor Day in New York on June 21, 2012.

In the Tuscaloosa Marine Shale, where the company has about 310,000 net
acres straddling the Mississippi and Louisiana border, Encana currently
has three wells on production. The Board of Education 01H was a well
drilled by a previous operator and completed by Encana. The Weyerhaeuser
73H-1 well was drilled by Encana at a horizontal lateral length of
approximately 5,000 feet with a 30-day initial production rate of 740
barrels of oil equivalent per day (BOE/d). The Horseshoe Hill 10H-1 was
drilled to a lateral length of 5,300 feet and successfully completed
with 18 stages, and had an initial 30-day production rate of 656 BOE/d.
Two additional wells were drilled in the quarter with lateral lengths of
7,500 feet and 8,800 feet and are expected to be completed by the end of
April.

In the Eaglebine play in East Texas where Encana holds a historical land
position, the company controls more than 105,000 net acres. Encana
drilled its first well in 2011, the Gresham 1H, with a horizontal
lateral of 5,200 feet and an initial 30-day production rate of about 240
BOE/d. Five more wells were drilled and completed in the first quarter
of 2012.

In Michigan, where Encana is targeting the combined Utica and
Collingwood formations, the company holds about 430,000 net acres. Two
horizontal wells drilled in 2011 have now been tied into sales with
encouraging results. One well has a 7,500-foot horizontal lateral length
and the second well has a 5,300-foot horizontal lateral length. Plant
NGL recoveries from the two wells are expected to be in excess of 90
barrels (bbls) of NGLs per million cubic feet (MMcf) of natural gas
production.

In the San Juan Basin, which is located largely in the northwest corner
of New Mexico, Encana now controls 168,000 net acres targeting the
oil-prone area of the Gallup formation. Encana has drilled three wells
of a five-well horizontal drilling exploration program, and is now flow
testing two wells. Test results are expected in the next few months.

In the Alberta Duvernay, where Encana holds about 370,000 net acres, the
company has drilled and completed three horizontal wells with lateral
lengths up to 6,300 feet. Encana has obtained core and reservoir data on
each well and is encouraged by the results, which confirm initial
expectations. Each of the wells tested has flowed significant condensate
volumes with favourable condensate to gas ratios in line with other
industry-announced results. Encana has two rigs drilling in the Duvernay.

Encana's risk management program continues to supplement revenue and
stabilize cash flow

As of March 31, 2012, Encana has hedged
approximately 2 Bcf/d, or approximately 65 percent of expected 2012
natural gas production at an average NYMEX price of $5.80 per Mcf. In
addition, Encana has hedged approximately 505 MMcf/d of 2013 natural gas
production at an average NYMEX price of $5.24 per thousand cubic feet
(Mcf).

Quarterly dividend of 20 cents per share declared

Encana′s
Board of Directors has declared a quarterly dividend of 20 cents per
share payable on June 29, 2012 to common shareholders of record as of
June 15, 2012.

2012 transition to U.S. GAAP financial reporting

Encana is
reporting its first quarter financial results in accordance with U.S.
Generally Accepted Accounting Principles (U.S. GAAP). Previously, the
company reported its financial results in accordance with International
Financial Reporting Standards (IFRS). Encana's U.S. GAAP interim
condensed consolidated financial statements for the period ended March
31, 2012 are available on the company's website at www.encana.com.
In addition, the company has also prepared supplemental U.S. GAAP
financial information including Encana's 2011 annual consolidated
financial statements and selected 2011 quarterly financial information,
which are available on the company's website.

Encana 2012 guidance

Encana′s updated corporate guidance for
2012 is posted on the company′s website at www.encana.com.

Financial strength

Encana maintains a strong balance sheet
and is focused on maintaining investment grade credit ratings, capital
discipline and financial flexibility. ?At March 31, 2012, 100 percent of
its outstanding debt was composed of fixed-rate debt with an average
remaining term of about 14 ?years. At March 31, 2012, Encana had
approximately $5.0 ?billion of unused committed revolving bank credit
facilities.

Additional information:

Financial

• 
  operating earnings per share of 33 cents, or $240 million
  
• 
  net earnings per share of 2 cents, or $12 million
  
• 
  capital investment, excluding acquisitions and divestitures, of about
  $1.1 billion
  

Operating

• 
  operating and administrative costs of 95 cents per thousand cubic feet
  equivalent (Mcfe)
  

Strategic developments

• 
  completed an agreement with Mitsubishi that sees the Japanese global
  integrated business enterprise invest approximately C$2.9 billion for
  a 40 percent interest in the Cutbank Ridge Partnership. The
  Partnership holds about 409,000 net acres of undeveloped
  Montney-formation natural gas lands in the Cutbank Ridge resource play
  in northeast British Columbia. Mitsubishi paid approximately C$1.45
  billion on closing and will also invest approximately C$1.45 billion,
  in addition to its 40 percent of the Partnership's future capital
  investment, during an initial commitment period of approximately five
  years
  
• 
  closed the sale of Encana′s natural gas processing assets in the
  Cutbank Ridge area for proceeds of approximately C$920 million
  
• 
  entered into a joint earning agreement with Exaro Energy III LLC that
  will see Exaro invest approximately $380 million over five years to
  earn a working interest in certain lands in the Jonah field in Wyoming
  
• 
  closed the remainder of the sale of North Texas natural gas producing
  assets for proceeds of approximately $114 million. The company closed
  the majority of the asset sale in December 2011 for approximately $836
  million
  
• 
  opened the first liquefied natural gas (LNG) fueling station in
  Louisiana to the public to serve fueling needs of heavy-duty truck
  fleets and other vehicles
  
• 
  entered into an agreement with Toyota Tsusho Wheatland Inc., a
  subsidiary of Toyota Tsusho Corporation, that will see the Japanese
  company invest approximately C$602 million to acquire a 32.5 percent
  royalty interest in natural gas production from a portion of Encana′s
  coalbed methane (CBM) resource play
  

IMPORTANT INFORMATION

Encana reports in U.S. dollars
unless otherwise noted. Production, sales and reserves estimates are
reported on an after-royalties basis, unless otherwise noted. Per share
amounts for cash flow and earnings are on a diluted basis. Encana is
reporting its first quarter financial results in accordance with U.S.
GAAP.The company′s unaudited interim condensed consolidated
financial statements for the quarter ended March 31, 2012 and
comparative information have been prepared in accordance with U.S. GAAP.Encana defines supply cost as the flat NYMEX natural gas price that
yields an internal rate of return of 9 percent after tax, and does not
include land costs. The term liquids is used to represent oil, NGLs and
condensate. The term liquids-rich is used to represent natural gas
streams with associated liquids volumes. Unless otherwise specified or
the context otherwise requires, reference to Encana or to the company
includes reference to subsidiaries of and partnership interests held by
Encana Corporation and its subsidiaries.

NOTE 1: Non-GAAP measures

This news release contains
references to non-GAAP measures as follows:

• 
  Cash flow is a non-GAAP measure defined as cash from operating
  activities excluding net change in other assets and liabilities, net
  change in non-cash working capital and cash tax on sale of assets.
  Free cash flow is a non-GAAP measure that Encana defines as cash flow
  in excess of capital investment, excluding net acquisitions and
  divestitures, and is used to determine the funds available for other
  investing and/or financing activities.
  
• 
  Operating earnings is a non-GAAP measure defined as net earnings
  excluding non-recurring or non-cash items that management believes
  reduces the comparability of the company's financial performance
  between periods. These after-tax items may include, but are not
  limited to, unrealized hedging gains/losses, impairments, foreign
  exchange gains/losses, income taxes related to divestitures and
  adjustments to normalize the effect of income taxes calculated using
  the estimated annual effective tax rate.
  
• 
  Capitalization is a non-GAAP measure defined as long-term debt,
  including the current portion, plus shareholders′ equity. Debt to
  capitalization, debt to adjusted EBITDA and debt to debt adjusted cash
  flow are three ratios that management monitors as indicators of the
  company′s overall financial strength.
  
• 
  Adjusted EBITDA is a non-GAAP measure defined as trailing 12-month net
  earnings before income taxes, foreign exchange gains or losses,
  interest, accretion of asset retirement obligation, depreciation,
  depletion and amortization, impairments, unrealized hedging gains and
  losses and other expenses. Debt adjusted cash flow is a non-GAAP
  measure defined as cash flow on a trailing 12-month basis excluding
  interest expense after tax.
  

These measures have been described and presented in this news release in
order to provide shareholders and potential investors with additional
information regarding Encana′s liquidity and its ability to generate
funds to finance its operations.

Encana Corporation

Encana is a leading North American energy
producer focused on pursuing the highest returns from its significant
portfolio of natural gas, oil and natural gas liquids. Recognized for
its expertise in resource play development, Encana is a disciplined,
innovative company committed to responsible development. Its common
shares trade on the Toronto and New York stock exchanges under the
symbol ECA.

ADVISORY REGARDING OIL AND GAS INFORMATION ? In this news
release, certain crude oil and NGLs volumes have been converted to cubic
feet equivalent (cfe) on the basis of one barrel (bbl) to six thousand
cubic feet (Mcf). Cfe may be misleading, particularly if used in
isolation. A conversion ratio of one bbl to six Mcf is based on an
energy equivalency conversion method primarily applicable at the burner
tip and does not represent value equivalency at the well head. Given
that the value ratio based on the current price of oil as compared to
natural gas is significantly different from the energy equivalency of
6:1, utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.

ADVISORY REGARDING FORWARD-LOOKING STATEMENTS ? In the interests
of providing Encana shareholders and potential investors with
information regarding Encana, including management′s assessment of
Encana′s and its subsidiaries′ future plans and operations, certain
statements contained in this news release are forward-looking statements
or information within the meaning of applicable securities legislation,
collectively referred to herein as 'forward-looking statements.?
Forward-looking statements in this news release include, but are not
limited to: expectation to successfully advance the company′s multiple
oil and liquids-rich natural gas plays to commerciality; expected
additional investments from Mitsubishi Corporation for the Cutbank Ridge
partnership, from Exaro Energy III LLC for the agreement in the Jonah
field and from the subsidiary of Toyota Tsusho for the agreement
relating to a portion of CBM resource play; target cash and cash
equivalents by end of 2012; ability to attract partnership opportunities
for the exploration and development of oil and liquids-rich assets and
for dry gas plays that could be linked to LNG projects; target to
maintain financial strength and flexibility by balancing capital
investment; expectation to diversify commodity mix and cash flow sources
by accelerating investment in prospective oil and liquids-rich natural
gas plays; anticipated benefits of using third-party capital in the
development of various types of company assets; target capacity
reductions in 2012; expected price correction resulting from increased
use of natural gas in electrical generation and from potential future
LNG exports; projected future development and results from the
Tuscaloosa Marine Shale, Eaglebine, Michigan, San Juan, Alberta Duvernay
and other prospective oil and liquids-rich assets; expectation for
Encana′s risk management to continue to supplement revenue and stabilize
cash flow; ability to maintain a strong balance sheet, investment grade
credit ratings and financial flexibility; and projections contained in
the company′s corporate guidance for 2012.

Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions or
expectations upon which they are based will occur. By their nature,
forward-looking statements involve numerous assumptions, known and
unknown risks and uncertainties, both general and specific, that
contribute to the possibility that the predictions, forecasts,
projections and other forward-looking statements will not occur, which
may cause the company′s actual performance and financial results in
future periods to differ materially from any estimates or projections of
future performance or results expressed or implied by such
forward-looking statements. These assumptions, risks and uncertainties
include, among other things: volatility of, and assumptions regarding
natural gas and liquids prices, including substantial or extended
decline of the same and their adverse effect on the company′s operations
and financial condition and the value and amount of its reserves;
assumptions based upon the company′s current guidance; fluctuations in
currency and interest rates; risk that the company may not conclude
divestitures of certain assets or other transactions (including
third-party capital investments, farm-outs or partnerships, which Encana
may refer to from time to time as 'joint ventures?) as a result of
various conditions not being met; product supply and demand; market
competition; risks inherent in the company′s and its subsidiaries′
marketing operations, including credit risks; imprecision of reserves
estimates and estimates of recoverable quantities of natural gas and
liquids from resource plays and other sources not currently classified
as proved, probable or possible reserves or economic contingent
resources, including future net revenue estimates; marketing margins;
potential disruption or unexpected technical difficulties in developing
new facilities; unexpected cost increases or technical difficulties in
constructing or modifying processing facilities; risks associated with
technology; the company′s ability to acquire or find additional
reserves; hedging activities resulting in realized and unrealized
losses; business interruption and casualty losses; risk of the company
not operating all of its properties and assets; counterparty risk;
downgrade in credit rating and its adverse effects; liability for
indemnification obligations to third parties; variability of dividends
to be paid; its ability to generate sufficient cash flow from operations
to meet its current and future obligations; its ability to access
external sources of debt and equity capital; the timing and the costs of
well and pipeline construction; the company′s ability to secure adequate
product transportation; changes in royalty, tax, environmental,
greenhouse gas, carbon, accounting and other laws or regulations or the
interpretations of such laws or regulations; political and economic
conditions in the countries in which the company operates; terrorist
threats; risks associated with existing and potential future lawsuits
and regulatory actions made against the company; and other risks and
uncertainties described from time to time in the reports and filings
made with securities regulatory authorities by Encana. Although Encana
believes that the expectations represented by such forward-looking
statements are reasonable, there can be no assurance that such
expectations will prove to be correct. Readers are cautioned that the
foregoing list of important factors is not exhaustive. In addition,
assumptions relating to such forward-looking statements generally
include Encana′s current expectations and projections made in light of,
and generally consistent with, its historical experience and its
perception of historical trends, including the conversion of resources
into reserves and production as well as expectations regarding rates of
advancement and innovation, generally consistent with and informed by
its past experience, all of which are subject to the risk factors
identified elsewhere in this news release.

Assumptions with respect to forward-looking information regarding
expanding Encana′s oil and NGLs production and extraction volumes are
based on existing expansion of natural gas processing facilities in
areas where Encana operates and the continued expansion and development
of oil and NGL production from existing properties within its asset
portfolio.

Forward-looking information respecting anticipated 2012 cash flow for
Encana is based upon achieving average production for 2012 of between
2.8 Bcf/d and 3.1 Bcf/d of natural gas and 28,000 bbls/d of liquids,
commodity prices for natural gas and liquids based on NYMEX $3.25 per
Mcf and WTI of $95 per bbl, an estimated U.S./Canadian dollar foreign
exchange rate of $1.00 and a weighted average number of outstanding
shares for Encana of approximately 736 million.

Furthermore, the forward looking statements contained in this news
release are made as of the date hereof and, except as required by law,
Encana undertakes no obligation to update publicly or revise any forward
looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained in this
news release are expressly qualified by this cautionary statement.

Further information on Encana Corporation is available on the company′s
website, www.encana.com,
or by contacting:

FOR FURTHER INFORMATION:

Investor
contacts:

Ryder McRitchie

Vice-President, Investor
Relations

(403) 645-2007

Lorna Klose

Manager,
Investor Relations

(403) 645-6977

Media contacts:

Carol
Howes

Manager, Media Relations

(403) 645-4799

Belinda
de Wolde

Director, Communications

(403) 645-4625