Filed pursuant to General
Instruction II.K. of Form F-9;
File No. 333-98087
PROSPECTUS SUPPLEMENT
---------------------
(TO PROSPECTUS DATED AUGUST 22, 2002)
US$500,000,000
[GRAPHIC OMITTED] ENCANA CORPORATION
[LOGO - ENCANA]
4.75% NOTES DUE 2013
--------------------------------------------------------------------------------
The notes will bear interest at the rate of 4.75% per year. We will pay
interest on the notes on April 15 and October 15 of each year, beginning April
15, 2004. The notes will mature on October 15, 2013. We may redeem some or all
of the notes, at any time, at the "make-whole" price described in this
prospectus supplement. We may also redeem all of the notes, at any time, if
certain events occur involving Canadian taxation.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 26 OF THE ACCOMPANYING PROSPECTUS.
WE ARE PERMITTED TO PREPARE THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS,
WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE PREPARE OUR FINANCIAL
STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. AS
A RESULT, THEY MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES
COMPANIES.
OWNING THE NOTES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED
STATES AND IN CANADA. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE TAX
DISCUSSION CONTAINED IN THIS PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES
FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN
CANADA, MOST OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE CANADIAN RESIDENTS,
AND MOST OF OUR ASSETS OR THE ASSETS OF OUR DIRECTORS AND OFFICERS AND THE
EXPERTS ARE LOCATED OUTSIDE THE UNITED STATES.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER NOTE TOTAL
-------- -----
Public offering price........................... 99.682% US$498,410,000
Underwriting commission......................... 0.650% US$ 3,250,000
Proceeds to EnCana, before expenses............. 99.032% US$495,160,000
The price of the notes will also include accrued interest, if any, from
October 2, 2003 to the date of delivery.
The underwriters expect to deliver the notes on or about October 2,
2003 through The Depository Trust Company.
___________
JOINT BOOK-RUNNING MANAGERS
CITIGROUP UBS INVESTMENT BANK
___________
ABN AMRO INCORPORATED
BNP PARIBAS
DEUTSCHE BANK SECURITIES
HSBC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
___________
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY
RBC CAPITAL MARKETS
September 29, 2003
IMPORTANT NOTICE ABOUT INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the notes we are offering and
also adds to and updates certain information contained in the accompanying
prospectus and the documents incorporated by reference. The second part, the
accompanying prospectus dated August 22, 2002, gives more general information,
some of which may not apply to the notes we are offering. The accompanying
prospectus is referred to as the "prospectus" in this prospectus supplement.
IF THE DESCRIPTION OF THE NOTES VARIES BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT, AND THE
UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT
INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN
OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AS WELL AS INFORMATION WE PREVIOUSLY
FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH THE ALBERTA
SECURITIES COMMISSION AND INCORPORATED BY REFERENCE, IS ACCURATE AS OF THEIR
RESPECTIVE DATES ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.
In this prospectus supplement, all capitalized terms used and not
otherwise defined herein have the meanings provided in the prospectus. In this
prospectus supplement, the prospectus and any document incorporated by
reference, unless otherwise specified or the context otherwise requires, all
dollar amounts are expressed in Canadian dollars, and all financial information
is determined using generally accepted accounting principles which are in effect
from time to time in Canada ("Canadian GAAP"). "U.S. GAAP" means generally
accepted accounting principles which are in effect from time to time in the
United States. For a discussion of the principal differences between our
financial results as calculated under Canadian GAAP and under U.S. GAAP, you
should refer to note 23 of our audited comparative consolidated financial
statements for the year ended December 31, 2002, incorporated by reference in
the prospectus. Unless otherwise specified or the context otherwise requires,
all references in this prospectus supplement and the prospectus to "EnCana",
"we", "us" and "our" mean EnCana Corporation and its consolidated subsidiaries
and partnerships. In the sections entitled "Summary of the Offering" and
"Description of the Notes" in this prospectus supplement and "Description of
Debt Securities" in the prospectus, "EnCana", "we", "us" and "our" mean EnCana
Corporation, without any of its subsidiaries or partnerships through which it
operates.
EXCHANGE RATE DATA
We publish our consolidated financial statements in Canadian dollars.
Unless otherwise specified or the context otherwise requires, all dollar amounts
are expressed in Canadian dollars and references to "dollars" or "$" are to
Canadian dollars and references to "U.S. dollars" or "US$" are to United States
dollars.
The following table sets forth certain exchange rates based on the noon
buying rate in The City of New York for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York (the
"noon buying rate"). These rates are set forth as United States dollars per
$1.00 and are the inverse of rates quoted by the Federal Reserve Bank of New
York for Canadian dollars per US$1.00. On September 29, 2003, the inverse of the
noon buying rate was US$0.7379 equals $1.00.
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------- JUNE 30,
--------
2000 2001 2002 2002 2003
---- ---- ---- ---- ----
High....................... 0.6969 0.6697 0.6619 0.6619 0.7492
Low........................ 0.6410 0.6241 0.6200 0.6200 0.6349
Average(1)................. 0.6732 0.6457 0.6369 0.6378 0.6939
Period End................. 0.6669 0.6279 0.6329 0.6583 0.7376
------------------------
(1) The average of the inverse of the noon buying rate on the last day of each
month during the applicable period.
S-2
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Forward-Looking Statements................................................ S-4
Summary of the Offering................................................... S-5
EnCana Corporation........................................................ S-7
Recent Developments....................................................... S-9
Use of Proceeds........................................................... S-10
Selected Financial and Operating Information.............................. S-10
Consolidated Capitalization............................................... S-13
Credit Ratings............................................................ S-14
Interest Coverage......................................................... S-15
Description of the Notes.................................................. S-16
Certain Income Tax Consequences........................................... S-20
Underwriting.............................................................. S-23
Legal Matters............................................................. S-25
Experts................................................................... S-25
Documents Incorporated by Reference....................................... S-25
PROSPECTUS
About this Prospectus..................................................... 2
Where You Can Find More Information....................................... 2
Forward-Looking Statements................................................ 5
EnCana Corporation........................................................ 7
Use of Proceeds........................................................... 8
Interest Coverage......................................................... 8
Description of Debt Securities............................................ 9
Risk Factors.............................................................. 26
Certain Income Tax Consequences........................................... 29
Plan of Distribution...................................................... 30
Legal Matters............................................................. 31
Experts................................................................... 31
Documents Filed as Part of the Registration Statement..................... 31
S-3
FORWARD-LOOKING STATEMENTS
Certain statements included in this prospectus supplement, the
prospectus and the documents incorporated therein constitute forward-looking
statements within the meaning of the United States Private Securities Litigation
Reform Act of 1995 relating to, but not limited to, our operations, anticipated
financial performance, business prospects and strategies. Forward-looking
statements typically contain statements with words such as "anticipate",
"believe", "expect", "plan", "intend" or similar words suggesting future
outcomes or statements regarding an outlook on oil and gas prices, estimates of
future production, reserves and resources, the estimated amounts and timing of
capital expenditures, anticipated future debt levels and royalty rates, or other
expenditures, beliefs, plans, objectives, assumptions or statements about future
events or performance.
You are cautioned not to place undue reliance on forward-looking
statements. By their nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and specific, that
contribute to the possibility that the predicted outcomes will not occur. These
factors include, but are not limited to:
o general economic, business and market conditions;
o volatility of oil, natural gas and natural gas liquids prices;
o fluctuations in currency and interest rates, product supply
and demand;
o competition;
o risks inherent in foreign operations, including political and
economic risk;
o risks of war, hostilities, civil insurrection and terrorist
threats;
o risks inherent in marketing operations;
o imprecision of reserve estimates;
o our ability to replace or expand reserves;
o our ability to either generate sufficient cash flow to meet
current and future obligations or to obtain external debt or
equity financing;
o our ability to enter into or renew leases;
o the timing and costs of pipeline and gas storage facility
construction and expansion;
o our ability to make capital investments and the amounts
thereof;
o imprecision in estimating future production capacity, and the
timing, costs and levels of production and drilling;
o results of our exploration, development and drilling activity;
o our ability to secure adequate product transportation;
o changes in regulations, including environmental regulations;
o risks associated with existing and potential future lawsuits
and regulatory actions against us;
o uncertainty in amounts and timing of royalty payments; and
o imprecision in estimating product sales.
We caution that the foregoing list of important factors is not
exhaustive. Events or circumstances could cause our actual results to differ
materially from those estimated or projected and expressed in, or implied by,
these forward-looking statements. You should also carefully consider the matters
discussed under "Risk Factors" in the prospectus. We undertake no obligation to
update publicly or otherwise revise any forward-looking statements, whether as a
result of new information, future events or otherwise, or the foregoing list of
factors affecting this information.
S-4
SUMMARY OF THE OFFERING
THE FOLLOWING IS A BRIEF SUMMARY OF SOME OF THE TERMS OF THIS OFFERING.
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE NOTES, SEE "DESCRIPTION OF
THE NOTES" IN THIS PROSPECTUS SUPPLEMENT AND "DESCRIPTION OF DEBT SECURITIES" IN
THE PROSPECTUS.
ISSUE..................... US$500 million aggregate principal amount of 4.75%
Notes due 2013.
SINKING FUND.............. None.
INTEREST PAYMENT DATES.... April 15 and October 15 of each year, beginning
April 15, 2004.
MATURITY DATE............. October 15, 2013.
RANKING................... The notes will be our direct, unsecured and
unsubordinated obligations and will rank equally
with all of our existing and future unsecured and
unsubordinated debt. We conduct a substantial
portion of our business through our corporate and
partnership subsidiaries. The notes will be
structurally subordinate to all existing and future
indebtedness and liabilities, including trade
payables, of any of our corporate and partnership
subsidiaries. See "Description of the
Notes--Ranking and Other Indebtedness" in this
prospectus supplement and "Description of Debt
Securities--Ranking and Other Indebtedness" in the
prospectus. As at June 30, 2003, our corporate and
partnership subsidiaries had approximately $36
million of indebtedness to third parties (excluding
intercompany liabilities and trade accounts
payable).
OPTIONAL REDEMPTION....... We may redeem the notes, in whole or in part, at
any time, at the "make-whole" price described in
this prospectus supplement. See "Description of the
Notes--Optional Redemption" in this prospectus
supplement.
We may also redeem all of the notes in whole, but
not in part, at the redemption prices described in
the accompanying prospectus at any time in the
event certain changes affecting Canadian
withholding taxes occur. See "Description of Debt
Securities--Tax Redemption" in the prospectus.
CERTAIN COVENANTS......... The indenture pursuant to which the notes will be
issued will contain certain covenants that, among
other things, limit:
o the ability of EnCana Corporation and its
restricted subsidiaries to create liens; and
o the ability of EnCana Corporation (exclusive of
its corporate and partnership subsidiaries) to
merge, amalgamate or consolidate with, or sell
all or substantially all of its assets to, any
other person.
See "Description of Debt Securities--Covenants" in
the prospectus. These covenants are subject to
important exceptions and qualifications which are
described under the caption "Description of Debt
Securities" in the prospectus.
S-5
USE OF PROCEEDS........... The net proceeds to us from this offering will be
approximately US$494.7 million, after deducting the
underwriting commission, and estimated expenses of
the offering of US$0.5 million. We intend to use
the net proceeds from this offering primarily to
repay our bank and commercial paper indebtedness
and the balance for general corporate purposes
relating to our primary areas of operations in
Western Canada, offshore Canada's East Coast, the
U.S. Rocky Mountains, the Gulf of Mexico, Ecuador
and the United Kingdom. See "Use of Proceeds" in
this prospectus supplement.
ADDITIONAL AMOUNTS........ Any payments made by us with respect to the notes
will be made without withholding or deduction for
Canadian taxes unless required to be withheld or
deducted by law or by the interpretation or
administration thereof. If we are so required to
withhold or deduct for Canadian taxes with respect
to a payment to the holders of notes, we will pay
the additional amount necessary so that the net
amount received by the holders of notes after such
withholding or deduction is not less than the
amount that such holders would have received in the
absence of the withholding or deduction. See
"Description of Debt Securities--Payment of
Additional Amounts" in the prospectus.
FORM...................... The notes will be represented by one or more fully
registered global notes deposited in book-entry
form with, or on behalf of, The Depository Trust
Company, and registered in the name of its nominee.
See "Description of the Notes--Book-Entry System"
in this prospectus supplement. Except as described
under "Description of the Notes" in this prospectus
supplement and "Description of Debt Securities" in
the prospectus, notes in certificated form will not
be issued.
GOVERNING LAW............. The notes and the indenture governing the notes
will be governed by the laws of the State of New
York.
S-6
ENCANA CORPORATION
We are one of the world's leading independent oil and natural gas
exploration and production companies, based on landholdings and production at
December 31, 2002. Our key landholdings are in Western Canada, the U.S. Rocky
Mountains, Ecuador, the United Kingdom ("U.K.") central North Sea, offshore
Canada's East Coast and the Gulf of Mexico. We have interests in midstream
operations and assets, including natural gas storage, natural gas liquids
("NGLs") gathering and processing facilities, power plants and pipelines. We
explore for, produce and market natural gas, crude oil and NGLs in Canada and
the United States. We are also engaged in exploration and production activities
internationally including production from Ecuador and the U.K. central North
Sea.
We were formed through the business combination (the "Merger") of
PanCanadian Energy Corporation ("PanCanadian") and Alberta Energy Company Ltd.
("AEC") on April 5, 2002. Pursuant to the Merger, PanCanadian indirectly
acquired all of the outstanding common shares of AEC and PanCanadian's name was
changed to EnCana Corporation. Effective January 1, 2003, we amalgamated with
our wholly owned subsidiary, AEC, and continued as one entity. As a result of
the amalgamation, we are the successor issuer in respect of AEC's previously
issued debt securities and are responsible for all of AEC's contractual
obligations.
Our business is organized into two principal operating divisions:
Upstream and Midstream & Marketing. The following is an overview of the major
businesses that comprise these divisions.
UPSTREAM
The Upstream division manages our oil and gas exploration, development
and production activity in North America, as well as offshore and
internationally. Approximately ninety percent of our reserves and production
stem from our core growth platforms in Western Canada and the U.S. Rockies. This
production source enables us to be the largest independent natural gas producer
in North America.
Within western Canada, our operations are divided into two regions. In
northeast British Columbia and the western Alberta foothills, we target oil,
medium to deep natural gas and NGLs. In the plains area of the Western Canada
Sedimentary Basin, we pursue natural gas and oil exploration and development,
including thermal recovery projects at Foster Creek and Christina Lake using
steam-assisted gravity drainage technology, and a carbon dioxide miscible flood
project at Weyburn. We have commenced commercial natural gas from coal ("NGC",
also known as coalbed methane) development in southern Alberta and are
evaluating the potential for NGC development in eastern British Columbia. As at
December 31, 2002, we had approximately 15 million net acres of undeveloped land
in Western Canada. As at that date, we owned the mineral rights on approximately
4 million acres of this undeveloped land in fee title, which means that
production from the land is subject to a mineral tax that is generally less than
the royalty imposed on production from land where the government owns the
mineral rights. The majority of such fee land is located in Alberta.
Our operations in the U.S. Rockies area are focused on exploiting deep,
tight, long-life natural gas formations primarily in the Jonah sweet natural gas
field located in the Green River Basin of southwest Wyoming and the Mamm Creek
natural gas field located in the Piceance Basin of northwest Colorado.
Offshore and internationally, our activities are primarily focused on
exploration and development in the Oriente Basin in Ecuador, in the U.K. central
North Sea, on the East Coast of Canada and in the Gulf of Mexico. In addition,
we conduct new ventures exploration in other parts of the world.
In Ecuador, we are the largest private sector crude oil producer. Our
indirect, wholly owned subsidiaries own interests in several concessions in the
Oriente Basin.
We have a working interest in the Scott and Telford fields located in
the U.K. central North Sea, 117 miles northeast of Aberdeen, Scotland. In June
2003, we agreed to exchange our non-operated
S-7
interest in the Llano discovery in the Gulf of Mexico for additional interests
in the Scott and Telford fields. Upon completion of the exchange, expected in
the fall of 2003, our working interest would increase to 27.5 percent at Scott
and 34.2 percent at Telford. Oil produced from both fields is processed at the
Scott platform and transported via pipeline to the non-operated Forties pipeline
system.
Also in the U.K. central North Sea, our crude oil discovery at Buzzard
is expected to start production in late 2006. We are the operator and own 45
percent and 35 percent of the two blocks where Buzzard is located.
Offshore the East Coast of Canada, we have a 100 percent working
interest in the Deep Panuke gas discovery approximately 200 kilometers off the
coast of Nova Scotia in approximately 40 meters of water. In February 2003, we
requested an adjournment of the regulatory approval process in order to pursue
further steps to improve the project's economics.
In the Gulf of Mexico, we own a 25 percent non-operated interest in the
deep water Tahiti oil discovery.
We are seeking new opportunities beyond our core geographic areas and
are actively exploring potential opportunities in Canada's Mackenzie Delta,
Alaska, Australia, Brazil, Central and West Africa, the Middle East and
Greenland.
MIDSTREAM & MARKETING
Our midstream activities are primarily comprised of three business
units: Gas Storage, Natural Gas Liquids and Power.
Based upon overall storage capacity, we are the largest independent
(non-utility) gas storage operator in North America with facilities in Alberta,
California and Oklahoma. We also lease gas storage capacity from other storage
operators located in the U.S. Gulf Coast and mid-continent regions. At year end
2002, we had storage capacity of approximately 145 billion cubic feet. We expect
this capacity to increase upon completion of the expansion of our Wild Goose Gas
Storage Facility in northern California and with the development of our new
Countess Gas Storage Facility in southeastern Alberta.
Our NGLs midstream facilities are among the largest in Canada. We hold
interests in four NGLs extraction plants that straddle two major natural gas
pipelines at Empress, Alberta plus storage and fractionation assets in
Saskatchewan, Eastern Canada and the United States.
We have interests in two 106 megawatt power plants in southern Alberta,
which supply electricity to the Power Pool of Alberta. We also have a 25 percent
interest in a cogeneration facility in Kingston, Ontario. Our total power
generation capacity from these facilities is approximately 186 megawatts.
We are part of a consortium that completed construction of the
Oleoducto de Crudos Pesados ("OCP") pipeline in Ecuador in August 2003. We have
an indirect 36.3 percent equity interest in the project. Upon commencement of
commercial operation of OCP, expected in October 2003, our interest in this
pipeline will be included as part of our Upstream division.
Our marketing business unit directly sells the majority of our
production and manages energy commodity risk. Our crude oil marketing operations
supply a number of third parties with marketing services for a fee. EnCana
Marketing will also purchase and take delivery of product from others and
deliver product to customers under transportation arrangements not utilized for
our own production.
S-8
RECENT DEVELOPMENTS
ACQUISITION OF CUTBANK RIDGE PROSPECTIVE NATURAL GAS LANDS
In September 2003, we completed the acquisition of approximately
500,000 net acres of prospective natural gas development lands in the Canadian
Rocky Mountain foothills. We have been assembling a land position in this area
for the past 18 months. In September 2003 we purchased a majority interest in 39
parcels of land totalling 350,000 net acres for $369 million. We previously
acquired 150,000 net acres through purchases, land swaps with other companies
and Crown land sales. The acquired lands are located approximately 50 kilometres
southwest of Dawson Creek, British Columbia.
NORMAL COURSE ISSUER BID PURCHASES
In accordance with the normal course issuer bid procedures under
Canadian securities laws, we are permitted to purchase up to 23,843,565 of our
common shares in the open market, for cancellation, during the twelve month
period ending October 21, 2003. This represents approximately 5 percent of the
common shares outstanding on October 22, 2002. As of September 19, 2003, we have
invested approximately $915 million purchasing 18,124,400 of our common shares,
which represents approximately 3.8 percent of our outstanding common shares as
at October 22, 2002. We expect to purchase a total of approximately 5 percent of
the outstanding common shares during 2003, and we intend to apply to renew the
normal course issuer bid, which expires on October 21, 2003.
SALE OF SYNCRUDE
In February 2003, we sold a 10 percent interest in the Syncrude Joint
Venture ("Syncrude") to Canadian Oil Sands Limited ("COS") for approximately
$1.07 billion. We also granted COS an option to purchase, on similar terms and
prior to year-end 2003, our remaining 3.75 percent interest and an overriding
royalty in Syncrude. On July 10, 2003, COS acquired our remaining 3.75 percent
interest and an overriding royalty for approximately $417 million, bringing the
total proceeds from the sale of our Syncrude interest to COS to approximately
$1.487 billion. Each transaction is subject to normal post-closing adjustments.
LEGAL PROCEEDINGS RELATING TO OUR DISCONTINUED MERCHANT ENERGY TRADING
OPERATIONS
Following the Merger, we determined to discontinue the Houston-based
merchant energy operation of a subsidiary of our predecessor company,
PanCanadian. As at December 31, 2002, the winding-down of this operation had
been substantially completed. However, we are subject to a number of legal
proceedings relating to these discontinued operations. In July 2003, our wholly
owned U.S. marketing subsidiary, WD Energy Services Inc., concluded a settlement
with the U.S. Commodity Futures Trading Commission ("CFTC") of a CFTC
investigation related to alleged inaccurate reporting of natural gas trading
information during 2000 and 2001 to energy industry publications by former
employees of our now discontinued Houston-based merchant energy trading
operation. Under the terms of the settlement, WD Energy Services Inc. agreed to
pay a penalty of US$20 million in full settlement, without admitting or denying
the findings of the CFTC.
In April 2003, an action was filed by E. & J. Gallo Winery in the
United States District Court, Eastern District of California, against us and WD
Energy Services Inc. alleging that we engaged in a conspiracy with unnamed
competitors in the natural gas and derivatives market in California in violation
of U.S. and California anti-trust and unfair competition laws to artificially
raise the price of natural gas through various means, including the illegal
sharing of price information through online trading, price indexes and wash
trading. The Gallo complaint claims damages in excess of US$30 million, before
potential trebling under California laws.
S-9
In addition, in 2003, we and WD Energy Services Inc., along with other
energy companies, were named as defendants in several class action lawsuits in
California and New York federal and state courts. The California lawsuits relate
to sales of natural gas in California from 1999 to the present and contain
essentially similar allegations as in the Gallo complaint. The New York lawsuit
claims that the defendants' alleged manipulation of natural gas price indices
resulted in higher prices of natural gas futures and option contracts traded on
the New York Mercantile Exchange (NYMEX) during the period from January 1, 2000
to December 31, 2002. As is customary, the class actions do not specify the
amount of damages claimed. There is no assurance that there will not be other
actions arising out of these allegations on behalf of the same or other classes
of defendants.
We intend to vigorously defend against all claims of liability alleged
in these lawsuits. However, we cannot predict the outcome of these proceedings
or the commencement or outcome of any future proceedings against us or whether
any such proceeding would lead to monetary damages which could have a material
adverse effect on our financial position.
USE OF PROCEEDS
The net proceeds to us from this offering will be approximately
US$494.7 million, after deducting the underwriting commission and the estimated
expenses payable by us of approximately US$0.5 million. The net proceeds
received by us from the sale of the notes will be used primarily to repay our
bank and commercial paper indebtedness. The balance, if any, will be used for
general corporate purposes relating to our primary areas of operations in
Western Canada, offshore Canada's East Coast, the U.S. Rocky Mountains, the Gulf
of Mexico, Ecuador and the United Kingdom. The net proceeds that are not
utilized immediately will be invested in short-term marketable securities.
SELECTED FINANCIAL AND OPERATING INFORMATION
SELECTED FINANCIAL INFORMATION
The following table sets forth selected pro forma and actual financial
information as at and for the year ended December 31, 2002 and selected actual
financial information as at and for the six months ended June 30, 2003.
The selected pro forma financial information has been derived from our
unaudited pro forma consolidated financial statements for the year ended
December 31, 2002, which are incorporated by reference in the prospectus. The
pro forma income statement and cash flow information for the year ended December
31, 2002 gives effect to the Merger as if it had occurred on January 1, 2002.
The pro forma financial information may not be indicative of the results that
would have occurred if the transaction had occurred at an earlier date, or that
will be obtained in the future.
The selected actual financial information has been derived from our
audited comparative consolidated financial statements for the year ended
December 31, 2002 and our unaudited comparative interim consolidated financial
statements for the six months ended June 30, 2003, which are incorporated by
reference in the prospectus. In the opinion of management, the unaudited
comparative interim consolidated financial statements present fairly in
accordance with Canadian GAAP the financial information for such period. Our
historical results are not necessarily indicative of the results that may be
expected for any future period or for a full year.
You should read the selected financial information in conjunction with
our historical and pro forma consolidated financial statements and "Management's
Discussion and Analysis" incorporated by reference in the prospectus.
S-10
PRO FORMA SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
2002(1) 2002(1) 2003(1)
------- ------- -------
(UNAUDITED)
INCOME STATEMENT (IN MILLIONS):
Revenues, net of royalties & production taxes.................... $10,011 $11,213 $ 7,262
Costs and expenses
Transportation and selling..................................... 574 677 364
Operating...................................................... 1,438 1,640 927
Purchased product.............................................. 3,448 3,854 2,503
Administrative................................................. 187 211 116
Interest, net.................................................. 419 489 170
Foreign exchange (gain)........................................ (20) (21) (535)
Depreciation, depletion and amortization....................... 2,153 2,500 1,463
Income taxes................................................... 618 634 235
Gain on corporate disposition.................................. (51) (51) --
Distributions on subsidiary preferred securities, net of tax... 20 31 --
------- ------- -------
Net earnings from continuing operations.......................... 1,225 1,249 2,019
Net (loss) earnings from discontinued operations................. (1) 5 293
------- ------- -------
Net earnings..................................................... 1,224 1,254 2,312
Distributions on preferred securities, net of tax.............. 3 3 (15)
------- ------- -------
Net earnings attributable to common shareholders................. $ 1,221 $ 1,251 $ 2,327
======= ======= =======
CASH FLOW STATEMENT (IN MILLIONS):
Cash flow........................................................ $ 3,821 $ 4,211 $ 3,290
Capital expenditures............................................. 4,940 5,752 3,031
OTHER FINANCIAL DATA (IN MILLIONS):
EBITDA(2)........................................................ $ 4,364 $ 4,831 $ 3,352
DECEMBER 31, JUNE 30,
2002 2003
---- ----
(UNAUDITED)
BALANCE SHEET (IN MILLIONS):
Working capital.................................................. $ 410 $ 1,005
Total assets..................................................... 31,322 29,603
Long-term debt................................................... 7,395 6,122
Preferred securities of subsidiary............................... 457 --
Shareholders' equity............................................. 13,794 15,356
------------------------
(1) Amounts for the year ended December 31, 2002 have not been restated to
reflect Syncrude, which was sold in 2003, as discontinued operations.
Amounts for the six months ended June 30, 2003 reflect Syncrude as
discontinued operations.
(2) EBITDA represents Net earnings before Net earnings from discontinued
operations, Distributions on subsidiary preferred securities, net of tax,
Gain on corporate disposition, Income taxes, Foreign exchange (gain),
Interest, net and Depreciation, depletion and amortization. EBITDA is
presented because we believe it is frequently used by security analysts and
others in evaluating companies and their ability to service debt. However,
EBITDA should not be considered as an alternative to Cash flow as a measure
of liquidity or as an alternative to Net earnings as an indicator of our
operating performance or any other measure of performance in accordance
with Canadian GAAP. EBITDA, as we use the term herein, may not be
comparable to EBITDA by other companies. The following table provides a
reconciliation of EBITDA to Net earnings, the most directly comparable
Canadian GAAP measure:
PRO FORMA SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
2002(1) 2002(1) 2003(1)
------- ------- -------
(UNAUDITED)
Net earnings....................................................... $ 1,224 $ 1,254 $ 2,312
Subtract:
Net (loss) earnings from discontinued operations................. (1) 5 293
Add:
Distributions on subsidiary preferred securities, net of tax..... 20 31 --
Gain on corporate disposition.................................... (51) (51) --
Income taxes..................................................... 618 634 235
Foreign exchange (gain).......................................... (20) (21) (535)
Interest, net.................................................... 419 489 170
Depreciation, depletion and amortization......................... 2,153 2,500 1,463
------- ------- -------
EBITDA............................................................. $ 4,364 $ 4,831 $ 3,352
======= ======= =======
S-11
SELECTED OPERATING INFORMATION
The following table sets forth selected operating information as at and
for the year ended December 31, 2002 and for the six months ended June 30, 2003.
The information for the year ended December 31, 2002 combines the results for
PanCanadian and AEC for the period prior to April 5, 2002 (the date of the
Merger). For the purposes of the following information, "bbls/d" means barrels
per day, "bcf" means billions of cubic feet, "boe/d" means barrels of oil
equivalent per day, "mmbbls" means millions of barrels, "mmboe" means millions
of barrels of oil equivalent and "mmcf/d" means millions of cubic feet per day.
Barrels of oil equivalent have been calculated on a 6:1 conversion basis.
PRO FORMA
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 2002 JUNE 30, 2003
----------------- -------------
SALES
Produced gas (mmcf/d)............................................ 2,758 2,968
Oil and NGLs (bbls/d)
North America
Conventional oil and NGLs.................................... 169,722 180,527
Syncrude..................................................... 31,556 13,792
International.................................................. 61,609 55,999
------- -------
Total Oil and NGLs (bbls/d)...................................... 262,887 250,318
======= =======
Total (boe/d).................................................... 722,554 744,985
DECEMBER 31, 2002
-----------------
GROSS PROVED RESERVES, BEFORE ROYALTIES
Natural Gas (bcf)................................................ 8,973
Oil and NGLs (mmbbls)(1)......................................... 1,417
Total (mmboe).................................................. 2,913
NET UNDEVELOPED LAND (THOUSANDS OF ACRES)
Canada........................................................... 21,618
United States.................................................... 3,468
International.................................................... 68,546
------
Total.......................................................... 93,632
======
------------------------
(1) Includes gross proved reserves before royalties of 434 mmbbls associated
with our 13.75 percent interest in the Syncrude project, the whole of which
we sold in February and July 2003.
S-12
CONSOLIDATED CAPITALIZATION
The following table summarizes our consolidated capitalization as at
June 30, 2003, both actual and as adjusted to give effect to the issuance of the
notes and the application of the net proceeds to repay our bank and commercial
paper indebtedness as described under "Use of Proceeds". You should read this
table together with our unaudited comparative interim consolidated financial
statements for the six month period ended June 30, 2003 which are incorporated
by reference in the prospectus. All U.S. dollar amounts have been converted to
Canadian dollars using the exchange rate of US$0.7378 equals $1.00 at June 30,
2003.
AS AT
JUNE 30, 2003
------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
(UNAUDITED)
LONG-TERM DEBT(1)
Revolving credit and term loan borrowings--Canadian(2) .... $ 1,043 $ 690
Revolving credit and term loan borrowings--U.S. (US$234)(2) 317 --
Unsecured debentures--Canadian ............................ 1,675 1,675
Senior notes--U.S. (US$2,213) ............................. 2,999 2,999
Increase in value of debt acquired ........................ 88 88
Notes offered hereby ...................................... -- 678
-------- --------
Total long-term debt .................................... 6,122 6,130
-------- --------
SHAREHOLDERS' EQUITY
Preferred securities ...................................... 549 549
Share capital(3)(4) ....................................... 8,791 8,791
Share options, net(5) ..................................... 102 102
Retained earnings ......................................... 6,900 6,900
Foreign currency translation adjustment ................... (986) (986)
-------- --------
Total shareholders' equity .............................. 15,356 15,356
-------- --------
TOTAL CAPITALIZATION ........................................ $ 21,478 $ 21,486
======== ========
------------------------
(1) At June 30, 2003, our subsidiaries had $36 million of long-term debt
outstanding.
(2) We and our subsidiaries have two revolving credit and term loan facilities
in place totalling approximately $4.1 billion Canadian equivalent at June
30, 2003. One of the facilities, totalling $4 billion, consists of two
tranches of $2 billion each. One tranche is fully revolving for a 364-day
period with provision for extensions at the option of the lenders and upon
notice from us. If not extended, this tranche converts to a non-revolving
reducing loan for a term of one year. The second tranche is fully revolving
for a period of three years from December 2002. The other facility, for one
of our subsidiaries, totalling approximately $100 million, is fully
revolving for a 364-day period with provision for extensions at the option
of the lenders and upon notice from the subsidiary. If not extended, this
facility converts to a non-revolving reducing loan for a term of 3 years.
Revolving credit and term loan borrowings include bank and commercial paper
indebtedness of $1,360 million as at June 30, 2003.
(3) An unlimited number of common shares are authorized. At June 30, 2003,
there were approximately 479.9 million common shares outstanding.
(4) We have option plans which permit common shares to be reserved for issuance
pursuant to options granted to our directors and employees. At June 30,
2003, options to purchase approximately 30.3 million common shares were
outstanding, 16.4 million of which were then exercisable, at exercise
prices ranging from $13.50 to $53.00 per common share.
(5) Share options, net is defined as the fair value of AEC share options
exchanged for share options of EnCana as part of the Merger.
S-13
CREDIT RATINGS
The notes have been assigned a rating of "A-" by Standard & Poor's
Ratings Services ("S&P"), a rating of "Baal" by Moody's Investors Service
("Moody's") and a rating of "A (low)" by Dominion Bond Rating Service Limited
("DBRS"). Credit ratings are intended to provide investors with an independent
measure of credit quality of any issue of securities.
S&P's credit ratings are on a long-term debt rating scale that ranges
from AAA to D, which represents the range from highest to lowest quality of such
securities rated. A rating of A- by S&P is the third highest of eleven
categories and indicates that the obligor is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligors in higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong. The addition of a plus
(+) or minus (-) designation after a rating indicates the relative standing
within a particular rating category.
Moody's credit ratings are on a long-term debt rating scale that ranges
from Aaa to C, which represents the range from highest to lowest quality of such
securities rated. A rating of Baal by Moody's is the fourth highest of nine
categories and is assigned to debt securities which are considered medium-grade
obligations (i.e. they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt securities lack outstanding
investment characteristics and in fact have speculative characteristics as well.
The addition of a 1, 2 or 3 modifier after a rating indicates the relative
standing within a particular rating category. The modifier 1 indicates that the
issue ranks in the higher end of its generic rating category, the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
DBRS' credit ratings are on a long-term debt rating scale that ranges
from AAA to D, which represents the range from highest to lowest quality of such
securities rated. A rating of A (low) by DBRS is the third highest of nine
categories and is assigned to debt securities considered to be of satisfactory
credit quality. Protection of interest and principal is still substantial, but
the degree of strength is less than with AA rated entities. While a respectable
rating, entities in the A category are considered to be more susceptible to
adverse economic conditions and have greater cyclical tendencies than higher
rated companies. The assignment of a "(high)" or "(low)" modifier within each
rating category indicates relative standing within such category. The "high" and
"low" grades are not used for the AAA category.
The credit ratings accorded to the notes by the rating agencies are not
recommendations to purchase, hold or sell the notes inasmuch as such ratings do
not comment as to market price or suitability for a particular investor. Any
rating may not remain in effect for any given period of time or may be revised
or withdrawn entirely by a rating agency in the future if in its judgement
circumstances so warrant, and if any such rating is so revised or withdrawn, we
are under no obligation to update this prospectus supplement.
S-14
INTEREST COVERAGE
The following sets forth interest coverage ratios calculated for the
twelve month period ended December 31, 2002 based on audited financial
information and for the twelve month period ended June 30, 2003 based on
unaudited financial information. The interest coverage ratios set out below have
been prepared and included in this prospectus supplement in accordance with
Canadian disclosure requirements and Canadian GAAP. The interest coverage ratios
set out below do not purport to be indicative of interest coverage ratios for
any future periods. The ratios are adjusted to give effect to the issuance of
the notes and the application of the net proceeds to repay bank and other short
term indebtedness as described under "Use of Proceeds". For further information
regarding interest coverage, reference is made to "Interest Coverage" in the
prospectus.
DECEMBER 31, 2002 JUNE 30, 2003
----------------- -------------
Interest coverage on long-term debt:
Net earnings.................................. 5.5 times 9.4 times
Cash flow..................................... 10.3 times 14.1 times
Interest coverage on long-term debt on a net earnings basis is equal to
net earnings before interest on long-term debt and income taxes divided by
interest expense on long-term debt. Interest coverage on long-term debt on a
cash flow basis is equal to cash flow before interest expense on long-term debt
and cash income taxes divided by interest expense on long-term debt. For
purposes of calculating the interest coverage ratios set forth herein, long-term
debt includes the current portion of long-term debt and amounts with respect to
notes issued hereunder.
Additionally, the interest coverage ratios above have been calculated
without including the annual carrying charges relating to our Preferred
Securities. If the Preferred Securities were classified as long-term debt (as
they would be under U.S. GAAP), these annual carrying charges would be included
in net interest expense. If these annual carrying charges had been included in
the calculations, the interest coverage ratios would have been as follows.
DECEMBER 31, 2002 JUNE 30, 2003
----------------- -------------
Interest coverage on long-term debt:
Net earnings.................................. 5.1 times 8.6 times
Cash flow..................................... 9.5 times 12.7 times
S-15
DESCRIPTION OF THE NOTES
The following description of the terms of the notes (referred to in the
prospectus as the "debt securities") supplements, and to the extent inconsistent
therewith replaces, the description set forth under "Description of Debt
Securities" in the prospectus and should be read in conjunction with such
description. Capitalized terms used but not defined in this prospectus
supplement have the meanings ascribed to them in the prospectus. In this section
only, "we", "us", "our" or "EnCana" refer to EnCana Corporation without any of
its subsidiaries or partnerships through which it operates.
GENERAL
Payment of the principal, premium, if any, and interest on the notes
will be made in United States dollars.
The notes initially will be issued in an aggregate principal amount of
US$500 million and will mature on October 15, 2013. The notes will bear interest
at the rate of 4.75% per year from October 2, 2003 or from the most recent date
to which interest has been paid or provided for, payable semi-annually on April
15 and October 15 of each year, commencing April 15, 2004 to the persons in
whose names the notes are registered at the close of business on the preceding
April 1 or October 1, respectively. The notes will be sold in denominations of
US$1,000 and integral multiples thereof.
We may from time to time without notice to, or the consent of, the
holders of the notes, create and issue additional notes under the Indenture.
Unless otherwise set forth in a prospectus supplement, such additional notes
will rank equally and have the same terms as the notes offered hereby in all
respects (or in all respects except for the payment of interest accruing prior
to the issue date of the new notes, or except for the first payments of interest
following the issue date of the new notes) so that the new notes may be
consolidated and form a single series with these notes. In the event that
additional notes are issued, we will prepare a new prospectus supplement.
The notes will not be entitled to the benefits of any sinking fund. We
may issue debt securities and incur additional indebtedness other than through
the offering of notes pursuant to this prospectus supplement.
The provisions of the Indenture relating to the payment of Additional
Amounts in respect of Canadian withholding taxes in certain circumstances
(described under the caption "Description of Debt Securities--Additional
Amounts" in the prospectus) and the provisions of the Indenture relating to the
redemption of notes in the event of specified changes in Canadian withholding
tax law on or after the date of this prospectus supplement (described under the
caption "Description of Debt Securities--Tax Redemption" in the prospectus) will
apply to the notes.
RANKING AND OTHER INDEBTEDNESS
The notes will be our direct unsecured obligations and will rank
equally and ratably with all of our other unsubordinated and unsecured
indebtedness. The notes will be structurally subordinate to all existing and
future indebtedness and liabilities, including trade accounts payables, of any
of our corporate and partnership subsidiaries. We conduct a substantial portion
of our operations through our corporate and partnership subsidiaries. At June
30, 2003, our corporate and partnership subsidiaries had approximately $36
million of indebtedness to third parties (excluding intercompany liabilities and
trade accounts payable).
S-16
OPTIONAL REDEMPTION
The notes will be redeemable, in whole or in part, at our option at any
time at a redemption price equal to the greater of:
o 100% of the principal amount of the notes to be redeemed, and
o the sum of the present values of the remaining scheduled
payments of principal and interest on the notes to be redeemed
(exclusive of interest accrued to the date of redemption)
discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined below) plus 15 basis
points,
in either case, plus accrued interest thereon to the date of
redemption.
"ADJUSTED TREASURY RATE" means, with respect to any redemption date,
the rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
or securities selected by the Independent Investment Banker as having an actual
or interpolated maturity comparable to the remaining term of the notes to be
redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the notes.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if fewer than four such Reference Treasury Dealer Quotations
are obtained, the average of all such quotations.
"INDEPENDENT INVESTMENT BANKER" means one of the Reference Treasury
Dealers, which is appointed by the Trustee after consultation with us.
"REFERENCE TREASURY DEALERS" means each of Citigroup Global Markets
Inc. and UBS Securities LLC or their affiliates, plus three others which are
primary U.S. Government securities dealers and their respective successors;
PROVIDED, HOWEVER, that if any of the foregoing or their affiliates shall cease
to be a primary U.S. Government securities dealer in the United States (a
"Primary Treasury Dealer"), we shall substitute for it another Primary Treasury
Dealer.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Reference Treasury Dealer, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted by such Reference Treasury Dealers at 3:30 p.m. New York Time on the
third business day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of the notes to be
redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or the portions of
the notes called for redemption.
In the case of a partial redemption of notes, selection of such notes
for redemption will be made PRO RATA, by lot or such other method as the Trustee
in its sole discretion deems appropriate and just. If any note is redeemed in
part, the notice of redemption relating to such note shall state the portion of
the principal amount thereof to be redeemed; PROVIDED that no note in an
aggregate principal amount of US$1,000 or less shall be redeemed in part. A
replacement note in principal amount equal to the
S-17
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original note.
BOOK-ENTRY SYSTEM
The Depository Trust Company (hereinafter referred to as the
"Depositary") will act as securities depository for the notes. The notes will be
issued as fully registered notes registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully registered global notes (hereinafter
referred to as the "global notes") will be issued for each of the notes, in the
aggregate principal amount of the issue, and will be deposited with the
Depositary. The provisions set forth under "Description of Debt
Securities--Global Securities" in the prospectus will be applicable to the
notes.
The following is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
United States Securities Exchange Act of 1934. The Depositary also facilitates
the settlement among participants of notes transactions, such as transfers and
pledges, in deposited notes through electronic computerized book-entry charges
in participants' accounts, thereby eliminating the need for physical movement of
notes certificates. Direct participants include:
o securities brokers and dealers;
o banks;
o trust companies;
o depositories for Euroclear and Clearstream;
o clearing corporations; and
o certain other organizations.
The Depositary is owned by a number of its direct participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a direct participant, either directly or indirectly, in the case of "indirect
participants". The rules applicable to the Depositary and its participants are
on file with the SEC.
Purchases of notes under the Depositary's system must be made by or
through direct participants, which will receive a credit for the notes on the
Depositary's records. The ownership interest of each actual purchaser of notes
represented by the global notes by a "beneficial owner" is in turn to be
recorded on the direct and indirect participant's records. Beneficial owners
will not receive written confirmation from the Depositary of their purchases but
beneficial owners are expected to receive written confirmation providing details
of the transaction, as well as periodic statements of their holdings, from the
direct or indirect participants through which the beneficial owners entered into
the transaction. Transfers of ownership interest in the global notes
representing the notes are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners of the
global notes representing notes will not receive notes in definitive form
representing their ownership interests, except in the event that use of the
book-entry system for the notes is discontinued or upon the occurrence of
certain other events described in this prospectus supplement.
S-18
To facilitate subsequent transfers, the global notes representing notes
which are deposited with the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of the global notes with the
Depositary and its registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depositary has no knowledge of the actual beneficial
owners of the global notes representing the notes. The Depositary's records
reflect only the identity of the direct participants to whose accounts the notes
are credited, which may or may not be the beneficial owners. The participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
direct participants, by direct participants to indirect participants and by
direct participants and indirect participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the global notes representing the notes. Under its usual procedures, the
Depositary mails an "omnibus proxy" to us as soon as possible after the
applicable record date. The omnibus proxy assigns Cede & Co.'s consenting or
voting rights to those direct participants whose accounts the notes are credited
on the applicable record date (identified in a listing attached to the omnibus
proxy).
Principal and interest payments on the global notes representing the
notes will be made to the Depositary. The Depositary's practice is to credit
direct participants' accounts on the applicable payment date in accordance with
their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on that date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with notes held for the
account of customers in bearer form or registered in "street name", and will be
the responsibility of the participant and not of the Depositary, the Trustee or
us, subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to the Depositary is the
responsibility of us or the Trustee, disbursement of these payments to direct
participants shall be the responsibility of the Depositary, and disbursement of
these payments to the beneficial owners shall be the responsibility of direct
and indirect participants. Neither we nor the Trustee will have any
responsibility or liability for disbursements of payments in respect of
ownership interest in the notes by the Depositary or the direct or indirect
participants or for maintaining or reviewing any records of the Depositary or
the direct or indirect participants relating to ownership interests in the notes
or the disbursement of payments in respect of the notes.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but is subject to any changes to the arrangements between us and the
Depositary and any changes to these procedures that may be instituted
unilaterally by the Depositary.
CERTIFICATED NOTES
The Depositary may discontinue providing its services as depository
with respect to the notes at any time by giving reasonable notice to us and the
Trustee. Under these circumstances, and in the event that a successor depository
is not appointed, notes in certificated form are required to be printed and
delivered. We may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor depository). In that event,
notes in certificated form will be printed and delivered. If at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act and
a successor depository is not appointed by us within 90 days or if there shall
have occurred and be continuing an Event of Default under the Indenture with
respect to the notes and the Trustee has received a request from a beneficial
holder of outstanding notes to issue notes in certificated form to such holder,
we will issue individual notes in certificated form in exchange for the global
notes.
S-19
CERTAIN INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED
TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE
INVESTOR AND NO REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY
PARTICULAR INVESTOR IS MADE. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE INCOME TAX
CONSEQUENCES TO THEM OF PURCHASING, HOLDING OR DISPOSING OF THE NOTES HAVING
REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING ANY CONSEQUENCES OF AN
INVESTMENT IN THE NOTES ARISING UNDER STATE, PROVINCIAL OR LOCAL TAX LAWS IN THE
UNITED STATES OR CANADA OR TAX LAWS OF JURISDICTIONS OUTSIDE THE UNITED STATES
OR CANADA.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal Canadian federal income
tax considerations generally applicable to you as a consequence of acquiring,
holding and disposing of notes; provided that you, at all relevant times, for
the purposes of the INCOME TAX ACT (Canada) (the "Tax Act") deal with EnCana at
arm's length, are not, and are not deemed to be, a resident of Canada, do not
use or hold and are not deemed by the provisions of the Tax Act to use or hold
the notes in the course of carrying on a business in Canada and, where you carry
on an insurance business in Canada and elsewhere, you establish that the notes
are neither "designated insurance property" (as defined in the Tax Act and the
regulations thereunder (the "Regulations")) nor effectively connected with the
insurance business you carry on in Canada.
This summary is based upon the current provisions of the Tax Act and
the Regulations, all specific proposals to amend such provisions publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the date
hereof, and an understanding of the current published administrative practices
of the Canada Customs and Revenue Agency. This summary is not exhaustive of all
possible Canadian federal income tax consequences, and except as noted above
does not take into account or anticipate any changes in law, whether by
legislative, governmental or judicial action, and does not take into account tax
legislation or considerations of any province, territory or foreign
jurisdiction, which may differ from the federal income tax considerations.
Under the Tax Act, you will not be subject to Canadian withholding tax
in respect of any amounts paid or credited by EnCana to you as, on account of,
in lieu of, or in satisfaction of interest on the notes. There are no other
Canadian taxes on income or capital gains payable under the Tax Act in respect
of the holding, redemption or disposition of the notes or the receipt of
interest on the notes by you from EnCana.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain U.S. federal income tax
consequences that may be relevant to the purchase, ownership and disposition of
notes by United States persons (as defined below) who purchase notes in this
offering at the issue price set forth on the cover of this prospectus supplement
and who hold the notes as capital assets ("U.S. Holders") within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
summary does not address tax consequences applicable to subsequent purchasers of
the notes. This discussion does not purport to deal with all aspects of U.S.
federal income taxation that may be relevant to particular holders in light of
their particular circumstances nor does it deal with persons that are subject to
special tax rules, such as dealers in securities or currencies, financial
institutions, insurance companies, tax-exempt organizations, persons holding the
notes as a part of a straddle, hedge, or conversion transaction or a synthetic
security or other integrated transaction, U.S. Holders whose "functional
currency" is not the U.S. dollar, and holders who are not U.S. Holders. This
discussion does not cover any state, local, or foreign tax consequences. The
discussion is based upon the provisions of the Code and United States Treasury
regulations, rulings and judicial decisions under the Code, all as currently in
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effect as of the date of this prospectus supplement, and those authorities may
be repealed, revoked or modified (possibly with retroactive effect) so as to
result in U.S. federal income tax consequences different from those discussed
below. There can be no assurance that the Internal Revenue Service (the "IRS")
will take a similar view as to any of the tax consequences described in this
summary.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE OR OF ANY LOCAL OR FOREIGN TAXING
JURISDICTION.
As used in this section, the term "United States person" means a
beneficial owner of a note that is (i) a citizen or resident of the United
States, (ii) a corporation created or organized in or under the laws of the
United States or any political subdivision thereof or therein, (iii) an estate
the income of which is subject to U.S. federal income taxation regardless of its
source, or (iv) a trust (A) which is subject to the supervision of a court
within the United States and the control of a United States person, or (B) that
was in existence on August 20, 1996, was treated as a United States person under
the Code on the previous day, and validly elected to continue to be so treated
under applicable United States Treasury regulations.
If a partnership holds a note, the U.S. federal income tax treatment of
a partner generally will depend on the status of the partner and the activities
of the partnership. A U.S. holder that is a partner of the partnership holding a
note should consult its own tax advisors.
PAYMENTS OF INTEREST
Interest on a note will generally be includable by a U.S. Holder as
ordinary income at the time the interest is paid or accrued, depending on the
U.S. Holder's method of accounting for U.S. federal income tax purposes. In
addition to interest on the notes, a U.S. Holder would be required to include as
income any Canadian withholding taxes and any additional amounts we may pay as a
result of the imposition of Canadian withholding taxes. As a result, a U.S.
Holder may be required to include more amounts in gross income than the amount
of cash it actually receives. A U.S. Holder may be entitled to deduct or credit
foreign withheld tax, subject to applicable limitations in the Code. For U.S.
foreign tax credit purposes, interest income on a note generally will constitute
foreign source income and be considered "passive income" or "financial services
income" (or, if the applicable rate of Canadian withholding tax is 5% or more,
interest on the notes will be treated as "high withholding tax interest"). The
rules governing the foreign tax credit are complex and investors are urged to
consult their tax advisors regarding the availability of the credit under their
particular circumstances.
ORIGINAL ISSUE DISCOUNT
It is not expected that the notes will be issued with original issue
discount. If, however, the notes are issued with more than a de minimis amount
of original issue discount, then such original issue discount would be treated
for U.S. federal income tax purposes as accruing over the notes' term as
interest income of the U.S. Holders. A U.S. Holder's adjusted tax basis in a
note would be increased by the amount of any original issue discount included in
its gross income. In compliance with United States Treasury regulations, if we
determine that the notes have original issue discount, we will provide certain
information to the IRS and/or U.S. Holders that is relevant to determining the
amount of original issue discount in each accrual period.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a note, a U.S. Holder
generally will recognize a taxable gain or loss equal to the difference between
the amount realized on such sale, exchange, retirement, or
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redemption (reduced by any amounts attributable to accrued but unpaid interest,
which will be taxable as ordinary income) and the U.S. Holder's adjusted tax
basis in the note. Such gain or loss generally will constitute a long term
capital gain or loss if the note was held by such U.S. Holder for more than one
year and otherwise will be short term capital gain or loss. Under current law,
net capital gains of non-corporate taxpayers (including individuals) are, under
some circumstances, taxed at lower rates than items of ordinary income. The
deductibility of capital losses is subject to limitations. In the case of a U.S.
Holder who is a United States resident (as defined in Section 865 of the Code),
any such gain or loss will be treated as U.S. source, unless it is attributable
to an office or other fixed place of business outside the United States and
certain other conditions are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments
of principal and interest on a note and payments of the proceeds of sale to U.S.
Holders other than certain exempt recipients (such as corporations). In
addition, a backup withholding tax may apply to such payments if such a U.S.
Holder fails to provide an accurate taxpayer identification number or otherwise
fails to comply with applicable requirements of the backup withholding rules.
Any amounts withheld under those rules will be allowed as a credit against the
U.S. Holder's U.S. federal income tax liability and may entitle the U.S. Holder
to a refund to the extent it exceeds such liability. A U.S. Holder who does not
provide a correct taxpayer identification number may be subject to penalties
imposed by the IRS.
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UNDERWRITING
We intend to offer the notes through the underwriters. Citigroup Global
Markets Inc. and UBS Securities LLC are acting as representatives of the
underwriters named below. Subject to the terms and conditions contained in an
underwriting agreement between us and the underwriters, we have agreed to sell
to the underwriters and the underwriters severally have agreed to purchase from
us, the principal amount of the notes listed opposite their names below.
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ --------
Citigroup Global Markets Inc.................... US$125,000,000
UBS Securities LLC.............................. 125,000,000
ABN AMRO Incorporated........................... 30,000,000
BNP Paribas Securities Corp..................... 30,000,000
Deutsche Bank Securities Inc.................... 30,000,000
HSBC Securities (USA) Inc....................... 30,000,000
Lehman Brothers Inc............................. 30,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................ 30,000,000
Banc of America Securities LLC.................. 10,000,000
Banc One Capital Markets, Inc................... 10,000,000
CIBC World Markets Corp......................... 10,000,000
Credit Suisse First Boston LLC.................. 10,000,000
Goldman, Sachs & Co............................. 10,000,000
Morgan Stanley & Co. Incorporated............... 10,000,000
RBC Dominion Securities Corporation............. 10,000,000
--------------
Total........................................... US$500,000,000
==============
In the underwriting agreement, the several underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the notes
offered hereby if any of the notes are purchased. In the event of default by an
underwriter, the underwriting agreement provides that, in certain circumstances,
purchase commitments of the non-defaulting underwriters may be increased or the
purchase agreement may be terminated. The obligations of the underwriters under
the underwriting agreement may also be terminated upon the occurrence of certain
stated events.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those
liabilities.
The underwriters are offering the notes, subject to prior sale, when,
as and if issued to and accepted by them, subject to approval of legal matters
by their counsel, including the validity of the notes, and other conditions
contained in the underwriting agreement, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the right
to withdraw, cancel or modify offers to the public and to reject orders in whole
or in part.
The notes will not be qualified for sale under the securities laws of
Canada or any province or territory of Canada and may not be offered or sold,
directly or indirectly, in Canada or to residents of Canada in contravention of
the securities laws of any province or territory in Canada. Each underwriter has
agreed that it will not, directly or indirectly, offer, sell or deliver any
notes purchased by it, in Canada or to residents of Canada in contravention of
the securities laws of any province or territory of Canada, and that any selling
agreement or similar agreement with respect to the notes will require each
dealer or other party thereto to make an agreement to the same effect.
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The representatives have advised us that the underwriters propose
initially to offer the notes to the public at the public offering price set
forth on the cover of this prospectus supplement and to certain dealers at that
price less a concession not to exceed 0.40% of the principal amount of the
notes. The underwriters may allow, and such dealers may reallow, a discount not
to exceed 0.25% of the principal amount of the notes on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed by the underwriters.
The expenses of the offering, not including the underwriting
commission, are estimated to be US$0.5 million and are payable by us.
We have agreed not to, prior to the closing of this offering, directly
or indirectly, offer, sell, contract to sell or otherwise dispose of any debt
securities which mature more than one year after the closing of this offering
and which are substantially similar to the notes, without first obtaining the
prior written consent of the representatives of the underwriters.
The notes are a new issue of securities with no established trading
market. We do not intend to apply for listing of the notes on any national
securities exchange or for quotation of the notes on any automated dealer
quotation system. We have been advised by the underwriters that they presently
intend to make a market in the notes after completion of the offering. However,
they are under no obligation to do so and may discontinue any market-making
activities at any time without any notice. We cannot assure the liquidity of the
trading market for the notes or that an active public market for the notes will
develop. If an active public trading market for the notes does not develop, the
market price and liquidity of the notes may be adversely affected.
The underwriters have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The underwriters may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their business. Also,
certain of the underwriters are affiliates of banks which are lenders to us and
to which we are currently indebted. As a consequence of their participation in
the offering, the underwriters affiliated with such banks will be entitled to
share in the underwriting commission relating to the offering of the notes. The
decision to distribute the notes hereunder and the determination of the terms of
this offering were made through negotiations between us and the underwriters.
Although the banks did not have any involvement in such decision or
determination, a portion of the proceeds of the offering may be used by us to
repay indebtedness to one of such banks and will be used to repay certain other
lenders. See "Use of Proceeds". As a result, such bank may receive more than 10%
of the net proceeds from the offering of the notes in the form of the repayment
of such indebtedness. Accordingly, the offering of the notes is being made
pursuant to Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. Pursuant to that rule, the appointment of a qualified
independent underwriter is not necessary in connection with this offering, as
the offering is of a class of securities rated BBB or better by S&P's rating
service or Baa or better by Moody's rating service.
This prospectus supplement and the prospectus in electronic format may
be made available on the websites maintained by one or more of the underwriters.
In connection with the offering, the underwriters are permitted to
engage in transactions that stabilize the market price of the notes. Such
transactions consist of bids or purchases to peg, fix or maintain the price of
the notes. If the underwriters create a short position in the notes in
connection with the offering (i.e., if they sell more notes than are on the
cover page of this prospectus supplement) the underwriters may reduce that short
position by purchasing notes in the open market. Purchases of a security to
stabilize the price or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases.
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Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither we nor
any of the underwriters makes any representation that the underwriters will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
LEGAL MATTERS
Certain legal matters relating to Canadian law will be passed upon for
us by Macleod Dixon LLP, Calgary, Alberta, Canada. Certain legal matters
relating to United States law will be passed upon for us by Paul, Weiss,
Rifkind, Wharton & Garrison LLP, New York, New York. In addition, certain legal
matters relating to United States law will be passed upon for the underwriters
by Shearman & Sterling LLP, Toronto, Ontario, Canada.
EXPERTS
The audited consolidated financial statements incorporated by reference
in the prospectus have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, Chartered Accountants, given on the authority of
said firm as experts in auditing and accounting. Information relating to our
reserves in our Annual Information Form dated February 19, 2003 was calculated
by Gilbert Laustsen Jung Associates Ltd., McDaniel & Associates Consultants
Ltd., Ryder Scott Company and Netherland, Sewell & Associates, Inc. as
independent petroleum consultants.
The principals of each of Gilbert Laustsen Jung Associates Ltd.,
McDaniel & Associates Consultants Ltd., Ryder Scott Company and Netherland,
Sewell & Associates, Inc., in each case, as a group own beneficially, directly
or indirectly, less than 1% of any class of our securities.
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus supplement is deemed to be incorporated by reference
into the prospectus solely for the purposes of the notes offered hereby. Other
documents are also incorporated or deemed to be incorporated by reference into
the prospectus. The following documents which have been filed with the
securities commission or similar authority in each of the provinces and
territories of Canada are also specifically incorporated by reference in and
form an integral part of the prospectus and this prospectus supplement:
(a) our Annual Information Form dated February 19, 2003 (including
Management's Discussion and Analysis for the year ended
December 31, 2002, incorporated therein by reference);
(b) our audited comparative consolidated financial statements for
the year ended December 31, 2002, including the auditor's
report thereon;
(c) our unaudited comparative interim consolidated financial
statements for the three and six month periods ended June 30,
2003, including Management's Discussion and Analysis;
(d) AEC's audited comparative consolidated statements of earnings,
retained earnings and cash flows for each of the years in the
three-year period ended December 31, 2001, including the
auditor's report thereon, and unaudited comparative
consolidated statements of earnings, retained earnings and
cash flows for the three month period ended March 31, 2002;
(e) our pro forma consolidated statement of earnings for the year
ended December 31, 2002, including the auditor's compilation
report thereon;
(f) our Management Proxy Circular dated February 28, 2003 relating
to the annual and special meeting of our shareholders held on
April 23, 2003 (excluding those portions under the headings
"Composition of the Human Resources and Compensation
Committee", "Human
S-25
Resources and Compensation Committee Report", "Performance
Chart" and "Statement of Corporate Governance Practices");
(g) our Material Change Report dated January 2, 2003 relating to
our amalgamation with our wholly owned subsidiary, AEC; and
(h) our Material Change Report dated February 7, 2003 relating to
our entering into an agreement to sell our interest in the
Syncrude project.
ANY STATEMENT CONTAINED IN THE PROSPECTUS, IN THIS PROSPECTUS
SUPPLEMENT OR IN ANY DOCUMENT (OR PART THEREOF) INCORPORATED BY REFERENCE, OR
DEEMED TO BE INCORPORATED BY REFERENCE, INTO THE PROSPECTUS FOR THE PURPOSE OF
THE OFFERING OF THE NOTES OFFERED HEREBY SHALL BE DEEMED TO BE MODIFIED OR
SUPERSEDED TO THE EXTENT THAT A STATEMENT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT (OR PART THEREOF) THAT
ALSO IS, OR IS DEEMED TO BE, INCORPORATED BY REFERENCE IN THE PROSPECTUS
MODIFIES OR SUPERSEDES THAT STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED
SHALL NOT BE DEEMED, EXCEPT AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE PART OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. THE MODIFYING OR SUPERSEDING
STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR
INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT WHICH IT MODIFIES OR
SUPERSEDES.
You may obtain a copy of our Annual Information Form and other
information identified above by writing or calling us at the following address
and telephone number:
EnCana Corporation
1800, 855 - 2nd Street S.W.
Calgary, Alberta T2P 2S5
(403) 645-2000
Attention: Corporate Secretary
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BASE SHELF PROSPECTUS
THIS SHORT FORM PROSPECTUS HAS BEEN FILED UNDER LEGISLATION IN THE PROVINCE OF
ALBERTA THAT PERMITS CERTAIN INFORMATION ABOUT THESE SECURITIES TO BE DETERMINED
AFTER THIS PROSPECTUS HAS BECOME FINAL AND THAT PERMITS THE OMISSION FROM THIS
PROSPECTUS OF THAT INFORMATION. THE LEGISLATION REQUIRES THE DELIVERY TO
PURCHASERS OF A PROSPECTUS SUPPLEMENT CONTAINING THE OMITTED INFORMATION WITHIN
A SPECIFIED PERIOD OF TIME AFTER AGREEING TO PURCHASE ANY OF THESE SECURITIES.
THIS SHORT FORM PROSPECTUS CONSTITUTES A PUBLIC OFFERING OF THE SECURITIES ONLY
IN THOSE JURISDICTIONS WHERE THEY MAY BE LAWFULLY OFFERED FOR SALE AND THEREIN
ONLY BY PERSONS PERMITTED TO SELL SUCH SECURITIES. NO SECURITIES REGULATORY
AUTHORITY HAS EXPRESSED AN OPINION ABOUT THESE SECURITIES AND IT IS AN OFFENCE
TO CLAIM OTHERWISE.
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS FROM DOCUMENTS
FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN CANADA. Copies of
the documents incorporated herein by reference may be obtained on request
without charge from the Corporate Secretary of EnCana Corporation, 1800, 855 -
2nd Street S.W., P.O. Box 2850, Calgary, Alberta, Canada T2P 2S5, Telephone:
(403) 645-2000.
SHORT FORM PROSPECTUS
[GRAPHIC OMITTED]
[LOGO - ENCANA]
ENCANA CORPORATION
US$2,000,000,000
DEBT SECURITIES
_______
We may from time to time sell up to US$2,000,000,000 (or the equivalent
in other currencies) aggregate principal amount of our debt securities. These
debt securities may consist of debentures, notes or other types of debt and may
be issuable in series. We will provide the specific terms of these securities in
supplements to this prospectus that will be delivered to purchasers together
with this prospectus. Unless otherwise provided in a prospectus supplement
relating to a series of debt securities, the debt securities will be our direct,
unsecured and unsubordinated obligations and will be issued under a trust
indenture. You should read this prospectus and any prospectus supplement
carefully before you invest.
_______
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENCE.
WE ARE PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED
BY THE UNITED STATES, TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE
PREPARE OUR FINANCIAL STATEMENTS, WHICH ARE INCORPORATED BY REFERENCE HEREIN, IN
ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THEY ARE
SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. THEY MAY NOT BE
COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES COMPANIES.
OWNING THE DEBT SECURITIES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN
THE UNITED STATES AND CANADA. THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS
SUPPLEMENT MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE
TAX DISCUSSION IN ANY APPLICABLE PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES
FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN
CANADA, MOST OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THE
PROSPECTUS ARE CANADIAN RESIDENTS, AND MOST OF OUR ASSETS OR THE ASSETS OF OUR
DIRECTORS AND OFFICERS AND THE EXPERTS ARE LOCATED OUTSIDE THE UNITED STATES.
THE DEBT SECURITIES OFFERED HEREBY HAVE NOT BEEN QUALIFIED FOR SALE
UNDER THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA AND ARE NOT
BEING AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO
ANY RESIDENT OF CANADA IN CONTRAVENTION OF THE SECURITIES LAWS OF ANY PROVINCE
OR TERRITORY OF CANADA.
THERE IS NO MARKET THROUGH WHICH THESE SECURITIES MAY BE SOLD AND
PURCHASERS MAY NOT BE ABLE TO RESELL SECURITIES PURCHASED UNDER THIS SHORT FORM
PROSPECTUS.
_______
August 22, 2002
TABLE OF CONTENTS
PAGE
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About This Prospectus................................................ 2
Where You Can Find More Information.................................. 2
Forward-Looking Statements........................................... 5
EnCana Corporation................................................... 7
Use of Proceeds...................................................... 8
Interest Coverage.................................................... 8
Description of Debt Securities....................................... 9
Risk Factors......................................................... 26
Certain Income Tax Consequences...................................... 29
Plan of Distribution................................................. 30
Legal Matters........................................................ 31
Experts.............................................................. 31
Documents Filed as Part of the Registration Statement................ 31
ABOUT THIS PROSPECTUS
In this prospectus and in any prospectus supplement, unless otherwise
specified or the context otherwise requires, all dollar amounts are expressed in
Canadian dollars, references to "dollars" or "$" are to Canadian dollars and all
references to "US$" are to United States dollars. Unless otherwise indicated,
all financial information included and incorporated by reference in this
prospectus or included in any prospectus supplement is determined using Canadian
generally accepted accounting principles, referred to as "Canadian GAAP". "U.S.
GAAP" means generally accepted accounting principles in the United States.
Except as set forth under "Description of Debt Securities", and unless the
context otherwise requires, all references in this prospectus and any prospectus
supplement to "EnCana", "we", "us" and "our" mean EnCana Corporation and its
consolidated subsidiaries and partnerships.
This prospectus is part of a registration statement on Form F-9
relating to the debt securities that we filed with the U.S. Securities and
Exchange Commission (the "SEC"). Under the shelf registration statement, we may,
from time to time, sell any combination of the debt securities described in this
prospectus in one or more offerings up to an aggregate principal amount of
US$2,000,000,000. This prospectus provides you with a general description of the
debt securities that we may offer. Each time we sell debt securities under the
registration statement, we will provide a prospectus supplement that will
contain specific information about the terms of that offering of debt
securities. The prospectus supplement may also add, update or change information
contained in this prospectus. Before you invest, you should read both this
prospectus and any applicable prospectus supplement together with additional
information described under the heading "Where You Can Find More Information".
This prospectus does not contain all of the information set forth in the
registration statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. You may refer to the registration
statement and the exhibits to the registration statement for further information
with respect to us and the debt securities.
WHERE YOU CAN FIND MORE INFORMATION
We file with the Alberta Securities Commission (the "ASC"), a
commission of authority in the Province of Alberta, Canada similar to the SEC,
annual and quarterly reports, material change reports and other information. We
are 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, we also file reports with and furnish other information to the
SEC. Under a multijurisdictional disclosure system adopted by the United States,
these reports and other information (including financial information) may be
prepared in accordance with the disclosure requirements of Canada, which differ
from those in the United States. You may read any document we furnish to the SEC
at the SEC's public reference rooms at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, 233 Broadway, New York, New York, 10279 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of the same documents from the public reference room of
2
the SEC at 450 Fifth Street, N.W., 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 rooms.
Under a multijurisdictional disclosure system adopted by the United
States, the SEC and the ASC allow us to incorporate by reference certain
information that we file with them, which means that we can disclose important
information to you by referring you to those documents. Information that is
incorporated by reference is an important part of this prospectus. We
incorporate by reference the documents listed below, which were filed with the
ASC under the SECURITIES ACT (Alberta).
On April 5, 2002, we completed a transaction with Alberta Energy
Company Ltd. ("AEC") under which we indirectly acquired all of the outstanding
common shares of AEC and our name was changed from PanCanadian Energy
Corporation ("PanCanadian") to EnCana Corporation. References below to documents
of ours which are dated prior to April 5, 2002 are to documents in the name of
PanCanadian.
The following documents which have been filed with the securities
commission or similar authority in each of the provinces and territories of
Canada are specifically incorporated by reference in and form an integral part
of this prospectus:
(a) our Annual Information Form dated February 22, 2002 (including
Management's Discussion and Analysis for the year ended
December 31, 2001, incorporated therein by reference);
(b) our audited comparative consolidated financial statements for
the year ended December 31, 2001, including the auditors'
report thereon;
(c) our Management Proxy Circular dated February 22, 2002 relating
to the annual and special meeting of our shareholders held on
April 4, 2002 (excluding those portions under the headings
"Comparative Shareholder Return" and "Corporate Governance");
(d) our and AEC's Joint Information Circular (the "Joint
Circular") dated February 22, 2002, relating to the annual and
special meeting of our shareholders and the special meeting of
the shareholders and optionholders of AEC, each held on April
4, 2002 (excluding those portions of Appendix G under the
headings "Composition of the Human Resources and Compensation
Committee", "Human Resources and Compensation Committee
Report" and "Performance Chart" and the portion of Appendix H
under the heading "Comparative Shareholder Return"), which
includes, among other things: AEC's Annual Information Form
dated February 20, 2002; audited comparative consolidated
financial statements of AEC, including the auditors' report
thereon; and unaudited pro forma consolidated financial
statements of EnCana for the year ended December 31, 2001,
including the auditors' compilation report thereon;
(e) our unaudited comparative interim consolidated financial
statements for the three and six month periods ended June 30,
2002, including the Management's Discussion and Analysis;
(f) the unaudited comparative interim consolidated financial
statements of AEC for the three month period ended March 31,
2002;
(g) our unaudited pro forma interim consolidated financial
statements for the six month period ended June 30, 2002,
including the auditors' compilation report thereon;
(h) our Material Change Report dated January 2, 2002 relating to
the amalgamation of PanCanadian and its wholly-owned
subsidiary, PanCanadian Petroleum Limited;
(i) our Material Change Report dated January 29, 2002 relating to
the entering into of the agreement providing for the
transaction with AEC;
3
(j) our Material Change Report dated March 8, 2002 relating to the
mailing of the Joint Circular; and
(k) our Material Change Report dated April 11, 2002 relating to
the completion of the transaction with AEC.
Any annual information form, audited annual consolidated financial
statements (together with the auditor's report thereon), information circular
(excluding the portion under the headings "Comparative Shareholder Return",
"Corporate Governance" or other similar headings), unaudited interim
consolidated financial statements and the accompanying management's discussion
and analysis or material change reports (excluding confidential material change
reports) subsequently filed by us with securities commissions or similar
authorities in the relevant provinces and territories of Canada after the date
of this prospectus and prior to the termination of the offering of debt
securities under any prospectus supplement shall be deemed to be incorporated by
reference into this prospectus. These documents are available through the
internet on the System for Electronic Document Analysis and Retrieval (SEDAR)
which can be accessed at www.sedar.com. In addition, any report filed by us with
the SEC pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act after the
date of this prospectus shall be deemed to be incorporated by reference into the
registration statement of which this prospectus forms a part if and to the
extent expressly provided in such report until all of the debt securities are
sold.
ANY STATEMENT CONTAINED IN THIS PROSPECTUS OR IN A DOCUMENT (OR PART
THEREOF) INCORPORATED BY REFERENCE, OR DEEMED TO BE INCORPORATED BY REFERENCE,
IN THIS PROSPECTUS SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED, FOR PURPOSES OF
THIS PROSPECTUS, TO THE EXTENT THAT A STATEMENT CONTAINED IN THE PROSPECTUS OR
IN ANY SUBSEQUENTLY FILED DOCUMENT (OR PART THEREOF) THAT ALSO IS, OR IS DEEMED
TO BE, INCORPORATED BY REFERENCE IN THIS PROSPECTUS MODIFIES OR REPLACES SUCH
STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT
AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE PART OF THIS PROSPECTUS. THE
MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR
SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE
DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
Updated interest coverage ratios will be filed quarterly with the
applicable securities regulatory authorities, including the SEC, either as
prospectus supplements or exhibits to our unaudited interim consolidated
financial statements and audited annual consolidated financial statements and
will be deemed to be incorporated by reference in this prospectus for the
purpose of the offering of the debt securities.
Upon a new annual information form and related annual consolidated
financial statements being filed by us with, and where required, accepted by,
the applicable securities regulatory authorities during the currency of this
prospectus, the previous annual information form, the previous annual
consolidated financial statements and all interim consolidated financial
statements and the accompanying management's discussion and analysis,
information circulars and material change reports filed prior to the
commencement of our financial year in which the new annual information form is
filed shall be deemed no longer to be incorporated into this prospectus for
purposes of future offers and sales of debt securities under this prospectus.
Upon interim consolidated financial statements and the accompanying management's
discussion and analysis being filed by us with the applicable securities
regulatory authorities during the currency of this prospectus, all interim
consolidated financial statements and the accompanying management's discussion
and analysis filed prior to the new interim consolidated financial statements
shall be deemed no longer to be incorporated into this prospectus for purposes
of future offers and sales of debt securities under this prospectus.
A prospectus supplement or prospectus supplements containing the
specific terms for an issue of debt securities will be delivered to purchasers
of such debt securities together with this prospectus and
4
will be deemed to be incorporated by reference into this prospectus as of the
date of such prospectus supplement but only for the purposes of the debt
securities issued thereunder.
The SEC permits oil and natural gas companies, in their filings with
the SEC, to disclose only proven reserves that a company has demonstrated by
actual production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. Canadian securities
laws permit oil and natural gas companies, in their filings with Canadian
securities regulators, to disclose probable reserves. Probable reserves are of a
higher risk and are generally believed to have a lower likelihood of recovery
than proven reserves. Certain reserve information included in the documents
incorporated by reference to describe our reserves, such as "probable" and
"proven plus probable" reserve information, is prohibited in filings with the
SEC by U.S. companies. For additional differences between Canadian and U.S.
standards of reporting reserves and production, see "Risk Factors -- There are
differences in United States and Canadian practices for reporting reserves and
production" in this prospectus.
You may obtain a copy of our Annual Information Form and other
information identified above by writing or calling us at the following address
and telephone number:
EnCana Corporation
1800, 855 - 2nd Street S.W.
Calgary, Alberta T2P 2S5
(403) 645-2000
Attention: Corporate Secretary
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT AND ON THE
OTHER INFORMATION INCLUDED IN THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS FORMS A PART. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE DEBT
SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED BY LAW. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY APPLICABLE
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THOSE DOCUMENTS.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this
prospectus constitute forward-looking statements within the meaning of the
United States Private Securities Legislation Reform Act of 1995 relating to, but
not limited to, our operations, anticipated financial performance, business
prospects and strategies. Forward-looking statements typically contain
statements with words such as "anticipate", "believe", "expect", "plan",
"intend" or similar words suggesting future outcomes or statements regarding an
outlook on oil and gas prices, estimates of future production, reserves and
resources, the estimated amounts and timing of capital expenditures, anticipated
future debt levels and royalty rates, or other expenditures, beliefs, plans,
objectives, assumptions or statements about future events or performance.
You are cautioned not to place undue reliance on forward-looking
statements. By their nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and specific, that
contribute to the possibility that the predicted outcomes will not occur. These
factors include, but are not limited to:
o general economic, business and market conditions;
o volatility of oil, natural gas and liquids prices;
o fluctuations in currency and interest rates, product supply
and demand;
o competition;
5
o risks inherent in foreign operations, including political and
economic risk;
o imprecision of reserve estimates;
o our ability to replace or expand reserves;
o our ability to either generate sufficient cash flow to meet
current and future obligations or to obtain external debt or
equity financing;
o our ability to enter into or renew leases;
o the timing and costs of pipeline and gas storage facility
construction and expansion;
o our ability to make capital investments and the amounts
thereof;
o imprecision in estimating future production capacity, and the
timing, costs and levels of production and drilling;
o results of our exploration, development and drilling;
o our ability to secure adequate product transportation;
o changes in regulations, including environmental regulations;
o uncertainty in amounts and timing of royalty payments; and
o imprecision in estimating product sales.
We caution that the foregoing list of important factors is not
exhaustive. Events or circumstances could cause our actual results to differ
materially from those estimated or projected and expressed in, or implied by,
these forward-looking statements. You should also carefully consider the matters
discussed under "Risk Factors" in this prospectus. We undertake no obligation to
update publicly or otherwise revise any forward-looking statements, whether as a
result of new information, future events or otherwise, or the foregoing list of
factors affecting this information.
6
ENCANA CORPORATION
We are one of the largest North American based independent oil and gas
exploration and production companies. Our key landholdings are in Western
Canada, offshore Canada's East Coast, the U.S. Rocky Mountains and the Gulf of
Mexico. We have interests in midstream operations and assets, including
pipelines and natural gas storage and processing facilities. We also market
crude oil, natural gas and natural gas liquids for consumption in Canada and the
United States. We are engaged in exploration and production activities
internationally including production from Ecuador and the U.K. central North
Sea.
We continually pursue opportunities to develop and expand our business,
which may include significant corporate or asset acquisitions. We may finance
such acquisitions with debt or equity, or a combination of both.
On April 5, 2002, we completed a transaction with AEC under which we
indirectly acquired all of the outstanding common shares of AEC in consideration
for common shares issued by us. Our name was also changed from PanCanadian
Energy Corporation to EnCana Corporation and our board of directors and senior
management was reconstituted. AEC remains an indirect wholly-owned subsidiary of
ours. AEC continues to have outstanding certain publicly traded debt and
Preferred Securities. For more information relating to the transaction with AEC,
see the Joint Circular, which is incorporated herein by reference.
Our registered and principal office is located at 1800, 855 - 2nd
Street S.W., Calgary, Alberta T2P 2S5, Canada.
DISCONTINUED OPERATIONS
On April 24, 2002, we adopted formal plans to exit from our
Houston-based merchant energy operations, which were included in our Midstream
and Marketing segment. Accordingly, these operations have been accounted for as
discontinued operations. The following table presents the effect of the
discontinued operations on our audited consolidated financial statements for the
years ended December 31, 2001, 2000 and 1999.
YEAR ENDED DECEMBER 31
----------------------
2001 2000 1999
---- ---- ----
($ MILLIONS)
Revenue......................................... 4,887 4,302 2,329
Expenses........................................ 2,986 2,651 1,812
----- ----- -----
Income before income taxes...................... 1,901 1,651 517
Provision for income taxes...................... 630 634 147
----- ----- -----
Income from Continuing Operations............... 1,271 1,017 370
Discontinued Operations......................... 33(1) 22 (20)
----- ----- -----
Net income...................................... 1,304 1,039 350
===== ===== =====
------------------------
(1) Upon review of additional information related to 2001 sales and purchases
of natural gas by our U.S. marketing subsidiary whose operations are
discontinued, we have determined that certain revenue and expenses should
have been reflected in our 2001 audited consolidated financial statements
on a net basis rather than included on a gross basis as Revenue and as
Expenses. The amendment, which has been reflected in Discontinued
Operations, had no effect on net earnings or cash flow, but Revenue and
Expenses each have been reduced by $1,126 million.
7
USE OF PROCEEDS
Unless otherwise indicated in an applicable prospectus supplement
relating to a series of debt securities, we will use the net proceeds we receive
from the sale of the debt securities for general corporate purposes relating to
our primary areas of operations in Western Canada, offshore Canada's East Coast,
the U.S. Rocky Mountains, the Gulf of Mexico, Ecuador and the United Kingdom.
Those general corporate purposes may include the repayment of indebtedness and
the financing of acquisitions. The amount of net proceeds to be used for any
such purpose will be described in an applicable prospectus supplement. We may
invest funds that we do not immediately use in short-term marketable securities.
INTEREST COVERAGE
The following sets forth interest coverage ratios for PanCanadian
calculated for the twelve month period ended December 31, 2001 based on audited
financial information, for EnCana calculated for the twelve month period ended
June 30, 2002 based on unaudited financial information (which includes the
financial results for AEC from April 5, 2002) and for EnCana calculated for the
twelve month period ended December 31, 2001 based on unaudited pro forma
financial information giving effect to the transaction with AEC as if it had
occurred on January 1, 2001. The interest coverage ratios do not give effect to
the debt securities offered by this prospectus since the aggregate principal
amount of debt securities that will be issued hereunder and the terms of issue
are not presently known. The interest coverage ratios set forth below do not
purport to be indicative of interest coverage ratios for any future periods. The
interest coverage ratios have been calculated based on information prepared in
accordance with Canadian GAAP.
PRO FORMA
DECEMBER 31, 2001 JUNE 30, 2002 DECEMBER 31, 2001
----------------- ------------- -----------------
Interest coverage on long-term debt:
Net earnings.................................. 21.0 times 8.4 times 10.2 times
Cash flow..................................... 29.7 times 14.2 times 15.9 times
Interest coverage on long-term debt on a net earnings basis is equal to
net earnings before interest on long-term debt and income taxes divided by
interest expense on long-term debt. Interest coverage on long-term debt on a
cash flow basis is equal to cash flow before interest expense on long-term debt
and cash income taxes divided by interest expense on long-term debt. For
purposes of calculating the interest coverage ratios set forth herein, long-term
debt includes the current portion of long-term debt and does not include any
amounts with respect to debt securities that may be issued under this
prospectus.
Additionally, the interest coverage ratios have been calculated without
including the annual carrying charges relating to our Preferred Securities or
the Preferred Securities of AEC. If the Preferred Securities, including AEC's
Preferred Securities, were classified as long-term debt (as they would be under
U.S. GAAP), these annual carrying charges would be included in net interest
expense. If these annual carrying charges had been included in the calculations,
the interest coverage ratios would have been as follows.
PRO FORMA
DECEMBER 31, 2001 JUNE 30, 2002 DECEMBER 31, 2001
----------------- ------------- -----------------
Interest coverage on long-term debt:
Net earnings.................................. 19.6 times 8.2 times 9.1 times
Cash flow..................................... 27.7 times 13.8 times 14.1 times
8
DESCRIPTION OF DEBT SECURITIES
In this section only, "we", "us", "our" or "EnCana" refer only to
EnCana Corporation without any of its subsidiaries or partnerships through which
it operates. The following description describes certain general terms and
provisions of the debt securities. We will provide the particular terms and
provisions of a series of debt securities and a description of how the general
terms and provisions described below may apply to that series in a supplement to
this prospectus.
The debt securities will be issued under an indenture (hereinafter
referred to as the "Indenture") to be entered into between us and The Bank of
New York, as "Trustee". The Indenture will be subject to and governed by the
U.S. Trust Indenture Act of 1939, as amended. A copy of the form of Indenture
has been filed as an exhibit to the registration statement filed with the SEC.
The following is a summary of the Indenture which describes certain general
terms and provisions of the debt securities and is not intended to be complete;
these statements are qualified in their entirety by, and subject to, the
provisions of the Indenture, including the definition of capitalized terms used
under this caption, all of which are incorporated by reference as part of the
statements made in this prospectus. We urge you to read the Indenture carefully,
because it is the Indenture, and not this summary, that governs your rights as a
holder of our debt securities. See "Where You Can Find More Information" in this
prospectus. Prospective investors should rely on information in the applicable
prospectus supplement, which may provide information that is different from this
prospectus.
We may, from time to time, issue debt instruments and incur additional
indebtedness other than through the issuance of debt securities pursuant to this
prospectus.
GENERAL
The Indenture does not limit the aggregate principal amount of debt
securities (which may include debentures, notes and other unsecured evidences of
indebtedness) that we may issue under the Indenture. It provides that debt
securities may be issued from time to time in one or more series and may be
denominated and payable in U.S. dollars or any foreign currency. Special
Canadian and U.S. federal income tax considerations applicable to any of our
debt securities denominated in a foreign currency will be described in the
prospectus supplement relating to any offering of debt securities denominated in
a foreign currency. The debt securities offered pursuant to this prospectus will
be issued in an amount up to US$2,000,000,000, or if any debt securities are
offered at original issue discount, such greater amount as shall result in an
aggregate offering price of up to US$2,000,000,000 or the equivalent in other
currencies. The Indenture also permits us to increase the principal amount of
any series of our debt securities previously issued and to issue that increased
principal amount. The applicable prospectus supplement will set forth the
following terms relating to the debt securities being offered by us:
o the specific designation and the aggregate principal amount of
the debt securities of such series;
o the extent and manner, if any, to which payment on or in
respect of our debt securities of such series will be senior
or will be subordinated to the prior payment of our other
liabilities and obligations;
o the percentage or percentages of principal amount at which our
debt securities of such series will be issued;
o the date or dates on which the principal of (and premium, if
any, on) our debt securities of such series will be payable
and the portion (if less than the principal amount) of the
debt securities of such series to be payable upon a
declaration of acceleration of maturity and/or the method by
which such date or dates shall be determined or extended;
9
o the rate or rates (whether fixed or variable) at which our
debt securities of such series will bear interest, if any, and
the date or dates from which such interest will accrue;
o the dates on which any interest will be payable and the
regular record dates for the payment of interest on our debt
securities of such series in registered form;
o the place or places where the principal of (and premium, if
any, and interest, if any, on) our debt securities will be
payable, and each office or agency where our debt securities
of such series may be presented for registration of transfer
or exchange;
o if other than U.S. dollars, the currency in which our debt
securities of such series are denominated or in which currency
payment of the principal of (and premium, if any, and
interest, if any, on) such debt securities of such series will
be payable;
o whether our debt securities of such series will be issuable in
the form of one or more global securities and, if so, the
identity of the depositary for the global securities;
o any mandatory or optional redemption or sinking fund
provisions;
o the period or periods, if any, within which, the price or
prices at which, the currency in which and the terms and
conditions upon which our debt securities of such series may
be redeemed or purchased by us;
o the terms and conditions, if any, upon which you may redeem
our debt securities of such series prior to maturity and the
price or prices at which and the currency in which our debt
securities of such series are payable;
o any index used to determine the amount of payments of
principal of (and premium, if any, or interest, if any, on)
our debt securities of such series;
o the terms, if any, on which our debt securities may be
converted or exchanged for other of our securities or
securities of other entities;
o any other terms of our debt securities of such series,
including covenants and events of default which apply solely
to a particular series of our debt securities being offered
which do not apply generally to other debt securities, or any
covenants or events of default generally applicable to our
debt securities of such series which do not apply to a
particular series of our debt securities;
o if other than The Depository Trust Company, the person
designated as the depositary for the debt securities of such
series;
o any applicable material Canadian and U.S. federal income tax
consequences;
o whether and under what circumstances we will pay Additional
Amounts on the debt securities of such series in respect of
certain taxes (and the terms of any such payment) and, if so,
whether we will have the option to redeem the debt securities
of such series rather than pay the Additional Amounts (and the
terms of any such option);
o whether the payment of our debt securities will be guaranteed
by any other person;
o whether the series of our debt securities are to be registered
securities, bearer securities (with or without coupons) or
both; and
o if other than denominations of US$1,000 and any integral
multiple thereof, the denominations in which any registered
securities of the series shall be issuable and, if other than
the denomination of US$5,000, the denomination or
denominations in which any bearer securities of the series
shall be issuable.
10
Unless otherwise indicated in the applicable prospectus supplement, the
Indenture does not afford holders of our debt securities the right to tender
such debt securities to us in the event that we have a change in control.
Our debt securities may be issued under the Indenture bearing no
interest or at a discount below their stated principal amount. The Canadian and
U.S. federal income tax consequences and other special considerations applicable
to any such discounted debt securities or other debt securities offered and sold
at par which are treated as having been issued at a discount for Canadian and/or
U.S. federal income tax purposes will be described in the prospectus supplement
relating to the debt securities.
RANKING AND OTHER INDEBTEDNESS
Unless otherwise indicated in an applicable prospectus supplement, the
debt securities will be unsecured obligations and will rank equally with all of
our other unsecured and unsubordinated indebtedness from time to time
outstanding. The debt securities will be structurally subordinated to all
existing and future indebtedness and liabilities, including trade payables, of
any of our subsidiaries or their partnerships.
FORM, DENOMINATIONS AND EXCHANGE
A series of our debt securities may be issued solely as registered
securities, solely as bearer securities or as both registered securities and
bearer securities. The Indenture also provides that a series of our debt
securities may be issuable in global form. Registered securities will be
issuable in denominations of US$1,000 and integral multiples of US$1,000 and
bearer securities will be issuable in denominations of US$5,000 or, in each
case, in such other denominations as may be set out in the terms of the debt
securities of any particular series. Unless otherwise indicated in the
applicable prospectus supplement, bearer securities will have interest coupons
attached.
A prospectus supplement may indicate the places to register a transfer
of our debt securities. Except for certain restrictions set forth in the
Indenture, no service charge will be made for any registration of transfer or
exchange of our debt securities, but we may, in certain instances, require a sum
sufficient to cover any tax or other governmental charges payable in connection
with these transactions.
We shall not be required to:
o issue, register the transfer of or exchange any series of our
debt securities during a period beginning at the opening of
business 15 days before any selection of that series of our
debt securities to be redeemed and ending at the close of
business on (i) if the series of our debt securities are
issuable only as registered securities, the day of mailing of
the relevant notice of redemption and (ii) if the series of
our debt securities are issuable as bearer securities, the day
of the first publication of the relevant notice of redemption
or, if the series of our debt securities are also issuable as
registered securities and there is no publication, the mailing
of the relevant notice of redemption;
o register the transfer of or exchange any registered security,
or portion thereof, called for redemption, except the
unredeemed portion of any registered security being redeemed
in part;
o exchange any bearer security selected for redemption, except
that, to the extent provided with respect to such bearer
security, such bearer security may be exchanged for a
registered security of that series and like tenor, PROVIDED
that such registered security shall be immediately surrendered
for redemption with written instruction for payment consistent
with the provisions of the Indenture; or
11
o issue, register the transfer of or exchange any of our debt
securities which have been surrendered for repayment at the
option of the holder, except the portion, if any, thereof not
to be so repaid.
PAYMENT
Unless otherwise indicated in the applicable prospectus supplement,
payment of principal of, (and premium, if any, and interest, if any, on) our
debt securities (other than global securities) will be made at the office or
agency of the Trustee, at 101 Barclay Street, 21st Floor West, New York, New
York 10286.
Unless otherwise indicated in the applicable prospectus supplement,
payment of any interest will be made to the persons in whose name our debt
securities are registered at the close of business on the day or days specified
by us.
GLOBAL SECURITIES
A series of our debt securities may be issued in whole or in part in
global form as a "global security" and will be registered in the name of and be
deposited with a depositary, or its nominee, each of which will be identified in
the prospectus supplement relating to that series. Unless and until exchanged,
in whole or in part, for our debt securities in definitive registered form, a
global security, may not be transferred except as a whole by the depositary for
such global security to a nominee of the depositary, by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any such nominee to a successor of the depositary or a nominee of
the successor.
The specific terms of the depositary arrangement with respect to any
portion of a particular series of our debt securities to be represented by a
global security will be described in a prospectus supplement relating to such
series. We anticipate that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a global security, the depositary therefor or its
nominee will credit, on its book entry and registration system, the respective
principal amounts of our debt securities represented by the global security to
the accounts of such persons, designated as "participants", having accounts with
such depositary or its nominee. Such accounts shall be designated by the
underwriters, dealers or agents participating in the distribution of our debt
securities or by us if such debt securities are offered and sold directly by us.
Ownership of beneficial interests in a global security will be limited to
participants or persons that may hold beneficial interests through participants.
Ownership of beneficial interests in a global security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the depositary therefor or its nominee (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). The laws of some
states in the United States may require that certain purchasers of securities
take physical delivery of such securities in definitive form.
So long as the depositary for a global security or its nominee, is the
registered owner of the global security, such depositary or such nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a global security will not
be entitled to have a series of our debt securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of such series of our debt securities in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Any payments of principal, premium, if any, and interest on global
securities registered in the name of a depositary or its nominee will be made to
the depositary or its nominee, as the case may be, as the registered owner of
the global security representing such debt securities. None of us, the Trustee
12
or any paying agent for our debt securities represented by the global securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of the global
security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
We expect that the depositary for a global security or its nominee,
upon receipt of any payment of principal, premium, if any, or interest, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of such depositary or its nominee. We also expect that
payments by participants to owners of beneficial interests in a global security
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name", and will be the responsibility of such
participants.
If a depositary for a global security representing a particular series
of our debt securities is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by us within 90 days, we
will issue such series of our debt securities in definitive form in exchange for
a global security representing such series of our debt securities. In addition,
we may at any time and in our sole discretion determine not to have a series of
our debt securities represented by a global security and, in such event, will
issue a series of our debt securities in definitive form in exchange for all of
the global securities representing the series of debt securities.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the Indenture. We urge you to read the Indenture for the full definition of all
such terms.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets of
any person on a consolidated basis (less applicable reserves and other properly
deductible items) after deducting therefrom:
o all current liabilities (excluding any indebtedness classified
as a current liability and any current liabilities which are
by their terms extendible or renewable at the option of the
obligor thereon to a time more than 12 months after the time
as of which the amount thereof is being computed);
o all goodwill, trade names, trademarks, patents, unamortized
debt discounts and expenses and other like intangibles; and
o appropriate adjustments on account of minority interests of
other persons holding shares of the Subsidiaries of such
person,
in each case, as shown on the most recent annual audited or quarterly unaudited
consolidated balance sheet of such person computed in accordance with GAAP.
"CURRENT ASSETS" means assets which in the ordinary course of business
are expected to be realized in cash or sold or consumed within 12 months.
"FACILITIES" means any drilling equipment, production equipment and
platforms or mining equipment; pipelines, pumping stations and other pipeline
facilities; terminals, warehouses and storage facilities; bulk plants;
production, separation, dehydration, extraction, treating and processing
facilities; gasification or natural gas liquefying facilities, flares, stacks
and burning towers; floatation mills, crushers and ore handling facilities; tank
cars, tankers, barges, ships, trucks, automobiles, airplanes and other marine,
automotive, aeronautical and other similar moveable facilities or equipment;
computer systems and associated programs or office equipment; roads, airports,
docks (including drydocks); reservoirs and waste disposal facilities; sewers;
generating plants (including power plants) and electric lines; telephone and
telegraph lines, radio and other communications facilities; townsites, housing
13
facilities, recreation halls, stores and other related facilities; and similar
facilities and equipment of or associated with any of the foregoing.
"FINANCIAL INSTRUMENT OBLIGATIONS" means obligations arising under:
o interest rate swap agreements, forward rate agreements, floor,
cap or collar agreements, futures or options, insurance or
other similar agreements or arrangements, or any combination
thereof, entered into by a person relating to interest rates
or pursuant to which the price, value or amount payable
thereunder is dependent or based upon interest rates in effect
from time to time or fluctuations in interest rates occurring
from time to time;
o currency swap agreements, cross-currency agreements, forward
agreements, floor, cap or collar agreements, futures or
options, insurance or other similar agreements or
arrangements, or any combination thereof, entered into by a
person relating to currency exchange rates or pursuant to
which the price, value or amount payable thereunder is
dependent or based upon currency exchange rates in effect from
time to time or fluctuations in currency exchange rates
occurring from time to time; and
o commodity swap or hedging agreements, floor, cap or collar
agreements, commodity futures or options or other similar
agreements or arrangements, or any combination thereof,
entered into by a person relating to one or more commodities
or pursuant to which the price, value or amount payable
thereunder is dependent or based upon the price of one or more
commodities in effect from time to time or fluctuations in the
price of one or more commodities occurring from time to time.
"GAAP" means generally accepted accounting principles in Canada which
are in effect from time to time, unless the person's most recent audited or
quarterly financial statements are not prepared in accordance with generally
accepted accounting principles in Canada, in which case GAAP shall mean
generally accepted accounting principles in the United States in effect from
time to time.
"LIEN" means, with respect to any properties or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, security interest, lien,
charge, encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such properties or assets (including, without limitation, any conditional sale
or other title retention agreement having substantially the same economic effect
as any of the foregoing).
"NON-RECOURSE DEBT" means indebtedness to finance the creation,
development, construction or acquisition of properties or assets and any
increases in or extensions, renewals or refinancings of such indebtedness,
PROVIDED that the recourse of the lender thereof (including any agent, trustee,
receiver or other person acting on behalf of such entity) in respect of such
indebtedness is limited in all circumstances to the properties or assets
created, developed, constructed or acquired in respect of which such
indebtedness has been incurred and to the receivables, inventory, equipment,
chattels payable, contracts, intangibles and other assets, rights or collateral
connected with the properties or assets created, developed, constructed or
acquired and to which such lender has recourse.
"PERMITTED LIENS" of any person at any particular time means:
o Liens existing as of the date of the Indenture, or arising
thereafter pursuant to contractual commitments entered into
prior to such date;
o Liens on Current Assets given in the ordinary course of
business to any financial institution or others to secure any
indebtedness payable on demand or maturing (including any
right of extension or renewal) within 12 months or less from
the date such indebtedness is incurred;
o Liens in connection with indebtedness, which, by its terms, is
Non-Recourse Debt to us or any of our Subsidiaries;
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o Liens existing on property or assets at the time of
acquisition (including by way of lease) by such person,
PROVIDED that such Liens were not incurred in anticipation of
such acquisition;
o Liens or obligations to incur Liens (including under
indentures, trust deeds and similar instruments) on property
or assets of another person existing at the time such other
person becomes a Subsidiary of such person, or is liquidated
or merged into, or amalgamated or consolidated with, such
person or Subsidiary of such person or at the time of the
sale, lease or other disposition to such person or Subsidiary
of such person of all or substantially all of the properties
and assets of such other person, PROVIDED that such Liens were
not incurred in anticipation of such other person becoming a
Subsidiary of such person;
o Liens upon property or assets of whatsoever nature other than
Restricted Property;
o Liens upon property or facilities used in connection with, or
necessarily incidental to, the purchase, sale, storage,
transportation or distribution of oil or gas or the products
derived from oil or gas;
o Liens arising under partnership agreements, oil and natural
gas leases, overriding royalty agreements, net profits
agreements, production payment agreements, royalty trust
agreements, master limited partnership agreements, farm-out
agreements, division orders, contracts for the sale, purchase,
exchange, storage, transportation, distribution, gathering or
processing of Restricted Property, unitizations and pooling
designations, declarations, orders and agreements, development
agreements, operating agreements, production sales contracts
(including security in respect of take or pay or similar
obligations thereunder), area of mutual interest agreements,
natural gas balancing or deferred production agreements,
injection, repressuring and recycling agreements, salt water
or other disposal agreements, seismic or geophysical permits
or agreements, which in each of the foregoing cases is
customary in the oil and natural gas business, and other
agreements which are customary in the oil and natural gas
business, PROVIDED in all instances that such Lien is limited
to the property or assets that are the subject of the relevant
agreement;
o Liens on assets or property (including oil sands property)
securing: (i) all or any portion of the cost of acquisition
(directly or indirectly), surveying, exploration, drilling,
development, extraction, operation, production, construction,
alteration, repair or improvement of all or any part of such
assets or property, the plugging and abandonment of wells and
the decommissioning or removal of structures or facilities
located thereon, and the reclamation and clean-up of such
properties, facilities and interests and surrounding lands
whether or not owned by us or our Restricted Subsidiaries,
(ii) all or any portion of the cost of acquiring (directly or
indirectly), developing, constructing, altering, improving,
operating or repairing any assets or property (or improvements
on such assets or property) used or to be used in connection
with such assets or property, whether or not located (or
located from time to time) at or on such assets or property,
(iii) indebtedness incurred by us or any of our Subsidiaries
to provide funds for the activities set forth in clauses (i)
and (ii) above, provided such indebtedness is incurred prior
to, during or within two years after the completion of
acquisition, construction or such other activities referred to
in clauses (i) and (ii) above, and (iv) indebtedness incurred
by us or any of our Subsidiaries to refinance indebtedness
incurred for the purposes set forth in clauses (i) and (ii)
above. Without limiting the generality of the foregoing, costs
incurred after the date hereof with respect to clauses (i) or
(ii) above shall include costs incurred for all facilities
relating to such assets or property, or to projects, ventures
or other arrangements of which such assets or property form a
part or which relate to such assets or property, which
facilities shall include, without limitation, Facilities,
whether or not in whole or in part located (or from time to
time located) at or on such assets or property;
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o Liens granted in the ordinary course of business in connection
with Financial Instrument Obligations;
o Purchase Money Mortgages;
o Liens in favor of us or any of our Subsidiaries to secure
indebtedness owed to us or any of our Subsidiaries; and
o any extension, renewal, alteration, refinancing, replacement,
exchange or refunding (or successive extensions, renewals,
alterations, refinancings, replacements, exchanges or
refundings) of all or part of any Lien referred to in the
foregoing clauses; PROVIDED, HOWEVER, that (i) such new Lien
shall be limited to all or part of the property or assets
which was secured by the prior Lien plus improvements on such
property or assets and (ii) the indebtedness, if any, secured
by the new Lien is not increased from the amount of the
indebtedness secured by the prior Lien then existing at the
time of such extension, renewal, alteration, refinancing,
replacement, exchange or refunding, plus an amount necessary
to pay fees and expenses, including premiums, related to such
extensions, renewals, alterations, refinancings, replacements,
exchanges or refundings.
"PURCHASE MONEY MORTGAGE" of any person means any Lien created upon any
property or assets of such person to secure or securing the whole or any part of
the purchase price of such property or assets or the whole or any part of the
cost of constructing or installing fixed improvements thereon or to secure or
securing the repayment of money borrowed to pay the whole or any part of such
purchase price or cost of any vendor's privilege or Lien on such property or
assets securing all or any part of such purchase price or cost including title
retention agreements and leases in the nature of title retention agreements;
PROVIDED that (i) the principal amount of money borrowed which is secured by
such Lien does not exceed 100% of such purchase price or cost and any fees
incurred in connection therewith, and (ii) such Lien does not extend to or cover
any other property other than such item of property and any improvements on such
item.
"RESTRICTED PROPERTY" means any oil, gas or mineral property of a
primary nature located in the United States or Canada, and any facilities
located in the United States or Canada directly related to the mining,
processing or manufacture of hydrocarbons or minerals, or any of the
constituents thereof and includes Voting Shares or other interests of a
corporation or other person which owns such property or facilities, but does not
include (i) any property or facilities used in connection with or necessarily
incidental to the purchase, sale, storage, transportation or distribution of
Restricted Property, (ii) any property which, in the opinion of our board of
directors, is not materially important to the total business conducted by us and
our Subsidiaries as an entirety or (iii) any portion of a particular property
which, in the opinion of our board of directors, is not materially important to
the use or operation of such property.
"RESTRICTED SUBSIDIARY" means, on any date, any Subsidiary of EnCana
which owns at the time Restricted Property; PROVIDED, HOWEVER, such term shall
not include a Subsidiary of EnCana if the amount of EnCana's share of
Shareholders' Equity of such Subsidiary constitutes, at the time of
determination, less than 2% of EnCana's Consolidated Net Tangible Assets.
"SHAREHOLDERS' EQUITY" means the aggregate amount of shareholders'
equity (including but not limited to share capital, contributed surplus and
retained earnings) of a person as shown on the most recent annual audited or
unaudited interim consolidated balance sheet of such person and computed in
accordance with GAAP.
"SUBSIDIARY" of any person means, on any date, any corporation or other
person of which Voting Shares or other interests carrying more than 50% of the
voting rights attached to all outstanding Voting Shares or other interests are
owned, directly or indirectly, by or for such person or one or more Subsidiaries
thereof.
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"UNRESTRICTED SUBSIDIARY" means a Subsidiary which is not or which has
ceased to be a Restricted Subsidiary.
"VOTING SHARES" means shares of any class of any corporation carrying
voting rights under all circumstances, PROVIDED that, for the purposes of this
definition, shares which only carry the right to vote conditionally on the
happening of any event shall not be considered Voting Shares, nor shall any
shares be deemed to cease to be Voting Shares solely by reason of a right to
vote accruing to shares of another class or classes by reason of the happening
of such an event, or solely because the right to vote may not be exercisable
under the charter of the corporation.
COVENANTS
LIMITATION ON LIENS
The Indenture provides that so long as any of our debt securities are
outstanding and subject to the provisions of the Indenture, we will not, and
will not permit any of our Restricted Subsidiaries to, create, incur, assume or
otherwise have outstanding any Lien securing any indebtedness for borrowed money
or interest thereon (or any liability of ours or such Restricted Subsidiaries
under any guarantee or endorsement or other instrument under which we or such
Restricted Subsidiaries are contingently liable, either directly or indirectly,
for borrowed money or interest thereon), other than Permitted Liens, without
also simultaneously or prior thereto securing, or causing such Restricted
Subsidiaries to secure, indebtedness under the Indenture so that our debt
securities are secured equally and ratably with or prior to such other
indebtedness, except that we and our Restricted Subsidiaries may incur a Lien to
secure indebtedness for borrowed money without securing our debt securities if,
after giving effect thereto, the principal amount of indebtedness for borrowed
money secured by Liens created, incurred or assumed after the date of the
Indenture and otherwise prohibited by the Indenture does not exceed 10% of our
Consolidated Net Tangible Assets.
Notwithstanding the foregoing, transactions such as the sale (including
any forward sale) or other transfer of (i) oil, gas, minerals or other resources
of a primary nature, whether in place or when produced, for a period of time
until, or in an amount such that, the purchaser will realize therefrom a
specified amount of money or a specified rate of return (however determined), or
a specified amount of such oil, gas, minerals, or other resources of a primary
nature, or (ii) any other interest in property of the character commonly
referred to as a "production payment", will not constitute a Lien and will not
result in us or a Restricted Subsidiary of ours being required to secure the
debt securities.
CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS
We may not consolidate or amalgamate with or merge into or enter into
any statutory arrangement with any other corporation, or convey, transfer or
lease all or substantially all our properties and assets to any person, unless:
o the entity formed by or continuing from such consolidation or
amalgamation or into which we are merged or with which we
enter into such statutory arrangement or the person which
acquires or leases all or substantially all of our properties
and assets is organized and existing under the laws of the
United States, any state thereof or the District of Columbia
or the laws of Canada or any province or territory thereof,
or, if such consolidation, amalgamation, merger, statutory
arrangement or other transaction would not impair the rights
of the holders of our debt securities, in any other country,
PROVIDED that if such successor entity is organized under the
laws of a jurisdiction other than the United States, any state
thereof or the District of Columbia, or the laws of Canada or
any province or territory thereof, the successor entity
assumes our obligations under the debt securities and the
Indenture to pay Additional Amounts, including the name of
such successor jurisdiction in addition to Canada in each
place that Canada appears in "-- Payment of Additional
Amounts" below;
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o the successor entity expressly assumes or assumes by operation
of law all of our obligations under our debt securities and
under the Indenture;
o immediately before and after giving effect to such
transaction, no event of default, and no event which, after
notice or lapse of time or both, would become an event of
default, shall have happened and be continuing; and
o certain other conditions are met.
If, as a result of any such transaction, any of our Restricted
Properties become subject to a Lien, then, unless such Lien could be created
pursuant to the Indenture provisions described under the "LIMITATION ON LIENS"
covenant above without equally and ratably securing our debt securities, we,
simultaneously with or prior to such transaction, will cause our debt securities
to be secured equally and ratably with or prior to the indebtedness secured by
such Lien.
PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise specified in the applicable prospectus supplement, all
payments made by or on behalf of us under or with respect to any series of our
debt securities will be made free and clear of and without withholding or
deduction for or on account of any present or future tax, duty, levy, impost,
assessment or other governmental charge (including penalties, interest and other
liabilities related thereto) imposed or levied by or on behalf of the Government
of Canada or any province or territory thereof or by any authority or agency
therein or thereof having power to tax (hereinafter "Canadian Taxes"), unless we
are required to withhold or deduct Canadian Taxes by law or by the
interpretation or administration thereof. If we are so required to withhold or
deduct any amount for or on account of Canadian Taxes from any payment made
under or with respect to the debt securities, we will pay to each holder of such
debt securities as additional interest such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each such
holder after such withholding or deduction (and after deducting any Canadian
Taxes on such Additional Amounts) will not be less than the amount such holder
would have received if such Canadian Taxes had not been withheld or deducted.
However, no Additional Amounts will be payable with respect to a payment made to
a debt securities holder (such holder, an "Excluded Holder") in respect of the
beneficial owner thereof:
o with which we do not deal at arm's length (for the purposes of
the INCOME TAX ACT (Canada)) at the time of the making of such
payment;
o which is subject to such Canadian Taxes by reason of the debt
securities holder being a resident, domicile or national of,
or engaged in business or maintaining a permanent
establishment or other physical presence in or otherwise
having some connection with Canada or any province or
territory thereof otherwise than by the mere holding of the
debt securities or the receipt of payments thereunder;
o which is subject to such Canadian Taxes by reason of the debt
securities holder's failure to comply with any certification,
identification, documentation or other reporting requirements
if compliance is required by law, regulation, administrative
practice or an applicable treaty as a precondition to
exemption from, or a reduction in the rate of deduction or
withholding of, such Canadian Taxes; or
o which is subject to such Canadian Taxes by reason of the legal
nature of the holder of the debt securities holder to the
benefit of an applicable treaty.
We will also:
o make such withholding or deduction; and
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o remit the full amount deducted or withheld to the relevant
authority in accordance with applicable law.
We will furnish to the holders of the debt securities, within 60 days
after the date the payment of any Canadian Taxes is due pursuant to applicable
law, certified copies of tax receipts or other documents evidencing such payment
by us.
We will indemnify and hold harmless each holder of debt securities
(other than an Excluded Holder) and upon written request reimburse each such
holder for the amount (excluding any Additional Amounts that have previously
been paid by us with respect thereto) of:
o any Canadian Taxes so levied or imposed and paid by such
holder as a result of payments made under or with respect to
the debt securities;
o any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto; and
o any Canadian Taxes imposed with respect to any reimbursement
under the preceding two bullet points, but excluding any such
Canadian Taxes on such holder's net income.
Wherever in the Indenture there is mentioned, in any context, the
payment of principal (and premium, if any), interest, if any, or any other
amount payable under or with respect to a debt security, such mention shall be
deemed to include mention of the payment of Additional Amounts to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof.
TAX REDEMPTION
Unless otherwise specified in the applicable prospectus supplement, a
series of our debt securities will be subject to redemption at any time, in
whole but not in part, at a redemption price equal to the principal amount
thereof together with accrued and unpaid interest to the date fixed for
redemption, upon the giving of a notice as described below, if:
o as a result of any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of Canada or of
any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position
regarding the application or interpretation of such laws,
regulations or rulings (including a holding by a court of
competent jurisdiction), which change or amendment is
announced or becomes effective on or after the date specified
in the applicable prospectus supplement, we have or will
become obligated to pay, on the next succeeding date on which
interest is due, Additional Amounts with respect to any debt
security of such series as described under "-- Payment of
Additional Amounts"; or
o on or after the date specified in the applicable prospectus
supplement, any action has been taken by any taxing authority
of, or any decision has been rendered by a court of competent
jurisdiction in Canada, or any political subdivision or taxing
authority thereof or therein, including any of those actions
specified in the paragraph immediately above, whether or not
such action was taken or decision was rendered with respect to
us, or any change, amendment, application or interpretation
shall be officially proposed, which, in any such case, in the
written opinion to us of legal counsel of recognized standing,
will result in our becoming obligated to pay, on the next
succeeding date on which interest is due, Additional Amounts
with respect to any debt security of such series;
and, in any such case, we, in our business judgment, determine that such
obligation cannot be avoided by the use of reasonable measures available to us.
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In the event that we elect to redeem a series of our debt securities
pursuant to the provisions set forth in the preceding paragraph, we shall
deliver to the Trustee a certificate, signed by an authorized officer, stating
that we are entitled to redeem such series of our debt securities pursuant to
their terms.
Notice of intention to redeem such series of our debt securities will
be given not more than 60 nor less than 30 days prior to the date fixed for
redemption and will specify the date fixed for redemption.
PROVISION OF FINANCIAL INFORMATION
We will file with the Trustee, within 15 days after we file them with
the SEC, copies, which may be in electronic format, of our annual report and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which we are
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that we may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise
report on an annual and quarterly basis on forms provided for such annual and
quarterly reporting pursuant to rules and regulations promulgated by the SEC, we
will continue to provide the Trustee:
o within 140 days after the end of each fiscal year, the
information required to be contained in annual reports on Form
20-F, Form 40-F or Form 10-K as applicable (or any successor
form); and
o within 65 days after the end of each of the first three fiscal
quarters of each fiscal year, the information required to be
contained in reports on Form 6-K (or any successor form)
which, regardless of applicable requirements shall, at a
minimum, contain such information required to be provided in
quarterly reports under the laws of Canada or any province
thereof to security holders of a corporation with securities
listed on the Toronto Stock Exchange, whether or not we have
any of our securities listed on such exchange. Such
information will be prepared in accordance with Canadian
disclosure requirements and GAAP; PROVIDED, HOWEVER, that we
shall not be obligated to file such report with the SEC if the
SEC does not permit such filings.
EVENTS OF DEFAULT
The following are summaries of events of default under the Indenture
with respect to any series of our debt securities:
o default in the payment of any interest on any debt security of
that series when it becomes due and payable, and continuance
of such default for a period of 30 days;
o default in the payment of the principal of (or premium, if
any, on), any debt security of that series when it becomes due
and payable;
o default in the performance, or breach, of any of our covenants
or warranties in the Indenture in respect of our debt
securities of that series (other than a covenant or warranty a
default in the performance of which or the breach of which is
specifically dealt with elsewhere in the Indenture), and
continuance of such default or breach for a period of 60 days
after receipt by us of written notice to us, specifying such
default or breach, by the Trustee or by the holders of at
least 25% in principal amount of all outstanding debt
securities of any series affected thereby;
o if an event of default (as defined in any indenture or
instrument under which we or one of our Restricted
Subsidiaries has at the time of the Indenture or shall
thereafter have outstanding any indebtedness for borrowed
money) shall happen and be continuing, or EnCana or any
Restricted Subsidiary of EnCana shall have failed to pay
principal amounts with respect to such indebtedness at
maturity and such event of default or failure to pay shall
result in such indebtedness being declared due and payable or
otherwise being accelerated, in either event so
20
that an amount in excess of the greater of US$75,000,000 and
2% of our Shareholders' Equity shall be or become due and
payable upon such declaration or otherwise accelerated prior
to the date on which the same would otherwise have become due
and payable (the "accelerated indebtedness"), and such
acceleration shall not be rescinded or annulled, or such event
of default or failure to pay under such indenture or
instrument shall not be remedied or cured, whether by payment
or otherwise, or waived by the holders of such accelerated
indebtedness, then (i) if the accelerated indebtedness shall
be as a result of an event of default which is not related to
the failure to pay principal or interest on the terms, at the
times, and on the conditions set out in any such indenture or
instrument, it shall not be considered an event of default for
purposes of the Indenture until 30 days after such
indebtedness has been accelerated, or (ii) if the accelerated
indebtedness shall occur as a result of such failure to pay
principal or interest or as a result of an event of default
which is related to the failure to pay principal or interest
on the terms, at the times, and on the conditions set out in
any such indenture or instrument, then (A) if such accelerated
indebtedness is, by its terms, Non-Recourse Debt to us or our
Restricted Subsidiaries, it shall not be considered an event
of default for purposes of the Indenture; or (B) if such
accelerated indebtedness is recourse to us or our Restricted
Subsidiaries, any requirement in connection with such failure
to pay or event of default for the giving of notice or the
lapse of time or the happening of any further condition, event
or act under such other indenture or instrument in connection
with such failure to pay principal or an event of default
shall be applicable together with an additional seven days
before being considered an event of default for purposes of
the Indenture;
o certain events in bankruptcy, insolvency or reorganization; or
o any other events of default provided with respect to debt
securities of that series.
If an event of default under the Indenture occurs and is continuing
with respect to any series of our debt securities, then and in every such case
the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of such affected series may, subject to any
subordination provisions thereof, declare the entire principal amount (or, if
the debt securities of that series are original issue discount debt securities,
such portion of the principal amount as may be specified in the terms of that
series) of all debt securities of such series and all accrued and unpaid
interest thereon to be immediately due and payable. However, at any time after a
declaration of acceleration with respect to any series of our debt securities
has been made, but before a judgment or decree for payment of the money due has
been obtained, the holders of a majority in principal amount of the outstanding
debt securities of that series, by written notice to us and the Trustee under
certain circumstances, may rescind and annul such acceleration.
Reference is made to the applicable prospectus supplement or
supplements relating to each series of our debt securities which are original
issue discount debt securities for the particular provisions relating to
acceleration of the maturity of a portion of the principal amount of such
original issue discount securities upon the occurrence of any event of default
and the continuation thereof.
Subject to certain limitations set forth in the Indenture, the holders
of a majority in principal amount of the outstanding debt securities of all
series affected by an event of default shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the debt securities of all series affected by such event of default.
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No holder of a debt security of any series will have any right to
institute any proceeding with respect to the Indenture, or for the appointment
of a receiver or a Trustee, or for any other remedy thereunder, unless:
o such holder has previously given to the Trustee written notice
of a continuing event of default with respect to the debt
securities of such series affected by such event of default;
o the holders of at least 25% in aggregate principal amount of
the outstanding debt securities of such series (voting as one
class) affected by such event of default have made written
request, and such holder or holders have offered reasonable
indemnity, to the Trustee to institute such proceeding as
Trustee; and
o the Trustee has failed to institute such proceeding, and has
not received from the holders of a majority in aggregate
principal amount of the outstanding debt securities of such
series affected by such event of default a direction
inconsistent with such request, within 60 days after such
notice, request and offer.
However, such above-mentioned limitations do not apply to a suit
instituted by the holder of a debt security for the enforcement of payment of
the principal of or any premium or interest on such debt security on or after
the applicable due date specified in such debt security.
We will annually furnish to the Trustee a statement by certain of our
officers as to whether or not we, to the best of their knowledge, are in
compliance with all conditions and covenants of the Indenture and, if not,
specifying all such known defaults.
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise specified in the applicable prospectus supplement, the
Indenture provides that, at our option, we will be discharged from any and all
obligations in respect of the outstanding debt securities of any series upon
irrevocable deposit with the Trustee, in trust, of money and/or government
securities which will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent chartered accountants (as evidenced by
an officer's certificate delivered to the Trustee) to pay the principal of (and
premium, if any, and each installment of interest, if any, on) the outstanding
debt securities of such series (hereinafter referred to as a "defeasance")
(except with respect to the authentication, transfer, exchange or replacement of
our debt securities or the maintenance of a place of payment and certain other
obligations set forth in the Indenture). Such trust may only be established if
among other things:
o we have delivered to the Trustee an opinion of counsel in the
United States stating that (i) we have received from, or there
has been published by, the Internal Revenue Service a ruling,
or (ii) since the date of execution of the Indenture, there
has been a change in the applicable U.S. federal income tax
law, in either case to the effect that the holders of the
outstanding debt securities of such series will not recognize
income, gain or loss for U.S. federal income tax purposes as a
result of such defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had
not occurred;
o we have delivered to the Trustee an opinion of counsel in
Canada or a ruling from the Canada Customs and Revenue Agency
to the effect that the holders of the outstanding debt
securities of such series will not recognize income, gain or
loss for Canadian federal or provincial income or other tax
purposes as a result of such Defeasance and will be subject to
Canadian federal or provincial income and other tax on the
same amounts, in the same manner and at the same times as
would have been the case had such defeasance not occurred (and
for the purposes of such opinion, such Canadian counsel shall
assume that holders of the outstanding debt securities of such
series include holders who are not resident in Canada);
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o no event of default or event that, with the passing of time or
the giving of notice, or both, shall constitute an event of
default shall have occurred and be continuing on the date of
such deposit; and
o we are not an "insolvent person" within the meaning of the
BANKRUPTCY AND INSOLVENCY ACT (Canada) on the date of such
deposit or at any time during the period ending on the 91st
day following such deposit.
We may exercise our defeasance option notwithstanding our prior
exercise of our Covenant Defeasance option described in the following paragraph
if we meet the conditions described in the preceding sentence at the time we
exercise the defeasance option.
The Indenture provides that, at our option, unless and until we have
exercised our Defeasance option described in the preceding paragraph, we may
omit to comply with the "LIMITATION ON LIENS" covenant, certain aspects of the
"CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS" covenant and certain
other covenants and such omission shall not be deemed to be an event of default
under the Indenture and our outstanding debt securities upon irrevocable deposit
with the Trustee, in trust, of money and/or government securities which will
provide money in an amount sufficient in the opinion of a nationally recognized
firm of independent chartered accountants (as evidenced by an officer's
certificate delivered to the Trustee) to pay the principal of (and premium, if
any, and each installment of interest, if any, on) the outstanding debt
securities (hereinafter referred to as "covenant defeasance"). If we exercise
our covenant defeasance option, the obligations under the Indenture other than
with respect to such covenants and the events of default other than with respect
to such covenants shall remain in full force and effect. Such trust may only be
established if, among other things:
o we have delivered to the Trustee an opinion of counsel in the
United States to the effect that the holders of our
outstanding debt securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such
covenant defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance
had not occurred;
o we have delivered to the Trustee an opinion of counsel in
Canada or a ruling from the Canada Customs and Revenue Agency
to the effect that the holders of our outstanding debt
securities will not recognize income, gain or loss for
Canadian federal or provincial income or other tax purposes as
a result of such covenant defeasance and will be subject to
Canadian federal or provincial income and other tax on the
same amounts, in the same manner and at the same times as
would have been the case had such covenant defeasance not
occurred (and for the purposes of such opinion, such Canadian
counsel shall assume that holders of our outstanding debt
securities include holders who are not resident in Canada);
o no event of default or event that, with the passing of time or
the giving of notice, or both, shall constitute an event of
default shall have occurred and be continuing on the date of
such deposit; and
o we are not an "insolvent person" within the meaning of the
BANKRUPTCY AND INSOLVENCY ACT (Canada) on the date of such
deposit or at any time during the period ending on the 91st
day following such deposit.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by us and the
Trustee with the consent of the holders of a majority in principal amount of the
outstanding debt securities of each series issued under the Indenture affected
by such modification or amendment (voting as one class);
23
PROVIDED, HOWEVER, that no such modification or amendment may, without the
consent of the holder of each outstanding debt security of such affected series:
o change the stated maturity of the principal of, or any
installment of interest, if any, on any debt security;
o reduce the principal amount of (or premium, if any, or
interest, if any, on) any debt security;
o reduce the amount of principal of a debt security payable upon
acceleration of the maturity thereof;
o change the place of payment;
o change the currency of payment of principal of (or premium, if
any, or interest, if any, on) any debt security;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security;
o reduce the percentage of principal amount of outstanding debt
securities of such series, the consent of the holders of which
is required for modification or amendment of the applicable
Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults; or
o modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of
past defaults or covenants except as otherwise specified in
the Indenture.
The holders of a majority in principal amount of our outstanding debt
securities of any series may on behalf of the holders of all debt securities of
that series waive, insofar as that series is concerned, compliance by us with
certain restrictive provisions of the Indenture. The holders of a majority in
principal amount of outstanding debt securities of any series may waive any past
default under the Indenture with respect to that series, except a default in the
payment of the principal of (or premium, if any) and interest, if any, on any
debt security of that series or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each outstanding debt security of that series. The Indenture or the debt
securities may be amended or supplemented, without the consent of any holder of
such debt securities, in order to, among other things, cure any ambiguity or
inconsistency or to make any change, in any case, that does not have a
materially adverse effect on the rights of any holder of such debt securities.
CONSENT TO JURISDICTION AND SERVICE
Under the Indenture, we irrevocably appoint CT Corporation System, 111
- 8th Avenue, 13th Floor, New York, New York, as our authorized agent for
service of process in any suit or proceeding arising out of or relating to our
debt securities or the Indenture and for actions brought under federal or state
securities laws in any federal or state court located in the New York, New York
and irrevocably submit to the non-exclusive jurisdiction of any such court.
GOVERNING LAW
Our debt securities and the Indenture will be governed by and construed
in accordance with the laws of the State of New York.
ENFORCEABILITY OF JUDGMENTS
Since most of our assets, as well as the assets of a number of our
directors and officers, are outside the United States, any judgment obtained in
the United States against us or certain of our
24
directors or officers, including judgments with respect to the payment of
principal on any debt securities, may not be collectible within the United
States.
We have been informed by Macleod Dixon LLP, our Canadian counsel, that
the laws of the Province of Alberta and the federal laws of Canada applicable
therein permit an action to be brought in a court of competent jurisdiction in
the Province of Alberta on any final and conclusive judgment IN PERSONAM of any
federal or state court located in the State of New York (a "New York Court")
against us, which judgment is subsisting and unsatisfied for a sum certain with
respect to the enforcement of the Indenture and the debt securities that is not
impeachable as void or voidable under the internal laws of the State of New York
if: (i) the New York Court rendering such judgment had jurisdiction over the
judgment debtor, as recognized by the courts of the Province of Alberta (and
submission by us in the Indenture to the jurisdiction of the New York Court will
be sufficient for that purpose); (ii) such judgment was not obtained by fraud or
in a manner contrary to natural justice and the enforcement thereof would not be
inconsistent with public policy, as such terms are understood under the laws of
the Province of Alberta or contrary to any order made by the Attorney General of
Canada under the FOREIGN EXTRATERRITORIAL MEASURES ACT (Canada) or by the
Competition Tribunal under the COMPETITION ACT (Canada); (iii) the enforcement
of such judgment would not be contrary to the laws of general application
limiting the enforcement of creditors' rights including bankruptcy,
reorganization, winding up, moratorium and similar laws and does not constitute,
directly or indirectly, the enforcement of foreign revenue, expropriatory or
penal laws in the Province of Alberta; (iv) no new admissible evidence relevant
to the action is discovered prior to the rendering of judgment by the court in
the Province of Alberta; (v) interest payable on the debt securities is not
characterized by a court in the Province of Alberta as interest payable at a
criminal rate within the meaning of Section 347 of the CRIMINAL CODE (Canada);
and (vi) the action to enforce such judgment is commenced within the appropriate
limitation period, except that any court in the Province of Alberta may only
give judgment in Canadian dollars.
In the opinion of such counsel, there are no reasons under present laws
of the Province of Alberta for avoiding recognition of such judgments of New
York Courts under the Indenture or on the debt securities based upon public
policy. We have been advised by such counsel that there is doubt as to the
enforceability in Canada by a court in original actions, or in actions to
enforce judgments of United States courts, of civil liabilities predicated
solely upon the United States federal securities laws.
25
RISK FACTORS
You should consider carefully the risk factors set forth below as well
as the other information contained in and incorporated by reference in this
prospectus and in the applicable prospectus supplement before purchasing the
debt securities. Additional risk factors are discussed in our Annual Information
Form dated February 22, 2002, in the Annual Information Form of AEC dated
February 20, 2002 included in Appendix G to the Joint Circular and in Appendix I
to the Joint Circular which risk factors are incorporated herein by reference.
If any event arising from these risks occurs, our business, prospectus,
financial condition, results of operation or cash flows could be materially
adversely affected.
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL AND GAS PRICES COULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
Our financial condition is substantially dependent on the prevailing
prices of crude oil and natural gas. Fluctuations in crude oil or natural gas
prices could have an adverse effect on our operations and financial condition
and the value and amount of our reserves. Prices for crude oil and natural gas
fluctuate in response to changes in the supply of and demand for, crude oil and
natural gas, market uncertainty and a variety of additional factors beyond our
control. Oil prices are determined by international supply and demand. Factors
which affect crude oil prices include the actions of the Organization of
Petroleum Exporting Countries, world economic conditions, government regulation,
political stability in the Middle East and elsewhere, the foreign supply of oil,
the price of foreign imports, the availability of alternate fuel sources and
weather conditions. Natural gas prices realized by us are affected primarily by
North American supply and demand, weather conditions and by prices of alternate
sources of energy. Any substantial or extended decline in the prices of crude
oil and natural gas could result in a delay or cancellation of existing or
future drilling, development or construction programs or curtailment in
production at some properties or result in unutilized long-term transportation
commitments, all of which could have an adverse effect on our revenues,
profitability and cash flows.
We conduct an annual assessment of the carrying value of our assets in
accordance with Canadian GAAP. If oil and natural gas prices decline, the
carrying value of our assets could be subject to financial downward revisions,
and our earnings could be adversely affected.
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
Our future oil and natural gas reserves and production, and therefore
our cash flows, are highly dependent upon our success in exploiting our current
reserve base and acquiring or discovering additional reserves. Without reserve
additions through exploration, acquisition or development activities, our
reserves and production will decline over time as reserves are depleted. The
business of exploring for, developing or acquiring reserves is capital
intensive. To the extent cash flows from operations are insufficient and
external sources of capital become limited, our ability to make the necessary
capital investments to maintain and expand our oil and natural gas reserves will
be impaired. In addition, there can be no guarantee that we will be able to find
and develop or acquire additional reserves to replace production at acceptable
costs.
OUR OIL AND GAS RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN.
There are numerous uncertainties inherent in estimating quantities of
oil and natural gas reserves, including many factors beyond our control. The
reserve data incorporated herein represents estimates only. A significant
portion of our reserve data has been prepared internally by us. In general,
estimates of economically recoverable oil and natural gas reserves and the
future net cash flows therefrom are based upon a number of variable factors and
assumptions, such as product prices, future operating and
26
capital costs, historical production from the properties and the assumed effects
of regulation by governmental agencies, all of which may vary considerably from
actual results. All such estimates are to some degree uncertain, and
classifications of reserves are only attempts to define the degree of
uncertainty involved. For those reasons, estimates of the economically
recoverable oil and natural gas reserves attributable to any particular group of
properties, classification of such reserves based on risk of recovery and
estimates of future net revenues expected therefrom, prepared by different
engineers or by the same engineers at different times, may vary substantially.
Our actual production, revenues, taxes and development and operating
expenditures with respect to our reserves may vary from such estimates, and such
variances could be material.
Estimates with respect to reserves that may be developed and produced
in the future are often based upon volumetric calculations and upon analogy to
similar types of reserves, rather than upon actual production history. Estimates
based on these methods generally are less reliable than those based on actual
production history. Subsequent evaluation of the same reserves based upon
production history will result in variations, which may be material, in the
estimated reserves.
THERE ARE DIFFERENCES IN UNITED STATES AND CANADIAN PRACTICES FOR REPORTING
RESERVES AND PRODUCTION.
We report production and reserve quantities in accordance with Canadian
practices. These practices are different from the practices used to report
production and estimate reserves in reports and other materials filed with the
SEC by U.S. companies. The primary differences are summarized below:
o We follow the Canadian practice of reporting gross production
and reserve volumes, which are prior to the deduction of
royalties and similar payments. In the United States,
production and reserve volumes are reported after deducting
these amounts.
o We include in our filings made with Canadian securities
authorities, including certain of the documents incorporated
in this prospectus, estimates of probable reserves. The SEC
generally prohibits the inclusion of estimates of probable
reserves in filings made with the SEC.
As a consequence, our production volumes and reserve estimates may not
be comparable to those made by U.S. companies subject to SEC reporting and
disclosure requirements.
WE WILL NOT OPERATE ALL OF OUR PROPERTIES AND ASSETS.
Other companies operate some of the assets in which we have interests.
As a result, we will have limited ability to exercise influence over operations
of these assets or their associated costs. Our dependence on the operator and
other working interest owners for these properties and our limited ability to
influence operations and associated costs could materially adversely affect our
financial performance. The success and timing of our activities on assets
operated by others therefore will depend upon a number of factors that are
outside of our control, including:
o timing and amount of capital expenditures;
o the operator's expertise and financial resources;
o approval of other participants;
o selection of technology; and
o risk management practices.
27
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL LEGISLATION IN ALL JURISDICTIONS IN
WHICH WE OPERATE AND ANY CHANGES IN SUCH LEGISLATION COULD NEGATIVELY AFFECT OUR
RESULTS OF OPERATIONS.
All phases of the oil and natural gas business are subject to
environmental regulation pursuant to a variety of Canadian, U.S. and other
federal, provincial, territorial, state and municipal laws and regulations
(collectively, "environmental legislation").
Environmental legislation imposes, among other things, restrictions,
liabilities and obligations in connection with the generation, handling, use,
storage, transportation, treatment and disposal of hazardous substances and
waste and in connection with spills, releases and emissions of various
substances to the environment. Environmental legislation also requires that
wells, facility sites and other properties associated with our operations be
operated, maintained, abandoned and reclaimed to the satisfaction of applicable
regulatory authorities. In addition, certain types of operations, including
exploration and development projects and changes to certain existing projects,
may require the submission and approval of environmental impact assessments or
permit applications. Compliance with environmental legislation can require
significant expenditures, including expenditures for clean up costs and damages
arising out of contaminated properties and failure to comply with environmental
legislation may result in the imposition of fines and penalties. Although it is
not expected that the costs of complying with environmental legislation will
have a material adverse effect on our financial condition or results of
operations, no assurance can be made that the costs of complying with
environmental legislation in the future will not have such an effect.
In 1994, the United Nations' Framework Convention on Climate Change
came into force and three years later led to the Kyoto Protocol which will
require, upon ratification, nations to reduce their emissions of carbon dioxide
and other greenhouse gases. Canada has not ratified the Kyoto Protocol, but
should it do so, reductions in greenhouse gases from our operations may be
required which could result in increased capital expenditures and reductions in
production of oil and gas. It is expected that other changes in environmental
legislation may also require, among other things, reductions in emissions to the
air from our operations and result in increased capital expenditures. Although
it is not expected that future changes in environmental legislation will result
in materially increased costs, such changes could occur and result in stricter
standards and enforcement, larger fines and liability, and increased capital
expenditures and operating costs, which could have a material adverse effect on
our financial condition or results of operations.
OUR OPERATIONS WILL BE SUBJECT TO BUSINESS INTERRUPTION AND CASUALTY LOSSES.
Our business will be subject to all of the operating risks normally
associated with the exploration for and production of oil and gas and the
operation of midstream facilities. These risks include blowouts, explosions,
fire, gaseous leaks, migration of harmful substances and oil spills, any of
which could cause personal injury, result in damage to, or destruction of, oil
and gas wells or formations or production facilities and other property,
equipment and the environment, as well as interrupt operations. In addition, all
of our operations will be subject to all of the risks normally incident to the
transportation, processing and storing of oil, natural gas and other related
products, drilling of oil and natural gas wells, and the operation and
development of oil and gas properties, including encountering unexpected
formations or pressures, premature declines of reservoirs, blowouts, equipment
failures and other accidents, sour gas releases, uncontrollable flows of oil,
natural gas or well fluids, adverse weather conditions, pollution and other
environmental risks.
The occurrence of a significant event against which we are not fully
insured could have a material adverse effect on our financial position.
28
OUR FOREIGN OPERATIONS WILL EXPOSE US TO RISKS FROM ABROAD WHICH COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
Some of our operations and related assets are located in countries
outside North America, some of which may be considered to be politically and
economically unstable. Exploration or development activities in such countries
may require protracted negotiations with host governments, national oil
companies and third parties and are frequently subject to economic and political
considerations, such as taxation, nationalization, expropriation, inflation,
currency fluctuations, increased regulation and approval requirements,
governmental regulation and the risk of actions by terrorist or insurgent
groups, any of which could aversely affect the economics of exploration or
development projects.
WE ARE SUBJECT TO INDEMNIFICATION OBLIGATIONS IN CONNECTION WITH PANCANADIAN'S
SPIN-OFF FROM CANADIAN PACIFIC LIMITED.
In connection with PanCanadian's spin-off from Canadian Pacific Limited
("CPL") on October 1, 2001, PanCanadian entered into an arrangement agreement
with certain other parties to the spin-off which contains a number of
representations, warranties and covenants, including (a) an agreement by each of
the parties to indemnify and hold harmless each other party on an after-tax
basis against any loss suffered or incurred resulting from a breach of a
representation, warranty or covenant; and (b) a covenant that each party will
not take any action, omit to take any action or enter into any transaction that
could adversely impact certain tax rulings received in connection with the
spin-off, including government opinions and related opinions of counsel and the
assumptions upon which they were made.
With respect to Canadian taxation, in addition to various transactions
that the respective parties were prohibited from undertaking prior to the
implementation of the CPL arrangement, after the implementation of the CPL
arrangement, no party generally is permitted to dispose of or exchange more than
10% of its assets or, among other things, undergo an acquisition of control
without severe adverse consequences where such disposition or acquisition of
control is for Canadian tax purposes part of a "series of transactions or
events" that includes the CPL arrangement, except in limited circumstances.
Should we be found to have breached our representations and warranties
or should we fail to satisfy the contractual covenants, we would be obligated to
indemnify the other parties to the arrangement agreement for losses incurred in
connection with such breach or failure. In addition, we are required to
indemnify the parties to the arrangement agreement against any loss which they
may incur resulting from a claim against us, their respective businesses or
their respective assets, whether arising prior to or after the completion of the
CPL arrangement. An indemnification claim against us pursuant to the provisions
of the arrangement agreement could have a material adverse effect upon us.
With respect to the transaction with AEC, PanCanadian and AEC received
opinions from PanCanadian's Canadian tax counsel and from AEC's Canadian tax
counsel based in part on certain tax rulings, opinions and other written advice
received from Canadian federal fiscal authorities, and an opinion from
PanCanadian's U.S. tax counsel to the effect that the transaction would not
cause the CPL arrangement to be taxed in a manner inconsistent with the tax
rulings received in connection with the CPL arrangement. The opinions are
subject to qualifications and assumptions which PanCanadian and AEC considered
to be reasonable.
CERTAIN INCOME TAX CONSEQUENCES
The applicable prospectus supplement will describe certain Canadian
federal income tax consequences to an investor who is a non-resident of Canada
of acquiring any debt securities offered thereunder, including whether the
payments of principal (premium, if any, and interest, if any) will be subject to
Canadian non-resident withholding tax. The applicable prospectus supplement will
also describe certain United States federal income tax consequences of the
acquisition, ownership and
29
disposition of any debt securities offered thereunder by an initial investor who
is a United States person (within the meaning of the United States Internal
Revenue Code), including, to the extent applicable, any such consequences
relating to debt securities payable in a currency other than the United States
dollar, issued at an original issue discount for United States federal income
tax purposes or containing early redemption provisions or other special items.
PLAN OF DISTRIBUTION
We may sell debt securities to or through underwriters or dealers and
also may sell debt securities directly to purchasers or through agents.
The distribution of debt securities of any series may be effected from
time to time in one or more transactions:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale; or
o at prices related to such prevailing market prices to be
negotiated with purchasers.
In connection with the sale of debt securities, underwriters may
receive compensation from us or from purchasers of debt securities for whom they
may act as agents in the form of concessions or commissions. Underwriters,
dealers and agents that participate in the distribution of debt securities may
be deemed to be underwriters and any commissions received by them from us and
any profit on the resale of debt securities by them may be deemed to be
underwriting commissions under the United States Securities Act of 1933, as
amended (the "Securities Act").
The prospectus supplement relating to each series of debt securities
will also set forth the terms of the offering of the debt securities, including
to the extent applicable, the initial offering price, our proceeds from the
offering, the underwriting concessions or commissions, and any other discounts
or concessions to be allowed or reallowed to dealers. Underwriters with respect
to each series sold to or through underwriters will be named in the prospectus
supplement relating to such series.
Under agreements which may be entered into by us, underwriters, dealers
and agents who participate in the distribution of debt securities may be
entitled to indemnification by us against certain liabilities, including
liabilities under the Securities Act. The underwriters, dealers and agents with
whom we enter into agreements may be customers of, engage in transactions with
or perform services for us in the ordinary course of business.
The debt securities offered hereby have not been qualified for sale
under the securities laws of any province or territory of Canada and are not
being and may not be offered or sold in Canada in contravention of the
securities laws of any province or territory of Canada. Each underwriter and
each dealer participating in the distribution of any series of debt securities
must agree that it will not offer to sell, directly or indirectly, any such debt
securities acquired by it in connection with such distribution, in Canada or to
residents of Canada in contravention of the securities laws of Canada or any
province or territory thereof.
Each series of debt securities will be a new issue of securities with
no established trading market. Unless otherwise specified in a prospectus
supplement relating to a series of debt securities, the debt securities will not
be listed on any securities exchange or on any automated dealer quotation
system. Certain broker-dealers may make a market in the debt securities, but
will not be obligated to do so and may discontinue any market making at any time
without notice. We cannot assure you that any broker-dealer will make a market
in the debt securities of any series or as to the liquidity of the trading
market, if any, for the debt securities of any series.
30
LEGAL MATTERS
Unless otherwise specified in the prospectus supplement relating to a
series of debt securities, certain legal matters relating to Canadian law will
be passed upon for us by Macleod Dixon LLP, Calgary, Alberta, Canada. Certain
legal matters in connection with the offering relating to United States law will
be passed upon for us by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New
York. In addition, certain legal matters relating to United States law will be
passed upon for any underwriters, dealers or agents by Shearman & Sterling,
Toronto, Ontario, Canada.
The partners and associates of Macleod Dixon LLP and Paul, Weiss,
Rifkind, Wharton & Garrison as a group beneficially own, directly or indirectly,
less than 1% of any class of our securities.
EXPERTS
The audited consolidated financial statements incorporated by reference
in this prospectus have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, Chartered Accountants, given on the authority of
said firm as experts in auditing and accounting. Information relating to our
reserves in the Annual Information Form of PanCanadian dated February 22, 2002
was calculated by our engineers except for our share of reserves held in
Petrovera Resources which was calculated by Ryder Scott Company as independent
petroleum consultants. Information relating to AEC's reserves in the Annual
Information Form of AEC dated February 20, 2002 included in Appendix G of the
Joint Circular was calculated by Gilbert Laustsen Jung Associates Ltd., McDaniel
& Associates Consultants Ltd., Ryder Scott Company and Netherland, Sewell &
Associates, Inc. as independent petroleum consultants.
The principals of each of Gilbert Laustsen Jung Associates Ltd.,
McDaniel & Associates Consultants Ltd., Ryder Scott Company and Netherland,
Sewell & Associates, Inc., in each case, as a group own beneficially, directly
or indirectly, less than 1% of any class of our securities.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the
registration statement of which this prospectus is a part insofar as required by
the SEC's Form F-9:
o the documents listed in the third paragraph under "Where You
Can Find More Information" in this prospectus;
o the consents of our accountants and AEC's accountants,
PricewaterhouseCoopers LLP;
o the consent of our counsel, Macleod Dixon LLP;
o the consent of our counsel, Paul, Weiss, Rifkind, Wharton &
Garrison;
o the consent of Felesky Flynn LLP;
o the consent of Sidley Austin Brown & Wood;
o the consent of McCarthy Tetrault LLP;
o the consents of our independent petroleum consultants, Gilbert
Laustsen Jung Associates Ltd., McDaniel & Associates
Consultants Ltd., Ryder Scott Company and Netherland, Sewell &
Associates, Inc.;
o powers of attorney from directors and officers of EnCana;
o the form of trust indenture relating to the debt securities;
o statement of eligibility of the trustee on Form T-1; and
o interest coverage ratios.
31
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US$500,000,000
ENCANA CORPORATION
4.75% NOTES DUE 2013
[GRAPHIC OMITTED]
[LOGO - ENCANA]
___________
PROSPECTUS SUPPLEMENT
SEPTEMBER 29, 2003
___________
CITIGROUP
UBS INVESTMENT BANK
___________
ABN AMRO INCORPORATED
BNP PARIBAS
DEUTSCHE BANK SECURITIES
HSBC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
___________
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY
RBC CAPITAL MARKETS