TEXT-S&P release on EnCana

(The following statement was released by the rating agency)

May 12 - Standard & Poor's Rating Services today said it placed its 'A-' corporate credit and senior unsecured debt ratings on EnCana Corp. (ECA.N) (ECA.TO) on CreditWatch with negative implications, following the company's announcement that it intends to restructure itself into two separate companies. The CreditWatch placement reflects our assessment that the new long-term corporate credit ratings on the two separate companies--a gas company (GasCo) and integrated oil company (IntegratedOilCo)--would either be the same or lower than the 'A-' ratings on EnCana.

"Based on our review of the asset portfolio composition of both companies, our evaluation of the growth profile associated with these assets and the expected capitalization and financial policies, the downside risk to the prospective ratings is limited to one notch," said Standard & Poor's credit analyst Michelle Dathorne.

"As a result, and barring any material changes, we expect that the ratings on the new companies would fall between 'BBB+' and 'A-'," Ms. Dathorne added. GasCo's business risk profile should remain relatively unchanged, based on the size and quality of the proven reserves base, its competitive cost profile, and its good profitability.

Partially offsetting these strengths are the diminished reserves and production diversity with the spinoff of the high quality and high growth in-situ oil sands and downstream assets. Given the volatile nature of natural gas prices, and the likelihood of prices moving dramatically between the shoulder and trough periods in any given year, the removal of the counterbalancing crude oil assets from the product mix weakens GasCo's overall business risk profile marginally.

IntegratedOilCo's business risk profile should benefit from the quality and balanced product mix of its reserves; a very good cost profile associated with its operating in-situ oil sands properties, Foster Creek and Christina Lake; and the strong profitability associated with these assets, which is further enhanced through its downstream integration with the Wood River and Borger refineries.

In addition, the track record established with the steam-assisted gravity drainage development costs, steam-oil ratio, and operating costs to date provides a high degree of confidence regarding IntegratedOilCo's forecast capital spending and operating costs. Also, the counterbalancing downstream component ensures profit margin stability, given the negative correlation between heavy oil price differentials and crack spreads. Although we initially assess IntegratedOilCo to have a slightly weaker business risk profile than that of GasCo, its credit profile has greater potential upside, based on its strong internal growth profile and competitive cost position.

We will resolve this CreditWatch placement once the company has completed the restructuring.