Good day, ladies and gentlemen, and thank you for standing by. Welcome to Encana Corporation's Second Quarter Results Conference Call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Members of the investment community will have the opportunity to ask questions and can joint the Q&A at any time. For members of media attending in a listen-only mode today, you may quote statements made from any of the Encana representatives. However, members of the media who wish to quote others who are speaking on this call today, we advise you to contact those individuals directly to obtain their consent. Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Encana Corporation. I would now like to turn the conference call over to Corey Code, Vice President of Investor Relations. Please go ahead, Mr. Code.

Thank you, operator, and welcome, everyone, to our second quarter 2018 results conference call. This call is being webcast, and the slides are available on our website at encana.com. Before we get started, please take note of the advisory regarding forward-looking statements in the news release and at the end of our webcast slides. Further advisory information is contained in our Annual Reports and other disclosure documents filed on SEDAR and EDGAR. Also I wish to highlight that Encana prepares its financial statements in accordance with U.S. GAAP, and reports its financial results in U.S. dollars. So references to dollars means U.S. dollars and the reserves, resources and production information are after royalties, unless otherwise noted. This morning, Doug Suttles, Encana's President and CEO, will open the call. Sherri Brillon, our CFO, will highlight our financial performance. Reneé Zemljak, our EVP of Midstream, Marketing & Fundamentals, will highlight the benefits of our marketing strategy. And Mike McAllister, our COO, will then describe our operational results. We will then open the call up for Q&A. I'll now turn the call over to Doug Suttles.

Thanks Corey, and thanks everyone for joining us this morning. Our second quarter results demonstrate why Encana is quickly differentiating it as an operator that excels in execution at scale. We put forth an ambitious objective at the start of the year to achieve 30% annual production growth while spending within cash flow. Our strong performance this year has put us in a position to meet that ambitious growth target. And we now expect to generate free cash flow this year. Our cash flow continues to grow through a combination of increased liquids mix, our relentless focus on efficiency, our end approach to maximizing realized prices. This means that we are translating higher commodity prices into higher margin. As a result, we now expect our 2018 cash flow margin will average about $16 per barrel or equivalent, up from our previous target of $14. Activity across our core assets were at peak levels during the quarter, setting us up to deliver 400,000 to 425,000 barrels oil equivalent per day in the fourth quarter. In the Montney, delivered liquids growth of 18% over the first quarter despite a plant turnaround at one of our facilities and we remain on track to achieve an average liquids rate of 55,000 to 65,000 barrels per day in the fourth quarter. We continue to see strong well results from our keep development approach in the Permian where we are currently producing at record levels of more than 90,000 BOE/d. Our Eagle Ford asset which achieves the highest price realizations in our portfolio, return to growth in the second quarter, and is supposed to continue growing for the rest of the year. Finally, in the Duvernay, we are seeing initial well results from our 2018 program where we have recently ramped up completions activity. Once again…

Thanks Doug. We are extremely pleased with our performance this quarter. We came into the year with the expectation that we would balance our capital program with cash flow. We now expect to generate free cash flow 2018 at strip prices. As Doug mentioned in his opening remarks, we increased our full-year expected cash flow margin to approximately per $16 per BOE. This is up from $14 per BOE. Our margin expansion is driven by our continued focus on growing higher value oil and condensate production. In the second quarter, liquids made up 46% of our total production. Our risk management program also supports our managed --our margin expansion. We saw another quarter of strong realized prices owing to our market diversification strategy and our basis hedge program. A discipline focused on managing costs, ensured the higher liquids prices we receive went directly to our margin. Second quarter cash flow margin was also positively impacted by tax and related interest recovery of $75 million. This contributed a $2.44 per BOE uplift to our second quarter cash flow margin of $19.09 per BOE. Overall, we have demonstrated a track record of holding the line on cost to ensure price increases expand our margin. Our second quarter cash flow of $586 million or $0.61 per share demonstrates the impact of our liquids driven margin expansion our net earnings fluctuated to a loss this quarter primarily due to an unrealized mark-to-market loss on risk management of $326 million versus a gain in the first quarter of $68 million before tax. Partially offsetting this impact is a smaller unrealized FX loss in Q1. These non-cash items tend to fluctuate quarter-to-quarter, but our upward trend to operating earnings and cash flow demonstrates our strong results/ our capital program remains on track with guidance. Our 2018…

Thanks Rene. Across the portfolio our plan is on track to grow 2018 production by 30% over last year, while now generating free cash flow. Continue to see the benefit of our cube development approach. Our latest cubes in the Permian are delivering strong production performance. In the second quarter, we achieved another significant milestone in the build-out of the Montney facilities. The tower in north centralized liquids hub came on stream ahead of schedule. This further de-risks our second half Montney liquids production ramp and has us firmly on track to achieve to 55,000 to 65,000 barrels per day in Q4. As industry activity picks up in the busier basins like the Permian and Eagle Ford continue to see benefit of our integrated supply chain strategy. Our proactive strategy means that we are not trying to secure new services in a competitive market. In the Permian, our transition to local sand has progressed well. We are currently using more than 90% local sand. In the Eagle Ford, we tested the Graben area and continued to develop the Austin Chalk. Early results are promising and are helping to de-risk future increases of our premium inventory. In the Duvernay, we had a successful quarter of drilling activity with new pacesetter performance on extended reach laterals. To achieve the objective of delivering 30% growth, we laid out our 2018 program with our drilling and completion activity weighted to the first half of the year. Having more than half of our activity completed gives us further confidence in being able to deliver Q4 targets. We expect our drilling activity in all four of our place to be lower in the second half of the year. In the Permian, we are currently running four rigs down from five in Q1. In Montney, we currently…

Thanks Mike. With the strong results we've achieved in the first half of the year, we remain firmly on track to meet our guidance for 2018. We are very confident in our ability to deliver the growth in liquids volumes we have targeted for the second half of this year. Our margins continue to expand, productivity continues to grow and we now expect to generate free cash flow this year, while delivering 30% annualized production growth. Our track record of efficient execution at scale has established Encana as a leading operator in each of our core plays. Our focus on technical and commercial innovation underpins our ability to drive strong returns at both the well level and for the corporation. Our first mover approach to market access and price risk diversification is paying off across the portfolio by increasing our margins and de-risking our five-year plan. Our focus on market intelligence really has become a competitive advantage. As we look out to 2019, we remain acutely focused on finding ways to make our five-year plan even better. We are focused on growing value. Our disciplined capital allocation is tightly aligned with an informed perspective on market fundamentals which is critical to our ability to further expand our margins. A key benefit of having a multi basin portfolio is the optionality it creates for capital allocation. We see this within our plays as Mike outlined in the Montney as well as across the portfolio with the Eagle Ford and its strong margins from LLS pricing. We expect to generate significant cash flow for share growth driven by strong liquids growth and a continued focus on driving efficiency across the business. We are excited that the results we've delivered so far this year have us on track for a strong finish to 2018 and a great launching point for 2019. Thanks for joining us this morning. And would now be happy to take your questions.

[Operator Instructions] We will now begin the question-and-answer session and go to the first caller. Brian Singer with Goldman Sachs. Your line is open.

Hi, good morning. This is Carolyn Schnabel on for Brian Singer. Just a couple questions. So first you've highlighted not just today but previously that your expectations for second half of the year CapEx to be down versus the first half. And now that we're here you're ready reiterating it and can you just talk a little bit more specifically about what drivers are beyond the drop in rig that you mentioned --rigs that you mentioned earlier, whether its facilities, inflation, expectations et cetera.

Yes, hi, Carolyn, you caught me off guard there when they announced you as Brian but yes know thanks for your question on capital. I think we've outlined all through the year that our plan through the year had a spending more capital in the first half than the second half. It was aligned with the growth pattern we had across the business. Mike talked some about this. Our 2Q capital was slightly higher than what we had planned because we actually drove longer laterals than we originally planned. It had faster cycle times. But as we look to the rest of the year, I think we plan to execute the rest of the program and then really any discussion about capital really now focuses on 2019, and we're looking at that quite hard right now.

Hey, Doug. It is Brian actually we're tag-teaming here. So I appreciate the time. For our follow-up, you mentioned that at today's strip and kind of are going to generate free cash flow during 2018. If we look at the share buyback that you have seems to be characterized is more driven by some of the asset sales that you've done so as Encana transitions to free cash flow, how do you think about the allocation there as is increasing the buybacks? I mean that would be under consideration.

Yes, Brian. This tag-teaming thing change in voice is going to get tough on me here, but we talked about this a number of times. We have what we call the three buckets, which we think about is resiliency which of course is trying to make the company stronger in a down market. So those are things like commitments and debt. We've talked about direct return to shareholders which are buybacks and dividends and then we've talked about reinvesting in the business. And we continue to talk about those things with the board and when we look at them I think the one we have said is some of the resiliency measures given where our balance sheet is today don't look particularly attractive. Obviously, we're halfway through the buyback we announced, and I think as we try to emphasize on the call we are managing cost and driving efficiency very effectively. So returning margin I mean price into margin and returns and that as we've said all along is critical for us to demonstrate that before we consider adding additional capital to the business, and growing even faster. I will tell you that Reneé mentioned this; we have our regional price protection in the Permian between transport and basis hedges aligned with our five-year plan. But what advantage we do have is obviously we have other assets in the portfolio to invest in to like the Eagle Ford. And we're looking at all that. So it's a little early to say exactly what we'll do, but if we can continue to demonstrate that we can manage cost and drive efficiency that'll be an important driver.

Your next question comes from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Thanks, good morning. Maybe just to dig in a little bit more into Pipestone and I'm wondering maybe if you could give us just a little bit more framework in terms of what the drilling program is looking like this year. Because I think it is it's a pretty big CapEx number, right, almost $200 million that you're spending there.

Yes, hi, Greg. I'll let Mike pick this up. I mean one of the things to know and Mike kind of highlight it both the cup Anchorage and at Pipestone that we're --we actually drill in and fill the facilities up over time. We don't try to have the well stock ready. That startup we don't think that's the best way to manage capital efficiency. Obviously, we brought the tower facility on well ahead of schedule and it was also under budget. The Pipestone facilities still tracking to early Q4; costs are looking good there but maybe Mike talked about the remainder of the year on drilling in Pipestone.

Yes. You bet Doug. So I mean currently have a couple of rigs running right now in Pipestone, and we'll kind of run at that level through to the end of the year, but we'll see kind of as Doug mentioned with the liquid hubs coming on early Q4 will be ramping our production into that capacity not have it sitting there waiting for the plant to start up.

And that's perfect and then the second is just comes back to the hedging. So Reneé did a great job in terms of running down how you approach things. I mean the hedging loss was kind of a fraction of what we were looking for. Could you could you enlighten me a little bit on why the numbers were so much better?

Well, I think Greg we obviously talked about we guide and provide information annually. So it is a little hard to see it across the quarters. And part of that is that in some of these markets were a big enough player that if we talked publicly about what we are doing we could we could potentially move those markets. So we have to be quite cautious in our disclosure there. But I would say it's a big focus. I mean I think we're a little unique in that we consider managing fundamentals, and markets one of the core four elements to deliver the most value in the business. And I think you just see that coming through In particular being out in front of market diversification. The benefit of being able to take Canadian gas to points like Dawn have been very important in our transport to Houston, where we can then decide where we want to sell that crude. We've sold some of it off Brent pricing some of it off the Gulf Coast pricing. And next year we'll have access to Corpus Christi as well pricing. I don't you have anything to add when Reneé. Reneé Zemljak: I think I'm --for the most part you covered it.

Your next question comes from the line of Gab Daoud with JPMorgan. Your line is open.

Hey, good morning, Doug and team. Maybe just a high-level capital allocation question and you did hit on this Doug in the prepared remarks a little bit, but could you maybe just talk about the likelihood of incremental recognitions above the base plant for next year? Potentially going to the Eagle Ford versus the Permian and how you kind of shape the Permian program next year ahead of your FTE ramp? Could you maybe just talk a little bit about that?

Yes, Gab, yes, it's a great question. We're working that very hard right now. Clearly, we have --we have additional transport volumes in 2019 both to Houston and effectively to Corpus and but that's really tied back to our original five-year plan. So one of the things we're looking at is we wouldn't want to add additional activity in the Permian that just grows barrels into big diff when we have other options like we have with Eagle Ford. I mean if you look at today's pricing, you're actually --you would actually be getting at least $20 a barrel more of an Eagle Ford barrel versus a Permian barrel. So Mike and his team are working quite hard to see what we can do efficiently beyond current activity levels. And that's part of thinking about 2019 capital, but we don't want to grow barrels in the Permian that are unprotected at the current diff market, but we have other options in the portfolio.

Great, that's helpful, thanks Doug. And then I'll try one more time on 2019 and your free cash flow, free cash flow profile, obviously, the $500 million estimate you guys have out there on a deck that's a bit stale. Could you maybe just give us a sense of what free cash flow could look like on 2019 on current pricing? Obviously, we could -- all kind of do the math ourselves but just curious to hear your thoughts and then also incremental use of the free cash above the $500 million? Would it --again sound unnecessarily but would it go towards more buybacks? You have some notes that are due next years or are it for some debt reduction, just anything there would be helpful.

Yes. Yes it's a little early to provide too much detail on 2019. Obviously, we're kicking off our budgeting process, but there'll be more and actually potentially a lot more cash flow next year. If you use kind of current strip pricing than we had in the original five-year plan. But and Sherri hit this pretty hard in her remarks. We're really focused on making sure that we convert price to margin and not let it go to cost. We're really pleased that year-over-year our costs are not up, they're down. We continue to drive our well performance and well costs in the right direction there as well, but this is critical to us. We don't just want to add activity to grow volume. We want to add -- if we add activity it has to grow cash flow. So we have to demonstrate that we're working that very hard right now. And it's one of the things under consideration. I tried to cover earlier the buckets-- the things like buying down long -term debt doesn't look attractive today given where our balance sheet is. So it's highly unlikely that competes well, but we are shareholder returns versus reinvesting in the business compete it's a bit early to make that call.

Your next question comes from the line of Jeffrey Campbell with Tuohy Brothers. Your line is open.

Good morning and congratulations on the continued success. We've sort of been gravitating towards Eagle Ford here, so I just thought I'd ask for a little update here. Page 9 slide 17 talks about stack pay and fill spacing and the Austin Chalk as sources for premium location outside. You've already mentioned the Austin Chalk today. Could you provide a quick update if stack pay and then fill drilling and fill spacing is being tested currently and maybe a little color if it is --

Yes. My prior some comments here we first started the Austin Chalk and it can -- our approach, it's geologically more complex than the main Eagle Ford zone. So we've stepped into this carefully to make sure we can --would have strong results across that and across those investments. And so you've seen us slowly picking up the pace. On spacing, we started out at a 1,000 well spacing in the Chalk. We're now testing down at 500 feet, literally to make the call on that but that's what we're looking at today. The other thing that's exciting in the Eagle Ford is an area we call the Graben which we currently don't carry premium inventory in but we've now got several wells in there with our new high-intensity completions, which are performing quite good. Mike maybe you'd some more color.

Yes, you bet you Doug. So with respect to the stacking question, we looked at sort of the two stacks in the Eagle Ford and then one in the Austin Chalk. And we've got some really encouraging results in the Graben here of late, which gives us some confidence you can actually add to our premium inventory not something in the Eagle Ford zone. So, yes, everything's looking really quite positive on the Eagle Ford with respect our well right now.

I want to make sure that I understood correctly. We said there -- have you been doing this Eagle Ford, Austin Chalk stacking in the Graben or have the encouraging Austin Chalk results in the Graben stand one well.

No. We actually --we do that -- we will have a call it a three stack; two Eagle Ford and one Austin Chalk but that's in Panna Maria area which would be to the southeast of the Graben. And the Graben was strictly just drilling, Eagle Ford, it's a one -- so basically one stack.

Okay, per well. The other question I wanted to ask was I bet these Permian cube results. I was just wondering if you can quantify or qualify what's leading the out performance that you've cited and kind of what I'm thinking is the obvious cube benefit is that the simultaneous completions avoid the parent child degradation and you guys have talked about that a lot. But it seems like the kids are exceeding the production enhancement that avoiding degradation would imply. So I'm just wondering is there something special going on incompletion or just the cube lend itself to some out performance and completions or is it could just be that the rock is better than you first estimated.

Yes. Jeff, I think that you've picked up on a really important point here that what we're showing is that if you do this take this cube approach you get rid of the Parent Child effect, you really mitigate that problem. So what we're showing is with cubes we're delivering some of those strongest wells in the Permian. But the recent jump is actually these high-intensity completions we've been pumping now for about nine months or so. So what we're showing and we actually think that those not only deliver a stronger early well performance will improve recovery because we're keeping the frac energy close to the well bore. So what we're now seeing is high-intensity completions combined with the cube are giving really strong results.

Yes. Just a little more color on that. We've tightened our cluster spacing from what we were doing sort of this time last year, basically putting in say anywhere between 15 to 20clusters per stage, as well as increasing our sand concentrations up to about 2,000 pounds per foot. So that's really helped drive the well performance that we're reporting this quarter. Along with that we're using longer laterals wherever we can as well.

And just a quick follow-up with regard to the sand is that the fact that you're now sourcing so much your sand locally, say given your price advantage that's allowing you to stuff a little bit more sand in these wells or would that be just fine anyway?

Yes. Jeff, it is cutting our cost. We've talked a lot about this. It really takes out the real piece of the sand cost which as you knows the majority of the cost of sand is transport not the sand itself. But that really the economics would work even without basin sand. They're strong enough. It just -- it's one of the levers we're pulling to counteract inflation to keep cost in line despite the fact that the world's busier and we've got some inflation even though it's moderated quite a bit more recently.

Your next question comes from the line of Jeoffrey Lambujon with Tudor, Pickering, Holt & Company. Your line is open.

Good morning, thanks for taking my questions. My first one is just on planning and maybe a near-term outlook for some higher level items you're working on. You guys just stayed ahead of some of the biggest headline risks kind of across the board in both the Permian and Montney especially related service costs. Marketing for example, I know there's been a big focus on the water hubs in the Permian recently. What are some of the things you're working on now that you see is out your headwind that you're trying to get in front of today?

Yes. Well, a lot of it - what's interesting is you've got always try to drive the car through the windshield and not the rear-view mirror. And so instead of looking at what's happening right now recently what we are anticipating to happen next. And clearly with the differentials in the Permian that's going to affect activity levels in the Permian we believe. And we're thinking about how we manage the supply chain through that period. Reneé spent a lot of time talking about how we try to integrate our view of markets and this isn't necessarily the macro, but the in basin markets. And then how we actually maximize our value across the portfolio. So that's a big feature today of what we're trying to anticipate. Clearly, we're thinking pretty hard about what are the next things we can do to lower cost to offset other pressures which might try to increase cost. And Mike talked about in the Permian third party show us is by far the fastest driller in the basin at 12.5 days per well. We've got wells we've drilled at sub 9 and we're trying to figure out how we get all of our wells to sub 9 instead of at 12.5. So we're pushing in all these areas and I think one of the things we're trying very hard to do in the company is not let the mindset go to oil prices are higher, but to say we have to create value through converting price to margin. And we have to do that through innovation both technically and commercially. I'd also point to our recent deal with Care as another example of that where we're creating flexibility and optionality in the business, which we're now seeing why that's valuable. And I know we've been committed to that even when it wasn't necessarily as popular and I think we're demonstrating now why it adds value.

Great, thanks. And my follow up on the design of Permian cubes, just seeing if you can give any more detail on what to expect for cube patterns in the back half of the year as it relates to targeting different horizons describe. I am just trying to get sense for other tests to watch for with maybe some context around the base design if you will.

Yes. Mike talked a little bit about this to where we're still tuning if you will the spacing and stacking. A lot of it now is how we optimize giving these new completion designs, but then when if you look at Martin County we're now -- we're proving that the Jo Mill is a commercial zone. We not think about how we incorporate the Jo Mill into those cubes. And then actually where do we --what do we do about coming back to areas where we didn't develop the Jo Mill and the early cubes. And I will say if you go back a few years ago the Jo Mill isn't -- wasn't even a flashing our eye at that point. This is just showing what being in the core of the best place really matters because they get better and these results are even actually going beyond what we expected. So it's really about fine-tuning spacing and stacking. It's also now about how do we incorporate new zones as we prove that they're commercial.

Your next question comes from the line of Jason Fu with Credit Suisse. Your line is open.

Hi, Doug. I guess I'm hearing that the margin conditions exist in the Eagle Ford for additional capital. I guess you've touched on it but I guess I'm wondering to what extent your inventory is expanding sufficiently to warrant additional capital there? Thanks.

Yes, Jason. It's kind of --in many ways you heard a pretty cool story. When we entered we said we would grow it to about 50,000 barrels a day which we did. We also said when we entered the basin over four years ago now that we had about 400 wells to drill, four years later we still say we have 400 wells to drill. And that's everything from down spacing to the upper Eagle Ford to the Austin Chalk. And now the Graben. So we can't -- this isn't -- this asset clearly is not near the scale of either the Permian or the Montney. But we could do more in that asset but we have to make sure we do it wisely and efficiently. It's not going to become 100,000 barrels a day asset, but it could grow beyond what we've had in the past. And Mike and his team are working quite hard to make sure we can do that efficiently. We have two rigs there today. We've run as many as four at some times in the past. And we're looking close at that for 2019.

At this time, we have completed the question-and-answer session, and will turn the call back to Mr. Code.

Thanks operator. This now concludes our Q2 call.