EnCana splits into two publicly traded energy companies

Date Closed: 11/30/2009

Value: C$35 billion

On November 30, 2009, EnCana completed its split into two highly focused energy companies: Cenovus Energy Inc., an integrated oil company and EnCana Corporation, a pure play natural gas company. The split transaction was accomplished through a shareholder approved, court sanctioned plan of arrangement.

As a result of the Arrangement, shareholders of EnCana received one new EnCana common share (which continued to be represented by existing EnCana common share certificates) and one common share of Cenovus for each EnCana common share held.

In connection with the transaction, EnCana shares (ex-distribution) and Cenovus shares were traded on a “when issued” basis from November 2, 2009 through December 2, 2009, on the Toronto Stock Exchange, and through December 8, 2009 on the New York Stock Exchange. Cenovus and post-split EnCana shares began regular trading on the Toronto Stock Exchange on December 3, 2009 and on the New York Stock Exchange on December 9, 2009 under the symbols CVE and ECA, respectively.

Prior to the completion of the split, on September 18, 2009, Cenovus Energy Inc. completed, in three tranches, a US$3.5 billion private offering of debt securities (comprised of US$800,000,000 aggregate principal amount of 4.50 per cent senior notes due September 15, 2014, US$1,300,000,000 aggregate principal amount of 5.70 per cent senior notes due October 15, 2019 and US$1,400,000,000 aggregate principal amount of 6.75 per cent senior notes due November 15, 2039) which are exempt from the registration requirements of the United States Securities Act of 1933, as amended, under Rule 144A and Regulation S.

The net proceeds of the offering were placed into an escrow account pending the completion of the Arrangement. Upon completion of the Arrangement, the net proceeds, together with other pre-funded amounts, were released from escrow and were applied to repay all of the amount outstanding under a demand intercompany note issued by Cenovus in favour of EnCana pursuant to the Arrangement in the amount of approximately US$3.5 billion.

Cenovus also obtained from a syndicate of lenders a $2.0 billion 3-year revolving credit facility and a $500 million 364-day revolving credit facility, the terms of such facilities commencing on the effective date of the Arrangement.

The transaction comprised a number of elements that spanned the period from the initial announcement in May 2008 to the closing in November 2009, including strategy and alternatives development, corporate governance, regulatory compliance, tax planning, asset reorganization and separation, the plan of arrangement, court and shareholder approval processes, securities regulatory compliance, stock exchange listings, the intercompany commercial arrangements process, the financial and non-financial disclosure process and the financings.

Tom Pepevnak of BLG assisted Cenovus in establishing hedging documentation with its principal counterparties, as well as documenting the transfer of a percentage of the economic value of EnCana's outstanding hedging portfolio to Cenovus.