Paul, Weiss, Rifkind, Wharton & Garrison LLP
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New York, New York 10019-6064
Writer's Direct Dial:
(212) 373-3078
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afoley@paulweiss.com
October 14, 2005
VIA EDGAR
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-7010
ATTENTION: Jill S. Davis, Branch Chief
Re: Response Submitted in the Matter of EnCana Corporation's
2004 40-F for Fiscal Year Ended December 31, 2004
(File No. 1-15226)
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Ladies and Gentlemen:
On behalf of our client, EnCana Corporation ("EnCana") and in
response to a comment letter dated October 6, 2005 (the "COMMENT LETTER") from
the staff (the "STAFF") of the Division of Corporation Finance of the U.S.
Securities and Exchange Commission (the "COMMISSION"), EnCana has asked us to
submit to you its responses to the Comment Letter (the "RESPONSES") relating to
its annual report on Form 40-F for the fiscal year ended December 31, 2004.
Attached as ANNEX A hereto, please find the Responses.
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IRS CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY
THE IRS, WE INFORM YOU THAT ANY U.S. FEDERAL TAX ADVICE CONTAINED IN THIS
DOCUMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE
PURPOSE OF (I) AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE OR (II)
PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER
THAT IS CONTAINED IN THIS DOCUMENT.
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U.S. Securities and Exchange Commission Page 2
The contact information of the responsible representative at EnCana
is Mr. John D. Watson, Executive Vice-President & Chief Financial Officer,
1800-855 2nd Street, S.W., P.O. Box 2850, Calgary, Alberta, Canada T2P 2S5.
In addition, please note that the submission of the Responses is
without prejudice to, and with full reservation of, all privileges, rights and
protections that may apply, including the attorney-client privilege and work
product doctrine.
If the Staff wishes to discuss this letter or the attached
documents, please contact Mr. Watson or me at (212) 373-3078.
Very truly yours,
/s/ Andrew J. Foley
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Andrew J. Foley
cc: John D. Watson
Gary Molnar
EnCana Corporation
ANNEX A
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See Attached.
COMPANY RESPONSES
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The headings and numbered responses set out below correspond to
the headings and numbered comments in the Comment Letter. The Company's
responses to the Staff's comments are as follows:
GENERAL
Form 40-F for the Fiscal Year Ended December 31, 2004
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Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
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Oil and Gas Reserves, Page 24
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1. We have reviewed your response to prior comment number one and are
unable to agree with your conclusion. As previously noted, the
subtotal Undiscounted pre-tax cash flows is not contemplated by
SFAS 69, as noted in Illustration 5 of the statement. Accordingly,
we reissue our prior comment in its entirety.
Response to Comment 1
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EnCana believes that SFAS 69 does not preclude the subtotal
"Undiscounted pre-tax cash flows" and the disclosure of such a
subtotal is beneficial to investors. However, to be responsive to
staff's comment, EnCana proposes to remove such subtotal from all
applicable future filings.
Note 1. Summary of Significant Accounting Policies, page 6
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A) Principles of Consolidation, page 6
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2. We have reviewed your response to prior comment number three. We
note your interpretation that Canadian GAAP, unlike EITF 00-01 for
US GAAP, has a broad definition of joint venture activity and as a
result there are certain types of entities and arrangements that
are permitted to be proportionately consolidated under Canadian
GAAP that would not be under US GAAP. We also note your conclusion
that Item 17(c)(2)(vii) is not applicable to you, based on your
determination that there is no US GAAP reconciling item. Please
clarify, if true, that the entities that you proportionately
consolidate under Canadian GAAP have the characteristics both in
terms of the industry and scope of operations and the legal form
and elements of shared control contemplated by EITF 00-1.
Additionally, as previously requested, please expand your
accounting policy to identify the legal form of each entity and the
nature of the activities in which the entity being proportionately
consolidated is engaged. To the extent that differences exist
between Canadian and US GAAP in your use of proportionate
consolidation, please expand your reconciliation to US GAAP
disclosure to identify this as a reconciling item or explain that
you have relied on an accommodation in Form 20-F and identify the
factors that you satisfied to avail yourself of this accommodation.
Response to Comment 2
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PLEASE CLARIFY, IF TRUE, THAT THE ENTITIES THAT YOU PROPORTIONATELY
CONSOLIDATE UNDER CANADIAN GAAP HAVE THE CHARACTERISTICS BOTH IN
TERMS OF INDUSTRY AND SCOPE OF OPERATIONS AND THE LEGAL FORM AND
ELEMENTS OF SHARED CONTROL CONTEMPLATED BY EITF-00-01.
The following is information on the scope of operations and legal
form of EnCana's entities that are proportionately consolidated
under Canadian GAAP. Substantially all items that are
proportionately consolidated in EnCana's consolidated financial
statements are undivided interests in jointly controlled assets,
all related to the production of crude oil and natural gas, held by
various wholly owned subsidiaries.
Additionally, in its consolidated financial statements for the
fiscal year ended December 31, 2004, EnCana proportionately
consolidated two entities, both of which are unincorporated
partnerships that carry on an active business of marketing natural
gas liquids. These two partnerships are not material in relation to
the EnCana consolidated financial statements. Collectively, they
contain less than 0.3% of EnCana's total assets and less than 0.5%
of EnCana's net earnings.
The operating, investing and financing activities of these entities
were determined in accordance with the partnership agreements. The
significant financial policies of these entities were determined in
conjunction with the other equity owner. As a partner in these
unincorporated partnerships, EnCana holds an undivided interest in
the assets, is proportionately liable for liabilities and no other
separate legal entity exists. Accordingly, these two entities that
EnCana proportionately consolidated in its consolidated financial
statements for the fiscal year ended December 31, 2004 have the
characteristics contemplated by EITF 00-01, as previously
described.
ADDITIONALLY, AS PREVIOUSLY REQUESTED, PLEASE EXPAND YOUR
ACCOUNTING POLICY TO IDENTIFY THE LEGAL FORM OF EACH ENTITY AND
NATURE OF THE ACTIVITIES IN WHICH THE ENTITY BEING PROPORTIONATELY
CONSOLIDATED IS ENGAGED.
In order to be responsive to the staff's comment, EnCana proposes
to expand the note on "Principles of Consolidation" under EnCana's
"Summary of Significant Accounting Policies" in the December 31,
2005 consolidated financial statements and all future filings as
applicable, with wording substantially similar to the following
(the text below has been marked to show changes from the note
disclosure relating to "Principles of Consolidation" in the Form
40-F for EnCana's 2004 fiscal year):
Principles of Consolidation
The Consolidated Financial Statements include the accounts of
EnCana Corporation and its subsidiaries ("EnCana" or the "Company")
and are presented in accordance with Canadian generally accepted
accounting principles. Information prepared in accordance with
generally accepted accounting principles in the United States is
included in Note 20.
Investments in jointly controlled partnerships and unincorporated
joint ventures carry on encana's exploration and production
activity and are accounted for using the proportionate
consolidation method, whereby encana's proportionate share of
revenues, expenses, assets and liabilities are included in the
accounts.
Investments in companies and partnerships in which EnCana does not
have a direct or joint control over the strategic operating,
investing and financing decisions, but does have significant
influence on them, are accounted for using the equity method.
TO THE EXTENT THAT DIFFERENCES EXIST BETWEEN CANADIAN AND US GAAP
IN YOUR USE OF PROPORTIONATE CONSOLIDATION, PLEASE EXPAND YOUR
RECONCILIATION TO US GAAP DISCLOSURE TO IDENTIFY THIS AS A
RECONCILING ITEM OR EXPLAIN THAT YOU HAVE RELIED ON AN
ACCOMMODATION IN FORM 20-F AND IDENTIFY THE FACTORS THAT YOU
SATISFIED TO AVAIL YOURSELF OF THIS ACCOMMODATION.
EnCana acknowledges that differences exist between Canadian and
U.S. GAAP with respect to proportionate consolidation. However,
EnCana did not, in its consolidated financial statements for the
fiscal year ended December 31, 2004, proportionately consolidate
any entity that created differences between Canadian and U.S. GAAP
in the use of proportionate consolidation. If, in the future,
EnCana has an entity that creates this difference in its
consolidation, EnCana's U.S. GAAP reconciliation note will be
expanded as requested.