12.Long-Term Debt


As at December 31	Note		2017		2016


U.S. Dollar Denominated Debt
Revolving credit and term loan borrowings	A	$	-	$	-
U.S. Unsecured Notes:	B
6.50% due May 15, 2019			500		500
3.90% due November 15, 2021			600		600
8.125% due September 15, 2030			300		300
7.20% due November 1, 2031			350		350
7.375% due November 1, 2031			500		500
6.50% due August 15, 2034			750		750
6.625% due August 15, 2037 (1)			462		462
6.50% due February 1, 2038 (1)			505		505
5.15% due November 15, 2041 (1)			244		244
Total Principal	F		4,211		4,211

Increase in Value of Debt Acquired	C		26		26
Unamortized Debt Discounts and Issuance Costs	D		(40)		(39)
Current Portion of Long-Term Debt	E		-		-
		$	4,197	$	4,198

(1)

Notes accepted for purchase in the March 2016 Tender Offers.

A)REVOLVING CREDIT AND TERM LOAN BORROWINGS

At December 31, 2017, Encana had in place committed revolving U.S. dollar denominated bank credit facilities totaling $4.5 billion which included $3.0 billion on a revolving bank credit facility for Encana and $1.5 billion on a revolving bank credit facility for a U.S. subsidiary. The facilities are extendible from time to time, but not more than once per year, for a period not longer than five years plus 90 days from the date of the extension request, at the option of the lenders and upon notice from Encana. The facilities mature in July 2020, and are fully revolving up to maturity.

Encana is subject to a financial covenant in its credit facility agreements whereby financing debt to adjusted capitalization cannot exceed 60 percent. Financing debt primarily includes total long-term debt and capital lease obligations. Adjusted capitalization is calculated as the sum of total financing debt, shareholders’ equity and a $7.7 billion equity adjustment for cumulative historical ceiling test impairments recorded as at December 31, 2011 in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP. As at December 31, 2017, the Company is in compliance with all financial covenants.

The Encana facility, which remained unused at December 31, 2017, is unsecured and bears interest at the lenders’ rates for Canadian prime, U.S. base rate, Bankers’ Acceptances or LIBOR, plus applicable margins. The U.S. subsidiary facility, which remained unused as at December 31, 2017, bears interest at either the lenders’ U.S. base rate or LIBOR, plus applicable margins.

Standby fees paid in 2017 relating to revolving credit and term loan agreements were approximately $15 million (2016 - $14 million; 2015 - $11 million).

B)UNSECURED NOTES

Shelf Prospectuses

Encana filed a shelf prospectus in Canada and a shelf registration statement in the U.S., in 2016 and 2017, respectively, whereby the Company may issue from time to time, debt securities, common shares, Class A preferred shares, subscription receipts, warrants, units, share purchase contracts and share purchase units in Canada and/or the U.S. In September 2016 and March 2015, the Company filed prospectus supplements for the issuance of common shares as described in Note 15. At December 31, 2017, $4.8 billion remained accessible under the Canadian shelf prospectus. The availability of issuing securities under the Canadian shelf prospectus and U.S. shelf registration statement is dependent upon market conditions.

U.S. Unsecured Notes

Unsecured notes include medium-term notes and senior notes that are issued from time to time under trust indentures and have equal priority with respect to the payment of both principal and interest.

On March 16, 2016, Encana announced tender offers (collectively, the “Tender Offers”) for certain of the Company’s outstanding senior notes (collectively, the “Notes”). The Tender Offers were for an aggregate purchase price of $250 million, excluding accrued and unpaid interest. The consideration for each $1,000 principal amount of Notes validly tendered and accepted for purchase included an early tender premium of $30 per $1,000 principal amount of Notes accepted for purchase, provided the Notes were validly tendered at or prior to the early tender date of March 29, 2016. All Notes validly tendered and accepted for purchase also received accrued and unpaid interest up to the settlement date.

On March 30, 2016, Encana announced an increase in the aggregate purchase price of the Tender Offers to $400 million, excluding accrued and unpaid interest, and accepted for purchase: i) $156 million aggregate principal amount of 5.15 percent notes due 2041; ii) $295 million aggregate principal amount of 6.50 percent notes due 2038; and iii) $38 million aggregate principal amount of 6.625 percent notes due 2037. The Company paid an aggregate amount of $406 million, including accrued and unpaid interest of $6 million and an early tender premium of $14 million, for Notes accepted for purchase. The Company used cash on hand and borrowings under its revolving credit facility to fund the Tender Offers.

Encana also recognized a gain on the early debt retirement of $103 million, before tax, representing the difference between the carrying amount of the Notes accepted for purchase and the consideration paid. The gain on the early debt retirement net of the early tender premium totaled $89 million, which is included in other (gains) losses in the Consolidated Statement of Earnings.

On March 5, 2015, Encana provided notice to noteholders that it would redeem the Company’s $700 million 5.90 percent notes due December 1, 2017 and C$750 million 5.80 percent medium-term notes due January 18, 2018. On April 6, 2015, the Company used net proceeds from the common shares issued, as disclosed in Note 15, and cash on hand to complete the note redemptions. In conjunction with the early note redemptions, the Company incurred a one-time interest payment of approximately $165 million as discussed in Note 4.

C)INCREASE IN VALUE OF DEBT ACQUIRED

Certain of the notes and debentures of the Company were acquired in business combinations and were accounted for at their fair value at the dates of acquisition. The difference between the fair value and the principal amount of the debt is being amortized over the remaining life of the outstanding debt acquired, which is approximately 13 years.

D)UNAMORTIZED DEBT DISCOUNTS AND ISSUANCE COSTS

Long-term debt premiums and discounts are capitalized within long-term debt and are being amortized using the effective interest method. During 2017 and 2016, no debt premiums or discounts were capitalized. Issuance costs are amortized over the term of the related debt.

E)CURRENT PORTION OF LONG-TERM DEBT

As at December 31, 2017 and 2016, there was no current portion of long-term debt.

F)MANDATORY DEBT PAYMENTS


		Principal		Interest
As at December 31		Amount		Amount


2018	$	-	$	267
2019		500		251
2020		-		234
2021		600		235
2022		-		211
Thereafter		3,111		2,546
Total	$	4,211	$	3,744

As at December 31, 2017, total long-term debt had a carrying value of $4,197 million and a fair value of $5,042 million (2016 - carrying value of $4,198 million and a fair value of $4,553 million). The estimated fair value of long-term borrowings is categorized within Level 2 of the fair value hierarchy and has been determined based on market information of long-term debt with similar terms and maturity, or by discounting future payments of interest and principal at interest rates expected to be available to the Company at period end.