CORPORATESISSUER COMMENT 10 February 2016RATINGSENCANA CORPORATION (ECA) Moodys SR Unsecured Rating Baa2Moodys Outlook RURBond-Implied Rating Caa2CDS-Implied Rating Caa2EDF-Implied Rating B3As of February 9, 2016ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market Signals ReviewEncana Corp.: Market-Implied Ratings Retreat to 10-Year Lows The bond- and CDS-implied ratings for Encana Energy both weakened recently to their worst levels of the last ten years. The EDF'-implied rating rose in January to one notch above its lowest level of the past decade. The sharp decline in global energy prices is weighing heavily on the market signals of energy companies such as Encana.FIGURE 1: GLOBAL CDS-IMPLIED RATING GAPS BY SECTOREnergy companies globally have experienced a severe and rapid deterioration in their CDS-implied ratings gaps (Figure 1). For the sector of 69 global energy companies that we monitor, the average CDS-implied ratings gap is almost -5 notches (red line) which maps to an average CDS spread of 833 bp as of February 9. The energy sector average CDS-implied ratings gap is much worse than its -1 notch level two years ago (blue line), zero notch level four years ago (green line), and +1 notch level seven years ago (purple line). The average CDS-implied ratings of the energy sector has underperformed all sectors in comparison to the levels seven years ago and 12 months ago. After the energy sector, banking has the second largest CDS-implied ratings gap of -3 notches, among 11 market-implied rating categories. Sovereign and non-banking finance also underperformed other sectors.MOODY'S ANALYTICS CORPORATES2 10 February 2016 Market Signals Review: Encana Corp.: Market-Implied Ratings Retreat to 10-Year LowsEncanas bond-implied rating ...
