The move comes amid a prolonged downturn in the price of so-called dry gas.
The Calgary-based company said the money, which is in addition to the company’s original $2.9-billion budget, will allow it to take advantage of what it called "positive initial results achieved in a number of oil and liquids rich natural gas plays."
As a result, Encana has increased its expected total liquids production for the year by seven per cent to 30,000 barrels per day.
"We're encouraged with the success we have realized so far this year in our oil and liquids rich natural gas plays," president and CEO Randy Eresman said.
"Increasing our 2012 capital investment supports our goal of developing a more diversified production portfolio."
BMO Capital Markets analyst Randy Ollenberger called the impact "mixed."
"The funding difference is expected to be made up by asset dispositions," Ollenberger wrote in a note to clients.
BMO rated Encana's stock a "market perform" with a US$20 target price.
Encana shares closed down C$1.74 — nearly eight per cent — at $20.39 Thursday on the Toronto Stock Exchange.
The company has been transitioning its technical and commercial expertise from the development of natural gas plays to oil and natural gas liquids and Eresman said the company expects to achieve a "more balanced operating cash flow stream in 2013."
Encana's original 2012 plan to drill between 40 and 45 wells has been expanded to drill between 115 and 120 wells in 10 plays, primarily focused on oil.
The company is expecting to drill approximately 350 oil and liquids rich wells in 2013.
Encana projects liquids production in 2013 to range from 60,000 to 70,000 barrels per day, about 40 per cent of which is expected to be comprised of oil and field condensate.
"This represents a two year compound annual growth rate of approximately 65 per cent, based on the midpoint of the range," the company said in a release.
Meanwhile, annualized natural gas production is expected to remain near current levels of about three billion cubic feet per day for 2012 and 2013.
For 2013, capital investment is estimated to range between $4 billion and $5 billion.
Meanwhile, Encana said is remains "cautiously optimistic" about a recovery in natural gas prices towards the end of 2012 and into 2013.
Back in April, Encana said it was slowing natural gas production in response to lingering price weakness. It was aiming for reductions totalling 600 million cubic feet per day gross before royalties compared to last year through reduced spending, production shut-ins and other measures.
The natural-gas focused company, grappling with an oversupply of natural gas, said it was clear that a continued reduction of drilling activity is required in order to restore the market to balance.
"As an almost pure-play natural gas producer, Encana has been most affected by the low price of the commodity caused by the continued excess of supply,'' Eresman said at the time.Suggest a correction