The Calgary-based company also plans to narrow its production focus to five oil-related projects in North America from as many as 30.
"In order to align our organization with our strategy, we have had to make a number of exceptionally difficult decisions," chief executive Doug Suttles said in a statement.
"The restructuring that is underway reflects our shift from funding about 30 different plays to focusing our resources on five key areas.
Encana said it plans to sell assets and improve its cash flow. It will also create a separate company to own its mineral rights and royalty interests across southern Alberta, the statement said.
An initial public offering will be done by mid-2014.
"Encana intends to retain a significant stake in the new company, which will manage leasing activities in the area currently known as Encana's Clearwater play," the statement said.
Suttles was upbeat about the company's future after the restructuring and layoffs
"I'm excited about Encana's future and encouraged by how our people have rallied as one team to get Encana back to winning," he said in the statement.
"While we have a lot of challenging work ahead of us, I am more confident than ever that we will be successful."
Encana shares closed Monday at $18.59 on the Toronto Stock Exchange. They have fallen 16.2 per cent in the past 12 months.