UPDATE 3-Canada's Encana slashes dividend, cuts capex

* Cuts annual dividend by nearly 79 pct to 6 cents/shr
* Cuts 2016 capex by 27 pct to $1.5-$1.7 bln
* Sees 2016 output of 340-370 mboe/d vs 395-430 mboe/d in
2015

(Adds details from conference call, analyst comment)
By Anet Josline Pinto
Dec 14 (Reuters) - Canadian oil and natural gas producer
Encana Corp ECA.TO ECA.N , responding to a sharp drop in oil
prices, has slashed its dividend by about 79 percent and its
2016 capital budget by more than a quarter.
The company's shares fell as much as 10 percent on the
Toronto and New York Stock Exchanges on Monday.
"The initial guidance that they put up for 2016 was little
worse than what most people were expecting on the production
side. And there is a risk the numbers could come down further
because the guidance was based on WTI of $50," said Cormark
Securities Inc analyst Amir Arif.
U.S. West Texas Intermediate CLc1 was trading at about
$35.56 per barrel at 1625 GMT.
Encana said it expected to produce an average
340,000-370,000 barrels of oil equivalent per day (boepd) next
year, down from the 395,000-430,000 boepd it expects to produce
in 2015.
The company expects to end 2015 with around 600 fewer staff,
down to 2,900 from around 3,500. Around half of this decrease is
attributable to natural attrition and divestitures, in which
staff transitioned to the purchasing company. The remaining half
is attributable to layoffs, Encana spokesman Doug McIntyre said.
Encana, which said in July that it had cut 200 jobs, plans
to spend $1.5-$1.7 billion in 2016, compared with $2.2 billion
this year.
The Calgary-based company, which cut its dividend for the
first time since 2013, joins other oil producers who have
reduced or suspended dividend to shore up their finances amid a
nearly 70 percent slide in global oil prices since June 2014.
Canadian Oil Sands Ltd COS.TO has slashed its dividend,
while Husky Energy Inc HSE.TO and Penn West Petroleum Ltd
PWT.TO have suspended dividends this year.
Encana said on Monday it would cut its annual dividend to 6
cents per share from 28 cents per share in 2015.
The company - focused on the Permian and Eagle Ford shale
fields in Texas and Montney and Duvernay shale fields in western
Canada - said 95 percent of its budget for 2016 would be
directed to these assets.
"While capital spending was in line with expectations, they
are getting less production for the same amount of money," said
BMO Capital Markets analyst Randy Ollenberger.
The company's U.S.-listed shares were down 7.5 percent at
$5.59 in mid-morning trade, while its Canada-listed shares were
down 7.6 percent at C$7.68.

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FACTBOX-As oil hedges roll off, US shale firms face stiff test
ahead
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