Encana Corp. reported a $1.7 billion first-quarter loss on Tuesday after booking a massive impairment charge largely related to slumping oil and gas prices.

Factoring out a $1.2 billion impairment charge and other items, the Calgary, Alberta-based energy company's operating earnings slumped 98%, but still came in ahead of analyst expectations.

Encana, which has worked to shift its focus to oil and gas liquids assets and away from natural gas, said liquids production jumped 78% from a year earlier to about 120,700 barrels a day.

Overall production, however, averaged about 430,100 barrels of oil equivalent a day, down from 536,100 barrels a day a year earlier. It said the drop reflects the sale of lower-margin assets and its shift to a higher-margin, liquids-weighted production mix.

"We've made good progress repositioning our portfolio which now includes core positions in some of the highest netback basins in North America," said Chief Executive Doug Suttles. "Our four most strategic assets are the growth engine of the company, currently generating better margins than the entire portfolio did in 2013 when both oil and natural gas prices were substantially higher."

Encana said about 74% of liquids production in the first quarter was generated from its core Montney, Duvernay, Eagle Ford and Permian shale formation assets.

The company's realized natural-gas price was down 18% from a year earlier, while oil and natural-gas liquids prices were 45% lower.

The company's operating earnings fell to $9 million, or 1 cent a share, from $515 million, or 70 cents a year earlier. The Thomson Reuters mean estimate was for a loss of 9 cents.

Cash flow fell to $495 million from $1.09 billion, largely due to lower oil and gas prices.

Encana is the latest in a string of Canadian energy companies whose first-quarter results have taken a hit from slumping commodity prices. Canadian Natural Resources Ltd. last week posted its first quarterly net loss in four years. Suncor Energy Inc. and Canadian Oil Sands Ltd. also reported losses.

Write to Judy McKinnon at judy.mckinnon@wsj.com

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