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November 2014 Investor Presentation – Encana Corp

Encana Corp · Nov 11, 2014 · 58 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. November 2014 Investor Presentation – Encana Corp – slide 1
    CORPORATE PRESENTATION Encana Corporation November 2014
  2. November 2014 Investor Presentation – Encana Corp – slide 2
    Business Strategy Getting Back to Winning VISION: LEADING NORTH AMERICAN RESOURCE PLAY COMPANY STRATEGY: DISCIPLINED FOCUS ON GENERATING PROFITABLE GROWTH GOAL: GROWING SHAREHOLDER VALUE Balanced liquids and natural gas Growth…
  3. November 2014 Investor Presentation – Encana Corp – slide 3
    2013 ? 2017 Strategy Scorecard Disciplined Focus on Generating Profitable Growth Operational Excellence Cost structure reset Higher netbacks and margins Capital efficiency Balance Sheet Strength Business model not dependent upon…
  4. November 2014 Investor Presentation – Encana Corp – slide 4
    Year to Date Highlights Executing on Strategy Operational Excellence YTD costs savings of $145 million from organizational realignment and operating efficiencies Delivered 61% liquids growth YTD 2014 vs. YTD 2013 Growth plays…
  5. November 2014 Investor Presentation – Encana Corp – slide 5
    Increasing Liquids Volumes From Growth Assets Steady Growth, Higher Margins 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 bbls/d Oil & NGLs Production Original 5 Growth…
  6. November 2014 Investor Presentation – Encana Corp – slide 6
    Focused on Value vs. Volumes Proceeds from 2014 asset sales plus balance sheet cash redeployed into liquids-rich assets at almost 3x margin High-graded portfolio into premium margin production 2014 Portfolio Transition Plan…
  7. November 2014 Investor Presentation – Encana Corp – slide 7
    Focused on Growing Value Growth Assets Deliver Superior Margin PRODUCTION TIME ~$8.00/ BOE ~$40.00 /BOE Replacing lower margin production with higher margin production from Encana?s growth assets 2015F Pre-hedge upstream…
  8. November 2014 Investor Presentation – Encana Corp – slide 8
    Athlon Energy ? The Best of the Permian Transformative Acquisition in World Class Basin ? $7.1B acquisition of Athlon Energy Inc. ? $5.93B cash plus assumption of $1.15B of long-term debt ? Midland Basin pure play, headquartered in…
  9. November 2014 Investor Presentation – Encana Corp – slide 9
    ? Permian Basin is the most prolific onshore oil basin in North America ? Basin production >1.7 MMbbls/d ? >35 Bboes of cumulative oil production ? Largest stacked oil resource mapped in North America ? Productive intervals spanning…
  10. November 2014 Investor Presentation – Encana Corp – slide 10
    ? Value driven, pure-play producer with top-tier margins ? High performing team with track record of growing value ? Assembled large contiguous acreage blocks in core of basin ? Highly conducive to further down-spacing ? Heavily…
  11. November 2014 Investor Presentation – Encana Corp – slide 11
    Enhancing and Accelerating Value Leveraging our Strengths to Add Value in the Permian ? Hitting the ground running in 2015: ? At least $1B capital program ? Initiate pad drilling program ? Ramp horizontal rig fleet from current 4 to…
  12. November 2014 Investor Presentation – Encana Corp – slide 12
    Permian Assets - Five Year Outlook Delivering Significant High Margin Growth 0 50 100 150 200 250 2015F 2017F 2019F Net Production (Mboe/d) Permian Net Production 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2015F…
  13. November 2014 Investor Presentation – Encana Corp – slide 13
    *Assumes flat pricing of $90/bbl WTI, $4/Mcf NYMEX. Transaction Accelerates Strategy Liquids Production Outlook of ~250 Mbbls/d by 2017 ? Transaction contributes significant CFPS growth from 2013 ? 2017 ? Targeting ~250 Mbbls/d…
  14. November 2014 Investor Presentation – Encana Corp – slide 14
    Cash Flow & Cost Improvements Key Operational Drivers ? YTD 2014 ? Focus on operational excellence ? Base production continues to perform better than expected ? Expect to reduce 2014 base decline from ~28-30% to ~25-27% ? Increase in…
  15. November 2014 Investor Presentation – Encana Corp – slide 15
    ? 2014F capex + dividends aligned with cash flow ? Expect ~$500 million free cash flow* in 2014 ? Investment grade credit rating ? ~$7.0 billion of cash and cash equivalents as at September 30, 2014 ? Sufficient cash to finance Athlon…
  16. November 2014 Investor Presentation – Encana Corp – slide 16
    Leading North American Resource Play Company Robust Portfolio with Visible Long Term Growth Options ? Positions in the heart of the top 2 Canadian resource plays (Montney and Duvernay) and top 2 U.S. resource plays (Eagle Ford and…
  17. November 2014 Investor Presentation – Encana Corp – slide 17
    Strong YTD Operational Performance ? Impressive results across the portfolio ? Type curve performance meeting or exceeding expectations ? YTD 2014 netbacks up 79% (excluding hedges) compared to 2013 (41% including hedges) ? Lower…
  18. November 2014 Investor Presentation – Encana Corp – slide 18
    Montney ? Continued success with high intensity completions in Cutbank Ridge ? 8 high-intensity completions wells producing in Q3 with 30 day IPs of 12-14 MMcf/d; ~100% above prior type curve ? Higher than expected liquid yields ?…
  19. November 2014 Investor Presentation – Encana Corp – slide 19
    Duvernay ? Continue to see significant improvements in drilling costs and cycle times vs. Q2 2014 ? Q3 drilling costs 17% lower than Q2 ? Drilled pacesetter 03/1-3-64-23 in 24.5 days for $3.6 million ? Continuing to develop long-term…
  20. November 2014 Investor Presentation – Encana Corp – slide 20
    Eagle Ford ? Land swap with EOG completed ? ~140 operated future development wells preserved ? Encana now controls timing and location of future wells ? New wells brought on production exceeding type curve expectations ? Achieving…
  21. November 2014 Investor Presentation – Encana Corp – slide 21
    Permian ? Acquisition expected to close on November 13th ? 2014F capital of $75 ? $95 million ? 2014F production of 4,000 BOE/d (annualized) ? ~ 85% liquids ? 4 horizontal rigs, 8 vertical rigs currently running ? Plan to increase…
  22. November 2014 Investor Presentation – Encana Corp – slide 22
    DJ Basin ? YTD drilling cycle times averaging 3 days faster than expectations ? Section length laterals averaging under 10 days spud-to-rig release ? One and one half section laterals averaging 13 days spud-to-rig release ?…
  23. November 2014 Investor Presentation – Encana Corp – slide 23
    San Juan ? YTD production and capital are in line with expectations ? On pace to deliver 2014 production growth ? Continuing to further delineate acreage ? Reducing cycle times ? Consistent 10 day spud to rig release ? 2014 YTD spud…
  24. November 2014 Investor Presentation – Encana Corp – slide 24
    Tuscaloosa Marine Shale ? Significant drilling improvements since Q1 2014 ? Last 8 wells averaging 7,100 feet lateral length ? All recent ECA wells meeting normalized type curve expectations ? All 7 wells brought on production in 2014…
  25. November 2014 Investor Presentation – Encana Corp – slide 25
    Focus across all fields on base optimization and operating cost reduction projects ? Haynesville re-frac wells continue to perform better than expectations ? Water management initiatives ? Frac communication mitigation programs ?…
  26. November 2014 Investor Presentation – Encana Corp – slide 26
    Key 2014 Deliverables ? Disciplined and focused capital program ? Targeting 75% of 2014 capex allocated to growth assets ? Pre-hedge upstream operating cash flow expected to be up ~60% year over year ? Accelerate high-margin growth…
  27. November 2014 Investor Presentation – Encana Corp – slide 27
    Disciplined Focus on Profitable Growth VISION: Leading North American oil and gas resource play company ? High quality rocks ? Scale and running room ? Operational excellence ? Portfolio optionality STRATEGY: Disciplined focus on…
  28. November 2014 Investor Presentation – Encana Corp – slide 28
    TOP TIER RESOURCE David Hill ? High quality rocks ? Scale ? Running room ? Oil and gas OPERATIONAL EXCELLENCE Mike McAllister ? Best in class operators can differentiate ? Focus on: efficiency integrated thinking maximize…
  29. November 2014 Investor Presentation – Encana Corp – slide 29
    Q3 in Review Delivering on the Plan Q3 2013 Q3 2014 % Ch Upstream Operating Cash Flow* ($MM) Excluding Hedging 622 952 53 Including Hedging 794 982 24 Total Cash Flow ($MM) 660 807 22 - $ per share, diluted 0.89 1.09 22 Operating…
  30. November 2014 Investor Presentation – Encana Corp – slide 30
    YTD* in Review Delivering on the Plan YTD 2013 YTD 2014 % Ch Total Cash Flow ($MM) 1,904 2,557 34 - $ per share, diluted 2.58 3.45 34 Operating Earnings ($MM) 576 967 68 - $ per share, diluted 0.78 1.30 67 Capital Investment ($MM)…
  31. November 2014 Investor Presentation – Encana Corp – slide 31
    Updated 2014 Guidance Generating Free Cash Flow in 2014 2014F Total Cash Flow ($B) 3.2 ? 3.3 - per common share, diluted ($/sh) 4.32 ? 4.45 Capital Investment ($B) 2.5 ? 2.6 Natural Gas (MMcf/d) 2,300 ? 2,400 Oil & Field Condensate…
  32. November 2014 Investor Presentation – Encana Corp – slide 32
    Oil & NGLs Volumes (Mbbls/d) Natural Gas Volumes (MMcf/d) Revised 2014 Production Guidance 0 10 20 30 40 50 60 70 80 90 100 Original Guidance Divestitures Closed at Q3 Eagle Ford Permian* Other Revised Guidance 0…
  33. November 2014 Investor Presentation – Encana Corp – slide 33
    Pursuing Value vs. Volumes 2014 Capital Program Overview 2013 2014F Upstream Operating Cash Flow ($B) 3.2 4.0 ? 4.1 ~25% growth y-o-y upstream operating CF Total Cash Flow ($B) 2.6 3.2 ? 3.3 Capital Investment ($B) 2.7 2.5 - 2.6…
  34. November 2014 Investor Presentation – Encana Corp – slide 34
    Focusing Capital on High Return Assets Oil and Liquids Focus Drives Margin Growth 2013 2014F % Production (MMcfe/d) 3,100 2,872 (7) NYMEX Gas Price ($/MMBtu) 3.65 4.40 21 WTI Oil Price ($/bbl) 97.97 95.00 (3) Average Wellhead Price…
  35. November 2014 Investor Presentation – Encana Corp – slide 35
    Capital Focused on Growth Assets Accelerate Investment in High Return Liquids ~85% of $2.5-$2.6B 2014F capital allocated to growth plays *Does not include carry capital. 2014 carry capital is expected to be ~$750 million to $1 billion.…
  36. November 2014 Investor Presentation – Encana Corp – slide 36
    Gas 86% Montney Decades of Low Cost Inventory Why we like it ? Massive running room and scale ? Potential of >2 Bcf/d and >50,000 bbls/d on Encana lands ? >25 years of drilling inventory ? Large contiguous core land positions ?…
  37. November 2014 Investor Presentation – Encana Corp – slide 37
    Montney Key Statistics Land (net acres): 575,000 Average working interest: 66% Type Curve EUR/well: 7 ? 9 Bcfe, 650 ? 1,000 MBoe Type Curve ROR: 60 ? >100% Well inventory (gross): 3,700 Well costs (DCT): $8 ? $10 million Royalty…
  38. November 2014 Investor Presentation – Encana Corp – slide 38
    Montney Cutbank Ridge Partnership (CRP) ? Partnership with Mitsubishi ? Encana 60% interest ? Mitsubishi, 40% interest ? Development areas ? Montney: Tower, Dawson North, Dawson South and Tumbler Ridge ? Cadomin ? Steeprock Doig…
  39. November 2014 Investor Presentation – Encana Corp – slide 39
    Duvernay Premier Position in World Class Reservoir Why we like it ? Massive resource ? Estimated total resource of 443 Tcf gas, 11.3 Bbbls NGLs, 61.7 Bbbls oil (source: ERCB; medium case) ? Huge potential growth engine for Encana ?…
  40. November 2014 Investor Presentation – Encana Corp – slide 40
    Duvernay Key Statistics Land (net acres) 250,000 Average working interest 50% RPH type curve EUR/well 1,000 ? 1,200 MBoe RPH type curve ROR 100% Well inventory (gross) 1,400 ? 1,450 RPH well costs (DCT)(1) $12 ? $18 million(1)…
  41. November 2014 Investor Presentation – Encana Corp – slide 41
    Duvernay Joint Venture ? Phoenix (subsidiary of PetroChina) agreed to invest C$2.18 billion for 49.9% working interest ? C$1.18 billion up front cash ? A further investment of C$1.0 billion during the commitment period (~4 years)
  42. November 2014 Investor Presentation – Encana Corp – slide 42
    DJ Basin Delivering High Margin Liquids Production Today Why we like it ? Light oil play with significant scale ? Encana in heart of the Wattenberg field ? Strong economics - oil and condensate make up 70% of total liquids ?…
  43. November 2014 Investor Presentation – Encana Corp – slide 43
    DJ Basin Key Statistics Land (net acres) 49,000 Average working interest 50% Type Curve EUR/well 325 ? 550 MBoe Type Curve ROR 55 ? 85% Well inventory (gross) 600 ? 1,000 Well costs (DCT) $4.5 ? $5.0 Royalty rate 18 ? 20% 2014F…
  44. November 2014 Investor Presentation – Encana Corp – slide 44
    San Juan First Mover in New Oil Play Why we like it ? Light, sweet oil play discovered by Encana ? Capable of producing ~50,000 boe/d ? Dominant operator in the play ? Strong economics, ability to apply scale ? Consistent well…
  45. November 2014 Investor Presentation – Encana Corp – slide 45
    San Juan Key Statistics Land (net acres) 182,000 Average working interest 54% RPH type curve EUR/well 560 ? 620Mboe RPH type curve ROR 45% ? 70% Well inventory (gross) 700+ RPH well costs (DCT) $4 ? $5 million Royalty rate 20%…
  46. November 2014 Investor Presentation – Encana Corp – slide 46
    ECA (200,000 net acres) 15 mi Oil Tuscaloosa Marine Shale Massive Oil Resource, Ideal for Execution at Scale Why we like it ? Emerging oil asset with massive upside potential ? Estimated 4 - 5 BBoe of PIIP ? Potential to produce…
  47. November 2014 Investor Presentation – Encana Corp – slide 47
    Eagle Ford Core Position in a Premier Oil Play Why we like it ? Largely contiguous position in the Karnes Trough ? core of the core of the Eagle Ford ? Acreage primarily lies in the condensate / volatile oil window ? most active and…
  48. November 2014 Investor Presentation – Encana Corp – slide 48
    Eagle Ford Core Position in a Premier Oil Play Why we like it ? Largely contiguous position in the Karnes Trough ? core of the core of the Eagle Ford ? Acreage primarily lies in the condensate / volatile oil window ? most active and…
  49. November 2014 Investor Presentation – Encana Corp – slide 49
    Eagle Ford Key Statistics Land (net acres) 45,500 Average working interest 97% RPH type curve EUR/well 300 ? 400 Mboe RPH type curve ROR 50% ? 90% Well inventory (gross) 400 RPH well costs (DCT) $7 ? $8 million Royalty rate 22%…
  50. November 2014 Investor Presentation – Encana Corp – slide 50
    Leveraging our Strengths to Drive Improved Returns ? Lower well costs ? Apply Encana?s resource play expertise to further decrease well costs ? Optimize completion techniques ? Continue trend of y-o-y per well production and return…
  51. November 2014 Investor Presentation – Encana Corp – slide 51
    El Paso Midland Artesia Big Spring Centurion North & South Basin Cactus Longhorn Reversal & Expansion Permian Express I BridgeTex West Texas Gulf Cushing Wichita Falls Longview Houston Permian Express II Corpus…
  52. November 2014 Investor Presentation – Encana Corp – slide 52
    2013 ? 2014F Total Liquids Production* 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 bbls/d 2014 Deliverables ? 1st half ? measurable cost improvements ? 2nd half ? visible progress on growth assets 2014…
  53. November 2014 Investor Presentation – Encana Corp – slide 53
    0 500 1,000 1,500 2,000 2,500 3,000 3,500 2013 ? 2014F Total Gas Production* MMcf/d Jan 2013 Jan 2014F Dec 2014F *Based on November 12, 2014 guidance assumptions. Base Growth plays Eagle Ford
  54. November 2014 Investor Presentation – Encana Corp – slide 54
    APA EOG DVN MRO ECA SWN TLM APC CHK RRC Credit Rating Comparison As of October 31, 2014 Indicates ratings below investment grade S&P Moody?s AAA Aaa AA+ Aa1 AA Aa2 AA- Aa3 A+ A1 A A2 A- A3 BBB+ Baa1 BBB Baa2 BBB- Baa3 BB+…
  55. November 2014 Investor Presentation – Encana Corp – slide 55
    Liquids Value Chain Projected Composition of Total Liquids Production Liquids primarily comprised of higher value products 2013 2014F 2014F Pricing (%WTI) Ethane 14% 10% 10 - 15% Propane 13% 12% 30 - 35% Butane 8% 7% 55 - 60% Oil…
  56. November 2014 Investor Presentation – Encana Corp – slide 56
    Updated Hedging Position 2014 Hedge Program Adds Greater Certainty to Cash Flow Since 2003, we?ve realized approximately $9 billion in hedging gains* *As at September 30, 2014, before-tax. 2.1 0.8 $4.17 $4.37 5 4 3 2 1 0 0.0…
  57. November 2014 Investor Presentation – Encana Corp – slide 57
    2014F ENCANA CORPORATE GUIDANCE US$, U.S. GAAP November 12, 2014 2014F Cash Flow ($ billions, except per share amount) Total Cash Flow (1)(2) 3.2 ? 3.3 - Per common share, diluted ($/share) 4.32 ? 4.45 Weighted average common…
  58. November 2014 Investor Presentation – Encana Corp – slide 58
    Operating Costs ($/Mcfe at 6:1 ratio) Upstream Operating Expense (3) 0.65 Transportation and Processing 1.43 Administrative Expense (3) 0.26 Depreciation, Depletion and Amortization Rate (4) 1.55 ? 1.60 Price Assumptions WTI ($/bbl)…

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