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October 2014 Investor Presentation – Encana Corp

Encana Corp · Oct 3, 2014 · 56 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. October 2014 Investor Presentation – Encana Corp – slide 1
    CORPORATE PRESENTATION Encana Corporation October 2014
  2. October 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. October 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. October 2014 Investor Presentation – Encana Corp – slide 4
    Scorecard - 12 Month Highlights Exceeding Expectations Operational Excellence Base production outperforming initial forecast Growth plays meeting/exceeding type curve expectations ~50% liquids growth 1H 2014 vs 1H 2013 1H 2014…
  5. October 2014 Investor Presentation – Encana Corp – slide 5
    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 Transactions High-Grade Asset…
  6. October 2014 Investor Presentation – Encana Corp – slide 6
    Focused on Growing Value Growth Assets Deliver Superior Margin PRODUCTION TIME ~$8.00/ Boe ~$40.00/Boe in 2015 previously ~$25.00/Boe Replacing lower margin production with higher margin production from Encana?s growth assets…
  7. October 2014 Investor Presentation – Encana Corp – slide 7
    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…
  8. October 2014 Investor Presentation – Encana Corp – slide 8
    ? 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 over…
  9. October 2014 Investor Presentation – Encana Corp – slide 9
    ? 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 weighted…
  10. October 2014 Investor Presentation – Encana Corp – slide 10
    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 7 by…
  11. October 2014 Investor Presentation – Encana Corp – slide 11
    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…
  12. October 2014 Investor Presentation – Encana Corp – slide 12
    *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…
  13. October 2014 Investor Presentation – Encana Corp – slide 13
    ? 2014F capex + dividends aligned with cash flow ? Expect ~$500 million free cash flow* in 2014 ? Investment grade credit rating ? ~$7 billion of cash and cash equivalents as at September 30, 2014 ? $4.3 billion of unused bank credit…
  14. October 2014 Investor Presentation – Encana Corp – slide 14
    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…
  15. October 2014 Investor Presentation – Encana Corp – slide 15
    Operational Update ? Strong YTD* operational performance across the portfolio ? Type curve performance meeting or exceeding expectations ? YTD* 2014 netbacks up 84% (excluding hedges) compared to 2013 (43% including hedges) ? Lower…
  16. October 2014 Investor Presentation – Encana Corp – slide 16
    Eagle Ford ? Acquisition closed on June 20th with 2 rigs running ? 2014F capital of $300 ? $320 million ? 2014F production of 22,000 boe/d (annualized) ? ~ 85% liquids ? Development plan to maximize free cash flow* ? $200 - $250…
  17. October 2014 Investor Presentation – Encana Corp – slide 17
    Montney ? Continued success with high intensity completions in Cutbank Ridge ? 7 high-intensity completions wells brought on in Q2 with 30 day IPs of 12-14 MMcf/d; ~100% above prior type curve ? Higher than expected liquid yields ?…
  18. October 2014 Investor Presentation – Encana Corp – slide 18
    DJ Basin ? YTD drilling cycle times averaging 3 days faster than expectations ? Drilled first 7-day spud-to-rig release 4,150 ft. well ? Successfully drilled 3rd 10,000 ft. lateral well ? Added second completions crew in May ?…
  19. October 2014 Investor Presentation – Encana Corp – slide 19
    San Juan ? Advancing efficient commercial development ? YTD production and capital are in line with expectations ? Continuing to further delineate acreage ? Consistent well performance at or above expectations ? 30 day IPs of 400 -…
  20. October 2014 Investor Presentation – Encana Corp – slide 20
    Duvernay ? Currently drilling on three 8-well pads in the Kaybob/Simonette area ? Completions commencing in Q3 ? 10 high-intensity-completions wells meeting or exceeding type curve expectations ? 30 day IPs averaging ~1,300 boe/d ?…
  21. October 2014 Investor Presentation – Encana Corp – slide 21
    Tuscaloosa Marine Shale ? Demonstrating achievement of type curve across Tier 1 acreage ? Wells drilled YTD 2014 generally meeting normalized type curve expectations ? Cost improvements continue to be achieved ? Mathis and Lewis wells…
  22. October 2014 Investor Presentation – Encana Corp – slide 22
    Focus across all fields on base optimization projects to offset PDP declines ? Haynesville re-frac program ? Excellent results from 2 wells completed to date ? IPs up to 100% higher than expectations ? 5 additional wells planned for…
  23. October 2014 Investor Presentation – Encana Corp – slide 23
    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 ~70% year over year ? Accelerate high-margin growth…
  24. October 2014 Investor Presentation – Encana Corp – slide 24
    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…
  25. October 2014 Investor Presentation – Encana Corp – slide 25
    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…
  26. October 2014 Investor Presentation – Encana Corp – slide 26
    Q2 In Review Strategy Delivering on Plan Q2 2013 Q2 2014 % Ch Upstream Operating Cash Flow ($MM) Excluding Hedging 737 898 22 Including Hedging 788 800 2 Total Cash Flow ($MM) 665 656 (1) - $ per share, diluted 0.90 0.89 (1)…
  27. October 2014 Investor Presentation – Encana Corp – slide 27
    YTD* Review Strategy Delivering on Plan YTD 2013 YTD 2014 % Ch Total Cash Flow ($MM) 1,244 1,750 41 - $ per share, diluted 1.69 2.36 40 Operating Earnings ($MM) 426 686 61 - $ per share, diluted 0.58 0.93 60 Capital Investment…
  28. October 2014 Investor Presentation – Encana Corp – slide 28
    2014 Guidance* Generating Free Cash Flow in 2014 2014F Total Cash Flow ($B) 3.4 ? 3.6 - per common share, diluted ($/sh) $4.60 ? 4.85 Capital Investment ($B) 2.7 ? 2.8 Natural Gas (MMcf/d) 2,400 ? 2,500 Oil & Field Condensate…
  29. October 2014 Investor Presentation – Encana Corp – slide 29
    Oil & NGL 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 Q2 Eagle Ford Other Revised Guidance 0 500 1,000…
  30. October 2014 Investor Presentation – Encana Corp – slide 30
    Pursuing Value vs. Volumes 2014 Capital Program Overview 2013 2014F Upstream Operating Cash Flow ($B) 3.2 4.1 ? 4.3 ~30% growth y-o-y total cash flow Total Cash Flow ($B) 2.6 3.4 ? 3.6 Capital Investment ($B) 2.7 2.6 ? 2.7 Dividend…
  31. October 2014 Investor Presentation – Encana Corp – slide 31
    Focusing Capital on High Return Assets Oil and Liquids Focus Drives Margin Growth 2013 2014F % Production (MMcfe/d) 3,100 3,000 (3) NYMEX Gas Price ($/MMBtu) 3.65 4.50 23 WTI Oil Price ($/bbl) 97.97 98.00 - Average Wellhead Price…
  32. October 2014 Investor Presentation – Encana Corp – slide 32
    Capital Focused on Growth Assets Accelerate Investment in High Return Liquids ~80% of $2.7-$2.8B 2014F capital allocated to growth plays *Does not include carry capital. 2014 carry capital is expected to be ~$750 million to $1 billion.…
  33. October 2014 Investor Presentation – Encana Corp – slide 33
    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 ?…
  34. October 2014 Investor Presentation – Encana Corp – slide 34
    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…
  35. October 2014 Investor Presentation – Encana Corp – slide 35
    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…
  36. October 2014 Investor Presentation – Encana Corp – slide 36
    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 ?…
  37. October 2014 Investor Presentation – Encana Corp – slide 37
    Duvernay Key Statistics Land (net acres) 262,000 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)…
  38. October 2014 Investor Presentation – Encana Corp – slide 38
    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)
  39. October 2014 Investor Presentation – Encana Corp – slide 39
    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 ?…
  40. October 2014 Investor Presentation – Encana Corp – slide 40
    DJ Basin Key Statistics Land (net acres) 49,000 Average working interest 50% Type Curve EUR/well 325 ? 425 MBoe Type Curve ROR 55 ? 85% Well inventory (gross) 600 ? 1,000 Well costs (DCT) $4.5 ? $5.0 Royalty rate 18 ? 20% 2014F…
  41. October 2014 Investor Presentation – Encana Corp – slide 41
    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…
  42. October 2014 Investor Presentation – Encana Corp – slide 42
    San Juan Key Statistics Land (net acres) 176,000 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%…
  43. October 2014 Investor Presentation – Encana Corp – slide 43
    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…
  44. October 2014 Investor Presentation – Encana Corp – slide 44
    Tuscaloosa Marine Shale Key Statistics Land (net acres) 200,000 Average working interest 60% RPH type curve EUR/well 650-750 MBoe RPH type curve ROR 35% ? 40% Well inventory (gross) 1,000 RPH well costs (DCT) $11 ? $13 million…
  45. October 2014 Investor Presentation – Encana Corp – slide 45
    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…
  46. October 2014 Investor Presentation – Encana Corp – slide 46
    Eagle Ford Key Statistics Land (net acres) 45,500 Average working interest 73% 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%…
  47. October 2014 Investor Presentation – Encana Corp – slide 47
    Summary of Eagle Ford Transaction Accretive Acquisition of a World Class Oil Resource Play ? $3.1B all cash acquisition of Eagle Ford oil asset ? 45,500 net acres in Karnes, Wilson and Atascosa counties ? 73% working interest ?…
  48. October 2014 Investor Presentation – Encana Corp – slide 48
    Eagle Ford: Potential for Further Value Creation Leveraging our Strengths to Drive Improved Returns ? Lower well costs ? Apply Encana?s resource play expertise to further decrease well costs ? Optimize completion techniques ?…
  49. October 2014 Investor Presentation – Encana Corp – slide 49
    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…
  50. October 2014 Investor Presentation – Encana Corp – slide 50
    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…
  51. October 2014 Investor Presentation – Encana Corp – slide 51
    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 July 24, 2014 guidance assumptions. Does not include the impact of the Bighorn and Power divestitures,…
  52. October 2014 Investor Presentation – Encana Corp – slide 52
    APA EOG DVN MRO ECA TLM SWN APC CHK RRC Credit Rating Comparison As of July 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+ Ba1…
  53. October 2014 Investor Presentation – Encana Corp – slide 53
    Liquids Value Chain Projected Composition of Total Liquids Production Liquids primarily comprised of higher value products 2013 2014F 2014F Pricing (%WTI) Ethane 14% 14% 10 - 15% Propane 13% 12% 30 - 35% Butane 8% 8% 55 - 60% Oil…
  54. October 2014 Investor Presentation – Encana Corp – slide 54
    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 June 30, 2014, before-tax. 2.1 0.8 $4.17 $4.37 5 4 3 2 1 0 0.0 0.5…
  55. October 2014 Investor Presentation – Encana Corp – slide 55
    2014F ENCANA CORPORATE GUIDANCE US$, U.S. GAAP July 24, 2014 2014F Cash Flow ($ billions, except per share amount) Total Cash Flow (1)(2) 3.4 ? 3.6 - Per common share, diluted ($/share) 4.60 ? 4.85 Weighted average common shares…
  56. October 2014 Investor Presentation – Encana Corp – slide 56
    Operating Costs ($/Mcfe at 6:1 ratio) Upstream Operating Expense (3) 0.65 Transportation and Processing 1.40 Administrative Expense (3) 0.25 Depreciation, Depletion and Amortization Rate (4) 1.50 2014 Sensitivities (1) ($ millions)…

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