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August 2014 Investor Presentation – Encana Corp

Encana Corp · Aug 4, 2014 · 50 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. August 2014 Investor Presentation – Encana Corp – slide 1
    CORPORATE PRESENTATION Encana Corporation August 2014
  2. August 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. August 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. August 2014 Investor Presentation – Encana Corp – slide 4
    Year To Date Highlights EXECUTING ON STRATEGY Operational Excellence YTD costs savings of $100 million from organizational realignment and operating efficiencies Delivered 49% liquids growth YTD 2014 vs. YTD 2013 Growth plays…
  5. August 2014 Investor Presentation – Encana Corp – slide 5
    Focusing Our Business RAPID PORTFOLIO TRANSITION CONTINUES ? A&D activity has accelerated the strategy and sharpened our focus ? Replacing natural gas production with high-margin liquids ? Addition of Eagle Ford as 6th growth play ?…
  6. August 2014 Investor Presentation – Encana Corp – slide 6
    Q2 In Review STRATEGY DELIVERING ON PLAN Q2 2013 Q2 2014 % Ch Upstream Operating Cash Flow ($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)…
  7. August 2014 Investor Presentation – Encana Corp – slide 7
    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 ~26% ? Increase in…
  8. August 2014 Investor Presentation – Encana Corp – slide 8
    ? 2014F capex + dividends aligned with cash flow ? Expect ~$500 million free cash flow* in 2014 ? Investment grade credit rating ? $2.7 billion of cash and cash equivalents as at June 30, 2014 ? Bighorn divestiture of $1.8 billion…
  9. August 2014 Investor Presentation – Encana Corp – slide 9
    Updated 2014 Guidance GENERATING FREE CASH FLOW IN 2014 2014F Total Cash Flow ($B) 3.4 ? 3.6 - per common share, diluted ($/sh) $4.59 ? 4.86 Capital Investment ($B) 2.7 ? 2.8 Natural Gas (MMcf/d) 2,400 ? 2,500 Oil & Field…
  10. August 2014 Investor Presentation – Encana Corp – slide 10
    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…
  11. August 2014 Investor Presentation – Encana Corp – slide 11
    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…
  12. August 2014 Investor Presentation – Encana Corp – slide 12
    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…
  13. August 2014 Investor Presentation – Encana Corp – slide 13
    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 ?…
  14. August 2014 Investor Presentation – Encana Corp – slide 14
    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 ?…
  15. August 2014 Investor Presentation – Encana Corp – slide 15
    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 -…
  16. August 2014 Investor Presentation – Encana Corp – slide 16
    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 ?…
  17. August 2014 Investor Presentation – Encana Corp – slide 17
    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…
  18. August 2014 Investor Presentation – Encana Corp – slide 18
    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…
  19. August 2014 Investor Presentation – Encana Corp – slide 19
    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…
  20. August 2014 Investor Presentation – Encana Corp – slide 20
    Focused on Growing Value, not Volumes GROWTH ASSETS DELIVER HIGHER MARGINS THAN BASE IN 2014 PRODUCTION TIME $3.40/ Mcfe $5.75/ Mcfe Replacing lower margin production with higher margin production from six growth assets 2014F…
  21. August 2014 Investor Presentation – Encana Corp – slide 21
    Disciplined Focus on Profitable Growth VISION: Leading North American oil and gas resource play company ? High quality rocks ? Scale and running room ? Operational excellence ? Portfolio optionality STRATEGY: Disciplined focus on…
  22. August 2014 Investor Presentation – Encana Corp – slide 22
    TOP TIER RESOURCE David Hill ? High quality rocks ? Scale ? Running room ? Oil and gas OPERATIONAL EXCELLENCE Mike McAllister ? Best in class operators can differentiate ? Focus on: efficiency integrated thinking maximize…
  23. August 2014 Investor Presentation – Encana Corp – slide 23
    YTD Review STRATEGY DELIVERING ON PLAN YTD 2013 YTD 2014 % Ch Total Cash Flow ($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 ($MM)…
  24. August 2014 Investor Presentation – Encana Corp – slide 24
    Pursuing Value vs. Volumes 2014 CAPITAL PROGRAM OVERVIEW 2013 2014F Upstream Operating Cash Flow ($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…
  25. August 2014 Investor Presentation – Encana Corp – slide 25
    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…
  26. August 2014 Investor Presentation – Encana Corp – slide 26
    Why the Growth Plays Matter LIQUIDS RICH & OIL OPPORTUNITY SET ? Returns >40% ? Liquids rich and oil assets ? Running room and scalability - growth potential of ~50,000 boe/d ? Best rocks ? Diversification of commodity, geography…
  27. August 2014 Investor Presentation – Encana Corp – slide 27
    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.…
  28. August 2014 Investor Presentation – Encana Corp – slide 28
    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 ?…
  29. August 2014 Investor Presentation – Encana Corp – slide 29
    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…
  30. August 2014 Investor Presentation – Encana Corp – slide 30
    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…
  31. August 2014 Investor Presentation – Encana Corp – slide 31
    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 ?…
  32. August 2014 Investor Presentation – Encana Corp – slide 32
    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)…
  33. August 2014 Investor Presentation – Encana Corp – slide 33
    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)
  34. August 2014 Investor Presentation – Encana Corp – slide 34
    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 ?…
  35. August 2014 Investor Presentation – Encana Corp – slide 35
    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…
  36. August 2014 Investor Presentation – Encana Corp – slide 36
    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…
  37. August 2014 Investor Presentation – Encana Corp – slide 37
    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%…
  38. August 2014 Investor Presentation – Encana Corp – slide 38
    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…
  39. August 2014 Investor Presentation – Encana Corp – slide 39
    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…
  40. August 2014 Investor Presentation – Encana Corp – slide 40
    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…
  41. August 2014 Investor Presentation – Encana Corp – slide 41
    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%…
  42. August 2014 Investor Presentation – Encana Corp – slide 42
    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 ?…
  43. August 2014 Investor Presentation – Encana Corp – slide 43
    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 ?…
  44. August 2014 Investor Presentation – Encana Corp – slide 44
    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…
  45. August 2014 Investor Presentation – Encana Corp – slide 45
    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 previously announced Bighorn and…
  46. August 2014 Investor Presentation – Encana Corp – slide 46
    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…
  47. August 2014 Investor Presentation – Encana Corp – slide 47
    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…
  48. August 2014 Investor Presentation – Encana Corp – slide 48
    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 $4.37 5 4 3 2 1 0 0.0 0.5…
  49. August 2014 Investor Presentation – Encana Corp – slide 49
    2014F ENCANA CORPORATE GUIDANCE US$, 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 ($/share) 4.60 ? 4.85 Weighted average common shares…
  50. August 2014 Investor Presentation – Encana Corp – slide 50
    Operating Costs ($/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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