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May 2014 Investor Presentation Update – Encana Corp

Encana Corp · May 30, 2014 · 45 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. May 2014 Investor Presentation Update – Encana Corp – slide 1
    Getting Back to Winning Encana Corporation Corporate Presentation May 2014 Vision Strategy Goal
  2. May 2014 Investor Presentation Update – Encana Corp – slide 2
    Getting Back to Winning Leading North American resource play company Disciplined focus on generating profitable growth Growing shareholder value Vision Strategy Goal ? Balanced liquids and natural gas ? Growth from a limited…
  3. May 2014 Investor Presentation Update – Encana Corp – slide 3
    ? Focused and disciplined capital allocation to core growth assets ? Target +10% CAGR CFPS through 2017 ? ~75% of 2017F upstream operating cash flow from liquids 2013 ? 2017 Strategy Scorecard Disciplined Focus on Generating…
  4. May 2014 Investor Presentation Update – Encana Corp – slide 4
    2014 Strategy Scorecard Delivering Value Now Portfolio Transition 2014 ? Forecast pre-hedge upstream operating CF up >10% year over year ? Five core growth assets: ? Allocated ~75% of 2014F capital ? Expected to generate ~45% of…
  5. May 2014 Investor Presentation Update – Encana Corp – slide 5
    Operational Excellence 2014 2014 Strategy Scorecard Delivering Value Now ? Focus on cost reduction and capital efficiency improvement ? Cost reduction of ~$40 million y-o-y in Q1 ? Complete appraisal of emerging liquids plays ?…
  6. May 2014 Investor Presentation Update – Encana Corp – slide 6
    Balance Sheet Strength 2014 2014 Strategy Scorecard Delivering Value Now ? Cash flow to exceed capex + dividends ? PrairieSky Royalty IPO ? $1 billion of debt principal settled with cash ? Maintain investment grade credit rating…
  7. May 2014 Investor Presentation Update – Encana Corp – slide 7
    Focusing Our Business Portfolio Transition Rapidly Underway ? Replacing natural gas production with high-margin liquids ? Addition of Eagle Ford as 6th core growth play ? Announced $3.1 billion acquisition of immediately self-funding…
  8. May 2014 Investor Presentation Update – Encana Corp – slide 8
    Cash Flow & Cost Improvements Key Operational Drivers - Q1 2014 ? Focus on operational excellence ? Deep Panuke ran at >85% utilization and contributed ~$395 million to operating cash flow ? Increase in liquids volumes ? 56% y-o-y…
  9. May 2014 Investor Presentation Update – Encana Corp – slide 9
    ? Allocated 80% of Q1 capital to core growth plays ? Announced acquisition of 6th core growth play in Eagle Ford ? Announced asset sales of ~$2.3B expected gross proceeds ? Filed final prospectus for PrairieSky Royalty IPO Year to…
  10. May 2014 Investor Presentation Update – Encana Corp – slide 10
    *Does not include carry capital. 2014 carry capital is expected to be ~$750 million - $1 billion. Based on mid-point of guidance. Capital Focused on Growth Assets Accelerate Investment in High Return Liquids 2013 ~75% of $2.4 - $2.5B…
  11. May 2014 Investor Presentation Update – Encana Corp – slide 11
    Time Focused on Growing Value, Not Volumes Production *Illustrative example based on 2014F pre-hedge upstream operating cash flow estimates. Core Growth Assets to Deliver Significantly Higher Margins than Base in 2014 Base production…
  12. May 2014 Investor Presentation Update – Encana Corp – slide 12
    Key Objectives for Five Core Growth Assets in 2014 Focus, Acceleration, Optimization In 2014F, the five core growth assets are expected to generate ~45% of total pre-hedge upstream operating CF from ~25% of total production Montney…
  13. May 2014 Investor Presentation Update – Encana Corp – slide 13
    Core Growth Play Update ? May 2014 Strong Results Across The Portfolio ? Longer laterals, more intense stimulation in CRP has increased IP rates by ~75% ? Pipestone drilling costs trending down by ~15% ? 8 rigs currently running ?…
  14. May 2014 Investor Presentation Update – Encana Corp – slide 14
    Base Asset Optimization ? Focus across all fields on base optimization projects to offset PDP declines ? Well recompletions ? Artificial lift initiatives ? Tubing installation projects ? Sour gas processing facility ? Field booster…
  15. May 2014 Investor Presentation Update – Encana Corp – slide 15
    Strategy To Deliver Sustainable Returns ? Disciplined and focused capital program ? 75% of 2014 capex allocated to core growth assets ? Pre-hedge upstream operating cash flow expected to be up ~50% year over year ? Accelerate…
  16. May 2014 Investor Presentation Update – Encana Corp – slide 16
    Encana Corporation Disciplined Focus on Profitable Growth ? Disciplined focus on generating profitable growth ? Capital allocated to core growth high return and scalable assets ? Acceleration of oil/liquids growth ? Reduce cost…
  17. May 2014 Investor Presentation Update – Encana Corp – slide 17
    Winning Core Competencies Aligned Organizational Structure ? High quality rocks ? Scale ? Running room ? Oil and gas ? Disciplined & dynamic ? Strong link to strategy ? Centrally controlled ? Informed ? High return projects ?…
  18. May 2014 Investor Presentation Update – Encana Corp – slide 18
    Q1 in Review Strategy Delivering Results Q1 2014 Q1 2013 % Ch Total Cash Flow ($MM) 1,094 579 89 - $ per share, diluted 1.48 0.79 87 Operating Earnings ($MM) 515 179 188 - $ per share, diluted 0.70 0.24 192 Capital Investment ($MM)…
  19. May 2014 Investor Presentation Update – Encana Corp – slide 19
    Pursuing Value vs. Volumes 2013 2014F Upstream Operating Cash Flow ($B) 3.2 3.7- 3.9 Total Cash Flow ($B) 2.6 2.9 ? 3.0 Capital Investment ($B) 2.7 2.4 ? 2.5 Dividend Cash Outflow ($B) 0.4 0.2 Net Free Cash Flow ($B) (0.5) 0.3…
  20. May 2014 Investor Presentation Update – Encana Corp – slide 20
    For illustrative purposes only. Please refer to company Guidance of May 13, 2014. 1)Transportation and processing cost increases in 2014 primarily due to Deep Panuke firm capacity agreements. 2) 2013 includes impact of LTI of…
  21. May 2014 Investor Presentation Update – Encana Corp – slide 21
    Why the Core Growth Assets Matter Liquids Rich & Oil Opportunity Set Montney Liquids rich Duvernay High value condensate DJ Basin Oil/liquids rich San Juan Oil Tuscaloosa Marine Shale Oil ? Returns >40% ? Liquids rich and oil…
  22. May 2014 Investor Presentation Update – Encana Corp – slide 22
    Montney Decades of Low Cost Inventory ? 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 ? Encana acreage in most…
  23. May 2014 Investor Presentation Update – Encana Corp – slide 23
    *Supply Cost is defined as the flat NYMEX/WTI price that yields an IRR of 9% and does not include land or G&A costs. Low end of natural gas supply cost reflects joint venture leverage. Montney Key Statistics Land (net acres) 575,000…
  24. May 2014 Investor Presentation Update – Encana Corp – slide 24
    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…
  25. May 2014 Investor Presentation Update – Encana Corp – slide 25
    Gas 50% Liquids 10% Duvernay 2017F Production ? 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 ? Potential for 20…
  26. May 2014 Investor Presentation Update – Encana Corp – slide 26
    *Supply Cost is defined as the flat NYMEX/WTI price that yields an IRR of 9% and does not include land or G&A costs. Reflects joint venture leverage. RPH = Resource Play Hub. (1) Range reflects well cost variability for a two well pad…
  27. May 2014 Investor Presentation Update – Encana Corp – slide 27
    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)
  28. May 2014 Investor Presentation Update – Encana Corp – slide 28
    DJ Basin Delivering High Margin Liquids Production Today ? Light oil play with significant scale ? Encana in heart of the Wattenberg field ? Strong economics - oil and condensate make up 70% of total liquids ? Significant well cost…
  29. May 2014 Investor Presentation Update – Encana Corp – slide 29
    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) 500 ? 700 Well costs (DCT) $4.5 ? $5.5 million Royalty rate 20% 2014F…
  30. May 2014 Investor Presentation Update – Encana Corp – slide 30
    San Juan First Mover in New Oil Play ? 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 performance at or…
  31. May 2014 Investor Presentation Update – Encana Corp – slide 31
    San Juan Key Statistics Land (net acres) 176,000 Average working interest 54% RPH type curve EUR/well 600 ? 680 MBoe RPH type curve ROR 45% ? 70% Well inventory (gross) 700+ RPH well costs (DCT) $4 ? $5 million Royalty rate 20%…
  32. May 2014 Investor Presentation Update – Encana Corp – slide 32
    Tuscaloosa Marine Shale Massive Oil Resource, Ideal for Execution at Scale ? Emerging oil asset with massive upside potential ? Estimated 8 BBoe of PIIP ? Potential to produce >50,000 bbls/d ? ~65% of Encana?s 200k net acres is Tier…
  33. May 2014 Investor Presentation Update – Encana Corp – slide 33
    TMS Key Statistics Land (net acres) 200,000 Average working interest 60% RPH type curve EUR/well 700 ? 800 MBoe RPH type curve ROR 40% ? 50% Well inventory (gross) 1,000 RPH well costs (DCT) $12 ? $14 million Royalty rate 20%…
  34. May 2014 Investor Presentation Update – Encana Corp – slide 34
    Eagle Ford Core Position in a Premier Oil Play ? Largely contiguous position in the Karnes Trough, considered the core of the core of the Eagle Ford ? Acreage primarily lies in the condensate / volatile oil window, the most active…
  35. May 2014 Investor Presentation Update – Encana Corp – slide 35
    Summary of Eagle Ford Transaction Terms 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…
  36. May 2014 Investor Presentation Update – Encana Corp – slide 36
    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 ?…
  37. May 2014 Investor Presentation Update – Encana Corp – slide 37
    2013 ? 2014F Total Liquids Production 2014F Average Liquids Production Growth of ~30% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Base Five Core Growth Plays bbls/d 2014 Deliverables ? 1st half ?…
  38. May 2014 Investor Presentation Update – Encana Corp – slide 38
    2013 ? 2014F Total Gas Production 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Base Five core growth plays MMcf/d Jan 2013 Jan 2014F Dec 2014F Jonah disposition
  39. May 2014 Investor Presentation Update – Encana Corp – slide 39
    Strategy Delivers Sustainable Returns ? Target +10% CAGR CFPS through 2017 ? Expected CFPS growth 3x faster than production ? Driven by accelerated capital allocation to high margin oil and condensate assets ? Anticipate ~75% of…
  40. May 2014 Investor Presentation Update – Encana Corp – slide 40
    Financial Strength Liquidity Supports Execution of Strategy ? 2014 capex + dividends aligned with cash flow ? Guidance indicates $300 million of free cash flow in 2014 ? Investment grade credit rating ? S&P revised outlook to…
  41. May 2014 Investor Presentation Update – Encana Corp – slide 41
    Credit Rating Comparison As of March 31, 2014 APA EOG DVN ECA TLM APC SWN CHK 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 BB…
  42. May 2014 Investor Presentation Update – Encana Corp – slide 42
    Liquids Value Chain Projected Composition of Total Liquids Production 2013 2014F 2014F Pricing (%WTI) Ethane 14% 14% 10 - 15% Propane 13% 12% 30 - 35% Butane 8% 8% 55 - 60% Oil and Condensate 65% 66% 85 - 90% Liquids primarily…
  43. May 2014 Investor Presentation Update – Encana Corp – slide 43
    0.8 2.1 $4.18 $4.37 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2014 2015 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 Updated Hedging Position 2014 Hedge Program Adds Greater Certainty To Cash Flow Bcf/d $/Mcf *As at March 31, 2014,…
  44. May 2014 Investor Presentation Update – Encana Corp – slide 44
    2014F ENCANA CORPORATE GUIDANCE US$, U.S. GAAP May 13, 2014 2014F Cash Flow ($ billions, except per share amount) Total Cash Flow (1)(2) 2.9 ? 3.0 - Per common share, diluted ($/share) 3.90 ? 4.05 Weighted average common shares…
  45. May 2014 Investor Presentation Update – Encana Corp – slide 45
    Operating Costs ($/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) 1.40 2014 Sensitivities (1) ($ millions)…

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