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January 2014 Investor Presentation – Cenovus Energy Inc.

Cenovus Energy Inc. · Jan 23, 2014 · 53 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. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 1
    CIBC Institutional Investor Conference Paul Reimer, Senior Vice-President, Marketing, Transportation & Power Whistler | January 22 - 23, 2014
  2. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 2
    A different kind of oil sands Focus on total shareholder return & building net asset value Foster Creek SAGD project Top-tier oil sands portfolio generates predictable, reliable growth Strong project execution & innovation drives…
  3. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 3
    Strong integrated oil portfolio TSX, NYSE | CVE Enterprise value $28 billion Shares outstanding 756 MM 2013F production Oil & NGLs Natural gas 181 Mbbls/d 525 MMcf/d 2012 proved & probable reserves 3.1 BBOE Bitumen Economic…
  4. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 4
    2014 milestones Q1 Grow reserves & contingent resources ?? Anticipate Grand Rapids regulatory approval (previously Q4 2013) Drill approximately 300 stratigraphic test wells & assess results Progress Narrows Lake phase A engineering,…
  5. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 5
    2013 milestones Q1 Grow reserves & contingent resources ??? Progress procurement, engineering & ground work at Narrows Lake project ? Drill 350 to 400 stratigraphic test wells & assess results ? Submit regulatory application for…
  6. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 6
    SAGD growth is the core of our strategy See advisory for information on the resource estimates. There is no certainty that it will be commercially viable to produce any portion of the contingent resources. Undiscovered BIIP 50 Bbbls…
  7. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 7
    0 100 200 300 400 500 600 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F Oil sands Pelican Lake Conventional oil & NGLs Mbbls/d Volumes are shown before royalties and net to Cenovus. 2013F…
  8. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 8
    0 50 100 150 200 250 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F Foster Creek Christina Lake Oil sands production Mbbls/d Production is shown before royalties on a gross basis. 2013F is based…
  9. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 9
    0 100 200 300 400 500 600 700 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F Mbbls/d CL ? C FC ? A CL ? A CL ? B FC ? C FC ? D FC ? E FC ? B CL ? D CL ? E CL ? F FC ?…
  10. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 10
    Project phase Regulatory status First production target Expected production capacity (bbls/d) gross Foster Creek1 A ? E 120,000 F Approved Q3-2014F 45,0002 G Approved 2015F 40,000 H Approved 2016F 40,000 J Submitted Q1-2013 2019F…
  11. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 11
    0 100 200 300 400 500 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F Emerging plays Narrows Lake Christina Lake Foster Creek Actual Mbbls/d Actual volumes are shown before royalties and on a…
  12. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 12
    0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 GR FC TL CL NL ? Lower capital cost ? Lower operating cost ? Smaller surface footprint ? Lower energy usage ? Lower emissions ? Less water usage Low SOR means: Peer producing projects…
  13. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 13
    Capital efficiency is calculated based on production design capacity for each phase. *Foster Creek FG&H expectations reflect greenfield expansion and design enhancement initiatives. **CDE optimization phase. Narrows Lake 0 10,000…
  14. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 14
    Engineering & procurement ? Standard, repeatable design ? Outsource detailed engineering ? Standard equipment & services Fabrication ? Cenovus-owned & operated module yard (Nisku) ? Eliminates field rework & enhances safety…
  15. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 15
    0 20 40 60 80 100 120 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Mbbls/d Production is shown on a gross basis. Daily production at Foster Creek Full capacity is ~95% utilization
  16. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 16
    0 20 40 60 80 100 120 140 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Mbbls/d Production is shown on a gross basis. Christina Lake is a top tier reservoir Daily production
  17. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 17
    0 20 40 60 80 100 120 175 global oil projects Oil sands SAGD projects Source: Goldman Sachs, Cenovus. Goldman Sachs defines breakeven as the US dollar equivalent WTI oil price required to achieve a 10% return. Cumulative peak…
  18. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 18
    Capital Tax & return (9% after-tax) Operating costs Royalties Blending & transport Light-heavy differential Supply cost (US$/bbl) at Investor Day: Project 2010 2013 Foster Creek 40 - 50 35 - 45 Christina Lake 45 - 55 35 - 45…
  19. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 19
    $2 - $3/bbl Growth capital: ? Phase expansion (includes all infrastructure & initial wells) ? Phase debottlenecking & optimization ? Numerator for capital efficiency calculation $6 - $7/bbl Sustaining capital: ? All wells, pads,…
  20. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 20
    Foster Creek Christina Lake Narrows Lake Grand Rapids Telephone Lake Working interest 50% 50% 50% 100% 100% Potential size (Mbbls/d gross) 310 310 130 180 300+* Design SOR 2.1 1.7 2.1 SAGD 1.6 SAP 3.0 - 3.5 2.1 Supply cost (US$/bbl…
  21. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 21
    Technology development drives SAGD performance: ? Wedge Well? technology ? Blowdown boiler ? Electric submersible pumps ? SkyStrat? drilling rig ? Solvent aided process ? Dewatering process Driving innovation in oil sands through…
  22. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 22
    Wedge Well? technology commercialized in 2010 Technology details: ? < 0.1 average SOR ? First year production rate of 600 - 800 bbls/d at Foster Creek, current average of 400 bbls/d; 300 - 400 bbls/d at Christina Lake ?…
  23. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 23
    ? Decreases SOR by ~30% ? Increases full field recovery rates by ~15% ? Increases growth capital 10 - 20% ? Decreases sustaining capital by ~10% ? Reduces non-fuel operating costs by 5 - 10% ? Lowers emissions, water usage &…
  24. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 24
    Telephone Lake commercial project: ? Regulatory approval expected Q2 2014 ? Initial production 90,000 bbls/d (phases A & B) ? Project SOR - 2.1 ? Peak production capacity 300,000+ bbls/d Borealis region: ? Contingent resources -…
  25. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 25
    Dewatering pilot update: ? Purpose is to reduce SOR ? Working as expected ? 4D seismic & well logs indicate we have successfully replaced water & confined air ? ~65% of mobile top water has been displaced in the pilot area to date…
  26. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 26
    SAGD pilot update: ? Operating for 30 months ? Two well pairs are currently producing ? Second well pair SAGD conversion occurred in mid-February Commercial project: ? Regulatory approval expected in Q1 2014 ? 180,000 bbls/d ?…
  27. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 27
    Traditional strat well SkyStrat? drilling rig 90 day window Year-round drilling High access costs Lower access costs Short season leads to labour inefficiencies Year-round drilling ensures access to top crews Access roads impact…
  28. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 28
    Upstream operating cash flow 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013F 2014F 2015F Oil sands Conventional oil Natural gas Conventional oil includes Pelican Lake and NGLs. 2013F based on commodity price assumptions as…
  29. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 29
    Conventional oil & gas: ? ~70% fee lands ? >20% IRR ? Payback less than 3 years ? Scalable & flexible capital program ? Diversification of product streams Pelican Lake & Weyburn: ? Core competency in enhanced oil recovery ?…
  30. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 30
    0.0 0.2 0.4 0.6 2010 2011 2012 2013F 2014F $ billion Capital Operating cash flow 0 10 20 30 2010 2011 2012 2013F 2014F Mbbls/d Production Operating cash flow is a non-GAAP measure. See advisory for information on Pelican Lake…
  31. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 31
    0 200 400 600 800 2010 2011 2012 2013F 2014F Production Natural gas: ? Significant cash flow with minimal capital investment & low operating costs ? Primarily fee lands ? CBM recompletions have strong returns ? 2013F…
  32. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 32
    Production Alberta pricing Transportation North American & global crude pricing Refining Global product pricing Participating in the value chain to expand margin Expanding margin through market access & integration
  33. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 33
    Wood River Refinery Borger Refinery ? Refineries have access to discounted crudes ? Wood River accesses multiple pipelines - Keystone, Express-Platte, Mustang, Ozark ? Borger has access to Canadian heavy, West Texas Sour & growing…
  34. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 34
    0.0 0.5 1.0 1.5 2009 2010 2011 2012 2013F 2014F Capital Operating cash flow $ billion ? Feedstock advantage & heavy processing capacity drive cash flow ? Minimal annual maintenance capital of $150 - $160 million 2013F and 2014F…
  35. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 35
    0 40 80 120 160 200 240 2011 2012 2013F 2014F* Mbbls/d Blended bitumen Blended conventional heavy *Expected net production capacity based on midpoints of the 2014 guidance document dated December 12, 2013. Blended conventional…
  36. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 36
    ? West Coast: Trans Mountain - 11,500 bbls/d ? US Gulf Coast: Pegasus, rail, barge - 30,000 bbls/d ? West Coast: Trans Mountain & Northern Gateway up to 175,000 bbls/d ? US Gulf Coast: Keystone XL & Enbridge US Gulf Coast access…
  37. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 37
    6,000 10,000 30,000 0 10,000 20,000 30,000 40,000 Current 2013F exit 2014F exit ? Rail opens new markets not currently pipeline connected ? Ability to move wider variety of crudes ? Pricing uplift exceeds rail costs ? Expect…
  38. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 38
    ? Supports infrastructure expansion for greater market access ? Provides secure access to new markets ? Defines costs for an agreed period ? Creates opportunity for preferred terms & tolling as anchor shipper Benefits of firm…
  39. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 39
    0 400 800 1,200 1,600 10.00 15.00 20.00 Refining operating cash flow sensitivities ? Operating cash flow $300 - $700 million* ? Capital $150 - $160 million ? Targeting 55% heavy crude input $1 change in crack spread = ~$65…
  40. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 40
    Operational ? Heavy oil production integrated with refining capacity ? Scalable conventional oil programs provide flexibility ? Portfolio approach to transportation Financial ? Financial strength to support growth plans ?…
  41. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 41
    2014F capital budget: $2.8 - $3.1 billion 2013F based on the October 24, 2013 guidance document. 2014F based on midpoints of the December 12, 2013 guidance document. See advisory. Capital investment focused on SAGD oil growth 2013F…
  42. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 42
    Annual capital allocation priorities: 1. Committed capital of ~$2.0 billion* ? support existing business operations ? progress approved expansions at multi-phase projects 2. Dividend payments ? ~$730 million in 2013 ? 10% increase…
  43. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 43
    6 5 4 3 2 1 0 2010 2011 2012 2013F 2014F $ billions 2013F based on commodity price assumptions outlined in the October 24, 2013 guidance document. 2014F based on commodity price assumptions outlined in the December 12, 2013 guidance…
  44. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 44
    *Non-GAAP measures. See advisory. Ensure significant liquidity & long dated debt maturities ? US$4.75 billion in notes with weighted average maturity in excess of 15 years ? $3.0 billion committed undrawn credit facility maturing…
  45. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 45
    Target range Debt to adjusted EBITDA ratios 0% 10% 20% 30% 40% 2012 2013F 2014F Debt to capitalization* Net debt to capitalization* Times Target range 0.0 0.5 1.0 1.5 2.0 2012 2013F 2014F Debt to adjusted EBITDA* Net debt…
  46. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 46
    Crude unhedged 47% Natural gas unhedged 7% Refining 12% Crude hedged 34% Hedges at September 30, 2013 Volume hedged Brent price $/bbl Production 2014F Volume % hedged Crude 50,000 bbls/d US$102.86 199 Mbbls/d 25%…
  47. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 47
    ? Strong financial health ? Sustainable pace of development ? Reliable, predictable cash flow to support payments ? Ongoing capital discipline 0.00 0.20 0.40 0.60 0.80 1.00 2011 2012 2013 $0.80 $0.88 $0.968 Dividend growth…
  48. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 48
    ^ Steepbank East McMurray Telephone Lake Grosmont Grand Rapids Foster Creek Proper Narrows Lake West Kirby Winefred Lake Christina Lake Proper Wabiskaw BOREALIS REGION GREATER PELICAN REGION CHRISTINA LAKE REGION FOSTER…
  49. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 49
    October 24, 2013 Narrows Lake Q4 2013 2013 Production (Mbbls/d) Operating cash flow ($ millions) (1) 210 - 225 875 - 900 190 - 210 610 - 630 400 - 435 1,485 - 1,530 Capital expenditures ($ millions) 210 - 225 810 - 830 175 - 190 675…
  50. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 50
    Q4 2013 2013 Total cash flow ($ billions) (1) 0.8 - 0.9 3.6 - 3.7 1.05 - 1.20 4.75 - 4.85 Operating cash flow ($ billions) (1) 1.0 - 1.1 4.4 - 4.6 Total capital expenditures ($ billions) 1.0 - 1.1 3.3 - 3.5 General & administrative…
  51. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 51
    December 12, 2013 Total Production (Mbbls/d) (1) 54 - 59 62 - 68 116 - 128 Operating cash flow ($ millions) (2) 880 - 980 920 - 1,020 1,800 - 2,000 Capital expenditures ($ millions) 680 - 760 750 - 820 210 - 230 1,640 - 1,810…
  52. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 52
    Oil production (Mbbls/d) (1) 190 - 208 Natural gas production (MMcf/d) 450 - 490 Total cash flow ($ billions) (2) 3.0 - 3.7 - per common share, diluted ($/share) 3.95 - 4.90 Operating cash flow ($ billions) (2) 3.7 - 4.5 Total…
  53. January 2014 Investor Presentation – Cenovus Energy Inc. – slide 53
    Investor relatIons contacts Graham Ingram senior analyst, Investor relations graham.ingram@cenovus.com 403.766.2849 Anna Kozicky senior analyst, Investor relations anna.kozicky@cenovus.com 403.766.4277 Bill Stait senior analyst,…

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