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December 2013 Investor Presentation – Encana Corp

Encana Corp · Dec 13, 2013 · 40 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. December 2013 Investor Presentation – Encana Corp – slide 1
    Getting Back to Winning 2014 Guidance Encana Corporation Corporate Presentation December 2013 Vision Strategy Goals
  2. December 2013 Investor Presentation – 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. December 2013 Investor Presentation – Encana Corp – slide 3
    ? Focused and disciplined capital allocation to five 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. December 2013 Investor Presentation – 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. December 2013 Investor Presentation – Encana Corp – slide 5
    Operational Excellence 2014 2014 Strategy Scorecard Delivering Value Now ? Focus on cost reduction and capital efficiency improvement ? +10% increase in 2014F netbacks ? Complete appraisal of emerging liquids plays ? TMS and South…
  6. December 2013 Investor Presentation – Encana Corp – slide 6
    Balance Sheet Integrity 2014 2014 Strategy Scorecard Delivering Value Now ? Capex + dividends* to be aligned with cash flow ? Clearwater Royalty Business IPO ? Plan to repay May 2014 debt maturity ($1 billion) with cash ? Maintain…
  7. December 2013 Investor Presentation – Encana Corp – slide 7
    3 *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 2013F ~75% of $2.4 -…
  8. December 2013 Investor Presentation – Encana Corp – slide 8
    Time Focused on Growing Value, Not Volumes Production *Illustrative example based on 2014F pre-hedge upstream operating cash flow estimates. Five Core Growth Assets to Deliver >2x CF*/Mcfe Than Base in 2014 Base production Five core…
  9. December 2013 Investor Presentation – Encana Corp – slide 9
    2014 Guidance ? Key Elements Demonstrating Business Model Sustainability and Improvement ? Guidance uses same NYMEX/WTI price assumptions as in 2013 ? Upstream operating cash flow expected to be up >10% year over year (before hedges)…
  10. December 2013 Investor Presentation – Encana Corp – slide 10
    2013F ? 2014F Total Liquids Production 2014F Average Liquids Production Growth of ~30% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Base Five Core Growth Plays bbls/d 2014 Deliverables ? 1st half ?…
  11. December 2013 Investor Presentation – Encana Corp – slide 11
    Key Objectives for Five Core Growth Assets in 2014 Focus, Acceleration, Optimization In 2014F, the five core growth assets are expected to generate ~45% of total pre-hedge upstream operating CF from ~25% of total production Montney…
  12. December 2013 Investor Presentation – Encana Corp – slide 12
    Strategy To Deliver Sustainable Returns ? Disciplined and focused capital program ? 75% of 2014 capex to five core growth assets ? Pre-hedge upstream operating CF expected to be up >10% year over year ? 2014F total cash flow in line…
  13. December 2013 Investor Presentation – Encana Corp – slide 13
    Encana Corporation Disciplined Focus on Profitable Growth ? Disciplined focus on generating profitable growth ? Capital allocated to five core growth high return and scalable assets ? Acceleration of oil/liquids growth ? Reduce cost…
  14. December 2013 Investor Presentation – Encana Corp – slide 14
    Pursuing Value vs. Volumes 2013F 2014F Upstream Operating Cash Flow ($B) 3.0 ? 3.2 3.0 ? 3.2 Total Cash Flow ($B) 2.4 ? 2.5 2.4 ? 2.5 Capital Investment ($B) 2.7 ? 2.9 2.4 ? 2.5 Dividend Cash Outflow ($B) 0.4 0.2 Net Free Cash Flow…
  15. December 2013 Investor Presentation – Encana Corp – slide 15
    For illustrative purposes only. Please refer to company Guidance of December 11, 2013. (1)Transportation and processing cost increases in 2014 primarily due to Deep Panuke firm capacity agreements. (2) Excludes LTI impact Focusing…
  16. December 2013 Investor Presentation – Encana Corp – slide 16
    Why the Five 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 Clearwater Royalty Business IPO…
  17. December 2013 Investor Presentation – Encana Corp – slide 17
    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…
  18. December 2013 Investor Presentation – Encana Corp – slide 18
    *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…
  19. December 2013 Investor Presentation – Encana Corp – slide 19
    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…
  20. December 2013 Investor Presentation – Encana Corp – slide 20
    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…
  21. December 2013 Investor Presentation – Encana Corp – slide 21
    *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…
  22. December 2013 Investor Presentation – Encana Corp – slide 22
    Unconventional Reservoir Comparison Duvernay ? World Class Reservoir *Encana estimate. Source: RBC Richardson Barr / RBC Rundle estimates, industry estimates, DOE April 2009 publication ?Modern Shale Gas: A Primer? Reservoir…
  23. December 2013 Investor Presentation – Encana Corp – slide 23
    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)
  24. December 2013 Investor Presentation – Encana Corp – slide 24
    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…
  25. December 2013 Investor Presentation – Encana Corp – slide 25
    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…
  26. December 2013 Investor Presentation – Encana Corp – slide 26
    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…
  27. December 2013 Investor Presentation – Encana Corp – slide 27
    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%…
  28. December 2013 Investor Presentation – Encana Corp – slide 28
    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 ? >60% of Encana?s 300k net acres is Tier…
  29. December 2013 Investor Presentation – Encana Corp – slide 29
    TMS Key Statistics Land (net acres) 302,000 Average working interest 75% RPH type curve EUR/well 700 ? 800 MBoe RPH type curve ROR 40% ? 50% Well inventory (gross) 1,300 RPH well costs (DCT) $12 ? $14 million Royalty rate 20%…
  30. December 2013 Investor Presentation – Encana Corp – slide 30
    Clearwater Royalty Business Public Offering Unlocking New Value ? Surfacing value from Encana?s large portfolio of Alberta mineral fee title lands ? ~5.2 million net acres with freehold oil or gas rights ? Transferring fee title and…
  31. December 2013 Investor Presentation – Encana Corp – slide 31
    Total Gas Production 2013F ? 2014F Modest Decline in 2014 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
  32. December 2013 Investor Presentation – Encana Corp – slide 32
    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…
  33. December 2013 Investor Presentation – Encana Corp – slide 33
    Maintaining Financial Strength & Flexibility ? Paid October 2013 debt maturity ($500 million) with cash ? Intend to repay May 2014 debt maturity ($1 billion) with cash ? $3.3 billion of cash and short term investments as at…
  34. December 2013 Investor Presentation – Encana Corp – slide 34
    Credit Rating Comparison As of November 30, 2013 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…
  35. December 2013 Investor Presentation – Encana Corp – slide 35
    Commodity Outlook Natural Gas Due to abundant, low cost supply, natural gas prices are expected to remain range bound around current levels September 2013. $0 $2 $4 $6 $8 $10 $12 2003 2004 2005 2006 2007 2008 2009 2010 2011…
  36. December 2013 Investor Presentation – Encana Corp – slide 36
    Commodity Outlook North American Oil $0 $20 $40 $60 $80 $100 $120 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 WTI Historical WTI Futures PIRA CERA Bank Consensus Oil prices are…
  37. December 2013 Investor Presentation – Encana Corp – slide 37
    Liquids Value Chain Projected Composition of Total Liquids Production 2013F 2014F 2014F Pricing (%WTI) Ethane 15% 14% 10 - 15% Propane 13% 12% 30 - 35% Butane 8% 8% 55 - 60% Oil and Condensate 64% 66% 85 - 90% Liquids primarily…
  38. December 2013 Investor Presentation – Encana Corp – slide 38
    0.8 1.5 2.3 $4.37 $4.19 $4.37 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2013 2014 2015 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 Detailed Market Fundamentals Key Strength - Supports Risk Management Bcf/d $/Mcf *As at September 30,…
  39. December 2013 Investor Presentation – Encana Corp – slide 39
    2014F ENCANA CORPORATE GUIDANCE US$, U.S. GAAP December 11, 2013 2014F Cash Flow ($ billions, except per share amount) Total Cash Flow (1)(2) 2.4 ? 2.5 - Per common share, diluted ($/share) 3.24 ? 3.37 Weighted average common…
  40. December 2013 Investor Presentation – Encana Corp – slide 40
    Operating Costs ($/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 1.25 2014 Sensitivities (1) ($ millions) Cash…

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