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May 2012 Investor Presentation – Encana Corp

Encana Corp · May 11, 2012 · 68 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 2012 Investor Presentation – Encana Corp – slide 1
    Encana Corporation Corporate Presentation May 2012 take a closer look
  2. May 2012 Investor Presentation – Encana Corp – slide 2
    2 Encana Corporation Focused On What We Do Best North America?s Resource Play Specialist ? Huge portfolio of resource plays ? Recognized leader in innovation and cost reduction Disciplined capital investment and project execution ?…
  3. May 2012 Investor Presentation – Encana Corp – slide 3
    3 Encana Corporation: Key Long-term Drivers ? Objectives: ? Invest in highest return projects ? Achieve greater market recognition for the value within our large asset base ? Leverage technology and expertise to lower cost…
  4. May 2012 Investor Presentation – Encana Corp – slide 4
    4 Greater Sierra (inc. Horn River) Duvernay Cutbank Ridge (inc. Montney) Bighorn Coalbed Methane Jonah Niobrara/Mancos DJ Niobrara Piceance Texas Haynesville Tuscaloosa Land as at December 31, 2011 *Excludes potential…
  5. May 2012 Investor Presentation – Encana Corp – slide 5
    5 Encana Corporation High-grading & Focusing of Portfolio Dividends* Horn River Share purchases* East Texas Haynesville Integrated oilsands business (Cenovus) Natural gas storage Chad Offshore Brazil 2006 - 2010 2006…
  6. May 2012 Investor Presentation – Encana Corp – slide 6
    6 Encana Today Rebalancing of Portfolio & Continued High-grading Dividends** Kitimat LNG export Increasing liquids extraction capacity: total liquids forecast > 80,000 bbl/d* Large-scale joint ventures Duvernay, Tuscaloosa &…
  7. May 2012 Investor Presentation – Encana Corp – slide 7
    Encana Corporation North America?s Resource Play Specialist Established history of developing resource plays from the ground up: ? From early stage identification ? Supported by dedicated new venture teams ? To large scale…
  8. May 2012 Investor Presentation – Encana Corp – slide 8
    8 Leading N.A. Resource Play Company Encana Resource Play Execution Methodology Resource Play Methodology Work With Governments ? Engage Stakeholders Address Infrastructure Exploration Assemble Land Base Pilot Understand…
  9. May 2012 Investor Presentation – Encana Corp – slide 9
    9 0 20 40 60 80 100 Peak Rate (%) New Plays Commercial Assets Harvest Assets Cutbank Ridge - Montney Cutbank Ridge - Montney Horseshoe Canyon CBM Horseshoe Canyon CBM Bighorn Bighorn Horn River ? Two Island Lake Horn River ?…
  10. May 2012 Investor Presentation – Encana Corp – slide 10
    Meeting the Challenge Adapting to a Prolonged Low Natural Gas Price Environment ? Oil & liquids plays ? Balancing commodity mix ? 55% capital directed to liquids plays ? Advancing potential liquids plays; developing new Key Resource…
  11. May 2012 Investor Presentation – Encana Corp – slide 11
    Increasing Exposure to Oil & NGLs ? Pursuing a full cycle, organic approach to shifting portfolio weighting ? Leveraging our core competency of horizontal drilling and completions ? Control over 2.8 million net acres of land with…
  12. May 2012 Investor Presentation – Encana Corp – slide 12
    12 Evaluating New Potential Oil & Liquids Plays 2012F - $400 MM Capital Spend to Mid Year Potential New Play Wells Duvernay 5 - 10 Tuscaloosa 5+ DJ Basin Niobrara 10+ Eaglebine 5+ Piceance Niobrara/Mancos 5+ San Juan 5+ Other 2…
  13. May 2012 Investor Presentation – Encana Corp – slide 13
    13 Attracting Third Party Investments ? Immediate recognition of hidden value ? Achieves targeted reduction in resource inventory ? Enhances financial flexibility ? Creates strategic partnerships ? Aligns with goal to expand…
  14. May 2012 Investor Presentation – Encana Corp – slide 14
    14 ($6.7) $2.0 $2.0 ($1.7) JV funded (25% carry) ECA funded NPV per well comparison* Supply cost: $3.15/MMbtu $1.90/MMbtu PIR @ 9 %: 0.35 1.30 Technical F&D: $1.40/mcf $0.70/mcf Accelerating Value Leveraging Third Party (JV)…
  15. May 2012 Investor Presentation – Encana Corp – slide 15
    15 Exploring Potential Additional Transactions Leveraging Our Asset Base ? Additional 10% of Cutbank Ridge Partnership ? LNG linked upstream packages ? upstream dry gas assets that support West Coast Canada or Gulf Coast U.S. LNG…
  16. May 2012 Investor Presentation – Encana Corp – slide 16
    16 ? Low cost focus - Advance resource play hub design and development ? Returns - Increase exposure to oil and natural gas liquids ? Leverage - Attract third party investments in undeveloped reserves and resources ? Value ?…
  17. May 2012 Investor Presentation – Encana Corp – slide 17
    17 ? Preserve natural gas resource potential ? Advance potential liquids plays ? Leverage technology and innovation to lower cost structures ? De-risk capital exposure and advance development through joint ventures ? Meet…
  18. May 2012 Investor Presentation – Encana Corp – slide 18
    18 USA Division Potential Liquids Portfolio 2011 Highlights ? Develop a low cost portfolio of high impact liquids plays ? Continue appraisal drilling program to assess prospectivity within captured plays ? Capture additional…
  19. May 2012 Investor Presentation – Encana Corp – slide 19
    9 19 Tuscaloosa Marine Shale Potential Light Oil Play ? 310,000 net acres ? 80% NRI ? 2-7 year lease term ? Vertical depth: ? 11,000 feet ? 2012F program: ? 2-3 rigs; 6 wells in first half of 2012 ? Weyerhauser well ? 5,000…
  20. May 2012 Investor Presentation – Encana Corp – slide 20
    20 Michigan Basin Collingwood/Utica Shale Early Entry ? First Mover Advantage ? 430,000 net acres ? Acquired at ~$200/acre ? Single well can hold 7,500 acres ? Vertical depth: ? 4,000 to 9,500 feet ? 2011 program ? Drilled 2…
  21. May 2012 Investor Presentation – Encana Corp – slide 21
    21 ? 48,000 net acres ? Vertical depth: ? 7,000 to 8,000 feet ? 2011 program: ? Drilled and completed 5 horizontal wells ? Oil IPs ranged between 260 and 540 bbls/d ? NGL production 100 ? 200 bbls/d DJ Basin Niobrara ? Wattenberg…
  22. May 2012 Investor Presentation – Encana Corp – slide 22
    22 Encana USA Division Additional Potential Oil & Liquids Plays San Juan Basin ? New Mexico light oil play ? ~168,000 net acres ? Vertical depth ~6,000 ft ? Five well exploration program in first half of 2012 Eaglebine…
  23. May 2012 Investor Presentation – Encana Corp – slide 23
    23 Haynesville Shale A Top-tier Asset in a Dynamic Market Region ? Haynesville industry-wide production has grown to approximately 6.5 to 7.0 Bcf/d in the past 5 years ? The asset: ? Is highly competitive on a cost basis ? Is one…
  24. May 2012 Investor Presentation – Encana Corp – slide 24
    24 Haynesville ? Encana Leading the Way Resource Play Hub Program ? Superior safety performance ? Reduced environmental impact ? Repeatable execution efficiency ? Long lateral development ? Regulatory changes ? Deep well…
  25. May 2012 Investor Presentation – Encana Corp – slide 25
    25 Haynesville Supply Cost Evolution 6 5 4 3 2 1 0 2008 LR 2009 LR 2010 RPH 2011F RPH 2012F ? Continuous completion design evolution ? Optimum well density ? Slowback ? Deeper longer wells ? Ultra long laterals ? Cross…
  26. May 2012 Investor Presentation – Encana Corp – slide 26
    26 Haynesville Resource Play Hub Long Lateral Current Pattern 640 acre, 4,600 ft lateral Previously undeveloped setback area Planned RPH Well Lease Retention Well New Planned Pattern 1,920 acre, 7,500 ft lateral Encana Leading…
  27. May 2012 Investor Presentation – Encana Corp – slide 27
    27 2012 Strategic Focus ? Implement Mitsubishi partnership ? Evaluate Duvernay and other potential liquids-rich assets ? Advance liquids extraction through deep-cut midstream arrangements ? Preserve natural gas resource…
  28. May 2012 Investor Presentation – Encana Corp – slide 28
    28 Cutbank Ridge Partnership Overview Encana & Mitsubishi Corporation ? Mitsubishi to invest C$2.9 billion for 40% interest in Cutbank Ridge Partnership ? C$1.45 billion up front ? C$1.45 billion as 50% of Encana?s share of…
  29. May 2012 Investor Presentation – Encana Corp – slide 29
    29 Exploration on Liquids-rich Lands Duvernay ? Exciting Potential Liquids Opportunity ? Started building land position in 2009 ? 370,000 net acres ? Simonette ? Kaybob ? Willesden Green ? 2011 Program ? Drilled 2 horizontal…
  30. May 2012 Investor Presentation – Encana Corp – slide 30
    30 Duvernay ? 2012 Parallel Track Strategy Accelerating Development & Leveraging Expertise Rapid Appraisal HZ Pilots RPH Dev Infrastructure solutions in Early Hub Dev place Steer Royalty & Regulatory Process Validate…
  31. May 2012 Investor Presentation – Encana Corp – slide 31
    31 Montney Resource Play Hub ? Wells per hub: 8 ? 12 ? Completions per hub: 100 ? 200 ? up to 17 stages/well ? ~11 acres/stage average ? Laterals ~650 ? 1000 feet apart ? Horizontal lateral length: ~6,500 ? 10,000 feet ?…
  32. May 2012 Investor Presentation – Encana Corp – slide 32
    32 Montney Supply Cost Evolution Advancing Resource Play Hub Design and Development *DCT ? includes lease boundary drill, complete and tie-in costs. **Supply Cost is defined as the flat NYMEX price that yields a risked IRR of 9% and…
  33. May 2012 Investor Presentation – Encana Corp – slide 33
    33 Pipestone Montney Overview ? Approximately 190,000 net acres in Pipestone area ? 2011 production: ? 19.7 MMcfe/d ? 1,010 bbls/d of liquids ? Liquids potential yield of 40-90 bbls/MMcf ? 2012 program: ? 7 wells planned (4…
  34. May 2012 Investor Presentation – Encana Corp – slide 34
    34 Bighorn 2012 Program Over 700 Net Horizontal Drilling Locations 2012 Program ? ~60-65 wells planned ? 35-40 horizontal; 20-25 deviated vertical ? Targeting Dunvegan, Falher, Wilrich and Cardium ENCANA LAND LEGEND ECA 2012…
  35. May 2012 Investor Presentation – Encana Corp – slide 35
    35 Increasing Liquids Extraction with Deep Cut 80,000 bbls/d by 2015F ? Includes current liquids production of ~29,000bbls/d* plus deep cut facility expansions in Western Canada ? Does not include organic liquids growth! ?…
  36. May 2012 Investor Presentation – Encana Corp – slide 36
    36 70% 80% 90% 100% 110% 120% 130% 2005 2006 2007 2008 2009 2010 2011 2012F *2012F based on February 17, 2012 guidance. Balancing Capital Investment with Cash Flow Capital as a Percentage of Cash Flow Less Dividends Historical…
  37. May 2012 Investor Presentation – Encana Corp – slide 37
    37 $0 $1 $2 $3 $4 $5 $6 $7 $8 2008 2009 2010 2011 2012F 3-5 yr target Encana Historical Supply Cost Proven Track Record of Lowering Cost Structures $/MMBtu Including $0.30 G&A. 2012F represent initial projections Upper…
  38. May 2012 Investor Presentation – Encana Corp – slide 38
    38 ? Renewed bank credit facilities ? ~$5 billion committed until October 2015 ? Advanced disposition & joint ventures processes to enhance financial flexibility ? 2011 announced divestitures total $3.5 billion ? 2012 announcements…
  39. May 2012 Investor Presentation – Encana Corp – slide 39
    39 0% 1% 2% 3% 4% ECA TLM CHK DVN APA EOG APC 0% 1% 2% 3% 4% 5% ECA S&P/TSX Utilities S&P/TSX Comp S&P/TSX 60 S&P/TSX Energy CAD 5-yr bond CAD 1- mth T-Bill Attractive Dividend, Strong Yield Q1 2012 Quarterly…
  40. May 2012 Investor Presentation – Encana Corp – slide 40
    North American Natural Gas Fundamentals ? Market prices may remain challenging for producers through end of 2012 ? The lack of winter demand has caused record storage inventories and increased the risk of shut-in pricing ? A…
  41. May 2012 Investor Presentation – Encana Corp – slide 41
    Abundance of natural gas enables an energy plan that will include? ? Natural gas as a preferred fuel for power generation ? Expanded natural gas use in industrial applications ? Accessing new markets ? LNG export ? Natural gas as a…
  42. May 2012 Investor Presentation – Encana Corp – slide 42
    42 $0 $5 $10 $15 $20 $25 Dec- 01 Dec- 02 Dec- 03 Dec- 04 Dec- 05 Dec- 06 Dec- 07 Dec- 08 Dec- 09 Dec- 10 Dec- 11 Dec- 12 Dec- 13 Dec- 14 Dec- 15 Gas Price per MMBtu Oil Source: NYMEX oil, coal, and…
  43. May 2012 Investor Presentation – Encana Corp – slide 43
    43 Coal to Gas Displacement Historical and Implied by Gas Forward Curve 8 6 4 2 0 10 12 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11…
  44. May 2012 Investor Presentation – Encana Corp – slide 44
    44 Kitimat LNG Project ? Encana 30% Interest Diversifying Markets ? Building Demand ? Co-owners ? Apache (40%, operator) ? Encana (30%) ? EOG (30%) ? 1,400 MMcf/d (10 MMT*) export capacity ? Pending final investment decision ?…
  45. May 2012 Investor Presentation – Encana Corp – slide 45
    45 Kitimat LNG Market Diversifying Markets ? Building Demand Canadian west coast LNG exports have transportation advantage relative to U.S. gulf coast Kitimat Japan South Korea China U.S. Gulf Coast Route
  46. May 2012 Investor Presentation – Encana Corp – slide 46
    46 Natural Gas Fueling Projects Paving Way for Transportation and Operations ? Infrastructure investment ? 5 CNG stations ? 1 mini liquefaction plant ? 6 mobile LNG stations ? 1 fixed LNG station ? Vehicle conversions ? 200 fleet…
  47. May 2012 Investor Presentation – Encana Corp – slide 47
    47 Impact of Natural Gas Initiatives Price Uplift and Operational Savings Through Internal Use Power Generation Drilling Light Duty Fleets On-Road Supply Chain ? $11 million saved ? $6.00/Mcf uplift ? 0.6 Bcf consumed ? $2.0…
  48. May 2012 Investor Presentation – Encana Corp – slide 48
    48 Take a Closer Look Strategically Positioned to Excel We are ? The leading North American resource play company ? Pursuing the greatest long-term value creation for shareholders ? Committed to responsible financial stewardship…
  49. May 2012 Investor Presentation – Encana Corp – slide 49
    0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 XOM ECA CHK DVN COP APC BP RDS APA SWN US Production Cdn Production Source: Company data, Energy eTrack estimates MMcf/d Leading North American Natural Gas Company Q4…
  50. May 2012 Investor Presentation – Encana Corp – slide 50
    Continuous Portfolio Highgrading ? 2010 ? ~70 deals for total value of ~$1.6 billion ? ~15 active joint ventures ? Divestitures of ~$883 million ? Acquisitions of ~$733 million 2010 ? 2011 ? Divestitures of ~$2.1 billion ?…
  51. May 2012 Investor Presentation – Encana Corp – slide 51
    52 Disciplined Risk Management Natural Gas Price Hedging* - Increased Cash Flow Certainty 0.5 2.0 $5.80 $5.24 0.0 0.5 1.0 1.5 2.0 2.5 2012 2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Volume Fixed Price Swap…
  52. May 2012 Investor Presentation – Encana Corp – slide 52
    53 *Supply Cost is defined as the flat NYMEX natural gas price that yields a risked IRR of 9% after tax and does not include land costs. Excludes emerging oil programs. Operating Efficiency Development Program ? Forecast Metrics…
  53. May 2012 Investor Presentation – Encana Corp – slide 53
    54 0 10 20 30 40 50 60 70 Annualized 2010 Production 2011 Reserves Res & ECR P1 ? 14.2 P2 ? 8.1 P3 ? 4.4 C1 ? 25.0 C2 ? 15.9 C3 ? 21.3 Comprehensive Disclosure Reserves and Resources (Tcfe) ? Best in class reserves and…
  54. May 2012 Investor Presentation – Encana Corp – slide 54
    55 High Quality Asset Base Reserves and Economic Contingent Resources (ECR) (Tcfe) Reserves: P1 is proved, P2 is probable, P3 is possible Economic contingent resources: C1 is low estimate, C1+C2 is best estimate, C1+C2+C3 is high…
  55. May 2012 Investor Presentation – Encana Corp – slide 55
    56 0 1 2 3 4 5 6 7 8 Other Jonah Texas Piceance Haynesville Bighorn CBM Horn River Greater Sierra Peace River Arch Cutbank Ridge1 2 3 1P (Proved) Reserves Evaluated by Independent Qualified Reserves Evaluators as of…
  56. May 2012 Investor Presentation – Encana Corp – slide 56
    57 Comprehensive Disclosure of Reserves & Resources Largest Reserves and Resource Life in Encana?s History Peace River Arch 3 0.5 0.1 0.1 1.3 0.3 0.3 Encana Reserves and Resources (Tcfe) 1 Estimated reserves Estimated economic…
  57. May 2012 Investor Presentation – Encana Corp – slide 57
    Reserves and Contingent Resources Definitions Characterization of Petroleum Initially in Place (PIIP) Reserve ? Resource Description Petroleum Resource Management System SPE ? PRMS Deve lopme nt not viable On produc tion P lay…
  58. May 2012 Investor Presentation – Encana Corp – slide 58
    59 Advancing Resource Play Hub Concentrated resource + Pad drilling + Manufacturing process = Resource play hub Represents 4-6 square miles of reservoir accessed from a single surface location.
  59. May 2012 Investor Presentation – Encana Corp – slide 59
    60 Resource Play Hub ? Horn River Style 14-Well Pad Site With Concurrent Operations 63-K Pad
  60. May 2012 Investor Presentation – Encana Corp – slide 60
    61 $2.95 $2.89 $2.21 $0.97 $1.34 $2.31 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 Dewpoint Shallow Cut Deep Cut Natural Gas NGLs Increasing Exposure to Oil and NGLs Liquids Value Uplift C$/Mcfe*…
  61. May 2012 Investor Presentation – Encana Corp – slide 61
    62 APA EOG DVN ECA TLM NXY 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 Ba2 BB- Ba3 B+ B1 B B2 Source:…
  62. May 2012 Investor Presentation – Encana Corp – slide 62
    63 Encana Corporation Debt Maturity Schedule ? December 31, 2011 ($US MM) FX rate as of December 30, 2011 - 1.0170 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2012 2013 2014 2015 2016 2017 2018 2019…
  63. May 2012 Investor Presentation – Encana Corp – slide 63
    64 Electric Power 41% Industrial 20% Residential 7% Transportation 28% Commercial 4% 80 Bcfe/d 117 Bcfe/d Electric Power 31% Industrial 31% Residential 22% Transportation 1% Commercial 15% *U.S. data is as of…
  64. May 2012 Investor Presentation – Encana Corp – slide 64
    65 0 50 100 150 200 250 300 350 Current Energy Use Current Natural Gas Consumption 2020F Consumption 2030F Consumption Residential Commercial Industrial Electric Power Transportation *U.S. data is as of 2010; Canadian data is…
  65. May 2012 Investor Presentation – Encana Corp – slide 65
    66 Natural Gas Opportunity Abundant, Affordable & Beneficial Attributes ? North American natural gas supply (& demand) could increase by approximately 25 Bcf/d 64 70 62 57 2 0 20 40 60 80 100 120 Coal Natural Gas Oil LNG…
  66. May 2012 Investor Presentation – Encana Corp – slide 66
    67 What Makes LNG for Transportation Viable? Illustrative Full Cycle Cost Components ? LNG vs. Diesel 12% 13% 7% 23% 21% 24% Sales and Excise Tax Retailing Distribution ? LNG offers 20% to 40% savings depending on region* ?…
  67. May 2012 Investor Presentation – Encana Corp – slide 67
    68 Driving the Transformation Natural Gas on Drilling Sites Economic Energy Security Environmental LNG Storage and Regas System CAT 3516 LNG Fuel Transport NatGas-Elect Gen Sets Fuel Cost Savings for 4-Well Pad Using LNG: $830,000
  68. May 2012 Investor Presentation – Encana Corp – slide 68
    Operating Costs ($/Mcfe) Upstream Operating Costs (5) 0.70 Administrative Expense 0.35 Upstream 2.7 - per common share, diluted ($/share) 4.75 2012F $0.05 decrease in the U.S./Canadian dollar exchange rate 0 130 $10/bbl increase in…

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