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BAML Global Energy Conference – Encana Corp

Encana Corp · Nov 18, 2011 · 63 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. BAML Global Energy Conference – Encana Corp – slide 1
    Encana Corporation Bank of America Merrill Lynch 2011 Global Energy Conference Sherri Brillon | Executive Vice-President & CFO Miami, FL | November 16, 2011 take a closer look
  2. BAML Global Energy Conference – Encana Corp – slide 2
    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 ?…
  3. BAML Global Energy Conference – Encana Corp – slide 3
    Encana Corporation Vast Land Position: 11.7 Million Net Acres Horn River Greater Sierra Duvernay Cutbank Ridge Deep Basin Montney Bighorn Coalbed Methane Alberta Bakken Collingwood Jonah Niobrara DJ Texas Piceance…
  4. BAML Global Energy Conference – Encana Corp – slide 4
    Encana Corporation Large, Diversified Portfolio & Production Base 0 100 200 300 400 500 600 Haynesville Cutbank Ridge* Jonah CBM Piceance Texas* Greater Sierra* Big Horn Other MMcfe/d Guidance as at October 20, 2011;…
  5. BAML Global Energy Conference – Encana Corp – slide 5
    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 ? Two…
  6. BAML Global Energy Conference – Encana Corp – slide 6
    Our Strategy Having built a high-quality resource base, the greatest value creating proposition for our shareholders is to now deliver a sustainably higher growth rate and to do it at the lowest possible cost ? Randy Eresman,…
  7. BAML Global Energy Conference – Encana Corp – slide 7
    ? Transparency - Provide comprehensive disclosure of reserves and resources ? Low cost focus - Advance resource play hub design and development ? Returns - Increase exposure to oil and natural gas liquids ? Leverage - Attract third…
  8. BAML Global Energy Conference – Encana Corp – slide 8
    0 10 20 30 40 50 60 70 Annualized 2010 Production 2010 Reserves Res & ECR P1 ? 14.3 P2 ? 8.7 P3 ? 4.1 C1 ? 20.0 C2 ? 16.7 C3 ? 19.8 Comprehensive Disclosure Reserves and Resources (Tcfe) ? Best in class reserves and…
  9. BAML Global Energy Conference – Encana Corp – slide 9
    Meeting the Challenge Adapting to a Prolonged Low Gas Price Environment ? Low cost focus ? $3.00/Mcf supply cost target on natural gas investment ? Continuous improvements in Resource Play Hub design and development ? Pursuing oil…
  10. BAML Global Energy Conference – Encana Corp – slide 10
    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.
  11. BAML Global Energy Conference – Encana Corp – slide 11
    Haynesville ? Encana Leading the Way Resource Play Hub Program ? Superior safety performance ? Reduced environmental impact ? Repeatable execution efficiency ? Long lateral development ? Deep well development ? Completion…
  12. BAML Global Energy Conference – Encana Corp – slide 12
    $0 $1 $2 $3 $4 $5 $6 $7 $8 2008 2009 2010 2011F 3-5 yr target Encana Historical Supply Cost Proven Track Record of Lowering Cost Structures $/MMBtu Including $0.30 G&A. 2011F represent initial projections Upper Quartile…
  13. BAML Global Energy Conference – Encana Corp – slide 13
    Planning Range 90% Confidence Range Encana?s Portfolio Focused on Lowest Supply Costs Rates of Return at Various NYMEX Natural Gas Prices Illustrative, based on capital weighted average of portfolio. Including $0.30/Mcfe G&A ?…
  14. BAML Global Energy Conference – Encana Corp – slide 14
    Increasing Exposure to Oil & NGLs ? Pursuing a full cycle, organic approach to shifting portfolio weighting ? Leveraging our core competency of horizontal drilling and completions ? Hold more than 2.1 million net acres of land with…
  15. BAML Global Energy Conference – Encana Corp – slide 15
    Continuous Portfolio Highgrading ? 2009 ? ~50 deals for total value of ~$1.3 billion ? ~10 active joint ventures ? Divestitures of ~$1,075 million ? Acquisitions of ~$260 million ? 2010 ? ~70 deals for total value of ~$1.6 billion…
  16. BAML Global Energy Conference – Encana Corp – slide 16
    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 market…
  17. BAML Global Energy Conference – Encana Corp – slide 17
    Abundance of natural gas enables an energy plan that will include? ? Natural gas as a preferred fuel for power generation ? Natural gas as a transportation fuel ? Expanded natural gas use in industrial applications ? Accessing new…
  18. BAML Global Energy Conference – Encana Corp – slide 18
    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 ?…
  19. BAML Global Energy Conference – Encana Corp – slide 19
    ? Renewed bank credit facilities ? ~$5 billion maturing October 2015 ? Advanced disposition & joint ventures processes to enhance financial flexibility ? Year to date announced net divestitures total $1.7 billion ? Balanced approach…
  20. BAML Global Energy Conference – Encana Corp – slide 20
    Disciplined Risk Management Natural Gas Price Hedging* - Increased Cash Flow Certainty 0.5 2.0 1.8 $5.76 $5.80 $5.24 0.0 0.5 1.0 1.5 2.0 2.5 2011 2012 2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Volume Fixed…
  21. BAML Global Energy Conference – Encana Corp – slide 21
    0% 1% 2% 3% 4% ECA TLM CHK DVN EOG APA APC 0% 1% 2% 3% 4% 5% ECA S&P/TSX Utilities S&P/TSX Energy S&P/TSX Comp S&P/TSX 60 CAD 5-yr bond CAD 1- mth T-Bill Attractive Dividend, Strong Yield Q3 2011 Quarterly…
  22. BAML Global Energy Conference – Encana Corp – slide 22
    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 ?…
  23. BAML Global Energy Conference – Encana Corp – slide 23
    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…
  24. BAML Global Energy Conference – Encana Corp – slide 24
    0 1 2 3 4 5 6 Other Greater Sierra* Jonah Bighorn CBM Texas Horn River Piceance Cutbank Ridge* Haynesville 1P (Proved) Reserves Evaluated by Independent Qualified Reserves Evaluators as of December 31, 2010. *Cutbank Ridge…
  25. BAML Global Energy Conference – Encana Corp – slide 25
    Comprehensive Disclosure of Reserves & Resources Largest Reserves and Resource Life in Encana?s History Total 14.3 8.7 4.1 20.0 16.7 19.8 Other 4 1.3 0.8 0.4 1.1 0.2 0.2 Jonah 2.0 0.8 0.6 0.2 0.3 0.4 Texas 1.6 0.3 0.3 2.1 0.5 0.7…
  26. BAML Global Energy Conference – Encana Corp – slide 26
    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…
  27. BAML Global Energy Conference – Encana Corp – slide 27
    High Value Inventory 35,000 1,800 2,600 1,800 5,400 1,500 800 900 2,700 1,200 15,900 2P+2C Inventory (net wells) USA Division Canadian Division Other(4) 993 1,200 61 1.00 - 3.50(3) Haynesville 350 1,300 100 3.50 - 4.00…
  28. BAML Global Energy Conference – Encana Corp – slide 28
    Source: Company Data, Energy eTrack Estimates MMcf/d Leading North American Natural Gas Company Q2 2011 North American Natural Gas Production 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 XOM ECA DVN CHK COP APC BP…
  29. BAML Global Energy Conference – Encana Corp – slide 29
    $0.30 $1.00 $0.50 to 2.00 7 6 5 4 3 2 1 0 9% IRR After Tax incl. G&A Increment from 9% to 15% Land costs First Mover Advantage Encana Point Forward vs. Industry Full Cycle Supply Costs $US/MMBtu Encana Point Forward Supply Cost*…
  30. BAML Global Energy Conference – Encana Corp – slide 30
    Encana Corporation Highly Economic Development Portfolio 2011F Development Program Illustrative, based on capital weighted average of development portfolio. Including $0.30 G&A. *Based on March 31, 2011 NYMEX forward strip, excludes…
  31. BAML Global Energy Conference – Encana Corp – slide 31
    Accelerated Pace of Development Managing the Gas Price Reality: $4 - $6+ NYMEX Natural Gas * Based on 2011 cost structures, price range of $4 - $6+ NYMEX natural gas. ? In a stronger price environment, Encana?s asset base is capable…
  32. BAML Global Energy Conference – Encana Corp – slide 32
    *Supply Cost is defined as the flat NYMEX natural gas price that yields a risked IRR of 9% after tax and does not include land costs. Operating Efficiency Development Program ? Forecast Metrics Supply Cost* ($/MMBtu) ~3.70 Production…
  33. BAML Global Energy Conference – Encana Corp – slide 33
    Encana Execution Methodology Full Cycle Value Creation Resource Play Methodology Work With Governments ? Engage Stakeholders Address Infrastructure Exploration Assemble Land Base Pilot Understand Technical Commercial…
  34. BAML Global Energy Conference – Encana Corp – slide 34
    ? Focusing more capital into higher liquids areas of existing developments ? Extracting more natural gas liquids from higher Btu streams ? Expanding dry gas developments into liquids rich window ? Exploring existing land base for…
  35. BAML Global Energy Conference – Encana Corp – slide 35
    Increasing Exposure to Oil and NGLs Liquids - Then & Now Pre-split (Cenovus assets) Current Technology: Liquids: ? Horizontal drilling ? Large, multi-stage completions ? Water flood ? Polymer flood ? CO 2 injection ? SAGD ?…
  36. BAML Global Energy Conference – Encana Corp – slide 36
    Source: Kitimat LNG website, www.kitimatlngfacility.com Kitimat LNG Market Diversifying Markets ? Building Demand
  37. BAML Global Energy Conference – Encana Corp – slide 37
    Encana DD&A & ROCE Canadian and U.S. GAAP Reconciliation* 1.75 2.64 1% 5% 107 11 105 573 (582) 107 374 481 YTD Sept 30, 2011 U.S. GAAP 17% -22% 16% Canadian GAAP/IFRS 20% 8% 6% Return on average capital employed (ROCE)…
  38. BAML Global Energy Conference – Encana Corp – slide 38
    APA EOG DVN ECA TLM NXY APC SWN CHK S&P Moody?s Indicates ratings below investment grade 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 Credit Rating…
  39. BAML Global Energy Conference – Encana Corp – slide 39
    $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038…
  40. BAML Global Energy Conference – Encana Corp – slide 40
    0% 10% 20% 30% 40% 50% 60% APA SWN DVN TLM EOG ECA NXY APC CHK HK .0x 1.0x 2.0x 3.0x 4.0x SWN APA TLM NXY EOG DVN APC ECA CHK HK Total Debt to Adjusted EBITDA Capital Discipline ? Q2, 2011 Total Debt to Capitalization…
  41. BAML Global Energy Conference – Encana Corp – slide 41
    ? Safe operations ? Maintain license to operate ? Advance oil plays ? Accelerate development through third party funding ? Advance innovation and technology ? Establish long-term strategic partnerships with service providers…
  42. BAML Global Energy Conference – Encana Corp – slide 42
    Tuscaloosa Marine Shale Emerging Light Oil Play MS LA LA MS Devon Locns Wey. 1H BOE #1H ECA Current Acreage Positions Existing Wells Encana Proposed New Wells ? ~270,000 net acres ? 80% NRI ? 2-7 year lease term ? Vertical…
  43. BAML Global Energy Conference – Encana Corp – slide 43
    ? 47,000 net acres ? Vertical depth: ? 6,000 to 12,000 feet ? 2011F program: ? 5 horizontal wells ? ~$19 MM 2011 Encana Proposed Locations Noble Gemini Oil IP 30 ~305 bbls/day Gas IP 30 ~4.15 MMscf/day OGIP Noble Hanscome…
  44. BAML Global Energy Conference – Encana Corp – slide 44
    Michigan Basin Collingwood Shale Early Entry ? First Mover Advantage Collingwood extent ECA acreage Kendall well Pioneer State well 2011F wells ? 425,000 net acres ? Acquired at ~$200/acre ? Single well can hold 7,500 acres ?…
  45. BAML Global Energy Conference – Encana Corp – slide 45
    Encana Acreage: 350,000 net Haynesville Advancing Resource Play Hub Development ? 21 JV rigs drilling ? 2 JV completion fleets ? Drill depth: 11,000-14,000 feet ? NGIP: 175-225 Bcf/section ? 2015F production: > 1Bcfe/d ? 2011F…
  46. BAML Global Energy Conference – Encana Corp – slide 46
    Haynesville Resource Play Hub Realized Efficiency Gains ? Increased operational efficiency ? Pad drilling; skiddable rigs ? Centralized completion process ? Fit-for-purpose equipment ? Repeatable execution ? Reduced location foot…
  47. BAML Global Energy Conference – Encana Corp – slide 47
    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 the…
  48. BAML Global Energy Conference – Encana Corp – slide 48
    Mid-Bossier Shale Capturing Value ? Mid-Bossier estimated productivity established across extensive acreage position: ? 100 to 200 Bcf/sec NGIP ? High quality shale as good as Haynesville ? ~24 wells for 2011F ? 150,000 to…
  49. BAML Global Energy Conference – Encana Corp – slide 49
    Strategic Focus ? Operate safely with minimal environmental impact ? Deliver high return growth ? Leverage technology advancements and operational efficiencies to lower capital costs ? Actively manage portfolio to maximize value…
  50. BAML Global Energy Conference – Encana Corp – slide 50
    ? Covers ~150km x 600km ? Montney fairway contains over 1,800 Tcf of NGIP ? ECA Montney acreage well positioned in the highest NGIP/section area. Montney Fairway High Montney Tight Gas Play GR_1 0 200 GAPI 2500 2550 2600…
  51. BAML Global Energy Conference – Encana Corp – slide 51
    ? Gas liquids and light oil encountered toward the east and NNE ? Recovery values average 50+ bbl/MMcf of C2+ with deep cut processing ? Current Montney land position of 1,120 net sections in the Cutbank area Liquids Rich Play…
  52. BAML Global Energy Conference – Encana Corp – slide 52
    Resthaven Falher F Hz Future Development Bighorn ? The Next Phase Horizontal Drilling 25?30 m 20?25 m 15?20 m 10?15 m 5?10 m 0?5 m Bighorn North Falher F / Wilrich A HZ Results per Frac (NBR Sales) 10 100 1000 10000 0 100…
  53. BAML Global Energy Conference – Encana Corp – slide 53
    Exploration on Liquids-rich Lands Duvernay - Exciting New Liquids Opportunity ? Started building land position in 2009 ? 365,000 net acres ? Simonette ? Kaybob ? Willesden Green ? Recent land sales have shown ? Increased…
  54. BAML Global Energy Conference – Encana Corp – slide 54
    $2.95 $3.20 $1.98 $1.80 $0.09 $0.97 $0.05 $0.04 $0.16 $0.09 2010 Efficiencies New Frac Technology Increased Fracs 2011 Target Enhanced Liquids Recovery Increased Fracs Resource Play Hub Efficiencies Long-Term Target ?…
  55. BAML Global Energy Conference – Encana Corp – slide 55
    Montney Resource Play Hub ? Wells per hub: 8 ? 12 ? Completions per hub: 100 ? 200 ? up to 17 stages/well ? ~11 acres/stage average ? Laterals ~200 ? 300m apart ? Horizontal lateral length: ~2,000 ? 3,000m ? Completions placed…
  56. BAML Global Energy Conference – Encana Corp – slide 56
    The Evolution of the Horn River Advancing Resource Play Hub Design and Development ? One pad accesses 4 sections ? 8 acres/interval 2010 2011F Future Spacing ? One pad accesses 6 sections ? 14 acres/interval ? One pad accesses…
  57. BAML Global Energy Conference – Encana Corp – slide 57
    CBM Development Strategy Pad Drilling ? 2011F type well: ? Shifting strategy to PAD style drilling with potential per well savings of 30% resulting in a supply cost of $3.00/MMBtu ? Capturing the Gas in the Box ? All Horseshoe…
  58. BAML Global Energy Conference – Encana Corp – slide 58
    Leaving the Dry Dock Positioning over Transport Vessel Ready to Sail to Nova Scotia Towing to Transport Vessel Deep Panuke Project First Natural Gas Production Forecast: Q1 2012 Photos courtesy of SBM Offshore
  59. BAML Global Energy Conference – Encana Corp – slide 59
    Natural Gas Opportunity Abundant, Affordable & Beneficial Attributes North American natural gas supply (& demand) could increase by approximately 25 Bcf/d 64 70 62 57 2 0 20 40 60 80 100 120 Coal Natural Gas Oil LNG…
  60. BAML Global Energy Conference – Encana Corp – slide 60
    Natural Gas Demand Advocacy in Canada & USA Economic and Environmental Benefits of Natural Gas ? Trade Organization Leadership ? Member of ANGA, CNGI, NGVA, CNGVA, CNGVC, WNGIC ? Formed Clean American Transportation Alliance (ANGA &…
  61. BAML Global Energy Conference – Encana Corp – slide 61
    2011F ENCANA CORPORATE GUIDANCE US$, US Protocols June 21, 2011 2011F Cash Flow ($ billions, except per share amounts) Total Cash Flow(1)(2)(3) 4.0 - 4.3 - per common share, diluted ($/share) 5.40 - 5.90 Upstream Operating Cash…
  62. BAML Global Energy Conference – Encana Corp – slide 62
    2011F Encana Corporate Guidance cont\'d?. 2011F Operating Costs (annual average) Total Operating and Administrative Costs ($/Mcfe) 1.15 - 1.20 Other DD&A, Upstream ($/Mcfe) 2.60 - 2.65 Sensitivities(3) ($ millions) $0.50/Mcf…
  63. BAML Global Energy Conference – Encana Corp – slide 63
    2011F Key Resource Play Information October 20, 2011 Production Capital Wells Planned (MMcfe/d) ($MM) (#) Jonah 280 500 70 Piceance 525 450 165 Texas 340 375 60 Haynesville 505 980 85 Greater Sierra(1) 350 260 30 Cutbank…

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