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Montney Investor Day – Encana Corp

Encana Corp · May 17, 2016 · 55 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. Montney Investor Day – Encana Corp – slide 1
  2. Montney Investor Day – Encana Corp – slide 2
    3 ENCANA Multi-Basin Portfolio Advantage ? ?Core of the core? positions in four of North America?s top basins ? Over 16,000 high quality locations ? Operational excellence ? Rapid application of innovations across the portfolio ?…
  3. Montney Investor Day – Encana Corp – slide 3
    7 0 250 500 750 1,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ? HZ development of BC Montney ENCANA MONTNEY Development History 2007 - 2008 2009 - 2011 2012 2013 - 2016 ? Conventional…
  4. Montney Investor Day – Encana Corp – slide 4
    8 0.00 0.20 0.40 Drilling Cost (MM$/1000?) ENCANA IS THE MONTNEY LEADER Combined Scale and Efficiency Largest Producer 0 200 400 600 800 1,000 1,200 Gross Operated Production (MMcf/d) 0 50 mi Cost Leader Massive Wells…
  5. Montney Investor Day – Encana Corp – slide 5
    10 -4 8 4 0 12 16 2016F 2017F 2018F 2019F 2020F Power Other Residental/Commercial Industrial Export to Mexico Gulf Coast LNG Total Supply NORTH AMERICAN NATURAL GAS FUNDAMENTALS Demand Expected to Grow by 14 Bcf/d by 2020 Source:…
  6. Montney Investor Day – Encana Corp – slide 6
    11 NORTH AMERICAN NATURAL GAS FUNDAMENTALS Future Demand Growth will be Concentrated in the Gulf Coast 1.2 0.5 0.0 0.8 1.6 2010-2015 2015-2020 West 3.8 9.5 0.0 6.0 12.0 2010-2015 2015-2020 Gulf Coast 1.7 1.1 0.0 1.0…
  7. Montney Investor Day – Encana Corp – slide 7
    12 0% 2% 4% 6% 8% 10% 8 6 4 2 0 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Montney Montney % of NA NORTH AMERICAN NATURAL GAS FUNDAMENTALS Low-Cost Supply Basins Continue to Grow…
  8. Montney Investor Day – Encana Corp – slide 8
    Source: RS Energy Group, Inc. ? ?Hardcore Canada? May 2016 13 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 Arkoma Woodford Fayetteville Piceance Utica Haynesville Marcellus Deep Basin Montney Break-even…
  9. Montney Investor Day – Encana Corp – slide 9
    Source: Encana Fundamentals, Baker Hughes (U.S. rigs), IHS (Canadian rigs) 14 0 100 200 300 400 500 600 700 800 900 2011 2012 2013 2014 2015 2016 Other North America Montney US Northeast NORTH AMERICAN NATURAL GAS…
  10. Montney Investor Day – Encana Corp – slide 10
    15 WESTERN CANADIAN MARKET FUNDAMENTALS Natural Gas Export Basin ? Premium Condensate Market Source: Encana Fundamentals *Net Effective Capacity (Bakken Access) To Pacific Northwest 4.1 Bcf To Eastern Canada 4.2 Bcf To U.S.…
  11. Montney Investor Day – Encana Corp – slide 11
    16 WESTERN CANADIAN NATURAL GAS FUNDAMENTALS Montney is the Growth Engine for WCSB ? Montney expected to grow to 7 Bcf/d in 2020, representing 38% of WCSB production ? Montney expected to lead WCSB growth back toward 2006…
  12. Montney Investor Day – Encana Corp – slide 12
    17 WESTERN CANADIAN NATURAL GAS FUNDAMENTALS Local Demand Growth Driven by Oil Sands ? >1 Bcf/d of growth from oil sands & power sector expected through 2020 ? Strong historical local demand growth has reduced reliance on total…
  13. Montney Investor Day – Encana Corp – slide 13
    18 WESTERN CANADIAN NATURAL GAS FUNDAMENTALS Required Exports and Currently Available Capacity ? Substantial existing physical export capacity ? Exceeds required exports by >1.5 Bcf/d ? Montney does not require any new transport…
  14. Montney Investor Day – Encana Corp – slide 14
    19 ? AECO is benchmark price for volumes traded on Nova Gas Transmission system (NGTL) ? Equivalent to NYMEX at Henry Hub ? Largest and most liquid gas trading hub in North America ? AECO Basis is price difference versus NYMEX ?…
  15. Montney Investor Day – Encana Corp – slide 15
    20 AECO BASIS Price-Setting Mechanism 4.0 5.0 6.0 7.0 8.0 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 WCSB Required Exports & Contracted Capacity Required WCSB Exports* Contracted…
  16. Montney Investor Day – Encana Corp – slide 16
    21 ? AECO basis has historically averaged $(0.50) ? Basis has recovered rapidly when it has widened before ? The market sees a directional return toward historical levels Forward Market Trends Toward Historical Levels Source:…
  17. Montney Investor Day – Encana Corp – slide 17
    22 Efficient Access to Market ? NGTL: ~11 Bcf/d of supply, >15,000 miles of pipeline, and thousands of receipt & delivery points ? Required expansions are inexpensive, timely, and provide system-wide access ? Approach is…
  18. Montney Investor Day – Encana Corp – slide 18
    23 MONTNEY ACCESS TO NORTH AMERICAN MARKETS Existing WCSB Export Infrastructure Allows for Growth Source: Encana Fundamentals *Required Exports = Expected Supply minus Expected Demand Bcf/d 9 8 7 6 10 11 12 2015 2016F 2017F 2018F…
  19. Montney Investor Day – Encana Corp – slide 19
    24 MONTNEY ACCESS TO NORTH AMERICAN MARKETS WCSB Transportation ? Cost Advantage to Northeast Market Source: Encana Fundamentals, Various Pipeline Websites Montney continues to compete in Western markets, capturing demand growth…
  20. Montney Investor Day – Encana Corp – slide 20
    25 FUNDAMENTALS The Montney Competes on a Delivered Cost Basis ? Montney growth is required to balance increasing North American demand ? Highly competitive supply cost ? Advantaged into Western and Eastern (Dawn) markets ? Existing…
  21. Montney Investor Day – Encana Corp – slide 21
    27 MONTNEY ? MOST ACTIVE GAS PLAY Q1 2016 Average Rig Activity Gas Wells Oil Wells Oil and Gas Wells Active Rigs Montney Sources: IHS, DrillingInfo, Nickles, EIA ?Active Rigs? data as of March 2016 Play 1Q16 Rig Activity…
  22. Montney Investor Day – Encana Corp – slide 22
    28 MONTNEY GEOLOGY OVERVIEW Depositional Environment ? Siltstone reservoir ? Not a shale ? High quality condensate & gas regions ? Robust performance across all fluid windows ? Multiple stacked zones ? Deposited in thick,…
  23. Montney Investor Day – Encana Corp – slide 23
    29 Areal Extent Same as Marcellus MONTNEY REGIONAL SCALE Montney (375 x 130 miles) British Columbia Alberta 0 40 80 Miles Peak 30d Rate (BOE/d) 0 - 100 100 - 150 150 - 200 200 + Marcellus ? Size and scale of Montney same…
  24. Montney Investor Day – Encana Corp – slide 24
    30 ENCANA?S MONTNEY ACREAGE Massive Contiguous Land Position Encana Acreage Peer Acreage Alberta 0 Miles 20 Encana Montney Acreage 810,000 gross acres (525,000 net) Peer acreage sourced from RS Energy Group, Inc. & Company…
  25. Montney Investor Day – Encana Corp – slide 25
    31 MONTNEY RESOURCE POTENTIAL Stacked Zones Comparable to the Permian 1,000? 2,000? 250? Permian Midland Basin (100 miles) Middle Spraberry to Base Wolfcamp C Montney (350 miles) Upper Montney to Base Sexsmith Marcellus (350…
  26. Montney Investor Day – Encana Corp – slide 26
    32 MONTNEY PLAY Three Distinct Regions ? Northwest 940 Hz wells drilled; 265 in 2015 ? Narrow region of high performance ? Central 2,100 Hz wells drilled; 260 in 2015 ? Highest quality pay ? Prolific condensate window ? Thickest…
  27. Montney Investor Day – Encana Corp – slide 27
    33 Encana?s Acreage is in the Core of the Basin MONTNEY REGIONAL SCALE Encana Acreage Central Northwest Southeast Alberta Alberta Core Acreage Peak 30d Rate (BOE/d) 0 - 100 100 - 150 150 - 200 200 + Condensate Rich Super…
  28. Montney Investor Day – Encana Corp – slide 28
    34 CROSS-SECTION OF THE MONTNEY Stacking Adds Scale Northwest (Structural Complexity) Central (Stacked, High Quality) Southeast (Stacked, Condensate Rich) 1,000? Hydrocarbon filled porosity Central Southeast Northwest…
  29. Montney Investor Day – Encana Corp – slide 29
    35 8 6 4 2 0 0 0.5 1 1.5 2 2.5 3 3.5 Gas Rate (MMcf/d) (Normalized to 8,200?) Cumulative Gas Production (Bcf) (Normalized to 8,200?) Average Gas Well Performance by Region (Wells Since 2014) WORLD CLASS GAS PLAY Best Rocks Drive…
  30. Montney Investor Day – Encana Corp – slide 30
    36 CORE POSITION IN A WORLD CLASS GAS PLAY Operational Excellence Driving Basin Leading Performance Encana 2015 Montney (25 Wells) Central Northwest 8 6 4 2 0 10 12 0 0.5 1 1.5 2 2.5 3 3.5 4 Gas Rate (MMcf/d) (Normalized to…
  31. Montney Investor Day – Encana Corp – slide 31
    37 8 4 0 12 16 0 1 2 3 4 5 6 7 Gas Rate (MMcf/d) (Normalized to 8,200?) Cumulative Gas Production (Bcf) (Normalized to 8,200?) Average Well Performance Marcellus vs. Encana Montney MONTNEY COMPETES WITH CORE MARCELLUS Encana…
  32. Montney Investor Day – Encana Corp – slide 32
    38 SIGNIFICANT CONDENSATE OPPORTUNITY Encana Delivering Strong Condensate Wells Gas Area 0-10 bbls/MMcf Condensate Area 10-100 bbls/MMcf Super Condensate Area >100 bbls/MMcf Condensate Natural Gas 0 1,000 2,000 3,000 4,000…
  33. Montney Investor Day – Encana Corp – slide 33
    39 STACKED RESOURCE POTENTIAL 10,000 Inventory Locations Stacking Development Layers (#) Condensate Rich Super Condensate Rich Conventional Gas Gross Acres Spacing Inventory Super Rich Condensate 82,000 440? 3,000 Condensate…
  34. Montney Investor Day – Encana Corp – slide 34
    41 ? Large resource poised for significant growth ? 525,000 net acres in 3 contiguous core blocks ? Over 1,000? of pay, up to 6 stacked horizons ? Up to 220 Bcf/section with up to 450 bbls/MMcf condensate ? 10,000 gross well…
  35. Montney Investor Day – Encana Corp – slide 35
    42 ENCANA IN THE MONTNEY 2007 - 2012 ? 4,200 - 7,800 ft lateral ? 300 - 1,000 lb/ft proppant ? 6 bbls/ft fluid ? 165 ft cluster spacing ? 660 ft stage spacing 2013 - 2015 Present Day Design ? 7,200 - 9,000 ft lateral ? 650 -…
  36. Montney Investor Day – Encana Corp – slide 36
    43 ENCANA IN THE MONTNEY Drilling & Completions 0 500 1,000 1,500 2,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F Proppant (lb/ft) 0.00 0.25 0.50 0.75 1.00 1.25 2006 2007 2008 2009 2010 2011 2012 2013 2014…
  37. Montney Investor Day – Encana Corp – slide 37
    44 $0 $1 $2 $3 $4 $5 $6 $7 $8 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F F&D ($/BOE) ENCANA IN THE MONTNEY Well Performance and F&D *All data normalized to $0.75 FX 0 400 800 1200 1600 2006 2007 2008 2009…
  38. Montney Investor Day – Encana Corp – slide 38
    45 ENCANA IN THE MONTNEY Resource Play Hub at Work ? Water Resource Hub: Centralized Water Handling Facility ? Capacity of 50,000 bbls/d, recycling and saline, non-potable source wells ? Made possible by concentrated, continuous…
  39. Montney Investor Day – Encana Corp – slide 39
    46 0 500 1,000 1,500 2,000 2,500 3,000 0 30 60 90 120 150 180 Rate (BOE/d) Producing Days Type Curve Actuals Type Curve IP180 Condensate = 370 bbls/d IP180 Gas = 5.4 MMcf/d EUR = 1.2 MMBOE D&C = $4.4 MM Lateral Length =…
  40. Montney Investor Day – Encana Corp – slide 40
    47 0 500 1,000 1,500 2,000 2,500 3,000 0 30 60 90 120 150 180 210 240 270 Rate (BOE/d) Producing Days Type Curve Actuals After 8 months 70% higher than type curve Rate restricted due to facility limitations CONDENSATE…
  41. Montney Investor Day – Encana Corp – slide 41
    48 0 500 1,000 1,500 2,000 2,500 3,000 0 60 120 180 240 300 360 Rate (BOE/d) Producing Days Lower Montney Type Curve Lower Montney Actuals Upper Montney Actuals CONDENSATE (10-100 bbls/MMcf) Dawson South Lower Montney Type…
  42. Montney Investor Day – Encana Corp – slide 42
    49 0 500 1,000 1,500 2,000 2,500 3,000 0 90 180 270 360 450 540 Rate (BOE/d) Producing Days Type Curve 12-25 Actuals 2-15 Actuals SUPER-CONDENSATE (>100 bbls/MMcf) Pipestone Type Well Metrics ? ECA Net Btax IRR (%) 139…
  43. Montney Investor Day – Encana Corp – slide 43
    50 ENCANA MONTNEY TYPE CURVES Total Gross Inventory BRITISH COLUMBIA ALBERTA Region Gas Condensate Super - Condensate Condensate Condensate Super - IP30 (BOE/d) 1,500 - 2,000 1,400 - 1,800 900 - 1,100 1,850 - 2,050 600 - 800 IP180…
  44. Montney Investor Day – Encana Corp – slide 44
    51 0 200 400 600 800 1,000 1,200 Gross Operated Production (MMcf/d) MONTNEY PRODUCERS AT A GLANCE Encana is the Largest Producer Peer acreage sourced from RS Energy Group, Inc. & Company Presentations Source : Industry data.…
  45. Montney Investor Day – Encana Corp – slide 45
    52 0.0 0.2 0.4 0.6 0.8 Drilling Cost (MM$/1000?) 0.0 0.2 0.4 0.6 0.8 Drilling Cost (MM$/1000?) ENCANA MONTNEY VS. COMPETITORS Drilling Performance ? Encana leading with longer laterals ? ~35 % greater than industry…
  46. Montney Investor Day – Encana Corp – slide 46
    53 0 400 800 1,200 1,600 0 12 24 36 48 Daily Rate (BOE/d) Months ENCANA MONTNEY VS. COMPETITORS Tower Performance and Economics 0.00 0.20 0.40 0.60 0.80 Tower Peer ECA Tower 2016 Pacesetter Completion Cost ($MM/1,000?)…
  47. Montney Investor Day – Encana Corp – slide 47
    54 0.00 0.20 0.40 0.60 0.80 Saturn Peer ECA Saturn 2016 Pacesetter Completion Cost ($MM/1,000?) ENCANA MONTNEY VS. COMPETITORS Saturn Performance and Economics Completion Comparison Encana Peer* Proppant Density (lb/ft) 1,200…
  48. Montney Investor Day – Encana Corp – slide 48
    55 ENCANA MONTNEY 10 Year Growth Plan 10 Year Production Forecast 0 25,000 50,000 75,000 100,000 125,000 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026…
  49. Montney Investor Day – Encana Corp – slide 49
    56 ? Encana utilizing ~1.0 Bcf/d of processing capacity ? 3rd party midstream facilities ? ECA owned facilities ? Unique fee for service agreement with Veresen Midstream Limited Partnership (VMLP) ? Processing capacity expansions…
  50. Montney Investor Day – Encana Corp – slide 50
    57 Gas Processing ? Encana bundled infrastructure model ? Larger and more efficient production growth ? Smaller environmental footprint with less risk of regulatory delays ? Lower construction cost ? Lower operating costs…
  51. Montney Investor Day – Encana Corp – slide 51
    58 LANDMARK AGREEMENT WITH VERESEN MIDSTREAM (VMLP) Innovative Fee-for-Service Structure ? Maximizing flexibility while managing execution ? In 2015, Encana and CRP sold infrastructure to VMLP and entered into gathering and processing…
  52. Montney Investor Day – Encana Corp – slide 52
    59 ? Midstream strategy allows Encana to focus capital on higher return D&C activities vs. facilities ? Delivers 2x growth INFRASTRUCTURE STRATEGY Capital Efficiency Driving Higher Production Growth 0 20 40 60 80 100 2016 2017…
  53. Montney Investor Day – Encana Corp – slide 53
    60 $50 Oil & $3.0 Gas ECA Self Build Capital ($MM) ~$4,200 BTax IRR 125% 75% Positive Cash Flow 1 year 1.5 years ? Material improvements to cash flow and returns ? ~30% higher operating cash flow over 10 years ? 50% higher IRR ?…
  54. Montney Investor Day – Encana Corp – slide 54
    61 Capital vs. Cash Flow at $40 WTI and $2.50 NYMEX Capital vs. Cash Flow at $50 WTI and $3.00 NYMEX MONTNEY DEVELOPMENT PLAN Free Cash Flow Generator Self Build = Theoretical Encana self build scenario where Encana incurs all…
  55. Montney Investor Day – Encana Corp – slide 55
    62 ENCANA MONTNEY Positioned for Growth Development Plan & Upside* Growth Forecast 0 25,000 50,000 75,000 100,000 125,000 150,000 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2016 2017 2018 2019 2020 2021 2022 2023…

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