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November 2017 Investor Presentation – Encana Corp

Encana Corp · Nov 23, 2017 · 69 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. November 2017 Investor Presentation – Encana Corp – slide 1
  2. November 2017 Investor Presentation – Encana Corp – slide 2
    TOP TIER RESOURCE OPERATIONAL EXCELLENCE BALANCE SHEET STRENGTH MARKET FUNDAMENTALS CAPITAL ALLOCATION Our Objectives ENCANA ? North American leader in: ? Generating free cash flow? ? ~$1.5 billion cumulative over plan ?…
  3. November 2017 Investor Presentation – Encana Corp – slide 3
    Our Business Works Today FOCUS ON QUALITY CORPORATE RETURNS Assumes flat $50/bbl WTI oil price, flat $3/MMBtu NYMEX natural gas price. ? Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures…
  4. November 2017 Investor Presentation – Encana Corp – slide 4
    FOCUS ON CORPORATE RETURNS Generating Value 5 year plan Return on Capital Employed? climbs to 10-15% Innovation & Discipline Drive Returns Stringent capital discipline Highly efficient execution fueled by innovation Among the…
  5. November 2017 Investor Presentation – Encana Corp – slide 5
    -1% 2% 5% 8% 2016A 2017F 2018F 2019F ECA per External study US large Caps US Small Caps Canadian Small Caps Canadian Large Caps Excl. ECA FOCUS ON CORPORATE RETURNS Differentiated Results ? Independent analysis of over 50 North…
  6. November 2017 Investor Presentation – Encana Corp – slide 6
    ? Updated 5 year plan is better across the board ? Capital productivity, margins, cash flow? growth & leverage all improved by >10% with a $5/bbl lower oil price ? Maintaining efficiencies in a busier industry ? Exit-to-exit…
  7. November 2017 Investor Presentation – Encana Corp – slide 7
    250 350 450 550 650 2017F 2018F 2019F 2020F 2021F 2022F 5 YEAR PLAN Self-Funding Post 2017 ? Resilient to operational risk ? Focus on high margin production ? Continuous improvement drives quality corporate returns ? Liquids…
  8. November 2017 Investor Presentation – Encana Corp – slide 8
    RESILIENT BUSINESS MODEL Capital Discipline & Risk Management ? Multi-basin portfolio ? Short cycle capital ? Highly focused capital allocation ? Integrated supply chain ? Flexible commercial arrangements ? Diversified market…
  9. November 2017 Investor Presentation – Encana Corp – slide 9
    ? Core positions in four of North America?s premier basins ? >23,000 total inventory locations ? YTD premium inventory increased by ~6x 2017 drilling activity ? ~11,000 premium return locations ? >35% ATROR? returns ? Oil or…
  10. November 2017 Investor Presentation – Encana Corp – slide 10
    Premier North American Basin PERMIAN BASIN *Estimated inventory based on 450-660 ft spacing ? Developing the cube ? Critical to creating value at industrial scale ? Reservoir & above-ground benefits ? Natural extension of our…
  11. November 2017 Investor Presentation – Encana Corp – slide 11
    ENCANA IN THE MONTNEY A Premier North American Play *Estimated inventory based on 440 - 880 ft spacing ? Encana?s Montney is a condensate play ? 6,900 premium condensate-rich inventory* ? Stacked horizontal development ? Over 1,000?…
  12. November 2017 Investor Presentation – Encana Corp – slide 12
    EAGLE FORD Core Position in the Oil Window ? Largely contiguous position in the Karnes Trough ? Most active and profitable trend in the Eagle Ford ? Completion innovations leading to better wells ? 2017 well inventory improvement ?…
  13. November 2017 Investor Presentation – Encana Corp – slide 13
    ? Large contiguous land base within core of play ? Significant growth opportunity ? Industry leading operating performance ? Multi-well pads and integrated infrastructure significantly reduce cost structures ? Consistently delivering…
  14. November 2017 Investor Presentation – Encana Corp – slide 14
    INNOVATION LEADERSHIP AT ENCANA A Competitive Advantage Drilling & Completions ? Proprietary in-house well design ? Integrated team with on-the-fly modeling capabilities ? Advanced completions ? Fibre-optic real-time…
  15. November 2017 Investor Presentation – Encana Corp – slide 15
    ? Chiefs organizational structure ? Promotes rapid transfer of technology between plays ? Rapidly translated success in tight cluster design from Eagle Ford to other plays ? Scaling to cube development model ? Applying advanced…
  16. November 2017 Investor Presentation – Encana Corp – slide 16
    INNOVATION SUCCESS Identifying Optimal Completion Design and Geometry ? Applying advanced completions to high-density, stacked development ? Key principles: ? Tight cluster spacing and optimal hydraulics maximize fracture surface…
  17. November 2017 Investor Presentation – Encana Corp – slide 17
    Multi-Spread Completions Plan vs. Actual Lease ? Leveraging our experience ? >4,500 horizontal wells drilled ? Rapid knowledge transfer between basins ? Leading industry safety performance year-over-year ? Development approach…
  18. November 2017 Investor Presentation – Encana Corp – slide 18
    CUBE DEVELOPMENT ABOVE-GROUND BENEFITS Development at Industrial Scale ? Highly efficient, agile development ? Multi-well pads ? Higher utilization of services & infrastructure ? Multiple drilling rigs and frac spreads on a pad ?…
  19. November 2017 Investor Presentation – Encana Corp – slide 19
    CUBE DEVELOPMENT ? Reservoir benefits ? Optimizes resource recovery ? Minimizes inter-wellbore communication ? Less downtime on existing wells ? Eliminates ?parent-child? in-fill drilling ? No poor performing ?child? wells in…
  20. November 2017 Investor Presentation – Encana Corp – slide 20
    MANAGING INFLATION ? Fully offsetting inflation with efficiency improvements ? Capital spent & wells drilled/on-stream match plan ? Seamless linkage between supply chain and ops teams ? Managing the supply chain ? Self-sourcing sand,…
  21. November 2017 Investor Presentation – Encana Corp – slide 21
    RISK MANAGEMENT PROGRAM Adds Greater Certainty to Cash Flow and De-Risks Capital Program 0 25 50 75 100 2017 * 2018 Volume (Mbbls/d) Oil and Condensate Positions WTI Fixed Price Swap $52.27/bbl WTI 3-Way Option $39.40 x…
  22. November 2017 Investor Presentation – Encana Corp – slide 22
    ASSET OVERVIEW Permian drilling in Midland County
  23. November 2017 Investor Presentation – Encana Corp – slide 23
    ENCANA?S POTENTIAL PREMIUM RETURN INVENTORY Only Premium Inventory Consumed in Growth Plan Permian Basin Montney Eagle Ford Duvernay 12,000 well inventory 3,450 premium…
  24. November 2017 Investor Presentation – Encana Corp – slide 24
    ENCANA?S PERMIAN ACREAGE Core Position in Midland Basin Martin Midland Howard Glasscock Upton Reagan Encana Land Basin Core ? In the Permian, execution efficiency at industrial scale is going to be critical ? Industry leader in…
  25. November 2017 Investor Presentation – Encana Corp – slide 25
    40 50 60 70 80 Q4 16 Q1 17 Q2 17 Q3 17 Oct 17 Q4 17F (MBOE/d) PERMIAN TRACK RECORD OF DELIVERY Advanced Completions Fueling 50% Permian Growth ? 2017 program delivering 50% growth Q416 to Q417 ? Reinforced by strong Q4 results…
  26. November 2017 Investor Presentation – Encana Corp – slide 26
    0 25 50 75 Peer 1 Peer 2 ECA Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Peer 15 Peer 16 Oil Production IP180/1,000ft (bbls/d) WELL PRODUCTIVITY Encana Wells Outpacing Peer Results Data…
  27. November 2017 Investor Presentation – Encana Corp – slide 27
    ? Step-change productivity increases ? Cube development approach continues to evolve in 2017 ? Data-driven innovation ? Added new benches ? Spacing and stacking trials ? Implemented advanced completion designs ? Evaluating emerging…
  28. November 2017 Investor Presentation – Encana Corp – slide 28
    ? Improves capital efficiency and de-risks supply ? 3 frac spreads per hub ? Simple and effective catch basin design ? Water hubs pay out in less than 12 months ? Mitigates risk of water supply restrictions ? County-by-County…
  29. November 2017 Investor Presentation – Encana Corp – slide 29
    EXPANDING MARGINS Reducing Operating Costs ? Improving efficiencies ? Company-wide effort ? Accountability at the operator level ? Working smarter ? >80% of produced water on pipe ? >70% of production on remote monitoring and…
  30. November 2017 Investor Presentation – Encana Corp – slide 30
    PERMIAN 5 Year Growth Profile - 40 80 120 160 200 240 2017F 2018F 2019F 2020F 2021F 2022F MBOE/d ? >50% of Encana?s capital directed to the Permian in 2018 ? Permian production expected to grow 3x ? 5 year CAGR 25% ?…
  31. November 2017 Investor Presentation – Encana Corp – slide 31
    Permian MIDSTREAM AND MARKETING OVERVIEW Gathering system links production to pipeline hubs Permian ? Majority of oil production gathered via pipeline with access to multiple physical markets ? Firm gas gathering and NGL…
  32. November 2017 Investor Presentation – Encana Corp – slide 32
    Past & Future Pipeline Capacity Expansions Align with Growth PERMIAN BASIN FUNDAMENTALS Source: Wells Fargo Securities, Encana - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Q1\'12A Q3\'12A Q1\'13A Q3\'13A…
  33. November 2017 Investor Presentation – Encana Corp – slide 33
    19 Mbbls/d to Houston ~10% 2018F PERMIAN RISK MANAGEMENT PROGRAM Market Access & Price Risk Management 10 Mbbls/d ($1.09)/bbl 39 Mbbls/d to Houston 2019F - 2020F Midland Exposure EPD* Midland to Houston 37 Mbbls/d…
  34. November 2017 Investor Presentation – Encana Corp – slide 34
    PERMIAN RESERVOIR Zone Martin Midland/ Upton Glasscock Howard Clear Fork ? ? M. SPBY ? ? Jo Mill ? ? L. SPBY ? ? ? ? L. SPBY- 2nd ? ? ? ? WCMP A ? ? ? ? WCMP A- 2nd ? ? WCMP B ? ? ? WCMP C ? ? WCMP D / Cline ? ? ? ? Deep…
  35. November 2017 Investor Presentation – Encana Corp – slide 35
    PREMIUM INCREASE OUTPACING DRILLING Gross Premium Return Inventory County Midland/ Upton Martin Howard Glasscock IP30 (BOE/d) 985 950 825 800 IP180 (BOE/d) 700 650 600 550 EUR/Well (Mbbls) 610 675 550 530 EUR/Well (MBOE) 1,020…
  36. November 2017 Investor Presentation – Encana Corp – slide 36
    MONTNEY Core Position Pipestone (up to 4 laterals) Tower/Dawson (up to 6 laterals) 650? Montney 1,000? Montney Alberta Pipestone Tower Dawson South B.C. Cross section
  37. November 2017 Investor Presentation – Encana Corp – slide 37
    0 100 200 300 400 500 600 Condensate IP180 (bbls/d, BOE/d) Top Performance vs. Peers MONTNEY WELL PRODUCTIVITY Peer data sourced from RS Energy Group, raw data provided by geoSCOUT. Focused on higher margin, higher return…
  38. November 2017 Investor Presentation – Encana Corp – slide 38
    0% 5% 10% 15% 20% 25% 0 25 50 75 100 125 150 175 Q4 16 Q1 17 Q2 17 Q3 17 Oct 17 Q4 17F % Liquids (MBOE/d) Total Production % Liquids MONTNEY TRACK RECORD OF DELIVERY Delivering Condensate Growth 0 25 50 75 0 30 60…
  39. November 2017 Investor Presentation – Encana Corp – slide 39
    AGREEMENT WITH VERESEN MIDSTREAM Fee-for-Service Structure ? Tower, Sunrise and Saturn plants on-stream ? Facilities came on ahead of schedule and under budget ? Encana designed, built and operates the facilities ? Innovative…
  40. November 2017 Investor Presentation – Encana Corp – slide 40
    ? Montney liquids production set to more than double from Q4 2016 to Q4 2017 ? Margin impact is significant ? Q4 2017 operating margin? expected to be up >50% versus Q4 2016 driven by greater liquids mix ? This expansion equates to…
  41. November 2017 Investor Presentation – Encana Corp – slide 41
    MONTNEY MIDSTREAM INFRASTRUCTURE Liquids Handling Capacity Supports Growth & Flexibility *Condensate and NGL capacities assume a 30% cut on C3+ facility capacities. All volumes are before shrink and royalties. **Saturn Phase 2 includes…
  42. November 2017 Investor Presentation – Encana Corp – slide 42
    MONTNEY SUSTAINED CONDENSATE PRODUCTION ? Condensate-gas ratio (CGR) varies with time ? Type curves reflect phase behaviour ? Initial condensate ratios up to 800 bbls/MMcf in the VO window ? ~1/2 of 2017 program are VO, VRGC and RGC…
  43. November 2017 Investor Presentation – Encana Corp – slide 43
    ENCANA MONTNEY Operating Cost Performance ? Workforce collaboration across the asset ? Optimizing water handling ? Managing field work using automated work orders and integrated scheduling ? Leveraging technology through the…
  44. November 2017 Investor Presentation – Encana Corp – slide 44
    ENCANA MONTNEY 5 Year Growth Profile - 500 1,000 1,500 2017F 2018F 2019F 2020F 2021F 2022F MMcf/d ? Development focused in condensate rich areas ? 2018 program to keep liquids capacity full ? Additional capacity comes online…
  45. November 2017 Investor Presentation – Encana Corp – slide 45
    WESTERN CANADIAN MARKET FUNDAMENTALS Premium Condensate Market & Natural Gas Export Basin Source: Encana Fundamentals, RBC Capital Markets, Various Pipeline Postings; *Net Effective Capacity (Bakken Access) Natural Gas Export…
  46. November 2017 Investor Presentation – Encana Corp – slide 46
    WCSB RISK MANAGEMENT PROGRAM Market Access & Price Risk Management* 500 MMcf/d 114 MMcf/d to Malin 88 MMcf/d to Chicago 316 MMcf/d to Dawn < 33% 2019F - 2020F AECO Exposure Physical Export Transport** AECO Basis Hedges *Charts…
  47. November 2017 Investor Presentation – Encana Corp – slide 47
    MONTNEY Cutbank Ridge Partnership (CRP) ? Partnership with a subsidiary of Mitsubishi ? Encana: 60% interest ? Mitsubishi: 40% interest ? Investment structure (C$2.9B) ? C$1.45 billion upfront in 2012 ? Further investment of C$1.45…
  48. November 2017 Investor Presentation – Encana Corp – slide 48
    MONTNEY Gross Premium Return Inventory Region Tower Dawson South Pipestone Type Wet Gas Gas Condensate Rich Gas Condensate Wet Gas Gas Condensate Gas Condensate Rich Gas Condensate Very Rich Gas Condensate Volatile Oil…
  49. November 2017 Investor Presentation – Encana Corp – slide 49
    LEADING OPERATOR Top Karnes County Producers Top Performance vs Peers* Eagle Ford 0 50 100 150 200 Oil Production IP180/1,000ft (bbls/d) Operating area map
  50. November 2017 Investor Presentation – Encana Corp – slide 50
    Austin Chalk Type Curve IP180 Eagle Ford Type Curve IP180 0 25 50 75 Q4 16 Q1 17 Q2 17 Q3 17 Oct 17 Q4 17F (MBOE/d) EAGLE FORD TRACK RECORD OF DELIVERY Generating Free Cash Flow? 0 50 100 150 200 250 0 30 60 90 120 150…
  51. November 2017 Investor Presentation – Encana Corp – slide 51
    EXPANDING MARGINS Reducing Operating Costs Eagle Ford Direct Operating Cost Reductions $4 $5 $6 $7 $8 $9 $10 2015 2016 2017F $/BOE ? Leveraging company-wide effort ? Optimized repairs, maintenance, and workovers ? Shifting…
  52. November 2017 Investor Presentation – Encana Corp – slide 52
    Eagle Ford MIDSTREAM AND MARKETING OVERVIEW ? Firm gas gathering and NGL processing aligned with asset development program ? Infield gathering and extensive market assets in place to ensure flow and downstream connectivity ?…
  53. November 2017 Investor Presentation – Encana Corp – slide 53
    EAGLE FORD Gross Premium Return Inventory Type Curve Eagle Ford Austin Chalk IP30 (BOE/d) 1200 1400 IP180 (BOE/d) 950 1040 EUR/Well (Mbbls) 490 590 EUR/Well (MBOE) 650 770 GOR (scf/bbl) 2,000 1,500 Gross Premium Return Inventory…
  54. November 2017 Investor Presentation – Encana Corp – slide 54
    LARGEST PRODUCER IN THE PLAY Duvernay Production at a Glance 12 miles Duvernay Acreage Top Productivity vs. Peers* Encana Land Core Reef Alberta Fox Creek Simonette North Simonette South 0 10 20 30 40 50 60 Encana…
  55. November 2017 Investor Presentation – Encana Corp – slide 55
    0 5 10 15 20 25 Q4 16 Q1 17 Q2 17 Q3 17 Oct 17 Q4 17F (MBOE/d) DUVERNAY TRACK RECORD OF DELIVERY Delivering Record Performance 0 50 100 150 200 250 300 0 30 60 90 120 150 180 Cumulative Production (MBOE) Days 2017 Avg…
  56. November 2017 Investor Presentation – Encana Corp – slide 56
    High CGR Gas Plants EXPANDING MARGINS Duvernay Operating Cost Performance ? Dramatic reduction in operating costs ? Three plants on-stream since 2014 ? Optimized for liquids handling ? Reduced trucking from location >70%…
  57. November 2017 Investor Presentation – Encana Corp – slide 57
    Duvernay ? Condensate sales via pipeline to premium Edmonton market center ? Firm market access aligned with development program ? Achieved liquids price upgrade while minimizing midstream capex via Alliance pipeline ? Diversified…
  58. November 2017 Investor Presentation – Encana Corp – slide 58
    High CGR Gas Plants STRATEGIC INFRASTRUCTURE CONNECTIVITY Duvernay Built For Purpose Midstream Solution Gross Facility Capacity Gas Capacity 155 MMcf/d Liquids Handling 30,000 bbls/d 10-29 15-31 5-31 Semcams KA Keyerra…
  59. November 2017 Investor Presentation – Encana Corp – slide 59
    DUVERNAY JOINT VENTURE ? Brion (formerly Phoenix, a subsidiary of PetroChina) agreed to invest C$2.18 billion for 49.9% working interest ? C$1.18 billion up front cash in 2012 ? Further investment of C$1.0 billion during the…
  60. November 2017 Investor Presentation – Encana Corp – slide 60
    DUVERNAY Gross Premium Return Inventory Region Simonette South Simonette North Type Rich Gas Condensate Very Rich Gas Condensate Rich Gas Condensate Very Rich Gas Condensate IP30 (BOE/d) 1,550 ? 1,650 1,600 - 1,700 1,200 ?…
  61. November 2017 Investor Presentation – Encana Corp – slide 61
    SAN JUAN BASIN Evaluating Liquids Growth Potential ? 2017 operation highlights ? 6 well program ? 6,100? average completed lateral length ? Evaluation Program ? Target best rock ? Advanced completion design ? Well spacing trial ?…
  62. November 2017 Investor Presentation – Encana Corp – slide 62
  63. November 2017 Investor Presentation – Encana Corp – slide 63
    Liquids primarily comprised of higher-value products Canada US 2017F* (Mbbls/d) 2017F Pricing (%WTI) 2017F* (Mbbls/d) 2017F Pricing (%WTI) Oil 0 ? 1 81% 75 ? 78 96% Condensate** 22 ? 25 99% 3 ? 4 82% Butane 3 ? 4 60% 4 ? 5…
  64. November 2017 Investor Presentation – Encana Corp – slide 64
    WESTERN CANADIAN CONDENSATE FUNDAMENTALS Premium Condensate Market Source: RBC Capital Markets and Government Data Condensate demand in western Canada is expected to outstrip domestic supply ? with imports bridging the gap…
  65. November 2017 Investor Presentation – Encana Corp – slide 65
    BUILDING ON OUR TRACK RECORD Maintaining Corporate Efficiency ? Low overhead costs enable returns ? Interest expense on debt stable with long term fixed rate maturities ~$70MM quarterly* ? Market optimization carries legacy…
  66. November 2017 Investor Presentation – Encana Corp – slide 66
    0% 10% 20% 30% 40% 50% 60% 70% 80% YE 2013 YE 2014 YE 2015 YE 2016 Q3 2017 ? $4.5B fully committed, unsecured, revolving credit facilities ? $4.5B available at September 30, 2017 ? Committed to July 2020 ? No use of credit…
  67. November 2017 Investor Presentation – Encana Corp – slide 67
    0 250 500 750 1,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 (US$ MM) ? Total debt reduced by ~$3 billion since Y/E 2014 ?…
  68. November 2017 Investor Presentation – Encana Corp – slide 68
    2017F ENCANA CORPORATE GUIDANCE (1) US$, U.S. GAAP July 21, 2017 2017F Capital Investment ($ billions) Total Capital Investment 1.6 ? 1.8 Production (after royalties) Liquids (Mbbls/d) 127 ? 132 % Oil & Condensate (2) 80 ? 85% %…
  69. November 2017 Investor Presentation – Encana Corp – slide 69
    Operating Costs ($/BOE at 6:1 ratio) Upstream Operating Expense (3) 3.60 ? 4.00 Transportation and Processing 6.25? 6.50 Administrative Expense (3) 1.40 ? 1.60 Production, Mineral & Other Taxes (% of Revenue (4)) 3.75 ? 4.25% 1.…

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