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2018 Capital Expenditure – Cenovus Energy Inc.

Cenovus Energy Inc. · Dec 14, 2017 · 51 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. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 1
  2. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 2
    About Cenovus British Columbia Alberta Saskatchewan Edmonton Calgary Regina Fort St. John Fort McMurray Saskatoon Horn River Elmworth-Wapiti Kaybob-Edson Clearwater Narrows Lake Christina Lake Foster Creek Telephone Lake…
  3. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 3
    2018 budget focuses on capital discipline ? Total capital guidance of $1.5 ? $1.7 billion ? Majority of budget is allocated to sustain base production at oil sands operations ? $270 million allocated for continued construction of…
  4. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 4
    G&A costs 2018F 2017F % change Non-rent ($ millions) 136 182 -25 Rent & office ($ millions) 164 118 40 Total ($ millions) 300 300 - Per-unit ($/BOE) 1.65 1.75 -6 Operating costs 2018F 2017F % change Total oil sands ($/bbl) 7.10 ?…
  5. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 5
    Delivering on our potential Note: See Advisory. 2017 accomplishments Transaction 2018 ipsr ifourlliyti efsinanced Q1 Continued to demonstrate strong operations ? Announced transformational acquisition ? Executed acquisition…
  6. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 6
    $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 Demonstrating top quartile oil sands operating costs Q3 2017 oil sands operating costs per barrel Operating costs ($/bbl) 5 Source: Company reports. Peers include ATH,…
  7. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 7
    Note: After-tax IRR based on go-forward spending and flat US$55/bbl WTI. See Advisory. Christina Lake phase G project profile 0 10 20 30 40 50 60 2017F 2018F 2019F 2020F 2021F 2022F 25% 40% 30% 5% 0 0 $0 $100 $200 $300…
  8. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 8
    Targeting $1 billion of cumulative cost reductions Note: General & administrative includes indirect costs. See Advisory. Capital efficiencies ? Supply chain benefits driven by increased size and scale ? Re-designed well pads ?…
  9. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 9
    ? Majority of 2018 capital sustains base production at Cenovus?s oil sands operations ?…
  10. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 10
    ~$3.9 billion Liquidity position supports resilience Note: Liquidity positions as at September 30, 2017. See Advisory. Liquidity position Near-term debt reduction ? ~$3.9 billion reduction in net debt position expected by year end ?…
  11. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 11
    Demonstrated track record of asset sales Note: See Advisory. Evaluating non-core assets Track record on divestitures since 2010 ? Continuing to evaluate portfolio for non-core divestitures ? Deep Basin non-core Clearwater assets…
  12. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 12
    Cost reductions improve sustainability Note: See Advisory. Oil sands sustaining capital Oil sands operating costs General & administrative costs $0.00 $3.00 $6.00 $9.00 $12.00 $15.00 2014 2015 2016 2017F 2018F $/bbl ? > 50%…
  13. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 13
    Sustainability drives free funds flow Note: Implied WTI breakeven required to cover sustaining capital and dividends. Decline rates as per Peters & Co. Limited. Free funds flow as per Peters & Co. as of December 11, 2017 strip pricing.…
  14. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 14
    *2015 CAPP RCE national data table for 2014 operating year. Leading environmental performance 0.303 0.304 0.295 0.288 0.312 0.221 0.222 0.224 0.234 0.255 0.522 0.00 0.10 0.20 0.30 0.40 0.50 0.60 2012 2013 2014 2015 2016 Oil…
  15. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 15
    Advancing our environmental performance ? Rigorous regulatory framework ensures environment considerations throughout project lifecycle ? Dedicated internal environment team focused on mitigating environmental risks ? Ongoing…
  16. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 16
    Deep inventory of short & long-cycle opportunities Development opportunity and growth potential Focused on the Spirit River and Montney formations 0 200 400 600 800 Spirit River Montney Other targets Internal Cenovus estimates…
  17. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 17
    0% 5% 10% 15% 20% 25% 30% 0 3 6 9 12 15 18 21 24 Months on production E20 PAD (2008) E15 PAD (2009) W02 PAD (2011) E08 PAD (2013) W08 PAD (2015) W07 PAD (2016) W10 PAD (2016) W05 PAD (2016) W18 PAD (2016) W23 PAD (2016) W15 PAD…
  18. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 18
    ? Superior start-up and steam circulation methods ? Advanced sub-surface equipment and design ? High pressure ramp up 2011 4D, or time-lapse seismic, can be acquired to determine changes in reservoir over an extended period. Lower…
  19. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 19
    0 500 1,000 1,500 2,000 2,500 3,000 3,500 1 31 61 91 121 151 181 211 241 271 301 331 361 391 421 Day Average 1,400m well Average 965m well Christina Lake H09 pad ? 6 well pairs at 1,600m H-09 p ? Improved conformance allows…
  20. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 20
    Redesigned well pads drive cost improvements Improvements provide sustainable reduction in F&D Transaction Redesigned well pisa dfu allty C fhinraisntcinead Lake ? Improved modular and scalable design for well pairs and pads ?…
  21. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 21
    Foster Creek estimated capital savings of $500 million After: ? 8 pads ? 66 wells ? ~$600 million ? 220 MMbbl recoverable Before: ? 18 pads ? 120 wells ? ~$1.1 billion ? 200 MMbbl recoverable Improved conformance, longer…
  22. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 22
    Christina Lake estimated capital savings of $800 million Before: ? 19 pads ? 213 wells ? ~$1.6 billion ? 310 MMbbl recoverable After: ? 13 pads ? 105 wells ? ~$800 million ? 310 MMbbl recoverable Improved conformance, longer…
  23. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 23
    Improvement drives sustainable reductions Redesigned well pads Lower F&D Targeting $8 ? $10/bbl ? Improved modular & scalable design ? Scope reduction reduces costs ? Reduced well pad footprint Improved well design ? Quicker…
  24. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 24
    2.1 2.7 4.0 3.1 2.1 5.3 2.4 4.1 4.2 3.6 3.1 1.0 2.0 3.0 4.0 5.0 6.0 0 100 200 300 400 1 2 3 4 5 6 7 8 9 10 11 Total production Portfolio-weighted SOR SOR reflects resource quality and execution Note: Production…
  25. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 25
    0 25 50 75 100 125 150 175 200 225 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F Mbbls/d Christina Lake overview Note: Production is shown before royalties on a gross…
  26. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 26
    Current productive capacity phases A-G (bbls/d) 180,000 Regulatory approved capacity (bbls/d) 295,000 Reservoir depth ~450 meters Net pay 25 ? 30 meters High permeability 5 ? 10 darcies High oil saturation ~80% API bitumen 9? ? 11?…
  27. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 27
    Solvents expected to create value and reduce emissions intensity ? Decreases SOR by ~30% - 35% ? Increases individual well production rates up to 10% ? Increases growth capital 15 - 20% ? Decreases sustaining capital by 10 - 30% ?…
  28. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 28
    Deep Basin provides second growth platform Note: Deep Basin summary statistics excludes any potential divestitures. See Advisory. Overview of Deep Basin ? One of the largest Deep Basin land positions ? Three core operating areas:…
  29. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 29
    No near-term takeaway constraints Asset overview Deep Basin infrastructure map ? ~1.4 BCF/d of net natural gas processing capacity and significant associated gathering infrastructure ? Infrastructure footprint spans the Deep Basin ?…
  30. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 30
    20% 40% 60% 80% 100% $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 Operating costs % Natural gas Driving efficiencies in Deep Basin operating costs Q3 2017 operating costs for Deep Basin &…
  31. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 31
    Upside potential from stacked pay Note: Formation rights (net acres) by area. Spirit River formation includes the Notikewin, Falher, and Wilrich. Upside potential from stacked pay Target formations Formation Elmworth Wapiti Kaybob…
  32. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 32
    Focus on high quality and low risk locations Drilling plans through 2018 focused on development and appraisal 2018 drilling Q1 Q2 Q3 Q4 Elmworth / Wapiti Wapiti Falher 6 wells Kaybob / Edson Kakwa Falher 5 wells 1 well Kaybob…
  33. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 33
  34. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 34
    Wapiti Falher development opportunity Wapiti Falher development plans Wapiti Falher development plans ? Tight gas sand play with attractive economics ? continuation of the Falher trends northwest of established development in Kakwa ?…
  35. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 35
    Kakwa Falher development opportunity Kakwa Falher development plans Kakwa Falher development plans ? One of the most economic plays in Western Canada ? stacked shoreface and fluvial channel play ? ~78,000 gross acres with ~65% working…
  36. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 36
    Edson Wilrich development opportunity Edson Wilrich development plans Edson Peco-Wolf development plans ? Emerging top quartile play in the Deep Basin ? ~150,000 net acres, majority of which is 100% working interest ? 4 wells…
  37. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 37
    Pipestone Montney development opportunity Pipestone Montney development plans Pipestone Montney acreage position ? ~25k gross acres with ~95% working interest ? thick 200m Montney interval with stack potential ? initial liquids yields…
  38. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 38
    Clearwater Spirit River development opportunity Clearwater Spirit River development plans Clearwater Spirit River development plans ? Proven top quartile play in the Deep Basin with high industry activity levels ? significant liquids…
  39. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 39
    Takeaway capacity provides certainty ? Cenovus has no near term takeaway capacity issues ? West Coast: Trans Mountain ? US Gulf Coast: Enbridge USGC/Flanagan South ? Bruderheim rail facility provides incremental optionality ?…
  40. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 40
    Deep Basin takeaway capacity and marketing Potential for growth and synergies with oil sands Current firm receipt capacity exceeds production levels ? Current firm receipt capacity exceeds forecast production levels ? sufficient…
  41. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 41
    Hedges at October 25, 2017 Volume Price Crude ? Brent Collars January ? June 80,000 bbls/d US$49.54/bbl ? US$59.86/bbl Crude ? Brent Fixed Price January - June 60,000 bbls/d US$53.34/bbl Crude ? Brent Put Contracts January ? June…
  42. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 42
    Refining capacity mitigates heavy oil differentials ? Refining assets help to mitigate exposure to wider light/heavy differentials ? Approximately 25% of total blended heavy oil volumes are mitigated with processing capacity ? Wood…
  43. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 43
    Refining operating margin sensitivities -$250 $0 $250 $500 $750 $1,000 $1,250 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 Chicago crack spread - US$/bbl US$20/bbl US$15/bbl US$10/bbl Refining operating margin net (LIFO basis)…
  44. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 44
    Creating value through social and governance performance ? SER Committee of the Board provides oversight of environment and sustainability performance ? Enterprise Risk Management program, practices and policy help ensure active and…
  45. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 45
    Supplemental terms of the ConocoPhillips? transaction ? Based on a 5-year time horizon, with a threshold price of $52.00/bbl Western Canadian Select (?WCS?) ? Calculation based on $6.0 million per quarter multiplied by the difference…
  46. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 46
    Steepbank East McMurray Telephone Lake Foster Creek Proper Narrows Lake West Kirby Winefred Lake Christina Lake Proper BOREALIS REGION CHRISTINA LAKE REGION FOSTER CREEK REGION Hardy Leismer Alberta Saskatchewan Fort…
  47. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 47
    November 1, 2017 2017 Corporate Guidance - C$, before royalties Guidance of all operating metrics includes forecast impacts of the acquisition effective May 18, 2017 UPSTREAM Production (Mbbls/d) Capital expenditures ($ millions)…
  48. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 48
    TOTAL Total liquids Total natural gas Total upstream Production (Mbbls/d, MBOE/d) 350 655 459 - 376 - 695 - 492 Capital expenditures ($ millions) 1,315 - 1,420 Capital expenditures ($ millions) Operating costs ($/bbl)…
  49. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 49
    December 13, 2017 2018 Corporate Guidance - C$, before royalties UPSTREAM ANDS Production (Mbbls/d) Capital expenditures ($ millions) Operating costs ($/bbl) Effective royalty rates (0/0) Steam to oil ratio Foster Creek 162 - 170…
  50. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 50
    TOTAL Production (Mbbls/d, MBOE/d) Capital expenditures ($ millions) Total liquids 393 417 Total natural gas(2) 540 560 Total upstream 483 510 1,215 - 1,350 REFINING & MARKETIN Refining (3) Marketing & transportation Capital…
  51. 2018 Capital Expenditure – Cenovus Energy Inc. – slide 51
    Investor relations contacts Kam Sandhar Vice-President, Investor Relations & Corporate Development kam.sandhar@cenovus.com 403.766.5883 Steven Murray Manager, Investor Relations steven.murray@cenovus.com 403.766.3382 Graham…

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