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March 2018 Corporate Presentation – Encana Corp

Encana Corp · Mar 15, 2018 · 60 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. March 2018 Corporate Presentation – Encana Corp – slide 1
  2. March 2018 Corporate Presentation – Encana Corp – slide 2
    ENCANA Value Proposition ? Encana today: ? Great portfolio with large inventory ? Strong balance sheet ? Disciplined capital allocation ? Leading growth ? cash flow, margin and liquids production ? Culture of…
  3. March 2018 Corporate Presentation – Encana Corp – slide 3
    FOCUSED ON SHAREHOLDER RETURNS ~$3 Billion of Free Cash FlowT Over Five Year Plan $400 million share repurchase program to be initiated in Q1 2018(a) ~$3 billion of cumulative free cash flowT (2018-2022F)* Balance sheet…
  4. March 2018 Corporate Presentation – Encana Corp – slide 4
    FOCUS ON QUALITY CORPORATE RETURNS Our Business Works Today Strategy Execution ? World class portfolio of assets ? Track record of delivery ? Execution excellence ? Culture of innovation both technical and commercial ? Market…
  5. March 2018 Corporate Presentation – Encana Corp – slide 5
    AN OPERATOR INVESTORS CAN COUNT ON Increasing Value & Resiliency ? Updated 5 year plan is better across the board ? Maintaining efficiencies in a busier industry ? Exit-to-exit production growth well ahead of plan ?…
  6. March 2018 Corporate Presentation – Encana Corp – slide 6
    RESILIENT BUSINESS MODEL Capital Discipline & Risk Management ? Multi-basin portfolio Net Debt to Adjusted EBITDAT ? Short cycle capital 3.2x ? Highly focused capital allocation ? Integrated supply chain 2.3x ?…
  7. March 2018 Corporate Presentation – Encana Corp – slide 7
    FOCUS ON CORPORATE RETURNS Differentiated ROCE ? Independent analysis of over 50 North American E&P?s ? Encana ?set to deliver above average ROCET through 2019?* ? Assumptions / Methodology* ? Projected ROCET based…
  8. March 2018 Corporate Presentation – Encana Corp – slide 8
    MARGIN EXPANSION CONTINUES Profitable Growth ? Cash flow marginT continues to grow ? 2017 cash flow marginT up 81% versus 2016 ? Liquids mix ? Higher realized pricing ? Lower operating and corporate costs ? 2018 cash…
  9. March 2018 Corporate Presentation – Encana Corp – slide 9
    5 YEAR PLAN Production Growth Within Cash Flow ? Resilient to operational risk ? Focus on high margin production ? Continuous improvement drives quality corporate returns ? Liquids production CAGR of ~20% ? Leading…
  10. March 2018 Corporate Presentation – Encana Corp – slide 10
    MARGIN GROWTH DRIVEN BY LIQUIDS Premium Liquids Markets and Diversified Gas Markets ? >70% revenue from liquids ? Oil and condensate priced at ~WTI accounts for ~65% of revenue ? Canadian Condensate ~ at par with WTI ?…
  11. March 2018 Corporate Presentation – Encana Corp – slide 11
    WORLD CLASS PORTFOLIO Encana\'s Resource In Context ? Core positions in four of North America?s premier basins ? >23,000 total inventory locations ? ~11,000 premium return locations ? >35% ATRORT returns ? Oil or…
  12. March 2018 Corporate Presentation – Encana Corp – slide 12
    PERMIAN BASIN Highly Efficient Development at Scale ? Developing the cube ? Critical to creating value at industrial scale ? Reservoir & above-ground benefits ? Natural extension of our experience & capabilities ?…
  13. March 2018 Corporate Presentation – Encana Corp – slide 13
    MONTNEY Driving Margin Expansion ? Encana?s Montney is a condensate play ? Receives ~WTI pricing ? Stacked horizontal development ? Over 1,000? of pay, up to 6 stacked horizons ? Completions design driving…
  14. March 2018 Corporate Presentation – Encana Corp – slide 14
    EAGLE FORD Technical Innovation Unlocking Value ? Largely contiguous position in the Karnes Trough ? Most active and profitable trend in the Eagle Ford ? Completion innovations leading to better wells ? Stacked pay, infill…
  15. March 2018 Corporate Presentation – Encana Corp – slide 15
    DUVERNAY Industry Leading Well Performance ? Large contiguous land base within condensate window ? WTI pricing for condensate ? Significant future growth opportunity ? Highly efficient operating performance ?…
  16. March 2018 Corporate Presentation – Encana Corp – slide 16
    TECHNOLOGY & INNOVATION LEADERSHIP AT ENCANA A Competitive Advantage Subsurface ? Geo-cellular reservoir modeling to identify the best rocks ? Leveraging massive proprietary analytics dataset (core, logs, seismic,…
  17. March 2018 Corporate Presentation – Encana Corp – slide 17
    INNOVATION IN OPERATIONS Driven By Culture ? Chiefs organizational structure ? Promotes rapid transfer of technology between plays ? Rapidly translated success in tight cluster design from Eagle Ford to other plays ?…
  18. March 2018 Corporate Presentation – Encana Corp – slide 18
    INNOVATION IN ACTION Evolution in Completion Design Fueling Growth ? Advanced completion design is focused on creating better wells for lower costs ? Applying completions intensity thoughtfully ? Tight clusters and…
  19. March 2018 Corporate Presentation – Encana Corp – slide 19
    CUBE DEVELOPMENT ABOVE-GROUND BENEFITS Development at Industrial Scale ? Highly efficient, agile development Multi-well ? Multi-well pads Pads ? Higher utilization of services & infrastructure Water Multi-rig, ?…
  20. March 2018 Corporate Presentation – Encana Corp – slide 20
    CUBE DEVELOPMENT Differentiated Execution ? Reservoir benefits ? Optimizes resource recovery ? Minimizes inter-wellbore communication ? Less downtime on existing wells ? Eliminates ?parent-child? in-fill drilling…
  21. March 2018 Corporate Presentation – Encana Corp – slide 21
    CUBE DEVELOPMENT Improved Resource Recovery & Efficiency ? Higher recovery from stacked pay reservoirs ? Generating effective draw down within cube Cube Development Maximizing Recovery from the Stack ? Highly efficient,…
  22. March 2018 Corporate Presentation – Encana Corp – slide 22
    COMMERCIAL INNOVATION Delivering Value in any Environment ECA 2018 D&C Cost Breakdown ? Fully offsetting service cost inflation with sourcing and efficiency improvements ~35% of well cost is drilling ? Seamless linkage between…
  23. March 2018 Corporate Presentation – Encana Corp – slide 23
    RISK MANAGEMENT Adds Greater Certainty to Cash Flow and De-Risks Capital Program ? 2018 Price sensitivity to a $5 decrease to WTI is about $120 million to cash flow ? 2018 Price sensitivity to a $0.25 decrease to NYMEX gas is…
  24. March 2018 Corporate Presentation – Encana Corp – slide 24
    BASIS RISK MANAGEMENT PROGRAM Market Access & Price Risk Management Western Canada ? Realized price including hedge expected to be ~$0.45 below NYMEX in 2018 ? AECO US$0.25 fluctuation equals less than US$15MM cash flow in…
  25. March 2018 Corporate Presentation – Encana Corp – slide 25
  26. March 2018 Corporate Presentation – Encana Corp – slide 26
    ENCANA?S POTENTIAL PREMIUM RETURN INVENTORY Only Premium Inventory Consumed in Growth Plan Permian Basin Montney Premium 12,000 well inventory 9,600 well inventory Inventory 3,450 premium locations 6,900 premium…
  27. March 2018 Corporate Presentation – Encana Corp – slide 27
    PERMIAN 2018 Program 2018 Program FY 2018 Plan Acreage (net acres) 118,000 ? 30% growth from FY2017 to FY2018 Average Working Interest (%) 94% ? 70% program focused in Midland/Martin Average Royalty…
  28. March 2018 Corporate Presentation – Encana Corp – slide 28
    PERMIAN CONTINUES STRONG EXECUTION Targeting 30% Annual Growth Permian Cube Performance ? Finished 2017 ahead of plan with Q4 production of >82MBOE/d 175 RAB 2 Q2 2017 (MBOE)* Abbie Laine Q1 2017 ? Innovation…
  29. March 2018 Corporate Presentation – Encana Corp – slide 29
    PERMIAN CONTINUES STRONG EXECUTION Targeting 30% Annual Growth Permian Cube Performance ? Finished 2017 ahead of plan with Q4 production of >82MBOE/d 175 RAB 2 Q2 2017 (MBOE)* Abbie Laine Q1 2017 ? Innovation…
  30. March 2018 Corporate Presentation – Encana Corp – slide 30
    PERMIAN 5 Year Growth Profile ? ~50% of Encana?s capital directed to the Permian in 2018 ? Permian production expected to grow 3x ? 5 year CAGR 25% ? Quality inventory with scale ? No infrastructure or midstream…
  31. March 2018 Corporate Presentation – Encana Corp – slide 31
    MIDSTREAM AND MARKETING OVERVIEW Permian Gathering system links production to Colorado pipeline hubs City Midland Pipelines connect to Cushing and Crane Gulf Coast Permian Permian: Proximity to…
  32. March 2018 Corporate Presentation – Encana Corp – slide 32
    PERMIAN BASIN FUNDAMENTALS Past & Future Pipeline Capacity Expansions Align with Growth Crude Oil Production / Takeaway Capacity (Mbbls/d) 5,000 Potential…
  33. March 2018 Corporate Presentation – Encana Corp – slide 33
    PERMIAN RESERVOIR Massive Potential with Stacked Benches Zone Martin Midland/ Glasscock Howard Upton Clear Fork ? ? M. SPBY ? ? Jo Mill ? ? L. SPBY ? ? ? ? L. SPBY- 2nd ? ? ? ? WCMP A ? ? ? ? WCMP A-…
  34. March 2018 Corporate Presentation – Encana Corp – slide 34
    PREMIUM INCREASE OUTPACING DRILLING Gross Premium Return Inventory County Midland/ Martin Howard Glasscock Upton IP30 (BOE/d) 985 950 825 800 IP180 (BOE/d) 700 650 600 550 EUR/Well (Mbbls) 610 675 550…
  35. March 2018 Corporate Presentation – Encana Corp – slide 35
    MONTNEY 2018 Program FY 2018 Plan 2018 Program Acreage (net acres) 379,000 ? 2018 significant production growth while British Columbia (CRP) 289,000 generating free cash flow Alberta (Pipestone) 90,000 Working…
  36. March 2018 Corporate Presentation – Encana Corp – slide 36
    Diversified Market Exposure in Western Canada Portfolio Approach to Price Risk Management 100% firm capacity on Nova Gas Transmission System (NGTL) Condensate sold into premium Condensate local Imports…
  37. March 2018 Corporate Presentation – Encana Corp – slide 37
    MONTNEY DELIVERING CONDENSATE GROWTH Significant Margin Expansion ? Margin expansion driven by liquids growth ? Liquids more than doubled from Q4/16 to Q4/17 and are set to double again in Q4/18 to 55-65Mbbls/d ? Cube…
  38. March 2018 Corporate Presentation – Encana Corp – slide 38
    MONTNEY CASH FLOW GROWTH High Quality Condensate Play ? Montney growth has been self-funded ? Transition to liquids and increase in scale driving margin expansion ? 2018 significant production growth while generating free cash…
  39. March 2018 Corporate Presentation – Encana Corp – slide 39
    AGREEMENT WITH VERESEN MIDSTREAM Fee-for-Service Structure All 3 Montney Plants On-Stream ? Tower, Sunrise and Saturn plants on-stream Q4 2017 ? Facilities came on ahead of schedule and under budget ? Encana designed, built…
  40. March 2018 Corporate Presentation – Encana Corp – slide 40
    MONTNEY INFRASTRUCTURE PLAN Liquids Handling Capacity Supports Growth & Flexibility Net Encana Capacity Icon Name Anticipated Gas* Condensate* NGLs* Timing (MMcf/d) (bbls/d) (bbls/d) Existing…
  41. March 2018 Corporate Presentation – Encana Corp – slide 41
    ENCANA MONTNEY 5 Year Growth Profile ? Development focused in condensate rich areas ? 2018 program to fill new liquids capacity ? Additional capacity comes online late 2018 ? Operating margin expected to increase >40% by…
  42. March 2018 Corporate Presentation – Encana Corp – slide 42
    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…
  43. March 2018 Corporate Presentation – Encana Corp – slide 43
    MONTNEY Gross Premium Return Inventory Region Tower Dawson South Pipestone Type Wet Gas Gas Rich Gas Wet Gas Gas Gas Rich Gas Very Rich Gas Volatile Oil Condensate Condensate Condensate Condensate Condensate…
  44. March 2018 Corporate Presentation – Encana Corp – slide 44
    EAGLE FORD & DUVERNAY Quality Assets Generating Free Operating Cash Flow ? Completions design continues to drive productivity improvements and expand inventory ? Eagle Ford and Austin Chalk ahead of type curve ? Duvernay…
  45. March 2018 Corporate Presentation – Encana Corp – slide 45
    EAGLE FORD 2018 Program FY 2018 Plan Acreage (net acres) 42,000 2018 Program Average Working Interest (%) 92% Average Royalty Rate (%) 20 ? 25% ? Maximize free operating cash flow Development Capital (net) $MM $270 -…
  46. March 2018 Corporate Presentation – Encana Corp – slide 46
    MIDSTREAM AND MARKETING OVERVIEW Eagle Ford ? Firm gas gathering and NGL processing Close proximity to market and aligned with asset development program well-developed infrastructure ? Infield gathering and extensive…
  47. March 2018 Corporate Presentation – Encana Corp – slide 47
    EAGLE FORD Gross Premium Return Inventory Type Curve Eagle Ford Austin Chalk IP30 (BOE/d) 1200 1400 ? 220 premium return IP180 (BOE/d) 950 1040 inventory locations EUR/Well (Mbbls) 490 590 ? Testing…
  48. March 2018 Corporate Presentation – Encana Corp – slide 48
    DUVERNAY 2018 Program FY 2018 Plan 2018 Program Simonette Acreage (net acres) 91,000 ? Maximize free operating cash flow Average Working Interest (%) 50% Average Royalty Rate (%) 5 ? 10% ? Strong margin driven by ~50%…
  49. March 2018 Corporate Presentation – Encana Corp – slide 49
    MIDSTREAM AND MARKETING OVERVIEW Duvernay Condensate to Edmonton market center Duvernay Alliance Pipeline to U.S. Midwest (Chicago) ? Condensate sales via pipeline to premium Edmonton market…
  50. March 2018 Corporate Presentation – Encana Corp – slide 50
    DUVERNAY Gross Premium Return Inventory Region Simonette South Simonette North Type Rich Gas Condensate Very Rich Gas Rich Gas Condensate Very Rich Gas Condensate Condensate IP30 (BOE/d) 1,550 ?…
  51. March 2018 Corporate Presentation – Encana Corp – slide 51
    SAN JUAN BASIN Evaluating Liquids Growth Potential ? Strong 2017 well results ? 5 Tocito wells exceeding type curve expectations ? Targeted best rock with transverse orientation and advanced completion design to generate…
  52. March 2018 Corporate Presentation – Encana Corp – slide 52
  53. March 2018 Corporate Presentation – Encana Corp – slide 53
    MAXIMIZING MARGIN Cost Control of Corporate Items Enhances Per Unit Margin ? Benefit of scale as per unit cost per BOE driven lower by cost control and growing production volumes ? Interest on debt is expected to be ~$70…
  54. March 2018 Corporate Presentation – Encana Corp – slide 54
    PRODUCT VALUE CHAIN Projected Composition of Total Production Canada US 2018F* 2018F Pricing 2018F* 2018F Pricing (Mbbls/d) (%WTI) (Mbbls/d) (%WTI) Oil 0 ? 1 98% 87 ? 90 100% Condensate** 38 ? 40 98% 3 ? 4…
  55. March 2018 Corporate Presentation – Encana Corp – slide 55
    WESTERN CANADIAN CONDENSATE FUNDAMENTALS Premium Condensate Market Condensate demand in western Canada is expected to outstrip domestic supply ? with imports bridging the gap Source: RBC Capital Markets and…
  56. March 2018 Corporate Presentation – Encana Corp – slide 56
    DISCIPLINED FINANCIAL MANAGEMENT Access to Ample Liquidity Through 2020 ? $4.5B fully committed, unsecured, revolving credit facilities ECA Ratio Well Within Covenant Threshold Debt to Adjusted CapitalizationT…
  57. March 2018 Corporate Presentation – Encana Corp – slide 57
    DISCIPLINED FINANCIAL MANAGEMENT Debt Portfolio as at December 31, 2017 ? Total debt reduced by ~$3 billion since Y/E 2014 ? Significant financial flexibility with no debt maturities until 2019 ? ~75% of fixed rate long-term…
  58. March 2018 Corporate Presentation – Encana Corp – slide 58
    NON-GAAP MEASURES Certain measures in this presentation do not have any standardized meaning as prescribed by U.S. GAAP and, therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures…
  59. March 2018 Corporate Presentation – Encana Corp – slide 59
    2018F ENCANA CORPORATE GUIDANCE US$, U.S. GAAP February 15, 2018 2018F Capital Investment ($ billions) Total Capital Investment 1.8 ? 1.9 Production (after royalties) Liquids (Mbbls/d) 165 ? 175…
  60. March 2018 Corporate Presentation – Encana Corp – slide 60

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