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May 2018 Corporate Presentation – Encana Corp

Encana Corp · May 8, 2018 · 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. May 2018 Corporate Presentation – Encana Corp – slide 1
  2. May 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 innovation…
  3. May 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 initiated in Q1 2018, ~25% completed in Q1 ~$3 billion of cumulative free cash flowT (2018-2022F)* Balance sheet…
  4. May 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. May 2018 Corporate Presentation – Encana Corp – slide 5
    AN OPERATOR INVESTORS CAN COUNT ON Increasing Value & Resiliency 2017-2022F Cash FlowT ~25% CAGR ? Updated 5 year plan is better across the board 5,000 4,000 ? Maintaining efficiencies in…
  6. May 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 ?…
  7. May 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 on…
  8. May 2018 Corporate Presentation – Encana Corp – slide 8
    COMPELLING MARGIN EXPANSION Liquids Mix Shift and Efficiency Driving Margin Expansion ? Oil and condensate growth driving margin expansion ? Sales market diversification increases per unit revenue ? Realized price more than…
  9. May 2018 Corporate Presentation – Encana Corp – slide 9
    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 flow…
  10. May 2018 Corporate Presentation – Encana Corp – slide 10
    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…
  11. May 2018 Corporate Presentation – Encana Corp – slide 11
    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 ?…
  12. May 2018 Corporate Presentation – Encana Corp – slide 12
    2018 GUIDANCE Cash FlowT and Production Growing >30% ? Capital balanced with expected cash flowT ? Total production is 95% from core assets ? Annual production growth of >30% excluding dispositions ? Q4 core asset production…
  13. May 2018 Corporate Presentation – Encana Corp – slide 13
    CONFIDENT IN 2018 EXECUTION Plan To Deliver >30% Production Growth* Within Cash FlowT ? >30% annual production growth* within cash flowT ? Capital program front end loaded ? Restarted Duvernay drilling in January ? Ramped…
  14. May 2018 Corporate Presentation – Encana Corp – slide 14
    FIRMLY ON TRACK 2018 Q1 Highlights ? Strong Q1 cash flowT Q1 2018 ? Strong realized pricing against benchmark Net Earnings ($MM) 151 Operating EarningsT ($MM) 156 prices Cash FlowT ($MM) 400 ?…
  15. May 2018 Corporate Presentation – Encana Corp – slide 15
    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 condensate…
  16. May 2018 Corporate Presentation – Encana Corp – slide 16
    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 ? Stacked…
  17. May 2018 Corporate Presentation – Encana Corp – slide 17
    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 productivity…
  18. May 2018 Corporate Presentation – Encana Corp – slide 18
    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…
  19. May 2018 Corporate Presentation – Encana Corp – slide 19
    DUVERNAY Industry Leading Well Performance ? Large contiguous land base within condensate window ? WTI pricing for condensate ? Significant future growth opportunity ? Highly efficient operating performance ? Multi-well…
  20. May 2018 Corporate Presentation – Encana Corp – slide 20
    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,…
  21. May 2018 Corporate Presentation – Encana Corp – slide 21
    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 ? Scaling…
  22. May 2018 Corporate Presentation – Encana Corp – slide 22
    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 optimized…
  23. May 2018 Corporate Presentation – Encana Corp – slide 23
    CUBE DEVELOPMENT Maximizing Value Through Optimized Development ? Spacing & stacking across multiple zones ? Vertical and horizontal optimizations ? System based approach considers how wells interact in the sub-surface over…
  24. May 2018 Corporate Presentation – Encana Corp – slide 24
    CUBE DEVELOPMENT Improved Resource Recovery & Efficiency ? Higher recovery from stacked pay reservoirs ? Generating effective draw down within cube ? Highly efficient, agile development ? Higher utilization of services &…
  25. May 2018 Corporate Presentation – Encana Corp – slide 25
    COMMERCIAL INNOVATION Delivering Value in any Environment ECA 2018 D&C Cost Breakdown ? Fully offsetting service cost inflation with sourcing and ~35% of well cost is drilling efficiency improvements ~65% of well cost is…
  26. May 2018 Corporate Presentation – Encana Corp – slide 26
  27. May 2018 Corporate Presentation – Encana Corp – slide 27
    EXPANDING MARGINS & DE-RISKING GROWTH Midstream & Marketing Focus ? Ensuring market access ? Manage flow assurance through flexible and reliable midstream arrangements ? Maintain diversified physical sales portfolio ?…
  28. May 2018 Corporate Presentation – Encana Corp – slide 28
    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 market and…
  29. May 2018 Corporate Presentation – Encana Corp – slide 29
    PERMIAN MIDSTREAM & MARKETING OVERVIEW Diversified Price Exposure ? Dedicated oil gathering ? 90% of oil gathered on Medallion system ? Provides better margins and flow assurance ? In system storage with multiple sales…
  30. May 2018 Corporate Presentation – Encana Corp – slide 30
    PERMIAN MARKET DIVERSIFICATION Maximizing Realized Price & Minimizing Basis Risk ? Permian realized oil price of $63.27/bbl in Q1 ? 101% of WTI benchmark price ? Limited Midland differential exposure for 2018 and 2019 ?…
  31. May 2018 Corporate Presentation – Encana Corp – slide 31
    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…
  32. May 2018 Corporate Presentation – Encana Corp – slide 32
    BASIS RISK MANAGEMENT PROGRAM Market Access & Price Risk Management ? Western Canada ? Realized price including hedge expected to be ~$0.25 below NYMEX in 2018 ? AECO US$0.25 fluctuation equals less than US$15MM cash flow in…
  33. May 2018 Corporate Presentation – Encana Corp – slide 33
    MARKET DIVERSIFICATION PAYS Q1 Canada Gas Price Uplift Demonstrates Value Q1 Canada Realized Gas Price (incl. Hedge) 96% of NYMEX Full Year AECO Gas Exposure Minimized AECO Basis Hedge: Q1 Average NYMEX Price US$3.00/MMBtu…
  34. May 2018 Corporate Presentation – Encana Corp – slide 34
    RISK MANAGEMENT Adds Greater Certainty to Cash Flow and De-Risks Capital Program ? 2018 balance of year price sensitivity to a $5 increase to WTI is about $35 million to cash flow ? 2018 balance of year price sensitivity to a…
  35. May 2018 Corporate Presentation – Encana Corp – slide 35
  36. May 2018 Corporate Presentation – Encana Corp – slide 36
    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…
  37. May 2018 Corporate Presentation – Encana Corp – slide 37
    PERMIAN 2018 Program 2018 Program FY 2018 Plan Acreage (net acres) 118,000 ? 30% growth from FY 2017 to FY 2018 Average Working Interest (%) 94% ? 70% program focused in Midland/Martin Average Royalty Rate (%)…
  38. May 2018 Corporate Presentation – Encana Corp – slide 38
    PERMIAN Q1 HIGHLIGHTS Targeting 30% Annual Production Growth ? 2018 program on track for 30% annualized production growth ? Q1 volumes flat from a strong Q4 ? Q2 growth will be modest with the impact of off-set frac…
  39. May 2018 Corporate Presentation – Encana Corp – slide 39
    PERMIAN CUBE DEVELOPMENT Strong Results Across New Cubes ? 2018 cubes will continue to target new benches and spacing and stacking configurations ? Testing Jo Mill, Middle Spraberry and Wolfcamp C ? Cube development continues…
  40. May 2018 Corporate Presentation – Encana Corp – slide 40
    CUBE DEVELOPMENT ABOVE-GROUND BENEFITS Effective Water Management ? Improves capital efficiency and de-risks supply ? 3 frac spreads per hub ? Simple and effective catch basin design Martin County ? Central Water Resource…
  41. May 2018 Corporate Presentation – Encana Corp – slide 41
    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…
  42. May 2018 Corporate Presentation – Encana Corp – slide 42
    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-…
  43. May 2018 Corporate Presentation – Encana Corp – slide 43
    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) 610 675 550 530…
  44. May 2018 Corporate Presentation – Encana Corp – slide 44
    MONTNEY 2018 Program FY 2018 Plan 2018 Program Acreage (net acres) 379,000 British Columbia (CRP) 289,000 ? 2018 significant production growth while generating free Alberta (Pipestone) 90,000 cash flow Working…
  45. May 2018 Corporate Presentation – Encana Corp – slide 45
    MONTNEY Q1 HIGHLIGHTS Set Up To Execute Liquids Growth Plan ? Montney liquids set to double again by Q4 2018 ? Growth weighted to second half of 2018 ? new liquids hubs ? Sexsmith Plant turn-around planned for Q2 ?…
  46. May 2018 Corporate Presentation – Encana Corp – slide 46
    MONTNEY CUBE DEVELOPMENT Strong Condensate Production Driving High Margins ? Cube development delivering strong operational efficiencies ? 5 cubes on-stream in Tower in Q1 with 6-14 wells/cube ? Average initial CGR of 100…
  47. May 2018 Corporate Presentation – Encana Corp – slide 47
    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…
  48. May 2018 Corporate Presentation – Encana Corp – slide 48
    PIPESTONE INFRASTRUCTURE SOLUTION Agreement with Keyera ? Supports condensate-focused growth in Pipestone ? Infrastructure supports Montney 5-year plan ? Includes Pipestone Liquids Hub and Pipestone Processing Facility ?…
  49. May 2018 Corporate Presentation – Encana Corp – slide 49
    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 and…
  50. May 2018 Corporate Presentation – Encana Corp – slide 50
    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 Facilities…
  51. May 2018 Corporate Presentation – Encana Corp – slide 51
    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…
  52. May 2018 Corporate Presentation – Encana Corp – slide 52
    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…
  53. May 2018 Corporate Presentation – Encana Corp – slide 53
    MONTNEY Gross Premium Return Inventory Region Tower Dawson South Pipestone Gas Rich Gas Gas Gas Rich Gas Very Rich Type Wet Gas Wet Gas Gas Volatile Oil Condensate Condensate Condensate Condensate…
  54. May 2018 Corporate Presentation – Encana Corp – slide 54
    EAGLE FORD & DUVERNAY Quality Assets Generating Free Operating Cash FlowT ? Combined 2018 annual production similar to 2017 ? Delivered ~$85 million of free operating cash flowT in Q1 ? Combined netback of ~$36/BOE in…
  55. May 2018 Corporate Presentation – Encana Corp – slide 55
    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 - 310 ?…
  56. May 2018 Corporate Presentation – Encana Corp – slide 56
    MIDSTREAM AND MARKETING OVERVIEW Eagle Ford Close proximity to market and well-developed infrastructure ? Firm gas gathering and NGL processing aligned with asset development program ? Infield gathering and extensive…
  57. May 2018 Corporate Presentation – Encana Corp – slide 57
    EAGLE FORD Gross Premium Return Inventory Type Curve Eagle Ford Austin Chalk IP30 (BOE/d) 1200 1400 IP180 (BOE/d) 950 1040 ? 220 premium return EUR/Well (Mbbls) 490 590 inventory locations ?…
  58. May 2018 Corporate Presentation – Encana Corp – slide 58
    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…
  59. May 2018 Corporate Presentation – Encana Corp – slide 59
    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…
  60. May 2018 Corporate Presentation – Encana Corp – slide 60
    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)…
  61. May 2018 Corporate Presentation – Encana Corp – slide 61
    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 more…
  62. May 2018 Corporate Presentation – Encana Corp – slide 62
  63. May 2018 Corporate Presentation – Encana Corp – slide 63
    MAXIMIZING MARGIN Cost Control of Corporate Items Enhances Per Unit Margin ? Benefit of scale driving lower per unit BOE costs ? Reducing costs & growing production volumes ? Interest on debt expected to be ~$70MM/quarter…
  64. May 2018 Corporate Presentation – Encana Corp – slide 64
    PRODUCT VALUE CHAIN Projected Composition of Total Production Excluding Hedge Canada US 2018F* 2018F Pricing 2018F* 2018F Pricing (Mbbls/d) (%WTI) (Mbbls/d) (%WTI) Oil 0 ? 1 93% 87 ? 90 97% Condensate** 38…
  65. May 2018 Corporate Presentation – Encana Corp – slide 65
    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…
  66. May 2018 Corporate Presentation – Encana Corp – slide 66
    DISCIPLINED FINANCIAL MANAGEMENT Access to Ample Liquidity Through 2022 ? $4.0B fully committed, unsecured, revolving credit facilities ? $4.0B available at March 31, 2018 ? Committed to July 2022 ? No use of credit…
  67. May 2018 Corporate Presentation – Encana Corp – slide 67
    DISCIPLINED FINANCIAL MANAGEMENT Debt Portfolio as at March 31, 2018 ? Total debt reduced by ~$3 billion since Y/E 2014 ? Significant financial flexibility ? ~75% of fixed rate long-term debt not due until 2030 and beyond ?…
  68. May 2018 Corporate Presentation – Encana Corp – slide 68
    2018F ENCANA CORPORATE GUIDANCE US$, 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 Natural Gas…
  69. May 2018 Corporate Presentation – Encana Corp – slide 69

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