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August 2018 Corporate Presentation – Encana Corp

Encana Corp · Aug 29, 2018 · 67 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. August 2018 Corporate Presentation – Encana Corp – slide 1
  2. August 2018 Corporate Presentation – Encana Corp – slide 2
    ENCANA Value Proposition TOP TIER MARKET RESOURCE FUNDAMENTALS ? Encana today: ? Great portfolio with large inventory ? Strong balance sheet ? Disciplined capital allocation ? Leading growth ? cash flow,…
  3. August 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, ~50% completed in H1 2018 ~$3 billion of cumulative free cash flowT (2018-2022F)* Balance sheet…
  4. August 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. August 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…
  6. August 2018 Corporate Presentation – Encana Corp – slide 6
    RESILIENT BUSINESS MODEL Capital Discipline & Risk Management ? Multi-basin portfolio ? Short cycle capital Net Debt to Adjusted EBITDAT 3.2x ? Highly focused capital allocation ? Integrated supply…
  7. August 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. August 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 flow…
  9. August 2018 Corporate Presentation – Encana Corp – slide 9
    FOCUSED ON QUALITY LIQUIDS GROWTH 1 Year of Liquids Growth Captures Value ? Focused liquids growth drives cash flow ? Liquids production up 32 Mbbls/d vs H1 2017 ? Liquids mix improves to 45% from 37% contributing an…
  10. August 2018 Corporate Presentation – Encana Corp – slide 10
    CONVERTING PRICE TO MARGIN Growing Liquids, Holding Costs to Expand Operating MarginT ? Increased liquids mix ? Oil and condensate growth driving margin expansion ? Cost control ? Holding the line on costs results in…
  11. August 2018 Corporate Presentation – Encana Corp – slide 11
    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…
  12. August 2018 Corporate Presentation – Encana Corp – slide 12
    2018 GUIDANCE Cash FlowT and Production Growing >30% ? Expect to generate free cash flowT in 2018 ? Total production is 95% from core assets ? Annual production growth of >30% excluding dispositions ? Q4 core asset…
  13. August 2018 Corporate Presentation – Encana Corp – slide 13
    CONFIDENT IN 2018 EXECUTION Plan To Deliver >30% Production Growth* ? >30% annual production growth* while generating free cash flowT ? Capital program front end loaded ? Restarted Duvernay drilling in January ? Ramped up…
  14. August 2018 Corporate Presentation – Encana Corp – slide 14
    STRONG FINANCIAL PERFORMANCE Q2 Highlights Q2 Q1 ? Expect to generate free cash flowT in 2018 2018 2018 Net Earnings ($MM) (151) 151 ? Full year cash flow marginT increases to ~$16/BOE…
  15. August 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. August 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. August 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. August 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. August 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. August 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. August 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. August 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. August 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. August 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. August 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. August 2018 Corporate Presentation – Encana Corp – slide 26
  27. August 2018 Corporate Presentation – Encana Corp – slide 27
    EXPANDING MARGINS & DE-RISKING GROWTH Midstream & Marketing Contributes ~$100 MM YTD ? Ensuring market access ? Manage flow assurance through flexible and reliable midstream arrangements ? Diversified physical sales portfolio…
  28. August 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. August 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. August 2018 Corporate Presentation – Encana Corp – slide 30
    MARKET DIVERSIFICATION PAYS Q2 Permian Price Uplift Delivers Value Q2 Permian Realized Oil Price (incl. Basis Hedge) ? Ensuring market access ? Firm transport to Houston ? Maximizing price realizations ? Portion of…
  31. August 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. August 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 ~$0.20 below NYMEX in 2018 ? AECO US$0.25 fluctuation equals less than US$15MM cash flow in…
  33. August 2018 Corporate Presentation – Encana Corp – slide 33
    MARKET DIVERSIFICATION PAYS YTD Canada Gas Price Uplift Demonstrates Value ? Ensuring market access ? Diversified sales points to Dawn, Chicago, and US Northwest ? Maximizing price realizations ? Diverse market price…
  34. August 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 ~$20 million to cash flow ? 2018 balance of year price sensitivity to a $0.25…
  35. August 2018 Corporate Presentation – Encana Corp – slide 35
  36. August 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. August 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% Average Royalty Rate (%) 25% ? 70% program focused in Midland/Martin…
  38. August 2018 Corporate Presentation – Encana Corp – slide 38
    PERMIAN CUBE DEVELOPMENT Driving Efficient Execution ? Permian currently at record production of >90 MBOE/d ? Strong production performance from new cube developments ? Brought on 3 cubes in Midland and Martin counties in Q2…
  39. August 2018 Corporate Presentation – Encana Corp – slide 39
    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…
  40. August 2018 Corporate Presentation – Encana Corp – slide 40
    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…
  41. August 2018 Corporate Presentation – Encana Corp – slide 41
    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-…
  42. August 2018 Corporate Presentation – Encana Corp – slide 42
    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…
  43. August 2018 Corporate Presentation – Encana Corp – slide 43
    MONTNEY 2018 Program FY 2018 Plan 2018 Program Acreage (net acres) 379,000 British Columbia 289,000 ? 2018 significant production growth while Alberta (Pipestone) 90,000 generating free cash flow Working Interest…
  44. August 2018 Corporate Presentation – Encana Corp – slide 44
    MONTNEY LIQUIDS GROWTH ON TRACK Liquids Production to Double Q4?17 to Q4?18 ? Montney liquids production up >18% in Q2 vs Q1 ? Strong liquids growth continuing in Q3 ? Currently producing >45 Mbbls/d ? Early start-up of…
  45. August 2018 Corporate Presentation – Encana Corp – slide 45
    MONTNEY OPTIONALITY Activity Focused on Richest Reservoir ? Encana?s Montney acreage spans the maturity window from dry gas to volatile oil ? Initial condensate gas ratios (CGRs) vary…
  46. August 2018 Corporate Presentation – Encana Corp – slide 46
    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…
  47. August 2018 Corporate Presentation – Encana Corp – slide 47
    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 ?…
  48. August 2018 Corporate Presentation – Encana Corp – slide 48
    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 ? Tower liquids hub on-line…
  49. August 2018 Corporate Presentation – Encana Corp – slide 49
    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…
  50. August 2018 Corporate Presentation – Encana Corp – slide 50
    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…
  51. August 2018 Corporate Presentation – Encana Corp – slide 51
    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…
  52. August 2018 Corporate Presentation – Encana Corp – slide 52
    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…
  53. August 2018 Corporate Presentation – Encana Corp – slide 53
    EAGLE FORD & DUVERNAY Generating Significant Free Operating Cash FlowT ? Eagle Ford returned to growth ? Brought on 11 wells in Eagle Ford in Q2 ? 2018 production results de-risking potential future premium inventory ?…
  54. August 2018 Corporate Presentation – Encana Corp – slide 54
    EAGLE FORD 2018 Program 2018 Program FY 2018 Plan Acreage (net acres) 42,000 ? Maximize free operating cash flow Average Working Interest (%) 92% Average Royalty Rate (%) 20 ? 25% ? Program weighted ~60%…
  55. August 2018 Corporate Presentation – Encana Corp – slide 55
    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…
  56. August 2018 Corporate Presentation – Encana Corp – slide 56
    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 ?…
  57. August 2018 Corporate Presentation – Encana Corp – slide 57
    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%…
  58. August 2018 Corporate Presentation – Encana Corp – slide 58
    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…
  59. August 2018 Corporate Presentation – Encana Corp – slide 59
    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 ? 1,650…
  60. August 2018 Corporate Presentation – Encana Corp – slide 60
    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…
  61. August 2018 Corporate Presentation – Encana Corp – slide 61
  62. August 2018 Corporate Presentation – Encana Corp – slide 62
    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…
  63. August 2018 Corporate Presentation – Encana Corp – slide 63
    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 88% 87 ? 90 97% Condensate** 37…
  64. August 2018 Corporate Presentation – Encana Corp – slide 64
    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…
  65. August 2018 Corporate Presentation – Encana Corp – slide 65
    DISCIPLINED FINANCIAL MANAGEMENT Access to Ample Liquidity Through 2022 ? $4.0B fully committed, unsecured, revolving credit facilities ? $4.0B available at June 30, 2018 ? Committed to July 2022 ? No use of credit…
  66. August 2018 Corporate Presentation – Encana Corp – slide 66
    DISCIPLINED FINANCIAL MANAGEMENT Debt Portfolio as at June 30, 2018 ? Total debt reduced by ~$3 billion since Y/E 2014 ? Significant financial flexibility ? ~75% of fixed rate long-term debt not due until 2030 and beyond ?…
  67. August 2018 Corporate Presentation – Encana Corp – slide 67
    2018F ENCANA CORPORATE GUIDANCE US$, 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…

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