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November 2018 Corporate Presentation – Encana Corp

Encana Corp · Nov 1, 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. November 2018 Corporate Presentation – Encana Corp – slide 1
  2. November 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. November 2018 Corporate Presentation – Encana Corp – slide 3
    FOCUSED ON SHAREHOLDER RETURNS ~$3 Billion of Free Cash Flow? Over Five Year Plan Repurchased 20.7MM shares for ~$250MM Q3 YTD ~$3 billion of cumulative free cash flow? (2018-2022F)* Balance sheet discipline Creates…
  4. November 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. November 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 ? Major facility milestones achieved ahead of schedule & under…
  6. November 2018 Corporate Presentation – Encana Corp – slide 6
    RESILIENT BUSINESS MODEL Capital Discipline & Risk Management • Multi-basin portfolio • Short cycle capital Net Debt to Adjusted EBITDA? 3.2x • Highly focused capital allocation • Integrated supply chain…
  7. November 2018 Corporate Presentation – Encana Corp – slide 7
    MARGIN EXPANSION CONTINUES Profitable Growth • Cash flow margin? continues to grow • 2017 cash flow margin? up 81% versus 2016 ? Liquids mix ? Higher realized pricing ? Lower operating and corporate costs • 2018 cash flow…
  8. November 2018 Corporate Presentation – Encana Corp – slide 8
    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…
  9. November 2018 Corporate Presentation – Encana Corp – slide 9
    2018 GUIDANCE UPDATE Free Cash Flow? Positive in 2018 • On track to deliver liquids growth 2018F Updated Guidance • 2018F cash flow margin? >$16/BOE ($14/BOE original) Capital Investment ($ billion) 2.0 – Driven by high value…
  10. November 2018 Corporate Presentation – Encana Corp – slide 10
    THE STRATEGY IS WORKING Liquids Growth + Margin Growth = Cash Flow? Growth • Focused liquids growth – 23 Mbbls/d increase in liquids in the quarter (15% increase) – >75% of liquids growth from oil and condensate – Liquids…
  11. November 2018 Corporate Presentation – Encana Corp – slide 11
    STRONG FINANCIAL PERFORMANCE Q3 Highlights Q3 2018 • FCF? positive in Q3 – Generated $66MM of FCF? Net Earnings ($MM) 39 – Expect full year positive FCF? Operating Earnings? ($MM) 163 – Cash flow margin? of $16.93/BOE…
  12. November 2018 Corporate Presentation – Encana Corp – slide 12
    WORLD CLASS PORTFOLIO Encana\'s Resource In Context • Core positions in four of North America’s premier basins • >23,000 total gross inventory locations* • ~11,000 gross premium return locations – >35% ATROR? returns – Oil…
  13. November 2018 Corporate Presentation – Encana Corp – slide 13
    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…
  14. November 2018 Corporate Presentation – Encana Corp – slide 14
    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…
  15. November 2018 Corporate Presentation – Encana Corp – slide 15
    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…
  16. November 2018 Corporate Presentation – Encana Corp – slide 16
    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…
  17. November 2018 Corporate Presentation – Encana Corp – slide 17
    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,…
  18. November 2018 Corporate Presentation – Encana Corp – slide 18
    INNOVATION IN OPERATIONS 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…
  19. November 2018 Corporate Presentation – Encana Corp – slide 19
    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…
  20. November 2018 Corporate Presentation – Encana Corp – slide 20
    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 &…
  21. November 2018 Corporate Presentation – Encana Corp – slide 21
    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…
  22. November 2018 Corporate Presentation – Encana Corp – slide 22
  23. November 2018 Corporate Presentation – Encana Corp – slide 23
    MARKET ACCESS & RISK MITIGATION Market Diversification Enhances Cash Flow? • Market diversification leads to strong price realizations – Realized Permian oil price of $70.03/bbl was 101% of WTI in Q3 (Midland price $56.84/bbl)…
  24. November 2018 Corporate Presentation – Encana Corp – slide 24
    MIDSTREAM AND MARKETING OVERVIEW Permian Gathering system Colorado links production to • Majority of oil production gathered via pipeline hubs City pipeline with access to multiple physical markets Midland…
  25. November 2018 Corporate Presentation – Encana Corp – slide 25
    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…
  26. November 2018 Corporate Presentation – Encana Corp – slide 26
    MARKET DIVERSIFICATION PAYS Q3 Permian Price Uplift Delivers Value • Ensuring market access – Firm market access to Houston • Maximizing price realizations – Portion of Permian volumes linked to Houston pricing –…
  27. November 2018 Corporate Presentation – Encana Corp – slide 27
    DIVERSIFIED MARKET EXPOSURE IN WESTERN CANADA Portfolio Approach to Price Risk Management • ~0.5 Bcf/d AECO basis hedged at 100% firm ($0.88/Mcf) to Henry Hub capacity on • ~0.5 Bcf/d firm transportation out of the Nova Gas…
  28. November 2018 Corporate Presentation – Encana Corp – slide 28
    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$5MM cash flow in…
  29. November 2018 Corporate Presentation – Encana Corp – slide 29
    RISK MANAGEMENT Adds Greater Certainty to Cash Flow and De-Risks Capital Program • 2018 balance of year price sensitivity to a $5 BENCHMARK HEDGES 2018* 2019 Oil and Condensate increase to WTI is ~$5 million to cash flow •…
  30. November 2018 Corporate Presentation – Encana Corp – slide 30
  31. November 2018 Corporate Presentation – Encana Corp – slide 31
    ENCANA’S POTENTIAL PREMIUM RETURN INVENTORY Only Premium Inventory Consumed in Growth Plan Permian Basin Montney Premium 12,000 gross well inventory* 9,600 gross well inventory* Inventory 3,450 premium…
  32. November 2018 Corporate Presentation – Encana Corp – slide 32
    PERMIAN 2018 Program 2018 Program FY 2018 Plan Acreage (net acres) 118,000 • 40% growth from FY 2017 to FY 2018 Average Working Interest (%) 94% Average Royalty Rate (%) 25% • 70% program focused in…
  33. November 2018 Corporate Presentation – Encana Corp – slide 33
    PERMIAN EXCEEDING TARGETS Cube Development Driving Efficient Execution • Permian delivering record production – Currently producing >100 MBOE/d – Cube development driving strong well performance – Exceeding targets of 30%…
  34. November 2018 Corporate Presentation – Encana Corp – slide 34
    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…
  35. November 2018 Corporate Presentation – Encana Corp – slide 35
    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…
  36. November 2018 Corporate Presentation – Encana Corp – slide 36
    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-…
  37. November 2018 Corporate Presentation – Encana Corp – slide 37
    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 EUR/Well…
  38. November 2018 Corporate Presentation – Encana Corp – slide 38
    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…
  39. November 2018 Corporate Presentation – Encana Corp – slide 39
    MONTNEY CONTINUES TO DELIVER LIQUIDS GROWTH Targeting Q4 Liquids Production of 55-65Mbbls/d • Montney liquids growth on track – Delivered >3x liquids production since Q1 2017 – Currently producing ~55Mbbls/d, on track to meet…
  40. November 2018 Corporate Presentation – Encana Corp – slide 40
    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…
  41. November 2018 Corporate Presentation – Encana Corp – slide 41
    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 •…
  42. November 2018 Corporate Presentation – Encana Corp – slide 42
    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…
  43. November 2018 Corporate Presentation – Encana Corp – slide 43
    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…
  44. November 2018 Corporate Presentation – Encana Corp – slide 44
    ENCANA MONTNEY 5 Year Growth Profile • Development focused in condensate rich areas • 2018 program to fill new liquids capacity • Operating margin expected to increase >40% by 2022 • Liquids production of 55-65 Mbbls/d Q4…
  45. November 2018 Corporate Presentation – Encana Corp – slide 45
    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…
  46. November 2018 Corporate Presentation – Encana Corp – slide 46
    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…
  47. November 2018 Corporate Presentation – Encana Corp – slide 47
    EAGLE FORD & DUVERNAY Generating Significant Free Operating Cash Flow? • Generated ~$215MM of combined free operating cash flow? YTD • Q3 Eagle Ford growth driven by strong Austin Chalk performance – Production up >15% Q3 vs Q2,…
  48. November 2018 Corporate Presentation – Encana Corp – slide 48
    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%…
  49. November 2018 Corporate Presentation – Encana Corp – slide 49
    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…
  50. November 2018 Corporate Presentation – Encana Corp – slide 50
    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 •…
  51. November 2018 Corporate Presentation – Encana Corp – slide 51
    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% liquids…
  52. November 2018 Corporate Presentation – Encana Corp – slide 52
    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…
  53. November 2018 Corporate Presentation – Encana Corp – slide 53
    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 –…
  54. November 2018 Corporate Presentation – Encana Corp – slide 54
  55. November 2018 Corporate Presentation – Encana Corp – slide 55
    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…
  56. November 2018 Corporate Presentation – Encana Corp – slide 56
    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 81% 88 – 91 99%…
  57. November 2018 Corporate Presentation – Encana Corp – slide 57
    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…
  58. November 2018 Corporate Presentation – Encana Corp – slide 58
    DISCIPLINED FINANCIAL MANAGEMENT Access to Ample Liquidity Through 2022 • $4.0B fully committed, unsecured, revolving credit facilities – $4.0B available at September 30, 2018 – Committed to July 2022 – No use of credit…
  59. November 2018 Corporate Presentation – Encana Corp – slide 59
    DISCIPLINED FINANCIAL MANAGEMENT Debt Portfolio as at September 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…
  60. November 2018 Corporate Presentation – Encana Corp – slide 60

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