Investor Day – Cenovus Energy Inc.

Cenovus Energy Inc. · Oct 2, 2019 · 101 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

Cenovus 2019 Investor Day Opening remarks Kam Sandhar, Senior Vice-President, Strategy & Corporate Development Investor Day Toronto October 2, 2019
Agenda Opening remarks Kam Sandhar Overview & highlights Alex Pourbaix Capital and financial framework Jon McKenzie Shareholder returns strategy Kam Sandhar Downstream Keith Chiasson Upstream Drew Zieglgansberger Exploration Focused…
Cenovus Leadership Team Alex Pourbaix Jon McKenzie Harbir Chhina Keith Chiasson Al Reid Kam Sandhar Sarah Walters Drew Zieglgansberger 3
Cenovus Energy Alex Pourbaix, President & Chief Executive Officer Investor Day Toronto October 2, 2019 Date here 8
Cenovus at a glance TSX, NYSE CVE Enterprise value 22 billion Telephone Lake 2019F production Oil Sands 353 Mbbls/d Narrows Lake Elmworth-Wapiti Deep Basin 99 MBOE/d Christina Lake Marten Hills Foster Creek 2018 proved &…
More Canadian barrels are in the worlds best interest Opportunity for high ESG-ranked Canadian barrels to displace lower ESG-ranked barrels Aggregated ESG scores and reserves of selected oil producing nations Aggregated ESG score Bbbls…
Why Cenovus Best-in-class Sustainability Financial & Capital assets Discipline Top tier SAGD assets Safe and reliable operations Strong balance sheet Track record of execution Responsible development Returns-focused capital…
Doing what we said we would do Strengthen Improve market Optimize balance sheet access cost structure 45% debt reduction Strategic rail contracts Christina Lake G: new since June 30, 2017 On track to 100Mbbl/d industry capital…
Highlights of our strategy and 5-year plan Disciplined capital & production Growing free funds flow & earnings Capital investment Total production Free funds flow and net earnings ( billions) (MBOE/d) ( billions) 3 750 3 2-3%…
Financial & Capital Framework Jon McKenzie, Executive Vice-President & Chief Financial Officer Investor Day Toronto October 2, 2019
Financial framework creates resilience and sustainability Further strengthen Maintain cost Returns focused Sustainably grow balance sheet and structure and reduce capital allocation shareholder returns financial resilience funds flow…
Further strengthen balance sheet and financial resilience Leverage targets will be achieved Net debt ( billions) 12.9 Grounding capital structure at 45 WTI Ensuring liquidity and resilience throughout the commodity price cycle…
Further strengthen balance sheet and financial resilience Driving cost savings and flexibility with continued deleveraging 570 Annual interest expense ( millions) Realigning capital structure to support the business plan 400…
Maintain cost structure while reducing funds flow volatility Reductions anchored in operational improvements and a realigned workforce Oil sands operating costs (/bbl) Corporate G&A costs (/BOE) 13.50 3.65 8 7 - 8 1.70 1.60 -…
Maintain cost structure while reducing funds flow volatility Sustainable reductions driven by technology and continuous improvement Oil sands sustaining capital costs (/bbl) Capital efficiencies by project (M/bbls/day) 14 40 up to…
Disciplined capital allocation drives growing returns Earnings per share (/share) Return on capital employed (%) 2.50 10% 2.00 8% 1.50 6% 1.00 4% 0.50 2% 0.00 0% 2020F 2021F 2022F 2023F 2024F 2020F 2021F 2022F…
Capacity to generate free funds flow through the cycle Low cost structure drives sustainability and free funds flow generation at 45 WTI Billions Projected free funds flow and capital 7 6 75 WTI 5 4 Base case 3 2 45 WTI 1 0…
Returns focused capital allocation Capital expenditures must increase our intrinsic value over time Must generate cost of capital returns at All 45 WTI, 1.50 AECO, 12.50 crack spread projects compete Increase resiliency and…
Returns focused capital allocation Deep portfolio of high return projects Potential IRR ranges for projects in the portfolio IRR (%) 100% Oil sands 75 WTI Potential to invest in projects sustaining 60 WTI that generate robust returns…
Timeline of capital allocation opportunities US500 US450 Earliest FID million Earliest million Christina Lake 3.00% in-service date 3.80% phase H maturity for DRU maturity 2020 2021 2022 2023 2024 Earliest FID Earliest FID…
Highlights of our strategy and 5-year plan Disciplined capital & production Growing cash flow & earnings Increasing returns on capital Capital investment Total production Adjusted funds flow & net earnings Return on capital employed (…
Shareholder Returns Strategy Kam Sandhar, Senior Vice-President, Strategy & Corporate Development Investor Day Toronto October 2, 2019 Date here 26
Sustainably increasing shareholder returns Current free funds flow capability at 45 WTI supports Q4 dividend increase Modest investment in the business positions us for sustainable dividend growth over the next five years and beyond…
Dividend growth strategy Dividend increase of 25% in Q4 2019 Sustainable dividend growth potential in the range of 5-10% per year Dividend Principles Dividend is a Sustainable at Not targeting yield or Maintain target permanent…
Cenovus dividend model Asset base conducive to sustainable dividend growth strategy Differentiating factors CVE Average Average Oil Sands Light Tight Oil Oil Sands Leading cost structure Sustaining…
Significant dividend growth capacity Increasing capability to grow the dividend even at 45 WTI Adjusted funds flow less sustaining capital at 45 WTI Billions 1.5 Significant dividend capacity Market access and 1.0 deleveraging…
Positioned for sustainable dividend growth Dividend sustainability 2020F WTI breakeven Dividend and total payout ratio (2020E) WTI (/bbl) % of 2020 cash flow 60 120% 50 100% 45 WTI threshold 40 80% 30 60% 20 40% 10 20% 0…
Disciplined approach to share repurchases Opportunistic, not programmatic Key metrics Net asset value per share Returns focused and value Share accretive at 60 WTI Funds flow per share repurchase principles Free funds flow per…
Returns focused capital allocation Evaluation of opportunities across the portfolio includes share buybacks Incremental opportunities for capital investment IRR (%) 75 WTI 100% 60 WTI 75% 45 WTI 50% 25% 0% Oil sands Marten…
COP block monetization Focusing on our balance sheet to support potential participation ConocoPhillips (COP) owns Top 10 shareholder positions (millions of shares) 16.9% of CVE shares outstanding COP 208 since 2017 84 Potential…
Disciplined capital allocation priorities Net debt 5…
Downstream Keith Chiasson, Executive Vice-President, Downstream Investor Day Toronto October 2, 2019 Date here 36
Global oil demand forecast to grow Significant investment required to offset declines Global oil demand (MMbbls/d) 120 Supply growth required to meet 100 demand growth and offset declines 80 New oil supply New sources of supply…
Location differentials drive value proposition Alberta to USGC differential consistently exceeds cost of transportation Global heavy crude differentials to Brent (US/bbl) 0 Pricing Average last Benchmark Notes 10 years -20…
Supply of heavy oil in USGC has become challenged Canadian supply partially offsets declines from other markets 3 Key heavy crude exporters to USGC (MMbbls/d) Demand for heavy oil is strong 2015-2016 average Heavy oil processing…
Global heavy conversion capacity to exceed supply Limited congestion expected for heavy conversion capacity Total global heavy supply by region and conversion capacity (MMbbls/d) 20 Forecast 15 10 5 0 1990 1995 2000 2005…
IMO 2020 potential impacts Consensus anticipating shorter duration and less severe impacts Bullish Bearish (narrower light-heavy differentials) (wider light-heavy differentials) Higher non-compliance rates Strict enforcement leading…
Redefining integration taking control of market access Strategic approach to increasing margins and reducing volatility Supporting optimal development of our upstream assets Focusing on market access and transporting products to…
Portfolio approach to markets provides optionality Portfolio of assets will change over time Pipelines are the preferred mode of transportation Rail bridges the gap until pipelines are constructed Refining provides counter-cyclical…
Pipelines are the preferred mode of transportation Current pipeline commitments provide diversification and flexibility Increased commitments by 22,500 bbls/d in 2019 Optimizing takeaway capacity to provide flexibility Canada…
Pipelines are the preferred mode of transportation Supporting expansion pipelines to secure future market access Meaningful commitments on Trans Mountain Expansion and Keystone XL expansions Support Enbridge Mainline conversion…
Rail bridges the gap until pipelines are built Structural rail program ramp-up on track to hit 100,000 bbls/d in 2019 Total US crude by rail sales (Mbbls/d) Rail provides access to markets not 120 directly connected by pipeline 100…
Rail bridges the gap until pipelines are built Reducing rail costs through consistent operations and improving cycle times Current committed capacity and shipping destinations Canada Bruderheim Hardisty 65,000 35,000 bbls/d…
Refineries provide counter cyclical cash flow Strategically located downstream assets provide heavy crude advantage Wood River Illustrative operating margin (percent of total) WTI-WCS differential (US/bbl) Crude capacity 333 Mbbls/d…
Track record of free funds flow through the cycle Benefiting from transportation congestion after investment in CORE project Projected to generate over 1.7 billion of operating margin in excess of capital investment from 2020-2024…
Evaluating high-return refinery growth projects Refinery optimization projects expected to provide 30-50% IRR WRB refinery growth capital investment Annual sustaining capital investment Millions of 100-150 million 400…
Improving margins through strategic integration Reducing exposure to WCS in Alberta Refining capacity and ex-Alberta transportation Marketing in excess of 550 Mbbls/d of commitments (Mbbls/d) blended heavy oil 800 up to 100%…
Investigating the merit of a Diluent Recovery Unit (DRU) Making rail economics competitive with pipelines Managing risk of prolonged 180 Mbbls/d pipeline congestion dilbit Removing blend volumes from Oil sands operations 60…
Neat bitumen netbacks could be competitive to pipelines Realizing higher value for neat bitumen barrels is a requirement Illustrative DRU value drivers Illustrative DRU economics Realized price (US/bbl) Feedstock (dilbit) 180,000 bbl/d…
Next steps in assessing the DRU opportunity Path to potential FID Illustrative DRU growth capital investment Millions Balance sheet strength 400 Complete regulatory and engineering work 300 Secure appropriate crude supply 200…
Upstream Drew Zieglgansberger, Executive Vice-President, Upstream Investor Day Toronto October 2, 2019 Date here 55
Applying our expertise to the next six billion barrels Nearly 50 year oil sands reserve life index Total produced barrels from our oil sands assets 6 billion 1 billion First 20 years Remaining 2P reserves Note: Values are…
Oil sands Building on our core strength Leveraging our best in class oil sands assets, operating expertise and cost structure Modest pace of development maintains cost structure and aligns with market access Free funds flow through the…
We are the leader in SAGD Largest producer Lowest SOR Most experienced Mbbls/d SOR Cumulative operating years 400 4.0 5,000 300 3.0 3,750 200 2.0 2,500 100 1.0 1,250 0 0.0 0 CVE CVE CVE Note: Average daily…
Innovation and experience generate results Improved conformance Track record Most experienced Longer of execution SAGD operator horizontal wells Redesigned well pads Note: See Advisory. 55
Advances in subsurface design and operating strategy Conformance refers to the consistency of steam across the reservoir, which drives bitumen recovery efficiency Lower SOR New design and Higher oil production Better conformance…
Operating strategy and execution delivers longer wells Pacesetter in SAGD horizontal drilling No degradation in well CN Tower 553 performance Oil Sands Peer Average 878 Fewer wells required to 2016 1,017 develop resource 2017…
Redesigned well pads drive cost improvements Longer wells accessing more reservoir New design 32 MMbbls Modular, scalable surface facility Increase in well length and number Old design 14 well pairs of wells per pad 12…
Sustainable reductions to cost structure Industry leading oil sands operating costs and sustaining capital /bbl Oil sands operating costs and sustaining capital 15 40% reduction 70% reduction 12 in operating in sustaining costs…
Oil sands sustaining capital projects Sustaining projects are some of the highest return projects in our portfolio Consistent approach to sustaining production at Foster Creek and Christina Lake Current and future programs implement…
Foster Creek phase H opportunity to optimize asset Leveraging brownfield expansion opportunity Benefiting from phases F and G pre-build Capital profile ( millions) Expected to be FID-ready in H2 2020, subject 300 to market access…
Christina Lake phase H / Narrows Lake tieback opportunity Extending industry leading cost structure Utilizing Christina Lake infrastructure to access Capital profile ( millions) 1 billion barrels of Narrows Lake resource 400 Expected…
Accessing Narrows Lake resource cost effectively Opportunity to access lower cost resource MEG Christina Lake Narrows Lake Centralizing operations at Christina Lake Elimination of standalone facility Accesses Narrows Lake…
Beyond 5 years: Christina Lake future expansions Opportunity to grow into large reserve life Potential to build on existing plant and infrastructure to develop additional resource Completing early stage evaluation work Represents…
Oil sands development plan aligned with strategy 69 Disciplined investment drives significant operating margin Oil sands capital investment Oil sands production (Mbbls/d) and operating margin ( billions) 500 5 2-3% production…
Deep Basin Disciplined approach to value creation Driving the business to be resilient at the bottom of the cycle Low decline Deep Basin asset allows for targeted, returns-focused investment Delivers over 500 million operating margin…
Deep Basin overview Over 2.8 million net acres and 1.2 Bcf/d of net processing capacity Low decline allows for moderated pace of development Disciplined capital investment within cash flows at strip pricing Repositioning the…
Progress on streamlining the Deep Basin business Repositioning to operate at the bottom of the cycle 1.50/GJ AECO Asset Streamlining the Cost structure dispositions portfolio improvements Pipestone disposition 14 smaller A&D 35%…
Deep Basin targeted development opportunity Generating free cash flow from focused investments Deep Basin 5-year forecast Reduced capital investment given Millions Production (MBOE/d) challenging price environment 400 110 Low base…
Exploration Harbir Chhina, Executive Vice-President & Chief Technology Officer Investor Day Toronto October 2, 2019 Date here 74
Exploration Focused investment unlocking new opportunities Athabasca oil sands area 5.4MM acres of mineral rights, Telephone Lake 57% undeveloped Extensive legacy proprietary seismic Narrows Lake Christina Lake database Marten…
Well positioned in the Marten Hills area High margin resource in the Clearwater Over 200 sections of prime oil sands leases 15-25API gravity crude with up to 30m of pay Primary production potential up to 25 Mbbls/d WCS pricing…
Disciplined approach to development Top tier initial results in a growing conventional play Cumulative oil production Marten Hills field activity Oil production (Mbbls) Producing well count (Mbbls/d) 250 15 150 102/08-36-074-25W4…
The power of multilaterals Smaller surface Improved capital Returns focused Scalable productivity footprint efficiency development Horizontal well 4-Lateral Parameter Vertical well (1,600m) (4 x 1,600m Hz.) Effective well length…
Marten Hills development and exploration upside Modest growth with a returns focus aligned with shareholder value proposition Oil production Capital investment and operating margin (Mbbls/d) ( Millions) 30 450 20 300 10 150 0…
Focused Innovation Harbir Chhina, Executive Vice-President & Chief Technology Officer Investor Day Toronto October 2, 2019 Date here 80
In situ technology development leader Continued improvement in capital and operating cost structure Unlocking the potential of our vast resource base Improving netbacks and driving free cash flow Continued reduction in GHG emissions…
Innovation drives sustainability in the business Impactful oil sands technologies New liner designs Flow control devices New 3D seismic (6-200 Hz) Longer horizontal wells Redesigned well pads and pad facilities Ultra high quality…
Technology driving material operating improvements Commercialized technologies and processes have positively impacted performance Normalized oil rate vs. time Normalized CSOR vs. time Cal-Day Oil Rate (bbls/d) CSOR 2,000 10 8…
Moving towards a long-term vision of zero steam Low concentration solvent pilot (SAP) High concentration solvent pilot Solvent injection started in Q1 2018 ISOR Propane concentration of 3-10wt% 6 Instantaneous SOR has fallen 20%…
Next steps in solvent commercialization Demonstration project overview Solvent and incremental SAGD oil production (Mbbls/d) Identified future development scope at Foster Creek to implement at pad scale 20 Solvent injection expected…
New plant design Apply disruptive technologies to change the game of processing Substantially reduce equipment and piping Innovation Highly modularized manufacturing Accelerate construction cycle 12,500/bbl/d efficiency for FCCL…
Supercritical Water Upgrading Continue to advance netback improvement projects in partial & commercial upgrading Cracking of hydrocarbons via reaction with supercritical H2O Technology Solids removal and water treatment Flashing…
Sustainability Al Reid, Executive Vice-President, Stakeholder Engagement, Safety, Legal & General Counsel Investor Day Toronto October 2, 2019 Date here 88
Sustainability embedded in company culture At Cenovus, sustainability is essential to the way we do business. It means creating a safe and inclusive workplace, partnering with local and Indigenous communities, and innovating to…
Adding business value through ESG Identified material ESG opportunities through third-party facilitated process Performance targets being developed for each area based on business plans Safety Governance Indigenous Water Climate…
Setting direction through sustainability governance BOARD COMMITTEE Safety, Environment, Responsibility and Reserves EXECUTIVE LEADERSHIP TEAM Championed by Executive Vice-President Stakeholder Engagement, Safety, Legal & General…
Board renewal Board renewal program supports distribution Progressing toward target of 1/3 of tenures, balancing company experience female independent directors with new perspectives Independent Director Tenure Female Independent…
Working here means Leading, best ever safety performance in 2018 working safely of injuries per 200,000 hours worked Delivering safe and reliable 0.75 operations is the key priority Third party safety culture 0.50 survey (DuPont…
Strong engagement with Indigenous communities 2.7 Indigenous business spend since 2009 on goods and Supports regulatory billion services certainty Establishes relationships for Long-term benefit agreements with Indigenous 9…
Proactively managing critical habitat for species at risk Cenovus Caribou Habitat Restoration project largest single project of its kind in the world Project focused on eliminating linear landscape features to mitigate predator…
Proactive abandonment and reclamation Proactive management of abandonment and reclamation obligations through voluntary early reclamation activities enables lower reclamation costs and asset retirement liability Asset retirement…
Responsible water stewardship Fresh water use intensity below in situ industry average No tailings ponds 0.4 No surface water used for steam Predominantly saline water used 0.3 Technology increases water use efficiency 0.2…
Direct emissions intensity lower than the average global barrel 30% reduction in emissions intensity since 2004 Oil sands direct emissions intensity kg CO2e per barrel 80 Average global barrel2,7 60 Average barrel refined in…
Putting Canadas GHG emissions into context Global GHG emissions Canadas GHG emissions by sector Source: World Resources Institute, 2017 Source: Environment and Climate Change Canada, 2018 95
Potential for further GHG emissions reductions Moving towards a long-term vision of zero steam Low concentration High concentration High temperature solvent solvent zero steam pilots have pilot has Potential to remove…
Collaborating to advance sustainable solutions Note: See Advisory. 97
Well positioned for the energy transition Positioning Canada as a global provider of responsibly produced, lower-emissions barrels to displace less responsibly produced, higher-emissions barrels Actions to address Managing…
Cenovus 2019 Investor Day Closing remarks Alex Pourbaix, President & Chief Executive Officer Investor Day Toronto October 2, 2019
Highlights of our strategy and 5-year plan Disciplined capital & production Growing free funds flow & earnings Capital investment Total production Free funds flow and net earnings ( billions) (MBOE/d) ( billions) 3 750 3 2-3%…