ENCANA CORPORATION. Financial Strength & Discipline. Sherri Brillon. Executive Vice President & Chief Financial Officer

Transcription

1 ENCANA CORPORATION Financial Strength & Discipline Sherri Brillon Executive Vice President & Chief Financial Officer

2 CORPORATE FINANCE Providing Financial Flexibility & Liquidity to Execute our Strategy Maintaining Financial Strength Ensuring ample access to a variety of funding sources Prudently managing debt levels Driving down corporate costs Mitigating commodity price risk Disciplined Capital Allocation Driven by strategy Disciplined & dynamic approach Focused on capital efficiency to drive returns Delivering profitable growth Capital discipline reinforced with dividend 2

3 AN OPERATOR INVESTORS CAN COUNT ON What s New in the Five-Year-Plan Building off of a very strong 2017 Q production expected to be almost 30,000 BOE/d higher than last year s plan Balanced commodity mix expected in Q production efficiency on track to be 10% better at $10,000 per flowing BOE 2017 corporate margin Ŧ expected to be close to $11/BOE Montney plants now on production Same value growth outcomes at $5/bbl lower WTI planning price Sustained cash flow Ŧ growth at lower price and significant free cash flow growth in the plan Increased resilience to risk Robust 2018 hedge positions on gas and oil/condensate plus significant basis and FX positions Combination of firm and physical capacity to ensure market access across the portfolio Ŧ Montney plants ahead of schedule and under budget 3

4 ENCANA Delivering Quality Corporate Returns North American leader in: Generating free cash flow Ŧ ~$1.5 billion cumulative over plan Cash flow Ŧ growth ~ 25% CAGR Corporate returns ROCE Ŧ climbs to 10-15% Execution efficiency ~$9,000 per flowing BOE Disciplined capital allocation 99% of capital to core assets Multi-basin advantage World class premium inventory in Texas oil and Canadian condensate Strong balance sheet Innovation company Focus on environmental, health, and safety performance Ŧ TOP TIER RESOURCE OPERATIONAL EXCELLENCE BALANCE SHEET STRENGTH MARKET FUNDAMENTALS CAPITAL ALLOCATION 4

5 Cash Flow Ŧ ($MM) Corporate Margin Ŧ ($/BOE) DELIVERING A BETTER 5 YEAR PLAN More Valuable & Resilient Updated five-year-plan is better across the board 2017F-2022F Cash Flow Ŧ ~25% CAGR Capital productivity, margins, cash flow Ŧ growth, leverage all improved by >10% even with a $5/bbl lower oil price 4, Continuous innovation and highly efficient execution makes the plan even more robust 3, provides a strong start to the plan 2017 exit-to-exit growth well ahead of original guidance Major facility milestones achieved in Q ahead of schedule & under budget Maintaining efficiencies in a busier industry 2,000 1, F 2018F 2019F 2020F 2021F 2022F - Cash flow Corporate Margin Ŧ 5

6 Capital ($MM] Cum. Free Cash Flow ($MM] GENERATING SIGNIFICANT FREE CASH FLOW Ŧ Disciplined Focus on Profitable Growth Well positioned for 2018 & beyond 2018 growth within cash flow Ŧ Generating strong free cash flow from 2019 onward 4,000 ~$1.5B of Cumulative Free Cash Flow Ŧ to , cash flow protected with hedges 1,400 Disciplined and dynamic capital allocation 3,000 1,200 Focused on core assets 1,000 Multi-basin advantage 2, Focused on world class premium inventory in Texas oil and Canadian condensate 1, F 2018F 2019F 2020F 2021F 2022F - Capital Cumulative Free Cash Flow Ŧ 6

7 FOCUS ON CORPORATE RETURNS Differentiated Results Independent Analysis of over 50 North American E&P s Encana set to deliver above average ROCE Ŧ through 2019 * Assumptions / Methodology* Projected ROCE Ŧ based on 2018 at US$46/bbl, 2019 at $49/bbl Calculated with non-gaap adjusted net income, denominator adds back cumulative historical impairments 2014 forward 8% 5% 2% -1% Independent Analysis* Return on Capital Employed Ŧ 2016A 2017F 2018F 2019F ECA per External study US Small Caps Canadian Large Caps Excl. ECA US large Caps Canadian Small Caps * Source: Macquarie Research: Making Energy Great Again, September Ŧ 7

8 ROCE Ŧ (%) FOCUS ON CORPORATE RETURNS Generating Value Innovation & Discipline Drive Returns 15% 5 year plan Return on Capital Employed Ŧ climbs to 10-15% 10% Stringent capital discipline Highly efficient execution fueled by innovation Among the lowest overhead costs in industry Minimizing non-well capital & managing risk 5% 0% 2018F 2019F 2020F 2021F 2022F Ŧ 8

9 LEADING CASH FLOW Ŧ PER SHARE GROWTH Immediate Value Creation ~25% CFPS Ŧ CAGR Leverage Dropping Cash Flow Ŧ per Share Net Debt to Adjusted EBITDA Ŧ Cash Flow per Share Ŧ x 3.2x 2.9x ~2x <2x 1.5x F 2018F 2019F 2020F 2021F 2022F Q2 2017F 2018F 2019F- 2022F Ŧ 9

10 (US$ MM) DISCIPLINED FINANCIAL MANAGEMENT Debt Portfolio as at June 30, 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 debt not due until 2030 and beyond Investment grade credit rating $4.5B fully committed, unsecured, revolving credit facilities Fixed Debt Maturity Schedule 1,

11 HEDGING STRATEGY Providing Confidence for Front End of Five Year Plan Programs designed to manage exposure to commodity price volatility Supports management of balance sheet risk Portfolio approach to derivatives for both WTI, NYMEX, & CAD$ Active management of regional natural gas basis & oil differentials Integrated hedging decision framework 11

12 Volume (Mbbls/d) Volume (Bcf/d) UNDERPINNING FIVE YEAR PLAN Hedging Positions ~50% of expected oil, condensate and natural gas production protected for Oil and Condensate Positions 1.50 Natural Gas Positions 75 $39.40 x $49.95 x $61.40 /bbl $35.00 x $45.00 x $54.19 /bbl $45.00 x $57.08/bbl $46.22 x $56.05/bbl 0.75 $2.27 x $2.75 x $3.07 /Mcf $3.75/Mcf 25 $52.27/bbl $52.95/bbl $2.96 x $3.57/Mcf $3.13/Mcf $3.07/Mcf * ** 2018 WTI Fixed Price Swap WTI 3-Way Option WTI Costless Collar NYMEX Fixed Price Swap NYMEX 3-Way Option NYMEX Costless Collar NYMEX Call Option Sold Risk management positions as at September 30, * October to December 2017 positions. ** November to December 2017 positions. 12

13 G&A $/BOE Production MBOE/d BUILDING ON OUR TRACK RECORD Maintaining Corporate Efficiency Low overhead costs enable returns Interest expense on debt stable with long term fixed rate maturities ~$70MM quarterly* Market optimization carries legacy unutilized costs for assets disposed ~$25MM per quarter Top quartile G&A/BOE Encana and Peers: G&A per BOE and Production MBOE/d *** $ $ $ Expected to further improve as production growth continues Current G&A levels can support activity levels in 2018 and beyond ~$45MM quarterly** $0 Peer 1 ECA Peer 2 Peer 9 Peer 8 Peer 7 Peer 6 Peer 5 Peer 4 Peer G&A/BOE Production Peer 10 Peer 11 - * Excluding one time payments. (Quarterly averages) **Excluding restructuring and long-term incentive costs. *** YTD June 2017, Source: IHS Company Insights; ECA internal figures. Peers include: CNQ, CXO, EGN, EOG, FANG, LPI, MRO, MUR, PXD, RSPP, SN 13

14 DISCIPLINED CAPITAL ALLOCATION Delivering Quality Corporate Returns Projected 2018 Program Capital balanced with cash flow Ŧ $1.6-$1.8 B total capital Permian: $ MM Montney: $ MM > 90% of capital to DC&T MBOE/d core asset production in 4Q/ Corporate margin Ŧ growth to ~$13.00/BOE at flat prices 70% Permian and Montney <1% Other assets 30% Eagle Ford & Duvernay *Assumes flat $50/bbl WTI oil price, flat $3.00/MMBtu NYMEX natural gas price. Ŧ 14

15 LINKAGE TO EXECUTIVE COMPENSATION Strategic Delivery & Value Creation Directly aligned with strategic delivery & value creation >90% at risk and directly correlated to achievement of company s strategy Annual bonus: Current year strategic plan delivery Long Term Incentives: Variable with share price, relative TSR and delivery of multi-year strategic objectives Environmental, Health, and Safety is a modifier Targets and results are approved by the Board 15

16 ENCANA S VALUE PROPOSITION What Makes Us Unique Return on Capital Employed Ŧ climbs to 10-15% over the 5 year plan ~25% Cash flow Ŧ CAGR 2018F 2022F ~$1.5 Billion Free cash flow Ŧ 2018F 2022F Assumes flat $50/bbl WTI oil price, flat $3.00/MMBtu NYMEX natural gas price. Ŧ 16