1 A Premier E&P 2019 Guidance & 2018 Financial Strength Results Conference Call Return of Capital F E B R U A R Y 2 8 , 2 0 1 9 Sustainable Free Cash Flow Capital Discipline High-Returns Multi-Basin Portfolio with Scale
M U L T I - B A S I N P O R T F O L I O W I T H S C A L E 2 Liquids-Focused, Multi-Basin Portfolio Strength • Core positions in three of the top plays in North America • 2.0 BBOE of proforma high quality proved reserves* o 2018 YE Reserve Life Index (RLI) of ~10 years o >80% increase to RLI since 2015 o 55% liquids 2.0 BBOE of Proforma Proved Reserves* 2018 PRODUCTION ASSET NET ACRES LIQUIDS % PERMIAN 115,000 92 MBOE/d 85% Permian Anadarko CORE ANADARKO 361,000 135 MBOE/d 60% MONTNEY 793,000 191 MBOE/d 22% EAGLE FORD 42,000 45 MBOE/d 81% OTHER WILLISTON 80,000 21 MBOE/d 84% Montney Other UINTA 222,000 20 MBOE/d 87% DUVERNAY 264,000 18 MBOE/d 44% * All reserves are stated on an SEC (U.S. protocol) basis. 2.1 BBOE of proforma NI 51-101 (Canadian protocol) proved reserves.
M U L T I - B A S I N P O R T F O L I O W I T H S C A L E 3 Creating Value Through Scale & Innovation Proven expertise in cube development • 25% Average D&C cost* Concurrent, multi-stack development maximizes the resource value and lowers well o reduction since 2015 costs Higher utilization of services & infrastructure o Reduced D&C cycle times o Supply chain management lowers costs, provides flexibility • and ensures access to quality services Fully offsets cost inflation with sourcing and efficiency improvements o Unbundling of services drives efficiencies with vendors o Self-sourcing commodities (local sand, water, OCTG) o • Centralized water infrastructure solutions D&C cost savings up to $300k/well o LOE savings up to ~$0.80/BOE o • Innovative midstream and transport arrangements Scale enables flexible low-cost transportation and processing agreements o Improves realized pricing, revenues and returns o Market diversification creates value and manages risk o * Weighted average D&C cost from Duvernay, Eagle Ford, Montney, and Permian
H I G H R E T U R N S 4 Deep Inventory of High Return Growth Assets Core 3 Liquids Growth* 2019F** Capital $2.7-2.9B 300 Montney Liquids Production (Mbbls/d) Anadarko 200 Permian Other 100 >75% of 2019F** capital directed to Core 3 plays • 0 • 20% less capital (2019F** vs 2018*) expected to generate 2016 2017 2018 2019F* growth and free cash flow Ŧ Permian Montney Anadarko * Full year proforma basis above includes legacy Newfield activity. ** Full year proforma basis above includes legacy Newfield activity from January 1 to February 13, 2019. On a reportable basis, amounts for volumes, capital and expenses will exclude amounts for this period. Ŧ Non -GAAP measures defined in advisories. For additional information regarding non- GAAP measures see the Company’s website.
C A P I T A L D I S C I P L I N E 5 Disciplined Approach Priority #1 - Financial Strength Manage leverage at mid-cycle prices to ~1.5x net debt to adjusted EBITDA Ŧ Maintain strong liquidity Investment grade credit ratings Priority #3 - Sustain Business Priority #2 – Dividends* Maintain cash flow Ŧ and liquids production in core areas Sustain current dividend Priority #4 – Dividend Growth Dividend increase as sustainable free cash flow Ŧ grows Priority #5 – Excess Free Cash Flow Ŧ Growth investment that generates Deleverage balance sheet Opportunistic share buybacks strong full-cycle returns and expands Reduce debt free cash flow Ŧ * Declaration and payment of future dividends subject to board approval Ŧ Non -GAAP measures defined in advisories. For additional information regarding non- GAAP measures see the Company’s website
S U S T A I N A B L E F R E E C A S H F L O W 6 Compelling Valuation Large/Mid-Cap E&P FCF Yield* 5.0% 8.0x Proven team with demonstrated • Ent. Value / 2019F EBITDA capital discipline 2.5% 6.0x 2019 FCF Yield (%) Consistently delivering on expectations • 0.0% 4.0x Coveted combination of sustainable • -2.5% 2.0x free cash flow* and liquids growth -5.0% 0.0x Peer 1 ECA Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 FCF Yield Ent. Value / EBITDA * Free cash flow / market cap: Peers include APA, CXO, DVN, EOG, FANG, MRO, NBL, PXD, QEP, WPX, XEC. Source: Factset, February 27, 2019
R E T U R N O F C A P I T A L 7 Returning Capital to Shareholders 2018 – 2019F Planned Returns $2.0 • Sold ~$13 billion of assets since 2013 >80% of production and proved reserves sold were natural gas o Distributions to Shareholders ($B) • Reshaped portfolio to liquids while returning cash to shareholders • Expanded liquidity and lowered leverage to $1.0 maintain flexibility to fund investor initiatives • Ongoing commitment to return cash to shareholders $1.25 billion buyback to be executed in 2019 o 25% increase in dividend as of Q1 2019 o $0.0 2018 2019F Dividends Buyback
F I N A N C I A L S T R E N G T H 8 Financial Flexibility Long-Term Debt ($B) Commitment to maintaining a strong balance sheet • 7.1 Reduced long-term debt by nearly $3 billion since 2013 o Reduced long-term commitments by ~$4.3 billion since 2013 o 4.2 Continue to manage to mid-cycle leverage target of 1.5x o Substantial liquidity • $4.0 billion fully committed, unsecured, revolving credit facilities o 2013 2018 Well dispersed long-term debt maturity profile o $1.3 billion combined cash on-hand as of year end 2018* o Long-Term Commitments ($B) 9.8 • Capital structure improves free cash flow Ŧ generation Lowered annual interest expense on debt by $193 million from 2013 o 5.5 Decreased cost-of-capital through scale o • Multi-basin model favored by credit agencies Commodity and geographic diversity reduces risk o Fitch upgraded Encana from BBB- to BBB (Feb. 15, 2019) o 2013 2018 S&P and Moody’s split rated with BBB - and Ba1, respectively o * Combined cash balance of NFX and ECA Ŧ Non -GAAP measures defined in advisories. For additional information regarding non- GAAP measures see the Company’s website
H I T T I N G T H E G R O U N D R U N N I N G 9 Rapid Integration Progression Anadarko Well Cost Savings • >$125 MM in annualized G&A synergies 1.00 o New organization structure implemented o Elimination of duplicative costs saves ~ $25 MM (credit facility, real estate, public company costs) 0.75 o Majority of one-time costs to be incurred in Q1; Q2 expected to show a normalized run-rate $MM 0.50 • $1 MM per well cost reduction in the Anadarko o Numerous identified and contracted savings already in place o Shift to in-basin sand provides immediate capital cost reduction 0.25 o Well design modifications reduce costs o Performance-based frac contracts expected to increase pumping hours per day 0.00 Well Cost Reduction • Cube development drilling starting early Q2 Well Design In-Basin Sand Utilization Completion Efficiencies D&C Supply Chain Savings
2 0 1 9 O U T L O O K 10 Delivering on Encana’s Priorities – Our 2019 Plan 2018 Combined 2019 Full Year (1) ECA+NFX Buyback of $1.25B + 25% dividend increase • Drives per share accretion o CAPITAL INVESTMENT ($ BILLION) 3.5 2.7 – 2.9 • Capital investment of $2.7-2.9B (1) TOTAL LIQUIDS (MBBLS/D) 290 300 – 320 Focused & disciplined: down ~20% from 2018 o Enhancing margins: delivering liquids growth o 1,598 1,550 – 1,650 NATURAL GAS (MMCF/D) Full year liquids growth of ~15% in Core 3 • 556 560 – 600 TOTAL PRODUCTION (MBOE/D) TOTAL COSTS PER BOE (2) Driving efficiencies across the business 13.46 12.75 – 13.25 • UPSTREAM T&P, OPERATING, PRODUCTION, MINERAL, AND OTHER TAXES PLUS G&A (1) Full year proforma basis above includes legacy Newfield activity from January 1 to February 13, 2019. On a reportable basis, amounts for volumes, capital and expenses will exclude amounts for this period. (2) Excludes long-term incentive costs, includes impact of reclassified Bow lease costs, excludes estimated transaction and reorganization costs incurred in 2019 at $200 million.
C O R E G R O W T H A S S E T 11 Anadarko Growing Production** • Liquids growth and free cash flow Ŧ generator o 134,800 BOE/d, 60% liquids in 2018 o ~100% of core lands held by production • Targeting $1 MM well cost reduction o Cube development drilling to commence in early Q2 o Targeting ~$6.9 MM/well D&C cost* in 2H 2019 • 2019F** D&C Cost* ($MM/well) o $800 - 850 MM capital program o Pivot to load-levelled program with 4 drilling rigs o Capital focused on STACK acreage * Normalized to 2019 program average lateral length of 10,000 ft ** Full year combined basis above includes legacy Newfield activity from January 1 to February 13, 2019. On a reportable basis, amounts for volumes, capital (~$170MM) and expenses will exclude amounts for this period. Ŧ Non -GAAP measures defined in advisories. For additional information regarding non- GAAP measures see the Company’s website
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