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1
The New Encana:the clear energy choice
Renee Zemljak | Executive Vice-President, Midstream, Marketing & Fundamentals
Natural Gas Fundamentals
Calgary | March 16, 2010New York | March 18, 2010
www.encana.com
What Has Happened?• Shale-gas mega plays are transforming global energy markets
• The full-cycle cost of supply continues to drop while the resource potential continues to grow
• High cost plays will be displaced
• New infrastructure additions are allowing low-cost supplies to grow
The Outcome:• Producers with high cost portfolios are likely to be squeezed out
and those companies that remain will be focused on margin
• North American natural gas is abundant, clean, reliable, and affordable
• Natural gas is well-positioned to serve a larger share of global energy demand
North American Natural Gas Resource PotentialA New Era
2
www.encana.com
0
20
40
60
80
100
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020Other Tight Gas Sands Shale Gas Mega Plays
Actual Projection
Supply can grow substantially while maintaining affordable costs for consumers
Bcf/d
Productive Capacity in the U.S. and CanadaSupply Potential at $6.50 NYMEX
Source: Encana, IHS Energy
Shale gas share grows from 16% in 2009 to 50% by 2020Shale gas share grows from 16% in 2009 to 50% by 2020
www.encana.com
Regional Market Highlights
• Massive infrastructure additions have caused price spreads to collapse across the North American continent
• Encana’s portfolio has benefited greatly from the levelizing of price spreads
• The Rockies Region is not expected to become export-constrained over the next few years
• Western Canada prices are expected to remain well-connected to neighboring markets
• The Gulf Region is very well-piped and is expected to pose relatively little flow and price risk
• The Northeast Region should still provide premium pricing, even with significant growth from the Marcellus Shale play
3
www.encana.comSource: Encana, FERC, EIANote: Includes projects built between 2007-2009 and committed projects to be built by 2012.
The Connected GridNew Infrastructure Has Changed the North American Gas Market
Bison: 0.48 Bcf/d
Intra-Gulf capacity additions: ~30 Bcf/d
West Storage Additions: 54 Bcf Producing Region Storage
Additions: 523 Bcf
Consuming Region Storage Additions: 172 Bcf
Ruby: 1.5 Bcf/d
REX: 1.8 Bcf/d
Supply Aggregation Points
Shale Supply RegionsPipeline Infrastructure
Shale Core Bubble
Marcellus Shale
www.encana.com
Encana’s Regional Price ExposureHistorical & Forward Relationships to NYMEX*
Encana’s portfolio benefits from tightening West-to-East spreads
Source: Encana, NYMEX Clearport, Platts Gas Daily*Historical prices: Average Platts Gas Daily prices from 2004-2008.*Forward prices as of market close on March 1, 2010. Average prices from 2010-2012.
MidCon
Rockies
SoCal
Sumas
AECO
San Juan
Gulf
HSCWaha
Chicago Appalachia
Dracut
86%
94%90%
99%
Malin91%
101%
90%
101%
85%
96%
111%
111%
105%
103%
98%
102%76%
95%
87%
96%
89%
98% 95%
99%
96%
98%Old Basis World (2004‐2008)
New Basis World (2010+)
Average Price
(Percent of NYMEX)
4
www.encana.com
Unhedged40.9%
Fixed Price Swap $6.01
59.1%
1,368 BBtu/d
Encana Natural Gas Production
April-December 2010F Pro Forma Net Revenue Interest
3,342 BBtu/d
1,974 BBtu/d
2010F Natural Gas Price Exposure As of March 9, 2010
Note: April-December 2010 NYMEX Price: $4.88 on March 9, 2010.Encana has approximately 1,000 BBtu/d hedged in each of calendar years 2011 and 2012 at an average price of about $6.50/Mcf.
www.encana.com
Concluding Remarks
• Encana has long relied on industry-leading fundamentals analysis to enhance our netbacks and shareholder returns
• Encana’s size, geographical diversity, and upstream institutional knowledge provide a competitive advantage in understanding market fundamentals
• We study market fundamentals to mitigate market price risk and optimize our upstream portfolio of assets
• Our dedication to studying market fundamentals and approach to taking action has resulted in:• Making key infrastructure investments that have provided
significant uplift to Encana’s upstream portfolio• Realized hedging gains (NYMEX and basis) of over $6 billion*
*Before tax natural gas hedge gains realized since 2002.
5
The New Encana:the clear energy choice
Supplemental
www.encana.com
Rockies Region
Source: Encana *Assumes the Rockies rig count remains at the current level (~115 rigs). Note that this is not Encana’s outlook – it is only for reference purposes.
The Rockies Region should not be export-constrained over the next few years
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012 2013 2014 2015
Available Export CapacitySupply*Demand + Export Capacity
Bcf/d
BisonRuby
supply is currently declining
constrained period
there is plenty of available export capacity
6
www.encana.com
WCSB Export Capacity
Western Canada TOTAL
Available Capacity = 4.3Exports = 10.1Export Capacity = 14.4
Western Canada
Western Canadian supply is declining and plenty of export capacity is available
Source: Encana, Bentek*All values are in Bcf/d and are 2009 averages.
Export Capacity = 6.5
Exports = 4.3
Available Capacity = 2.2
TransCanada Mainline
Export Capacity = 1.6
Exports = 1.6
Available Capacity = 0
Alliance
Export Capacity = 2.2
Exports = 1.4
Available Capacity = 0.8
McNeill
Export Capacity = 2.8
Exports = 2.0
Available Capacity = 0.8
KingsgateExport Capacity = 1.3
Exports = 0.8
Available Capacity = 0.5
Sumas
www.encana.com
Canad
ian Im
ports
Northeast Region
Source: Encana, Platts POWERmap Note: Values in table are averages from 2006-2009.
ME
MA
ON
MI
PA
NY
RI
MD
WV
VAKY
NHVT
CT
NJ
DE
OH
REX
Easter
n Gulf S
upply
Canadian Imports
Canadian Imports
LNG
LNG
Cent
ral G
ulf S
uppl
y
Midwest Supply
Marcellus fairway
The Northeast Region should still provide premium pricing
Even with significant Marcellus growth, the Northeast Region will need to rely heavily on imports to
serve its large demand
Even with significant Marcellus growth, the Northeast Region will need to rely heavily on imports to
serve its large demand
5.6Gulf
10.5Imports
Volume (Bcf/d)Variable
2.3Canada
12.2Demand
0.8
1.8
1.7
LNG
REX & Midwest
Local Supply
7
www.encana.com
Gulf Region
Source: Encana, Platts POWERmap *Approximate.
The Gulf Region is very well-piped, and thus, posesrelatively little flow and price risk
Henry HubHoustonShip Channel
Carthage Hub
Woodford
Fayetteville
Haynesville
Barnett 6 Bcf/d
9 Bc
f/d
7 Bc
f/d
There is adequate takeaway
capacity from Haynesville
and Perryville
There is adequate takeaway
capacity from Haynesville
and Perryville
Key Pricing PointX Bcf/d Capacity At Year End 2011*
SHALE CORE
SHALE CORE
SHAL
E CO
RE
Bossier
Perryville
15 Bcf/d