Cenovus Energy Inc. · TSX:CVE
Cenovus Energy — Merger or Acquisition (March 2017)
39 slides from Cenovus Energy's merger presentation, March 2017
Slide 1: Transforming an oil sands leader
Transforming an oil sands leader
Slide 2: A strategic and transformative transaction
A strategic and transformative transaction + 298,000 BOE/d Acquired from ConocoPhillips for $17.7 billion 50% Working Interest in FCCL 50% Working Interest in FCCL • 178,000 bbls/d of oil sands production (net) • 368,000 bbls/d of regulatory approved capacity (net) Emerging Oil Sands • 3.24 billion
Slide 3: Transforming an oil sands leader
Transforming an oil sands leader • Immediately accretive to per share metrics 2017F production volumes • expected to increase 2018F adjusted funds flow per share MBOE/d by 18%, net of planned asset sales 947 1,000 708 • expected to reduce 2018F operating costs per BOE by 800 588 16% and G&A per BOE
Slide 4: Anchor position in two high quality plays
Anchor position in two high quality plays • Consolidates ownership of top-tier oil sands ConocoPhillips projects (Horn River) • no incremental staff or integration required • low-risk growth profile with emerging technology upside Pelican Lake (21,000 bbls/d) • Deep Basin assets high-grade portfolio
Slide 5: Detailed transaction overview
Detailed transaction overview • 298,000 BOE/d (70% liquids) based on 2017F estimates • ConocoPhillips’ 50% interest in the FCCL Partnership (178,000 bbls/d 2017F) • Majority of ConocoPhillips’ Deep Basin assets (120,000 BOE/d 2017F; 26% liquids; 17% decline rate) Asset overview • 2017F Operating Mar
Slide 6: A compelling three-year outlook
A compelling three-year outlook Highly accretive to key financial and operational metrics Cenovus Cenovus pro forma impact (%) 2017F Accretion/ 2018F Accretion/ 2019F Accretion/ FORECAST FINANCIAL MEASURES 2017F (before (post (post asset sales) Change asset sales) Change asset sales) Change Adjusted
Slide 7: Transaction is fully funded
Transaction is fully funded Financing strategy supports execution of transaction Transaction Transactionisisfully fullyfinanced funded • Successfully executed strategic financing plan $ billions • issued $3.6 billion of Cenovus common shares to $18.0 ConocoPhillips $17.7 $3.6 • closed $3.0 billion c
Slide 8: Maturity and liquidity profile
Maturity and liquidity profile Strong liquidity pro forma the acquisition Debt maturity profile • Committed to investment grade credit ratings (US$ millions) $1,500 • investment grade ratings from S&P Global Ratings, 6.75% Fitch Ratings, and DBRS Limited 5.70% $1,250 4.25% • Intend to repay borrowin
Slide 9: Committed to executing on asset sales
Committed to executing on asset sales Depth of portfolio provides optionality for asset sales Potential Transaction asset is fully sale proceeds financed • High degree of confidence in ability to execute Potential proceeds $ billions dispositions and repay outstanding bridge loan $8.0 • Pelican Lake
Slide 10: Preserving financial resilience
Preserving financial resilience Financing plan supports investment grade ratings Debt metrics expected to trend lower • Targeting 1.0 - 2.0x debt to adjusted EBITDA and Net debt to capitalization (%) Net debt to adjusted EBITDA (times) 30 – 40% debt to capitalization over the long-term 60% 5.0 • Fin
Slide 11: Consolidating our interest in top-tier oil sands
Consolidating our interest in top-tier oil sands • Acquiring remaining 50% interest in two top-tier Foster Creek 81-5W4 producing thermal oil sands projects with current 2017F production: 158,000 bbls/d production capacity of 390,000 bbls/d Production capacity: 180,000 bbls/d December 2016 SOR: 2.4x
Slide 12: Largest & most efficient thermal portfolio
Largest & most efficient thermal portfolio Reinforcing our position as a leader in SAGD Production Portfolio-Weighted (Mbbls/d) December 2016 Average Production Portfolio-Weighted SOR SOR 400 5.0 4.5 4.3 4.3 4.0 300 4.0 3.2 3.1 200 2.8 3.0 2.5 2.4 2.1 2.1 2.2 100 2.0 0 1.0 Pro forma Cenovus . Note:
Slide 13: A demonstrated track record of execution
A demonstrated track record of execution Cenovus is the largest thermal oil sands producer A track record of successful execution • Successfully executed 14 major capacity expansions Production capacity 26% CAGR in representing 390,000 bbls/d (gross) of production (Mbbls/d) production capacity since
Slide 14: Technology innovation enhances value
Technology innovation enhances value Focused innovation drives technological advancement Emerging technology drives incremental oil sands value • Targeting oil sands sustaining capital costs of $7/bbl Illustrative potential NPV uplift (gross, $ billions, discounted at 9%) • Each $1/bbl reduction in
Slide 15: Deep Basin provides second growth platform
Deep Basin provides second growth platform • One of the largest Deep Basin land positions in the WCSB • Three core operating areas: Elmworth-Wapiti, Kaybob-Edson, and Clearwater • Low decline production base coupled with significant liquids-rich development upside Overview of Deep Basin • Deep inven
Slide 16: Over a decade of future drilling opportunities
Over a decade of future drilling opportunities ~1,500 potential drilling opportunities identified Focused on the Spirit River and Montney formations • Initial development focused on the Spirit River and Future drilling opportunities by targeted formation Internal Cenovus estimates Montney formations
Slide 17: Maximizing value in the Deep Basin
Maximizing value in the Deep Basin Taking a disciplined approach to development Internally funded growth potential • Expect to run a three rig program in 2017 and ramping Deep Basin capital expenditures and operating margin ($ millions) up thereafter Capital Expenditures Operating Margin $1,000 • po
Slide 18: The new Cenovus
The new Cenovus ConocoPhillips • One of the largest Canadian energy (Horn River) companies • A leader in SAGD development and innovation • Substantial inventory of regulatory approved oil sands projects Pelican Lake (21,000 bbls/d) Overview • Low decline production base coupled with significant deve
Slide 19: Significant cash generation capacity
Significant cash generation capacity Capital allocation priorities Free funds flow provides capital flexibility • Financial resilience and safe, reliable operations Pro forma 2018F free funds flow before dividends ($ millions) • Sustainable returns to shareholders $2,500 • plan to revisit the optima
Slide 20: A compelling three-year outlook
A compelling three-year outlook Increased scale and depth of portfolio Second growth platform provides capital flexibility • Clear line of sight to production growth through steady Total Cenovus capital expenditures ($ millions) capital investment Cenovus Pro forma $2,500 • 125,000 bbls/d of potenti
Slide 21: Top-tier assets drive value-added growth
Top-tier assets drive value-added growth Full exposure to future growth opportunities Illustrative 5-year growth outlook • Expanded portfolio enhances scale and generates Total Cenovus pro forma production significant long-term production growth (MBOE/d) • Well defined oil sands growth opportunities
Slide 22: Low cost structure drives margin improvement
Low cost structure drives margin improvement Cost reductions improving sustainability Meaningful cost reductions drive future performance • Oil sands netbacks remain competitive $/BOE Cenovus 2014A Cenovus 2017F 48% 32% • estimated field level break-even oil price of $15.00 US$25-$30/bbl WTI • Struc
Slide 23: Downstream assets provide integration
Downstream assets provide integration Downstream integration helps to mitigate differentials Sufficient near term takeaway capacity • Approximately 25% of total blended bitumen price exposure can be mitigated with heavy oil processing capacity Alberta • Wood River and Borger refineries capable of pr
Slide 24: A strategic and transformative transaction
A strategic and transformative transaction ConocoPhillips (Horn River) • Provides accretion on key metrics • Enhances scale and capital flexibility Pelican Lake (21,000 bbls/d) • Maintains financial resilience Oil sands (356,000 bbls/d) Acquiring ConocoPhillips’ 50% interest Deep Basin • Consolidate
Slide 25: Appendix
Appendix ENERGY
Slide 26: Christina Lake asset overview
Christina Lake asset overview Asset overview Christina Lake area asset map • One of the highest quality thermal oil sands projects in the industry 79-4W4 • High average production per well and industry leading steam-oil ratio • Christina Lake phase G is the next phase of potential development with p
Slide 27: Foster Creek asset overview
Foster Creek asset overview Asset overview Foster Creek area asset map • The first commercial steam-assisted gravity drainage project in the 73-3W4 industry • High quality reservoir with a December 2016 steam-oil ratio of 2.4 • Foster Creek phase H is the next phase of potential development with pro
Slide 28: Narrows Lake asset overview
Narrows Lake asset overview Asset overview Narrows Lake area asset map • Expected to be the first commercial steam-assisted gravity drainage 79-4W4 project to utilize solvents in the industry • Solvent aided process is expected to reduce SOR by ~30% while increasing recovery factor by ~15% • Narrows
Slide 29: Elmworth-Wapiti asset overview
Elmworth-Wapiti asset overview Asset overview Elmworth-Wapiti area asset map • ~1.2 million net acres of land developed largely with vertical wells; acreage held by production with minimal expiries • Prolific hydrocarbon stack producing oil & gas from multiple formations • Strong horizontal liquids-
Slide 30: Kaybob-Edson asset overview
Kaybob-Edson asset overview Asset overview Kaybob-Edson area asset map • Asset anchored by Spirit River development and production in Kakwa and Edson • Meaningful Montney and Duvernay potential with continued delineation activity by offsetting operators • Additional multi-horizon potential given Cre
Slide 31: Clearwater asset overview
Clearwater asset overview Asset overview Clearwater area asset map • Significant horizontal development potential across Spirit River, Cardium, and Glauconitic • Meaningful offsetting industry activity in recent years despite limited capitalization of the acquired Clearwater assets • Infrastructure
Slide 32: Deep Basin infrastructure overview
Deep Basin infrastructure overview Asset overview Deep Basin infrastructure map • ~1.4 BCF/d of net natural gas processing capacity and significant associated gathering infrastructure • Infrastructure footprint spans the Deep Basin • Ownership and control underpins operational flexibility • Excess p
Slide 33: Supplemental terms of the transaction
Supplemental terms of the transaction Contingent payment terms Vendor take-back terms • Based on a 5-year time horizon, with a threshold price of • ConocoPhillips has agreed to receive 208 million common $52.00/bbl Western Canadian Select (“WCS”) shares of Cenovus • Calculation based on $6.0 million
Slide 34: Investor relations contacts
Investor relations contacts Kam Sandhar Vice-President, Investor Relations & Corporate Development kam.sandhar@cenovus.com 403.766.5883 Graham Ingram Manager, Investor Relations graham.ingram@cenovus.com 403.766.2849 Steven Murray Senior Analyst, Investor Relations steven.murray@cenovus.com 403.766.
Slide 35: Advisory
Advisory Advisory A final base shelf prospectus containing important information relating to the securities described in this presentation has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the final base shelf prospectus, any amen
Slide 36: Advisory
Advisory FORWARD-LOOKING INFORMATION CONTINUED The forward looking information in this presentation also includes financial outlook regarding Cenovus and other forward looking metrics (including production and financial oil and gas related metrics) relating to the Acquisition and the Assets, namely
Slide 37: Advisory
Advisory Purchasers should not place undue reliance on the forward looking information contained in this presentation, the final base shelf prospectus, any applicable prospectus supplement or the documents incorporated by reference therein, as actual results achieved will vary from the forward looki
Slide 38: Advisory
Advisory OIL AND GAS INFORMATION With respect to the Assets, the reserves and resources data and related information in this presentation were prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") and GLJ Petroleum Consultants Ltd. ("GLJ"). McDaniel evaluated approximately 84% of the Asset
Slide 39: Advisory
Advisory OIL AND GAS INFORMATION "Decline rate" is defined as the rate at which proved developed producing reserves are expected to naturally decline according to the evaluation by our independent qualified reserves evaluator. "F&D" is defined as expected initial well costs divided by forecasted ave