Professional Documents
Culture Documents
John Brannan
Executive Vice-President and President, Integrated Oil Division
Investor Day | Calgary - June 17 | New York - June 21
1
Growth strategy
Driven by bitumen resource
• Projects capable of supporting 20% CAGR through 2019
• 56 Bbbls best estimate for discovered BIIP
• 5.4 Bbbls best estimate for contingent resource
La &
ke
k
Current
total heavy oil processing
tin ee
production
ris Cr
a
capacity
Ch ster
Base
Fo
Commerciality
growth plan
s Growth
ni l
rtu na
tie
po itio
Op Add
90 %
25
)~
–09
0 05
(2
R
60 AG
rC
5y
30
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1
2010
2
Foster Creek - leading the way
3
Foster Creek future development
Total planned capacity of ~235,000 bbls/d
Phases F, G & H
• Staged plant expansion west of phases A - E
• Each expansion adds
30,000 bbls/d of productive
capacity
• Regulatory approval
anticipated second half 2010
• Up to 12 months
acceleration of phase F
• Requires $76 million
(gross) in 2010F
Phase I now planned
Timelines are subject to regulatory approvals. Volumes are shown on a 100% basis.
4
Christina Lake current phases
Pilot project began in 2000
First production in 2002
18,000 bbls/d of productive
capacity (phases A&B)
• Currently producing
approximately 15,000 bbls/d
from 17 wells
30,000
costs (2010F)
0
A&B CD&E
18Mbbls/d 120Mbbls/d
Volumes are shown on a 100% basis.
Timelines are subject to regulatory approvals. Volumes are shown on a 100% basis.
5
Project schedules
Regulatory First production Expected cumulative
Project phase
applications target production capacity (bbls/d)
Foster Creek
A-E Q1 1999 Q1 2002 120,000
F Q2 2009 2014F 150,000
G Q2 2009 2016F 180,000
H Q2 2009 2017F 210,000
I ~2014F ~2019F ~235,000
Christina Lake
A-B Q3 1998 Q4 2002 18,000
C Q3 2007 Q3 2011F 58,000
D Q3 2007 Q2 2013F 98,000
E Q4 2009 2014F 138,000
F Q4 2009 2016F 178,000
G Q4 2009 2017F 218,000
H ~2013F ~2019F ~258,000
On stream Under construction Submitted for regulatory approval* Planned no approvals*
150
100
50
0
2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F
Volumes are shown before royalties and net to CVE (50% basis).
6
Timeline - illustrative SAGD phase
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Prepare application
Regulatory approval(1)
Engineering
Procurement Initial
capital
Construction(2)
Commissioning
Steam
Production
(1) Receipt of regulatory approval is variable. Assumes construction starts when approval is received.
(2) Construction time is variable depending on several factors. Commissioning, steam and production would be timed
accordingly.
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Why we’re successful – how we do it
Top quality reservoirs
Manufacturing approach
& project execution
Operational excellence
Technological innovations
Top quality people
0
Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer CVE Peer CVE
FC CL
Peers include: CNQ, COP, CLL, DVN, HSE, IMO, JACOS, MEG, NXY, RDS, SU.
Source: ERCB public domain data, April, 2009 – March, 2010.
8
Manufacturing approach to development
Increasing efficiency is reducing execution timeline
Manufacturing process
• Staged development
• Dedicated in-house construction management teams
• Multiple small contractors
• Standard designs
• Assembly line drilling & completions
Module yard
• Enhanced safety
• Minimize rework and cost over-runs
• Cost savings and schedule certainty
• Accessible labor
9
Pipe module
10
Operational excellence - Foster Creek
Mbbls/d Record production
120 113 Mbbls/d March 1, 2010
100
80
60
40
20
0
1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10
Volumes are shown on a 100% basis.
15
Turnaround
10
0
1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10
Volumes are shown on a 100% basis.
11
Electric Submersible Pumps (ESP)
ESP run life
ESPs reduce SOR through use of cumulative MTTF in months
lower operating pressures 13
12.7 months
10
Down time for a pump change
• 75% reduction 9
Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
• 24 hour service rig operations Days down on pump change
time 15 days: 20
0
*Based on plant production of 100 Mbbls/d and 1 pump 2003 2004 2005 2006 2007 2008 2009
change per well per year.
Wedge wells
• < 0.1 average SOR
Steam
• 600 – 800 bbls/d average chambers
production rate at Foster Creek coalesce
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Increased recovery with wedge wells
Illustrative well performance
Percent recovery*
80%
Incremental recovery
with wedge wells
Accelerated recovery
60%
with wedge wells
40%
0%
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Year
*Percent recovery of exploitable bitumen in place.
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Canadian & US crude oil pipeline proposals
Kinder Morgan Enbridge Gateway
TMX Northern Leg TransCanada Keystone Enbridge Alberta Clipper
500 Mbbls/d TBD 450 Mbbls/d July 2010
400 Mbbls/d 2015+ 435 Mbbls/d June
Cushing Extension Southern Access Expansion
155 Mbbls/d 2011 800 Mbbls/d TBD
Heartland Extension Southern Access Extension
600 Mbbls/d 2013+ 400+ Mbbls/d TBD
Kinder Morgan
TMX2 Expansion
80 Mbbls/d 2015+
TMX3 Expansion Enbridge Ohio Access
320 Mbbls/d 2015+ 20-180 Mbbls/d TBD
Enbridge Line 9 Reversal
(Trailbreaker)
215 Mbbls/d TBD
TransCanada
Keystone XL
700 Mbbls/d 2013
Sunoco Buffalo to
BP/Enbridge GAP reversal Philadelphia New Line
Flanagan-Cushing 400 Mbbls/d TBD
300-400 Mbbls/d 2012+ Marysville to Toledo
Expansion
190-288 Mbbls/d TBD
Muskeg Expansion
38 Mbbls/d TBD
ExxonMobil/Enbridge
Pegasus Expansion
30 Mbbls/d June 2009 TransCanada
Texas Access New Line Louisiana Access
445 Mbbls/d TBD Sunoco to USGC
300 Mbbls/d TBD Scope TBD
Source: CAPP
Downstream overview
Top quality refinery assets
Wood River (Post-CORE)
• 356 Mbbls/d crude throughput
• 240 Mbbls/d heavy crude capacity
• ~89% clean product yield
Borger
• 146 Mbbls/d crude throughput
• 35 Mbbls/d heavy crude capacity
• ~89% clean product yield
Integration strategy
• Capture full value chain - bitumen to transportation fuels
• Minimize risk - reduce exposure to light / heavy differential
• Continue to optimize Wood River and Borger to increase heavy processing
capacity
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Bitumen value chain – net margin
History of margin sharing
Share of bitumen value chain margin
100%
0%
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Total net margin available for one bbl of bitumen refined into
transportation fuels. Downstream margin based on Purvin & Gertz PADD Downstream net margin
II heavy refining margin. Upstream margin based on Purvin & Gertz
bitumen field price and average SAGD opex assuming a 2.5 SOR. Upstream net margin
Source: Purvin & Gertz, CVE.
250
200
150
100
50
0
2008 2009 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F
Volumes are shown before royalties and net to CVE (50% basis).
15
Wood River CORE project
Increases overall capacity
• 50 Mbbls/d of increased crude
throughput
• 130 Mbbls/d of increased heavy
crude capacity
- lowers crude input costs
• ~10% increase in clean product
yield
~$4.00/bbl margin improvement
Completion mid-2011 (Coker)
• 9 of 21 scope areas already
complete
Final cost forecast to be within
10% of budget
Offloading modules
16
CORE project - new units area
30
Baker O’Brien complexity index
25
Borger
10
17
Building value
Top quality assets
• Foster Creek and Christina Lake are recognized as best in industry
Supplemental information
18
Foster Creek summary
2009 2010F
(1) Includes well pairs and wedge wells, excludes strat wells.
(2) Operating cash flow is a non-GAAP measure. Numbers shown include hedges.
(3) Average WTI or NYMEX price required for an after-tax cost of capital return of 9%.
40
formation water 20
10
0
2008 2009 2010F 2011F 2012F 2013F 2014F
19
Christina Lake summary
2009 2010F
(1) Includes well pairs plus wedge wells, excludes strat wells.
(2) Operating cash flow is a non-GAAP measure. Numbers shown include hedges.
(3) Average WTI or NYMEX price required for an after-tax cost of capital return of 9%.
30
10
0
2008 2009 2010F 2011F 2012F 2013F 2014F
20
Western Canadian Sedimentary Basin pipelines
Mbbl/d Existing and Planned Pipeline Project Capacity (Unrisked)
6,500
6,100 Alberta Clipper Expansion
6,000
CAPP supply forecast 150
350
TMX Northern Leg
5,500 (June 2009) 400 400 400 (Kitimat)
Proposed
projects 200 525 525 525 Enbridge Northern
5,000 175 Gateway
100 200 200 200 200
4,500 400 400 400 400 400
Keystone XL (Expansion)
200
500 300 300 300 300 300 300 300 300 300 300 300
Express Pipeline
318 318 318 318 318 318 318 318 318 318 318
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Wood River
306 18 50 110 10.0
pre-CORE
Wood River
356 83 130 240 15.0
post-CORE
Figures represent 100% of the Wood River and Borger refinery operations.
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Representative crude slates & yields
Refinery inputs - % crude slate Refinery output - % yield
100%
75%
50%
25%
0%
WR current WR post-CORE Borger WR current WR post-CORE Borger
$2
$1
$-
$0 +$1 +$2 +$3 +$4
WCS differential ($/bbl)
22
Downstream margin sensitivity
Wood River (post-CORE) and Borger
Net margin
($/bbl) 3-2-1 crack spread ($/bbl)
$4
$3
$2
$1
$-
$0 +$1 +$2 +$3 +$4
WCS differential ($/bbl)
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Forward-looking information
This presentation contains certain forward-looking statements and information about our current expectations, estimates and projections about the future,
based on certain assumptions made by the Company in light of its experience and perception of historical trends. Although we believe that the
expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
Forward-looking statements are typically identified by words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast” or “F”, “target”,
“project”, “objective”, “could”, “focus”, “goal”, “proposed”, “scheduled”, “outlook”, “potential”, “may” or similar expressions suggesting future outcomes or
statements regarding an outlook, including statements about our strategy, our projected future value or net asset value, schedules, land positions,
production, including, without limitation, the stability or growth thereof, reserves and resources estimates, material properties, uses and development of
our technology, risk mitigation efforts, commodity prices, shareholder value, cash flow, funding alternatives, costs and expected impact of future
commitments in respect of our ongoing operations generally and with respect to certain properties and interests held by Cenovus. Readers are cautioned
not to place undue reliance on forward-looking statements and information as our actual results may differ materially from those expressed or implied.
Forward-looking statements involve a number of assumptions, risks and uncertainties, some of which are specific to Cenovus and others that apply to the
industry generally. The risk factors and uncertainties that could cause actual results to differ materially, and the factors or assumptions on which the
forward-looking information is based, include, among other things: volatility of and assumptions regarding oil and gas prices; assumptions inherent in our
current guidance; our projected capital investment levels, the flexibility of capital spending plans and the associated source of funding; the effect of our
risk management program, including the impact of derivative financial instruments and our access to various sources of capital; accuracy of cost
estimates; fluctuations in commodity, currency and interest rates; fluctuations in product supply and demand; market competition, including from
alternative energy sources; risks inherent in our marketing operations, including credit risks; success of hedging strategies; maintaining a desirable debt
to cash flow ratio; accuracy of our reserves, resources and future production estimates; estimates of quantities of oil, bitumen, natural gas and liquids
from properties and other sources not currently classified as proved; our ability to replace and expand oil and gas reserves; the ability of us and
ConocoPhillips to maintain our relationship and to successfully manage and operate the North American integrated heavy oil business and to obtain
necessary regulatory approvals; the successful and timely implementation of capital projects; reliability of our assets; refining and marketing margins;
potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; potential failure of new products to
achieve acceptance in the market; unexpected cost increases or technical difficulties in constructing or modifying manufacturing or refining facilities;
unexpected difficulties in manufacturing, transporting or refining synthetic crude oil; risks associated with technology and its application to our business;
our ability to generate sufficient cash flow from operations to meet our current and future obligations; our ability to access external sources of debt and
equity capital; the timing and the costs of well and pipeline construction; our ability to secure adequate product transportation; changes in royalty, tax,
environmental, greenhouse gas, carbon and other laws or regulations, or the interpretations of such laws or regulations, as adopted or proposed, the
impact thereof and the costs associated with compliance; the expected impact and timing of various accounting pronouncements, rule changes and
standards on us, our financial results and our consolidated financial statements; changes in the general economic, market and business conditions; the
political and economic conditions in the countries in which we operate; the occurrence of unexpected events such as war, terrorist threats, hostilities, civil
insurrection and instability affecting countries in which we operate; risks associated with existing and potential future lawsuits and regulatory actions
made against us; our financing plans and initiatives; the historical financial information pertaining to our assets as operated by Encana prior to November
30, 2009 may not be representative of our results as an independent entity; our limited operating history as a separate entity and other risks and
uncertainties described from time to time in the filings we make with securities regulatory authorities. The forward-looking statements and information
contained in this presentation, including the assumptions, risks and uncertainties underlying such statements, are made as of the date of this
presentation.
Many of these risk factors are discussed in further detail in our 2010 First Quarter Report to Shareholders, our 2009 AIF/Form 40-F and our MD&A for the
year ended December 31, 2009, each as filed at www.sedar.com and www.sec.gov, and available at www.cenovus.com. The Cenovus 2010 Corporate
Guidance, including the assumptions on which it is based, is available at www.cenovus.com.
Non-GAAP measures (Operating Earnings, Operating Cash Flow, Cash flow, Free Cash Flow, Capitalization and Adjusted EBITDA) have been described
and presented in order to provide shareholders and potential investors with additional information regarding Cenovus’s liquidity and its ability to generate
funds to finance its operations. Please see our 2010 First Quarter Report to Shareholders for a full discussion of the use of each measure.
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