Investor Presentation

Transcription

1 Investor Presentation April 2018 NYSE: DVN devonenergy.com

2 Investor Contacts & Notices Investor Relations Contacts Scott Coody, Vice President, Investor Relations (405) / scott.coody@dvn.com Chris Carr, Supervisor, Investor Relations (405) / chris.carr@dvn.com Forward-Looking Statements This presentation includes "forward-looking statements" as defined by the Securities and Exchange Commission (the SEC ). Such statements are subject to a variety of risks and uncertainties that could cause actual results or developments to differ materially from those projected in the forward-looking statements. Please refer to the slide entitled Forward-Looking Statements included in this presentation for other important information regarding such statements. Use of Non-GAAP Information This presentation may include non-gaap financial measures. Such non-gaap measures are not alternatives to GAAP measures, and you should not consider these non- GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. For additional disclosure regarding such non-gaap measures, including reconciliations to their most directly comparable GAAP measure, please refer to Devon s most recent earnings release at Cautionary Note to Investors The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This presentation may contain certain terms, such as resource potential, risked or unrisked resource, potential locations, risked or unrisked locations, exploration target size and other similar terms. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at You can also obtain this form from the SEC by calling SEC-0330 or from the SEC s website at 2

3 Devon s Investment Thesis Delaware & STACK focused Expanding high-margin production Disciplined capital allocation Significant financial strength Multi-decade growth platform >30,000 DELAWARE & STACK POTENTIAL LOCATIONS 3

4 Devon s 2020 Vision TOP OBJECTIVE: OPTIMIZE RETURNS & DELIVER CAPITAL-EFFICIENT, CASH-FLOW GROWTH Focus on capital efficiency Reduce per-unit cash costs by ~15% Deliver >25% oil production CAGR in Delaware & STACK Management incentives aligned with returns Portfolio simplification $1.0 billion of assets sold over last year Further high-grade portfolio (>$5 billion of potential asset sales) Improve financial strength Target net debt to EBITDA of 1.0x to 1.5x Attain high investment-grade credit rating Return cash to shareholders Generate free cash flow above $50 WTI Sustainably increase dividend (33% increase in 2018) $1 billion share repurchase program underway 4

5 2020 Vision To Drive Significant Cash Flow Growth Growing higher-value production U.S. Oil Production (MBOD) Cost savings to expand margins Upstream Per-Unit Cash Cost ($/BOE) 200 $18 ~15% COST SAVINGS MID-TEENS CAGR DRIVEN BY >25% CAGR IN DELAWARE & STACK $12 $6 Interest G&A Op. Cost e 2019e 2020e $ e 2019e 2020e Driving upstream cash flow expansion $ Billions ($50 WTI & $3 HH) Significant upside to higher prices At $60 WTI Through 2020 $2.2 >15% CAGR 2.5Billion CUMULATIVE FREE CASH FLOW e 2019e 2020e 5

6 2018 Capital & Production Outlook FOCUSED DEVELOPMENT PROGRAM $ OPTIMIZED FOR RETURNS OIL GROWTH SELF FUNDED AT $50 WTI NO PLANS TO INCREASE ACTIVITY LEVELS 2018e E&P CAPITAL $ Billion 90% DEVOTED TO U.S. RESOURCE PLAYS DELAWARE & STACK >35% Increase (2017 VS 2018) 6

7 Shareholder-Friendly Initiatives Return cash to shareholders $1 billion share repurchase program initiated in Q % increase in quarterly cash dividend $1 billion debt reduction plan underway 7

8 Operational Excellence Capture FULL VALUE Improve RETURNS Maximize base production Minimize controllable downtime Enhance well productivity Leverage midstream operations Control operating costs Optimize capital program Disciplined project execution Perform premier technical work Focus on development drilling Increase capital efficiency 8

9 Operational Excellence: Multi-Zone Strategy Multi-zone development strategy underway >10 multi-zone projects scheduled in 2018 Initial results encouraging $1 million savings per well at Anaconda project 30% drilling efficiencies achieved at Showboat Initial Coyote well 24-hr IP: 8,200 BOED Massive technology upside For additional information see our Q4 operations report. MULTI-ZONE DEVELOPMENT >40% NPV UPLIFT PER SECTION 9

10 Innovation Momentum - Technology Projects In Flight SUBSURFACE DRILLING & COMPLETIONS PRODUCTION OPERATIONS WATER MANAGEMENT CORPORATE Improved 3D seismic interpretation High-graded location selection Optimized landing zones Well productivity predictions Depletion analysis Geospatial optimization Cyber-geosteering Flat, in-zone wells Fiber-optic sensing Prolonged drill-bit life Coiled-tubing drill-outs Efficient flowbacks Cutting-edge frac modeling Predictive pump failures Field-issue prioritization Optimized compressors Production monitoring Flood optimization Inter-well communication (data analytics) Gas lift for EOR Water-treatment options Frac fluid chemistry Data acquisition and management systems Leak detection in piping systems Water transfer and storage safety Accounting process automation World-class partnerships in digital innovation platforms Enterprise dashboards for information Accessible mobile applications across all aspects of the business Targeting hundreds of millions in value creation annually 10

11 Delaware Basin Franchise Asset POTATO BASIN World-class oil opportunity Multi-decade growth platform Up to 15 target intervals Spud Muffin Eddy TODD Tomb Raider Boomslang Flowing Back Cobra Flagler Medusa Drilling Anaconda 10 Wells Online Lea THISTLE/GAUCHO Accelerating development activity Lusitano Drilling Seawolf Drilling Current Developments Future Projects (Timing TBD) Core Development Area Snapping 2018 Spud Van Doo Dah COTTON DRAW Loving Fighting Okra 2018 Spud RATTLESNAKE 11

12 Delaware Basin Multi-Zone Projects Ramping Up Anaconda project online THISTLE/GAUCHO Initial multi-zone project Anaconda 10 Wells Online Achieved savings of $1 MM per well 30-day rates: ~1,600 BOED per well Eddy Boomslang Flowing Back (11 wells) Lea Initial Boomslang wells flowing back Boomslang Project 11 wells across 3 landing zones Record drilling time achieved 15% drilling improvement vs. Anaconda Peak rates expected in Q2 LEONARD BONE SPRING A B C 1 ST 2 ND Initial Development (11-Well Program) Future Potential For additional information see our Q4 operations report. 12

13 Delaware Basin Most Active Asset In 2018 Significant increase in activity 2018 E&P Capital Driving high-return growth Production (MBOED) >85 ~50% $725 MM Leonard Bone Spring Wolfcamp INCREASE VS >40% GROWTH Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e 2018e Exit Rate 13

14 Delaware Basin Significant Resource Opportunity Basin Slope 1 Section 1 Section 6,500 DELAWARE SANDS Madera Lower Brushy RISKED LOCATIONS >1.3 MM NET EFFECTIVE ACRES >4,000 OF PAY LEONARD BONE SPRING A B C 1 st 2 nd (Upper & Lower) 3 rd X/Y Risked Location Unrisked Location Note: Graphic for illustrative purposes only and not necessarily representative across Devon s entire acreage position. WOLFCAMP A, B, C & D 14

15 STACK Franchise Asset Best-in-class acreage position >600k net acres by formation Up to 4 target intervals per unit Accelerating development activity Coyote Completing (7 wells) Blaine Kraken 2018 Spud (16 wells) Centaur Horsefly Drilling (10 wells) Minnie Haha Kingfisher Showboat Completing (24 wells) Cascade 2018 Spud (7 wells) Northwoods Geis 2018 Spud (6 wells) 2018 Developments Future Projects (Timing TBD) Caddo Bernhardt 2018 Spud (8 wells) Canadian 15

16 STACK Multi-Zone Activity Underway Showboat drilling concluded 30% drilling efficiencies reached Average cost savings: $500k per well First production: Q Blaine Coyote Completing (7 wells) Kingfisher Showboat (2 drilling units) Completing (24 wells) Completion activity underway at Coyote Improved drilling times by up to 25% Initial well 24-hr IP: 8,200 BOED MERAMEC UPPER LOWER Showboat Development First multi-zone STACK development WDFD For additional information see our Q4 operations report. 16

17 STACK Multi-Decade Growth Platform Activity shifting to economic core WOODFORD E&P CAPITAL 2018e MERAMEC ACTIVITY >95% High-returning production growth Production (MBOED) >140 (>40% oil growth) Q Q Q Q e Exit Rate Improving cost structure LOE & Transportation Expense ($/BOE) $7.38 $7.24 ~10% IMPROVEMENT ~$6.60 1H H e Tremendous resource potential RISKED LOCATIONS 5,700 >11,000 POTENTIAL LOCATIONS 17

18 Significant Financial Strength Investment-grade credit ratings PROTECTING OUR ABILITY TO EXECUTE Disciplined hedging program ~50% of 2018 oil & gas volumes protected Attractive WCS basis swaps Significant investment in EnLink Midstream Excellent Liquidity Cash: $2.7B INVESTMENT- GRADE CREDIT RATINGS EnLink Investment Market Value: ~$3.2B Divestitures to further enhance financial strength (1) See appendix for detail of hedging positions. Disciplined Hedging 2018: ~50% (1) 18

19 Devon s Investment Thesis Delaware & STACK focused Expanding high-margin production Disciplined capital allocation Significant financial strength Multi-decade growth platform >30,000 DELAWARE & STACK POTENTIAL LOCATIONS 19

20 Thank you. For additional information see our Q4 Operations Report Thank you.

21 Forward-Looking Statements This presentation includes "forward-looking statements" as defined by the SEC. Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words expects, believes, will, would, could, forecasts, projections, estimates, plans, expectations, targets, opportunities, potential, anticipates, outlook and other similar terminology. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in oil and gas operations; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks related to our hedging activities; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; the extent to which insurance covers any losses we may experience; competition for leases, materials, people and capital; our ability to successfully complete mergers, acquisitions and divestitures; and any of the other risks and uncertainties identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this presentation are made as of the date of this presentation, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forwardlooking statements as a result of new information, future events or otherwise. 21

22 Appendix NYSE: DVN devonenergy.com

23 Cash-Flow Generating Assets 15% ENLINK $2.3B (1) 35% HEAVY OIL HEAVY OIL 30% EAGLE FORD CASH FLOW % BARNETT BARNETT (1) Represents field-level cash flow before G&A and taxes. EAGLE FORD 23

24 Rockies An Emerging Oil Growth Asset Premier Powder River Basin position POWDER RIVER BASIN ACTIVITY Q4 net production: 19 MBOED ~400,000 net surface acres Stacked pay: >10 prospective intervals Super Mario Turner activity accelerating 2018 plans $150 million of capital investment Spud ~20 wells (1) All activity normalized for 10,000 laterals. 24

25 2020 Vision: Management Compensation RETURN MEASURE #1 CASH RETURN ON CAPITAL EMPLOYED Cash Flow from Operations + After-tax Interest Expense + EnLink Distributions Average Book Equity + Average Net Debt = TARGET 20% RETURN MEASURE #2 RETURN ON CAPITAL PROGRAM Internal rate of return on capital investment over 2 year period, after burdening for G&A and corporate costs = TARGET 15% 25

26 Hedge Position As of 12/31/17 OIL DERIVATIVES SWAPS COLLARS PERIOD VOLUME (MBPD) WEIGHTED AVG. PRICE ($/BBL) VOLUME (MBPD) WEIGHTED AVG. FLOOR PRICE ($/BBL) WEIGHTED AVG. CEILING PRICE ($/BBL) FY $ $46 $56 FY $ $46 $56 NATURAL GAS DERIVATIVES SWAPS COLLARS PERIOD VOLUME (MMBTU/D) WEIGHTED AVG. PRICE ($/MMBTU) VOLUME (MMBTU/D) WEIGHTED AVG. FLOOR PRICE ($/MMBTU) WEIGHTED AVG. CEILING PRICE ($/MMBTU) FY $ $2.94 $3.26 FY $ $2.84 $