Devon Energy Corporation · NYSE:DVN
Devon Energy — Q4 2018 Earnings Presentation
28 slides from Devon Energy's earnings presentation, Feb 19, 2019
Slide 1: Strategic Update & Q4 2018 Operations Report
Strategic Update & Q4 2018 Operations Report February 19, 2019 Exhibit 99.3
Slide 2: Completing Transformation to a U.S. Oil Growth Company
Completing Transformation to a U.S. Oil Growth Company Sharpens focus on world-class U.S. oil assets Delaware, STACK, Eagle Ford and Powder River High-margins and low cost of supply Multi-decade growth platform Pursuing strategic alternatives for Barnett Shale and Canadian assets Outright sale or sp
Slide 3: A Track Record of Execution
A Track Record of Execution Divestiture Assets New Devon Brazil Azerbaijan China Russia GoM Shelf GoM Deepwater San Juan East Texas Mississippian Granite Wash Uinta Washakie Conventional Canadian Assets Midland Assets DIVESTITURE PROCEEDS EnLink West Africa $30 Billion > Heavy Oil(1) Barnett Shale(1
Slide 4: New Devon's World-Class Oil Assets Visualized
New Devon’s World-Class Oil Assets Visualized Portfolio positioned in top oil basins Well level breakeven (PV-10, WTI to HH @ 20:1) ($/bbl) Net Acres 40,000 Net Acres 280,000 Net Acres 280,000 Net Acres 330,000 DOMINANT POSITION IN 4 TOP OIL PLAYS Source: RS Energy Group, December 2018. Breakeven($/
Slide 5: Unleashing Potential of World-Class Oil Assets
Unleashing Potential of World-Class Oil Assets U.S. well productivity showcases asset quality Source: IHS/Devon. All wells drilled since 2015 and includes operators with more than 100 wells. Superior oil growth and pricing +17% (vs. 2017) +1% (vs. 2017) DECLINE 20% (FY 2018) Improved per-unit costs
Slide 6: Inventory Supports Sustainable Long-Term Growth
Inventory Supports Sustainable Long-Term Growth STACK Delaware Basin Eagle Ford PRB 4,200 operated locations (Avg. lateral length: ~7,500’) ~280 operated wells online (Avg. lateral length: ~8,000’) 15 YEAR INVENTORY (AT CURRENT ACTIVITY PACE) WTD AVG. IRR: >50% 6,500 operated locations (Avg. lateral
Slide 7: Next Steps to Optimize New Devon Cost Structure
Next Steps to Optimize New Devon Cost Structure Aggressively pursuing improved cost structure New Devon expected cost savings by area vs. 2018 results ($MM) $780 ANNUAL COST SAVINGS BY 2021 MILLION Timing of annual cost savings Cumulative estimated annual cost savings ($MM) Interest G&A D&C(1) LOE G
Slide 8: Disciplined Returns-Focused Strategy
Disciplined Returns-Focused Strategy KEY STRATEGIC OBJECTIVES Fund high-return projects Maintain financial strength Return cash to shareholders Generate free cash flow 1 2 3 4 (1) Price sensitivity also assumes $3 Henry Hub and current hedge position. $40 Free cash flow accelerates (no change to act
Slide 9: New Devon: 3-Year Performance Targets
New Devon: 3-Year Performance Targets CUMULATIVE FREE CASH FLOW OIL GROWTH COST SAVINGS DEBT TARGET CAPITAL PROGRAM RETURN ON CAPITAL TARGET: >15%(1) (At $50 WTI & $3 HH) $1.6 At $55 WTI & $3 HH 12% – 17% CAGR (FY2018 – 2021) Total Light-Oil Production $780 MM By 2021 See pg. 7 for detail 1.0x to 1.
Slide 10: New Devon: Free Cash Flow Yield to Investors
New Devon: Free Cash Flow Yield to Investors ($50 WTI) ($55 WTI) Cumulative Free Cash Flow $2.3B Cumulative Free Cash Flow ($B) Cumulative Free Cash Flow $1.6B Free Cash Yield (Annual Avg.) Cumulative Free Cash Flow $0.8B Note: Free cash flow yield assumes market capitalization based on current shar
Slide 11: Attractive Entry Point for World-Class Oil Business
Attractive Entry Point for World-Class Oil Business New Devon: trading at significant discount $ in Billions $15.7 $2.5 $16.8 Peer trading multiples 2019e EV/EBITDAX(1) Peer average 6.8x (1) Estimates were sourced from Credit Suisse and assumes $54 WTI and $3.05 HH. “EV” stands for enterprise value.
Slide 12: Why Own New Devon?
Why Own New Devon? World-class U.S. oil company Unrivaled acreage position in top basins Multi-decade inventory to drive sustainable growth Accelerating value realization for Canada & Barnett Focused on operational excellence Aggressively reducing costs Shifting to higher-margin production Positione
Slide 13: Q4 2018 Operations Report & 2019 Outlook
Q4 2018 Operations Report & 2019 Outlook
Slide 14: Q4 2018 - Asset Detail
Q4 2018 - ASSET DETAIL DELAWARE STACK PRB EAGLE FORD PRODUCTION Oil (MBbl/d) 45 31 13 30 NGL (MBbl/d) 18 37 2 15 Gas (MMcf/d) 127 343 20 95 Total (MBoe/d) 84(1) 126 18(1) 61 ASSET MARGIN (per Boe) Realized price $37.84(2) $29.40 $46.27 $44.20 Lease operating expenses ($6.04) ($1.84) ($6.95) ($2.69)
Slide 15: New Devon: Pro Forma Financials
New Devon: Pro Forma Financials KEY METRICS (WTI / HH) Q4 2018 ($58.80 / $3.65) FY 2018 ($64.79 / $3.09) FY 2019 (ASSUMES PRO FORMA COSTS) ($50 / $3) Oil production (MBbls/d) 125 121 137 - 143 NGL production (MBbls/d) 73 69 70 - 74 Gas production (MMcf/d) 589 537 520 - 550 Total production (MBoe/d)
Slide 16: Executing on Disciplined Strategy in 2018
Executing on Disciplined Strategy in 2018 Shifted U.S. oil assets into development U.S. oil growth +17% in 2018 (vs. 2017) Divestiture program reached ~$5 billion Reduced consolidated debt by >40% Raised quarterly dividend 33% Repurchased 15% of stock in 2018 ü ü ü ü ü Share buyback $6.8 Billion Ups
Slide 17: Capital Efficiencies Accelerate in 2019
Capital Efficiencies Accelerate in 2019 Focused on top-tier oil development opportunities 2019e E&P capital (New Devon) $1.8-$2.0 E&P CAPITAL 47% DELAWARE 21% STACK 16% POWDER RIVER 16% EAGLE FORD BILLION 2019 CAPITAL ACTIVITY E&P CAPITAL ($MM) NEW WELLS ONLINE (Operated) Delaware Basin $900 100-110
Slide 18: Disciplined Growth Benefits From Buyback Activity
Disciplined Growth Benefits From Buyback Activity Focused on delivering sustainable, high-margin growth (funded at $46 WTI) Driven by U.S. oil growth (+13%-18% vs. 2018) U.S. oil exit rate: >20% vs. 2018 avg. Top-line production to advance (+8% vs. 2018) Eagle Ford timing to impact Q1 (see pg. 25) M
Slide 19: Delaware Basin – Capital-Efficient Growth Engine
Delaware Basin – Capital-Efficient Growth Engine DELAWARE BASIN OVERVIEW RATTLESNAKE Q4 2018 Key Wells Upcoming Projects THISTLE/GAUCHO POTATO BASIN TODD COTTON DRAW Seawolf (7 Wolfcamp wells) Avg. IP 30: 3,000 BOED/well 2,800 BOED 30-DAY IPs Fighting Okra Flowing Back New Mexico Texas 15 WELLS AVG.
Slide 20: Step-Change in Delaware Basin Well Productivity
Step-Change in Delaware Basin Well Productivity Well productivity reaching record highs Average cumulative oil production per well (MBO) Months Online 2018 average 2015-2017 average Bone Spring Wolfcamp Leonard Significant growth platform at $50 WTI Gross operated inventory locations generating IRR
Slide 21: Focusing on Wolfcamp & Bone Spring Projects in 2019
Focusing on Wolfcamp & Bone Spring Projects in 2019 Todd Area Bone Spring “Cats” Area (~20 wells online in 2019) Eddy Boundary Raider (2 wells) Avg. IP 24: 12 MBOED/well RATTLESNAKE DEVELOPMENT ACTIVITY Rattlesnake Area Lea ACCELERATING TODD DEVELOPMENT PROGRAM Flagler (Phase 1) Completing Lea Wolfc
Slide 22: Delaware Basin – Focused Development Plan in 2019
Delaware Basin – Focused Development Plan in 2019 Diversified state-line activity Percent of activity by formation Delivering high-margin growth Net production (MBOED) 2019 DRILLING ACTIVITY Wolfcamp (45%) Bone Spring (30%) Leonard (25%) Top-funded asset in portfolio (~$900 million) Low-risk develop
Slide 23: STACK – Optimizing Infill Spacing
Net production increases 11% vs. Q4 2017 Oil production increased 9% (vs. Q3 2018) Growth driven by infill development activity (see map) Highest Q4 rates from Chipmunk & Faith Marie activity Safari project design supports future infill spacing Spaced at 5 wells per unit (Avg. IP30: 1,400 BOED) Well
Slide 24: STACK – 2019 Strategic Priorities
STACK – 2019 Strategic Priorities Transitioning infill developments to 4-6 wells per unit Investment concentrated in volatile-oil window Wells primarily targeting Upper Meramec interval Strategic priorities for 2019 capital program Generate attractive infill development returns Prioritizing free cas
Slide 25: Eagle Ford
Eagle Ford Q4 production averaged 61 MBOED (50% oil) Net production 11% higher vs. Q4 2017 15 new wells: Avg. IP30 3,700 BOED High-rates driven by larger completion design Increasing activity to a 3 rig program in 2019 ~70 spuds planned (40-50 wells online by year-end) Targeting up to 25 horizontal
Slide 26: Powder River Basin
Powder River Basin Net production increased 27% vs. Q4 2017 8 wells online in late December (Avg. IP30: 1,500 BOED) January 2019 production: 22 MBOED (+25% vs. Q4) Increasing activity to 4 rigs in 2019 Represents 2x increase in activity from 2018 Dedicated and decoupled stimulation services improve
Slide 27: Barnett Shale and Canada
Barnett Shale Canada Dow JV efficiently maintaining base production Q4 production: 103 MBOED (~30% NGLs) Minimum volume commitments expired at year end Wise County divestiture package closed in October Stable production outlook expected in 2019 Capital investment: $65 million (~35 new wells online)
Slide 28: Investor Contacts & Notices
Investor Contacts & Notices Investor Relations Contacts Scott CoodyChris Carr VP, Investor RelationsManager, Investor Relations 405-552-4735405-228-2496 Email: investor.relations@dvn.com Forward-Looking Statements This presentation includes “forward-looking statements” as defined by the Securities a