Devon Energy Corporation · NYSE:DVN
Devon Energy — Q3 2019 Earnings Presentation
23 slides from Devon Energy's earnings presentation, Nov 5, 2019
Slide 1: Q3 2019 Operations Report
November 5, 2019 Q3 2019 Operations Report Exhibit 99.2
Slide 2: Q3 Summary – Efficiently Advancing the Business
Q3 Summary – Efficiently Advancing the Business FINANCIAL RESULTS IMPROVING OUTLOOK OPERATING HIGHLIGHTS Operating cash flow increased 22% to $597 million (vs. Q2 2019) Repurchased $550 million of shares in Q3 ($4.8 billion since 2018) Outstanding share count to decline 30% by year-end (pg. 10) $100
Slide 3: Profitability continues to expand
Profitability continues to expand Share count (MM) and EBITDAX ($MM) EBITDAX ($MM) Share Count (MM) Share Count EBITDAX Share count down 27% EBITDAX up 30% Q3 2019 Change (vs Q2’19) Key Metrics(1) GAAP earnings (per share) Core earnings(2) (per share) EBITDAX(2) ($MM) $0.35 $0.29 $652 -13% +26% +4%
Slide 4: Q3 2019 – Operating Performance
Beat Q3 midpoint guidance Q3 2019 – Operating Performance U.S. oil production(1) (MBOD) U.S. total production(1) (MBOED) Upstream capital ($MM) 148 325 $527(2) +19% +12% +1% WTI price ($/Bbl) Oil realizations (% of WTI) Q3 2019 (Continuing Ops.) $56.34 97% Change (vs. Q3’18) (Reported Results)(3) -1
Slide 5: Operational Success Driving Improved 2019 Outlook
Operational Success Driving Improved 2019 Outlook Scalable growth driving per-unit costs lower in Q4 Run-rate savings to reach >$200 million by year-end $1.7 billion debt redeemed YTD (annual interest savings: >$60 million) LOE & GP&T G&A Financing costs Lowering G&A expense outlook for 3rd time in
Slide 6: Strategic Framework for the 2020 Planning Cycle
Strategic Framework for the 2020 Planning Cycle CAPITAL ALLOCATION PRIORITIES Maintain base production Pursue high-return growth projects Return excess cash to shareholders Fund dividends 1 2 3 4 WTI PRICE (ASSUMES $2.50 HENRY HUB) Maintain capital discipline Free cash flow accelerates GREATER THAN
Slide 7: Preliminary 2020 Outlook
SHARE COUNT VS. 2019 NEW DEVON ASSETS E&P CAPITAL PROGRAM Preliminary 2020 Outlook 7%-9% Growth $1.7-$1.9 Billion OPTIMIZED FOR RETURNS DESIGNED FOR ULTRA-LOW BREAKEVEN PRICING 6%-8% Reduction DRIVEN BY LOW-RISK DEVELOPMENT DRILLING OIL GROWTH SHARE REDUCTION $ ENHANCING PER-SHARE CASH FLOW GROWTH P
Slide 8: 2020 Plan Positioned for Attractive Free Cash Flow
2020 Plan Positioned for Attractive Free Cash Flow $675 2020e Free Cash Flow ($MM) (before dividends) $400 2020e Free Cash Flow Yield Free Cash Flow Free Cash Flow Yield $125 $55 WTI $2.50 HH MILLION MILLION MILLION FY2020 OUTLOOK Note: Free cash flow yield assumes market capitalization based on sha
Slide 9: 2019 & 2020 Outlook = Improved Capital Efficiency
2019 & 2020 Outlook = Improved Capital Efficiency Original Plan (2/19/19 Guide) Oil production remains on track New Devon 2019-2020 cumulative oil production (MMBO) Efficiencies driving lower capital requirements New Devon 2019-2020 cumulative upstream capital ($B) Current Plan (11/05/19 Guide) New
Slide 10: Committed to Return of Capital to Shareholders
Dedicated to disciplined allocation of capital Committed to Return of Capital to Shareholders $11.0 Billion 30% SHARE COUNT REDUCTION 527 ~375(1) 521 491 459 415 ~ 397 Assumes remaining authorization is completed by year-end and incremental shares are repurchased at current share price. 434 Repurcha
Slide 11: Building a Fortress Balance Sheet
Building a Fortress Balance Sheet Aggressive debt reduction improves financial strength Net debt(1) ($B) $10.7 $2.6 >75% SINCE 2015 ($ in billions) Total debt (GAAP) $4.3 Less cash $1.7 Net debt (Non-GAAP)(1) $2.6 EBITDAX (Non-GAAP)(1)(2) $2.6 Net debt to EBITDAX ratio 1.0x Low leverage provides com
Slide 12: Divestiture Program Accelerates Value Creation
Divestiture Program Accelerates Value Creation Resource depth allows for portfolio high-grading Cotton Draw midstream partnership formed Contributing gathering & compression assets Devon to remain operator of the assets Receive $100 million cash distribution in Q4 Partner to fund $40 million of expa
Slide 13: Highly-Regarded ESG Performance
Highly-Regarded ESG Performance For additional information see our 2019 Sustainability Report Included within the Dow Jones Sustainability Index top-quartile ESG ratings vs. peers ESG metrics incorporated in compensation structure Established methane emission reduction target Key Messages ENVIRONMEN
Slide 14: Q3 2019 - Asset Detail
Q3 2019 - ASSET DETAIL NEW DEVON DELAWARE STACK POWDER RIVER EAGLE FORD(1) OTHER PRODUCTION Oil (MBbl/d) 148 70 32 18 22 6 NGL (MBbl/d) 79 28 37 2 11 1 Gas (MMcf/d) 588 167 317 28 75 1 Total (MBoe/d) 325 127 121 25 45 7 ASSET MARGIN (per Boe) Realized price $30.32 $33.48 $22.07 $41.20 $35.10 $46.41
Slide 15: Delaware Basin – Capital-Efficient Growth Engine
Delaware Basin – Capital-Efficient Growth Engine Leonard Shale headlines Q3 operating performance Represents ~50% of new wells online (15 wells in Q3) Leonard well performance exceeding expectations Top project: N. Thistle 10 (EURs: 1.4 MMBOE/well) (pg. 17) Scalable infrastructure driving cost savin
Slide 16: Delaware Basin – Step-Change in Operating Results
Productivity Improvement (2019 vs. 2018) 90 Day Oil IP Rate per 1K lateral, BOD (2019) PEER AVG. PEER AVG. APA CVX NBL XOM MTDR FANG PDCE CRZO PRIVATES WPX CXO MRO CDEV OXY EOG COP DVN Source: IHS, Goldman Sachs Global Investment Research Note: Bubble size represents 2019 wells as a percent of Delaw
Slide 17: Delaware – Development Projects Advancing on Plan
Delaware – Development Projects Advancing on Plan Q3-2019a Q4-2019e Q1-2020e Q2-2020e Completion Spud Muffin (7 wells in the Bone Spring and Wolfcamp) Production Completion Lusitano (Phase 2: 5 wells in the Bone Spring and Wolfcamp) Production Cat Scratch (Phase 2: 10 Bone Spring wells) Drilling Com
Slide 18: Todd Area – A Significant Long-Term Growth Platform
Todd Area – A Significant Long-Term Growth Platform Delivering highly-economic results across multiple formations Charged reservoir with stacked-pay potential Large, contiguous units with high working interest (>90%) 2019 capital activity: ~30 new wells online Q4 catalyst alert: Cat Scratch Fever 2.
Slide 19: Powder River Basin – Delivering Robust Oil Growth
Powder River Basin – Delivering Robust Oil Growth High-margin oil volume growth accelerating Turner program driving volume growth Initial Niobrara spacing tests successful (pg. 20) raising 2019 production exit-rate targets Expect >70% oil growth vs. Q4‘18 (prior target: >50%) Achieving operational e
Slide 20: Niobrara – An Emerging Oil Resource Play
Niobrara – An Emerging Oil Resource Play Niobrara acreage resides in the core of oil fairway Significant potential with 200,000 net acres High working interest across position (>85%) Large, contiguous units secure operatorship Extended-reach drilling units maximize efficiencies Industry permitting &
Slide 21: Eagle Ford – Operational Momentum Established
Eagle Ford – Operational Momentum Established Strong production momentum heading into Q4 2019 Peak capital spending occurred in Q3 (+70% vs. 1H’19) Q4 2019e net production rate: 50-55 MBOED Growth driven by >25 Eagle Ford wells Achieving sustainable capital efficiencies Attained cost reductions of >
Slide 22: STACK – Tailoring Activity to Current Price Environment
STACK – Tailoring Activity to Current Price Environment Infill program achieving strong operational results Recent developments spaced at 4-6 wells per unit Well productivity exceeding type curve expectations Q3 net production: 121 MBOED (56% liquids) top highlight: Centaur project (IP30: 2,600 BOED
Slide 23: 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