Slide 1: Q3 2020 Earnings Presentation
Q3 2020 Earnings Presentation October 29, 2020 NYSE: DVN devonenergy.com
Slide 2: Key Takeaways From Our Presentation
Key Takeaways From Our Presentation TRANSFORMATIONAL MERGER OF EQUALS WITH WPX #1 Creates a leading U.S. producer & builds a dominant Delaware position #2 Q3 RESULTS DRIVE IMPROVED 2020 OUTLOOK Favorable to guidance on all production, capital & operating costs FREE CASH FLOW GROWTH ACCELERATES #3 Co
Slide 3: Devon & WPX – Strategic Merger of Equals
Devon & WPX – Strategic Merger of Equals ACCRETIVE ON ALL RELEVANT FINANCIAL METRICS + EXPECTED CLOSING Q1 2021 (Combines the best capabilities of both organizations) ACCELERATES CASH-RETURN BUSINESS MODEL WILLISTON (Merger enhances free cash flow generating capabilities) POWDER RIVER BASIN BASIN MA
Slide 4: Our Disciplined Cash-Return Business Model
Our Disciplined Cash-Return Business Model PROGRESSIVE DISCIPLINED OIL GROWTH targets: up to 5% annually “Devon’s CASH-RETURN business GROWTH STRATEGY Growing margins through operational & corporate cost reductions model is designed to moderate growth, optimize capital efficiencies REDUCED Tar
Slide 5: Committed to Top-Tier ESG Performance
Committed to Top-Tier ESG Performance ENVIRONMENT SOCIAL & SAFETY GOVERNANCE ACHIEVED methane intensity target of Provided STEM resources across our ESG incorporated into COMPENSATION 0.28% in 2019 communities, impacting 17,000 students STRUCTURE (including safety & emissions metrics) Lowere
Slide 6: Approach to the Current Environment
Approach to the Current Environment TOP PRIORITIES IN CURRENT MARKET 1 1 Protect financial strength GREATER THAN Evaluate select growth projects $45 Limit reinvestment: up to 5% growth 2 Fund fixed quarterly dividend Prioritize free cash flow growth $40-$45 Variable dividend payout expands (
Slide 7: Q3 2020 – Executing on Our Disciplined Strategy
Q3 2020 – Executing on Our Disciplined Strategy RESILIENT OPERATIONAL IMPROVING PRODUCTION IMPROVEMENTS COST STRUCTURE OIL PRODUCTION LO E & G P & T E X P E N S E S G&A EXPENSES 146 MBOD $7.49 per BOE $75 million 6 MBOD ABOVE GUIDANCE 8% BELOW GUIDANCE 30% YEAR-OVER-YEAR Key Messages Capital spend
Slide 8: Delaware Basin – Our Capital-Efficient Growth Engine
Delaware Basin – Our Capital-Efficient Growth Engine HIGH-MARGIN 155 WOLFCAMP PROGRAM HEADLINES Q3 RESULTS GROW TH 22% POTATO BASIN PROLIFIC Q3 WELL RESULTS 3,900 SUCCESSFUL 3-MILE YEAR OVER YEAR BOED/WELL WOLFCAMP DEVELOPMENT PRODUCTION (MBOED) A V G . I P 3 0 (1) TODD LIGHT-OIL MIX: >65% Cobra (15
Slide 9: Delaware Basin – Operating Efficiencies Accelerate
Delaware Basin – Operating Efficiencies Accelerate Drilling and completion efficiencies accelerate Operating scale driving per-unit costs lower (1) Drilling and completion costs per lateral foot (all formations) LOE & GP&T expense ($/BOE) 40% 26% $940 $7.63 $846 IMPROVEMENT $6.39 IMPROVEMENT SINCE 2
Slide 10: Delaware – Development Projects Advancing on Plan
Delaware – Development Projects Advancing on Plan DELAWARE BASIN UPCOMING ACTIVITY High-confidence projects to drive strong Q4 production Upcoming developments Eddy Lea Purrito Q3-2020a Q4-2020e Q1-2021e Q2-2021e Al-Mal 6 Bone Spring wells 5 Bone Spring wells ONLINE IN LATE Q3 Completion Production
Slide 11: Strong Execution Driving Improved 2020 Outlook
Strong Execution Driving Improved 2020 Outlook Updated 2020 Improved vs. Revised Key Messages Guidance Outlook Budget (1) Raising 2020 OIL OUTLOOK for 2nd consecutive quarter Oil production 152 – 154 5,500 BOD (MBOD) Improvement Driven by Delaware well productivity & base production results Driv
Slide 12: Strategic Asset Sales Accelerate Value Creation
Strategic Asset Sales Accelerate Value Creation CANADIAN HEAVY OIL Strategic transactions ENHANCE competitive position (COMPLETED EXIT FROM CANADA) Proceeds: CAD $3.8 billion Closed: Q2 2019 Barnett Shale divestiture closed on Oct. 1 — Potential for $260 million of CONTINGENT PAYMENTS — Continge
Slide 13: Operations Scaled to Generate Free Cash Flow
Operations Scaled to Generate Free Cash Flow Successfully navigating challenging market conditions ($ in billions) REWARDING SHAREHOLDERS WITH CASH RETURNS $3.5 B $1.0 B DIVEST RAISED fixed quarterly dividend 22% to $0.11/share in 2020 PROCEEDS Paid $100 million SPECIAL DIVIDEND on Oct. 1st IMPLEMEN
Slide 14: Free Cash Flow Priorities
Free Cash Flow Priorities VARIABLE DIVIDEND STRATEGY FIXED DIVIDEND EFFECTIVE UPON CLOSE OF WPX TRANSACTION IN 2021 Paid quarterly at $0.11 per share Target payout: up to 10% of cash flow STEP 1: VARIABLE DIVIDEND CALCULATION Operating Cash Flow (GAAP) DEBT REDUCTION PROGRAM − Cash Capital Expen
Slide 15: Our Advantaged Capital Structure
Our Advantaged Capital Structure Strong liquidity with no near-term debt maturities Balance sheet strength provides competitive advantage (1) Outstanding debt maturities ($MM) Net debt to 2020e EBITDAX $4,900 6.0x SIGNIFICANT Excellent liquidity ($4.9 billion) ADVANTAGED POSITION TOP-QUARTILE FINA
Slide 16: Why Own the Go-Forward Devon?
Why Own the Go-Forward Devon? PREMIER MULTI-BASIN PORTFOLIO DISCIPLINED RETURNS-DRIVEN STRATEGY DELIVERING TOP-TIER OPERATING RESULTS SIGNIFICANT FINANCIAL STRENGTH & LIQUIDITY COMMITTED TO RETURNING CASH TO SHAREHOLDERS | Q3 2020 Earnings Presentation 16
Slide 17: Devon and WPX Merger Appendix
Devon and WPX Merger Appendix NYSE: DVN devonenergy.com NYSE: WPX wpxenergy.com NYSE: DVN devonenergy.com
Slide 18: Devon & WPX – Transaction Overview
Devon & WPX – Transaction Overview Transaction value: ~$12 billion (enterprise value) TRANSACTION All-stock, merger of equals transaction STRUCTURE Exchange ratio: 0.5165 shares of Devon for each share of WPX Pro forma equity ownership: 57% Devon and 43% WPX Combined company headquartered
Slide 19: Transaction is Accretive in Year-One
Transaction is Accretive in Year-One ACCRETION TO SHAREHOLDERS PRO FORMA FOR YEAR-ONE SYNERGIES SIGNIFICANT FINANCIAL OPERATING CASH FLOW 5%-10% BENEFITS FOR SHAREHOLDERS IMPROVEMENT FREE CASH FLOW GENERATION >2X IMPROVEMENT IMPROVES FUNDED AT MAINTENANCE $33 WTI CAPITAL BREAKEVEN ACCRETIVE TO CREDI
Slide 20: Builds a Dominant Delaware Basin Position
Builds a Dominant Delaware Basin Position COMBINED DELAWARE BASIN ACREAGE POSITION World-class oil resource opportunity DELAWARE PRODUCTION PROFILE — Stacked-pay position across 400,000 net acres — Acreage in economic core of the play 60% OF TOTAL COMPANY — Multi-decade inventory opportunity Eddy
Slide 21: Capturing $575 Million in Annual Cost Savings
Capturing $575 Million in Annual Cost Savings Combination to drive cost synergies by year-end 2021 Annual cost savings expected by year-end 2021 ($MM) > $2BILLION All-In Expected To Be PV-10 Costs (1) $100 Completed By OF COST $125 YE 2021 SAVINGS OVER THE NEXT 5 YEARS $75 $300 Savings $100 $75 ↆ$57
Slide 22: Positioned for Attractive Free Cash Flow Yields
Positioned for Attractive Free Cash Flow Yields Operations scaled to lower breakeven funding Free cash flow at maintenance capital 2021e pro forma maintenance capital assumptions (1) 2021e pro forma free cash flow sensitivities 30% OIL PRODUCTION 2020e EXIT-RATE >280 32% $33 WTI FREE CASH FLOW YIELD
Slide 23: A Proven Team Committed to Value Creation
A Proven Team Committed to Value Creation Dave Hager Rick Muncrief Jeff Ritenour Clay Gaspar Executive Chairman President & CEO EVP & Chief Financial Officer EVP & Chief Operating Officer David Harris Dennis Cameron Tana Cashion EVP & Chief Corporate EVP & General Counsel SVP of Human Resources Deve
Slide 24: Q3 2020 Results Appendix
Q3 2020 Results Appendix NYSE: DVN devonenergy.com
Slide 25: Q3 2020 – Asset-Level Modeling Stats
Q3 2020 – Asset-Level Modeling Stats Q3 2020 - ASSET DETAIL DEVON DELAWARE POWDER RIVER EAGLE FORD ANADARKO OTHER PRODUCTION Oil (MBbl/d) 146 77 21 22 19 7 NGL (MBbl/d) 83 38 3 11 30 1 Gas (MMcf/d) 580 239 23 73 242 3 Total (MBoe/d) 326 155 28 46 89 8 ASSET MARGIN (per Boe) Realized price $22.60 $24
Slide 26: Q3 2020 – Key Asset Highlights
Q3 2020 – Key Asset Highlights MULTI-BASIN PORTFOLIO DELIVERING STRONG RESULTS SEE KEY MODELING DETAILS FOR ADDITIONAL INFORMATION (PAGE 25) Production increased 9% year-over-year to 28 MBOED POWDER Per-unit operating costs IMPROVED 20% vs. year-ago quarter RIVER 3-well Niobrara spacing test f
Slide 27: Investor Contacts & Notices
Investor Contacts & Notices Investors and security holders will be able to obtain copies of the registration statement and the joint proxy statement/prospectus and other Investor Relations Contacts documents containing important information about Devon and WPX free of charge from the SEC’s website w
Slide 28: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements This communication includes “forward-looking statements” as defined by the SEC. Such statements include those concerning strategic plans, Devon’s and WPX’s expectations and objectives for future operations, as well as other future events or condi