Devon Energy Corporation · NYSE:DVN
Devon Energy — Q3 2018 Earnings Presentation
22 slides from Devon Energy's earnings presentation, Nov 6, 2018
Slide 1: Q3 2018 Operations Report
Q3 2018 Operations Report Key Messages 2 Outlook 3 Modeling Stats 7 Q3 Results 8 Delaware Basin 11 STACK15 Rockies 18 Eagle Ford & Barnett Shale 19 Heavy Oil 20 NYSE: DVN devonenergy.com Exhibit 99.2
Slide 2: Disciplined Growth Strategy
Disciplined Growth Strategy U.S. oil growth ahead of plan (+200 basis point vs. budget) No change to capital spending outlook Corporate cost savings: ~$475 million/year Operating cash flow accelerates in Q3 (+61% YoY) Reduced consolidated debt by >40% Repurchasing ~20% of outstanding stock Raised qu
Slide 3: 2018 Outlook: U.S. Growth Initiatives Ahead of Plan
2018 Outlook: U.S. Growth Initiatives Ahead of Plan U.S. growth exceeding expectations YTD 2018e oil production growth rates (retained assets) U.S. Oil Production (MBOD) 2018e 2017 % Delaware Basin 42 30 STACK 32 25 Rockies 15 10 Eagle Ford 28 34 Other 6 6 Total retained assets 123 105 +17% Divested
Slide 4: 2019 Preview: Keeping Our Discipline
OUTSTANDING SHARES U.S. RETAINED ASSETS E&P CAPITAL PROGRAM 2019 Preview: Keeping Our Discipline 15%-19% Growth $2.4-$2.7 Billion OPTIMIZED FOR RETURNS POSITIONED FOR FREE CASH FLOW ~20% Reduction DRIVEN BY LOW-RISK DEVELOPMENT PROGRAM OIL GROWTH SHARE REDUCTION $ ENHANCING PER-SHARE CASH FLOW GROWT
Slide 5: 2018e Executing the Multi-Year Business Plan
2018e Executing the Multi-Year Business Plan +15% – 17% CAGR Multi-Year Targets (2017-2020) 17% YoY growth 9% YoY growth in U.S. G&A/interest: ↓$475 MM Trending above 3-year plan ~$5 billion by year end >40% decrease in debt Note: Assumes $65 WTI, $3 Henry Hub and current WCS strip pricing U.S. oil
Slide 6: Strategic Deployment of Excess Cash
Strategic Deployment of Excess Cash $4 billion share-repurchase program underway Represents ~20% of outstanding shares $2.7 billion repurchased to date Expect program to be completed by Q1 2019 Raised quarterly dividend by 33% in 2018 Target cash flow payout ratio: 5% - 10% Expect to deliver sustain
Slide 7: Key Metrics and Q3 2018 Asset Detail
KEY METRICS Q3 ACTUALS U.S. oil – retained (MBbls/d) 125 Canada oil (MBbls/d) 102 NGLs – retained (MBbls/d) 107 Gas - retained (MMcf/d) 1,001 Total retained assets (MBoe/d) 500 U.S. divested assets (MBoe/d) 22 Total (MBoe/d) 522 LOE & GP&T ($/BOE) $9.45 General & administrative expenses ($MM) $147 F
Slide 8: Q3 Results Headlined by Free Cash Flow Generation
Corporate cost structure continues to improve G&A declines 42% vs. peak rates Borrowing costs reduced 17% vs. Q3 2017 Capital discipline accelerates free cash flow growth Q3 capital 9% below midpoint guidance Generated $249 million of free cash flow in Q3 Q3 Results Headlined by Free Cash Flow Gener
Slide 9: Capturing the Benefit of Higher NGLs Pricing
One of the largest NGLs producers in the U.S. Q3 retained NGLs production: 107 MBbls per day Represents ~20% of production mix 98% of NGLs have access to Mont Belvieu markets(1) >30% premium to Conway pricing (see chart) Margins to benefit from contractual rights to recover operated ethane productio
Slide 10: Divestiture Program Accelerates Value Creation
Divestiture Program Accelerates Value Creation SALES PRICE: $3.125 Billion ACCRETIVE MULTIPLE: 12x Cash Flow TRANSACTION DETAILS CLOSED Resource quality & depth allows for high-grading of portfolio Announced $4.7 billion of divestitures to date Closed EnLink transaction in July ($3.125 billion) Upst
Slide 11: Delaware Basin – Q3 2018 Results
Delaware Basin – Q3 2018 Results 79 (Q3 Guide: 70-75)(1) 45% GROWTH YEAR OVER YEAR Q3 Production Outperforms Guidance(1) Retained production (MBOED) Delaware Well Productivity Reaching Record Highs Average Cumulative Oil Production Per Well (MBOD) 2018 2015-2017 avg. Months Online >70% IMPROVEMENT 2
Slide 12: Delaware – Wolfcamp Program Delivers Prolific Results
Delaware – Wolfcamp Program Delivers Prolific Results WOLFCAMP DEVELOPMENT PROGRAM BUILDING MOMENTUM Current Projects COTTON DRAW RATTLESNAKE New Mexico Texas Development Areas ~4,000 Q3 WOLFCAMP WELLS(1) BOED AVG. 30-DAY IPs Lusitano 2 Wolfcamp wells online Avg. IP 30: 4,600 BOED/well Seawolf 5 of
Slide 13: Delaware – Infrastructure Supports Profitable Growth
Delaware – Infrastructure Supports Profitable Growth Premium oil pricing and flow assurance Q3 oil realizations: 97% of WTI(1) Swaps & firm transport protect ~75% of 2019 oil Firm oil sales contracts guarantee in basin flow assurance (100 MBOD of contractual capacity in basin) NGLs have firm transpo
Slide 14: Delaware Basin – Raising Growth Outlook
Delaware Basin – Raising Growth Outlook Raising 2018 production growth estimates Increasing 2018 exit rate growth: ~90 MBOED(1) Non-core divestitures: 3 MBOED impact to Q4 Activity to reach 10 operated rigs around year end Ramping-up capital investment in 2019 Delaware is top-funded asset by a wide
Slide 15: STACK – Initial Infill Spacing Results
STACK – Initial Infill Spacing Results Initial Infill Spacing Results Showboat 12 wells/unit (avg. lateral: 7,000’) Avg. 90-Day IP: 800 BOED Horsefly 10 wells per drilling unit Avg. 30-Day IP: 1,475 BOED Coyote 7-well development project Avg. 90-Day IP: 3,100 BOED Bernhardt 8 wells per drilling unit
Slide 16: STACK – Next Steps to Optimize Development Returns
STACK – Next Steps to Optimize Development Returns Learnings from high-density infill tests Initial results indicate spacing was too tight Flowback approach key for oil recoveries Upper Meramec delivered best well results Vertical communication observed Substantial D&C savings achieved (pg. 15) Reve
Slide 17: STACK – Outlook
STACK – Outlook Upcoming activity highly accretive to corporate return targets Q4 activity: 20 to 25 new wells online Re-establishes growth trajectory by year end Positioned for production growth in 2019 2nd highest funded asset in portfolio Capital investment: $500-$700 million Expect to bring onli
Slide 18: Rockies – An Emerging Growth Opportunity
Rockies – An Emerging Growth Opportunity Net production increased 17% vs. Q2 2018 Oil production ~75% of product mix Powder River barrels receive WTI pricing Accelerating capital activity in 2019 Expect to operate 4 rigs by early next year Represents 2x increase in activity from 2018 No permitting o
Slide 19: Eagle Ford and Barnett Shale Q3 Results
Eagle Ford and Barnett Shale Q3 Results 20 Eagle Ford Wells Avg. 30-Day IP: ~3,000 BOED/Well EAGLE FORD OVERVIEW Q3 production averaged 60 MBOED (51% oil) Strong well results drive 10% growth vs. Q2 20 new wells : IP30 ~3,000 BOED (50% oil) Completion design contributes to performance Free cash flow
Slide 20: Heavy Oil – Overview & Outlook
Heavy Oil – Overview & Outlook Q3 net production: 104,000 Boe per day Jackfish 1 maintenance impact: ~15 MBOD Jackfish 2&3 produced at nameplate capacity LOE per Boe declined 16% vs. Q2 2018 Full-scale operations restored at Jackfish complex Rates reach ~110% of nameplate capacity in October Adjuste
Slide 21: Heavy Oil – Mitigating Pricing Pressures in 2019
Heavy Oil – Mitigating Pricing Pressures in 2019 Actively adding WCS financial swaps in 2019 (21 MBOD at ~$23 off WTI in 1H 2019) Secured firm transport to Gulf Coast (Agreements cover ~10% of production) Seeking accretive rail contracts (Targeting up to 20% of production) Directly connected to Nort
Slide 22: Investor Contacts & Notices
Investor Contacts & Notices Investor Relations Contacts Scott CoodyChris Carr VP, Investor RelationsSupervisor, 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 Securitie