Devon Energy Corporation · NYSE:DVN
Devon Energy — Jefferies Global Energy Conference 2014
62 slides from Devon Energy's conference presentation, Nov 12, 2014
Slide 1: Jefferies Global Energy Conference
Jefferies Global Energy Conference November 12, 2014
Slide 2: Investor Notices
Investor Notices Safe Harbor Some of the information provided in this presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. Words such as “forecasts," "projections," "estimates," "plans," "expectations," "targets," and other comparable terminology o
Slide 3: Devon Today
Devon Today Delivering Shareholder Value • A leading North American E&P • Focused and balanced portfolio • Oil driving production growth • Expanding margins • Strong financial position • Accelerating activity NYSE: DVN www.devonenergy.com Slide 3
Slide 4: Devon Today: Strong North American Pure Play
Devon Today Strong North American Pure Play Devon’s Core & Emerging Assets • Q3 2014 net production: 640 MBOED(1) • Deep inventory of oil opportunities Heavy Oil Core — Top-tier Eagle Ford development Emerging — High-quality Permian Basin position — World-class heavy oil projects — Upside potential
Slide 5: Focused & Balanced Portfolio
Focused & Balanced Portfolio • Positioned in top North American Q3 2014 Product Mix(1) basins • Completed asset divestiture program 34% — >$5 billion in gas-weighted asset sales 45% • Oil & NGL: 55% of production 21% • Focused on oil and value growth Oil NGLs Natural Gas (1) Excludes non-core divest
Slide 6: 2014 Production Growth Targets
2014 Production Growth Targets U.S. Oil Production(1) Total Oil Production(1) BOE Production(1) (MBOPD) (MBOPD) (MBOED) 614 - 620 206 - 209 539 152 127 - 128 73 2013 2014e 2013 2014e 2013 2014e U.S. Canada 6:1 20:1 (1) Excludes non-core divestiture assets. NYSE: DVN www.devonenergy.com Slide 6
Slide 7: Preliminary 2015 Outlook
Preliminary 2015 Outlook Total Oil Production(1) Key Highlights (MBOPD) • On track to deliver 2015 oil production growth of 20 - 25%(1) — Driven by Eagle Ford, Permian and Jackfish 3 206 - 209 • Top-line BOE growth: mid-single digits Oil (1) Natural Gas • Growth achievable with similar spend rate to
Slide 8: Devon Oil Production
Devon Oil Production Significant Oil Producer in North America Q2 2014 Oil Production Devon(1) vs. N.A. Onshore Pure-Play Peers 300 250 200 MBOD 150 100 50 0 EOG CLR CHK WLL PXD MEG CXO NFX XEC OAS ECA SD LPI FANG RRC (1) Excludes non-core divestiture assets. NYSE: DVN www.devonenergy.com Slide 8
Slide 9: Expanding Margins
Expanding Margins Pre-Tax Cash Margin Per Boe(1) • High-margin oil growth (September Year to Date) $29.51 • Improved price realizations $21.47 • Effective cost management • Non-core asset divestitures 2013 YTD 2014 YTD (1) Pre-tax cash margin is defined as unhedged upstream revenues and midstream op
Slide 10: Financial Strength & Flexibility
Financial Strength & Flexibility • Strong investment-grade ratings — Cash balances: $3.4 billion (9/30/14) — Net debt(1): $6.8 billion (excluding EnLink) • Cash flow protected by hedges — Majority of Q4 production hedged above current pricing levels — >50% of 2015 oil protected at $91 per barrel • S
Slide 11: Asset Overview
Asset Overview
Slide 12: Permian Basin
Permian Basin Delaware Basin Delivering Outstanding Results • Activity focused on repeatable, high-impact Bone Spring — Brought 13 wells online in Q3 — 30-day IP rate: ≈900 BOED (80% oil) Central Eddy — Results >50% higher than type curve • New completion design provides further upside — Testing san
Slide 13: Bone Spring
Bone Spring Raising Type Curve 30-Day IP Rates Key Modeling Stats (MBOED) 750+ 30-Day IP (BOED) 750+ EUR (MMBOE) 450+ 575 D&C Cost (in millions) $6 - $7 Oil / NGL (% of Production) 65% / 20% WI / NRI 71% / 56% Previous Revised LOE ($/BOE) $14 Slide 13
Slide 14: Delaware Basin
Delaware Basin Significant Resource Opportunity Gross Risked 2014e Net Risked Risked Wells Undrilled Activity Formation Acres Per Section Locations (Wells Drilled) Delaware Sands 80,000 4 700 20 Leonard Shale 60,000 5 700 1 Bone Spring 285,000 5 3,500 >100 Wolfcamp Under >100,000 n/a 3 Evaluation Ot
Slide 15: Permian Basin Net Production
Permian Basin Delivering Significant Oil Production Growth 60 50 Net Production (MBOPD) 40 30 20 10 0 2009 2010 2011 2012 2013 2014e NYSE: DVN www.devonenergy.com Slide 15
Slide 16: Eagle Ford Overview
Eagle Ford Overview World-Class Oil Asset • Located in best part of Eagle Ford OKLAHOMA • Net acreage: 82,000 TEXAS — DeWitt: 48% WI / 36% NRI (50,000 net acres) — Lavaca: 81% WI / 63% NRI (32,000 net acres) • September exit rate: 87 MBOED • 2014e net production: 70 – 80 MBOED(1) — 57% Oil — 19% NGL
Slide 17: Eagle Ford Production Results and Outlook
Eagle Ford Production Results and Outlook 2014 Results to Date Multi-Year Production Outlook (MBOED) (MBOED) >100 87 70 – 80(1) 49 March 2014 September 2014 2014e 2015e (1) Represents Devon’s estimated net production from March through December. Slide 17
Slide 18: Lower Eagle Ford Upside
Lower Eagle Ford Upside Lavaca County Devon’s Lavaca County • Net acreage: 32,000 Bock Unit (3 wells) Non-operated Berger 1H Lower Eagle Ford Lower Eagle Ford • Q3 results highlighted by 7 24-Hr IP: 1,291 BOED 24-Hr IP: 2,401 BOED Avg. high-rate wells (see map) Gonzales • Significant upside potentia
Slide 19: Upper Eagle Ford Potential
Upper Eagle Ford Potential DeWitt and Lavaca Counties OKLAHOMA • Encouraging industry results TEXAS Robin 1H • Pay thickest in DeWitt County Q4 Spud Medina 2H Angela 1H • Spud first well in Q3 Q4 Completion Q4 Spud Gonzales • 5 additional tests planned for Nancy 1H 2014 Q4 Completion Lavaca Pargmann
Slide 20: Heavy Oil Developments
Heavy Oil Developments Jackfish & Pike SAGD Characteristics: Jackfish 1 Jackfish 2 • Low F&D T75 • Low geologic risk Jackfish 3 • Flat production profile • Long reserve life >20 years T74 Pike Project Area Access Pipeline Each SAGD Project: T73 6 Miles • 300 MMBO gross EUR R8 R7 R6 R5 R4 • Proved re
Slide 21: Jackfish Heavy Oil Developments
Jackfish Heavy Oil Developments Delivering Visible Oil Growth Jackfish Complex: • Q3 2014 production: — Gross production: 64 MBOPD (20% higher YoY) — Net production: 53 MBOPD • Delivering top-tier operating results at J1 • Plant start-up began on July 13th at J3 — 2014e exit rate: 10 MBOPD — Expect
Slide 22: Anadarko Basin
Anadarko Basin Cana-Woodford Accelerating Activity Cana-Woodford Overview: • Net acreage: 280,000 — Stacked-pay potential — 200,000 net acres in oil and liquids window • Q3 2014 net production: 71 MBOED — Production increased 25% YoY — Oil and NGL 45% of production • Improved completion design enhan
Slide 23: Raising Cana-Woodford Type Curve
Raising Cana-Woodford Type Curve Liquids-Rich Core EURs (MMBOE) 30-Day IP Rates (BOED) 1.7 1,200 1.4 920 Previous Revised Cost Per Well ($MM) $8.0 $8.2 Previous Revised Previous Revised
Slide 24: Rockies Oil
Rockies Oil Powder River Basin • Net acreage: 150,000 • Stacked oil targets (Parkman, Turner, Frontier & others) • Activity focused on repeatable Parkman formation — Six high-rate development wells in Q3 — 30-day IP rate: 1,080 BOED (85% light oil) • Risked drilling inventory: ≈1,000 (75% Parkman) •
Slide 25: Innovative Midstream Combination
Innovative Midstream Combination EnLink Midstream Overview • Devon retains majority ownership — General partner (ENLC 70%) — MLP (ENLK 52%) • EnLink transaction highly accretive to shareholders • Market value of Devon’s EnLink ownership interest: ≈$8 billion • Improves capital efficiency, diversific
Slide 26: Why Own Devon?
Why Own Devon? • A leading North American E&P • Focused and balanced portfolio • Oil driving production growth • Expanding margins • Strong financial position • Accelerating activity NYSE: DVN www.devonenergy.com Slide 26
Slide 27: Thank You
Thank You devon
Slide 28: Appendix A: Strategy & Operations
Appendix A Strategy & Operations
Slide 29: Disciplined Capital Allocation
Disciplined Capital Allocation Top objective: Maximize shareholder returns by optimizing cash flow per share, adjusted for debt • Investing in E&P capital projects — Accelerating development of high-margin oil projects — Leveraging JV drilling carries in emerging plays • High-grading asset portfolio
Slide 30: Non-Core Asset Sales
Non-Core Asset Sales Sharpening The Focus • Sold Canadian conventional business for C$3.125 billion — US$2.8 billion (after foreign exchange) — Accretive transaction: 7 times 2013 EBITDA — Closed April 1, 2014 • Sold U.S. non-core assets for $2.3 billion — Accretive transaction: 7 times 2013 EBITDA
Slide 31: 2014 E&P Capital Program
2014 E&P Capital Program Delivering Strong Oil Growth 2014 E&P Capital Budget E&P Capital % of $5.0 - $5.4 Billion(1) Spent ($B)(1) Budget 2% 5% Q1 2014 $1.2 23% 5% Q2 2014 $1.3 23% 7% 28% Q3 2014 $1.3 25% Sept YTD $3.8 72% 11% • Capital concentrated in oil development plays — ≈80% directed toward o
Slide 32: Permian Basin Overview
Permian Basin Overview 2014 Focus Areas NEW MEXICO OKLAHOMA • Net acreage: 1.3 million basin-wide with stacked-pay potential New Mexico Texas TEXAS • Q3 2014 net production: 98 MBOED Eastern Northwestern (≈60% oil) Midland Shelf Shelf Basin • Deep inventory of low-risk projects Wolfberry Bone Spring
Slide 33: Permian Basin: Midland-Wolfcamp Shale
Permian Basin Midland-Wolfcamp Shale Oil Development • Net acreage: 122,000 • Low-risk, high-margin light oil play • Thick pay with multiple intervals (up to 1,100’) Reagan Irion • Q3 2014 net production: 15 MBOED (>150% higher YoY) • 2014 capital: ≈$200 million NM Crockett • 2014 plans: Drill ≈150
Slide 34: Pike Overview
Pike Overview SAGD Oil Development Jackfish Pike 1 Development Pike leasehold Area • 50% operated working interest • Similar reservoir characteristics to Jackfish • Up to five 35 MBOPD SAGD Pike development phases Potential Pike 1 development • Single plant pad • Up to three 35 MBOPD projects Pike A
Slide 35: Lloydminster
Lloydminster Oil Development Iron River • Net acreage: ≈700,000 Manatokan • Low-risk development • Strong operating margins End Lake • Q3 2014 net production: 31 MBOED • 2014 plans: ≈150 wells Lloydminster Alberta Lloydminster B. C. Sask. NYSE: DVN www.devonenergy.com Slide 35
Slide 36: Mississippian-Woodford Trend
Mississippian-Woodford Trend Emerging Oil Opportunity OKLAHOMA • Net acres to DVN in JV area: ≈180,000 TEXAS • Drilling activity focused on joint venture acreage • Multiple oil-bearing intervals • Q3 2014 net production rate: 21,000 BOED • 2014 plans: Drill ≈250 wells • Risked inventory: 1,000 locat
Slide 37: Barnett Shale
Barnett Shale Liquids-Rich Gas Development Jack Wise Denton • Net acreage: 625,000 Denton • Low average royalty burden: 18% • Q3 2014 net production: 1.2 BCFED Palo Pinto Parker DRY GAS — Liquids 27% of total production LIQUIDS-RICH Ft. Worth • Expected to generate >$1 billion of free cash flow in 2
Slide 38: Anadarko Basin: Granite Wash
Anadarko Basin Granite Wash • Net acreage: 66,000 • Legacy land position held by production • Low average royalty burden: 19% Hemphill • Q3 2014 net production: 21 MBOED Wheeler Granite Wash OKLAHOMA Oklahoma City TEXAS NYSE: DVN www.devonenergy.com Slide 38
Slide 39: Joint Venture Transactions
Joint Venture Transactions Oil & Liquids Exploration Sinopec Joint Venture • $2.5 billion transaction ($900 million cash and $1.6 billion drilling carry) • Drilling carry balance: $280 million (9/30/14) • Sinopec receives 33% of Devon’s interest • Net acreage in joint venture: ≈700,000 Michigan • De
Slide 40: Potential Drop Down Assets
Potential Drop Down Assets Access & Victoria Express Pipelines Access Pipeline Victoria Express Pipeline JACKFISH & PIKE Colorado Gonzales 16” Diluent Line Lavaca Wharton (Edmonton to Jackfish Area) 24” Diluent Line DeWitt (Sturgeon to Jackfish Area) Jackson 42” Blend Line Karnes Matagorda Sturgeon
Slide 41: EnLink Midstream Business
EnLink Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) GP Public Unitholders ≈70% (115 MM units) ≈52% LP (120 MM units) ≈30% General Partner 100% Incentive Distribution Rights (IDRs) EnLink Midstream LLC (ENLC) General Partner, MLP ≈7% LP and Public IDRs Unitholders Maste
Slide 42: Attractively Hedged
Attractively Hedged Oil Hedges • ≈60% of oil production hedged (Q4 2014) — 75 MBOPD swapped at $94 per BBL — 65 MBOPD collared at $89 - $100 per BBL — 50 MBOPD WCS basis swapped at $17 off WTI • 138 MBOPD of oil production hedged in 2015 — 107 MBOPD swapped at $91 per BBL — 31 MBOPD collared at $90
Slide 43: Appendix B: Supply & Demand
Appendix B Supply & Demand
Slide 44: Canadian Oil Supply & System Export Capacity
Canadian Oil Supply & System Export Capacity 9.0 8.0 7.0 6.0 MMBOD 5.0 4.0 3.0 2.0 1.0 0.0 2011 2012 2013 2014e 2015e 2016e 2017e 2018e Oil Supply Current Export & Local Demand Capacity Rail Alberta Clipper - Flanagan South Trans Mountain Expansion Keystone XL Energy East Enbridge Line 3 Replacement
Slide 45: Canadian Oil Pipeline Capacity Additions
Canadian Oil Pipeline Capacity Additions Flanagan South: Flanagan to USGC • Capacity: staged increments up to 0.6 MMBOPD • Estimated in service: Q4 2014 Kitimat Alberta Clipper/Southern Access: Hardisty to Flanagan • Capacity: staged increments up to 0.8 MMBOPD Edmonton • Estimated combined in servi
Slide 46: Canadian Oil Rail Transport Fees
Canadian Oil Rail Transport Fees Potential Rail $ Per BBL Costs Oil Sands Trucking & Loading ≈$5.00 Rail Car Rental ≈$2.50 Transport Fee Variable (Mileage Based) West Coast Refining Offloading Fee ≈$2.00 East Coast Refining Gulf Coast Refining
Slide 47: Heavy Oil Refinery Expansions
Heavy Oil Refinery Expansions In-Service Capacity Operator Location Date Increase (BOPD) Husky Lima, Ohio 2016 40,000 Northwest Edmonton, Alberta 2017 80,000 Upgrading Total Capacity Increase 120,000 NYSE: DVN www.devonenergy.com Slide 47
Slide 48: U.S. Natural Gas Demand Growth By Sector
U.S. Natural Gas Demand Growth By Sector 2013-2018 90 85 6.5 0.5 80 2.1 BCFD 3.7 75 2.5 87 -0.5 70 72 65 60 2013 Industrial Res/Com Electric Mex/Can Other LNG 2018 Total Baseline Exports Exports Source: Wood Mackenzie, EIA, PIRA, Bloomberg, FERC, US DOE, and Devon estimates NYSE: DVN www.devonenergy
Slide 49: U.S. Natural Gas Coal Retirement Demand
U.S. Natural Gas Cumulative Coal Retirement Demand Forecast 6 4 3.7 2.9 2 1.6 BCFD 0.0 0 -0.2 -2 2014F 2015F 2016F 2017F 2018F Renewable Generation Coal Retirements Fuel Switching Net Effect Source: NYSE: DVN Wood Mackenzie, Bernstein, PIRA, and Devon estimates www.devonenergy.com Slide 49
Slide 50: U.S. Natural Gas Annual Industrial Demand
U.S. Natural Gas Annual Industrial Demand 25 22.5 22.9 22.1 22 21.1 21.5 20.0 19 BCFD 16 13 10 2008 2009 2010 2011 2012 2013A 2014F 2015F 2016F 2017F 2018F Base Y/Y Growth Source: Devon estimates NYSE: DVN www.devonenergy.com Slide 50
Slide 51: U.S. Natural Gas LNG Projects
U.S. Natural Gas LNG Projects Total Capacity Non-FTA Final DOE Approval Approval Facility Developer(s) Location FTA/Non-FTA Capacity Start-Up Date Investment Non-FTA FERC (BCFD) (BCFD) Decision (FID) Sabine Pass Cheniere Cameron, LA 2.2 2.2 4Q 2015 Approved Approved July 2012 (phase 1 & 2) Freeport
Slide 52: Canadian Natural Gas LNG Projects
Canadian Natural Gas LNG Projects Capacity Start-Up NEB Export Facility Developer(s) Location (BCFD) Date License Douglas Channel Energy LNG Partners, Haisla Floating LNG, 0.1 2017 Approved Nation Kitimat, B.C. Kitimat LNG Apache, Chevron Kitimat, B.C. 0.7 2019 Approved LNG Canada Shell, Mitsubishi,
Slide 53: Natural Gas Liquids Supply
Natural Gas Liquids Supply Estimated Ethane Rejection U.S. NGL Supply by Component (MMBPD) 2.0 4.5 Ethane Extraction Ethane Rejection 4.0 1.5 3.5 MMBPD 3.0 1.0 2.5 2.0 0.5 1.5 1.0 0.0 0.5 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 0.0 Q1 Q2 Q3 Q4* Q1 Q2 Q3F Q4F* 2014 2014 2015 2013 2014F (A+F) SA SA Ethane
Slide 54: U.S. Natural Gas Liquids Demand
U.S. Natural Gas Liquids Demand U.S. NGL Demand Petchem Other End Use Refinery/Blender Exports 5.0 4.5 4.3 4.1 3.9 3.9 4.0 3.8 3.6 3.7 3.5 3.5 3.2 3.2 3.3 3.0 3.0 MMBPD 2.5 2.0 1.5 1.0 0.5 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 A+F Q4F 2013 2014 2014 2015 YTD* YTD* SA SA 2013 2014F *2013 YTD – Actual data through
Slide 55: Natural Gas Liquids: LPG and Ethane Exports
Natural Gas Liquids Demand – LPG and Ethane Exports 1600 Exports of Propane 1400 Exports of Butane Exports of Ethane LPG (Propane & Butane) Export Capacity 1200 LPG + Ethane Export Capacity 1000 MBPD 800 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 2016 Source: EIA, Argus, Platts, Waterborne Ene
Slide 56: Natural Gas Liquids: Cracking Rates & Inventories
Natural Gas Liquids Cracking Rates & Inventories U.S. Ethane Cracking Rates U.S. Ethane Inventories 5 Yr. High/Low 2014 2013 5 Yr Avg. 5 Yr. High/Low 2014 2013 5 Yr. AVG. 1.3 45 40 1.1 35 MMBbl MMBbl 30 0.9 25 0.7 20 15 0.5 10 5 0.3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Slide 57: Appendix C: Key Modeling Statistics
Appendix C Key Modeling Statistics
Slide 58: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Bone Spring (Permian Basin) Midland-Wolfcamp Shale (Permian Basin) Working interest / royalty: 71% / 21% Working interest / royalty: 69% / 24% Drill & complete costs: $6 - $7 MM Drill & complete costs: $6 - $6.5 MM 30-day IP rate: 750+ BOED 30-d
Slide 59: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Eagle Ford (DeWitt County) Eagle Ford (Lavaca County) Working interest / royalty: 48% / 25% Working interest / royalty: 81% / 22% Drill & complete costs: $9 - $10 MM Drill & complete costs: $9 MM 30-day IP rate: 1,200 – 1,400 30-day IP rate: 1,0
Slide 60: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Mississippian Lime (Mississippian-Woodford Trend) Woodford Oil Shale (Mississippian-Woodford Trend) Working interest / royalty: 35% / 19% Working interest / royalty: 42% / 22% Drill & complete costs: $3 - $4 MM Drill & complete costs: $3 - $4 MM
Slide 61: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Cana-Woodford Shale Barnett Shale Working interest / royalty: 51% / 21% Working interest / royalty: 89% / 18% Drill & complete costs: $8 - $8.5 MM Drill & complete costs: $3 - $3.5 MM 30-day IP rate: 1,200 BOED 30-day IP rate: 3 MMCFED EUR: 1.7
Slide 62: Discussion of Risk Factors
Discussion of Risk Factors Information provided in this presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. Forward-looking statements are identified in this presentation as “forecasts, projections, estimates, plans, expectations, targets, opportu
Devon Energy — Jefferies Global Energy Conference 2014 on 6ix