Devon Energy Corporation · NYSE:DVN
Devon Energy — Q1 2018 Earnings Presentation
25 slides from Devon Energy's earnings presentation, May 1, 2018
Slide 1: Q1 2018 Operations Report
Q1 2018 Operations Report Key Messages 2 Modeling Stats 3 Q1 Results 4 Outlook 5 Delaware Basin 9 STACK15 Rockies 21 Heavy Oil 22 Eagle Ford 23 Barnett Shale 24 NYSE: DVN devonenergy.com Exhibit 99.2
Slide 2: Executing the 2020 Vision
Executing the 2020 Vision Raising U.S. oil production guidance for 2018 Q1 production at high end of guide Record-setting well productivity driving strong returns Executing multi-zone projects ahead of plan Marketing & supply chain provides certainty of execution Services and supplies secured at com
Slide 3: Key Modeling Stats
KEY METRICS Q1 ACTUALS(1) Q1 GUIDANCE U.S. oil (MBbls/d) 122 117 - 122 Canada oil (MBbls/d) 129 125 - 130 NGLs (MBbls/d) 97 98 - 103 Gas (MMcf/d) 1,177 1,139 - 1,191 Total (MBoe/d) 544 530 - 554 Production expenses ($MM) $543 $500 - $550 General & administrative expenses ($MM) $226 $210 - $230 Finan
Slide 4: Q1 2018 Results
Q1 2018 Results U.S. oil production at top end of guidance Delaware & STACK deliver strong growth Delaware March oil production 30% higher vs. Q4 2017 STACK oil production increases 20% vs. Q4 2017 Massive record-setting wells brought online Two Boundary Raider wells IP24: 24 MBOED (~80% oil) Coyote
Slide 5: 2018 Outlook
2018 Outlook Raising 2018 U.S. oil production guidance Expect 16% growth vs. 2017 (~30% exit-rate growth) Guidance increased by ~200 basis points Cost structure to improve throughout 2018 G&A and interest savings: ~$175 MM annually (~65% of 2020 Vision target) Per-unit LOE to decline 5% to 10% by ye
Slide 6: 2020 Vision: Driving Significant Cash Flow Growth
2020 Vision: Driving Significant Cash Flow Growth G&A Op. Cost Interest Cost savings to expand margins Upstream Per-Unit Cash Cost ($/BOE) Growing higher-value production U.S. Oil Production (MBOD) MID-TEENS CAGR DRIVEN BY >25% CAGR IN DELAWARE & STACK 15% COST SAVINGS $2.2 CAGR >25% Driving upstrea
Slide 7: Shareholder-Friendly Initiatives
$1 billion share-repurchase program underway $204 million repurchased to date (6.2 million shares) Average price: $33 per share Expect to be completed by year end Raised quarterly dividend by 33% New quarterly rate: $0.08 per share (effective Q2 2018) Target cash flow payout ratio: 5% - 10% Position
Slide 8: Portfolio Simplification Strategy
Portfolio Simplification Strategy Resource quality & depth allows for high-grading of portfolio Potential for >$5 billion of asset disposals Divest proceeds to date: $1.1 billion Committed to bringing forward appropriate value as market conditions allow Optionality to monetize oil or gas Multiple in
Slide 9: Delaware Basin – Q1 2018 Results
Delaware Basin – Q1 2018 Results March production averages 73 MBOED Oil volumes 30% higher vs. Q4 2017 Driven by focused development program Generating best returns in portfolio Two Boundary Raider wells achieve highest flow rates in Delaware Basin history B. Raider 212H - IP24: 12,868 BOED (82% oil
Slide 10: Initial Multi-Zone Projects Delivering Strong Results
Initial Multi-Zone Projects Delivering Strong Results Frac efficiencies reaching up to 15 stages/day Anaconda project savings: $1 MM per well Average well cost declined to ~$5.5 million Project EUR trending toward 8 MMBOE Boomslang project attains 1st production 11 wells across 3 intervals (Leonard
Slide 11: World-Class Rattlesnake Developments Advancing
World-Class Rattlesnake Developments Advancing Completion work underway at Seawolf project 12 wells targeting multiple Wolfcamp intervals Drilling efficiency improved 67% vs. prior activity Avg. drilling savings: ~$800,000 per well Fighting Okra infill drilling program progressing Developing 9 Wolfc
Slide 12: Delaware Basin Development Activity
Q1-2018a Q2-2018e Q3-2018e Q4-2018e Boomslang (11 well pattern across 3 intervals in the Leonard and Bone Spring) Drilling Completion Production Drilling Completion Production Drilling Completion Fighting Okra (9 well pattern across 3 intervals in the Wolfcamp) Completion Production Production Seawo
Slide 13: Protecting Price & Flow Assurance
Firm transport and basis swaps protect price realizations Midland basis swaps protect ~50% of oil production ~40% of oil delivered on firm transport to Gulf Coast Term gas sales in place to flow to West Coast (avoids WAHA hub) Gas basis swaps protect ~40% of production Field-level infrastructure in
Slide 14: Delaware Basin – Outlook
Delaware Basin – Outlook Significant resource opportunity (~300,000 net surface acres with >15 development targets) >15% sequential quarter production growth expected in Q2 Capital spending on track with 2018 budget (~$725 million) Production exit-rate growth: >40% by year end Franchise asset provid
Slide 15: STACK – Q1 2018 Results
STACK – Q1 2018 Results Oil production increases 68% from Q1 17 Coyote development delivering record flow rates Top wells average IP30 of ~3,500 BOED Field-level cash flow expands 60% year over year Liquids volumes account for ~80% of revenue Per-unit operating costs to decline >10% by Q4 2018 Showb
Slide 16: STACK – Infill Development Strategy
Next 3 projects designed to inform future infill decisions Testing 9, 10 & 12 Meramec wells per drilling unit Program to deliver attractive returns (Showboat/Horsefly/Bernhardt) Burdened wellhead IRRs projected at ~40%(1) (at strip pricing) Low-risk appraisal objectives (testing spacing & secondary
Slide 17: STACK Development Activity Progressing
STACK Development Activity Progressing 60% of capital activity in 2018 associated with multi-zone developments 4 multi-zone projects expected to contribute to 1st production by YE 2018 DEVELOPMENT STRATEGY BUILDING MOMENTUM STACK DEVELOPMENT ACTIVITY Kingfisher Canadian Dewey Custer Blaine 2018 Deve
Slide 18: STACK Infill Projects Delivering Efficiencies
STACK Infill Projects Delivering Efficiencies Record flow rates achieved at Coyote project Project developing Lower Meramec sweet spot Average IP30: 4,400 BOED (4 of 7 wells online) Drilling time improved by up to 25% vs. offsetting Faith Marie well ($1 MM savings per well) Completion costs reduced
Slide 19: STACK – Certainty of Execution
STACK – Certainty of Execution Improved oil takeaway infrastructure boosts pricing (~$1/Bbl uplift) Majority of oil planned to be connected to gathering systems (Black Coyote online in April) Reliable and cost-effective pipeline access to Cushing (see map) Gas flow assurance: Devon holds firm transp
Slide 20: STACK – Outlook
STACK – Outlook Activity concentrated in over-pressured oil window (best returns in play) >100 new operated wells online in 2018 Targeting higher-return Meramec formation Accelerated capital spend in Q1 due to completion efficiencies (32% of budget) 2018 production plan on track Q2 oil volumes flat
Slide 21: Rockies
Rockies Oil production increased 17% vs. Q4 2017 Parkman/Teapot activity drives growth Low costs drive strong returns (~$5 MM per well) Testing Niobrara potential (~400k prospective acres) Initial well flowing back Completion work underway at 2nd appraisal well “Super Mario” Turner activity accelera
Slide 22: Heavy Oil
Heavy Oil Oil production at high end of guidance in Q1 Q2 volumes impacted by turnaround and royalties Jackfish turnaround impact: ~15 MBOD Higher royalties: ~3 MBOD WCS hedges protecting cash flow in 2018 ~50% hedged at $15 off WTI Free cash flow in 2018: $550 million(1) Heavy Oil 2018e Free Cash F
Slide 23: Eagle Ford: Stabilizing High-Margin Production
Stabilizing High-Margin Production Eagle Ford Strong production growth in Q2 (chart below) Two frac crews currently on site 25 wells to be tied-in Plan in place to stabilize production 35 to 40 new wells online in 2H 2018 Free cash flow in 2018: >$400 million(1) 10 Staggered laterals Lower Eagle For
Slide 24: Barnett Shale
Barnett Shale Johnson County divestiture announced Proceeds: $553 million (closing late May) Q1 production: 33 MBOED (18% liquids) Partnership formed with DowDupont Selling ½ working interest in 116 locations Devon to receive ~$75 million over 5 yrs Drilling commitment of up to 24 wells/year No rest
Slide 25: 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