Devon Energy Corporation · NYSE:DVN
Devon Energy — Investor Presentation (April 2019)
28 slides from Devon Energy's investor presentation, April 2019
Slide 1: Investor Presentation
Investor Presentation April 2019 NYSE: DVN devonenergy.com
Slide 2: Devon's Competitive Advantage
Devon’s Competitive Advantage ▪ World-class U.S. oil portfolio ▪ Disciplined returns-driven strategy ▪ Generating free cash flow ▪ Investment-grade financial position Investor Presentation 2
Slide 3: Completing Transformation to a U.S. Oil Growth Company
Completing Transformation to a U.S. Oil Growth Company New Devon Overview ▪ Sharpens focus on world-class U.S. oil assets Production: 296 MBOED (Q4 2018) — U.S. oil business has achieved operating scale Revenue: 84% oil & liquids Oil growth rate: 17% in 2018 — Dramatically improves cost structure an
Slide 4: A Track Record of Execution
A Track Record of Execution Conventional Canadian Heavy Oil(1) DIVESTITURE PROCEEDS >$30Billion Assets Russia POWDER RIVER Rockies CO2 (marketing) Washakie Uinta Azerbaijan San Juan Mississippian China Granite Wash STACK DELAWARE Barnett Shale(1) West Africa Midland Assets EnLink East Texas EAGLE FO
Slide 5: New Devon's World-Class Oil Assets Visualized
New Devon’s World-Class Oil Assets Visualized Portfolio positioned in top oil basins Well level breakeven (PV-10, WTI to HH @ 20:1) ($/bbl) 4 $90 $80 DOMINANT TOP OIL $70 POSITION IN PLAYS Breakeven($/bbl@20:1 WTI:HH) $60 Net Net Acres Acres 280,000 $50 Net 330,000 Acres Net 40,000 $40 Acres 280,000
Slide 6: Unleashing Potential of World-Class Oil Assets
Unleashing Potential of World-Class Oil Assets U.S. well productivity showcases asset quality +40% Source: IHS/Devon. All wells drilled since 2015 and includes operators with more than 100 wells. SUPERIOR 900 WELL Avg. 90-Day IPs BOED, 20:1 RESULTS VS. PEER AVG. 750 600 PEER AVG. 450 300 150 Top 40
Slide 7: Inventory Supports Sustainable Long-Term Growth
Inventory Supports Sustainable Long-Term Growth High-return inventory potential(1) Gross operated inventory locations 6,500 operated >20 YEAR INVENTORY (AT CURRENT ACTIVITY PACE) locations (Avg. lateral length: <7,500’) 6,000 15 YEAR INVENTORY 4,200 operated (AT CURRENT ACTIVITY PACE) locations WTD
Slide 8: Next Steps to Optimize New Devon Cost Structure
Next Steps to Optimize New Devon Cost Structure Aggressively pursuing improved cost structure Timing of annual cost savings New Devon expected cost savings by area vs. 2018 results ($MM) Cumulative estimated annual cost savings ($MM) $800 G&A $300 MM $600 $780 Interest LOE Interest $130 MM G&A $400
Slide 9: Disciplined Returns-Driven Strategy
Disciplined Returns-Driven Strategy KEY STRATEGIC OBJECTIVES APPROACH TO THE CURRENT ENVIRONMENT WTI PRICE(1) 1 Fund high-return projects Maintain financial strength and $40 operational continuity (New Devon FCF breakeven below $40 in 2019 with hedging gains) 2 Generate free cash flow $46 Key strate
Slide 10: Committed to Return of Capital to Shareholders
Committed to Return of Capital to Shareholders Repurchase program accelerates per-share growth Delivering sustainable dividend growth Outstanding shares (MM) Annual divided per share 527 521 ~ 30% $0.36 (1) 491 SHARE COUNT REDUCTION 459 $0.24 423 50% INCREASE ~375 (OVER PAST 2 YEARS) Q1 2018 Q2 2018
Slide 11: 2019 Capital Objectives
2019 Capital Objectives Focused on top-tier oil development opportunities Positioned for high-return growth in 2019 >20% 2019e New Devon E&P capital New Devon U.S oil production (MBOD) (2019 exit rate vs. FY 2018) DELAWARE STACK 47% 21% 121 13% - 18% OIL GROWTH 2018 vs 2019 $1.8-$2.0 FY 2018 Q1 2019
Slide 12: New Devon: 3-Year Performance Targets
New Devon: 3-Year Performance Targets RETURN ON CAPITAL TARGET: >15% (1) (At $50 WTI & $3 HH) CUMULATIVE FREE CAPITAL PROGRAM CASH FLOW OIL GROWTH COST SAVINGS DEBT TARGET Funded $1.6 12% – 17% $780 MM 1.0x to 1.5x At $46 WTI BILLION CAGR (FY2018 – 2021) By 2021 Assumes $3 HH price At $55 WTI & $3 H
Slide 13: New Devon: Free Cash Flow Yield to Investors
New Devon: Free Cash Flow Yield to Investors (1) $2.3B 10% $2.4 3-YEAR CAPITAL PLAN Cumulative Free Cash Flow $2.0 OIL CAGR: 12%-17% 8% (1) BREAKEVEN: $46 WTI $1.6B Cumulative Free Cash Flow ($B) Free Cash Yield (Annual Avg.) (BREAKEVEN CALC INCLUSIVE OF ALL CAPEX) Cumulative Free Cash Flow $1.6 6%
Slide 14: Attractive Entry Point for World-Class Oil Business
Attractive Entry Point for World-Class Oil Business Peer trading multiples New Devon: trading at significant discount 2019e EV/EBITDAX(1) $ in Billions 9.0x $24 Peer Multiple * New DVN EBITDAX Valuation (7.0x * $2.5B) Gap 8.0x Peer average 7.0x $18 $17.2 7.0x $15.9 6.0x Discounted $12 valuation 5.0x
Slide 15: Delaware Basin – Capital-Efficient Growth Engine
Delaware Basin – Capital-Efficient Growth Engine POTATO BASIN THISTLE/GAUCHO Eddy Lea World-class oil opportunity TODD Boundary Raider (2 Bone Spring wells) Tomb Raider (3 Wolfcamp wells) Avg. IP24 hr: 12 MBOED/well Avg. IP30: 3,500 BOED/well Multi-decade growth platform Cats (5 Bone Spring wells) A
Slide 16: Step-Change in Delaware Basin Well Productivity
Step-Change in Delaware Basin Well Productivity Well productivity reaching record highs Significant growth platform at $50 WTI Average cumulative oil production per well (MBO) Gross operated inventory locations generating IRR >20%(1) 300 16 YEAR INVENTORY (AT CURRENT ACTIVITY PACE) 2018 Boundary Rai
Slide 17: Focusing on Wolfcamp & Bone Spring Projects in 2019
Focusing on Wolfcamp & Bone Spring Projects in 2019 ▪ Wolfcamp program: ~45% of 2019 drilling activity ▪ Development of Bone Spring in Todd area underway ▪ Six key projects underway in Rattlesnake area ▪ Cats activity offsetting prolific Boundary Raider wells — Seawolf delivers massive rates (IP30:
Slide 18: Delaware Basin – Focused Development Plan in 2019
Delaware Basin – Focused Development Plan in 2019 ▪ Top-funded asset in portfolio (~$900 million) ▪ Infrastructure drives sustainable savings and ESG benefits — Low-risk development activity: ~95% of program — Operating costs to improve >60% vs. peak rates — Running 11 operated rigs (spud ~125 wells
Slide 19: STACK – Optimizing Infill Spacing
STACK – Optimizing Infill Spacing ▪ Net production increases 11% vs. Q4 2017 STACK DEVELOPMENT ACTIVITY — Oil production increased 9% (vs. Q3 2018) Developments Online Faith Marie (2 wells) Kingfisher Avg. IP30: 3,100 BOED — Growth driven by infill development activity (see map) Upcoming Development
Slide 20: STACK – 2019 Strategic Priorities
STACK – 2019 Strategic Priorities ▪ Transitioning infill developments to 4-6 wells per unit Updated infill development type curve expectations Early results in line with type curve expectations (BOED) — Investment concentrated in volatile-oil window Type Curve (10K LATERAL) — Wells primarily targeti
Slide 21: Eagle Ford
Eagle Ford ▪ Q4 production averaged 61 MBOED (50% oil) EAGLE FORD OVERVIEW — Net production 11% higher vs. Q4 2017 FREE CASH FLOW — 15 new wells: Avg. IP30 3,700 BOED $ 515 — High-rates driven by larger completion design MILLION IN 2018 ▪ Increasing activity to a 3 rig program in 2019 Austin Chalk A
Slide 22: Powder River Basin
Powder River Basin ▪ Net production increased 27% vs. Q4 2017 KEY POWDER RIVER BASIN ACTIVITY — 8 wells online in late December (Avg. IP30: 1,500 BOED) PRB Activity 2019 Activity — January 2019 production: 22 MBOED (+25% vs. Q4) ~50 Spuds Q4 2018 Activity (Planned for 2019) ▪ Increasing activity to
Slide 23: Why Own New Devon?
Why Own New Devon? New Devon Overview ▪ World-class U.S. oil portfolio Production: 296 MBOED (Q4 2018) — Unrivaled acreage position in top basins Revenue: 84% oil & liquids — Multi-decade inventory to drive sustainable growth Oil growth rate: 17% in 2018 Multi-decade growth platform ▪ Disciplined re
Slide 24: Investor Contacts & Notices
Investor Contacts & Notices reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved Investor Relations Contacts in oil and gas operations; regulatory restrictions, compliance costs and other risks relating to gover
Slide 25: Highly-Regarded ESG Performance
Highly-Regarded ESG Performance OVERALL SCORE TOP-QUARTILE ENVIRONMENT SCORE ENVIRONMENT +43% VERSUS PEER AVG. DVN’s SCORE: 2 PEER AVERAGE: 3.5 PERFORMANCE 58 85 Peer Group Avg. 54 SOCIAL +35% VERSUS PEER AVG. DVN’s SCORE: 2 PEER AVERAGE: 3.1 +36% SOCIAL SCORE DVN’s SCORE: 3 GOVERNANCE 0 25 50 75 10
Slide 26: Q4 2018 - Key Modeling Stats
Q4 2018 - Key Modeling Stats Q4 2018 - ASSET DETAIL DELAWARE STACK PRB EAGLE FORD PRODUCTION Oil (MBbl/d) 45 31 13 30 NGL (MBbl/d) 18 37 2 15 Gas (MMcf/d) 127 343 20 95 Total (MBoe/d) 84(1) 126 18(1) 61 ASSET MARGIN (per Boe) Realized price $37.84(2) $29.40 $46.27 $44.20 Lease operating expenses ($6
Slide 27: New Devon: Pro Forma Financials
New Devon: Pro Forma Financials KEY METRICS Q4 2018 FY 2018 FY 2019 (ASSUMES PRO FORMA COSTS) (WTI / HH) ($58.80 / $3.65) ($64.79 / $3.09) ($50 / $3) Oil production (MBbls/d) 125 121 137 - 143 NGL production (MBbls/d) 73 69 70 - 74 Gas production (MMcf/d) 589 537 520 - 550 Total production (MBoe/d)
Slide 28: Barnett Shale Canada
Barnett Shale Canada ▪ Dow JV efficiently maintaining base production ▪ Q4 impacted by curtailments & royalties — Q4 production: 103 MBOED (~30% NGLs) — Reduced production due to market conditions (17 MBOD) — Minimum volume commitments expired at year end — Royalty adjustments increased Q4 volumes (