Devon Energy Corporation · NYSE:DVN
Devon Energy — Q2 2018 Earnings Presentation
25 slides from Devon Energy's earnings presentation, Jul 31, 2018
Slide 1: Q2 2018 Operations Report
Q2 2018 Operations Report Key Messages 2 Modeling Stats 3 Q2 Results 4 Outlook 6 Delaware Basin 12 STACK17 Eagle Ford 21 Rockies 22 Barnett Shale 23 Heavy Oil 24 NYSE: DVN devonenergy.com Exhibit 99.2
Slide 2: Key Messages: Q2 light-oil production exceeds high end of guidance
Q2 light-oil production exceeds high end of guidance Driven by strong well productivity in Delaware and STACK U.S. light-oil growth running ahead of original budget YTD No change to full-year capital spending budget Free cash flow positioned to rapidly expand Majority of U.S. oil has access to premi
Slide 3: Key Modeling Stats
KEY METRICS Q2 ACTUALS(1) Q2 GUIDANCE U.S. oil (MBbls/d) 136 129 - 134 Canada oil (MBbls/d) 109 110 - 115 NGLs (MBbls/d) 105 97 - 100 Gas (MMcf/d) 1,025 1,001 – 1,053 Total retained (MBoe/d) 520 503 - 525 Production expenses ($MM) $572 $530 - $580 General & administrative expenses ($MM) $153 $150 -
Slide 4: Q2 2018 Results – U.S. Oil Growth Accelerates
Q2 2018 Results – U.S. Oil Growth Accelerates U.S. oil production exceeds guidance 2,000 barrels per day above top end of range 12% increase in oil production vs. Q1 2018 Delaware & STACK continue to deliver strong growth Delaware oil production 54% higher year over year STACK oil volumes increase 4
Slide 5: Q2 2018 Results - Margins Continue to Expand
Q2 2018 Results - Margins Continue to Expand Production shifting to higher-value product mix Light-oil production is highest growth product Liquids reach 67% of retained asset volumes Majority of light-oil production has access to premium Gulf Coast pricing Q2 2018 U.S. oil realizations: 98% of WTI(
Slide 6: 2018 Outlook
2018 Outlook U.S. oil production growth exceeding budget YTD On track to deliver 16% growth vs. 2017 ~200 basis points above original budget expectations Q3 volumes impacted by timing of completions Canada production to increase to ~120 MBOED in Q3 Jackfish 1 turnaround extends into Q3 (pg. 24) Cost
Slide 7: Supply Chain Strategy Effectively Mitigating Inflation
Supply Chain Strategy Effectively Mitigating Inflation Devon expects low-to-mid single-digit inflation (vs. 2017) No change to 2018 capital spending outlook Minimal inflation expected in 2H 2018 Development efficiencies offsetting cost pressures YTD Multi-year development plans allow for longer-term
Slide 8: Protecting Price & Flow Assurance
Protecting Price & Flow Assurance Majority of U.S. oil production has access to Gulf Coast markets (premium to WTI pricing) Delaware Basin positioned for attractive oil pricing (pg. 13) Basis swaps & firm transport protect ~90% of oil volumes Firm transport secured for 2019 gas growth expectations B
Slide 9: EnLink Sale Drives $4 Billion Share-Buyback Program
EnLink Sale Drives $4 Billion Share-Buyback Program SALES PRICE: $3.125 Billion ACCRETIVE MULTIPLE: 12x Cash Flow ENLC ENLK 115 MM Units 95 MM Units TRANSACTION DETAILS Devon exits EnLink position for $3.125 billion Accretive transaction at 12x cash flow No tax leakage associated with sale Transacti
Slide 10: Asset Divestiture Update
Resource quality & depth allows for high-grading of portfolio Announced $4.2 billion of divestitures to date Closed EnLink transaction in July ($3.125 billion) Upstream asset sales: $1.1 billion No incremental cash taxes from transactions Marketing additional ~$1 billion of assets Southern Delaware
Slide 11: 2020 Vision: Next Steps
2020 Vision: Next Steps Expand per-unit margins Maintain capital discipline Portfolio simplification Shareholder-friendly initiatives NEXT STEPS TO FURTHER OPTIMIZE RETURNS & CAPITAL-EFFICIENCY FOR SHAREHOLDERS Maintain strong pricing through basis swaps & firm transport Maintain discipline: no chan
Slide 12: Delaware Basin – Q2 2018 Results
Delaware Basin – Q2 2018 Results Production increased 42% year over year Driven by focused activity in economic core of play Oil volumes achieve highest growth (54% vs. Q2 17) Prolific Bone Spring well results achieved in Q2 Top 10 new wells: avg. IP30 ~3,000 BOED (75% oil) Record results in Cotton
Slide 13: Delaware – Infrastructure Supports Profitable Growth
Delaware – Infrastructure Supports Profitable Growth Positioned for flow assurance and premium pricing Q2 oil realizations: 97% of WTI(1) Swaps & firm transport protect ~90% of oil volumes Firm oil sales contracts guarantee in basin flow assurance (100 MBOD of contractual capacity in basin) Firm tra
Slide 14: Delaware Development Projects Advancing on Plan
DEVELOPMENT STRATEGY BUILDING MOMENTUM Delaware Development Projects Advancing on Plan Boomslang project reaches peak rates (Avg. IP30 across 11 wells: ~1,650 BOED) Wolfcamp development program builds momentum in 2H 2018 (see pg. 15) Q2-2018a Q3-2018e Q4-2018e Q1-2019e Completion Production Completi
Slide 15: Delaware – Wolfcamp Program Building Momentum
Delaware – Wolfcamp Program Building Momentum Seawolf project to deliver 1st production in Q3 Developing Wolfcamp sweet spot in Lea County 12 wells across multiple Wolfcamp landing zones Average working interest: 50% Peak project rates expected by Q4 2018 Drilling operations completed at Fighting Ok
Slide 16: Delaware Basin – Outlook
Delaware Basin – Outlook 2018 capital & production plan on track Q3 volumes impacted by timing of completions Multi-zone projects to accelerate production growth in Q4 2018 Mitigating inflation: no change to $725 MM capital budget Franchise asset provides multi-decade oil growth opportunity ~300k ne
Slide 17: STACK – Q2 2018 Results
STACK – Q2 2018 Results Production increases 26% year over year Driven by oil volumes (up 41% vs. Q2 2017) Showboat project a key contributor to growth Liquids volumes account for ~80% of revenue STACK play continues to deliver high-rate wells Top 10 new wells in Q2: avg. IP30 2,400 BOED Highlighted
Slide 18: STACK – Access to Premium Markets Expands Margins
STACK – Access to Premium Markets Expands Margins (1) Includes benefits of Marketlink firm transport to Gulf Coast Oil production has access to premium gulf coast pricing Marketlink firm transport (30 MBOD): covers ~75% of oil In-basin sales have cost-effective access to Cushing Strong oil realizati
Slide 19: STACK – Infill Development Strategy
STACK – Infill Development Strategy Next 3 projects designed to inform future infill decisions Testing 8, 10 & 12 Meramec wells per drilling unit All wells now online at Showboat (12 wells per drilling unit) Average 30-day rates: ~1,800 BOED(1) (56% oil) Undeveloped upper Meramec zones delivered bes
Slide 20: STACK – Centralized Facilities to Drive Returns Higher
STACK – Centralized Facilities to Drive Returns Higher Centralized facilities designed to support future regional development projects (see map) Central tank battery connected to gathering systems Designed to support multiple development projects Project IRRs to benefit from less capital intensity I
Slide 21: Eagle Ford Q2 Results
MILLION Eagle Ford Q2 Results 8 Lower Eagle Ford Avg. 30-Day IP: 3,100 BOED Q2 Results 15 Lower Eagle Ford Avg. 30-Day IP: 3,300 BOED EAGLE FORD OVERVIEW 25% Oil Prolific well results drive strong Q2 oil growth Net production 31% higher vs. Q1 2018 23 wells average IP30 of ~3,200 BOED (60% oil) High
Slide 22: Rockies
Rockies Parkman Turner Niobrara 2018 ACTIVITY ~20 WELLS 14 17 Growth plans on track MBOD Teapot Powder River Basin activity Activity by zone Oil production increased 22% vs. Q2 2017 Two Turner wells brought online in Q2 (8k laterals) Avg. IP30: 1,450 BOED (75% oil) Powder River barrels receive WTI p
Slide 23: Barnett Shale
Barnett Shale Johnson County sale completed in May Gross proceeds: $553 million Q2 production: 21 MBOED (80% gas) Stable production outlook for remainder of year Driven by Dow JV and refrac program Minimum volume commitments to expire in 2018 ~$100 million cash flow benefit in 2019 BARNETT SHALE OVE
Slide 24: Heavy Oil
Heavy Oil Q2 PRODUCTION GROSS NET Jackfish 1 (MBOD) 21.7 19.1 Jackfish 2 (MBOD) 39.2 37.5 Jackfish 3 (MBOD) 36.3 34.8 Lloydminster (MBOED) 21.5 19.3 Total Heavy Oil (MBOED) 118.7 110.7 SAGD Sweet Spot (1) Assumes $65 WTI and $25 differential for 2H 2018 and includes benefits of basis swaps. Q2 volum
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