Slide 1: UBS Bus-less Tour
UBS Bus-less Tour September 18, 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 with growing cash flow • Accelerating activity NYSE: DVN www.devonenergy.com Slide 3
Slide 4: Devon: Strong North American Pure Play
Devon: Strong North American Pure Play Devon’s Core & Emerging Assets • Q2 2014 net production: 620 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 in em
Slide 5: Focused & Balanced Portfolio
Focused & Balanced Portfolio • Positioned in top North American Q4 2014e Product Mix (1) basins • Completed asset divestiture program — >$5 billion in gas-weighted asset sales 37% 43% • Oil & NGLs ≈60% by year-end 20% • Focused on oil and value growth Oil NGLs Natural Gas (1) Excludes non-core dives
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) 198 - 216 579 - 622 539 152 124 - 136 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 3 198 - 216 • Top-line BOE growth: mid-single digits Oil (1) Natural • Gas High-margin production expected to expand ma
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 $40.00 • Improved price realizations $30.47 $30.00 $21.82 $20.00 • Effective cost management $10.00 • Non-core asset divestitures $0.00 Q2 2013 Q2 2014 (1) Pre-tax cash margin is defined as unhedged upstream revenues and midst
Slide 10: Financial Strength & Flexibility
Financial Strength & Flexibility • Investment-grade ratings — Fitch: BBB — Moody’s: Baa1 — S&P: BBB+ • Cash balances at 6/30/14: $1.7 billion • Future divestiture proceeds to reduce debt • Pro forma net debt at 6/30/14(1): ≈$9 billion (>$7B excluding EnLink) • Cash flow protected by hedges (1) Inclu
Slide 11: Accelerating Activity
Accelerating Activity • Delaware Basin — Currently: 12 operated rigs — Expected by year-end 2015: up to 20 operated rigs • Cana-Woodford — Currently: 1 operated rig — Expected by Q1 2015: ≈10 total rigs (op and non-op) • Powder River Basin — Currently: 3 operated rigs — Expected by year-end 2014: 4
Slide 12: Asset Overview
Asset Overview
Slide 13: Permian Basin
Permian Basin Delaware Basin Delivering Outstanding Results • Activity focused on repeatable, high-impact Bone Spring — Brought 22 wells online in Q2 — 30-day IP rate: 660 BOED Central Eddy • Recent Delaware Sands success — Two high-rate wells in Q2 — 30-day IP rate: ≈1,000 BOED (70% oil) Lea • Oper
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 ≈120 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 OKLAHOMA • Located in best part of Eagle Ford TEXAS • Net acreage: 82,000 — Working interest: 50% — Net revenue interest: 38% Gonzales • Q2 2014 net production: 65 MBOED Lavaca • 2014e net production: 70 – 80 MBOED(1) — 57% Oil — 19% NGLs DeWitt — 24% Gas Ka
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 73 70 – 80 (1) 65 49 March 2014 Q2 2014 June 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 Pavlicek Un 2H • Net acres: 32,000 24-Hr IP: 1,319 BOED Zebra Hunter 2H • Significant upside potential 24-Hr IP: 1,511 BOED • Early results exceeding Zebra Hunter 3H expectations 24-Hr IP: 2,250 BOED Pavlicek Un 5H 24-HR IP: 1,411 BOED Gonz
Slide 19: Upper Eagle Ford Potential
Upper Eagle Ford Potential DeWitt and Lavaca Counties OKLAHOMA Sustr #1H 24-Hr IP: 1,054 BOED Targac #1H • Encouraging industry results 24-Hr IP: 1,398 BOED TEXAS • Pay thickest in DeWitt County Fojtik #1H 24-Hr IP: 1,209 BOED Martinsen 2H 24-Hr IP: 1,360 BOED • Spud first well in Q3 Welhausen A 2H
Slide 20: Heavy Oil Developments
Heavy Oil Developments Jackfish & Pike SAGD Characteristics: Jackfish 1 T76 Jackfish 2 • Low F&D • Low geologic risk Jackfish 3 T75 • 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 • Prove
Slide 21: Jackfish Heavy Oil Developments
Jackfish Heavy Oil Developments Delivering Visible Oil Growth Jackfish Complex: • Q2 2014 production: — Gross production: 60 MBOPD (52 MBOPD net) • Delivering top-tier operating results at J1 • Plant start-up began on July 13th at J3 — Expect ramp-up to 35,000 MBOPD over next 18 months • Provides vi
Slide 22: Anadarko Basin
Anadarko Basin Cana-Woodford Acquisition & Upside Dewey • Q2 2014 net production: 64 MBOED (>40% liquids) • Workover activity yielding excellent results Blaine Kingfisher — Acid treatments performed on 200+ wells — Avg. rates per well increased 1 to 2+ MMCFED — Payback period for treatment <3 months
Slide 23: Cana-Woodford Completion Improvements
Cana-Woodford Completion Improvements Old Design: 10 Frac Stages 40 Perf Clusters Sand: 3.5 MM lbs. Fluid: 130k Bbls. New Design: 20 Frac Stages 80 Perf Clusters Sand: 6.0 MM lbs. Fluid: 140k Bbls. NYSE: DVN www.devonenergy.com Slide 23
Slide 24: Cana-Woodford Q2 Results
Cana-Woodford Q2 Results Liquids-Rich Core 30-Day IP Rates (MBOED) EURs 1,250 (MMBOE) 920 1.7+ 1.4 2014 Type Curve Q2 Results Cost Per Well ($MM) $8.0 $8.0 2014 Type Curve Q2 Results 2014 Type Curve Q2 Results Slide 24
Slide 25: Rockies Oil
Rockies Oil Powder River Basin • Net acreage: 150,000 MONTANA • Stacked oil targets (Parkman, Turner, Frontier & others) WYOMING • Activity focused on repeatable Parkman formation — Two high-rate wells in Q2 Current Focus Area — 30-day IP rate: 950 BOED (95% light oil) • Risked drilling inventory: ≈
Slide 26: 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 27: 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 with growing cash flow • Accelerating activity NYSE: DVN www.devonenergy.com Slide 27
Slide 28: Thank You
Thank You devon
Slide 29: Appendix A: Strategy & Operations
Appendix A Strategy & Operations
Slide 30: 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 31: 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 32: 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 24% 7% 28% 1st Half Total $2.5 47% 11% • Capital concentrated in oil development plays — ≈80% directed toward oil opportu
Slide 33: 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 • Q2 2014 net production: 95 MBOED Eastern Northwestern (≈60% oil) Midland Shelf Shelf Basin • Deep inventory of low-risk projects Wolfberry Bone Spring
Slide 34: Permian Basin: Midland-Wolfcamp Shale Oil Development
Permian Basin Midland-Wolfcamp Shale Oil Development Overview • Net acreage: 117,000 • Low-risk, high-margin light oil play • Delivering consistent economic results • Thick pay with multiple intervals (up to 1,100’) Reagan Irion • Multi-year drilling inventory (≈750 locations) • Efficiencies achieve
Slide 35: Jackfish Heavy Oil Developments: Free Cash Flow
Jackfish Heavy Oil Developments Significant Free Cash Flow Generation Free Cash Flow Outlook $1,200 $1,000 $800 $ in millions $600 $400 $200 $0 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e Assumptions: 1) $90 WTI oil and $4.50 Henry Hub natural gas 2) Bitumen realizations
Slide 36: Pike Overview
Pike Overview SAGD Oil Development Pike leasehold Jackfish Pike 1 • 50% operated working interest Development Area • Similar reservoir characteristics to Jackfish • Up to five 35 MBOPD SAGD development phases Pike Project Area Potential Pike 1 development • Single plant pad • Up to three 35 MBOPD pr
Slide 37: SAGD Upside
SAGD Upside Solvents Potential Benefits • Increases production rates per well and plant production capacity • Lower steam-oil ratios (15% - 50% decrease) • Reduces plant emissions Risks • Access to solvent • Solvent recovery Status Update • 1st pilot program: Initiated in 2013 NYSE: DVN www.devonene
Slide 38: Small-Scale SAGD
Small-Scale SAGD • Reusable SAGD facilities designed to exploit smaller accumulations of bitumen (4 prospects identified) — Targeted resource: 35-70 MMBO per project — Peak production rates up to 10 MBOPD per project — Less upfront capital commitments (30% of the capital required for traditional SAG
Slide 39: Lloydminster
Lloydminster Oil Development Iron River • Net acreage: ≈700,000 Manatokan • Low-risk development • Strong operating margins End Lake • Q2 2014 net production: 29 MBOED • 2014 plans: ≈180 wells Lloydminster Alberta Lloydminster B. C. Sask. NYSE: DVN www.devonenergy.com Slide 39
Slide 40: Mississippian-Woodford Trend
Mississippian-Woodford Trend Emerging Oil Opportunity OK • Net acres to DVN in JV area: ≈200,000 Garfield Noble • Drilling activity focused on joint venture acreage Pawnee • Multiple oil-bearing intervals • Q2 2014 net production rate: 18,000 BOED • 2014 plans: Drill >250 wells Payne • Risked invent
Slide 41: Barnett Shale
Barnett Shale Liquids-Rich Gas Development Jack Wise Denton • Net acreage: 625,000 Denton • Low average royalty burden: 18% • Q2 2014 net production: 1.3 BCFED Palo Pinto Parker DRY GAS — Liquids 27% of total production LIQUIDS-RICH — Total liquids growth 2% YoY Ft. Worth • Expected to generate >$1
Slide 42: Granite Wash
Granite Wash Oil & Liquids-Rich Gas Development • Net acreage: 66,000 • Legacy land position held by production • Low average royalty burden: 19% Hemphill • Q2 2014 net production: 24 MBOED Wheeler Granite Wash OKLAHOMA Oklahoma City TEXAS NYSE: DVN www.devonenergy.com Slide 42
Slide 43: 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: $500 million (6/30/14) • Sinopec receives 33% of Devon’s interest • Net acreage in joint venture: >1 million Michigan •
Slide 44: 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 45: 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 46: Attractively Hedged
Attractively Hedged Oil Hedges • ≈65% of “go-forward” oil production hedged (Q3-Q4 2014) — 75 MBOPD swapped at $94 per BBL — 65 MBOPD collared at $89 - $100 per BBL — 30 MBOPD WCS basis swapped at $18 off WTI (Q3 2014 only) • 138 MBOPD of oil production hedged in 2015 — 107 MBOPD swapped at $91 per
Slide 47: Appendix B: Supply & Demand
Appendix B Supply & Demand
Slide 48: 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 Northern Gateway Enbridge L
Slide 49: 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 50: 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 51: 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 51
Slide 52: 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 53: U.S. Natural Gas Cumulative 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 53
Slide 54: U.S. Natural Gas Annual Industrial Demand
U.S. Natural Gas Annual Industrial Demand 25 22.5 22.9 22.1 22 21.5 20.8 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 54
Slide 55: 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 56: 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 2018 Approved LNG Canada Shell, Mitsubishi,
Slide 57: 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 Q2 Q1 Q2 Q3 Q4* Q1 Q3F Q4F* A+F 2014 2013 2014F 2014F (A+F) Ethane after
Slide 58: U.S. Natural Gas Liquids Demand
U.S. Natural Gas Liquids Demand Petchem Other End Use Refinery/Blender Exports 5.0 4.5 4.1 3.9 4.0 3.8 3.8 3.6 3.6 3.5 3.5 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 A+F Q3F Q4F 2013 2014 YTD* YTD* 2013 2014F *2013 YTD – Actual data through June ’13 and 2014 YTD actual through A
Slide 59: Natural Gas Liquids Demand – LPG exports
Natural Gas Liquids Demand – LPG exports 1,200 1,000 800 MBPD 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Actual LPG Exports Current LPG Capacity Planned LPG Capacity Source: EIA, Argus, Platts, Waterborne Energy, Bentek and Wells Fargo Page 59
Slide 60: 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 40 35 1.1 MMBbl 30 MMBbl 0.9 25 20 0.7 15 0.5 10 5 0.3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Ju
Slide 61: Appendix C: Key Modeling Statistics
Appendix C Key Modeling Statistics
Slide 62: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Bone Spring (Permian Basin) Midland-Wolfcamp Shale (Permian Basin) Working interest / royalty: 76% / 21% Working interest / royalty: 62% / 24% Drill & complete costs: $6 MM Drill & complete costs: $6 MM 30-day IP rate: 550 - 600 BOED 30-day IP r
Slide 63: Key Modeling Statistics
Key Modeling Statistics Based on 2014 Drilling Program Eagle Ford (DeWitt County) Eagle Ford (Lavaca County) Working interest / royalty: 50% / 25% Working interest / royalty: 50% / 25% 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 64: 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 65: 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 MM Drill & complete costs: $3 - $3.5 MM 30-day IP rate: 920 MBOE 30-day IP rate: 3 MMCFED EUR: 1.4 MMBOE EUR
Slide 66: 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
Slide 67: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Debt Devon defines net debt as debt less cash and cash equivalents. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt. RECONCILIATION TO GAAP INFORMATION (in billions) June 30, 2014 Total