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UBS Global Oil and Gas Conference – Devon Energy Corp

Devon Energy Corp · May 21, 2013 · 59 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 1
    UBS Global Oil & Gas Conference May 21, 2013
  2. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 2
    Devon Today Horn River Oil Proved reserves: 3.0 billion BOE Liquids-Rich (47% liquids) Jackfish Dry Gas Deep Basin Pike Q1 2013 production: 687 MBOED Ferrier Corridor Production mix: 24% oil 17% NGLs Powder River 59% natural…
  3. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 3
    Progress Report First-Quarter Highlights Total oil production increased 14% Permian Basin oil production up 24% Jackfish oil production up 18% Positive results in emerging oil plays Recent wells in Mississippian play 1,000 BOPD…
  4. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 4
    Devons Strengths Disciplined focus on per share results Deep inventory of development opportunities Strong, highly-visible oil growth Significant positions in emerging oil plays Superior financial strength and…
  5. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 5
    Financial Strength & Flexibility Cash and short-term investments: 6.5 billion (As of 3/31/13) Net debt-to-cap ratio: 22% Strong investment grade ratings Fitch: BBB+ Moodys: Baa1 S&P: BBB+ Provides flexibility to invest in…
  6. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 6
    Attractively Hedged Oil Hedges Q2-Q4 2013: 135 MBOPD at a protected price of 95 per BBL (80% of forecasted oil production) 2014: 31 MBOPD at a protected price of 92 per BBL WCS Regional Oil Basis Swaps Q2-Q4 2013: 35 MBOPD at a…
  7. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 7
    Capital Allocation Criteria E&P capital projects Balancing resource capture and development Debt reduction Reduced net debt by 20% since 2003 Share repurchases Reduced net share count by 20% since 2004 Dividends Average…
  8. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 8
    Developing the Resource Base E&P Game Plan Goal: Maximize return on investment Balance resource capture and resource development Current focus on high-margin oil opportunities Utilize joint ventures to recover exploration…
  9. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 9
    E&P Capital Allocation 2013 Capital Budget 3% 7% Development activity Exploration activity Leasehold capture 90% 4.9 - 5.3 Billion 100% of capital allocated towards oil and liquids-rich projects Note: Capital…
  10. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 10
    2013 Capital Program Delivering Strong Oil Growth Total oil production growth rate: mid-teens U.S. growth rate: 40% Concentrate capital in oil-driven development projects Accelerate drilling in Permian Basin Reduce activity in…
  11. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 11
    Significant Oil Production Growth North American Onshore Production Data in MBOPD 164-174 146 123 106 101 90 75 66 2006 2007 2008 2009 2010 2011 2012 2013e NYSE: DVN www.devonenergy.com Slide 12
  12. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 12
    Permian Basin Overview Oil Opportunities NEW MEXICO OKLAHOMA Net risked resource: 2.8 BBOE Risked locations: 8,000 New Mexico Texas TEXAS Eastern Northwestern Net acreage: 1.3 million basin-wide Midland Shelf Shelf…
  13. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 13
    Permian Basin Bone Spring & Delaware NW Shelf Overview New Mexico Net acreage: 210,000 Texas Gaines Dawson Q1 2013 net production: 21 MBOED (65% oil) Lea Low-risk, high-margin oil plays Eddy 12 operated rigs Bone Spring…
  14. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 14
    Permian Basin Central and Midland Basin Oil Opportunities Midland-Wolfcamp Shale Net acreage: 67,000 New Mexico Texas Delivering consistent economic results Eastern Multi-year drilling inventory (800 locations) Northwestern…
  15. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 15
    Mississippian Trend Emerging Oil Opportunity Kansas Net risked resource: 800 MMBOE Oklahoma Risked locations: 5,000 Kay Net acreage: 600,000 (450,000 net acres outside of Sinopec JV) Grant Osage Operated rig count: 15…
  16. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 16
    Devons Thermal Oil Position SAGD Development Field characteristics Jackfish Low F&D Jackfish 2 Flat production profile Long reserve life 20 years Jackfish 3 Jackfish 1 Top-tier operating performance Q1 2013 net production: 33…
  17. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 17
    Jackfish Performance 1 Performance Comparison to Industry SAGD Projects 63 Months After Project Startup Cumulative Steam Oil Ratio (SOR) Production Per Well (BOPD) 3.56 890 2.70 370 Industry Industry Average…
  18. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 18
    Long-Term Production Outlook Thermal Oil Net Barrels Per Day 175,000 Net Risked Resource: 1.4 BBO 150,000 54,000 Q1 2013 2020 NYSE: DVN www.devonenergy.com Slide 19
  19. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 19
    Canadian Oil Differential Outlook Increased refinery capacity for heavier crudes 260 MBOPD of incremental demand by 2H 2013 (Whiting) Significant pipeline expansions Flanagan South & Seaway: 585 MBOPD by mid-2014 Keystone XL :…
  20. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 20
    Cana Woodford Shale Liquids-Rich Gas Development Net risked resource: 11.4 TCFE OKLAHOMA Dewey Blaine Risked locations: 5,400 TEXAS Net acreage: 250,000 Low average royalty burden: 21% Custer Q1 2013 net production: 340…
  21. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 21
    Barnett Shale Liquids-Rich Gas Development Net risked resource: 14 TCFE Jack Wise Denton Risked locations: 5,000 Denton Bridgeport Plant Net acreage: 615,000 Low average royalty burden: 18% Palo Pinto Parker DRY GAS Q1 2013 net…
  22. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 22
    Enhanced By Midstream Operations Key Midstream Assets Ownership in 16,000 miles of pipeline United States: 6,500 miles Access Pipeline (Thermal Oil) Jackfish 50% WI Canada: 9,500 miles Edmonton Capacity net to Devon: Blended…
  23. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 23
    Devons Valuation Enterprise Value to 2013e EBITDA Multiple 9.2 7.0 North American Pure Play Average: 7.0 6.1 6.0 5.9 5.7 5.3 5.2 5.0 4.3 4.3 4.2 3.8 3.5 3.1 A B C D E F G DVN H I J K L M N Source: Thomson First…
  24. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 24
    Potential To Unlock Value Considering several options including: Midstream MLP Joint ventures Asset sales NYSE: DVN www.devonenergy.com Slide 25
  25. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 25
    Why Own Devon Disciplined focus on per share results Deep inventory of development opportunities World-class SAGD position Strong Permian Basin position Dominant positions in Barnett & Cana Shale plays Strong, highly-visible…
  26. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 26
    Thank You.
  27. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 27
    Appendix A Strategy & Operations
  28. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 28
    Strategic Objective Devon strives to maximize long-term value for our shareholders by growing cash flow per share, adjusted for debt. NYSE: DVN www.devonenergy.com Slide 29
  29. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 29
    We Pursue Our Strategic Objective By: Exercising capital discipline Maintaining a low-cost structure to maximize operating margins Focusing on high-return projects Improving performance through our midstream operations…
  30. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 30
    Advantaged Resource Base Low entry costs (acreage and royalties) Large, concentrated positions High-graded portfolio (capturing and divesting) Strategic midstream presence in key plays NYSE: DVN www.devonenergy.com…
  31. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 31
    Portfolio Management Goal: Optimize depth, diversity, and quality of drilling inventory Harvesting mature and lower return assets (Since 2002 divested 18 billion of assets) New leasehold capture (Since 2009 invested 4 billion…
  32. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 32
    Joint Venture Rationale Objective: Utilize partnerships in exploration Improves capital efficiency Accelerates de-risking and commercialization Mitigates exploration risk Flexibility to generate new prospects Preserves…
  33. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 33
    Other Natural Gas Optionality Natural Gas Net Acreage Horn River Play Position Conventional Plays Canada 4 million acres Conventional Carthage 209,000 acres Horn River 178,000 acres Powder River Groesbeck 170,000 acres…
  34. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 34
    Other Natural Gas Optionality Net Acreage Net Production Proved Reserves Natural Gas Play Position Q1 2013 12/31/12 Canada Conventional 4 million acres 448 MMCFED 684 BCFE Powder River 109,000 acres 47 MMCFED 19 BCFE Carthage…
  35. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 35
    Canadian Oil Sands Industry Overview Fort Hills Kearl Horizon Lake Northern Lights Project Type Joslyn Creek Muskeg River In-Situ Projects Albian Syncrude Firebag Mining Projects Dover Jackpine Peace River MacKay River…
  36. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 36
    Pike Project Overview Pike leasehold Jackfish Pike 1A, 1B & 1C 50% operated working interest Focus Area Similar reservoir characteristics to Jackfish Up to five 35 MBOPD SAGD development phases Pike Project Area Potential…
  37. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 37
    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…
  38. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 38
    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…
  39. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 39
    Heavy Oil Midstream Infrastructure Access Pipeline JACKFISH & PIKE 200 mile dual pipeline from Edmonton to Devons thermal acreage Devon ownership: 50% Capacity net to Devon Blended bitumen: 105 MBOPD (170 MBOPD after expansion…
  40. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 40
    Lloydminster Oil Development Iron River Net risked resource: 60 MMBOE Risked locations: 1,000 Manatokan Net acreage: 700,000 Low-risk development End Lake Strong operating margins Lloydminster Q1 2013 net production: 30…
  41. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 41
    Ferrier Emerging Liquids Opportunity Net acreage: 240,000 Multiple target formations: (Cardium oil, Viking, Glauconite, & Lower Cretaceous) Phase 1 development: 200 drilling locations 1 MMBOE risked resource Liquids 50% of…
  42. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 42
    Granite Wash Oil & Liquids-Rich Development Net risked resource: 200 MMBOE Risked locations: 350 net wells Net acreage: 66,000 Legacy land position held by production Hemphill Low average royalty burden: 19% Q1 2013 net…
  43. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 43
    Joint Venture Transactions Oil & Liquids Exploration Sinopec Joint Venture 2.5 billion transaction (900 million cash and 1.6 billion drilling carry) Sinopec receives 33% of Devons interest Net acreage in joint venture: 1.5…
  44. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 44
    Appendix B Financial
  45. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 45
    Debt Maturity Schedule As of March 31, 2013 Due Date Interest Rate In Millions Commercial Paper 0.4% 3,697 January 2014 5.6% 500 July 2016 2.4% 500 May 2017 1.9% 750 July 2018 8.3% 125 January 2019 6.3% 700 July 2021…
  46. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 46
    Natural Gas Hedges Q2-Q4 2013 750 MMCFD collared: 3.55 floor and 4.19 ceiling 988 MMCFD swapped at 4.09 FY 2014 140 MMCFD collared: 4.00 floor and 4.62 ceiling 763 MMCFD swapped at 4.40 500 MMCFD of call options sold at…
  47. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 47
    Oil Hedges Q2-Q4 2013 65 MBOPD collared: 90 floor and 112 ceiling 70 MBOPD swapped at 100 35 MBOPD swapped at a differential to WTI of 22 (WCS regional basis swaps) 10 MBOPD of call options sold at 120 FY 2014 10 MBOPD…
  48. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 48
    2013 Operating Cash Flow Estimates In Billions WTI-Cushing Price Henry Hub Price 80.00 90.00 100.00 3.25 5.0 5.0 5.3 3.75 5.0 5.1 5.4 4.25 5.1 5.2 5.5 Note: Operating cash flow assumes the mid-point of Devons full-year…
  49. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 49
    Sources and Uses of Cash Before Share Buybacks and Dividends In Billions 2009-2012 2009 2010 2011 2012 Total Operating Cash Flow 4.8 5.5 6.2 5.0 21.5 Asset Sales / JV Proceeds 0.0 7.0 3.4 1.5 11.9 Capital Expenditures (5.4)…
  50. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 50
    Appendix C Supply & Demand
  51. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 51
    Canadian Crude Oil Supply and System Capacity 8.0 7.0 6.0 5.0 MMBOD 4.0 3.0 2.0 1.0 0.0 2011 2012 2013e 2014e 2015e 2016e 2017e 2018e Oil Supply Current Export & Local Demand Capacity Rail Flanagan South…
  52. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 52
    Canadian Oil Pipeline Capacity Additions Flanagan South: Chicago to USGC Capacity: 0.6 MMBOPD Kitimat Estimated in service by mid-2014 Edmonton Keystone XL: Hardisty to USGC Hardisty Capacity: 0.8 MMBOPD Vancouver Canaport…
  53. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 53
    Heavy Oil Blend Rail Transport Fees Potential Rail Costs Per Bbl Oil Sands Trucking & Loading 7.00 Rail Car Rental 5.00 Variable Transport Fee (Mileage Based) West Coast Refining Offloading Fee 3.00 East Coast…
  54. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 54
    Heavy Oil Refinery Expansions In Service Capacity Operator Location Date Increase (BOPD) BP Whiting, Indiana 2H 2013 260,000 Northwest Edmonton, Alberta 2016 80,000 Upgrading Total Capacity Increase from 2013 to 2016…
  55. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 55
    North America Natural Gas Demand Growth By Sector 2013-2017 80 1.7 78 3.0 75 0.8 BCFD 2.0 70 70 65 2013 Industrial Res/Com Power LNG Exports 2017e Baseline Source: NYSE: DVN Wood Mackenzie, EIA, Bentek,…
  56. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 56
    North America Natural Gas Cumulative Coal Retirement Demand Forecast 8 Forecasted Retirement Demand Potential Demand 6 3.2 BCFD 4 2.9 2 0.8 3.0 2.6 0.7 1.0 0.5 0 2013e 2014e 2015e 2016e 2017e Source:…
  57. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 57
    North America Natural Gas Annual Industrial Demand 22 21 20 19 BCFD 18 17 16 15 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e Source: Wood Mackenzie, EIA, and company data NYSE: DVN…
  58. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 58
    North America Natural Gas U.S. LNG Projects Final Capacity Start- Approval Approval Investment Facility Developer(s) Location (BCFD) Up Date DOE Exports FERC Decision (FID) Sabine Pass Cheniere Cameron, LA 2.3 4Q 2015 Approved…
  59. UBS Global Oil and Gas Conference – Devon Energy Corp – slide 59
    North America Natural Gas Canada LNG Projects NEB Capacity Facility Developer(s) Location Start-Up Date Export (BCFD) License Douglas Channel LNG Partners, Haisla Floating LNG, 0.1 2015 Approved Energy Nation Kitimat, B.C.…

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