2012 Analyst Day – Devon Energy Corp

Devon Energy Corp · Apr 4, 2012 · 189 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

2012 Analyst Day April 4, 2012
Agenda 8:00 8:05 a.m. Welcome & Introduction Vince White Senior Vice President, Communications & Investor Relations 8:05 8:25 a.m. Strategy & Outlook John Richels President & CEO 8:25 8:45 a.m. E&P Overview Dave Hager Executive…
Long-Term Outlook Economic Assumptions Devons 2012-2016 forecast assumes: Strip pricing as of March 20, 2012 (rounded): WTI Price Henry Hub Price 2012 105 2.75 2013 105 3.50 2014 100 4.00 2015 95 4.25 2016 + 95 4.50 NGL…
Long-Term Outlook Economic Assumptions Devons E&P capital expenditure forecast through 2016: E&P Capital ( Billions) 2012 6.3 2013 6.6 2014 7.4 2015 7.3 2016 + 7.8 NYSE: DVN www.devonenergy.com Slide 4
Strategy & Outlook John Richels President & CEO
Devon Today Horn River Oil Proved reserves: 3.0 billion BOE Liquids-Rich Jackfish Dry Gas (42% liquids) Deep Basin Pike Q4 2011 production: 680 MBOED Canadian Oil Potential (35% liquids) Sales revenue mix: 45% oil Powder…
Key Messages Committed to delivering: Top quartile per share results Strong full-cycle returns Deep inventory of repeatable opportunities in current environment Strong, highly-visible oil and liquids growth Significant…
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 9
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…
Exercising Capital Discipline Capital Allocation Criteria E&P capital projects Balancing resource capture and development (Exploration & leasehold capital: 20% of E&P capital since 2009) Debt reduction Reduced net debt by 4…
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…
Focused on High-Return Growth North American Onshore Historical Performance Production Growth LOE per BOE (MMBOE) 240 (/BOE) 220 223 207 8.06 7.71 7.32 6.87 7.32 6.54 R 183 CAG 7 % 168 2006 2007 2008 2009 2010 2011 2006…
Enhanced By Midstream Operations Key Midstream Assets Ownership in 15,000 miles of pipeline Access Pipeline (Thermal Oil) United States: 6,500 miles Jackfish 50% WI Edmonton 24 blend line Jackfish to Sturgeon Canada: 9,500…
Maintaining Financial Strength & Flexibility As of December 31, 2011 Cash and short-term investments: 7.1 billion Net debt-to-cap ratio: 11% Strong investment grade ratings Fitch: BBB+ Moodys: Baa1 S&P: BBB+ Disciplined…
Devons Recycle Ratio North America Onshore Full-Year 2011 Results Per BOE Revenue (excluding hedges) 36.90 Cash costs(1) (12.78) Midstream capital (1.39) Cash margin per BOE 22.73 3-yr drilling F&D (includes performance…
Recycle Ratio Excluding Hedges Full-Year 2011 Results 180% 177% 176% 162% 151% 129% 124% 65% Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Note: Peer group includes APA, APC, CHK, ECA, EOG, NBL and NFX Source:…
Devons Risked Resource Base High-Quality and Balanced 16.2 BBOE Risked Resource (31.8 BBOE Unrisked) Risked Resource By Product (BBOE) 19% Oil (29%) 4.7 NGLs (19%) 3.1 Gas (52%) 8.4 81% Total 16.2 Proved Reserves…
Long-Term Outlook Robust Oil & Liquids Production Growth Production Data in MMBOE 8% A GR: 6% - o nC ducti : 16% - 18% ) l P ro 5-Year Production CAGR Tota s C AG id R 340 (Liqu 315 (331-349) By Product 290 (308-323) 268…
Long-Term Outlook Robust Oil & Liquids Production Growth Q4 2011 2016 Oil Gas Liquids Liquids Gas Oil 20% 32% Gas NGLs 48% Gas 15% 65% NGLs 20% 680 MBOED 905-955 MBOED (35% Liquids) (50% Liquids) NYSE: DVN…
Long-Term Outlook Strong Cash Flow Growth Operating Cash Flow Cash Flow Per Debt-Adjusted Share ( Billions) ( Per Share) 10.1 % 13 21.75 8.8 G R: CA ow 7.7 Fl 18.50 sh Ca 16.50 6.6 6.0 14.25 13.25 2012e 2013e 2014e…
Devons Compelling Valuation Enterprise Value to 2013e EBITDA Multiple 5.7 4.8 Peer Average: 4.2 4.0 4.0 3.8 3.7 3.6 3.5 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Note: Peer group includes APA, APC, CHK, ECA, EOG,…
Misconceptions About Devon Natural gas focused with minimal liquids exposure 42% of proved reserves are liquids (Oil 60% of liquids reserves) Production 50% liquids by 2016 Key assets are maturing 3 out of 4 focus areas are in…
What About the Cash Deployment of 7.1 Billion of Cash Reinvestment in E&P projects Accelerate existing projects Large-scale new ventures Repurchase of shares Reduction of debt NYSE: DVN www.devonenergy.com Slide 24
Why Own Devon Committed to delivering: Top quartile per share results Strong full-cycle returns Deep inventory of repeatable opportunities in current environment Strong, highly-visible oil and liquids growth Significant…
E&P Overview Dave Hager Executive Vice President, E&P
E&P Strategy Goal: Maximize return on investment Assemble large, concentrated positions Build inventory with early mover positions Balance resource capture and resource development Current investment focus on oil &…
Portfolio Management Goal: Optimize depth, diversity, and quality of drilling inventory Harvesting mature and lower return assets (Since 2002 divested 17 billion of assets) New leasehold capture (Since 2009 invested 4 billion…
Devons Resource Base Petroleum Reserves Classification Framework Uniform classification system for petroleum resource estimates Adopted by Society of Petroleum Engineers (SPE) Supported by widely respected professional…
Devons Risked Resource Base 16.2 BBOE Risked Resource (31.8 BBOE Unrisked) Devons Risked Resource Base High quality reserves: 3.0 BBOE (26% PUD) 19% Deep inventory of economic drilling opportunities Recent acreage capture…
Proved Reserves History of Growth 7 % 3.0 BBOE w th: 3 r o or eG h 0.7 2.4 BBOE . O ns Repositioning N.A (24%) Divestitures 0.2 (10%) (2009 2011) 0.4 (17%) 1.8 2.3 (76%) (73%) December 31, 2008 December 31,…
Risked Resource Base History of Growth 16.2 BBOE 7% : 11 h owt 4.5 G r e (28%) 10.8 BBOE hor ns Repositioning A .O Divestitures 3.4 N. (2009 2011) (32%) 2.3 (21%) 11.7 (72%) 5.1 (47%) March 2008 April 2012 U.S.…
Resource By Asset Strong Foundation for Growth Data in BBOE Additional Unrisked Proved Total Risked Resource Reserves + Risked = Resources Potential Permian Basin 7.6 0.2 2.6 2.8 Barnett Shale 4.3 1.2 1.3 2.5 Cana Woodford…
Growing the Resource Base New Ventures Exploration Assembled 1.4 million net acres in five high-impact plays Targeting oil and liquids-rich opportunities Low acreage costs and low royalty rates Michigan Rockies Oil Utica…
Joint Venture Agreement Deal Structure and Rationale Announced January 3, 2012 Deal Structure 2.5 billion transaction with Sinopec (900 million cash and 1.6 billion carry) Sinopec receives 33% of Devons interest in five new…
Growing the Resource Base New Ventures Exploration Cline Shale Net acreage: 500,000 (closed & committed) 2012 plans: Drill 15 wells (4 rigs by year-end) Attractive attributes: Permian Basin oil play Michigan Low entry costs…
2012 Exploration & Leasehold Budget Reconciliation Millions Original 2012 exploration & leasehold budget 530 Undisclosed oil play 1 500 (Captured 250,000 net acres; targeting 500,000 net acres) Cline Shale 350 Other…
2012 E&P Capital Allocation Original Budget Revised Budget 4% 6% Development 17% activity Exploration 8% activity Leasehold capture 75% 90% 5.1 - 5.5 Billion 6.1 - 6.5 Billion 100% NYSE: DVN of capital allocated…
2012 Capital Program Delivering Strong Oil & Liquids Growth 2012 Exit Rate Oil production Annual growth rate: 22% - 24% Driven by Jackfish and Permian Oil 25% of total company volumes 23% NGLs production Annual growth rate: 11%…
2012 Liquids Growth By Key Asset wth or 96 MMBOE G s %) uid - 24 +3 MMBOE Liq 2% :2 19% owth +3 MMBOE - gr % il 17 (O +3 MMBOE +6 MMBOE 81 MMBOE 2011a 2012e Base Production Thermal Permian Cana Barnett NYSE: DVN…
2012 F&D Target E&P capital 6.1 6.5 billion Capitalized G&A and interest 0.4 billion Drill-bit capital 6.5 6.9 billion Drill-bit reserve additions(1) 360 - 390 MMBOE F&D(1) 16 - 19/BOE Reserve replacement(1) 150% (1)…
Long-Term Outlook Production By Key Asset Production Data in MMBOE G R : 6 % - 8% r oduc t ion CA ) Total P sC A GR: 1 6 % - 1 8% 340 (Liquid 315 (331-349) 290 (308-323) 268 (284-296) 255 (265-270) (253-257) 240 2011a…
Summary Committed to: Maximizing return on investment Maintaining a balanced portfolio Optimizing depth and quality of portfolio Deep inventory of opportunities in current environment Robust oil-focused leasehold capture…
New Ventures Dave Hager Executive Vice President, E&P
New Ventures/Exploration Well Resourced Technical expertise Budget Objectives/Strategy Establish material positions in new high-margin plays (oil current focus) Be an early mover (reasonable acreage costs and royalty…
New Ventures/Exploration Process Unlocking Significant Potential Unrisked Methodical exploration Resource (BBOE) Initial assessment New ventures 8.4 Oil in place (Sinopec JV & Cline Shale) Permeability Other U.S. exploration…
Canada Exploration Oil & Liquids Opportunities Net prospective acres: 4 million Net unrisked resource: 2.2 BBOE 2012 plans: Drill 90 wells Normandville Montney (light oil) Testing 10 new play types including: Deep Basin…
Other U.S. Exploration Oil & Liquids Opportunities Net prospective acres: 1.3 million Net unrisked resource: 5.8 BBOE Focus on oil opportunities Targeting tight carbonates/clastics and shale Currently evaluating 16…
Initial New Venture Positions Five Oil and Liquids-Rich Plays Partnered with Sinopec Mississippian Rockies Oil Utica Ohio Tuscaloosa Michigan Net Acres 320,000 230,000 220,000 PRB 235,000 285,000 360,000 Assembled 100,000 DJ Basin…
Mississippian Overview DVN (net) JV (gross) OKLAHOMA Net acres: 153,000 230,000 Kingman Pl ay Unrisked res. 560 840 Tr MMBOE MMBOE en TEXAS Sumner d Barber Harper 2012 capital: 26 MM 90 MM Kansas 2011/12 plans: Drill 50…
Mississippian Stratigraphic Section Permian Multiple prolific lithologies Virgilian High porosity chert Missourian Pennsylvanian Desmoinesian Siliceous limestone with medium porosity Atokan Morrowan Chesterian Fractured…
Mississippian Type Log Gamma Ray Resistivity Porosity Widespread shelf setting with minimal Mississippi relief Gross thickness: 100 - 300 Oil window with 39 - 42 degree gravity and 4,000 GOR average Microdarcy permeability…
Mississippian Fractures Within Interval Frank 1-33 CT Scan Upper Mississippian Core Samples Upper Mississippian Mineralized fractures (white) Healed to fully open fractures (black) Both fracture types improve effectiveness…
Mississippian Results to Date & Targets Target Well Economics Grant Kay Drill & complete cost: 3.0 3.5 million EUR: 300 400 MBOE (80% liquids) IP rate (1st month avg): 275 - 325 BOED Noble Garfield Average royalty: 20% Winney…
Ohio Utica Overview DVN (net) JV (gross) Devon Acreage Net acres: 157,000 235,000 NY MI Portage Unrisked res. 640 950 Medina MMBOE MMBOE PA Rich Summit IN 2012 capital: 26 MM 100 MM O il W Mahoning…
Ohio Utica Stratigraphic Section Queenston Hybrid unconventional resource Lithology consists of laminated limestone- Utica mudstone In-situ fractures Ordovician Point Pleasant Trenton Frac barriers above and below (no wet…
Ohio Utica Type Log Gamma Ray Resistivity Porosity Utica Point Pleasant primary reservoir Gross thickness: 100 - 140 Consistent interval thickness Low structural relief Point Pleasant Play spans dry gas to oil…
Ohio Utica Permeability Analysis Fixed Ion Beam Scanned Electron Microscope FIBSEM analysis enables imaging of (FIBSEM Analysis) connected pores Significant size pores present Indicates potential to move liquids Top-tier…
Ohio Utica Results to Date & Targets Richman Farms 1H Target Well Economics Drilling Drill & complete cost: 3.0 5.0 million Eichelberger 1H Portage Completing Medina Summit EUR: 200 - 300 MBOE (85% liquids) Mahoning…
Rockies Oil Overview DVN (net) JV (gross) Sheridan Campbell Crook Net acres: 213,000 320,000 PR Basin Net Acreage: WYOMING Gillette DVN: 146,000 Unrisked res. 890 1,330 JV: 220,000 MMBOE MMBOE Johnson Weston South Dakota UTAH…
Rockies Oil Stratigraphic Section Powder River Basin Pierre Shale Primary targets: Niobrara and Mowry High total organic content in Mowry and Niobrara Sharon Sprgs Mbr Niobrara A Secondary targets: Turner, Muddy, Dakota and…
Rockies Oil Results to Date & Targets Campbell Crook Target Well Economics PR Basin Cross Creek 663-1NH (Niobrara) Drilling Waterbuck 2342 (Turner) Drill & complete cost: 5.5 6.0 million 30 Day IP: 433 BOED Johnson EUR: 300 - 400…
Rockies Oil Learnings to Date What We Know Fractures in Niobrara are key initial wells had lower facture intensity Deeper areas in PRB with higher GOR performing better in Niobrara Encouraging initial results from other zones…
Tuscaloosa Overview DVN (net) JV (gross) Net acres: 190,000 285,000 ARKANSAS MISSISSIPPI Unrisked res. 1,150 1,730 ALABAMA MMBOE MMBOE 2012 capital: 44 MM 167 MM LOUISIANA 2011/12 plans: Drill 10 wells Wilkinson Amite Pike…
Tuscaloosa Stratigraphic Section Navarro Highly laminated lithology Taylor Austin Brittle intervals of sand, siltstone and limestone Eagle Ford Eagle Tuscaloosa Ford Group Significant fracture system Cretaceous…
Tuscaloosa Type Log Gamma Ray Resistivity Porosity Widespread shelf setting; low Top TMS structural relief Gross thickness: 100 250 High resistivity Highly overpressured: 0.7 psi/ft Base TMS Frac barriers above and below…
Tuscaloosa Significant Fracture System Fractures are dominant component Very dense fractures Closely spaced fractures will improve permeability Challenges for drilling NYSE: DVN www.devonenergy.com Slide 67
Tuscaloosa Results to Date & Targets Target Well Economics Drill & complete cost: 12 14 million Richland Farms 74H-1 Completing EUR: 400 - 600 MBOE (90% liquids) Wilkinson Murphy 63H-1 Weyerhaeuser 14H-1 Drilling Walthall…
Michigan DVN (net) JV (gross) Lake Michigan Net acres: 240,000 360,000 NY MICHIGAN Unrisked res. 1,530 2,290 PA MMBOE MMBOE Kalkaska Crawford Oscoda Alcona Lake OH Huron IN 2012 capital: 34 MM 108 MM WV Wexford Missaukee…
Michigan Stratigraphic Section Undifferentiated A1 Carbonate Salina F Salina E Laminated organic-rich argillaceous limestone/ Salina D dolomite Salina C Silurian Salina B Salina A2 Carb Gross thickness: 45 - 65 Salina A2…
Michigan Type Log Gamma Ray Resistivity Porosity A1 Carbonate A1 Carbonate Dolomitic limestone Vuggy porosity A1 Salt Cores show fracture development Utica Highly fractured and overpressured Utica Shale Silty,…
Michigan Results to Date & Targets Lake Target Well Economics A1 Michigan Drill & complete cost: 5.5 8.0 million Crawford Oscoda Alcona Kalkaska Lake Huron EUR: 800 - 900 MBOE (55% liquids) Greer 1-9 (A1 & Utica) Wexford…
JV New Venture Plays Summary DVN Unrisked Resource % Liquids Net Acres (MMBOE) Mississippian 153,000 560 80% Ohio Utica 157,000 640 85% Rockies Oil 213,000 890 90% Michigan Rockies Oil Utica Ohio Tuscaloosa 190,000 1,150…
Additional New Ventures Emerging Play Exposure Continues Net Acreage Closed or Unrisked Resource Target Committed (MMBOE) Cline Shale 500,000 500,000 3,600 Undisclosed oil play 1 250,000 500,000 2,700 Total 750,000…
Cline Shale Overview Net acres: 500,000 Crosby Dickens NEW MEXICO OKLAHOMA Cochran Hockley Lubbock Unrisked res. 3.6 BBOE Kent ern w est Terry Lynn Garza Eastern rth f Yoakum TEXAS 2012 capital: 350 MM No Shel Shelf Mi d l…
Cline Shale Stratigraphic Section Organic-rich shale Mixed silt and sand interbeds Gross thickness: 200 - 550 Total organic content: 1 - 8% Cisco Canyon Cline Pennsylvanian Frac barriers above and below NYSE: DVN…
Cline Shale Type Log Gamma Ray Resistivity Porosity Broad shelf setting with minimal relief Cline Shale Oil window with 38 - 42 gravity and 2,500 to 3,000 GOR Excellent porosity: 6 12% Microdarcy permeability Strawn…
Cline Shale Results to Date & Targets Target Well Economics Crosby Dickens Cochran Hockley Lubbock Drill & complete cost: 6.5 million Kent rn este rth w f Yoakum Terry Lynn Garza Eastern EUR: 570 MBOE (85% liquids) No…
New Ventures/Exploration Key Messages Well-funded, technically-capable new venture group Significant exploration potential on existing asset base Material new venture positions in oil plays Utilizing partnerships to improve…
Q&A
Permian Basin Andy Coolidge Business Unit Vice President, Permian Basin
Permian Basin Key Messages Industry leader in basin 1.5 million net acres with stacked-pay potential Currently 1 horizontal driller Deep inventory of low-risk oil development projects Significant positions in emerging,…
Geology Overview Low-Risk Development Plays New Mexico Texas Northwestern Midlan Shelf Easter d Basin Centra n Shelf l Basin Midland Dela war Pla e tform Basi n Diablo Ozona Arch…
Permian Basin Overview Net acres: 1.5 million New Mexico NEW MEXICO OKLAHOMA Texas Net unrisked resource: 7.6 BBOE Eastern Northwestern TEXAS Net risked resource: 2.8 BBOE Midland Shelf Shelf Basin Risked locations:…
Permian Basin Independent E&P Acreage Positions Net Acres (In Thousands) 2,400 1,500 1,500 900 830 647 448 300 237 228 210 142 138 100 99 83 51 44 30 30 OXY DVN APA PXD CHK CXO XEC APC EOG SD EGN AREX EP KWK RRC…
Permian Risked Resource 2.8 BBOE Risked Resource (7.6 BBOE Unrisked) Risked Resource By Product (BBOE) 7% Oil (45%) 1.3 NGLs (29%) 0.8 Gas (26%) 0.7 93% Total 2.8 Proved Reserves Additional Risked (9% PUD) Potential…
Additional Permian Resource Upside Uncharacterized Plays Devon has broad exposure across basin 50 potential play types in basin Horizontal potential in early stages of evaluation Many play types yet to be characterized…
Permian Basin Delivering Strong Oil and Liquids Production Production Data in MBOED u c t ion CAGR:16% od Liquids PPrroduction CAGR: 11%) (Total 49.0 (75% liquids) 42.7 39.8 (71% liquids) (68% liquids) 2009a 2010a…
Permian Basin Operated Rig Count Average Annual Operated Rig Count 40 35 30 26 21 16 11 2 2009a 2010a 2011a 2012e 2013e 2014e 2015e 2016e Actual results Forecast NYSE: DVN www.devonenergy.com Slide 89
Permian Basin Devons Ability to Execute Largely derisked and moving into development mode Strong relationships with service providers Significant operating presence in basin Well-established regulatory regime Industry leader…
Permian Basin NGL Takeaway Capacity Inflows from Rockies: 250 MBLPD Existing NGL pipelines at capacity Mont Belvieu: Additional capacity expected by mid-2013 470 MBLPD LoneStar Gateway (210 MBLPD Q2 2013) Permian Basin…
Permian Basin Oil Takeaway Capacity Cushing: 500 MBOPD Oil takeaway is near capacity Longview/Houston: Cushing 230 MBOPD Capacity additions Basin (50 MBOPD Q2 2012) Longview Permian Basin West Texas Gulf (160 MBOPD Q1…
Long-Term Production Outlook Permian Basin Production Data in MBOED % 137 - 25 R : 20% (125-150) on CAG 115 r oduct i (105-125) l P 95 Tota (87-103) 80 (75-85) 60 (57-63) 49 2011a 2012e 2013e 2014e 2015e 2016e…
2012 Capital Objectives Permian Basin 2012 Budget 2012 Targets 2012 plans: Drill 300 wells 20% 24 operated rigs by year-end 25% liquids production growth 20% 60% Driven by 30% oil growth Accelerate exploration activity…
Permian Basin Current Development Activity Net acres: 420,000 New Mexico NEW MEXICO OKLAHOMA Texas Risked resource: 470 MMBOE Risked locations: 1,800 Northwestern TEXAS Shelf 2012 capital: 800 million Midland 2012…
Bone Spring & Delaware Current Development Activity Net acres: 185,000 NEW MEXICO OKLAHOMA Risked resource: 140 MMBOE Risked locations: 550 TEXAS Northwestern Shelf 2012 capital: 350 million 2012 plans: Drill 110 wells New…
Bone Spring & Delaware Continuous Improvement Performance Exceeds Expectations Net Production MBOED (Bone Spring Type Curve) (Bone Spring & Delaware) 10,000 65% 19 GR: Average Type Curve A Production Rate (BOED) C…
Wolfberry Current Development Activity Net acres: 160,000 NEW MEXICO OKLAHOMA New Mexico Risked resource: 120 MMBOE Texas TEXAS Risked locations: 1,000 Northwestern Shelf 2012 capital: 275 million 2012 plans: Drill…
Wolfberry Current Development Activity Net Production Improved Drilling Efficiency (MBOED) (Drilling Days) 3 0% 15 %I R: 10 mp A G ro io nC 11.6 ve me t nt d uc Pr o 9 9.9 6 2010a 2011a 2012e 2009 2012-YTD NYSE:…
Central Basin Platform Current Development Activity Net acres: 77,000 OKLAHOMA New Mexico NEW MEXICO Risked resource: 210 MMBOE Texas TEXAS Risked locations: 200 Northwestern Midland Shelf Basin 2012 capital: 175…
Permian Basin Emerging Opportunities Net acres: 800,000 NEW MEXICO OKLAHOMA Unrisked resource: 4.9 BBOE Eastern TEXAS 2012 capital: 575 million Northwestern Shelf Shelf 2012 plans: Drill 50 wells New Mexico Midland…