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Jefferies Global Energy Conference – Devon Energy Corp

Devon Energy Corp · Nov 12, 2013 · 65 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. Jefferies Global Energy Conference – Devon Energy Corp – slide 1
    Jefferies Global Energy Conference November 12, 2013
  2. Jefferies Global Energy Conference – Devon Energy Corp – slide 2
    Devon Today Proved reserves: 3.0 billion BOE Oil (47% liquids) Jackfish Liquids-Rich Gas Pike Q3 2013 production: 691 MBOED Revenue mix: 59% oil 28% natural gas Rockies Oil 13% NGLs Significant midstream business…
  3. Jefferies Global Energy Conference – Devon Energy Corp – slide 3
    Progress Report Third-Quarter Highlights Permian Basin drives 38% growth in U.S. oil production Strong results from Woodford Oil Shale (Q3 30-day IPs averaged 535 BOED) Oil & liquids production is 43% of total volumes…
  4. Jefferies Global Energy Conference – Devon Energy Corp – slide 4
    Devons Strengths Disciplined focus on returns Deep inventory of oil & liquids opportunities Strong Permian Basin position World-class SAGD position Premier positions in Barnett & Cana Shale plays Upside potential in emerging…
  5. Jefferies Global Energy Conference – Devon Energy Corp – slide 5
    Financial Strength & Flexibility Cash balances at 9/30/13: 4.3 billion (Repatriate another 2 billion to U.S. by year-end) Net debt-to-cap ratio: 22% Strong investment grade ratings Fitch: BBB+ Moodys: Baa1 S&P: BBB+ Cash flows…
  6. Jefferies Global Energy Conference – Devon Energy Corp – slide 6
    Disciplined Capital Allocation E&P capital projects Accelerating development of high-margin oil projects Leverage JV drilling carries in emerging plays Debt reduction Reduced debt balances by 2 billion since March Returning…
  7. Jefferies Global Energy Conference – Devon Energy Corp – slide 7
    2013 Capital Program Delivering Strong Oil Growth 2013 Capital Budget Key Highlights 2013 E&P capital budget: 4.9 - 5.3 billion 10% Capital concentrated in oil development plays Deliver 30% growth in U.S. oil production…
  8. Jefferies Global Energy Conference – Devon Energy Corp – slide 8
    Significant Oil Production Growth North American Onshore Production Data in MBOPD 165-170 146 123 106 101 90 75 66 2006 2007 2008 2009 2010 2011 2012 2013e NYSE: DVN www.devonenergy.com Slide 9
  9. Jefferies Global Energy Conference – Devon Energy Corp – slide 9
    Permian Basin Overview Oil Opportunities NEW MEXICO OKLAHOMA Net risked resource: 2.8 BBOE Risked locations: 8,000 New Mexico Texas TEXAS Northwestern Eastern Net acreage: 1.3 million basin-wide Midland Shelf Shelf…
  10. Jefferies Global Energy Conference – Devon Energy Corp – slide 10
    Permian Basin Delaware Basin Oil Developments Overview Net acreage: 320,000 Q3 2013 net production: 24 MBOED (60% oil) Low-risk, high-margin oil plays Central Operated rig count: 13 Eddy Drilling inventory increased 400%…
  11. Jefferies Global Energy Conference – Devon Energy Corp – slide 11
    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…
  12. Jefferies Global Energy Conference – Devon Energy Corp – slide 12
    Permian Basin Continuous Improvement Service & supply costs down 3% in 2013 Drilling efficiencies achieved in Midland-Wolfcamp Drilling days down 50% since 2012 Driven by pad drilling Recent Bone Spring results exceeding type…
  13. Jefferies Global Energy Conference – Devon Energy Corp – slide 13
    Mississippian-Woodford Trend Emerging Oil Opportunity Overview Net acreage across trend: 650,000 Multiple oil-bearing intervals to evaluate September rate: 11,000 BOED (60% since June) Kay Operated rig count: 15 Grant 2013…
  14. Jefferies Global Energy Conference – Devon Energy Corp – slide 14
    Jackfish Overview SAGD Oil Development Overview Low F&D Flat production profile Jackfish 1 Long reserve life 20 years Jackfish 2 Jackfish 1 Gross production: 35 MBOPD Q3 2013 net production: 30 MBOPD 1 Mile Jackfish 3…
  15. Jefferies Global Energy Conference – Devon Energy Corp – slide 15
    Jackfish Performance 1 Performance Comparison to Industry SAGD Projects 70 Months After Project Startup Cumulative Steam Oil Ratio Production Per Well (BOPD) (Barrels of steam to produce a barrel of oil) 3.49 970 2.67…
  16. Jefferies Global Energy Conference – Devon Energy Corp – slide 16
    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…
  17. Jefferies Global Energy Conference – Devon Energy Corp – slide 17
    Long-Term Production Outlook Canadian SAGD Oil Net Barrels Per Day 175,000 Net Risked Resource: 1.4 BBO 150,000 45,600 Q3 2013 2020 NYSE: DVN www.devonenergy.com Slide 18
  18. Jefferies Global Energy Conference – Devon Energy Corp – slide 18
    Cana Woodford Shale Liquids-Rich Gas Development Net risked resource: 11 TCFE OKLAHOMA Dewey Blaine Risked locations: 5,000 TEXAS Net acreage: 248,000 Low average royalty burden: 21% Custer Q3 2013 net production: 57 MBOED…
  19. Jefferies Global Energy Conference – Devon Energy Corp – slide 19
    Barnett Shale Liquids-Rich Gas Development Net risked resource: 14 TCFE Jack Wise Denton Risked locations: 5,000 Denton Bridgeport Plant Net acreage: 613,000 Low average royalty burden: 18% Palo Pinto Parker DRY GAS 175,000 net…
  20. Jefferies Global Energy Conference – Devon Energy Corp – slide 20
    Cana Woodford & Barnett Shale Continuous Improvement Service & supply costs down 6% in 2013 Drilling days declined 50% at Cana since 2011 Recent wells at Cana exceeding type curve by 15% Base production performance at…
  21. Jefferies Global Energy Conference – Devon Energy Corp – slide 21
    Strategic Midstream Combination Transaction Overview PA Devon and Crosstex to OH MARCELLUS combine midstream assets to CANA- OK form new midstream business WOODFORD UTICA ARKOMA- WV Increases scale and WOODFORD…
  22. Jefferies Global Energy Conference – Devon Energy Corp – slide 22
    Strategic Midstream Combination Benefits to Devon Retains majority ownership of midstream business (GP 70%; MLP 53%) Majority interest in public GP with incentive distributions at highest tier Provides immediate market-based…
  23. Jefferies Global Energy Conference – Devon Energy Corp – slide 23
    Strategic Midstream Combination Unlocking Value Transaction highly accretive to shareholders Initially valued assets at 4.8 billion Current market value of Devons ownership interest in new business: 6.5 billion (16 per share)…
  24. Jefferies Global Energy Conference – Devon Energy Corp – slide 24
    Why Own Devon Disciplined focus on returns Deep inventory of oil & liquids opportunities Strong Permian Basin position World-class SAGD position Premier positions in Barnett & Cana Shale plays Upside potential in emerging oil…
  25. Jefferies Global Energy Conference – Devon Energy Corp – slide 25
    Thank You.
  26. Jefferies Global Energy Conference – Devon Energy Corp – slide 26
    Appendix A Strategy & Operations
  27. Jefferies Global Energy Conference – Devon Energy Corp – slide 27
    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 28
  28. Jefferies Global Energy Conference – Devon Energy Corp – slide 28
    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…
  29. Jefferies Global Energy Conference – Devon Energy Corp – slide 29
    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…
  30. Jefferies Global Energy Conference – Devon Energy Corp – slide 30
    Portfolio Management Goal: Optimize depth, diversity, and quality of drilling inventory Harvesting mature and lower return assets New leasehold capture Joint ventures / farm-ins NYSE: DVN www.devonenergy.com Slide 31
  31. Jefferies Global Energy Conference – Devon Energy Corp – slide 31
    Joint Venture Rationale Objective: Utilize partnerships in exploration Improves capital efficiency Accelerates de-risking and commercialization Mitigates exploration risk Provides flexibility to generate new prospects…
  32. Jefferies Global Energy Conference – Devon Energy Corp – slide 32
    Rockies Oil Powder River Basin Net risked resource: 100 MMBOE MT Risked locations: 600 Sheridan WY Net acreage: 150,000 Johnson Stacked oil targets (Parkman, Turner, Frontier & others) High impact wells (Best wells: IPs…
  33. Jefferies Global Energy Conference – Devon Energy Corp – slide 33
    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…
  34. Jefferies Global Energy Conference – Devon Energy Corp – slide 34
    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…
  35. Jefferies Global Energy Conference – Devon Energy Corp – slide 35
    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…
  36. Jefferies Global Energy Conference – Devon Energy Corp – slide 36
    SAGD 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…
  37. Jefferies Global Energy Conference – Devon Energy Corp – slide 37
    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 Q3 2013 net production: 29…
  38. Jefferies Global Energy Conference – Devon Energy Corp – slide 38
    Ferrier Corridor Emerging Oil & Liquids-Rich Opportunity Net acreage: 260,000 Multiple target formations (Cardium oil, Viking, Glauconite, & Lower Cretaceous) Phase 1 development: 200 drilling locations 1 MMBOE risked…
  39. Jefferies Global Energy Conference – Devon Energy Corp – slide 39
    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% Q3 2013 net…
  40. Jefferies Global Energy Conference – Devon Energy Corp – slide 40
    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: 1.0 billion (9/30/13) Sinopec receives 33% of Devons…
  41. Jefferies Global Energy Conference – Devon Energy Corp – slide 41
    Appendix B Midstream & Financial
  42. Jefferies Global Energy Conference – Devon Energy Corp – slide 42
    New Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) New GP Public Unitholders 70% 53% LP 30% General Partner 100% Incentive Distribution Rights (IDRs) (New GP) General Partner, MLP 7% LP and…
  43. Jefferies Global Energy Conference – Devon Energy Corp – slide 43
    New Midstream Business Transaction Overview Devon Energy Corporation Devon forms and contributes (NYSE: DVN) substantially all of its U.S. based midstream assets to Devon Form Holdings Holdings. Devon contributes 100 million…
  44. Jefferies Global Energy Conference – Devon Energy Corp – slide 44
    New Midstream Business 2014e Financial Outlook 2014e adjusted EBITDA (pre-synergies) Pro Forma 700 MM combined 2014e Outlook 500 MM at the MLP Combined Adjusted EBITDA 700 MM Synergies contribute to distributable MLP Adjusted…
  45. Jefferies Global Energy Conference – Devon Energy Corp – slide 45
    Debt Maturity Schedule As of September 30, 2013 Due Date Interest Rate In Billions Commercial Paper 0.4% 1.6 January 2014 5.6% 0.5 July 2016 2.4% 0.5 May 2017 1.9% 0.8 July 2018 8.3% 0.1 January 2019 6.3% 0.7 July 2021…
  46. Jefferies Global Energy Conference – Devon Energy Corp – slide 46
    Attractively Hedged Oil Hedges Q4 2013: 70 MBOPD swapped at 100 per BBL Q4 2013: 72 MBOPD collared at 111 ceiling and 91 floor 2014: 101 MBOPD protected at 92 per BBL WCS Regional Oil Basis Swaps Q4 2013: 40 MBOPD at a 22…
  47. Jefferies Global Energy Conference – Devon Energy Corp – slide 47
    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)…
  48. Jefferies Global Energy Conference – Devon Energy Corp – slide 48
    Appendix C Supply & Demand
  49. Jefferies Global Energy Conference – Devon Energy Corp – slide 49
    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 Alberta Clipper -…
  50. Jefferies Global Energy Conference – Devon Energy Corp – slide 50
    Canadian Oil Pipeline Capacity Additions Flanagan South: Flanagan to USGC Kitimat Capacity: 0.6 MMBOPD Estimated in service by mid-2014 Edmonton Alberta Clipper/Southern Access: Hardisty to Flanagan Capacity: up to 0.8 MMBOPD…
  51. Jefferies Global Energy Conference – Devon Energy Corp – slide 51
    Canadian Oil Rail Transport Fees Potential Rail Per BBL Costs SAGD Projects Trucking & Loading 5.00 Rail Car Rental 2.50 Transport Fee Variable (Mileage Based) West Coast Refining Offloading Fee 2.00 East Coast…
  52. Jefferies Global Energy Conference – Devon Energy Corp – slide 52
    Heavy Oil Refinery Expansions In-Service Capacity Operator Location Date Increase (BOPD) BP Whiting, Indiana Ramping-up 260,000 Northwest Edmonton, Alberta 2016 80,000 Upgrading Total Capacity Increase from 2013 to 2016…
  53. Jefferies Global Energy Conference – Devon Energy Corp – slide 53
    U.S. Natural Gas Demand Growth By Sector 2013-2017 90 85 2 80 5 BCFD 75 3 84 2 (1) 72 70 65 2013 Industrial Res/Com Power LNG Exports Mex/Can 2017e Baseline Exports Source: Wood Mackenzie, EIA, PIRA,…
  54. Jefferies Global Energy Conference – Devon Energy Corp – slide 54
    U.S. 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: NYSE: DVN…
  55. Jefferies Global Energy Conference – Devon Energy Corp – slide 55
    U.S. Natural Gas Annual Industrial Demand 23 22 21 20 BCFD 19 18 17 16 15 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e Source: Wood Mackenzie, EIA, and company data NYSE: DVN…
  56. Jefferies Global Energy Conference – Devon Energy Corp – slide 56
    U.S. Natural Gas LNG Projects Approval Final Capacity Start-Up Approval Facility Developer(s) Location DOE Investment (BCFD) Date FERC (Non-FTA) Decision (FID) Sabine Pass Cheniere Cameron, LA 2.2 4Q 2015 Approved Approved July…
  57. Jefferies Global Energy Conference – Devon Energy Corp – slide 57
    Canadian Natural Gas LNG Projects Capacity NEB Export Facility Developer(s) Location Start-Up Date (BCFD) License Douglas Channel Energy LNG Partners, Haisla Floating LNG, 0.1 2015 Approved Nation Kitimat, B.C. Kitimat LNG Apache,…
  58. Jefferies Global Energy Conference – Devon Energy Corp – slide 58
    Natural Gas Liquids Supply & Ethane Rejection Estimated Ethane Rejection U.S. NGL Supply by Component (MMBPD) 1,400 4.0 Ethane Supply MBPD 1,200 3.5 1,000 3.0 800 2.5 2.0 600 1.5 400 1.0 200 0.5 0 0.0 Jan 2010 Jan…
  59. Jefferies Global Energy Conference – Devon Energy Corp – slide 59
    Natural Gas Liquids Demand U.S. LPG exports Propane Exports (Jan 2013 Aug 2013): +125% Total LPG Exports (Jan 2013 June 2013): +60% 900 800 700 600 500 MBPD 400 300 Targa Expansion 200 Q3 2013 70 MPD Enterprise…
  60. Jefferies Global Energy Conference – Devon Energy Corp – slide 60
    Natural Gas Liquids Inventories Above Five-Year Average U.S. Ethane Inventories U.S. Ethane Cracking Rate 5 Yr. High/Low 2013 2012 5 Yr. AVG. 5 Yr. High/Low 2013 2012 5 Yr. AVG. 40 1.2 35 1.0 30 25 0.8 MMBPD MMBbl 20…
  61. Jefferies Global Energy Conference – Devon Energy Corp – slide 61
    Appendix D Key Modeling Statistics
  62. Jefferies Global Energy Conference – Devon Energy Corp – slide 62
    Key Modeling Statistics Based on 2013 Drilling Program Bone Spring (Permian Basin) Delaware Sands (Permian Basin) Working interest / royalty: 76% / 21% Working interest / royalty: 76% / 14% Drill & complete costs: 5 - 7 MM Drill &…
  63. Jefferies Global Energy Conference – Devon Energy Corp – slide 63
    Key Modeling Statistics Based on 2013 Drilling Program Midland-Wolfcamp Shale (Permian Basin) Wolfberry (Permian Basin) Working interest / royalty: 62% / 24% Working interest / royalty: 97% / 23% Drill & complete costs: 6 MM Drill…
  64. Jefferies Global Energy Conference – Devon Energy Corp – slide 64
    Key Modeling Statistics Based on 2013 Drilling Program Mississippian Lime (Mississippian-Woodford Trend) Woodford Oil Shale (Mississippian-Woodford Trend) Working interest / royalty: 35% / 19% Working interest / royalty: 42% / 22%…
  65. Jefferies Global Energy Conference – Devon Energy Corp – slide 65
    Key Modeling Statistics Based on 2013 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 - 4 MM…

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