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January 2014 Investor Presentation – Devon Energy Corp

Devon Energy Corp · Jan 10, 2014 · 74 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. January 2014 Investor Presentation – Devon Energy Corp – slide 1
    Investor Presentation January 2014
  2. January 2014 Investor Presentation – Devon Energy Corp – slide 2
    The New Devon Increased focus on core assets Significant oil production growth visibility Higher operating margins Continued financial strength NYSE: DVN www.devonenergy.com Slide 3
  3. January 2014 Investor Presentation – Devon Energy Corp – slide 3
    The New Devon Sharpening The Focus Accretive Eagle Ford acquisition Strategic midstream combination Announced non-core asset sales NYSE: DVN www.devonenergy.com Slide 4
  4. January 2014 Investor Presentation – Devon Energy Corp – slide 4
    Accretive Eagle Ford Acquisition Transaction Overview Devon acquires GeoSoutherns assets in the Eagle Ford Low-risk development acreage Significant current production: 53 MBOED Risked resource: 400 MMBOE Purchase price: 6 billion 4.0x…
  5. January 2014 Investor Presentation – Devon Energy Corp – slide 5
    Accretive Eagle Ford Acquisition Strategic Rationale Immediately accretive transaction Entry into another world-class, light oil play Best part of best play in North America Derisked and ready for full development Visible oil…
  6. January 2014 Investor Presentation – Devon Energy Corp – slide 6
    Strategic Midstream Combination Transaction Overview Devon and Crosstex to combine midstream assets to form new midstream business Provides market-based valuation for Devons U.S. midstream business (GP and MLP) Devon retains…
  7. January 2014 Investor Presentation – Devon Energy Corp – slide 7
    Strategic Midstream Combination Unlocking Significant Value PA OH Transaction highly accretive to MARCELLUS shareholders CANA- WOODFORD OK UTICA Initially valued assets at ARKOMA- WV 4.8 billion WOODFORD PERMIAN BASIN…
  8. January 2014 Investor Presentation – Devon Energy Corp – slide 8
    Announced Non-Core Asset Sales Increasing Our Focus Human and financial capital The New Devon focused on core assets Net Production Q4 2013e Monetize non-core assets (MBOED) Canadian Conventional Devon Today 690 (88 MBOED)…
  9. January 2014 Investor Presentation – Devon Energy Corp – slide 9
    The New Devon Increased Focus on Core Assets Devons Core & Emerging Assets Pro forma Q4-13e net production(1): 593 MBOED 32% Oil (186 MBOD) 20% NGLs (121 MBLD) Heavy Oil Core 48% Gas (1.7 BCFD) Emerging Deep inventory of oil…
  10. January 2014 Investor Presentation – Devon Energy Corp – slide 10
    The New Devon Significant Oil Producer Q3 2013 Oil Production (MBOD) Pro Forma New Devon(1) vs. N.A. Onshore Peers 250 200 150 100 50 0 EOG CHK CLR PXD WLL CXO SD NFX XEC MEG OAS ECA LPI RRC FANG Devon U.S. Devon…
  11. January 2014 Investor Presentation – Devon Energy Corp – slide 11
    The New Devon Outlook Focused capital program: Eagle Ford, Permian, and Heavy Oil Living within cash flow Remaining drilling carries: 1.5 billion Midstream capital relief Deliver significant multi-year same-store-sales…
  12. January 2014 Investor Presentation – Devon Energy Corp – slide 12
    Disciplined Capital Allocation Top strategic objective: Maximize per share growth on a debt-adjusted basis through: Investing in E&P capital projects Accelerating development of high-margin oil projects Leveraging JV drilling…
  13. January 2014 Investor Presentation – Devon Energy Corp – slide 13
    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 Q4 2013e net production: 53 MBOED 56% Oil (30 MBOD)…
  14. January 2014 Investor Presentation – Devon Energy Corp – slide 14
    Eagle Ford Low-Risk Development Inventory OKLAHOMA TEXAS Devon Existing Undrilled Acreage Producer Infill Derisked and ready for development Risked resource: 400 MMBOE DeWitt 80% resides in DeWitt County Risked…
  15. January 2014 Investor Presentation – Devon Energy Corp – slide 15
    Eagle Ford Production Growth 2014 & Beyond 2014e Production Outlook Multi-Year Production Outlook (MBOED) (MBOED) 135 - 145 70 - 75 53 53 Q4 2013e 2014e Q4 2013e 2017e Immediately self-funding in 2014 Production CAGR…
  16. January 2014 Investor Presentation – Devon Energy Corp – slide 16
    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…
  17. January 2014 Investor Presentation – Devon Energy Corp – slide 17
    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%…
  18. January 2014 Investor Presentation – Devon Energy Corp – slide 18
    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…
  19. January 2014 Investor Presentation – Devon Energy Corp – slide 19
    Permian Basin Delivering Significant Oil Production Growth 60 49 46 40 40 Net Production (MBOD) 40 38 35 33 31 28 28 25 20 0 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 NYSE: DVN…
  20. January 2014 Investor Presentation – Devon Energy Corp – slide 20
    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 Top-tier operating…
  21. January 2014 Investor Presentation – Devon Energy Corp – slide 21
    Jackfish SAGD Developments Visible Oil Growth & Free Cash Flow Generation Oil Production Growth Outlook Free Cash Flow Outlook 100 1000 77 - 82 800 75 Net Production (MBOD) 62 - 67 in millions 600 47 - 52 50 46…
  22. January 2014 Investor Presentation – Devon Energy Corp – slide 22
    Mississippian-Woodford Trend Emerging Oil Opportunity Overview Net acreage across trend: 650,000 Multiple oil-bearing intervals September rate: 11,000 BOED (60% since June) Kay Operated rig count: 15 Grant 2013 plans: Drill 350…
  23. January 2014 Investor Presentation – Devon Energy Corp – slide 23
    Mississippian-Woodford Trend Emerging Oil Growth Play 20 15 15 Net Production (MBOED) 13 10 9 5 5 3 2 1 0 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13e 2013e Exit Rate NYSE: DVN www.devonenergy.com Slide 24
  24. January 2014 Investor Presentation – Devon Energy Corp – slide 24
    Liquids-Rich Gas Optionality Net risked resource: 25 TCFE Granite Wash Risked locations: 10,000 Net Acres: 66,000 Production: 126 MMCFED Operated Rigs: 3 Net acreage: 927,000 Hemphill Blaine Canadian Oklahoma City Low…
  25. January 2014 Investor Presentation – Devon Energy Corp – slide 25
    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% Investment-grade ratings Fitch: BBB Moodys: Baa1 S&P: BBB+ Flexibility to…
  26. January 2014 Investor Presentation – Devon Energy Corp – slide 26
    Attractively Hedged Oil Hedges Q4 2013: 142 MBOPD protected at 95 per BBL 80% of forecasted oil production Q4 2013: 40 MBOPD at a 22 differential to WTI Western Canadian Select regional basis swaps 2014: 138 MBOPD protected at…
  27. January 2014 Investor Presentation – Devon Energy Corp – slide 27
    Why Own Devon Disciplined focus on returns Deep inventory of oil opportunities Top-tier Eagle Ford development Strong Permian Basin position World-class SAGD oil projects Upside potential in emerging oil plays Visible,…
  28. January 2014 Investor Presentation – Devon Energy Corp – slide 28
    Thank You
  29. January 2014 Investor Presentation – Devon Energy Corp – slide 29
    Appendix A Strategy & Operations
  30. January 2014 Investor Presentation – Devon Energy Corp – slide 30
    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 31
  31. January 2014 Investor Presentation – Devon Energy Corp – slide 31
    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…
  32. January 2014 Investor Presentation – Devon Energy Corp – slide 32
    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…
  33. January 2014 Investor Presentation – Devon Energy Corp – slide 33
    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 34
  34. January 2014 Investor Presentation – Devon Energy Corp – slide 34
    Building Momentum Third-Quarter 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…
  35. January 2014 Investor Presentation – Devon Energy Corp – slide 35
    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…
  36. January 2014 Investor Presentation – Devon Energy Corp – slide 36
    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…
  37. January 2014 Investor Presentation – Devon Energy Corp – slide 37
    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…
  38. January 2014 Investor Presentation – Devon Energy Corp – slide 38
    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…
  39. January 2014 Investor Presentation – Devon Energy Corp – slide 39
    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…
  40. January 2014 Investor Presentation – Devon Energy Corp – slide 40
    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…
  41. January 2014 Investor Presentation – Devon Energy Corp – slide 41
    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…
  42. January 2014 Investor Presentation – Devon Energy Corp – slide 42
    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…
  43. January 2014 Investor Presentation – Devon Energy Corp – slide 43
    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…
  44. January 2014 Investor Presentation – Devon Energy Corp – slide 44
    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…
  45. January 2014 Investor Presentation – Devon Energy Corp – slide 45
    Cana Woodford Shale Liquids-Rich Gas Development Net risked resource: 11 TCFE OKLAHOMA Dewey Blaine Risked locations: 5,000 Net acreage: 248,000 TEXAS Low average royalty burden: 21% Custer Q3 2013 net production: 57 MBOED…
  46. January 2014 Investor Presentation – Devon Energy Corp – slide 46
    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…
  47. January 2014 Investor Presentation – Devon Energy Corp – slide 47
    Granite Wash Oil & Liquids-Rich Gas 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…
  48. January 2014 Investor Presentation – Devon Energy Corp – slide 48
    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…
  49. January 2014 Investor Presentation – Devon Energy Corp – slide 49
    Appendix B Midstream & Financial
  50. January 2014 Investor Presentation – Devon Energy Corp – slide 50
    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…
  51. January 2014 Investor Presentation – Devon Energy Corp – slide 51
    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…
  52. January 2014 Investor Presentation – Devon Energy Corp – slide 52
    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…
  53. January 2014 Investor Presentation – Devon Energy Corp – slide 53
    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…
  54. January 2014 Investor Presentation – Devon Energy Corp – slide 54
    Appendix C Supply & Demand
  55. January 2014 Investor Presentation – Devon Energy Corp – slide 55
    Canadian Crude Oil Supply & 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 -…
  56. January 2014 Investor Presentation – Devon Energy Corp – slide 56
    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…
  57. January 2014 Investor Presentation – Devon Energy Corp – slide 57
    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…
  58. January 2014 Investor Presentation – Devon Energy Corp – slide 58
    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…
  59. January 2014 Investor Presentation – Devon Energy Corp – slide 59
    U.S. Natural Gas Demand Growth By Sector 2013-2017 90 85 2 84 80 5 BCFD 75 3 2 (1) 72 70 65 2013 Industrial Res/Com Power LNG Exports Mex/Can 2017e Baseline Exports Source: Wood Mackenzie, EIA, PIRA,…
  60. January 2014 Investor Presentation – Devon Energy Corp – slide 60
    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…
  61. January 2014 Investor Presentation – Devon Energy Corp – slide 61
    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…
  62. January 2014 Investor Presentation – Devon Energy Corp – slide 62
    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…
  63. January 2014 Investor Presentation – Devon Energy Corp – slide 63
    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,…
  64. January 2014 Investor Presentation – Devon Energy Corp – slide 64
    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…
  65. January 2014 Investor Presentation – Devon Energy Corp – slide 65
    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…
  66. January 2014 Investor Presentation – Devon Energy Corp – slide 66
    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 0.8 25 MMBPD MMBbl 20…
  67. January 2014 Investor Presentation – Devon Energy Corp – slide 67
    Appendix D Key Modeling Statistics
  68. January 2014 Investor Presentation – Devon Energy Corp – slide 68
    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 &…
  69. January 2014 Investor Presentation – Devon Energy Corp – slide 69
    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…
  70. January 2014 Investor Presentation – Devon Energy Corp – slide 70
    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%…
  71. January 2014 Investor Presentation – Devon Energy Corp – slide 71
    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…
  72. January 2014 Investor Presentation – Devon Energy Corp – slide 72
    Key Modeling Statistics Based on 2014 Drilling Program Eagle Ford (DeWitt County) Eagle Ford (Lavaca County) Working interest / royalty: 50% / 38% Working interest / royalty: 50% / 38% Drill & complete costs: 9 - 10 MM Drill &…
  73. January 2014 Investor Presentation – Devon Energy Corp – slide 73
    Appendix E Risk Factors & Non-GAAP Reconciliations
  74. January 2014 Investor Presentation – Devon Energy Corp – slide 74
    Non-GAAP Reconciliation Net Debt & Adjusted Capitalization Devon believes that using net debt for the calculation of net debt to adjusted capitalization provides a better measure than using debt. Devon defines net debt as debt less…

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