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Canaccord Genuity Global Resources Conference – Devon Energy Corp

Devon Energy Corp · Oct 17, 2013 · 66 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. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 1
    Canaccord Genuity Global Resource Conference October 17, 2013
  2. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 2
    Devon Today Proved reserves: 3.0 billion BOE Oil (47% liquids) Jackfish Liquids-Rich Gas Pike Q2 2013 production: 698 MBOED Production mix: 24% oil 18% NGLs Rockies Oil 58% natural gas Significant midstream business…
  3. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 3
    Progress Report Second-Quarter Highlights Permian Basin drives 36% growth in U.S. oil production Expanded light-oil drilling inventory in Delaware Basin (400% increase since mid-2012) Unveiled new Woodford Oil Shale play…
  4. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 4
    Devons Strengths Disciplined focus on returns Deep inventory of development opportunities Strong Permian Basin position World-class SAGD position Premier positions in Barnett & Cana Shale plays Visible, low-risk oil production…
  5. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 5
    Financial Strength & Flexibility Cash and short-term investments: 4.2 billion (As of 6/30/13) Net debt-to-cap ratio: 23% Strong investment grade ratings Fitch: BBB+ Moodys: Baa1 S&P: BBB+ Flexibility to invest in all market…
  6. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 6
    Attractively Hedged Oil Hedges (80% of forecasted oil production) Q3-Q4 2013: 70 MBOPD swapped at 100 per BBL Q3-Q4 2013: 70 MBOPD collared at 111 ceiling and 90 floor WCS Regional Oil Basis Swaps Q3-Q4 2013: 40 MBOPD at a 22…
  7. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 7
    Capital Allocation E&P capital projects Balancing resource capture and development Debt reduction Reduced debt by 2 billion in Q2 2013 Share repurchases Reduced net share count by 20% since 2004 Dividends Average annual…
  8. Canaccord Genuity Global Resources 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 Leverage joint ventures to improve capital…
  9. Canaccord Genuity Global Resources 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. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 10
    2013 Capital Program Delivering Strong Oil Growth Total oil production growth rate: 16%-19% U.S. oil growth rate: 40% Long-term investment in Canadian SAGD oil projects Concentrate capital in oil-driven development projects…
  11. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 11
    Significant Oil Production Growth North American Onshore Production Data in MBOPD 169-173 146 123 106 101 90 75 66 2006 2007 2008 2009 2010 2011 2012 2013e NYSE: DVN www.devonenergy.com Slide 12
  12. Canaccord Genuity Global Resources 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 Northwestern Eastern Net acreage: 1.3 million basin-wide Midland Shelf Shelf…
  13. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 13
    Permian Basin Delaware Basin Oil Developments Overview Net acreage: 320,000 Q2 2013 net production: 23 MBOED (60% oil) Low-risk, high-margin oil plays Central Operated rig count: 13 Eddy Drilling inventory increased 400%…
  14. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 14
    Permian Basin Midland-Wolfcamp Shale Oil Development Overview Net acreage to JV: 100,000 Low-risk, high-margin light oil play Delivering consistent economic results Thick pay with multiple intervals (Up to 1,100) Reagan…
  15. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 15
    Permian Basin Continuous Improvement Service & supply costs down 3% in 2013 Drilling efficiencies achieved in Midland-Wolfcamp Drilling days down 60% since 2012 Driven by pad drilling Recent Bone Spring results exceeding type…
  16. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 16
    Mississippian-Woodford Trend Emerging Oil Opportunity Overview Net acreage across trend: 650,000 Multiple oil-bearing intervals to evaluate Kay June exit rate: 7,000 BOED (100% since March) Grant Operated rig count: 15 Osage…
  17. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 17
    Jackfish Overview SAGD Oil Development Overview Low F&D Flat production profile Jackfish 1 Long reserve life 20 years Jackfish 2 Jackfish 1 Top-tier operating performance Q2 2013 net production: 32 MBOPD 1 Mile Jackfish 3…
  18. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 18
    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…
  19. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 19
    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…
  20. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 20
    Long-Term Production Outlook Canadian SAGD Oil Net Barrels Per Day 175,000 Net Risked Resource: 1.4 BBO 150,000 53,200 Q2 2013 2020 NYSE: DVN www.devonenergy.com Slide 21
  21. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 21
    Cana Woodford Shale Liquids-Rich Gas Development Net risked resource: 11 TCFE OKLAHOMA Dewey Blaine Risked locations: 5,000 TEXAS Net acreage: 250,000 Low average royalty burden: 21% Custer Q2 2013 net production: 322 MMCFED…
  22. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 22
    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 175,000 net…
  23. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 23
    Cana Woodford & Barnett Shale Continuous Improvement Service & supply costs down 7% in 2013 Drilling days declined 40% at Cana since 2011 Recent wells at Cana exceeding type curve by 10% Base production performance at…
  24. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 24
    Enhanced By Midstream Operations Key Midstream Assets Ownership in 16,000 miles of pipeline United States: 6,500 miles Access Pipeline (SAGD Oil) Jackfish 50% WI Canada: 9,500 miles Edmonton Capacity net to Devon: Blended…
  25. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 25
    Creation of Midstream MLP S-1 filed on September 27, 2013 MLP will initially own a minority interest in Devons U.S. midstream business Devon will own the general partner Devon will initially own a majority of the partnership…
  26. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 26
    Why Own Devon Disciplined focus on returns Deep inventory of development opportunities Strong Permian Basin position World-class SAGD position Premier positions in Barnett & Cana Shale plays Visible, low-risk oil production…
  27. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 27
    Thank You.
  28. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 28
    Appendix A Strategy & Operations
  29. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 29
    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 30
  30. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 30
    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…
  31. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 31
    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…
  32. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 32
    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…
  33. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 33
    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…
  34. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 34
    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…
  35. Canaccord Genuity Global Resources 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. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 36
    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…
  37. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 37
    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…
  38. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 38
    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…
  39. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 39
    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 Q2 2013 net production: 30…
  40. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 40
    Ferrier Corridor Emerging Oil & Liquids-Rich Opportunity Net acreage: 240,000 Multiple target formations (Cardium oil, Viking, Glauconite, & Lower Cretaceous) Phase 1 development: 200 drilling locations 1 MMBOE risked…
  41. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 41
    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% Q2 2013 net…
  42. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 42
    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: 1.2 billion (6/30/13) Sinopec receives 33% of Devons…
  43. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 43
    Appendix B Financial
  44. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 44
    Debt Maturity Schedule As of June 30, 2013 Due Date Interest Rate In Billions Commercial Paper 0.4% 1.7 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 4.0%…
  45. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 45
    Natural Gas Hedges Q3-Q4 2013 650 MMCFD collared: 3.61 floor and 4.28 ceiling 988 MMCFD swapped at 4.09 FY 2014 210 MMCFD collared: 4.01 floor and 4.71 ceiling 800 MMCFD swapped at 4.42 500 MMCFD of call options sold at…
  46. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 46
    Oil Hedges Q3-Q4 2013 70 MBOPD collared: 90 floor and 111 ceiling 70 MBOPD swapped at 100 40 MBOPD swapped at a 22 differential to WTI (WCS regional basis swaps) 10 MBOPD of call options sold at 120 FY 2014 12 MBOPD collared:…
  47. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 47
    2013 Operating Cash Flow Estimates In Billions WTI-Cushing Price Henry Hub Price 80.00 90.00 100.00 3.25 5.1 5.2 5.3 3.75 5.1 5.2 5.4 4.25 5.2 5.3 5.5 Note: Operating cash flow assumes the mid-point of Devons full-year…
  48. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 48
    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)…
  49. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 49
    Appendix C Supply & Demand
  50. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 50
    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…
  51. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 51
    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…
  52. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 52
    Canadian Oil Rail Transport Fees Potential Rail Costs Per Bbl SAGD Projects Trucking & Loading 7.00 Rail Car Rental 5.00 Transport Fee Variable (Mileage Based) West Coast Refining Offloading Fee 3.00 East Coast…
  53. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 53
    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…
  54. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 54
    U.S. Natural Gas Demand Growth By Sector 2013-2017 80 3.6 75 3.0 BCFD 0.8 79 2.0 70 70 65 2013 Industrial Res/Com Power LNG Exports 2017e Baseline Source: NYSE: DVN Wood Mackenzie, EIA, Bentek, and company…
  55. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 55
    U.S. Natural Gas Cumulative Coal Retirement Demand Forecast 8 Forecasted Retirement Demand Potential Demand 6 3.2 BCFD 4 2.9 2.1 2 3.0 2.3 2.6 0.5 0.7 0 2013e 2014e 2015e 2016e 2017e Source: NYSE: DVN…
  56. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 56
    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…
  57. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 57
    U.S. Natural Gas LNG Projects Final Approval Capacity Start- Approval Investment Facility Developer(s) Location DOE Exports (BCFD) Up Date FERC Decision (Non-FTA) (FID) Sabine Pass Cheniere Cameron, LA 2.2 4Q 2015 Approved…
  58. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 58
    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,…
  59. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 59
    Natural Gas Liquids Ethane rejection & supply continue to increase 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…
  60. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 60
    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…
  61. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 61
    Natural Gas Liquids Inventories above the 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…
  62. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 62
    Appendix D Key Modeling Statistics
  63. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 63
    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 &…
  64. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 64
    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…
  65. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 65
    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%…
  66. Canaccord Genuity Global Resources Conference – Devon Energy Corp – slide 66
    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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