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August 2014 Investor Presentation – Devon Energy Corp

Devon Energy Corp · Aug 1, 2014 · 62 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. August 2014 Investor Presentation – Devon Energy Corp – slide 1
    Investor Presentation August 2014
  2. August 2014 Investor Presentation – Devon Energy Corp – slide 2
    Devon Today Sharpening The Focus Devons Core & Emerging Assets Q2 2014 net production: 620 MBOED(1) Oil & NGLs 60% of production by year-end Heavy Oil Core Deep inventory of oil opportunities Emerging Top-tier Eagle Ford…
  3. August 2014 Investor Presentation – Devon Energy Corp – slide 3
    Second-Quarter 2014 Highlights U.S. Oil Production Growth(1) Completed portfolio transformation announced last year 140 128 Net Production (MBOPD) 120 Closed on sale of Canadian gas business for 2.8 billion 100 Added 50,000…
  4. August 2014 Investor Presentation – Devon Energy Corp – slide 4
    2014 Production Growth Targets U.S. Oil Production(1) Total Oil Production(1) BOE Production(1) (MBOPD) (MBOPD) (MBOED) 198 - 216 579 - 622 539 152 124 - 136 73 2013 2014e 2013 2014e 2013 2014e U.S. Canada 6:1…
  5. August 2014 Investor Presentation – Devon Energy Corp – slide 5
    Accelerating Drilling Activity Delaware Basin Currently: 12 operated rigs Expected by year-end 2015: up to 20 operated rigs Cana-Woodford Currently: 1 operated rig Expected by Q1 2015: 10 total rigs (op and non-op) Powder…
  6. August 2014 Investor Presentation – Devon Energy Corp – slide 6
    Preliminary 2015 Outlook Total Oil Production(1) Key Highlights (MBOPD) On track to deliver 2015 oil production growth 20%(1) Driven by Eagle Ford, Permian and Jackfish 3 198 - 216 Oil Increased activity levels expected at…
  7. August 2014 Investor Presentation – Devon Energy Corp – slide 7
    Permian Basin Delaware Basin Delivering Outstanding Results Activity focused on repeatable, high-impact Bone Spring Brought 22 wells online in Q2 30-day IP rate: 660 BOED Central Eddy Recent Delaware Sands success Two…
  8. August 2014 Investor Presentation – Devon Energy Corp – slide 8
    Delaware Basin Significant Resource Opportunity Gross Risked 2014e Net Risked Risked Wells Undrilled Activity Formation Acres Per Section Locations (Wells Drilled) Delaware Sands 80,000 4 700 20 Leonard Shale 60,000 5 700 1…
  9. August 2014 Investor Presentation – Devon Energy Corp – slide 9
    Delaware Basin Upside Enhanced Completions & Tighter Spacing Proppant Per Lateral Foot Evaluating larger, more focused frac design in the Delaware Basin 2,500 2,000 Pounds Per Foot 2,000 Testing 2,000 lbs of proppant per…
  10. August 2014 Investor Presentation – Devon Energy Corp – slide 10
    Permian Basin Delivering Significant Oil Production Growth 60 50 Net Production (MBOPD) 40 30 20 10 0 2009 2010 2011 2012 2013 2014e NYSE: DVN www.devonenergy.com Slide 11
  11. August 2014 Investor Presentation – Devon Energy Corp – slide 11
    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 Q2 2014 net production: 65 MBOED Lavaca 2014e net…
  12. August 2014 Investor Presentation – Devon Energy Corp – slide 12
    Eagle Ford Production Results and Outlook 2014 Results to Date Multi-Year Production Outlook (MBOED) (MBOED) 100 73 70 80 (1) 65 49 March 2014 Q2 2014 June 2014 2014e 2015e (1) Represents Devons estimated net…
  13. August 2014 Investor Presentation – Devon Energy Corp – slide 13
    Lower Eagle Ford Upside Lavaca County Devons Lavaca County Pavlicek Un 2H Net acres: 32,000 24-Hr IP: 1,319 BOED Zebra Hunter 2H Significant upside potential 24-Hr IP: 1,511 BOED Early results exceeding Zebra Hunter 3H…
  14. August 2014 Investor Presentation – Devon Energy Corp – slide 14
    Upper Eagle Ford Potential DeWitt and Lavaca Counties OKLAHOMA Sustr 1H 24-Hr IP: 1,054 BOED Targac 1H Encouraging industry results 24-Hr IP: 1,398 BOED TEXAS Pay thickest in DeWitt County Fojtik 1H 24-Hr IP: 1,209 BOED…
  15. August 2014 Investor Presentation – Devon Energy Corp – slide 15
    Heavy Oil Developments Jackfish & Pike SAGD Characteristics: Jackfish 1 T76 Jackfish 2 Low F&D Low geologic risk Jackfish 3 T75 Flat production profile Long reserve life 20 years T74 Pike Project Area Access Pipeline Each…
  16. August 2014 Investor Presentation – Devon Energy Corp – slide 16
    Jackfish Heavy Oil Developments Delivering Visible Oil Growth Jackfish Complex: Q2 2014 production: Gross production: 60 MBOPD (52 MBOPD net) Delivering top-tier operating results at J1 Plant start-up began on July 13th at…
  17. August 2014 Investor Presentation – Devon Energy Corp – slide 17
    Jackfish Heavy Oil Developments Significant Free Cash Flow Generation Free Cash Flow Outlook 1,200 1,000 800 in millions 600 400 200 0 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e…
  18. August 2014 Investor Presentation – Devon Energy Corp – slide 18
    Anadarko Basin Cana-Woodford Acquisition & Upside Dewey Q2 2014 net production: 64 MBOED (40% liquids) Workover activity yielding excellent results Blaine Kingfisher Acid treatments performed on 200+ wells Avg. rates per well…
  19. August 2014 Investor Presentation – Devon Energy Corp – slide 19
    Cana-Woodford Completion Improvements Old Design: 10 Frac Stages 40 Perf Clusters Sand: 3.5 MM lbs. Fluid: 130k Bbls. New Design: 20 Frac Stages 80 Perf Clusters Sand: 6.0 MM lbs. Fluid: 140k Bbls. NYSE: DVN…
  20. August 2014 Investor Presentation – Devon Energy Corp – slide 20
    Cana-Woodford Q2 Results Liquids-Rich Core 30-Day IP Rates (MBOED) EURs 1,250 (MMBOE) 920 1.7+ 1.4 2014 Type Curve Q2 Results Cost Per Well (MM) 8.0 8.0 2014 Type Curve Q2 Results 2014 Type Curve Q2 Results…
  21. August 2014 Investor Presentation – Devon Energy Corp – slide 21
    Rockies Oil Powder River Basin Net acreage: 150,000 MONTANA Stacked oil targets (Parkman, Turner, Frontier & others) WYOMING Activity focused on repeatable Parkman formation Two high-rate wells in Q2 Current Focus Area…
  22. August 2014 Investor Presentation – Devon Energy Corp – slide 22
    Financial Strength & Flexibility Investment-grade ratings Fitch: BBB Moodys: Baa1 S&P: BBB+ Cash balances at 6/30/14: 1.7 billion Future divestiture proceeds to reduce debt Pro forma net debt at 6/30/14(1): 9 billion (7B…
  23. August 2014 Investor Presentation – Devon Energy Corp – slide 23
    Innovative Midstream Combination EnLink Midstream Overview Devon retains majority ownership General partner (ENLC 70%) MLP (ENLK 52%) EnLink transaction highly accretive to shareholders Market value of Devons EnLink…
  24. August 2014 Investor Presentation – Devon Energy Corp – slide 24
    Potential Drop Down Assets Access & Victoria Express Pipelines Access Pipeline Victoria Express Pipeline JACKFISH & PIKE Colorado Gonzales 16 Diluent Line Lavaca Wharton (Edmonton to Jackfish Area) 24 Diluent Line DeWitt…
  25. August 2014 Investor Presentation – Devon Energy Corp – slide 25
    Why Own Devon Disciplined focus on returns Deep inventory of oil opportunities Top-tier Eagle Ford development Strong Permian Basin position World-class heavy oil projects Upside potential in emerging oil plays Visible,…
  26. August 2014 Investor Presentation – Devon Energy Corp – slide 26
    Thank You
  27. August 2014 Investor Presentation – Devon Energy Corp – slide 27
    Appendix A Strategy & Operations
  28. August 2014 Investor Presentation – Devon Energy Corp – slide 28
    Disciplined Capital Allocation Top objective: Maximize shareholder returns by optimizing cash flow per share, adjusted for debt Investing in E&P capital projects Accelerating development of high-margin oil projects Leveraging JV…
  29. August 2014 Investor Presentation – Devon Energy Corp – slide 29
    Non-Core Asset Sales Sharpening The Focus Sold Canadian conventional business for C3.125 billion US2.8 billion (after foreign exchange) Accretive transaction: 7 times 2013 EBITDA Closed April 1, 2014 Announced U.S. non-core…
  30. August 2014 Investor Presentation – Devon Energy Corp – slide 30
    2014 E&P Capital Program Delivering Strong Oil Growth 2014 E&P Capital Budget E&P Capital % of 5.0 - 5.4 Billion (1) Spent (B) (1) Budget 2% 5% Q1 2014 1.2 23% 5% Q2 2014 1.3 24% 7% 28% 1st Half Total 2.5 47% 11% Capital…
  31. August 2014 Investor Presentation – Devon Energy Corp – slide 31
    Permian Basin Overview 2014 Focus Areas NEW MEXICO OKLAHOMA Net acreage: 1.3 million basin-wide with stacked-pay potential New Mexico Texas TEXAS Q2 2014 net production: 95 MBOED Eastern Northwestern (60% oil) Midland…
  32. August 2014 Investor Presentation – Devon Energy Corp – slide 32
    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…
  33. August 2014 Investor Presentation – Devon Energy Corp – slide 33
    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…
  34. August 2014 Investor Presentation – 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. August 2014 Investor Presentation – 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. August 2014 Investor Presentation – Devon Energy Corp – slide 36
    Lloydminster Oil Development Iron River Net acreage: 700,000 Manatokan Low-risk development Strong operating margins End Lake Q2 2014 net production: 29 MBOED 2014 plans: 180 wells Lloydminster Alberta Lloydminster…
  37. August 2014 Investor Presentation – Devon Energy Corp – slide 37
    Mississippian-Woodford Trend Emerging Oil Opportunity OK Net acres to DVN in JV area: 200,000 Garfield Noble Drilling activity focused on joint venture acreage Pawnee Multiple oil-bearing intervals Q2 2014 net production…
  38. August 2014 Investor Presentation – Devon Energy Corp – slide 38
    Barnett Shale Liquids-Rich Gas Development Jack Wise Denton Net acreage: 625,000 Denton Low average royalty burden: 18% Q2 2014 net production: 1.3 BCFED Palo Pinto Parker DRY GAS Liquids 27% of total production LIQUIDS-RICH…
  39. August 2014 Investor Presentation – Devon Energy Corp – slide 39
    Granite Wash Oil & Liquids-Rich Gas Development Net acreage: 66,000 Legacy land position held by production Low average royalty burden: 19% Hemphill Q2 2014 net production: 24 MBOED Wheeler Granite Wash OKLAHOMA…
  40. August 2014 Investor Presentation – 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: 500 million (6/30/14) Sinopec receives 33% of Devons…
  41. August 2014 Investor Presentation – Devon Energy Corp – slide 41
    Attractively Hedged Oil Hedges 65% of go-forward oil production hedged (Q3-Q4 2014) 75 MBOPD swapped at 94 per BBL 65 MBOPD collared at 89 - 100 per BBL 30 MBOPD WCS basis swapped at 18 off WTI (Q3 2014 only) 138 MBOPD of oil…
  42. August 2014 Investor Presentation – Devon Energy Corp – slide 42
    EnLink Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) GP Public Unitholders 70% (115 MM units) 52% LP (120 MM units) 30% General Partner 100% Incentive Distribution Rights (IDRs) EnLink Midstream…
  43. August 2014 Investor Presentation – Devon Energy Corp – slide 43
    Appendix B Supply & Demand
  44. August 2014 Investor Presentation – Devon Energy Corp – slide 44
    Canadian Oil Supply & System Export Capacity 9.0 8.0 7.0 6.0 MMBOD 5.0 4.0 3.0 2.0 1.0 0.0 2011 2012 2013 2014e 2015e 2016e 2017e 2018e Oil Supply Current Export & Local Demand Capacity Rail Alberta Clipper -…
  45. August 2014 Investor Presentation – Devon Energy Corp – slide 45
    Canadian Oil Pipeline Capacity Additions Flanagan South: Flanagan to USGC Capacity: staged increments up to 0.6 MMBOPD Estimated in service: Q4 2014 Kitimat Alberta Clipper/Southern Access: Hardisty to Flanagan Capacity: staged…
  46. August 2014 Investor Presentation – Devon Energy Corp – slide 46
    Canadian Oil Rail Transport Fees Potential Rail Per BBL Costs Oil Sands Trucking & Loading 5.00 Rail Car Rental 2.50 Transport Fee Variable (Mileage Based) West Coast Refining Offloading Fee 2.00 East Coast Refining…
  47. August 2014 Investor Presentation – Devon Energy Corp – slide 47
    Heavy Oil Refinery Expansions In-Service Capacity Operator Location Date Increase (BOPD) Husky Lima, Ohio 2016 40,000 Northwest Edmonton, Alberta 2017 80,000 Upgrading Total Capacity Increase 120,000 NYSE: DVN…
  48. August 2014 Investor Presentation – Devon Energy Corp – slide 48
    U.S. Natural Gas Demand Growth By Sector 2013-2018 90 85 6.5 0.5 80 2.1 BCFD 3.7 75 2.5 87 -0.5 70 72 65 60 2013 Industrial Res/Com Electric Mex/Can Other LNG 2018 Total Baseline Exports Exports Source:…
  49. August 2014 Investor Presentation – Devon Energy Corp – slide 49
    U.S. Natural Gas Cumulative Coal Retirement Demand Forecast 6 4 3.7 2.9 2 1.6 BCFD 0.0 0 -0.2 -2 2014F 2015F 2016F 2017F 2018F Renewable Generation Coal Retirements Fuel Switching Net Effect Source: NYSE:…
  50. August 2014 Investor Presentation – Devon Energy Corp – slide 50
    U.S. Natural Gas Annual Industrial Demand 25 22.5 22.9 22.1 22 21.5 20.8 20.0 19 BCFD 16 13 10 2008 2009 2010 2011 2012 2013A 2014F 2015F 2016F 2017F 2018F Base Y/Y Growth Source: Devon estimates NYSE: DVN…
  51. August 2014 Investor Presentation – Devon Energy Corp – slide 51
    U.S. Natural Gas LNG Projects Total Capacity Non-FTA Final DOE Approval Approval Facility Developer(s) Location FTA/Non-FTA Capacity Start-Up Date Investment Non-FTA FERC (BCFD) (BCFD) Decision (FID) Sabine Pass Cheniere Cameron,…
  52. August 2014 Investor Presentation – Devon Energy Corp – slide 52
    Canadian Natural Gas LNG Projects Capacity Start-Up NEB Export Facility Developer(s) Location (BCFD) Date License Douglas Channel Energy LNG Partners, Haisla Floating LNG, 0.1 2017 Approved Nation Kitimat, B.C. Kitimat LNG Apache,…
  53. August 2014 Investor Presentation – Devon Energy Corp – slide 53
    Natural Gas Liquids Supply Estimated Ethane Rejection U.S. NGL Supply by Component (MMBPD) 2.0 4.5 Ethane Extraction Ethane Rejection 4.0 1.5 3.5 MMBPD 3.0 1.0 2.5 2.0 0.5 1.5 1.0 0.0 0.5 Jan-10 Jan-11 Jan-12 Jan-13…
  54. August 2014 Investor Presentation – Devon Energy Corp – slide 54
    U.S. Natural Gas Liquids Demand Petchem Other End Use Refinery/Blender Exports 5.0 4.5 4.1 3.9 4.0 3.8 3.8 3.6 3.6 3.5 3.5 3.2 3.3 3.0 3.0 MMBPD 2.5 2.0 1.5 1.0 0.5 0.0 Q1 Q2 Q3 Q4 Q1 Q2 A+F Q3F Q4F 2013…
  55. August 2014 Investor Presentation – Devon Energy Corp – slide 55
    Natural Gas Liquids Demand LPG exports 1,200 1,000 800 MBPD 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Actual LPG Exports Current LPG Capacity Planned LPG Capacity Source: EIA, Argus,…
  56. August 2014 Investor Presentation – Devon Energy Corp – slide 56
    Natural Gas Liquids Cracking Rates & Inventories U.S. Ethane Cracking Rates U.S. Ethane Inventories 5 Yr. High/Low 2014 2013 5 Yr Avg. 5 Yr. High/Low 2014 2013 5 Yr. AVG. 1.3 40 35 1.1 MMBbl 30 MMBbl 0.9 25 20 0.7…
  57. August 2014 Investor Presentation – Devon Energy Corp – slide 57
    Appendix C Key Modeling Statistics
  58. August 2014 Investor Presentation – Devon Energy Corp – slide 58
    Key Modeling Statistics Based on 2014 Drilling Program Bone Spring (Permian Basin) Midland-Wolfcamp Shale (Permian Basin) Working interest / royalty: 76% / 21% Working interest / royalty: 62% / 24% Drill & complete costs: 6 MM…
  59. August 2014 Investor Presentation – Devon Energy Corp – slide 59
    Key Modeling Statistics Based on 2014 Drilling Program Eagle Ford (DeWitt County) Eagle Ford (Lavaca County) Working interest / royalty: 50% / 25% Working interest / royalty: 50% / 25% Drill & complete costs: 9 - 10 MM Drill &…
  60. August 2014 Investor Presentation – Devon Energy Corp – slide 60
    Key Modeling Statistics Based on 2014 Drilling Program Mississippian Lime (Mississippian-Woodford Trend) Woodford Oil Shale (Mississippian-Woodford Trend) Working interest / royalty: 35% / 19% Working interest / royalty: 42% / 22%…
  61. August 2014 Investor Presentation – Devon Energy Corp – slide 61
    Key Modeling Statistics Based on 2014 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 - 3.5 MM…
  62. August 2014 Investor Presentation – Devon Energy Corp – slide 62
    Non-GAAP Reconciliation Net Debt Devon defines net debt as debt less cash and cash equivalents. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt.…

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