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IPAA Oil & Gas Investment Symposium – Devon Energy Corp

Devon Energy Corp · Apr 8, 2014 · 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. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 1
    IPAA Oil & Gas Investment Symposium April 8, 2014
  2. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 2
    Devon Today Sharpening The Focus Devons Core & Emerging Assets Proved reserves: 2.6 billion BOE(1) 2014e net production: 580 620 MBOED(1) Heavy Oil Core Expect multi-year oil growth 20% Emerging Oil & liquids 55% of 2014e…
  3. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 3
    Sharpening The Focus Recent Strategic Actions Accretive Eagle Ford acquisition Innovative midstream combination Announced non-core asset sales NYSE: DVN www.devonenergy.com Slide 4
  4. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 4
    Accretive Eagle Ford Acquisition Strategic Rationale Entry into another world-class, light oil play Best part of best play in North America Derisked and ready for full development Visible oil growth in low-risk, repeatable play…
  5. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 5
    Innovative Midstream Combination EnLink Midstream Overview PA Devon retains majority ownership OH MARCELLUS GP (ENLC 70%) CANA- OK MLP (ENLK 53%) WOODFORD UTICA ARKOMA- WV EnLink transaction highly accretive WOODFORD…
  6. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 6
    Non-Core Asset Sales Sharpening The Focus Announced sale of Canadian conventional business for C3.125 billion US2.7 billion after tax (5% effective tax rate after repatriation) Highly accretive transaction: 7 times 2013 EBITDA…
  7. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 7
    Sharpening The Focus Devons Go-Forward Asset Base Increased focus on core assets Significant oil production growth visibility Higher operating margins Maintaining gas optionality Continued financial strength NYSE: DVN…
  8. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 8
    Disciplined Capital Allocation Top strategic objective: Maximize growth in cash flow per share, adjusted for debt Investing in E&P capital projects Accelerating development of high-margin oil projects Leveraging JV drilling…
  9. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 9
    2014 E&P Capital Program Delivering Strong Oil Growth 2014 Capital Budget Key Highlights 2014 E&P capital: 5% Go-forward assets: 4.8 - 5.2 billion 260 million attributable to non-core properties Capital concentrated in oil…
  10. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 10
    Permian Basin Overview 2014 Focus Areas NEW MEXICO OKLAHOMA Net acreage: 1.3 million basin-wide with stacked-pay potential New Mexico Texas TEXAS Q4 2013 net production: 86 MBOED Eastern Northwestern (60% oil) Midland…
  11. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 11
    Permian Basin Delaware Basin Oil Developments Overview Net acreage: 320,000 Q4 2013 net production: 24 MBOED (60% oil) Low-risk, high-margin oil plays Stacked oil pays Central Eddy Operated rig count: 12 Bone Spring /…
  12. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 12
    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…
  13. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 13
    Permian Basin Delivering Significant Oil Production Growth 60 46 Net Production (MBOPD) 40 36 28 23 20 20 0 2009 2010 2011 2012 2013 NYSE: DVN www.devonenergy.com Slide 14
  14. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 14
    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 Acquisition closed on February 28th Lavaca 2014e…
  15. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 15
    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…
  16. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 16
    Eagle Ford Production Outlook Multi-Year Production Outlook (MBOED) Expected production CAGR in excess 135 - 145 of 30% through 2017 Generates significant free cash flow Immediately self-funding in 2014 2.5 billion of free…
  17. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 17
    Jackfish Overview SAGD Oil Development Overview Low F&D Flat production profile Long reserve life 20 years Jackfish 1 Q4 2013 production from Jackfish projects Jackfish 2 Gross production: 58 MBOPD Net production: 53 MBOPD…
  18. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 18
    Jackfish SAGD Developments Visible Oil Growth & Free Cash Flow Generation Oil Production Growth Outlook Free Cash Flow Outlook 100 1,000 77 - 82 800 Net Production (MBOPD) 75 62 - 67 in millions 600 47 - 52 50…
  19. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 19
    Mississippian-Woodford Trend Emerging Oil Opportunity Overview Net acreage across trend: 600,000 Multiple oil-bearing intervals December net production rate: 16,000 BOED Kay Operated rig count: 8 Grant Drilling activity focused…
  20. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 20
    Mississippian-Woodford Trend Emerging Oil Opportunity 30 20 - 25 Net Production (MBOED) 20 14 10 9 5 3 2 1 0 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 2014e Exit Rate NYSE: DVN www.devonenergy.com Slide 21
  21. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 21
    Liquids-Rich Gas Optionality Barnett Shale & Anadarko Basin Net risked resource: 25 TCFE Risked locations: 10,000 Net acreage: 900,000 Hemphill Blaine Canadian Oklahoma City Low average royalty…
  22. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 22
    Financial Strength & Flexibility Cash balances at 12/31/13: 6.1 billion Net debt-to-cap ratio: 23% Investment-grade ratings Fitch: BBB Moodys: Baa1 S&P: BBB+ Flexibility to invest in all market cycles Cash flow protected by…
  23. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 23
    Attractively Hedged Oil Hedges 70% of go-forward oil production hedged in 2014 75 MBOPD swapped at 94 per BBL 70 MBOPD collared at 89 - 101 per BBL Natural Gas Hedges 75% of go-forward gas production hedged in 2014 800 MMCFD…
  24. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 24
    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,…
  25. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 25
    Thank You
  26. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 26
    Appendix A Strategy & Operations
  27. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 31
    U.S. Non-Core Asset Divestitures Net Production Q4 2013 Gas NGLs Oil BOE (MMCFD) (MBLD) (MBOD) (MBOED) Rockies 125 5 3 30 Gulf Coast 94 2 1 18 Mid-Continent 36 2 - 8 Total U.S. Non-Core 255 9 4 56 Reserves 12/31/2013 Gas NGLs…
  32. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 32
    Rockies Oil Powder River Basin MT Net acreage: 150,000 Sheridan WY Stacked oil targets (Parkman, Turner, Frontier & others) High impact wells (Best wells: IPs 1,000 BOED) Johnson Operated rig count: 3 Campbell 2014…
  33. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – 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. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 37
    Lloydminster Oil Development Iron River Net acreage: 700,000 Manatokan Low-risk development Strong operating margins End Lake Q4 2013 net production: 32 MBOED 2014 plans: 150 wells Lloydminster Alberta Lloydminster…
  38. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 38
    Barnett Shale Liquids-Rich Gas Development Jack Wise Denton Net acreage: 600,000 Denton Bridgeport Plant Low average royalty burden: 18% Q4 2013 net production: 1.3 BCFED Palo Pinto Parker DRY GAS Liquids 26% of total…
  39. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 39
    Cana Woodford Shale Liquids-Rich Gas Development Dewey Blaine OKLAHOMA Net acreage: 250,000 TEXAS Low average royalty burden: 21% Q4 2013 net production: 58 MBOED Custer Oil & NGLs 38% of total production Canadian Total…
  40. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 40
    Granite Wash Oil & Liquids-Rich Gas Development Net acreage: 65,000 Legacy land position held by production Low average royalty burden: 19% Hemphill Q4 2013 net production: 23 MBOED Wheeler Granite Wash OKLAHOMA…
  41. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 41
    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: 850 million (12/31/13) Sinopec receives 33% of Devons…
  42. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 42
    Appendix B EnLink Midstream
  43. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 43
    EnLink Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) GP Public Unitholders 70% (115 MM units) 53% LP (120 MM units) 30% General Partner 100% Incentive Distribution Rights (IDRs) EnLink Midstream…
  44. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 44
    EnLink Midstream 2014e Financial Outlook Adjusted EBITDA (Q2-Q4 2014e) 525 MM combined (700 MM annualized) 375 MM at the MLP (500 MM annualized) Capital expenditures (Q2Q4 2014e ) Maintenance: 80 MM (50 MM at MLP) Growth: 300…
  45. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 45
    Appendix C Supply & Demand
  46. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 46
    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 -…
  47. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 47
    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…
  48. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 48
    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…
  49. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 49
    Heavy Oil Refinery Expansions In-Service Capacity Operator Location Date Increase (BOPD) Fully BP Whiting, Indiana 260,000 Operational Northwest Edmonton, Alberta 2016 80,000 Upgrading Total Capacity Increase 340,000…
  50. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 50
    U.S. Natural Gas Demand Growth By Sector 2013-2018 90 85 6.5 0.5 80 2.1 3.7 BCFD 75 2.5 -0.5 87 70 72 65 60 2013 Industrial Res/Com Electric Mex/Can Other LNG 2018 Total Baseline Exports Exports Source:…
  51. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 51
    U.S. Natural Gas Cumulative Coal Retirement Demand Forecast Renewable Generation Coal Retirements Fuel Switching Net Effect 6 4 3.7 2.9 BCFD 2 1.6 0.0 0 -0.2 -2 2014F 2015F 2016F 2017F 2018F Source: NYSE:…
  52. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 52
    U.S. Natural Gas Annual Industrial Demand Base Y/Y Growth 25 22.5 22.1 21.7 22 21.1 20.3 20.0 19 BCFD 16 13 10 2008 2009 2010 2011 2012 2013E 2014F 2015F 2016F 2017F 2018F Source: Wood Mackenzie, EIA, and…
  53. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 53
    U.S. Natural Gas LNG Projects Final Total Capacity Non-FTA DOE Start-Up Approval Investment Facility Developer(s) Location FTA/Non-FTA Capacity Approval Date FERC Decision (BCFD) (BCFD) Non-FTA (FID) Sabine Pass Cheniere…
  54. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 54
    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,…
  55. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 55
    Natural Gas Liquids Ethane Rejection & Supply Estimated Ethane Rejection U.S. NGL Supply by Component 1.4 4.0 1.2 3.5 1.0 3.0 2.5 0.8 MMBPD MMBPD 2.0 0.6 1.5 0.4 1.0 0.2 0.5 0.0 0.0 Q1 Q2 Q3 Q4* Q1 Q2 Q3 Jan 2010…
  56. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 56
    Natural Gas Liquids Demand LPG exports Actual LPG Exports Forecasted LPG Projects Capacity 1,200 1,000 800 MBPD 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: EIA, Argus, Platts, Waterborne…
  57. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 57
    Natural Gas Liquids Inventories and Cracking Rates 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 Average 40 1,100 35 30 900 25 MMBPD MMBbl 20 700…
  58. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 58
    Appendix D Key Modeling Statistics
  59. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 59
    Key Modeling Statistics Based on 2014 Drilling Program Bone Spring (Permian Basin) Delaware Sands (Permian Basin) Working interest / royalty: 76% / 21% Working interest / royalty: 76% / 14% Drill & complete costs: 6 MM Drill &…
  60. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 60
    Key Modeling Statistics Based on 2014 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…
  61. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 61
    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 &…
  62. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 62
    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%…
  63. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 63
    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…
  64. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 64
    Appendix E Risk Factors & Non-GAAP Reconciliations
  65. IPAA Oil & Gas Investment Symposium – Devon Energy Corp – slide 65
    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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