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Credit Suisse 19th Annual Energy Summit – Devon Energy Corp

Devon Energy Corp · Feb 12, 2014 · 73 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. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 1
    Investor Presentation February 2014
  2. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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…
  5. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 6
    Strategic Midstream Combination EnLink Midstream Transaction Overview Devon and Crosstex to combine midstream assets to form EnLink Midstream Provides market-based valuation for Devons U.S. midstream business Devon retains…
  7. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 7
    Strategic Midstream Combination Unlocking Significant Value PA OH EnLink transaction highly accretive MARCELLUS to shareholders CANA- WOODFORD OK UTICA Initially valued assets at ARKOMA- WV 4.8 billion WOODFORD PERMIAN…
  8. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 28
    Thank You
  29. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 29
    Appendix A Strategy & Operations
  30. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – 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. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 49
    Appendix B Midstream & Financial
  50. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 50
    EnLink Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) GP Public Unitholders 70% 53% LP 30% General Partner 100% Incentive Distribution Rights (IDRs) EnLink Midstream LLC (ENLC) General Partner,…
  51. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 51
    EnLink Midstream 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 EBITDA…
  52. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 52
    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…
  53. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 53
    Appendix C Supply & Demand
  54. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 54
    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 -…
  55. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 55
    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…
  56. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 56
    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…
  57. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 57
    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…
  58. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 58
    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,…
  59. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 59
    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…
  60. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 60
    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…
  61. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 61
    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…
  62. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 62
    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,…
  63. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 63
    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…
  64. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 64
    Natural Gas Liquids Demand U.S. LPG exports 1400 1200 1000 800 MBPD 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Actual LPG Exports Assumed Projects
  65. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 65
    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…
  66. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 66
    Appendix D Key Modeling Statistics
  67. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 67
    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 &…
  68. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 68
    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…
  69. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 69
    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%…
  70. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 70
    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…
  71. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 71
    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 &…
  72. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 72
    Appendix E Risk Factors & Non-GAAP Reconciliations
  73. Credit Suisse 19th Annual Energy Summit – Devon Energy Corp – slide 73
    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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