scotia howard weil energy conference
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NYSE: DVNdevonenergy.com
Scotia Howard Weil Energy ConferenceMarch 27, 2017
Investor Contacts & Notices
2
Investor Relations Contacts
Scott Coody, Vice President, Investor Relations(405) 552-4735 / scott.coody@dvn.com
Chris Carr, Supervisor, Investor Relations(405) 228-2496 / chris.carr@dvn.com
Forward-Looking StatementsThis presentation includes "forward-looking statements" as defined by the Securities and Exchange Commission (the “SEC”). Such statements are subject to a variety of risks and uncertainties that could cause actual results or developments to differ materially from those projected in the forward-looking statements. Please refer to the slide entitled “Forward-Looking Statements” included in this presentation for other important information regarding such statements.
Use of Non-GAAP InformationThis presentation may include non-GAAP financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. For additional disclosure regarding such non-GAAP measures, including reconciliations to their most directly comparable GAAP measure, please refer to Devon’s most recent earnings release at www.devonenergy.com.
Cautionary Note to Investors The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This presentation may contain certain terms, such as resource potential, risked or unrisked resource, potential locations, risked or unrisked locations, exploration target size and other similar terms. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.
Devon TodayA Leading North American E&P
3
Key Messages
Premier asset portfolio
Multi-decade growth platform
Focused in STACK and Delaware Basin
Delivering top-tier execution
Significant financial strength
Heavy Oil
Rockies Oil
Barnett Shale
STACK
Oil46%
NGL18%
Gas36%
Production 2017e: 539 - 561 MBOED
Delaware Basin
Eagle Ford
Strategic Approach To 2017
4
Further increase capital productivity
Maintain improved cost structure
Focused on value and returns
Concentrate activity within STACK and Delaware
Harvest cash flow from other assets
Invest directionally within cash flow
Disciplined hedging program
Driveefficienciesacross the portfolio
Accelerateactivity
Protectinvestment-gradebalance sheet
Operating Strategy For Success
5
Maximize base production
— Minimize controllable downtime
— Enhance well productivity
— Leverage midstream operations
— Control operating costs
Optimize capital program
— Disciplined project execution
— Perform premier technical work
— Focus on development drilling
— Increase capital efficiency
CaptureFULL VALUE
ImproveRETURNS
Delivering Record-Setting Well Productivity
6
Best drilling results in Devon’s 45-year history
— Development drilling focused in top resource plays
— Enhanced completion designs and improved well placement
0
150
300
450
600
750
2012 2013 2014 2015 2016
Avg. 90-Day Wellhead IPsBOED, 20:1
IMPROVEMENT>300%
Efficiency Gains Create Tremendous Value
7
Achieved $1.3 billion of annual cost savings
― LOE and G&A reduced ≈30% from peak rates
Base production initiatives yielding excellent results
― Efforts achieving 2% production uplift
― Creating ≈$100 million of value annually
D&C costs reduced by up to 45%(1)
― Driven by efficiencies and supply chain costs
― More than offsetting larger completions
Operating Costs and G&A$ Billions
2014 2015 2016
$2.8
$4.1
LOE Prod. Taxes G&A
BCOST SAVINGS
(1) From peak levels in 2014.
$1.3
Performance Transformation Continues In 2017
Drilling activity to shift to longer laterals
— Improves capital efficiency & well productivity
Control supply chain to reduce costs
— Unbundling historical, high-margin services
— Utilizing more diversified vendor universe
— Adding longer-term contracts to capture lower costs
“Big data” innovations to create substantial value
— Leveraging advanced analytics to improve operations
— Efficient data systems optimize overhead structure
TargetingHUNDREDSOF MILLIONSin savings
8
Accelerating Capital Investment
9
Disciplined capital allocation focused on returns
2017 E&P capital: $2.0 to $2.3 billion
— Concentrated in STACK & Delaware Basin
— Invest directionally within cash flow
— Capital programs have significant flexibility
Ramping up to 20 operated rigs by year end
— Steady rig additions throughout the year
— Generates momentum into 2018
0
10
20
30
40
2015 2016 20172015 2016 2017e
AT YEAR END 2016RIGS
BY YEAR END 2017RIGS
Rig Activity – U.S. Resource PlaysOperated Rigs
E & P C A P I T A L
2017e
UP TO
Billion
2017 Capital Outlook
$2.0-2.3
1020
Rapid Expansion Of High-Margin Production
10
Accelerated investment drives strong oil growth
— U.S. oil growth: 13% - 17% (2017 vs. Q4 16)
— Production growth resumes in Q1 2017
Higher growth rates expected in 2018
— U.S. oil production to advance by ≈20%
— Driven by >30% growth in STACK & Delaware
Positioned to deliver peer-leading cash flow expansion
2017 & 2018 Outlook
U.S. Oil Production GrowthMBOD
Q4 2016 2017e 2018e
105
(vs. Q4 2016)
+13 - 17%(vs. 2017)
+≈20%
Expanding The Resource Base
1111
Initial multi-zone Meramec development program
Ongoing Meramec infill tests to define future developments
Substantial productivity gains with Woodford row developments
Significant Wolfcamp drilling program
Initial Leonard TRAC project underway
Infill spacing tests to define upside
Testing new refrac and completion designs
Barnett Shale
Eagle Ford
Catalyst-Rich Drilling Schedule In 2017
High-Growth Assets
STACK
Delaware Basin
Other Key Assets
Impactful appraisal work underway in STACK and Delaware
— >1 million surface acres
— 30,000 potential locations (1/3 derisked)
— Appraisal work to expand inventory
Efforts to define upside in other cash-flow generating assets
Initiatives refining view of total resource potential
World-class development opportunity
— >600,000 net acres by formation(1)
— Top targets: Meramec & Woodford
— Q4 net production: 88 MBOED
Largest leasehold position of any operator
— Deep inventory of low-risk projects
Most active asset in portfolio
— 2017 capital: $750 million
— Up to 10 operated rigs by year-end
STACKBest-In-Class Position
12
STACK RESOURCE OVERVIEW
NET ACRES(1)
kRISKED LOCATIONS
Woodford – Core Area
Meramec – Core Area
Canadian
Kingfisher
Blaine
Custer
Dewey
(1) Represents Meramec and Woodford net acreage by formation.
>600 5,400
STACK
1313
88
Q4 2016 Q1 2017e Q2 2017e Q3 2017e Q4 2017e
STACK Production GrowthMBOED
>120
GROWTH
Production expected to increase >35% during 2017
Product mix shifting to higher-margin oil and liquids production
Positioned For Strong Production Growth
>35%
Initial Meramec spacing pilots successful
— Tested multi-zone, staggered laterals
— Spacing up to 7 wells in a single interval
First multi-zone development in 2H 2017
— Up to 15 wells in a single drilling unit
— Across 3 different Meramec intervals
Significant upside with future projects
— Potential for 20 to 30 wells per drilling unit
— Evaluating co-development with Woodford
STACKMeramec Moving To Full-Field Development
14
STACK PILOTS – OPERATED & NON-OPERATED
Canadian
Kingfisher
Blaine
Non-Operated
Operated
Born Free Staggered Pilot30-Day IP: 2,200 BOED
Pump House 7-Well Pattern30-Day IP: 2,100 BOED
Alma 5-Well Pilot30-Day IP: 1,400 BOED
Showboat Development ≈15 wells (2H 2017) Parent well:
30-Day IP: 1,750 BOEDYr. 1 cum: 550 MBOE
STACK
15
Appraisal & infill success increases inventory
— Raised inventory 40% above previous estimates
— Meramec inventory: 1,700 risked locations
Future development to leverage long laterals
— Further enhances capital and well productivity
— Represents 60% of planned activity in 2017
Meramec Resource Continues To Expand
1,700 RISKED LOCATIONS
MERAMEC INVENTORY
Meramec Over-Pressured Oil - 10,000’ LateralType Well
IP
EUR
D&C
1,600 - 2,000MBOE (40% - 50% Oil)
1,900 - 2,30030-Day, BOED
$7.5 - 9.0$MM
40%
STACKWoodford Shale: A Top-Tier Liquids-Rich Development
16
Hobson Row completion activity underway
— 5-section development with ≈40 wells
— Testing larger completions, tighter spacing and increased lateral length
— Peak rates expected during Q2 2017
Jacobs Row to utilize long laterals
— 13-section development with ≈70 wells
— Initial activity to commence in 2H 2017
Deep inventory of low-risk Woodford projects
— 3,700 risked, undrilled locations
Woodford Eastern Core Activity
Woodford Core
Jacobs Row≈70 Wells (10K laterals)Activity begins 2H 2017
Hobson Row≈40 Wells drilled (5-sections)Completions underway
Canadian
KingfisherBlaine
IP EUR D&C1,600MBOE
1,50030-Day, BOED(>25% Oil)
$6.0 - 6.5$MM
Woodford - 5,000’ LateralEastern Core Type Well
Delaware BasinA World-Class Oil Play
17
Industry leader in basin
— 670,000 net acres by formation
— Acreage concentrated in core of the play
— Q4 net production: 54 MBOED
Deep inventory of low-risk oil projects
— >5,800 risked locations
— Massive upside with >20,000 potential locations
Accelerating activity in 2017
— 2017 capital: $700 million
— Drilling concentrated in basin of SE New Mexico
EddyLea
S L O P E
B A S I N
Reeves
Loving Winkler
Ward
Bone Spring285,000 net acres
Wolfcamp225,000 net acres
Leonard Shale60,000 net acres
Delaware Sands80,000 net acres
Delaware BasinMaximizing The Value Of Every Barrel
18
$16.87
$14.80
$12.62$12.00
$10.76
$8.82$7.72 $7.42
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
Delaware Basin Unit LOE$/BOE
Delaware Basin Unit LOEPeak cost to Q4 2016
I M P R O V E M E N T
Majority of cost savings are sustainable
— Improved electrical infrastructure
— Enhanced water-handling infrastructure 56%
Delaware Basin
19
Ramping up to 10 rigs by year-end 2017
— Development activity targeting Bone Spring & Leonard
— Significant appraisal work in Wolfcamp play
Production growth >20% by year end
— Driven by light-oil production
— Growth resumes by end of Q1 2017
Shift to longer laterals improves capital efficiency
— Lateral length 40% higher in 2017
Accelerating Drilling Activity
19
54
Q4 2016 Q1 2017e Q2 2017e Q3 2017e Q4 2017e
>65
Delaware Basin 2017 Drilling Plans≈100 Operated Wells
Delaware Basin Production GrowthMBOED
36%
36%
23%
5%
BoneSpring
Wolfcamp
DelawareSands
LeonardShale
GROWTH>20%
Delaware BasinTotal Reservoir Access Concept (TRAC)
20
A disciplined development approach to drive returns higher
— More efficient permitting process
— Minimizes surface disturbance
— Utilizes integrated surface facilities
— Flexibility to add/defer development zones
— Allows for simultaneous operations
Initial TRAC project underway
— Drilling multi-zone Leonard Shale project
— Large pad developments to accelerate in 2H 2017 & 2018
Delaware BasinGrowing Resource Opportunity
21
Identified >5,800 risked locations
Massive upside with >20,000 potential locations
Catalyst-rich drilling activity in 2017
— ≈60% in Wolfcamp & Leonard
Results to optimize future TRAC developments
Note: Graphic for illustrative purposes only and not necessarily representative across Devon’s entire acreage position.
Basin Slope
DEL
AW
AR
E SA
ND
S Madera
Lower Brushy
LEO
NA
RD A
B
C
BO
NE
SPR
ING
1st
2nd
(Upper &Lower)
3rd
WO
LFC
AM
P
X/Y
A, B, C & D
Risked Location Unrisked Location
1 Section 1 Section
Advantaged Capital Structure
22
Investment-grade credit ratings
― Strong liquidity: $2 billion of cash (12/31/16)
― No significant debt maturities until 2021
Disciplined risk management protects cash flow
― ≈50% of production hedged in 2017
― Program consists of systematic & discretionary hedges
Significant investment in EnLink Midstream
― Distributions received: ≈$270 million annually
― Ownership interest valued at ≈$4 billion
INVESTMENT-GRADEcredit ratings
Devon EnergyA Leading North American E&P
23
Premier asset portfolio
Multi-decade growth platform
Delivering top-tier results
Significant financial strength
Thank you.
24
Forward-Looking Statements
25
This presentation includes "forward-looking statements" as defined by the SEC. Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices, including the currently depressed commodity price environment; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this presentation are made as of the date of this presentation, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
NYSE: DVNdevonenergy.com
Appendix
Canadian Heavy Oil
27
Top-tier thermal oil position
— High reservoir quality: <2.5 SOR(1)
— Massive risked resource: 1.4 BBO
Jackfish complex oil production up 26% YoY
— Q4 production: 121 MBOD
— 15% above nameplate capacity
Significant cash flow generation
— Potential to approach $800 million in 2017(2)
— >$3.5 billion since first production
(1) Current steam-to-oil ratio for Jackfish complex.(2) Assumes $55 WTI.
Thermal Heavy Oil ProjectsOperational Projects
Eagle Ford
28
2 0 1 6 F R E E C A S H F L O W
MILLION
CR
ETA
CEO
US
AUSTIN CHALK
UPPER EAGLEFORD SHALE
LOWER EAGLEFORD SHALE
BUDA
DEL RIO
Multi-Zone “Diamond” Pilot(9-well pattern testing up to 18 wells per section)
880’440’
Top-tier acreage position
— 65,000 net acres focused in DeWitt Co.
— Best-in-class productivity
— Q4 net production: 60 MBOED (75% liquids)
Completion activity underway
— Reduce DUCs to 30 to 40 by year-end 2017
— Multi-zone “diamond” pilot flowing back
Significant free cash flow generating asset
— >$350 million of free cash flow in 2016
350$>
Rockies Oil
29
Johnson
Campbell
Converse
Weston
Niobrara
Natrona
Premier Powder River Basin position
— 470,000 net surface acres
— Q4 net production: 15 MBOED (74% oil)
>50% improvement in LOE from early 2016
Drilling activity resumed in the Power River
— Targeting Parkman, Teapot and Turner formations
— Initial results expected in Q1 2017
Parkman
Turner
Teapot
Initial Powder River Focus Areas
Barnett Shale
30
Wise
ParkerTarrantFT. WORTH
Denton
DENTON
Significant gas optionality
— Net acres: 610,000
— Q4 net production: 163 MBOED (27% liquids)
Future development activity to unlock significant value
— Identified 1,000 horizontal refrac locations
— Improved rig economics for 1,500 undrilled locations Horizontal Refrac
Undrilled Location
Future Development
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