Bank of America Merrill Lynch Global Energy Conference November 16, 2017 NYSE: DVN devonenergy.com
Investor Contacts & Notices 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 Statements This 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 stateme nts. Use of Non-GAAP Information This 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. 2 | Investor Presentation
Devon’s Competitive Advantage STACK & Delaware focused Top-tier operating results Multi-decade growth platform Innovative culture >30,000 STACK & DELAWARE POTENTIAL LOCATIONS Significant financial strength 3 | Investor Presentation
Devon’s 2020 Vision Focus on Deliver top-tier returns on invested capital financial returns Return cash to shareholders Advance STACK & Delaware activity Further high-grade Monetize less competitive assets asset portfolio Multi-billion dollar divestiture potential Expand Shift production to higher-value products per-unit margins Maximize margins by lowering cost structure Improve Divestiture proceeds to reduce debt balance sheet strength Net debt to EBITDA target: 1.0x – 1.5x 4 | Investor Presentation
2017 Capital Program 2 0 1 7 e E & P C A P I T A L $2.0-2.1 Billion Disciplined focus on value and returns Capital program funded within cash flow U.S. Rig Activity 10% (~20 development rigs in Q4) Shifting to full-field development OTHER ASSETS 90% Efficiencies driving capital costs lower STACK & DELAWARE For additional information see our Q3 operations report . 5 | Investor Presentation
Expanding High-Returning Oil Production U.S. Oil Production Rapidly growing highest-value product MBOD +~20% (vs. Q4 16) +~15% Driven by STACK & Delaware Basin (vs. Q4 16) 102 (1) Building operational momentum into 2018 Q4 2016 2017e Q4 2017e For additional information see our Q3 operations report . (1) Adjusted for the sale of minor, non-core assets 6 | Investor Presentation
Preliminary 2018 Outlook $ OPTIMIZED OIL DEBT FOR RETURNS GROWTH REDUCTION 2 0 1 8 e E & P C A P I TA L STACK & DEL AWARE TA R G E T I N G >30% Increase $2.0-2.5 Billion $1 Billion F U N D E D W I T H I N (2017 VS 2018) O P E R AT I N G C A S H F LO W 7 | Investor Presentation
Significant Financial Strength PROTECTING OUR ABILITY Investment-grade credit ratings TO EXECUTE Disciplined Disciplined hedging program Hedging Q4 17:~65% Excellent 1H 18:~40% Significant investment in EnLink Midstream Liquidity Cash: $2.8 billon INVESTMENT- $1 billion divestiture program underway GRADE CREDIT RATINGS Additional multi-billion dollar divestiture potential EnLink Investment Market value: ~$3.5 billion 8 | Investor Presentation
Operational Excellence Capture Improve FULL VALUE RETURNS Maximize base production Optimize capital program Minimize controllable downtime Disciplined project execution Enhance well productivity Perform premier technical work Leverage midstream operations Focus on development drilling Control operating costs Increase capital efficiency 9 | Investor Presentation
T op-Tier Operating Performance Best-in-class well productivity DEVON WELL ACTIVITY Avg. 90-Day Wellhead IPs BOED, 20:1 (Since 2012) 1,000 ~400% 800 I M P R O V E M E N T 600 400 200 Peers Source : IHS/Devon. Top operators with more than 40 wells over the past year ending October 2017. BOTTOM LINE IMPACT FROM OPERATIONAL EXCELLENCE INITIATIVES 34% >40% 2% PRODUCTION UPLIFT COST REDUCTION D&C IMPROVEMENT To annual base production Operating expense & G&A since Across key U.S. plays since 2014 ($100 MM benefit annually) 2014 ($1.4B annual benefit) 10 | Investor Presentation
The Next Frontier Of Efficiency Gains Multi-zone manufacturing strategy underway Leading-edge development concept Debundling supply chain drives costs lower Massive technology upside remains ANACONDA MULTI-ZONE PROJECT $ 1 MILLION SAVINGS PER WELL For additional information see our Q3 operations report . 11 | Investor Presentation
Innovation Momentum - T echnology Projects In Flight P R O D U C T I O N D R I L L I N G & W A T E R C O M P L E T I O N S O P E R A T I O N S M A N A G E M E N T C O R P O R A T E S U B S U R F A C E Improved 3D seismic Cyber-geosteering Predictive pump failures Water-treatment options Accounting process interpretation automation Flat, in-zone wells Field-issue prioritization Frac fluid chemistry High-graded location selection World-class partnerships in Fiber-optic sensing Optimized compressors Data acquisition and digital innovation platforms Optimized landing zones management systems Prolonged drill-bit life Production monitoring Enterprise dashboards for Well productivity predictions Leak detection in piping Coiled-tubing drill-outs Flood optimization information systems Depletion analysis Efficient flowbacks Inter-well communication Accessible mobile Water transfer and storage Geospatial optimization (data analytics) applications across all Cutting-edge frac modeling safety aspects of the business Gas lift for EOR Targeting hundreds of millions in value creation annually 12 | Investor Presentation
STACK – Franchise Asset Kingfisher Blaine Best-in-class acreage position Showboat Sonoyta Drilling Underway (24 wells) 670k net acres by formation Coyote Sidney Drilling Underway (7 wells) Privott Up to 4 target intervals per unit Smilodon Fleenor Bernhardt Accelerating development activity 2018 Spud (8 wells) Horsefly Q4 2017 Spud (10 wells) Canadian Upcoming Development Future Projects (Timing TBD) Caddo 13 | Investor Presentation
STACK – Multi-Decade Growth Platform Best-in-class well results High-returning production growth STACK Avg. 90- Day Wellhead IPs Per 1,000’ Lateral MBOED ~ 120 BOED, 20:1 111 160 >70% VS. PEER AVG. 105 120 95 >70% 88 >35% VS. Q4 2016 80 40 GROWTH 0 DVN MRO XEC NFX GST CLR ALTMES Peers Q4 16 Q1 17 Q2 17 Q3 17 Q4 17e Note: IHS/Devon. Wells completed over the past year. Tremendous resource potential Advantaged cost structure Lease Operating Expense 5 , 700 STACK RISKED LOCATIONS $/BOE $4.97 ~$4.30 ~15% IMPROVEMENT >11,000 POTENTIAL LOCATIONS Q4 2016 Q4 2017e 14 | Investor Presentation
STACK - Development Activity Full-field development underway Kingfisher Coyote Drilling Underway (7 wells) Showboat Faith Marie Activity focused on Coyote & Showboat Drilling Underway (24 wells) 24-Hr IP: 5,100 BOED 5 operated rigs (2 drilling units) Projects offset by prolific well results Privott 17-H Blaine 24-Hr IP: 6,000 BOED 1 st production expected in 1H 2018 Showboat Development First multi-zone STACK development UPPER MERAMEC LOWER For additional information see our Q3 operations report . WDFD 15 | Investor Presentation
Delaware Basin – Franchise Asset POTATO BASIN World-class oil opportunity Medusa TODD Q4 17 Spud (20 wells) Cobra Tomb Raider Multi-decade growth platform Spud Muffin Anaconda Flowing Back (10 wells) Boomslang Up to 15 target intervals Completing (11 wells) THISTLE/GAUCHO Eddy Lea Accelerating development activity Lusitano Seawolf Q4 17 Spud (6 wells) Drilling (12 wells) Snapping Mean Green COTTON DRAW Upcoming Development Fighting Okra Future Projects (Timing TBD) RATTLESNAKE Core Development Area Loving 16 | Investor Presentation
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