Investor Presentation December 2019 NYSE: DVN devonenergy.com
Devon’s Competitive Advantage World-class U.S. oil portfolio New Devon Overview — Unrivaled acreage position in top basins — Multi-decade growth inventory Production: 325 MBOED (Q3 2019) Revenue: 74% oil — Top-tier well productivity across all assets Oil growth rate: 20%-21% in 2019 Disciplined returns-driven strategy Multi-decade growth inventory POWDER RIVER 25 MBOED (71% OIL) — Aggressively improving cost structure — Growing higher-margin oil production STACK 121 MBOED (26% OIL) — Positioned for FREE CASH FLOW above $48 WTI DELAWARE 127 MBOED (56% OIL) Delivering value to shareholders EAGLE FORD — Committed to return of capital 45 MBOED (49% OIL) — Capital-efficient per-share growth — Building a fortress balance sheet 2 Investor Presentation
Unleashing Potential of World-Class Oil Assets U.S. well productivity showcases asset quality High-return inventory diversified across top U.S. basins Source: IHS/Devon. All wells drilled from 2015 through 2019 YTD. Includes operators with more than 150 wells. Gross operated inventory locations (non-operated locations not included) 950 6,500 operated >20 YEAR INVENTORY locations (AT CURRENT DRILLING PACE) RESULTS ~45% 850 SUPERIOR 6,000 WELL VS. PEER AVG. 750 Avg. 90-Day IPs BOED, 20:1 15 YEAR INVENTORY 4,200 operated (AT CURRENT DRILLING PACE) locations 650 4,000 PEER AVG. PRB 550 Eagle Ford STACK 2,000 450 Delaware Basin ~280 operated 350 wells online 0 2019 Program High-Return Inventory Risked Inventory 250 (@ $50 WTI) (@ $60 WTI) Top 50 U.S. Producers Note: High-return inventory represents locations estimated to generate >20% IRR. Returns based on all-in E&P capital investment, which includes drilling, completion and well-site facilities and flow back. 3 Investor Presentation
Executing on Our Strategic Objectives Efficiencies delivering improved capital outlook U.S. oil production exceeds guidance New Devon 2019e E&P capital New Devon (MBOD) U.S. OIL PRODUCTION 148 (Q3 Guide: 141-147) 4,000 DELAWARE POWDER RIVER 50% 20% E&P CAPITAL 124 $1.83-$1.87 BARRELS PER DAY BILLION ABOVE MIDPOINT Original Guidance ($1.8 - $2.0 billion) Q3 2018 Q3 2019 EAGLE Improving cost structure expands margins FORD STACK Per-unit cost (reported) ($/BOE) 14% 16% Interest G&A $14.18 LOE & GP&T Operational efficiencies continue to ACCELERATE $11.86 16% Strong well productivity drives Q3 oil volumes above guidance DECLINE — Lowered 2019 capital outlook by $50 million — SINCE Q3 2018 $780 MM cost savings initiative ahead of plan (80% by YE19) — Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Old DVN DVN Today 4 Investor Presentation
Operational Success Driving Improved 2019 Outlook vs. Original Key Messages Updated Guidance Guidance RAISING OIL GROWTH outlook for 3 rd time in 2019 (1) U.S. oil growth 20% – 21% 550 Basis Point Delaware, Eagle Ford and PRB to drive strong Q4 growth (vs. 2018) Improvement Scalable growth driving per-unit costs lower in Q4 LOE & GP&T $7.60 – $7.65 15% Higher-cost Canadian assets exit portfolio (per BOE) Improvement Lowering G&A expense outlook for 3 rd time in 2019 G&A $460 – $470 17% Run-rate savings to REACH > $200 MILLION by year-end ($ in millions) Improvement $1.7 billion debt redeemed YTD (annual interest savings: >$60 million) Financing costs $245 – $255 22% Evaluating next steps for debt reduction program Improvement ($ in millions) Q4 capital spending lower due to timing of completion activity (1) Upstream capital $1.83 – $1.87 $50 Million Expect FREE CASH FLOW to accelerate in Q4 2019 ($ in billions) Improvement Improv oved o outloo ook (1) Represents New Devon performance target (excludes Barnett Shale). 5 Investor Presentation
Framework for the 2020 Planning Cycle CAPITAL ALLOCATION PRIORITIES Maintain capital DISCIPLINE GREATER ER THAN AN Maintain base production $50 50 1 Free cash flow accelerates Balance GROWTH & FREE CASH FLOW 2 Fund dividends Fund dividends $50 50 Improve financial strength (Program funded @ $48 WTI) Pursue high-return growth projects 3 Protect financial strength $4 $45 Exercise capital FLEXIBILITY Return excess cash to shareholders 4 Maintain operational continuity WTI PRICE (ASSUMES $2.50 HENRY HUB) 6 Investor Presentation
Preliminary 2020 Outlook $ OPTIMIZED OIL SHARE FOR RETURNS GROWTH REDUCTION N E W D E V O N A S S E T S E & P C A P I TA L P R O G R A M S H A R E CO U N T VS . 2 0 1 9 $1.7-$1.9 Billion 7%-9% Growth 6%-8% Reduction D E S I G N E D F O R U LT R A - LO W DRIVEN BY LOW-RISK ENHANCING PER-SHARE B R E A K E V E N P R I C I N G DEVELOPMENT DRILLING CASH FLOW GROW TH Key Messages Program funded at $48 WTI & $2.50 Henry Hub Low maintenance capital provides planning flexibility Expect oil volumes to average up to 160 MBOD in 2020 Positioned for attractive FREE CASH FLOW 7 Investor Presentation
Positioned for Attractive Free Cash Flow in 2020 FY2020 OUTLOOK $675 $750 10% OIL GROWTH: 7%-9% MILLION BREAKEVEN: $48 WTI 8% (Assumes $2.50 Henry Hub) 2020e Free Cash Flow ($MM) 2020e Free Cash Flow Yield EXCLUDES BARNETT SHALE $500 $400 (before dividends) 6% MILLION 4% $250 $125 MILLION 2% $- 0% $50 WTI $55 WTI $60 WTI $2.50 HH $2.50 HH $2.50 HH Free Cash Flow Free Cash Flow Yield Note: Free cash flow yield assumes market capitalization based on share price as of 11/01/19 multiplied by expected shares outstanding at year-end 2019 (~375 mm shares). Free cash flow represents operating cash flow less total capital requirements before dividends. 8 Investor Presentation
2019 & 2020 Outlook = Improved Capital Efficiency Oil production remains on track Efficiencies driving lower capital requirements New Devon 2019-2020 cumulative upstream capital ($B) New Devon 2019-2020 cumulative oil production (MMBO) $4.2 120 Current Plan Original Plan Original Plan ~$400 MILLION (11/05/19 Guide) (2/19/19 Guide) (2/19/19 Guide) LESS CAPITAL $4.0 105 New Devon Cumulative Oil Production (MMBO) New Devon Cumulative Upstream Capital ($B) (VS. ORIGINAL PLAN) $3.8 90 Current Plan (11/05/19 Guide) $3.6 75 $3.4 60 $3.2 45 $3.0 30 2019e - 2020e 2019e - 2020e 2019e - 2020e 2019e - 2020e ( Cumulative Capital) ( Cumulative Capital) ( Cumulative Oil) ( Cumulative Oil) 9 Investor Presentation
Committed to Return of Capital to Shareholders Dedicated to disciplined allocation of capital Repurchase program accelerates per-share growth Outstanding basic shares (MM) $11.0 Billion 527 521 70 % ~ 30 % ~ 491 ALLOCATED TO SHARE COUNT SHAREHOLDER REDUCTION 459 RETURNS & DEBT 434 REDUCTION 415 Dividends 397 Debt reduction 383 ~375 (1) Share buyback New Devon capital Uses of Cash Since 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 10/31/19 YE 2019e (1) Assumes remaining authorization is completed by year-end and incremental shares are repurchased at current share price. 10 Investor Presentation
Building a Fortress Balance Sheet Significant liquidity with no near-term debt maturities Aggressive debt reduction improves financial strength Net debt (1) ($B) Debt maturities ($MM) $4,700 $10.7 SIGNIFICANT FINANCIAL FLEXIBILITY NO DEBT MATURITIES Cash >75% UNTIL 2025 $2.6 Credit REDUCTION $1,250 Facility $750 $750 $675 $485 SINCE 2015 $366 $73 Liquidity Liquidity 2025 2027 2031 2032 2041 2042 2045 12/31/2015 12/31/2016 12/31/2017 12/31/2018 9/30/2019 Low leverage provides competitive advantage Debt redemption program: targeting up to $3 billion NET DEBT ($ in billions) — $1.7 billion of debt retired YTD 1.0x Total debt (GAAP) $4.3 — Evaluating next steps for debt reduction program Less cash $1.7 — Potential INTEREST SAVINGS of ~$130 million annually Net debt (Non-GAAP) (1) $2.6 TO EBITDAX EBITDAX (Non-GAAP) (1)(2) $2.6 Hedging program further protects financial strength AS OF 9/30/2019 Net debt to EBITDAX ratio 1.0x — Majority of oil and gas volumes protected in Q4 2019 — Targeting ~50% oil & gas production in 2020 (1) Net debt and EBITDAX are non-GAAP measures. Non-GAAP reconciliations are provided in Q3 earnings release materials. (2) Based on last 12 months results from continuing operations. 11 Investor Presentation
Divestiture Program Accelerates Value Creation Resource depth allows for portfolio high-grading SALES PRICE: ACCRETIVE MULTIPLE: CAD $3.8 BILLION ~10x CASH FLOW CANADIAN CLOSED: Cotton Draw midstream partnership formed HEAVY OIL Q2 2019 — Contributing gathering & compression assets — Devon to remain operator of the assets POWDER RIVER — Receive $100 MILLION cash distribution in Q4 ROCKIES CO 2 — Partner to fund $40 million of expansion capital Q3 Production: 3 MBOED Sales process: Ongoing COTTON DRAW Barnett Shale divestiture process progressing (MIDSTREAM PARTNERSHIP) — Data rooms opened in early Q3 Proceeds: $100 million STACK Gathering: 90 miles — Initial bids RECEIVED in September Compression: 4 stations — Ongoing negotiations with advantaged bidders DELAWARE BARNETT SHALE Q3 Production: 100 MBOED Exited Canada for CAD $3.8 billion (USD $2.8B) Sales process: Ongoing DEVON ASSETS — Transaction closed in Q2 2019 EAGLE FORD DIVESTITURE ASSETS 12 Investor Presentation
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