Q1 2019 Management Commentary May 1, 2019 NYSE: DVN devonenergy.com
Defining the “New Devon” World-class U.S. oil company New Devon Overview — Unrivaled acreage position in top basins Production: 308 MBOED (Q1 2019) — Multi-decade inventory to drive sustainable growth Revenue: 84% oil & liquids — Resource depth allows for high-grading of portfolio Oil growth rate: 17% in 2019 (exiting Canada & Barnett positions) Multi-decade growth platform POWDER RIVER Focused on operational excellence 21 MBOED (76% OIL) — Aggressively reducing costs STACK — Shifting to higher-margin production 123 MBOED (55% LIQUIDS) DELAWARE — Positioned for mid-teens oil growth and free cash 107 MBOED (56% OIL) flow generation above $46 WTI EAGLE FORD 50 MBOED (50% OIL) Delivering value to shareholders — Committed to return of capital — Capital-efficient per-share growth 2 Q1 2019 Management Commentary
“New Devon” Delivers Strong Q1 Outperformance “New Devon” oil production exceeds guidance Light-oil production exceeds guidance New Devon (MBOD) — 8,000 barrels per day above top end of range U.S. OIL PRODUCTION — 24% increase in oil production vs. Q1 2018 138 (Q1 Guide: 125-130) 8,000 Delaware well productivity drives Q1 oil beat — Results headlined by CAT SCRATCH FEVER wells 111 BARRELS PER DAY — High-rate Wolfcamp wells at Rattlesnake ABOVE GUIDANCE Per-unit operating costs continue to improve Q1 2018 Q1 2019 — Operating costs decline 12% vs. Q1 ‘18 Improving cost structure expands margins Per-unit cost ($/BOE) — G&A cost reductions ahead of plan Interest G&A LOE & GP&T $15.50 $16 Capital discipline accelerates free cash flow growth $13.63 — Capital spend 9% BELOW MIDPOINT guidance 12% DECLINE $11 — Q1 spending represents 24% of full-year budget YEAR OVER YEAR — Generating free cash flow above $46 WTI $6 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 3 Q1 2019 Management Commentary
Raising Our 2019 Growth Outlook Raising “New Devon” 2019 oil production outlook No change to 2019 capital investment plans HIGH-RATE WELLS DRIVE Q2 OIL BEAT New Devon U.S oil production (MBOD) New Devon 2019e E&P capital >25% (2019 exit rate STACK DELAWARE vs. FY 2018) +200 BASIS POINTS 20% 50% (VS ORIGINAL GUIDANCE) $1.8-$2.0 BILLION E&P CAPITAL EAGLE FORD POWDER RIVER 15% 15% ~17% 121 Q1 2019 CAPITAL SPENDING OIL GROWTH 9% BELOW 2018 vs 2019 midpoint GUIDANCE REPRESENTS 24% OF 2019 CAPITAL BUDGET FY 2018 Q1 2019 Q2 2019e 2H 2019e 2019e Exit Rate 4 Q1 2019 Management Commentary
Optimizing New Devon’s Cost Structure Aggressively pursuing improved cost structure Cost savings initiatives trending ahead of plan New Devon expected cost savings by area vs. 2018 results ($MM) Estimated cost savings by area as of 4/30/19 ($MM) $350 (1) G&A 70% 65% $300 MM CURRENTLY ACHIEVED BY YEAR-END 2019 BY YEAR-END 2019 $300 (Run-rate as of 4/30/19) $780 Interest (2) $130 MM UPCOMING 2019 SAVINGS (Based on decisions made) MILLION $250 FUTURE COST INITIATIVES ANNUAL COST (Expected during 2020 & 2021) Per-Unit $200 SAVINGS BY 2021 D&C Recurring LOE Efficiencies $50 MM $300 MM 100% $150 BY YEAR-END 2019 $100 Cost savings designed to be front-end weighted 50% BY YEAR-END 2019 $50 — >70% of savings achieved by year-end 2019 — G&A run-rate savings YTD: ~$110 million (3) $- (1) G&A Drilling & Interest (2) LOE — D&C efficiencies reflected in 2019 outlook Completions (1) ~$100 MM associated with the exit of Canada and Barnett. (2) Assumes $3 billion of debt repayments with the exit of Canada and Barnett. (3) Run-rate saving achieved as of 4/30/19 5 Q1 2019 Management Commentary
Divestiture Program Accelerates Value Creation Resource quality & depth allows for high-grading CANADA of portfolio Production: 113 MBOED Data room: Open in Q2 NEW DEVON ASSETS Pursuing strategic alternatives for Barnett Shale and DIVESTITURE ASSETS Canadian assets — Outright sale or spin-off POWDER RIVER — Data rooms: open Q2 2019 ROCKIES CO 2 — Expect to complete by year end Production: 3 MBOED Sales process: Ongoing Proceeds will be utilized for debt repayment STACK — Targeted debt-to-EBITDA ratio: 1.0x-1.5x — Expect up to $3 billion of debt repayments DELAWARE BASIN BARNETT SHALE Production: 103 MBOED Rockies CO 2 asset sale expected in 2019 Data room: Open in Q2 EAGLE FORD 6 Q1 2019 Management Commentary
Committed to Return of Capital to Shareholders Repurchase program accelerates per-share growth Delivering sustainable dividend growth Outstanding shares (MM) Annual divided per share 25 % > (2) 527 $0.36 521 SHARE COUNT 491 REDUCTION 459 $0.24 50 % 417 INCREASE ~390 (1) (OVER P AST 2 YEARS) Q1 2018 Q2 2018 Q3 2018 Q4 2018 3/31/19 YE 2019e 2017 2018 Current RET RETURN RNED > >$4 BILLION ON O OF F CAPITAL T TO SHAREH REHOL OLDERS RS O OVER L R LAST 12 MONTHS (1) Assumes an incremental $1 billion of shares are repurchased at current share price. (2) Annualized run-rate based on dividend increase effective in Q2 2019. . 7 Q1 2019 Management Commentary
Delaware Basin – Positioned for High-Return Growth Well productivity reaching record highs Positioned for flow assurance & premium pricing Average cumulative oil production per well (MBO) FLOW ASSURANCE & PRICING STRONG OIL PRICE REALIZATIONS Firm m oil t il tra ransport: : ~ 20 MB 20 MBOD D 300 FOCUS IN 2019 BASIS FIELD-LEVEL PRICING SWAPS 2018 Boundary Raider wells BONE SPRING Q1 RESULTS Firm m oil s il sale les: 100 MB 100 MBOD i D in ba basin FIRM OIL SALES (~25 MBOD) (targeting Bone Spring) 97% & WOLFCAMP 250 Swaps ps protect ct >90 90% % of g gas v volu lumes OF WTI GULF COAST Gas so s sold und under L LT co cont ntracts to s to West st Coast st FIRM TRANSPORT 200 (~20 MBOD) 2018 Wolfcamp Operating scale drives per-unit costs lower program 150 Delaware Basin LOE & GP&T expense ($/BOE) 2018 average (>90% improvement $17.20 vs. 3-year avg.) 100 2015-2017 average 60% $9.54 $9.03 50 $7.64 $6.81 IMPROVEMENT 0 2015 Peak 2016 2017 2018 Q1 2019 1 2 3 4 5 6 7 8 9 Months Online 8 Q1 2019 Management Commentary
Delaware Basin – A Multi-Decade Growth Platform High return inventory at $50 WTI Massive stacked-pay resource opportunity Gross operated inventory locations generating IRR >20% (1) Potential landing zones by core operating region Potato Cotton Rattlesnake Todd Thistle 16 YEA YEAR INVENTORY Basin 2,000 locations Draw (AT CURRENT ACTIVITY PACE) (Avg. lateral length: 7,500’) Weighted Avg. IRR: >50% Delaware Leonard Leonard Bone Spring feet of pay Wolfcamp ~5,000 Bone Spring Wolfcamp 125 wells drilled (Avg. lateral length: 8,000’) 2019 Program High Return Inventory (1) IRR on E&P capital investment (includes drilling, completion and well-site facilities and flow back). 9 Q1 2019 Management Commentary
Delaware Basin – Prolific Well Results Drive Q1 Results Outstanding well productivity drives Q1 outperformance Production (MBOED) 107 Gas NGL Oil 61 76% GROWTH YEAR OVER YEAR Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Key Delaware Basin Highlights Diversified activity across five core areas World-class wells in Todd and Rattlesnake areas in Q1 Infrastructure and flow assurance to ensure margin growth (1) Peak 24-hour production rates achieved to understand well deliverability. Current production rates constrained due to facility capacity. 10 Q1 2019 Management Commentary
New Devon: Free Cash Flow Yield to Investors (1) $3.0B 3-YEAR CAPITAL PLAN 10% Cumulative Free OIL CAGR: 12%-17% Cash Flow $3.0 (1) $2.3B BREAKEVEN: $46 WTI 8% Cumulative Free Cash Flow ($B) $2.5 (CALCULATION INCLUSIVE OF ALL CAPEX) Cumulative Free Free Cash Yield (Annual Avg.) Cash Flow $1.6B (1) 6% $2.0 Cumulative Free Cash Flow $1.5 4% $1.0 2% $0.5 $- 0% 2019 - 2021 2019 - 2021 2019 - 2021 ($55 WTI) ($60 WTI) ($65 WTI) Cumulative Free Cash Flow Free Cash Flow Yield (Annual Avg.) Note: Free cash flow yield assumes market capitalization based on current share price multiplied by expected shares outstanding at year-end 2019 (~390 mm shares). Cumulative free cash flow represents the aggregate operating cash flow less total capital requirements before dividend. Assumes $3 HH price. (1) Assumes cost savings are fully realized at the beginning of 2019. 11 Q1 2019 Management Commentary
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