Q2 2018 Management Commentary August 1, 2018 NYSE: DVN devonenergy.com
Exe xecu cuting ting the 20 e 2020 Vi Visi sion on Q2 light-oil production exceeds high end of guidance — Driven by strong well productivity in Delaware and STACK — U.S. light-oil growth running ahead of original budget YTD DEVON’S 2020 VISION — No change to full-year capital spending budget Maximize cash flow Free cash flow positioned to rapidly expand — Majority of U.S. oil has access to premium Gulf Coast pricing Focus on capital efficiency — G&A and interest savings to reach ~$475 MM annually (1) — Per-unit LOE on track to improve by ~10% by 1H 2019 Portfolio simplification Divestiture program accelerates value creation — Ownership in EnLink Midstream monetized for 12x cash flow Improve financial strength — Expect to exceed $5 billion divestiture target around year end Return cash to shareholders Shareholder-friendly initiatives underway — Recently increased share-repurchase program to $4 billion — Consolidated debt has declined by ~40% YTD (1) (1) Includes the pro forma benefits related to the sale of EnLink Midstream in mid-July. 2 | Q2 2018 Management Commentary
2020 Vi Visi sion: on: Nex ext St Step eps NEXT STEPS TO FURTHER OPTIMIZE RETURNS & CAPITAL-EFFICIENCY FOR SHAREHOLDERS Execute on light-oil growth plans (mid-teens CAGR through 2020) Expand per per-uni nit t margi gins ns Maintain strong pricing through basis swaps & firm transport Improve per-unit cash costs by ~10% by 1H 2019 (1) Maintain discipline: no change to multi-year development plans Maintain cap apital tal di discipline cipline Concentrate activity in economic core of Delaware & STACK Generate free cash flow in 2H 2018 (2) Currently marketing ~$1 billion of non-core assets across the U.S. Portfolio simpl plifica ificati tion on Expect to exceed $5 billion divestiture target by around year end Continuously evaluating options to high-grade portfolio Complete $4 billion share-repurchase program by 1H 2019 Shareholder-friendly ini nitia tiati tives es Retire ~$280 million of maturing debt by early next year Positioned to sustainably grow quarterly dividend rate (1) Cash costs include LOE, G&A and interest expense. (2) Assumes $65 WTI & $2.75 Henry Hub pricing 3 | Q2 2018 Management Commentary
Q2 2018 Results – U.S. Oil Growth Accelerates High-returning U.S. oil production exceeds guidance U.S. oil production exceeds guidance MBOD — 2,000 barrels per day above top end of range — 12% increase in oil production vs. Q1 2018 U.S. OIL PRODUCTION 136 2,000 (Q2 Guide: 129-134) Delaware & STACK continue to deliver strong growth — Delaware oil production 54% higher year over year 122 BARRELS PER DAY — STACK oil volumes increase 41% vs. Q2 2017 ABOVE GUIDANCE — Multi-zone developments building momentum Q1 2018 Q2 2018 Prolific wells brought online drive Q2 oil beat HIGH-RATE WELLS DRIVE Q2 OIL BEAT — 4-well Cotton Draw package IP30: 14 MBOED — Top 10 STACK wells avg. IP30 2,400 BOED per well T op Delaware IP30: 14,000 BOED (70% oil) Well Results (Total rate from 4-well package in Cotton Draw area) Capital spending reduced 9% vs. Q1 2018 — Driven by reduced seasonal drilling in Canada and T op 10 STACK Avg. IP30: 2,400 BOED (~50% oil) timing of Eagle Ford activity Well Results (Top well: Porcupine 1H w/ IP30 of 3,700 BOED) 4 | Q2 2018 Management Commentary
Supply Chain Strategy Effectively Mitigating Inflation Devon expects low-to-mid single-digit inflation (vs. 2017) SERVICES & SUPPLIES SECURED — No change to 2018 capital spending outlook SERVICES & SUPPLIES SECURED — Minimal inflation expected in 2H 2018 — Development efficiencies offsetting cost pressures YTD Multi-year development plans allow for longer-term commitments at below-market rates — Decoupling historically bundled services across supply chain — Expanded vendor universe to achieve LOE and capital savings — Vast majority of services and supplies secured through 2019 This innovative contracting strategy is delivering strong results — 75% of rigs price protected at below market rates — Long-term dedicated frac crews in Delaware & STACK at significant discounts to market rates — Regional sand strategy delivering 30% savings 5 | Q2 2018 Management Commentary
Protecting Price & Flow Assurance Access to Premium Gulf Coast Markets Majority of U.S. oil production has access to Gulf Coast markets (premium to WTI pricing) STACK • Firm transport: 30 MBOD (Marketlink) Delaware Basin positioned for attractive oil pricing • Gas protected by swaps & firm transport — Swaps & firm transport protect ~90% of oil volumes Delaware — Firm transport secured for 2019 gas growth expectations Basin — Basis swaps protect gas production STACK volumes have access to advantaged markets — Pipeline access to premium Gulf Coast oil pricing • Firm transport: ~20 MBOD (Longhorn) • Firm sales: 100 MBOD (guaranteed flow) — Firm transport covers vast majority of gas production • Basis swaps protect in-basin sales — ~60% of gas volumes price protected (~$0.50 off HH) Gulf Coast Basis hedges protecting cash flow in Canada — WCS swaps protect ~50% of oil volumes in 2018 ($15 off WTI) 6 | Q2 2018 Management Commentary
EnLink Sale Drives $4 Billion Share-Buyback Program TRANSACTION DETAILS Devon exits EnLink position for $3.125 billion — Accretive transaction at 12x cash flow ENLC 115 MM Units — No tax leakage associated with sale ENLK 95 MM Units — Transaction closed in mid-July SALES PRICE: ACCRETIVE MULTIPLE: Board increases share-buyback program to $4 billion $3.125 Billion 12x Cash Flow — Largest authorization of any E&P company to date (1) — ~$1 billion repurchased through July (24 million shares) $4 Billion Share-Repurchase Program Underway Utilizing ASR programs to execute authorization (2) — Initial ASR program to begin in August — $4 billion authorization to be completed by 1H 2019 Repurchased to date (~$1 billion or ~5% of shares) Remaining program $1 BILLION Financial reporting benefits of EnLink sale — Reduces consolidated debt by $3.9 billion Repurchased To Date — G&A and interest savings of ~$300 million annually $3 BILLION REMAINING (1) Measured as a % of market capitalization (2) ASR is an acronym for “accelerated share repurchase” 7 | Q2 2018 Management Commentary
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 s tatements 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 second-quarter 2018 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. 8 | Q2 2018 Management Commentary
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