Q4 2017 Management Commentary February 21, 2018 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 statements. 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 | Q4 2017 Management Commentary
2018 Capital & Production Outlook FOCUSED $ OPTIMIZED OIL DEVELOPMENT FOR RETURNS GROWTH PROGRAM S E L F F U N D E D AT 2 0 1 8 e E & P C A P I TA L STACK & DEL AWARE $50 WTI >35% Increase $2.2-2.4 Billion NO PL ANS TO INCREASE 90% DEVOTED TO (2017 VS 2018) ACTIVIT Y LEVELS U.S. RESOURCE PL AYS 3 | Q4 2017 Management Commentary
2020 Vision: Strategic Principles TOP OBJECTIVE: OPTIMIZE RETURNS & DELIVER CAPITAL-EFFIECENT, CASH-FLOW GROWTH Maximize cash flow Leverage technology to optimize base production and aggressively reduce per-unit cash costs. Focus on capital efficiency Optimize returns across the portfolio through more measured and consistent capital investment in the Delaware and STACK. Portfolio simplification Bring forward value by monetizing non-core assets at the appropriate value as market conditions allow. Improve financial strength Attain a top-tier balance sheet in the E&P space by targeting a net debt to EBITDA ratio of 1.0x - 1.5x and maintain the ratio in a sustained $50 WTI price environment. Return cash to shareholders Sustainably return increasing amounts of cash to shareholders through higher dividends and opportunistic share buybacks. 4 | Q4 2017 Management Commentary
2020 Vision: 3-Year Outlook 3-YEAR PERFORMANCE TARGETS (1) (ASSUMING $50 WTI & $3 HENRY HUB) >25% CAGR FREE CASH FLOW GENERATION DELAWARE + STACK OIL PRODUCTION ABOVE $50 WTI & $3 HH >15% ~15% COST SAVINGS MID-TEENS CAGR PER-UNIT CASH U.S. OIL PRODUCTION EXPECTED BY 2020 >15% CAGR 1.0x-1.5x CORPORATE LEVEL RETURNS UPSTREAM CASH FLOW NET DEBT TO EBITDA PORTFOLIO SHAREHOLDER SIMPLIFICATION RETURNS $2.5 BILLION OF CUMULATIVE FREE POTENTIAL FOR >$5 BILLION See slide 6 for return measure targets and calculations. OF ASSET DIVESTITURES CASH FLOW AT $60 WTI (1) 3-year performance targets reflect capabilities of current asset portfolio and do not include assumptions for divestitures. 5 | Q4 2017 Management Commentary
2020 Vision: Management Compensation RETURN MEASURE #1 CASH RETURN ON CAPITAL EMPLOYED TA R G E T Cash Flow from Operations + After-tax Interest Expense + EnLink Distributions = 20% Average Book Equity + Average Net Debt RETURN MEASURE #2 RETURN ON CAPITAL PROGRAM TA R G E T Internal rate of return on capital investment over 2 year period, = 15% after burdening for G&A and corporate costs 6 | Q4 2017 Management Commentary
Production Update Q4 2017 oil volumes impacted by non- Q4 2017 OIL VARIANCE (MBOD) operated activity Q4 2017 Guidance (based on midpoint) 260 Strong Q4 2017 operated well productivity (6) STACK well timing (non-operated) (3) — Top 30 wells avg. 30-day IP: 2,500 BOED Other U.S. resource plays (5) Jackfish complex maintenance 2018 production update Q4 2017 Actual 246 — >50 non-op STACK wells online in January — February daily rates for Delaware & STACK ~195,000 BOED 7 | Q4 2017 Management Commentary
Full-Field Development Projects Activity in economic core of the Delaware & STACK >10 multi-zone projects scheduled in 2018 DELAWARE BASIN ACTIVITY STACK ACTIVITY 8 | Q4 2017 Management Commentary
Delaware – Multi-Zone Project Update Anaconda project online THISTLE/GAUCHO — Initial multi-zone project Anaconda 30-day IP: ~1,600 BOED per well — Achieved savings of $1 MM per well Lea Boomslang — 30-day rates: ~1,600 BOED per well Eddy Peak rates: Q2 18 Boomslang Project Boomslang completions underway Testing 11 wells per section across 3 landing zones — 15% drilling improvement vs. Anaconda A LEONARD Initial B — 7 of 11 wells in early stages of flowback Development (11-Well Program) C — 6 month cycle time 1 SPRING BONE Future Potential 2 9 | Q4 2017 Management Commentary
STACK – Multi-Zone Project Update Showboat drilling concluded Blaine Kingfisher — 30% drilling efficiencies reached Showboat (2 drilling units) Coyote (Initial Well) — Average cost savings: $500K per well First production: Q2 2018 24-Hour IP: 8,200 BOED — First production: Q2 2018 Completion activity underway at Coyote Showboat Development First multi-zone STACK development — 7-well development project UPPER MERAMEC — Improved drilling times by up to 25% LOWER — Initial well flowing back: 8,200 BOED (24-hr IP) WDFD 10 | Q4 2017 Management Commentary
Certainty of Execution D E L A W A R E & S T A C K Multi-year asset development plans Efficiencies to offset industry inflation Services and supplies secured C O M P L E T I O N C R E W S S E C U R E D — Efficiencies to drive rig reduction — Delaware & STACK frac crews secured — Sand supply locked-in No takeaway constraints 11 | Q4 2017 Management Commentary
Financial Strategy STRONG FINANCIAL POSITION Maintain investment-grade ratings — Strong liquidity: $2.7 billion of cash Excellent — Disciplined risk management Liquidity Cash: $2.7B — Targeted net debt to EBITDA: 1.0x – 1.5x EnLink Investment Market Value: ~$3.5B Capital allocation priorities in 2018 INVESTMENT- GRADE — Fund Delaware & STACK capital plan CREDIT RATINGS — Reduce up to $1.5 billion of upstream debt — Increase cash returns to shareholders Disciplined Hedging 2018: ~50% 12 | Q4 2017 Management Commentary
Thank you. For additional information see our Q4 Operations Report Thank you.
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