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Devon Energy July Presentation Devon Energy July Presentation Presentation Transcript

  • Investor Presentation July 2014
  • NYSE: DVN www.devonenergy.com Slide 2 Investor Notices Safe Harbor Some of the information provided in this presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. Words such as “forecasts," "projections," "estimates," "plans," "expectations," "targets," and other comparable terminology often identify forward-looking statements. Such statements concerning future performance are subject to a variety of risks and uncertainties that could cause Devon’s actual results to differ materially from the forward-looking statements contained herein, including as a result of the items described under "Risk Factors" in our most recent Form 10-K; and the items described under "Information Regarding Forward-Looking Estimates" in our Form 8-K filed May 7, 2014. Cautionary Note to Investors The United States Securities and Exchange Commission 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 and exploration target size. 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 from us at Devon Energy Corporation, Attn. Investor Relations, 333 West Sheridan, Oklahoma City, OK 73102-5015. 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.
  • Slide 3 Devon Today Sharpening The Focus Devon’s Core & Emerging Assets Core Emerging Heavy Oil Rockies Oil Mississippian- Woodford Barnett Shale Permian Basin Anadarko Basin Eagle Ford • Proved reserves: 2.6 billion BOE(1) • Q1 2014 net production:563 MBOED(1) — Oil & NGLs >50% of production mix — Expect multi-year oil growth >20% • Deep inventory of oil opportunities — Top-tier Eagle Ford development — Strong Permian Basin position — World-class SAGD oil projects — Upside potential in emerging plays • Midstream business valued at >$8 billion • Enterprise Value: ≈$45 billion (1) Excludes non-core assets identified for monetization. View slide
  • First-Quarter 2014 Highlights (1) Excludes non-core assets identified for monetization. 0 25 50 75 100 Q1 2013 Q1 2014 NetProduction(MBOPD) 62.7 97.5 U.S. Oil Production Growth(1) Unhedged Operating Margin Per Boe(2) • Delivered U.S. oil production growth of 56% YoY(1) — Achieved excellent well results in the Delaware Basin — Eagle Ford contributed 1 month of production to Q1 • Expanded operating margins by 54% YoY • Increased risked drilling inventory by >5,000 locations — Driven by Delaware Basin, Eagle Ford, Cana & Rockies • Closed Eagle Ford and EnLink Midstream transactions • Monetized Canadian conventional gas business • Added 50,000 net acres to core Cana-Woodford play (Announced May 2014) (2) Unhedged operating margin is a non-GAAP measure. Represented above is unhedged upstream revenues and midstream operating profit less LOE and production & property taxes, divided by BOE production. $20.87 $32.23 $0.00 $10.00 $20.00 $30.00 $40.00 Q1 2013 Q1 2014 View slide
  • Slide 5 Non-Core Asset Sales Sharpening The Focus • Sold Canadian conventional business for C$3.125 billion — US$2.7 billion after tax (≈5% effective tax rate after repatriation) — Accretive transaction: 7 times 2013 EBITDA — Closed April 1, 2014 • Announced U.S. non-core assets sale for $2.3 billion — $1.8 billion after tax — Accretive transaction: 7 times 2013 EBITDA — Expected to close in the third quarter of 2014 NYSE: DVN www.devonenergy.com
  • Slide 6 Permian Basin 28% 21%21% 7% 5% 11% 2% 5% Note: Capital figures exclude capitalized G&A and interest, midstream and other corporate capital. For 2014, this represents approximately $1.4 billion. Property acquisitions are also excluded. Key Highlights • 2014 E&P capital: — “Go-forward” assets: $4.8 - $5.2 billion — $260 million attributable to non-core properties • Capital concentrated in oil development plays — “Go-forward” assets delivering >70% growth in U.S. oil production — Long-term investment in Canadian oil growth — “Go-forward” assets growing top-line production ≈10% • Total capital spend to remain within cash flow • JV carries minimize capital costs in emerging oil plays (>$1 billion of drilling carries in 2014) 2014 Capital Budget $5.0 - 5.4 Billion Eagle Ford Heavy Oil Anadarko Basin Barnett Shale Emerging Oil Other Non-Core Assets 2014 E&P Capital Program Delivering Strong Oil Growth
  • NYSE: DVN www.devonenergy.com Slide 7 2014 Production Growth Targets 2013 2014e 73 124 - 136 Total Oil Production(1) (MBOPD) (1) Estimates exclude assets identified for monetization. 2013 2014e 539 579 - 622 U.S. Oil Production(1) (MBOPD) BOE Production(1) (MBOED) U.S. Canada 2013 2014e 152 198 - 216 6:1 20:1
  • Slide 8 Preliminary 2015 Outlook 2014e 2015e Oil NGLs Natural Gas (1) Estimates exclude assets identified for monetization. Total Oil Production(1) (MBOPD) Key Highlights • On track to deliver 2015 oil production growth >20%(1) — Driven by Eagle Ford, Permian and Jackfish 3 • Increased activity levels expected at Cana • High-margin production growth expected to expand operating margins • Growing cash flow to comfortably fund capital demands 198 - 216
  • Devon Oil Production Significant Oil Producer in North America 0 50 100 150 200 250 EOG CHK CLR WLL PXD CXO NFX OAS XEC SD MEG ECA LPI RRC FANG Q4 2013 Oil Production Pro Forma New Devon(1) vs. N.A. Onshore Pure-Play Peers Slide 9NYSE: DVN www.devonenergy.com (1) Pro Forma for Eagle Ford assets and excluding assets identified for monetization. MBOPD CanadaU.S.
  • NYSE: DVN www.devonenergy.com Permian Basin Overview 2014 Focus Areas • Net acreage: 1.3 million basin-wide with stacked-pay potential • Q1 2014 net production: 91 MBOED (60% oil) • Deep inventory of low-risk projects • Delivering highly economic & robust production growth — Expect ≈20% oil growth in 2014 • Operated rig count: 23 • 2014 capital: $1.5 billion • 2014 plans: Drill ≈350 wells NYSE: DVN Midland Basin Northwestern Shelf Central Basin Platform Ozona ArchDiablo Platform NewMexico Texas Midland Wolfberry Conventional Wolfcamp Shale Eastern Shelf TEXAS NEW MEXICO OKLAHOMA Bone Spring & Delaware Slide 10
  • Permian Basin Delivering Significant Oil Production Growth 0 10 20 30 40 50 60 2009 2010 2011 2012 2013 2014e NetProduction(MBOPD) NYSE: DVN www.devonenergy.com Slide 11
  • Slide 12 Delaware Basin Significant Resource Opportunity Loving Winkler Ward Reeves Lea Eddy Central New Mexico Texas Delaware Sands 80,000 net acres Leonard Shale 60,000 net acres Bone Spring 285,000 net acres Wolfcamp >100,000 net acres TEXAS NEW MEXICO OKLAHOMA • Operated rig count: 12 • 2014 plans: Drill ≈150 wells • Activity focused on repeatable, high- impact Bone Spring • Two recent high-rate Delaware Sands wells — 30-day IP rate: >1,000 BOED (≈90% oil) • Initial Wolfcamp well in Ward County successful — 30-day IP rate: 950 BOED (85% oil)
  • NYSE: DVN www.devonenergy.com Slide 13 Delaware Basin Significant Resource Opportunity Net Acres Producing Wells 2014e Activity (Wells Drilled) Risked Undrilled Locations 80,000 78 20 700 60,000 40 1 700 285,000 233 ≈120 3,500 >100,000 12 3 Under Evaluation 20,000 2 4 >200 >500,000 365 ≈150 >5,000 Delaware SandsDelaware Sands Leonard ShaleLeonard Shale Bone SpringBone Spring WolfcampWolfcamp Other (Yeso & Strawn)Other (Yeso & Strawn) Formation Total
  • Slide 14 Eagle Ford Overview World-Class Oil Asset • Located in best part of Eagle Ford • Net acreage: 82,000 — Working interest: 50% — Net revenue interest: 38% • Acquisition closed on February 28th • Current daily rate: 64 MBOED • 2014e net production: 70 – 80 MBOED(1) — 57% Oil — 19% NGLs — 24% Gas • Risked resource: ≈400 MMBOE • Drilling inventory: ≈1,200 locations • 2014 capital: $1.1 billion Karnes Devon Acreage Gonzales DeWitt Lavaca TEXAS OKLAHOMA (1) Represents Devon’s average estimated net production from March through December.
  • NYSE: DVN www.devonenergy.com Slide 15 Eagle Ford Low-Risk Development Inventory DeWitt Existing Producer Undrilled Infill Devon Acreage TEXAS OKLAHOMA • Derisked and ready for development • Risked resource: ≈400 MMBOE — 80% resides in DeWitt County • Risked undrilled locations: ≈1,200
  • 2014e Production Outlook (MBOED) Slide 16 Eagle Ford Production Outlook March 2014 May 2014 Q2 2014e 2H 2014e 65 – 70 80 – 85 64 49 Multi-Year Production Outlook (MBOED) 2014e 2015e 70 – 80 (1) >100 (1) Represents Devon’s estimated net production from March through December.
  • NYSE: DVN www.devonenergy.com Slide 17 Eagle Ford Upside Recent Industry Success - Lavaca County Gonzales DeWitt Lavaca Zebra Hunter 3H 24-Hr IP: 2,250 BOED Zebra Hunter 2H 24-Hr IP: 1,511 BOED Welhausen A2H 24-Hr IP: 2,165 BOED Welhausen B1H 24-Hr IP: 1,536 BOED Lower Eagle Ford Upper Eagle Ford Devon’s Lavaca County • Net acres: 32,000 • <10% of acquisition value assigned • Significant upside potential • 2014 plans: Drill >30 wells Pavlicek Un 2H 24-Hr IP: 1,319 BOED Pavlicek Un 5H 24-HR IP: 1,411 BOED Fojtik #1H 24-Hr IP: 1,209 BOED Sustr #1H 24-Hr IP: 1,054 BOED Targac #1H 24-Hr IP: 1,398 BOED Recent Industry Drilling
  • SAGD Oil Developments Jackfish & Pike Slide 18 Ft. McMurray Edmonton Calgary ALBERTABRITISH COLUMBIA Jackfish & Pike Jackfish 1 Jackfish 2 Jackfish 3 Access Pipeline R8 R7 R6 R5 R4 T76 T75 T74 T73 Jackfish Acreage (100% WI) Pike Acreage (50% WI) Access Pipeline (50% Ownership) Pike Project Area 6 Miles SAGD Characteristics: • Low F&D • Low geologic risk • High reservoir quality • Flat production profile • Long reserve life >20 years • Q1 2014 production from Jackfish projects — Gross production: 62 MBOPD (9% increase YOY) — Net production: 52 MBOPD Each SAGD Project: • 300 MMBO gross EUR • Proved reserves 12/31/13: 552 MMBO • Risked resource: 1.4 BBO
  • NYSE: DVN www.devonenergy.com Slide 19 Jackfish SAGD Developments Visible Oil Growth 0 25 50 75 100 2014e 2015e 2016e NetProduction(MBOPD) 47 - 52 62 - 67 77 - 82 Oil Production Growth Outlook Jackfish 1 • Facility running above name-plate capacity — Q1 2014 production: 37 MBOPD gross (29 MBOPD net) • Delivering top-tier operating results • Solvent and gas co-injection pilots underway Jackfish 2 • Q1 2014 production increased 8% YoY — Q1 2014 production: 25 MBOPD gross (23 MBOPD net) • New well pad ramping up Jackfish 3 • Commissioning underway • Plant start-up expected in Q3 2014
  • NYSE: DVN www.devonenergy.com Slide 20 Jackfish SAGD Developments Significant Free Cash Flow Generation Assumptions: 1) $90 WTI oil and $4.50 Henry Hub natural gas 2) Bitumen realizations at 65% of WTI 3) Non-fuel operating costs of $12 per barrel 4) Free cash flow is after maintenance capital (average of ≈$300 million per year) and before income tax. $0 $200 $400 $600 $800 $1,000 $1,200 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e $inmillions Free Cash Flow Outlook
  • Slide 21 Mississippian-Woodford & Rockies Emerging Oil Opportunities NYSE: DVN www.devonenergy.com OKLAHOMA Mississippian-Woodford Net Acres: ≈200,000 (Inside JV) Q1 Net Production: 19,000 BOED Operated rigs: 8 2014 Capital: ≈$300 million Rockies Oil Net Acres: 150,000 (Powder River Basin) Q1 Net Production: 20,000 BOED Operated rigs: 3 2014 Capital: ≈$300 million WYOMING Mississippian-Woodford • Multiple oil-bearing intervals • Q1 2014 net production increased 35% sequentially • Drilling activity focused on JV acreage • Best wells to-date: IP’s >1,000 BOED • Integration of 3D seismic will optimize results Rockies Oil • Focused in Powder River Basin (Best wells IP’s >1 MBOED) • Stacked oil targets (Parkman, Turner, Frontier & others) • Risked inventory: ≈1,000 locations and growing 0 10 20 30 40 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 NetProduction(MBOED) Emerging Oil Production Growth
  • NYSE: DVN www.devonenergy.com Slide 22 Liquids-Rich Gas Barnett Shale & Anadarko Basin Net risked resource: >25 TCFE Risked locations: >10,000 • Net acreage: >900,000 • Low average royalty burden: <20% • Q1 2014 net production: 1.8 BCFED (32% liquids) • Significant free cash flow (>$1 billion in 2014) • Operated rig count: 4 • 2014 capital: $600 million • 2014 plans: Drill ≈200 wells Basin Wheeler Hemphill Canadian Blaine Caddo Johnson Tarrant DentonWise Parker Ft. Worth Denton Oklahoma City Barnett Shale Net Acres: >600,000 Q1 Net Production: 1.3 BCFED Operated Rigs: 2 Anadarko Basin (Cana & Granite Wash) Net Acres: ≈350,000 Q1 Net Production: 512 MMCFED Operated Rigs: 2
  • Slide 23 Anadarko Basin Resource Capture Cana-Woodford Acquisition & Upside • Acquired 50,000 net acres (announced May 2014) — Directly overlaps existing leasehold — Increases Cana position to ≈300,000 net acres • Improved completion design enhancing returns — Utilizing more proppant per well (70% higher) — Increased frac stages (up to 20 stages) • Workover activity yielding excellent results — Chemical treatments performed on 70 wells — Avg. rates per well increased from 1 to 3+ MMCFED — Payback period for treatment <3 months — Identified >200 additional future locations • Significant undrilled well inventory — Total Cana risked locations: >5,000 Custer Dewey Blaine Caddo Canadian Grady Cana Plant Existing Devon acreage Acquired acreage TEXAS OKLAHOMA Kingfisher
  • NYSE: DVN www.devonenergy.com Slide 24 Disciplined Capital Allocation • Investing in E&P capital projects — Accelerating development of high-margin oil projects — Leveraging JV drilling carries in emerging plays • High-grading asset portfolio • Returning capital to shareholders — Reduced net share count by ≈20% over past decade — Increased average annual dividend by 23% since 2004 • Reducing debt Top objective: Maximize shareholder returns by optimizing cash flow per share, adjusted for debt
  • Financial Strength & Flexibility • Investment-grade ratings — Fitch: BBB — Moody’s: Baa1 — S&P: BBB+ • Cash balances at 3/31/14: $2.0 billion • Pro forma net debt at 3/31/14(1): $11 billion (≈$9B excluding EnLink) • Future divestiture proceeds to reduce debt • Cash flow protected by hedges Note: Includes a non-GAAP measure, see appendix for required disclosures. (1) Includes net proceeds from sale of Canadian conventional assets in April 2014 (US$2.7 billion).
  • NYSE: DVN www.devonenergy.com Slide 26 Innovative Midstream Combination EnLink Midstream Overview AUSTIN CHALK EAGLE FORD PERMIAN BASIN CANA- WOODFORD ARKOMA- WOODFORD BARNETT SHALE HAYNESVILLE & COTTON VALLEY UTICA MARCELLUS LA TX OK OH WV PA Gathering System Processing Plant Fractionation Facility North Texas Systems LIG System PNGL System Cajun‐Sibon Expansion Howard Energy Ohio River Valley Pipeline Storage Crude & Brine Truck Station Brine Disposal Well Barge Terminal Rail Terminal • Devon retains majority ownership — General partner (ENLC 70%) — MLP (ENLK 52%) • EnLink transaction highly accretive to shareholders • Market value of Devon’s EnLink ownership interest: >$8 billion • Improves capital efficiency, diversification, scale and growth of midstream business
  • Slide 27 EDMONTON HARDISTY Express P/L To U.S. Rockies 16” Diluent Line (Edmonton to Jackfish Area) Oil Pipelines JACKFISH & PIKE Sturgeon Terminal 24” Diluent Line (Sturgeon to Jackfish Area) 42” Blend Line (Jackfish Area to Sturgeon) 30” Blend Line (Sturgeon to Edmonton) • Three ≈180 mile pipelines from Sturgeon Terminal to Devon’s thermal acreage • ≈30 miles of dual pipeline from Sturgeon Terminal to Edmonton • Devon ownership: 50% — ≈$1B invested to date • Capacity net to Devon (after 2014 expansion): — Blended bitumen: 170 MBOPD — Diluent: 95 MBPD • Expandable with additional investment • Access to Edmonton refining and rail, west coast waterborne and U.S. markets • Flexibility enhances economics Potential Drop Down Asset Access Pipeline (SAGD Oil Midstream)
  • NYSE: DVN www.devonenergy.com Slide 28 Why Own Devon? • Disciplined focus on returns • Deep inventory of oil opportunities — Top-tier Eagle Ford development — Strong Permian Basin position — World-class SAGD oil projects — Upside potential in emerging oil plays • Visible, low-risk oil production growth • Strong balance sheet • Active portfolio management
  • Thank You
  • Appendix A Strategy & Operations
  • NYSE: DVN www.devonenergy.com Slide 31 Strategic Objective Devon strives to maximize long-term value for our shareholders by growing cash flow per share, adjusted for debt.
  • NYSE: DVN www.devonenergy.com Slide 32 We Pursue Our Strategic Objective By: • Exercising capital discipline • Maintaining a low-cost structure to maximize operating margins • Focusing on high-return projects • Improving performance through midstream business • Preserving financial strength and flexibility
  • NYSE: DVN www.devonenergy.com Slide 33 Advantaged Resource Base • Low entry costs (acreage and royalties) • Large, concentrated positions • High-graded portfolio (capturing and divesting) • Strategic midstream business
  • NYSE: DVN www.devonenergy.com Slide 34 Portfolio Management Goal: Optimize depth, diversity, and quality of drilling inventory • Harvesting mature and lower-return assets • New leasehold capture • Joint ventures / farm-ins
  • NYSE: DVN www.devonenergy.com Slide 35 Pike Overview SAGD Oil Development Pike leasehold • 50% operated working interest • Similar reservoir characteristics to Jackfish • Up to five 35 MBOPD SAGD development phases Potential Pike 1 development • Single plant pad • Up to three 35 MBOPD projects • Developed concurrently Jackfish Pike acreage (50% WI) >15m (≈50ft) continuous bitumen pay Pike Project Area Pike 1 Development Area Access Pipeline (50% Ownership)
  • NYSE: DVN www.devonenergy.com Slide 36 SAGD Upside Solvents Potential Benefits • Increases production rates per well and plant production capacity • Lower steam-oil ratios (15% - 50% decrease) • Reduces plant emissions Risks • Access to solvent • Solvent recovery Status Update • 1st pilot program: Initiated in 2013
  • NYSE: DVN www.devonenergy.com Slide 37 Small-Scale SAGD • Reusable SAGD facilities designed to exploit smaller accumulations of bitumen (4 prospects identified) — Targeted resource: 35-70 MMBO per project — Peak production rates up to 10 MBOPD per project — Less upfront capital commitments (30% of the capital required for traditional SAGD projects) — Earlier return on capital (1st oil sale ≈25 months after sanctioning)
  • NYSE: DVN www.devonenergy.com Slide 38 Iron River Manatokan End Lake Lloydminster Lloydminster Oil Development • Net acreage: ≈700,000 • Low-risk development • Strong operating margins • Q1 2014 net production: 30 MBOED • 2014 plans: ≈150 wells B. C. Alberta Sask. Lloydminster
  • Mississippian-Woodford Trend Emerging Oil Opportunity Pawnee Payne Logan Garfield Noble Joint Venture Acreage Nemaha Ridge • Net acres to DVN in JV area: ≈200,000 • Drilling activity focused on joint venture acreage • Multiple oil-bearing intervals • Q1 2014 net production rate: 19,000 BOED • Operated rig count: 8 • 2014 plans: Drill >200 wells • Risked inventory: 1,000 locations and growing • Best wells to-date: IP’s >1,000 BOED • Integration of 3D seismic will optimize results NYSE: DVN www.devonenergy.com Slide 39 OK
  • Rockies Oil Powder River Basin Slide 40 Sheridan Campbell Johnson Converse MT WY Natrona • Net acreage: 150,000 • Stacked oil targets (Parkman, Turner, Frontier & others) • High impact wells (Best wells: IP’s >1,000 BOED) • Operated rig count: 3 • 2014 plans: Drill ≈30 wells
  • Barnett Shale Liquids-Rich Gas Development • Net acreage: ≈600,000 • Low average royalty burden: 18% • Q1 2014 net production: 1.3 BCFED — Liquids 27% of total production — Total liquids growth 5% YoY • Liquids-rich drilling inventory: >2,500 locations ParkerPalo Pinto Hood Tarrant Johnson Erath Hill Jack Denton Wise Denton Ft. Worth DRY GAS Bridgeport Plant LIQUIDS-RICH TEXAS OKLAHOMA www.devonenergy.com Slide 41
  • Permian Basin Midland-Wolfcamp Shale Oil Development Reagan Irion Crockett TX NM Overview • Net acreage: 117,000 • Low-risk, high-margin light oil play • Delivering consistent economic results • Thick pay with multiple intervals (up to 1,100’) • Multi-year drilling inventory (≈800 locations) • Efficiencies achieved through pad drilling — Drilling time down to <15 days — >50% improvement in drilling time since 2012 — Recent well drilled in only 4 days Current Development Plans • Operated rig count: 5 • 2014 capital: ≈$200 million • 2014 plans: Drill 140 wells NYSE: DVN www.devonenergy.com Slide 42
  • NYSE: DVN www.devonenergy.com Slide 43 Granite Wash Oil & Liquids-Rich Gas Development • Net acreage: 66,000 • Legacy land position held by production • Low average royalty burden: 19% • Q1 2014 net production: 22 MBOED OKLAHOMA Oklahoma City TEXAS Granite Wash Hemphill Wheeler
  • NYSE: DVN www.devonenergy.com Slide 44 Mississippian (≈300,000 JV acres) Rockies Oil (323,000 JV acres) Utica Ohio (≈200,000 JV acres) Michigan (≈400,000 JV acres) Joint Venture Transactions Oil & Liquids Exploration Sinopec Joint Venture • $2.5 billion transaction ($900 million cash and $1.6 billion drilling carry) • Drilling carry balance: $685 million (3/31/14) • Sinopec receives 33% of Devon’s interest • Net acreage in joint venture: >1 million • Devon serves as operator Sumitomo Joint Venture • $1.4 billion transaction ($400 million cash and $1.0 billion drilling carry) • Drilling carry balance: $450 million (3/31/14) • Sumitomo receives 30% of Devon’s interest • Net acreage in joint venture: >600,000 • Devon serves as operator Sinopec joint venture assets Cline Shale & Wolfcamp Shale (>600,000 JV acres) Sumitomo joint venture assets
  • Slide 45 Attractively Hedged Oil Hedges • ≈70% of “go-forward” oil production hedged (Q2-Q4 2014) — 75 MBOPD swapped at $94 per BBL — 69 MBOPD collared at $89 - $100 per BBL — 12 MBOPD swapped at an $18 differential to WTI (WCS basis swap) • 80 MBOPD of oil production hedged in 2015 — 77 MBOPD swapped at $90 per BBL — 3 MBOPD collared at $86 - $96 per BBL Natural Gas Hedges • ≈75% of “go-forward” gas production hedged (Q2-Q4 2014) — 800 MMCFD swapped at $4.42 per MCF — 460 MMCFD collared at $4.03 - $4.51 per MCF Note: The pricing points referenced above are weighted average prices.
  • NYSE: DVN www.devonenergy.com Slide 46 EnLink Midstream Business Ownership Structure Devon Energy Corporation (NYSE: DVN) General Partner EnLink Midstream LLC (ENLC) Master Limited Partnership EnLink Midstream Partners LP (ENLK) Devon Midstream Holdings, LP (“Devon Holdings”) GP Public  Unitholders MLP Public  Unitholders ≈30% ≈40% LP ≈52% LP (120 MM units) General Partner, ≈7% LP and IDRs 50% LP50% LP 100% Incentive Distribution Rights (IDRs) Dist./Qtr Splits ≤ $0.2500 2% / 98% ≤ $0.3125 15% / 85% ≤ $0.3750 25% / 75% > $0.3750 50% / 50% ≈70% (115 MM units)
  • Potential Drop Down Asset Victoria Express Pipeline (VEX) (Eagle Ford) • ≈56 mile crude oil pipeline from Eagle Ford core to Devon’s Port of Victoria terminal • 50 MBOPD start-up capacity (expandable) • ≈300,000 barrels of storage available • VEX commissioning to begin early Q3 • Provides additional market options for crude and condensate • Devon ownership: 100% • Total current project capital: $70 MM (≈1/2 of capital spent by GeoSouthern) Point Comfort Port of Victoria Karnes Gonzales DeWitt Lavaca Victoria Jackson Goliad Wharton Colorado Calhoun Refugio Aransas Matagorda VEX Potential Expansion VEX Under Construction Devon Acreage Gulf of Mexico
  • Appendix B Supply & Demand
  • Canadian Crude Oil Supply & System Export Capacity Source: Canadian Association of Petroleum Producers and Devon estimates 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2011 2012 2013 2014e 2015e 2016e 2017e 2018e MMBOD Oil Supply Current Export & Local Demand Capacity Rail Alberta Clipper - Flanagan South Trans Mountain Expansion Keystone XL Energy East Northern Gateway Enbridge Line 3 Replacement
  • NYSE: DVN www.devonenergy.com Slide 50 Canadian Oil Pipeline Capacity Additions Flanagan South: Flanagan to USGC • Capacity: staged increments up to 0.6 MMBOPD • Estimated in service: Q3 2014 Alberta Clipper/Southern Access: Hardisty to Flanagan • Capacity: staged increments up to 0.8 MMBOPD • Estimated in service: mid-2015 Enbridge Line 9B Reversal: Sarnia to Montreal • Capacity: 0.3 MMBOPD • Estimated in service: Q4 2014 Keystone XL: Hardisty to USGC • Capacity: 0.8 MMBOPD • Estimated in service: mid-2016 Trans Mountain: Edmonton to Vancouver • Capacity: 0.6 MMBOPD • Estimated in service: 2017 Enbridge Line 3 Replacement : Hardisty to Superior • Capacity: 0.8 MMBOPD • Estimated in service: Q3 2017 Energy East: Hardisty to St. John • Capacity: 1.1 MMBOPD • Estimated in service: 2018 Northern Gateway: Edmonton to Kitimat • Capacity: 0.5 MMBOPD • Estimated in service: 2018 U.S. Gulf Coast (USGC) Cushing Hardisty Edmonton Flanagan Kitimat St. John Vancouver Superior Sarnia Montreal
  • Canadian Oil Rail Transport Fees Potential Rail Costs $ Per BBL Trucking & Loading ≈$5.00 Rail Car Rental ≈$2.50 Transport Fee Variable (Mileage Based) Offloading Fee ≈$2.00 Oil Sands West Coast Refining Gulf Coast Refining East Coast Refining
  • www.devonenergy.com Slide 52 Heavy Oil Refinery Expansions Operator Location In-Service Date Capacity Increase (BOPD) Husky Lima, Ohio 2016 40,000 Northwest Upgrading Edmonton, Alberta 2017 80,000 Total Capacity Increase 120,000 NYSE: DVN
  • NYSE: DVN www.devonenergy.com Slide 53 U.S. Natural Gas Demand Growth By Sector 2013-2018 Source: Wood Mackenzie, EIA, PIRA, Bloomberg, FERC, US DOE, and Devon estimates BCFD 72 2.5 3.7 2.1 0.5 6.5 87 60 65 70 75 80 85 90 2013 Baseline Industrial Res/Com Electric Mex/Can Exports Other LNG Exports 2018 Total -0.5
  • NYSE: DVN www.devonenergy.com Slide 54 U.S. Natural Gas Cumulative Coal Retirement Demand Forecast Source: Wood Mackenzie, Bernstein, PIRA, and Devon estimates BCFD -0.2 0.0 1.6 2.9 3.7 -2 0 2 4 6 2014F 2015F 2016F 2017F 2018F Renewable Generation Coal Retirements Fuel Switching Net Effect
  • NYSE: DVN www.devonenergy.com Slide 55 U.S. Natural Gas Annual Industrial Demand Source: Devon estimates 20.0 20.5 21.1 21.7 22.1 22.5 10 13 16 19 22 25 2008 2009 2010 2011 2012 2013A 2014F 2015F 2016F 2017F 2018F BCFD Base Y/Y Growth
  • NYSE: DVN www.devonenergy.com U.S. Natural Gas LNG Projects Facility Developer(s) Location Total Capacity FTA/Non-FTA (BCFD) Non-FTA Capacity (BCFD) Start-Up Date DOE Approval Non-FTA Approval FERC Final Investment Decision (FID) Sabine Pass (phase 1 & 2) Cheniere Cameron, LA 2.2 2.2 4Q 2015 Approved Approved July 2012 Freeport LNG (phase 1) Freeport LNG Freeport, TX 1.4 1.4 4Q 2017 Approved Filed -- Lake Charles Lake Charles Exports/Trunkline Lake Charles, LA 2.0 2.0 2Q 2019 Approved Pre-Filed -- Cove Point Dominion Lusby, MD 1.0 0.8 2017 Approved Filed -- Freeport LNG (phase 2) Freeport LNG Freeport, TX 1.4 0.4 4Q 2018 Approved Pre-Filed Cameron Sempra Energy Hackberry, LA 1.7 1.7 2017 Approved Filed -- Jordan Cove Fort Chicago Coos Bay, OR 1.2 0.8 2017 Approved Approved -- Oregon LNG LNG Development Astoria, OR 1.3 1.3 4Q 2017 Pending Filed -- Corpus Christi Cheniere Corpus Christi, TX 2.1 2.1 2020 Pending Filed -- Excelerate LNG Excelerate Lavaca Bay, TX 1.4 1.4 2020 Pending Pre-Filed -- Gulf Coast LNG Freeport LNG Brownsville, TX 2.8 2.8 2020 Pending -- -- Others 16 – 18 15 – 17 2017 - 2026 -- -- -- TOTAL U.S. 34.5 – 36.5 31.9 – 33.9
  • NYSE: DVN www.devonenergy.com Canadian Natural Gas LNG Projects Facility Developer(s) Location Capacity (BCFD) Start-Up Date NEB Export License Douglas Channel Energy LNG Partners, Haisla Nation Floating LNG, Kitimat, B.C. 0.1 2017 Approved Kitimat LNG Apache, Chevron Kitimat, B.C. 0.7 2018 Approved LNG Canada Shell, Mitsubishi, KOGAS, PetroChina Kitimat, B.C. 1.6 2019 Approved Pacific Northwest LNG Petronas, Japex Prince Rupert, B.C. (Lelu Island) 2.0 2019 Approved Prince Rupert LNG BG Group Prince Rupert, B.C. (Ridley Island) 1.8 2020 Approved WCC LNG Ltd Imperial/Exxon Grassy Point (Prince Rupert B.C.) 1.3 2022 Approved Woodfibre LNG Pacific Oil & Gas Group Squamish, B.C. 0.3 2017 Approved Goldboro LNG Pieridae Energy Nova Scotia 1.3 2019 Filed Triton LNG Altagas, Idemitsu Kosan (Japan) Floating LNG, Kitimat or Prince Rupert, B.C. 0.3 2017 Filed Aurora LNG CNOOC-Nexen Grassy Point (Prince Rupert B.C.) 3.2 2022 Filed TOTAL CANADA 12.6
  • 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Jan 2010 Jan 2011 Jan 2012 Jan 2013 MMBPD Estimated Ethane Rejection Ethane Extraction Ethane Rejection Natural Gas Liquids Supply Page 58 Q1 Q2 Q3 Q4* Q1F Q2F Q3F Q4F* 2013 2014F 2012 Final 2013 Final Ethane 0.9 0.9 1.0 1.0 1.1 1.2 1.2 1.2 1.0 1.0 NG Propane 0.9 0.9 0.9 1.0 1.1 1.0 1.0 1.1 0.8 0.9 Refinery Propane 0.5 0.6 0.6 0.6 0.5 0.6 0.6 0.6 0.6 0.6 Isobutane 0.2 0.2 0.3 0.2 0.3 0.3 0.3 0.3 0.2 0.2 Normal Butane* 0.2 0.5 0.4 0.1 0.5 0.6 0.5 0.2 0.3 0.3 Natural Gasoline 0.3 0.4 0.4 0.3 0.5 0.5 0.5 0.5 0.3 0.4 Total US NGL Supply 3.2 3.5 3.5 3.2 4.0 4.0 4.1 3.9 3.2 3.3 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 U.S. NGL Supply by Component** (MMBPD) *Q4 Normal Butane volumes reflect excess refinery usage reported as negative production, which impacts reported total. ** Product total includes imports and refinery surplus volumes Source: EIA, Wells Fargo, Morgan Stanley, Bentek, and Devon estimates
  • 0.4 0.4 0.5 0.6 0.8 0.8 0.8 0.8 0.3 0.5 3.6 3.0 3.2 3.9 4.1 3.7 3.8 4.1 3.1 3.4 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Q1 Q2 Q3 Q4 Q1F Q2F Q3F Q4F 2012 2013 2013 2014F MMBPD Petchem Other End Use Refinery/Blender Exports U.S. Natural Gas Liquids Demand Source: EIA, Hodson Report, CMAI, Wells Fargo, Bentek, and Devon forecasts
  • Natural Gas Liquids Demand – LPG exports Page 60 0 200 400 600 800 1,000 1,200 2007 2008 2009 2010 2011 2012 2013 2014 2015 MBPD Actual LPG Exports Current LPG Capacity Planned LPG Capacity Source: EIA, Argus, Platts, Waterborne Energy, Bentek and Wells Fargo
  • Natural Gas Liquids Inventories & Cracking Rates 5 10 15 20 25 30 35 40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMBbl U.S. Ethane Inventories 5 Yr. High/Low 2013 2012 5 Yr. AVG. 0.3 0.5 0.7 0.9 1.1 1.3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMBPD U.S. Ethane Cracking Rate 5 Yr. High/Low 2013 2012 5 Yr Average 0.0 0.1 0.2 0.3 0.4 0.5 0.6 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMBPD U.S. Propane Cracking Rate 5 Yr. High/Low 5 Yr Average 2013 2012 End of Month Weekly Total 2014 10 20 30 40 50 60 70 80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMBbl U.S. Propane Inventories 5 yr High/Low 2013 2012 5 Yr. AVG. Page 61Source: EIA and Hodson Report
  • Appendix C Key Modeling Statistics
  • NYSE: DVN www.devonenergy.com Slide 63 Key Modeling Statistics Based on 2014 Drilling Program 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Bone Spring (Permian Basin) Working interest / royalty: 76% / 21% Drill & complete costs: $6 MM 30-day IP rate: 550 - 600 BOED EUR: 400 – 500 MBOE Oil / NGLs as % of production: 65% / 20% 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Midland-Wolfcamp Shale (Permian Basin) Working interest / royalty: 62% / 24% Drill & complete costs: $6 MM 30-day IP rate: 400 BOED EUR: 450 MBOE Oil / NGLs as % of production: 55% / 25%
  • NYSE: DVN www.devonenergy.com Slide 64 Key Modeling Statistics Based on 2014 Drilling Program 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Eagle Ford (DeWitt County) Working interest / royalty: 50% / 25% Drill & complete costs: $9 - $10 MM 30-day IP rate: 1,200 – 1,400 BOED EUR: 850 – 950 MBOE Oil / NGLs as % of production: 60% / 20% 0% 15% 30% 45% 60% 75% 90% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Eagle Ford (Lavaca County) Working interest / royalty: 50% / 25% Drill & complete costs: $9 MM 30-day IP rate: 1,000 – 1,100 BOED EUR: 400 – 500 MBOE Oil / NGLs as % of production: 75% / 10%
  • NYSE: DVN www.devonenergy.com Slide 65 Key Modeling Statistics Based on 2014 Drilling Program 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Mississippian Lime (Mississippian-Woodford Trend) Working interest / royalty: 35% / 19% Drill & complete costs: $3 - $4 MM 30-day IP rate: 250 - 350 BOED EUR: 300 – 400 MBOE Oil / NGLs as % of production: 40% / 20% 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Woodford Oil Shale (Mississippian-Woodford Trend) Working interest / royalty: 42% / 22% Drill & complete costs: $3 - $4 MM 30-day IP rate: 250 - 350 BOED EUR: 300 – 400 MBOE Oil / NGLs as % of production: 35% / 35%
  • NYSE: DVN www.devonenergy.com Slide 66 Key Modeling Statistics Based on 2014 Drilling Program 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Cana-Woodford Shale Working interest / royalty: 51% / 21% Drill & complete costs: $8 MM 30-day IP rate: 5.5 MMCFED EUR: 8 BCFE Oil / NGLs as % of production: 10% / 25% 0% 15% 30% 45% 60% 75% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Decline Rates (1st month to 13th month) Barnett Shale Working interest / royalty: 89% / 18% Drill & complete costs: $3 - $3.5 MM 30-day IP rate: 3 MMCFED EUR: 4 BCFE Oil / NGLs as % of production: 5% / 45%
  • Discussion of Risk Factors Information provided in this presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. Forward-looking statements are identified in this presentation as “forecasts, projections, estimates, plans, expectations, targets, opportunities, potential, outlook, etc.” and are subject to a variety of risk factors. A discussion of risk factors that could cause Devon’s actual results to differ materially from the forward-looking statements contained herein are outlined below. The forward-looking statements provided in this presentation are based on management’s examination of historical operating trends, the information which was used to prepare reserve reports and other data in Devon’s possession or available from third parties. Devon cautions that its future oil, natural gas and NGL production, revenues and expenses are subject to all of the risks and uncertainties normally incident to the exploration for and development, production and sale of oil, gas and NGLs. These risks include, but are not limited to, price volatility, inflation or lack of availability of goods and services, environmental risks, drilling risks, political changes; changes in laws or regulations, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks identified in our Form 10-K and our other filings with the SEC. Specific Assumptions and Risks Related to Price and Production Estimates Prices for oil, natural gas and NGLs are determined primarily by prevailing market conditions. Market conditions for these products are influenced by regional and worldwide economic conditions, weather and other local market conditions. These factors are beyond Devon’s control and are difficult to predict. In addition to volatility in general, Devon’s oil, gas and NGL prices may vary considerably due to differences between regional markets, differing quality of oil produced (i.e., sweet crude versus heavy or sour crude), differing Btu contents of gas produced, transportation availability and costs and demand for the various products derived from oil, natural gas and NGLs. Substantially all of Devon’s revenues are attributable to sales, processing and transportation of these three commodities. Consequently, Devon’s financial results and resources are highly influenced by price volatility. Estimates for Devon’s future production of oil, natural gas and NGLs are based on the assumption that market demand and prices for oil, gas and NGLs will continue at levels that allow for profitable production of these products. There can be no assurance of such stability. Most of Devon’s Canadian production of oil, natural gas and NGLs is subject to government royalties that fluctuate with prices. Thus, price fluctuations can affect reported production. Estimates for Devon’s future processing and transport of oil, natural gas and NGLs are based on the assumption that market demand and prices for oil, gas and NGLs will continue at levels that allow for profitable processing and transport of these products. There can be no assurance of such stability. The production, transportation, processing and marketing of oil, natural gas and NGLs are complex processes which are subject to disruption due to transportation and processing availability, mechanical failure, human error, meteorological events including, but not limited to, hurricanes, and numerous other factors. The following forward-looking statements were prepared assuming demand, curtailment, producibility and general market conditions for Devon’s oil, natural gas and NGLs will be substantially similar to those of 2013, unless otherwise noted. Assumptions and Risks Related to Capital Expenditures Estimates Devon’s capital expenditures budget is based on an expected range of future oil, natural gas and NGL prices as well as the expected costs of the capital additions. Should actual prices received differ materially from Devon’s price expectations for its future production, some projects may be accelerated or deferred and, consequently, may increase or decrease capital expenditures. In addition, if the actual material or labor costs of the budgeted items vary significantly from the anticipated amounts, actual capital expenditures could vary materially from Devon’s estimates. Assumptions and Risks Related to Marketing and Midstream Estimates Devon cautions that its future marketing and midstream revenues and expenses are subject to all of the risks and uncertainties normally incident to the marketing and midstream business. These risks include, but are not limited to, price volatility, environmental risks, mechanical failures, regulatory changes, the uncertainty inherent in estimating future processing volumes and pipeline throughput, cost of goods and services and other risks.
  • Non-GAAP Reconciliation Net Debt Slide 68 Devon defines net debt as debt less cash, cash equivalents and short-term investments. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt. Note: The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles). The company must reconcile the Non-GAAP financial measure to related GAAP information. RECONCILIATION TO GAAP INFORMATION (in billions) Total debt (GAAP) at 3/31/2014 $15.5 Adjustments: Cash and short-term investments at 3/31/2014 2.0 Net debt (Non-GAAP) at 3/31/2014 $13.5 Net proceeds from Canadian conventional gas sale (April 2014) 2.8 Pro Forma Net Debt $10.7