Date post: | 26-Jul-2015 |
Category: |
Documents |
Upload: | devon-energy-corporation |
View: | 9,858 times |
Download: | 0 times |
NYSE: DVNdevonenergy.com
Raymond James InstitutionalInvestors ConferenceMarch 2, 2015
Investor Contacts & Notices
Investor Relations Contacts
Howard J. Thill, Senior Vice President, Communications & Investor Relations(405) 552‐3693 / [email protected]
Scott Coody, Director, Investor Relations(405) 552‐4735 / [email protected]
Shea Snyder, Director, Investor Communications(405) 552‐4782 / [email protected]
Safe HarborSome 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 furnished February 17, 2015.
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.
2
Devon TodaySuperior Execution Delivering Shareholder Value
3
A leading North American E&P
Building operational momentum
Disciplined capital allocation
Oil driving production growth
Financial strength and flexibility
Significant midstream business
A Leading North American E&P
4
Heavy Oil
Rockies Oil
Barnett Shale
Eagle Ford
Permian Basin
Focused and balanced asset portfolio
— Proved reserves: 2.8 billion BOE— Net production: 664 MBOED— Upstream revenue: 60% oil
Deep inventory of opportunities
— Prolific Eagle Ford assets— High‐quality Permian Basin position— World‐class heavy oil projects— Top‐tier liquids‐rich gas plays
Positioned to deliver visible, low‐riskproduction growth
Note: All figures represent Devon’s retained asset portfolio.
Anadarko Basin
Oil Assets
Liquids‐Rich Gas Assets
A Leading North American E&P
Premier and sustainable asset portfolio
— High‐returning projects— Positioned in top‐tier basins— Balanced between oil and gas— Deep inventory of opportunities
Focused on superior execution
— Technical and operational excellence— Production optimization
Strategic midstream business
Maintain financial strength and flexibility
Strategy For Long‐Term Success
5
6
Building Operational MomentumQ4 & Full‐Year 2014 Highlights
Delivered U.S. oil production growth of 82%
— Prolific Eagle Ford development results
― Excellent results in Delaware Basin
Q4 top‐line production 20% higher
Liquids approach 60% of production mix
Proved oil reserves increase to all‐time high
Record midstream operating profit36%
21%
43%
Oil
NGL
Gas
80
146
Q4 2013 Q4 2014
82%Growth
U.S. Oil Production GrowthMBOD
Q4 2014 Production Mix664 MBOED
Note: All figures represent Devon’s retained asset portfolio.
Disciplined Capital Allocation2015 Capital Outlook
7
2015 E&P Capital Budget$4.1 ‐ $4.4 Billion
Balances capital with cash inflows
Reduced 20% from 2014
Focused on best developmentopportunities
Minimal exploration activity
Dynamically allocate capital throughout 2015
Oil Driving Production Growth2015 Production Outlook
8
2014 2015e
209
≈20‐25%Expected Growth
250 ‐ 260
Total Oil ProductionMBOD
Note: All figures represent Devon’s retained asset portfolio.
Oil production growth: ≈20% ‐ 25%
— Driven by Eagle Ford, Permian & Jackfish 3
Top‐line BOE growth: ≈5%
Capital efficient growth achievable with 20% less spend than 2014
Oil Driving Production GrowthSignificant Oil Producer in North America
9
0
50
100
150
200
250
300
350
EOG CLR CHK WLL PXD CXO MEG ECA NFX XEC OAS SD LPI FANG RRC
Q3 2014 Oil Production Devon vs. N.A. Onshore Peers
MBO
D
Note: All figures represent Devon’s retained asset portfolio.
10
Financial Strength & Flexibility
Strong investment‐grade ratings
— Cash balances: $1.5 billion
— Net debt(1): $7.8 billion (excluding EnLink)
Cash flow protected by hedges
— >50% of 2015 oil protected at $91 per barrel
— ≈40% of 2015 gas protected at $4.17 per Mcf
— Fair market value of hedges: ≈$2 billion (12/31/14)
Significant EnLink optionality
— Equity ownership interest valued at >$7 billion
— Cash distributions from EnLink to reach ≈$300 million in 2015
— Midstream asset dropdown potential
(1) Net debt is a Non‐GAAP measure defined as total debt less cash and cash equivalents and debt attributable to the consolidationof EnLink Midstream.
Strategic Midstream BusinessEnLink Overview
11
Market Value of EnLink OwnershipFebruary 2015
Devon’s equity ownership interest
— 49% of MLP (ENLK: 120 MM units)— 70% of GP (ENLC: 115 MM shares)
Highly accretive transaction
Improves capital efficiency and growthtrajectory of midstream business
Distributions to reach ≈$300 MM in 2015
Midstream asset dropdown potential
— Victoria Express Pipeline in Eagle Ford— Access Heavy Oil Pipeline in Canada
Asset OverviewPremier North American Portfolio
Oil Assets
HEAVY OIL
ROCKIES OIL
ANADARKO BASIN
BARNETT SHALE
EAGLE FORD
PERMIANBASIN
Liquids‐Rich Gas Assets
12
Eagle FordOverview
13
Top‐tier acreage position
— 82,000 net acres focused in DeWitt Co.— Q4 net production: 98 MBOED
Highest returning asset in portfolio
— Delivering industry‐leading well results— ≈1,000 undrilled locations in inventory— 2014 cash margin >$50 per BOE
2015 Outlook: High activity in DeWitt
— 2015 capital: ≈$1.1 billion— Running 11 to 12 rigs in 2015
Dewitt
LavacaGonzales
Karnes
Devon AcreageOil Condensate & NGLsDry Gas
Eagle FordProlific Production Results
49
98
March Q2 Q3 Q4
Eagle Ford Production GrowthMBOED
Production doubled since March 2014 acquisition
Q4 2014 production increased 26% over Q3
Light oil >60% of production mix
100%Increase
14
Eagle FordProlific Development Results
15
Prolific Q4 results in DeWitt County
— 62 wells: 30‐day IP avg. 2,100 BOED— Results >50% above type curve — IP’s for top 5 wells exceeded 3,000 BOED
Raising type curve expectations
— Boosting 30‐day IP expectations by >25%— Driven by production optimization program— Potential for higher EURs
Expect 50%‐plus production growth in 2015
— Driven by DeWitt development program
1,3001,650
Previous Revised
>25%Increase
Revised Eagle Ford Type Well30‐Day IP Rate, BOED
65
>100
2014 2015e
>50%Expected Growth
2015 Eagle Ford Production GrowthMBOED
Permian Production Growth2014 vs 2013 (MBOED)
Permian BasinOverview
16
Industry leader in basin
— 1.2 million net surface acres with stacked pay— Q4 net production: 98 MBOED— Production growth 23% higher in 2014— Liquids 77% of production mix
Deep inventory of low‐risk projects
— >5,000 locations in Delaware Basin— Significant upside from downspacing
2015 Outlook: Most active asset
— 2015 capital: ≈$1.3 billion— Running 13 operated rigs in Delaware Basin
Permian BasinActivity Focused in Delaware Basin
17
Significant oil resource opportunity
Activity focused on Bone Spring play
Delivering prolific production growth
Bone Spring285,000 net acres
Delaware Sands80,000 net acres
Leonard Shale60,000 net acres
Wolfcamp>100,000 net acres
Eddy
Lea
Reeves
Loving Winkler
Ward
2009 2010 2011 2012 2013 2014
Delaware Basin Production GrowthMBOED
16
45
≈190%Growth(CAGR: 23%)
Oil NGL Gas
Delaware BasinNew Completion Design Enhances Results
18
Well performance exceeding expectations
— Results highlighted by 13 wells in Q4 — Targeting 2nd Bone Spring interval in NM— Applied ≈2x more sand than historic design— Initial 30‐day rates improved by >60%
Further design enhancements underway
— Testing up to 3,000 lbs. of sand per lateral ft.— Preliminary results positive
2015 activity will utilize larger completions
575
940
Old Design Q4 Results
>60%Increase
30‐Day IP RatesBOED
Old Design
Q4Results*
SandPounds Per Foot
600 1,600
Frac Stages 13 16
* Incremental capital for Q4 wells wasapproximately $700,000 per well.
Identified >5,000 risked, undrilled locations
— Conservatively assumes 4 to 5 wells per risked, drillable section— ≈70% of inventory resides in the Bone Spring formation
Downspacing pilots underway
— Testing 8 wells per section in lower 2nd Bone Spring interval (traditional landing zone)— Appraising stand‐alone commerciality of upper portion of 2nd Bone Spring
Delaware BasinSignificant & Growing Resource Opportunity
Total 19
Net Prospective
Acres Risk FactorNet Risked
AcresRisked Wells Per Section
Gross Risked UndrilledLocations
160,000 50% 80,000 4 700
85,000 30% 60,000 5 700
440,000 35% 285,000 4‐5 3,500
>100,000 n/a >100,000 n/a Evaluating
40,000 50% 20,000 4 >200
Total >500,000 >5,000
Formation
Delaware Sands
Leonard Shale
Bone Spring
Wolfcamp
Other (Yeso & Strawn)
Heavy OilOverview
20
Located in best part of oil sands
— Low geologic risk— Thick and continuous reservoir— Industry leading operating results— Massive risked resource: 1.4 BBO
Features of each Jackfish project:
— 300 MMBO gross EUR— Long reserve life >20 years— Flat production profile
2015 Outlook: 20%‐plus growth
— 2015 capital: ≈$700 million— Delivering >20% production growth
Jackfish 1Jackfish 2
Jackfish 3
Access Pipeline
Pike Project Area
6 Miles
R6 R5 R4
T76
T75
T74
T73
Jackfish Acreage100% WI
Pike Acreage50% WI
Access Pipeline50% Ownership
Jackfish Heavy Oil DevelopmentsDelivering Visible Oil Growth
21
Jackfish 1 delivering top‐tier results
— Q4 gross production: 37 MBOD— Exceeding facility nameplate capacity— Steam‐to‐oil ratio declines to record
low of 2.5
Jackfish 2 production increases
— Q4 gross production: 26 MBOD— Production increased 10% YoY
Jackfish 3 ramp‐up ahead of schedule
— Q4 gross production: 11 MBOD— Expect 35 MBOD by end of 2015
60%
70%
80%
90%
100%
110%
2011 2012 2013 2014
% of D
esigne
d Ca
pacity Utilized
2011 2012 2013 2014
Facility Turnaround
Jackfish 1 Plant Utilization90 Day Moving Avg.
Jackfish 3 Production Ramp‐UpBOD
0
5,000
10,000
15,000
Aug‐14 Sep‐14 Oct‐14 Nov‐14 Dec‐14Gross Oil Prod
uctio
n (BOD)
ActualOriginal Plan
+5,500 BODvs. Original Plan
Anadarko BasinCana‐Woodford Overview
22
Excellent Q4 results in Cana‐Woodford
— Q4 net production: 76 MBOED— Production increased 35% YoY— 1st operated STACK well brought online
High‐rate development wells in Q4
— Cana results >20% above type curve— Driven by improved completion design
2015 Outlook: Accelerating Cana activity
— 2015 capital: $400 million— Running 8 rigs in 2015— Continue appraising STACK opportunity
Caddo
Canadian
Kingfisher
Blaine
Mullen 1H24‐Hr IP: 1,500 BOED Emma 1H
10,000’ LateralQ1 Completion
WoodfordMeramec
Chiles & Hancock Pads9 WellsAvg. 30‐Day IP: 1,460 BOED
Why Own Devon?
23
A leading North American E&P
Building operational momentum
Disciplined capital allocation
Oil driving production growth
Financial strength and flexibility
Significant midstream business
Thank you.
Appendix
Permian BasinOverview
26
Industry leader in basin
— 1.2 million net surface acres withstacked pay
— Q4 net production: 98 MBOED— Production growth 23% higher in 2014— Liquids 77% of production mix
Deep inventory of low‐risk projects
— >5,000 locations in Delaware Basin— Significant upside from downspacing
2015 Outlook: Most active asset
— 2015 capital: ≈$1.3 billion— Running 13 operated rigs in
Delaware Basin
Bone Spring, Delaware,
Wolfcamp
Conventional
Gaines Dawson Borden
Howard MitchellAndrews
EctorWinkler
Lea
Ward
Reeves
Loving
Eddy
Crane
Midland
Midland
Reagan
Wolfberry
Upton
Irion
Crockett
WolfcampShale
Glasscock
Sterling
Pecos
Martin
Leonard &Wolfcamp
Barnett ShaleLiquids‐Rich Gas Development
27
Significant gas optionality
— Net acres: 623,000— Best position in play— Q4 net production: 201 MBOED— Liquids 27% of production mix
Generated free cash flow of $1 billionin 2014
2015 Outlook
— 2015 capital: ≈$150 million— Focused on optimizing base production
Liquids‐Rich Dry Gas
Wise
Parker
Johnson
Hood
Tarrant
Denton
Ft. Worth
Rockies OilPowder River Basin
28
Emerging light oil opportunity
— Net acres: 150,000— Stacked pay potential— 1,000 risked locations in inventory— Q4 net production: 19 MBOED
Notable Q4 development activity
— 4 wells: 30‐day IP avg. 800 BOED— Light oil 90% of production mix
2015 Outlook
— 2015 capital: ≈$350 million— Running 2 operated rigs
Parkman Focus Area
Campbell
Converse
Johnson
Upper Eagle Ford PotentialDeWitt and Lavaca Counties
29
Pay thickest in DeWitt County
First 2 operated wells online
Encouraging early results
2015 Outlook
— Bring 4 wells online
Medina 2HUpper Eagle Ford Marl30‐Day IP: 850 BOED
Nancy 1HUpper Eagle Ford Marl30‐Day IP: 800 BOED
Dewitt
Lavaca
Gonzales
KarnesNet Pay (ft.)
05
10152025303540
Devon Operated
≈56 mile crude oil pipeline from Eagle Ford core to Port of Victoria terminal
≈300,000 barrels of storage available
Capacity:— 50 MBOPD operational capacity (expandable)
Devon ownership: 100%— ≈$70 MM invested to date
Victoria Express Pipeline
Potential Drop Down AssetsAccess & Victoria Express Pipelines
30
Access Pipeline
Three ≈180 mile pipelines from Sturgeon Terminal to Devon’s thermal acreage
≈30 miles of dual pipeline from Sturgeon Terminal to Edmonton
Capacity net to Devon:— Blended bitumen: 170 MBOPD
Devon ownership: 50% — ≈$1B invested to date
PORT OF VICTORIA
Karnes
Gonzales
DeWitt
Victoria
Jackson
Goliad
Wharton
Colorado
Calhoun
Refugio
Aransas
Matagorda
Gulf ofMexico
Lavaca
Devon AcreageExpress
To U.S. Rockies
JACKFISH & PIKE
SturgeonTerminal
EDMONTON
HARDISTY
16” Diluent Line(Edmonton to Jackfish)
Oil Pipelines
24” Diluent Line(Sturgeon to Jackfish)
42” Blend Line(Jackfish to Sturgeon)
30” Blend Line(Sturgeon to Edmonton)
Key Modeling Statistics
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 (Delaware Basin)
Working interest / royalty: 67% / 21%
30‐day IP rate: 750+ BOED
EUR: 450+ 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)
Eagle Ford (DeWitt County)
Working interest / royalty: 48% / 22%
30‐day IP rate: 1,650 BOED
EUR: 900+ MBOE
Oil / NGLs as % of production: 60% / 20%
31
Key Modeling Statistics
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%
30‐day IP rate: 1,200 BOED
EUR: 1.7 MMBOE
Oil / NGLs as % of production: 5% / 40%
32
0%
15%
30%
45%
60%
75%
90%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Decline Rates(1st month to 13th month)
Rockies: Powder River Basin (Parkman)
Working interest / royalty: 40% / 18%
30‐day IP rate: 525 BOED
EUR: 300 MBOE
Oil as % of production: 95%
Discussion of Risk Factors
33
Forward‐Looking Statements: Information provided in this presentation includes “forward‐looking statements” as defined by the Securities and Exchange Commission. Forward‐looking statements are often identified by use of the words “forecasts”, “projections”, “estimates”, “plans”, “expectations”, “targets”, “opportunities”, “potential”, “outlook”, and other similar terminology.” Such statements 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 NGL. 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: A significant and prolonged deterioration in market conditions and the other assumptions on which our estimates are based will impact many aspects of our business and our results. Substantially all of Devon’s revenues are attributable to sales, processing and transportation of three commodities: oil, natural gas and NGL. Prices for oil, natural gas and NGL are determined primarily by prevailing market conditions, which may be impacted by a variety of general and specific factors that are difficult to control or predict. Worldwide and regional economic conditions, weather and other local market conditions influence the supply of and demand for energy commodities. In particular, concerns about the level of global crude‐oil and natural‐gas inventories and the production trends of significant oil producers like OPEC, among other things, have led to a significant drop in prices. In addition to volatility from general market conditions, Devon’s oil, natural gas and NGL prices may vary considerably due to factors specific to Devon, such as pricing differentials among the various regional markets in which our products are sold, the value derivable from the quality of oil Devon produces (i.e., sweet crude versus heavy or sour crude),the Btu content of gas produced, the availability and capacity of transportation facilities we may utilize, and the costs and demand for the various products derived from oil, natural gas and NGL. Estimates for Devon’s future production of oil, natural gas and NGL are based on the assumption that market demand and prices for oil, natural gas and NGL will be at levels that allow for profitable production of these products. As illustrated by recent market trends, there can be no assurance of such stability. Much of Devon’s production in Canada is subject to government royalties that fluctuate with prices, which, therefore, will affect reported production. Estimates for Devon’s future processing and transportation of oil, natural gas and NGL are based on the assumption that market demand and prices for oil, natural gas and NGL will be at levels that allow for profitable processing and transport of these products. As with our production estimates, there can be no assurance of such stability. The production, transportation, processing and marketing of oil, natural gas and NGL 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, tornadoes, extreme temperatures, and numerous other factors.
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.