DEVON ENERGY CORPORATION Q3 2023 Earnings Presentation
November 7, 2023
NYSE: DVN
devonenergy.com
Key Takeaways From Our Presentation | |||
1 | FIXED + VARIABLE DIVIDEND INCREASED 57% | ||
Total dividend of $0.77 per share announced with Q3 results | |||
2 | PRODUCTION PER SHARE EXPANDS 10% IN Q3 | ||
Delaware Basin results headline Q3 operating performance | |||
3 | FREE CASH FLOW GENERATION ACCELERATES | ||
>2x improvement in free cash flow to $843 million (vs. Q2 2023) | |||
4 | IMPROVED CAPITAL EFFICIENCY OUTLOOK IN 2024 | ||
Expect lower capital spending & higher free cash flow generation | |||
5 | BALANCE SHEET CONTINUES TO STRENGTHEN | ||
Retired debt & maintained low leverage profile of 0.7x (as of 9/30/23) |
| Q3 2023 Earnings Presentation | 2 |
Our Disciplined Business Model
DISCIPLINED GROWTH STRATEGY
- MODERATED OIL GROWTH targets: up to 5% annually
- Focused on growing per-share value
CONSISTENT REINVESTMENT RATES
- Returns-drivenstrategy prioritizes FREE CASH FLOW generation
- Optimizing results with steady activity levels through the cycle
ATTRACTIVE CASH RETURNS
- Strategy designed to deliver higher cash returns vs. broader market
- Optimize allocation between DIVIDENDS & SHARE REPURCHASES
MAINTAIN LOW LEVERAGE
- Net debt-to-EBITDAX: 0.7x (as of 9/30/2023)
- Strong liquidity & low breakeven levels enhance FINANCIAL STRENGTH
PURSUE
ESG EXCELLENCE
- ESG initiatives incorporated into COMPENSATION structure
- Committed to aggressive emissions reduction targets
| Q3 2023 Earnings Presentation | 3 |
Strategy Creating Significant Value for Shareholders
Delivering on our promise to shareholders
Cumulative uses of cash since WPX merger ($ in billions)
- Strategy designed for sustainable free cash flow generation
Industry-first cash-return framework unveiled in 2020 | $9.8 |
- Flexibility to optimize value creation through the cycle
$5.2
>$12 BILLION
SINCE LATE 2020
(2-TIMES MERGER VALUATION)
+
$5.9 BILLION VALUATION(1) | $3.1 | ||||||||||||
$1.2 | |||||||||||||
Acquisitions | Share Repurchases | ||||||||||||
Debt Reduction | Dividends | ||||||||||||
2020 | 1H 2021 | 2H 2021 | 1H 2022 | 2H 2022 | 2023 YTD | ||||||||
(1) Combined market capitalization for Devon and WPX on 9/28/2020.
| Q3 2023 Earnings Presentation | 4 |
Portfolio Built to Deliver Sustainable Performance
PREMIER MULTI-BASIN PORTFOLIO | |
Acreage resides in top U.S. resource plays | |
Underpinned by world-class Delaware Basin position | |
$ | |
DIVERSIFIED COMMODITY MIX | |
Balanced exposure to oil, NGLs & natural gas production | |
Access to premium markets improves realized pricing |
OPERATING SCALE ENHANCES PROFITABILITY
Low-cost structure drives differentiated margins
- Track record of improving efficiencies & lowering cost of supply
DEEP INVENTORY OF REPEATABLE OPPORTUNITIES
- Possess ~12 years of low-risk development inventory
- Upside from ongoing appraisal (>1.2 million acres in U.S. resource plays)
WILLISTON BASIN
54 MBOED
POWDER RIVER BASIN
19 MBOED
OUR SUSTAINABLE PLATFORM
MULTI-DECADE
RESOURCE OPPORTUNITY
ANADARKO BASIN
80 MBOED
DELAWARE BASIN
440 MBOED
EAGLE FORD
68 MBOED
| Q3 2023 Earnings Presentation | 5 |
Advantaged Operating Scale & Diversification
Top U.S. onshore pure-play producers
Q3 2023 total production (MBOED)(1)
Oil | Gas | ||||
1,000 | Volumes | Volumes | |||
48% | 27% |
BALANCED | ||||||||||||||||||||||||||||||||||||||||||
750 | COMMODITY | |||||||||||||||||||||||||||||||||||||||||
EXPOSURE | ||||||||||||||||||||||||||||||||||||||||||
NGL | ||||||||||||||||||||||||||||||||||||||||||
500 | Volumes | |||||||||||||||||||||||||||||||||||||||||
250 | 25% | |||||||||||||||||||||||||||||||||||||||||
Total Production (MBOED) Oil Production (MBOD)
TOP U.S. ONSHORE PRODUCERS
(1) Sourced from FactSet & Devon. Q3 2023 actual results where available & Wall Street consensus estimates. Represents U.S. upstream peers with >10% oil mix. Excludes COP & OXY due to extensive offshore & international production.
| Q3 2023 Earnings Presentation | 6 |
Q3 Results & Updated 2023 Outlook
Q3 RESULTS | Q4 OUTLOOK | KEY MESSAGES | |
TOTAL | 665 | ~ 650 | Production per share increased 10% year over year in Q3 |
PRODUCTION | (MBOED) | (MBOED) | Q4 outlook impacted by Williston declines & Delaware activity timing |
TOTAL | $896(1) | $900 | Capital investment declined 12% in Q3 vs. Q2 2023 |
CAPITAL | ($ in millions) | ($ in millions) | Reduced spending in 2H driven by drop of 4th frac crew in Delaware |
FREE CASH | $843 | >$900 | Free cash flow generation in Q3 increased by >2-times vs. Q2 2023 |
FLOW | ($ in millions) | ($ in millions) | Disciplined strategy delivers 13 straight quarters of free cash flow |
CASH | $492(2) | TBD | Dividend payout increased 57% in Q3 vs. Q2 2023 to $0.77 per share |
RETURNS | ($ in millions) | (Trending higher) | Cash returns projected to improve in Q4 2023 (higher buybacks expected) |
Note: Q4 outlook assumes $85 WTI. Free cash flow is a non-GAAP measure. See Devon's third-quarter 2023 earnings materials for more details regarding non-GAAP disclosures.
(1) Excludes acquisition capital. (2) Represents dividends declared based on Q3 results.
| Q3 2023 Earnings Presentation
Improved Capital Efficiency in 2024
2024 OUTLOOK | HIGH-GRADING CAPITAL | |||
TOTAL CAPITAL ($ IN BILLIONS) | ||||
TOTAL | $3.3-$3.6 | 10% | ||
$3.80 | ~ | |||
CAPITAL | BILLION | |||
$ | BREAKEVEN | < $40 | REDUCTION | |
$3.45 | ||||
FUNDING | WTI OIL PRICE | |||
TOTAL | ~650 | |||
VOLUMES | MBOED | |||
(Oil: 315 MBOD) | ||||
ATTRACTIVE | >20% | |||
RETURNS | ROCE | 2023e | 2024e | |
2024 outlook assumes an $80 WTI price deck and 5% service cost deflation versus 2023.
FREE CASH FLOW GROWTH
($ IN BILLIONS) | |
~ | $3.2 |
20% | |
IMPROVEMENT | |
$2.7 | |
2023e | 2024e |
| Q3 2023 Earnings Presentation | 8 |
Catalysts Driving Improved Outlook
CONCENTRATING INVESTMENT IN THE DELAWARE
- Activity to focus on multizone Wolfcamp projects in core of play
- Infrastructure buildout progressing to ease constraints in 2024
HIGH-GRADING ACTIVITY ACROSS OTHER KEY ASSETS
- Williston Basin capital activity to reduce by 50% (vs. 2023)
- Eagle Ford to reduce appraisal & increase activity in DeWitt County
IMPROVING WELL PRODUCTIVITY
- Delaware well productivity drives improved outlook (pg. 18)
- High-gradedplan in the Williston & Eagle Ford also contributes
DELAWARE-FOCUSED PROGRAM | |
> | New |
Mexico | |
Texas | |
2024e CAPITAL | |
60%OF |
- EFFICIENCIES ENHANCED BY COST DEFLATION
- Forecasting service cost deflation of 5% in 2024
- Deflation in OCTG & sand costs driving improved outlook
| Q3 2023 Earnings Presentation | 9 |
Upcoming Quarterly Production Cadence
Dropped to | Adding | ||||||
3 Frac Crews | |||||||
Temporary 4th frac crew in | in Delaware | 4th Frac Crew | |||||
in Delaware | |||||||
the Delaware was dropped | 300 | 321 | ~315 | ~315 | |||
mid-year to replenish DUC | |||||||
inventory | (MBOD) | ||||||
Lower activity will result in | 250 | ||||||
PRODUCTIONOIL | |||||||
production declines for Q4 | |||||||
Adding 4th crew back in Q1 | 200 | ||||||
2023 & Q1 2024 | |||||||
driving oil growth over | 150 | ||||||
remainder of 2024 | |||||||
100 | Q3 2023 | Q4 2023e | Q1 2024e | Q2-Q4 2024e | FY 2024e Avg. | ||
| Q3 2023 Earnings Presentation | 10 |
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Disclaimer
Devon Energy Corporation published this content on 07 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 November 2023 21:18:29 UTC.
