Q2 2017 Operations Report August 1, 2017 NYSE: DVN devonenergy.com - PowerPoint PPT Presentation

Q2 2017 Operations Report August 1, 2017 NYSE: DVN devonenergy.com Highlights & CEO Perspective 2 Delaware Basin 13 Contents Results & Outlook 3 Rockies 17 Operational Excellence 6 Cash Flow Generating Assets 19 STACK 9 Contacts & Investor Notices 22 | Q2 2017 OPERATIONS REPORT

Highlights & CEO Perspective Q2 Highlights & Outlook CEO Perspective U.S. oil production exceeds guidance  Efficiencies drive 2017 capital outlook $100 million lower Positioned to Deliver  Free cash flow increases cash balances to $2.4 billion Devon’s three -fold strategy of operating  in North America’s very best resource plays, delivering superior execution and maintaining a high degree of financial Well Results strength is working exceptionally well and Dave Hager generating top-tier operating results. Hobson Row advances STACK production 20% YTD  President & CEO Record Meramec well reaches 6,000 BOED  With this strategy, Devon’s priorities in the current environment are: Strong Bone Spring & Leonard wells jumpstart Delaware growth  1) Build and maintain momentum in STACK and Delaware Rockies appraisal wells projected IP30 >1,500 barrels of oil per day  2) Organically fund capital programs 3) Execute on asset divestiture program 4) Further improve investment-grade financial strength. Portfolio & Resource Updates With our advantaged asset base and ability to deliver best-in-class Wolfcamp risked resource expands by 200%  well results, we remain well positioned to deliver value and returns on our capital investments. Woodford condensate corridor value increases  Divestiture program achieves $340 million of asset sales  For more details on our top-tier operating performance, I encourage every investor to read about our accomplishments in the “ Operational Excellence ” section on pages 6-8. | Q2 2017 OPERATIONS REPORT 2

Results & Outlook U.S. Oil Production Exceeds Guidance Strong Exit Rates Build Momentum into 2018 Q2 results are highlighted by 8% Based on the strong results YTD, Devon is firmly on track to achieve its full-year 2017 production   production growth from the company’s targets and expects U.S. oil production growth to exit 2017 at a rate of 18% to 23% higher than STACK and Delaware Basin assets year-end 2016 (chart below). compared to the first quarter. This growth will be driven by the company’s STACK and Delaware Basin assets. Combined, these  This growth drove oil production in the two franchise assets are expected to increase production by >30% by the end of 2017.  U.S. above the top end of guidance to an average of 116,000 barrels per day. U.S. Oil Production E&P CAPITAL YTD (MBOD) Recent drilling activity from Devon’s U.S .  +18 - 23% 17% operations was highlighted by 9 wells in the STACK and Delaware that achieved 105 initial 30-day rates averaging nearly 2,000 Boe per day. BEL OW A key well brought online in late June was  the record-setting Privott 17-H well in the MIDPOIN T STACK, which achieved a peak rate of 6,000 Boe per day (50% oil). Q4 2016 2017e Exit Rate Overall, production averaged 536,000 Boe  per day in the second quarter, exceeding Lowering 2017 Capital Outlook by $100 Million midpoint guidance by 6,000 Boe per day. Due to operational efficiencies (see discussion pg. 8) , E&P capital spending has been 17% below  midpoint guidance in 1H17 or 39% of the 2017 budget. Devon now expects E&P capital to range from $1.9 to $2.2 billion in 2017, a $100 million  decrease compared to previous guidance . With this improved outlook, the company has not made any changes to its planned activity levels in 2017 and remains on track to increase to ~20 operated rigs by year-end. | Q2 2017 OPERATIONS REPORT 3

Results & Outlook Shift to Higher-Margin Production Rapidly Expands Cash Flow With the company’s aggressive shift to higher -margin production, This higher-value production mix, combined with a significantly   liquids are now projected to account for ~65% of Devon’s product mix improved cost structure, positions the company to deliver peer-leading by year-end (chart below). cash flow expansion in 2017 (charts below). Shifting to higher-value production Delivering peer-leading cash flow expansion Liquids % of Total Product Mix $ Billions >$2.5 (1) ~65% 61% 61% 52% 42% 2013 2014 2015 2016 Q4 2017e >175% $0.9 (2) Cost savings boost margins INCREASE LOE, Production Taxes and G&A ($ Billions) $4.1 $3.7 2016 2017e $2.8 ~$2.7 Upstream Cash Flow EnLink Distributions (1) Assumes $50 WTI and $3 Henry Hub in 2017; excludes EnLink operating cash flow. (2) 2016 excludes $150 million of cash flow associated with divestiture assets and includes 2014 2015 2016 2017e $265 million of cash associated with debt repayments. | Q2 2017 OPERATIONS REPORT 4

Results & Outlook Free Cash Flow Generation Increases Divestiture Program Advances with $340 Million of Asset Sales Cash Balances to $2.4 Billion The company’s financial strength will be In July, Devon took an important step toward   In Q2, the company’s upstream operations further enhanced by proceeds from its that divestiture goal by announcing the sale  generated free cash flow increasing Devon’s recently announced $1 billion divestiture of its non-core Lavaca County assets in the cash balances by $250 million to $2.4 billion program. Eagle Ford for $205 million, which is at the end of June. expected to close in 2H 2017. Devon’s divestitures will include ~35,000 Boe  In addition to the company’s strong liquidity per day of production (~30% liquids) from Combined with other minor asset sales,   and investment-grade ratings, Devon’s select non-core leasehold within the Barnett Devon has now sold $340 million of assets or financial position is further bolstered by its Shale and the Eagle Ford, along with other roughly one-third of its divestiture target. attractive hedge position. minor properties across the U.S. (map below). The company has ~55% of its oil and gas  production protected for the remainder of BARNETT SHALE: JOHNSON COUNTY EAGLE FORD: LAVACA COUNTY 2017, ~25% of its oil and gas production locked-in at favorable prices in Q1 2018 and Devon is actively accumulating additional hedges over the next 18 months. This disciplined, risk-management program  consists of systematic hedges added at market on a quarterly basis and discretionary SOLD hedges that supplement the systematic program when favorable market conditions exist. Sale announced in Q3 Data room: open in Q3 2017   Proceeds: $205 MM Represents~20% of Barnett   production, reserves and cash flow Closing: 2H 2017  | Q2 2017 OPERATIONS REPORT 5

Operational Excellence & T echnology Leadership Delivering Industry-Leading Well Productivity Led by the STACK, Delaware and Eagle Ford, Devon has delivered the A critical contributor to the best-in-class well productivity is the   best well productivity of any U.S. operator over the past year and has company’s enhanced technical capabilities, where Devon has developed increased its 90-day rates by >450% since 2012 (chart below). and deployed leading technologies across every aspect of its business. Avg. 90-Day Wellhead IPs SINCE 2012 >450% BOED, 20:1 1,000 800 I M P R O V E M E N T 600 400 200 Top 30 U.S. Producers Source: IHS/Devon. Top operators with more than 40 wells over the past year (July 2016 - June 2017). Technology Leadership Provides Competitive Advantage Since 2012, Devon has been an early adopter of leading-edge Devon’s culture of embracing cutting -edge technologies will continue   technologies and invested in proprietary data management tools to to drive differentiated operating performance in the future with its establish a competitive advantage in the upstream space. leadership in deploying predictive analytics and artificial intelligence across its operations. The integration of these technology and data driven initiatives has set the  foundation for the company’s top -tier operating results. (see page 7 for further commentary and examples). | Q2 2017 OPERATIONS REPORT 6

Operational Excellence & T echnology Leadership Technology Initiatives Underway: A Billion Dollar-Plus Annual Prize With the technology and data management initiatives underway, Devon is targeting more than a billion dollars of value annually through  improvements in subsurface characterizations, the application of leading drilling and completion practices and production optimization initiatives. SUBSURFACE DRILLING & COMPLETIONS PRODUCTION OPERATIONS Predictive pump failures Improved 3D seismic Cyber-geosteering    interpretation/integration Field issue prioritization ~99% time in zone   High-graded location selection Faster response times  Fiber-optic sensing   Optimized landing zones Optimized compressors  Screen-out prediction   Well productivity predictions 2% annual production uplift  Prolonged drill-bit life   Depletion analysis  Coiled-tubing drill-outs  Geospatial optimization  Faster flowbacks  Cutting-edge frac modeling  BOTTOM LINE IMPACT FROM OPERATIONAL EXCELLENCE INITIATIVES >40% >450% 2% IMPROVEMENT INCREASE UPLIFT In D&C costs In 90-day well To annual base across key plays productivity since production ($100 million since 2014 2012 (peer leading) benefit annually) | Q2 2017 OPERATIONS REPORT 7