Q2 2018 Management Commentary August 1, 2018 NYSE: DVN - - PowerPoint PPT Presentation

NYSE: DVN devonenergy.com

Q2 2018 Management Commentary

August 1, 2018

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| Q2 2018 Management Commentary

Q2 light-oil production exceeds high end of guidance

— Driven by strong well productivity in Delaware and STACK — U.S. light-oil growth running ahead of original budget YTD — No change to full-year capital spending budget

Free cash flow positioned to rapidly expand

— Majority of U.S. oil has access to premium Gulf Coast pricing — G&A and interest savings to reach ~$475 MM annually(1) — Per-unit LOE on track to improve by ~10% by 1H 2019

Divestiture program accelerates value creation

— Ownership in EnLink Midstream monetized for 12x cash flow — Expect to exceed $5 billion divestiture target around year end

Shareholder-friendly initiatives underway

— Recently increased share-repurchase program to $4 billion — Consolidated debt has declined by ~40% YTD(1)

Exe xecu cuting ting the 20 e 2020 Vi Visi sion

• n

Focus on capital efficiency Portfolio simplification Improve financial strength Return cash to shareholders Maximize cash flow

DEVON’S 2020 VISION

(1) Includes the pro forma benefits related to the sale of EnLink Midstream in mid-July.

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| Q2 2018 Management Commentary

2020 Vi Visi sion:

• n: Nex

ext St Step eps

Expand per per-uni nit t margi gins ns Maintain cap apital tal di discipline cipline Portfolio simpl plifica ificati tion

• n

Shareholder-friendly ini nitia tiati tives es

NEXT STEPS TO FURTHER OPTIMIZE RETURNS & CAPITAL-EFFICIENCY FOR SHAREHOLDERS

• Maintain strong pricing through basis swaps & firm transport
• Maintain discipline: no change to multi-year development plans
• Expect to exceed $5 billion divestiture target by around year end
• Retire ~$280 million of maturing debt by early next year
• Positioned to sustainably grow quarterly dividend rate
• Currently marketing ~$1 billion of non-core assets across the U.S.
• Execute on light-oil growth plans (mid-teens CAGR through 2020)
• Concentrate activity in economic core of Delaware & STACK
• Improve per-unit cash costs by ~10% by 1H 2019(1)
• Complete $4 billion share-repurchase program by 1H 2019
• Generate free cash flow in 2H 2018(2)
• Continuously evaluating options to high-grade portfolio

(1) Cash costs include LOE, G&A and interest expense. (2) Assumes $65 WTI & $2.75 Henry Hub pricing

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| Q2 2018 Management Commentary

Q2 2018 Results – U.S. Oil Growth Accelerates

• U.S. oil production exceeds guidance

— 2,000 barrels per day above top end of range — 12% increase in oil production vs. Q1 2018

• Delaware & STACK continue to deliver strong growth

— Delaware oil production 54% higher year over year — STACK oil volumes increase 41% vs. Q2 2017 — Multi-zone developments building momentum

• Prolific wells brought online drive Q2 oil beat

— 4-well Cotton Draw package IP30: 14 MBOED — Top 10 STACK wells avg. IP30 2,400 BOED per well

• Capital spending reduced 9% vs. Q1 2018

— Driven by reduced seasonal drilling in Canada and timing of Eagle Ford activity IP30: 14,000 BOED (70% oil)

(Total rate from 4-well package in Cotton Draw area)

T

• p Delaware

Well Results T

• p 10 STACK

Well Results

HIGH-RATE WELLS DRIVE Q2 OIL BEAT

• Avg. IP30: 2,400 BOED (~50% oil)

(Top well: Porcupine 1H w/ IP30 of 3,700 BOED)

Q1 2018 Q2 2018

High-returning U.S. oil production exceeds guidance

MBOD

136

(Q2 Guide: 129-134)

2,000

ABOVE GUIDANCE U.S. OIL PRODUCTION

122

BARRELS PER DAY

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| Q2 2018 Management Commentary

Supply Chain Strategy Effectively Mitigating Inflation

• Devon expects low-to-mid single-digit inflation (vs. 2017)

— No change to 2018 capital spending outlook — Minimal inflation expected in 2H 2018 — Development efficiencies offsetting cost pressures YTD

• Multi-year development plans allow for longer-term

commitments at below-market rates

— Decoupling historically bundled services across supply chain — Expanded vendor universe to achieve LOE and capital savings — Vast majority of services and supplies secured through 2019

• This innovative contracting strategy is delivering strong results

— 75% of rigs price protected at below market rates — Long-term dedicated frac crews in Delaware & STACK at significant discounts to market rates — Regional sand strategy delivering 30% savings SERVICES & SUPPLIES SECURED SERVICES & SUPPLIES SECURED

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| Q2 2018 Management Commentary

Protecting Price & Flow Assurance

• Majority of U.S. oil production has access to Gulf Coast

markets (premium to WTI pricing)

• Delaware Basin positioned for attractive oil pricing

— Swaps & firm transport protect ~90% of oil volumes — Firm transport secured for 2019 gas growth expectations — Basis swaps protect gas production

• STACK volumes have access to advantaged markets

— Pipeline access to premium Gulf Coast oil pricing — Firm transport covers vast majority of gas production — ~60% of gas volumes price protected (~$0.50 off HH)

• Basis hedges protecting cash flow in Canada

— WCS swaps protect ~50% of oil volumes in 2018 ($15 off WTI)

Gulf Coast

Access to Premium Gulf Coast Markets

• Firm transport: 30 MBOD (Marketlink)
• Gas protected by swaps & firm transport

STACK Delaware Basin

• Firm transport: ~20 MBOD (Longhorn)
• Firm sales: 100 MBOD (guaranteed flow)
• Basis swaps protect in-basin sales

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| Q2 2018 Management Commentary

EnLink Sale Drives $4 Billion Share-Buyback Program

SALES PRICE:

$3.125 Billion

ACCRETIVE MULTIPLE:

12x Cash Flow

ENLC ENLK 115 MM Units 95 MM Units

TRANSACTION DETAILS

• Devon exits EnLink position for $3.125 billion

— Accretive transaction at 12x cash flow — No tax leakage associated with sale — Transaction closed in mid-July

• Board increases share-buyback program to $4 billion

— Largest authorization of any E&P company to date(1) — ~$1 billion repurchased through July (24 million shares)

• Utilizing ASR programs to execute authorization(2)

— Initial ASR program to begin in August — $4 billion authorization to be completed by 1H 2019

• Financial reporting benefits of EnLink sale

— Reduces consolidated debt by $3.9 billion — G&A and interest savings of ~$300 million annually

(1) Measured as a % of market capitalization (2) ASR is an acronym for “accelerated share repurchase”

$4 Billion Share-Repurchase Program Underway

$1 BILLION

Repurchased To Date

Repurchased to date

(~$1 billion or ~5% of shares)

Remaining program

$3 BILLION REMAINING

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| Q2 2018 Management Commentary

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 second-quarter 2018 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.