Devon Energy Corporation (DVN)

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Devon Energy Corporation (DVN)

UBS Global Oil and Gas Conference Call

May 21, 2013 11:00 ET

Executives

Dave Hager - Executive Vice President, Exploration Production

Presentation

Unidentified Analyst

Okay, moving along to keep on schedule. Our next presentation is Devon Energy, very happy to introduce Dave Hager, who is Executive Vice President of Exploration Production. Dave?

Dave Hager - Executive Vice President, Exploration Production

Thank you, (Bill). Good morning everyone. Before I start this presentation I’m going to do something a little bit unusual here, I’m just going to make a comment that if my enthusiasm doesn’t seem quite as strong as it normally might be. We’re certainly with the headquarters of Devon Energy in Oklahoma City in about 10 miles away from the tragedy that took place in Moore, Oklahoma the tornadoes (Audio Gap) with a little bit of a heavy heart for every things going on out there right now. I can tell you that from a Devon’s standpoint it did not impact any of our operation so we’re certainly fine from that standpoint, we have had a number of employees that have either had damage or lost their homes and so obviously we’re thinking about them as well we’re thinking about the whole greater Moore in Oklahoma City Community this morning.

So with that I’ll go ahead and start the presentation. Obviously I’m going to be making some forward-looking statements. The actual results may differ and look at our SEC filings for a discussion of the risk factors. Just moving on to the overview of Devon today, we are obviously one of the largest independents out there, see our proved reserves for the - about 3 billion barrels of oil equivalent now about 47% liquids overall. Our first quarter production came in above our guidance. We had guided at 670 to 680 and we came in at 687 so we’re – feel like we had a strong operational first quarter there and we’re importantly continuing to move our production mix to a more liquids based. You can see now that 41% of our production is liquids, 24% of that overall percentage is oil as well.

So, looking at some of the highlights of the first quarter, again we felt like we had very good results. Overall year-over-year our oil production increased by 14% that was led by strong increases in our light oil production in the Permian Basin with 24% and then also pretty strong increase up in our heavy oil projects up in Canada our SAGD projects and Jackfish up nicely year-over-year as well. We did have – also had some very positive results from our emerging oil plays led by the Mississippian where we talked about that we had rates on some wells, we’ve drilled up there at over 1000 barrels of oil per day and that’s not 1000 barrels of oil equivalent per day that’s 1000 barrels of oil per day.

So we’re very encouraged by that and I’ll go into little more detail on that but I think it’s the fact that we’re taking a more scientific and geologically based approach to that play acquiring 3Ds and we’re understanding what is making a good well in those plays, it’s really starting to show the success and the wisdom of taking that approach. We’ve also had good results in the Rockies here recently in addition to that so our exploration program, we feel was adding to the long-term oil growth that we have as a company. We also did add some hedges I’ll detail those out a little bit more and we announced that we’re bringing back $2 billion of our roughly $6.5 billion that we had at international we’re repatriating about $2 billion of that cash back to the U.S.

Obviously it is a challenge to move to a higher oil weighted production profile. We are successfully doing it, it’s a multi-year process, when you already have is producing about 150,000 barrels of oil a day sort of move that, it takes a while that is a challenge. We obviously last year also had some headwinds in regards to NGL pricing, headwinds also in Canadian differentials. I think now we can – NGLs I think that it still will remain challenge for a period of time but we’re seeing significant improvement in the differentials in Canada obviously little bit improvement on the gas side as well and so some of the challenges that we’ve faced in 2012 are behind us and we are very confident moving forward. When you look at how Devon approaching its business that we are very focused and we talk a lot about improving results on a cash flow per debt-adjusted share basis that’s no metric is perfect out there, we recognize that, but we certainly think that (debt probably) has a highest correlation with stock price performance is one that we look at closely.

We do have a very deep inventory of development projects and in areas like the Permian very strong position in the Permian, one of the best positions in the industry in the Permian, light oil portfolio also deep inventories in areas like Cana even in the Barnett where we are the premier player in the Barnett in addition to growth opportunities in areas in development such as the thermal oil in Canada. So we do have strong highly visible growth. We have also exposure to emerging plays such as the Mississippian and very strong financial capabilities as well. If you look it overall I mentioned we had about $6.5 billion of short term and cash investments of which we’re repatriating about $2 billion right now, very strong investment grade credit rating at this point which gives us flexibility on how we want to approach our business and so we have all options available to us on how we want to grow and invest the business and we consider all options when making our investment decisions.

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