Q4 2017 Management Commentary February 21, 2018 NYSE: DVN - - PowerPoint PPT Presentation

NYSE: DVN devonenergy.com

Q4 2017 Management Commentary

February 21, 2018

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| Q4 2017 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 most recent 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.

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| Q4 2017 Management Commentary

2018 Capital & Production Outlook

STACK & DEL AWARE

>35% Increase $2.2-2.4 Billion

2 0 1 8 e E & P C A P I TA L

OPTIMIZED FOR RETURNS

90% DEVOTED TO U.S. RESOURCE PL AYS

$50 WTI

S E L F F U N D E D AT

(2017 VS 2018)

OIL GROWTH FOCUSED DEVELOPMENT PROGRAM

$

NO PL ANS TO INCREASE ACTIVIT Y LEVELS

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2020 Vision: Strategic Principles

• Leverage technology to optimize base production and aggressively reduce per-unit

cash costs.

• Optimize returns across the portfolio through more measured and consistent capital

investment in the Delaware and STACK.

• Bring forward value by monetizing non-core assets at the appropriate value as market

conditions allow.

• Attain a top-tier balance sheet in the E&P space by targeting a net debt to EBITDA ratio
• f 1.0x - 1.5x and maintain the ratio in a sustained $50 WTI price environment.
• Sustainably return increasing amounts of cash to shareholders through higher dividends

and opportunistic share buybacks.

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

TOP OBJECTIVE: OPTIMIZE RETURNS & DELIVER CAPITAL-EFFIECENT, CASH-FLOW GROWTH

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2020 Vision: 3-Year Outlook

>15%

CORPORATE LEVEL RETURNS

3-YEAR PERFORMANCE TARGETS(1)

(ASSUMING $50 WTI & $3 HENRY HUB)

>25% CAGR

DELAWARE + STACK OIL PRODUCTION

FREE CASH FLOW GENERATION

ABOVE $50 WTI & $3 HH

~15% COST SAVINGS

EXPECTED BY 2020

PORTFOLIO SIMPLIFICATION

POTENTIAL FOR >$5 BILLION OF ASSET DIVESTITURES

1.0x-1.5x

NET DEBT TO EBITDA

>15% CAGR

UPSTREAM CASH FLOW PER-UNIT CASH

SHAREHOLDER RETURNS

$2.5 BILLION OF CUMULATIVE FREE CASH FLOW AT $60 WTI

MID-TEENS CAGR

U.S. OIL PRODUCTION

(1) 3-year performance targets reflect capabilities of current asset portfolio and do not include assumptions for divestitures. See slide 6 for return measure targets and calculations.

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2020 Vision: Management Compensation

Cash Flow from Operations + After-tax Interest Expense + EnLink Distributions Average Book Equity + Average Net Debt Internal rate of return on capital investment over 2 year period, after burdening for G&A and corporate costs RETURN MEASURE #1 CASH RETURN ON CAPITAL EMPLOYED RETURN MEASURE #2 RETURN ON CAPITAL PROGRAM

20%

TA R G E T

=

15%

TA R G E T

=

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| Q4 2017 Management Commentary

Production Update

• Q4 2017 oil volumes impacted by non-
• perated activity
• Strong Q4 2017 operated well productivity

— Top 30 wells avg. 30-day IP: 2,500 BOED

• 2018 production update

— >50 non-op STACK wells online in January — February daily rates for Delaware & STACK ~195,000 BOED

Q4 2017 OIL VARIANCE (MBOD)

Q4 2017 Guidance (based on midpoint) 260 STACK well timing (non-operated) (6) Other U.S. resource plays (3) Jackfish complex maintenance (5) Q4 2017 Actual 246

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Full-Field Development Projects

• Activity in economic core of the Delaware & STACK
• >10 multi-zone projects scheduled in 2018

DELAWARE BASIN ACTIVITY STACK ACTIVITY

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Delaware – Multi-Zone Project Update

THISTLE/GAUCHO

Lea Eddy Boomslang

Peak rates: Q2 18

Anaconda

30-day IP: ~1,600 BOED per well

Boomslang Project

Testing 11 wells per section across 3 landing zones

LEONARD A B C BONE SPRING 1 2

Initial Development

(11-Well Program)

Future Potential

• Anaconda project online

— Initial multi-zone project — Achieved savings of $1 MM per well — 30-day rates: ~1,600 BOED per well

• Boomslang completions underway

— 15% drilling improvement vs. Anaconda — 7 of 11 wells in early stages of flowback — 6 month cycle time

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STACK – Multi-Zone Project Update

• Showboat drilling concluded

— 30% drilling efficiencies reached — Average cost savings: $500K per well — First production: Q2 2018

• Completion activity underway at Coyote

— 7-well development project — Improved drilling times by up to 25% — Initial well flowing back: 8,200 BOED (24-hr IP)

Showboat Development

First multi-zone STACK development

MERAMEC UPPER LOWER WDFD

Kingfisher Blaine Coyote (Initial Well)

24-Hour IP: 8,200 BOED

Showboat (2 drilling units)

First production: Q2 2018

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Certainty of Execution

• Multi-year asset development plans
• Efficiencies to offset industry inflation
• Services and supplies secured

— Efficiencies to drive rig reduction — Delaware & STACK frac crews secured — Sand supply locked-in

• No takeaway constraints

D E L A W A R E & S T A C K

S E C U R E D

C O M P L E T I O N C R E W S

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Financial Strategy

INVESTMENT- GRADE

CREDIT RATINGS

EnLink Investment

Market Value: ~$3.5B

Excellent Liquidity

Cash: $2.7B

STRONG FINANCIAL POSITION

Disciplined Hedging

2018: ~50%

• Maintain investment-grade ratings

— Strong liquidity: $2.7 billion of cash — Disciplined risk management — Targeted net debt to EBITDA: 1.0x – 1.5x

• Capital allocation priorities in 2018

— Fund Delaware & STACK capital plan — Reduce up to $1.5 billion of upstream debt — Increase cash returns to shareholders

Thank you.

Thank you.

For additional information see our

Q4 Operations Report

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Forward-Looking Statements

This presentation includes "forward-looking statements" as defined by the SEC. Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in oil and gas operations; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks related to our hedging activities; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; the extent to which insurance covers any losses we may experience; competition for leases, materials, people and capital; our ability to successfully complete mergers, acquisitions and divestitures; and any of the other risks and uncertainties identified in

• ur Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or

developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this presentation are made as of the date of this presentation, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward- looking statements as a result of new information, future events or otherwise.