Devon Energy OverviewDevon Energy OverviewTodd Moehlenbrock, Vice President – Engineering Technology
2012 International Sucker Rod Pumping WorkshopSeptember 27, 2012
Rotaflex
Texaco’s first Rotaflex installation
B F Harrison B #1B.F. Harrison B #1North Teague FieldSouth of Eunice, New Mexico
Your humble presenter!
NYSE: DVN www.devonenergy.com page 2
Devon History
• Founded as a private company in 1971
• Became a public company in 1988
• Currently listed on the New York Stock yExchange under the ticker symbol DVN
• Has grown from 185 employees in 1981 to more than 5 000 employees todayto more than 5,000 employees today
• Established a portfolio to provide stable production and a solid platform for future growth
NYSE: DVN www.devonenergy.com page 3
Top Oklahoma companies Enterprise valueUS$, Billions
NYSE: DVN www.devonenergy.com page 4
Note: Enterprise value – August 2012.
Mergers & Acquisitions
$Ocean Energy Chief
$5.3 billion2003
$2.2 billion2006
Mitchell Energy P g$3.5 billion
2002$2.6 billion
1999
Mitchell Energy
A d
Pennzenergy
Northstar L
$4.6 billion2001
$759 million1998
Anderson Exploration
Northstar Energy
2001
$3.5 billionNorth American Onshore Assets
$254 million
Santa Fe Snyder Kerr-McGee
2000$254 million
1996
Employment centers
Oklahoma City:C t H d tCALGARY Corporate Headquarters1,648 employees
Calgary, Alberta:1,004 employees
Houston:495 employees
OKLAHOMA CITY
p y
Field Offices:2,222 employees
HOUSTON
Total:~5400 employees
NYSE: DVN www.devonenergy.com page 6
Current as of February 2012
Devon Today
Horn River Oil
Proved reserves: 3.0 billion BOE(42% liquids)
Q2 2012 production: 679 MBOED
JackfishPike
Ferrier CorridorDeep Basin
Liquids-Rich
Dry Gas
Production mix: 22% oil
15% NGLsR ki
MichiganPowder River
63% natural gas
Significant midstream businessGranite Wash
Cana WoodfordMississippian
RockiesOil Utica Ohio
g
Washakie
2012e operating profit: ≈$385 million
Enterprise value: $25 billion
GBarnett Shale
Permian Basin Tuscaloosa Shale
Haynesville/BossierCarthage
Groesbeck
NYSE: DVN www.devonenergy.com Slide 7
Carthage
Devon’s Strengths
Disciplined focus on per share resultsDisciplined focus on per share results
Deep inventory of development opportunitiesp y p pp
Strong, highly-visible oil growth
Significant positions in emerging oil plays
Superior financial strength and flexibility
NYSE: DVN www.devonenergy.com Slide 8
Track Record of SuccessNorth American Onshore Historical Performance
240Production Growth
(MMBOE)LOE per BOE
($/BOE)
223220
207
182
$6.54$7.32
$8.06$6.87 $7.32 $7.71
168
2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
233%198%
269%223% $10.01
$11.68$13.36
$10.88$11.59$12.87
Drill-Bit Reserve Replacement(1)
(% of Production Replaced)Drill-Bit F&D (3 Yr Avg.)(1)
($/BOE)
198%175% 160%
$10.01
NYSE: DVN www.devonenergy.com Slide 9
2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
(1) Excludes price revisionsNote: Includes a non-GAAP measure, see appendix for required disclosures.
Significant Oil Production GrowthNorth American Onshore
148 6
Production Data in MBOPD
148.6
122.5
105 9105.9100.9
89.7
74.965 765.7
NYSE: DVN www.devonenergy.com Slide 10
2006 2007 2008 2009 2010 2011 Q2-2012
2012 Capital ProgramDelivering Strong Oil & Liquids Growth
2012e Exit Rate Oil productionOil production
Oil
2012e Exit Rate Oil productionOil production• Annual growth rate: 22% - 24%• Driven by Jackfish and Permian• ≈25% of total company volumes
NGLs productionNGLs productionOil24%
NGLs productionNGLs production• Annual growth rate: 11% - 13%• Driven by Cana and Barnett activity• NGLs have access to Mont Belvieu
N l d iN l d iGas59% NGLs
17%
Natural gas productionNatural gas production• Expect minor declines• No dry gas rigs running• No significant lease expirations
≈710 MBOED
NYSE: DVN www.devonenergy.com Slide 11
(40% Oil & Liquids)
Resource By AssetStrong Foundation for Growth
Unrisked Proved Additional Risked Total Risked
Data in BBOE
+Resource Reserves Risked Potential Resources
Permian Basin 7.6 0.2 2.6 2.8
B tt Sh l 4 3 1 2 1 3 2 5
+ =
Barnett Shale 4.3 1.2 1.3 2.5
Cana Woodford Shale 2.8 0.3 1.6 1.9
Canadian Oil Sands 2.1 0.5 0.9 1.4
East Texas/Gulf Coast 0.9 0.2 0.6 0.8
Other U.S. 4.6 0.4 1.7 2.1
Other Canada 3 3 0 2 1 8 2 0Other Canada 3.3 0.2 1.8 2.0
Horn River 1.4 - 1.1 1.1
Sinopec JV Assets (net) 4.8 - 1.6 1.6
NYSE: DVN www.devonenergy.com Slide 12
Total 31.8 3.0 13.2 16.2
Growing the Resource BaseNew Ventures Exploration
Sinopec Joint VentureSinopec Joint VentureSinopec Joint VentureSinopec Joint Venture• $2.5 billion transaction
($900 million cash and $1.6 billion drilling carry)
• Sinopec receives 33% of Devon’s interest
Rockies OilMichigan
• Net acreage in joint venture: 1.5 million
• Devon serves as operator
Mississippian
Rockies OilUtica Ohio Sumitomo Joint VentureSumitomo Joint Venture
• $1.4 billion transaction ($340 million cash and $1.025 billion drilling carry)
• Sumitomo receives 30% of Devon’s interest
Tuscaloosa Shale
• Sumitomo receives 30% of Devon s interest
• Net acreage in joint venture: 650,000
• Devon serves as operator
Cline Shale & Wolfcamp Shale
NYSE: DVN www.devonenergy.com Slide 13
Sinopec joint venture assets
Sumitomo joint venture assets
Joint Venture Rationale
Objective: Utilize partnerships in new ventures explorationObjective: Utilize partnerships in new ventures exploration
• Improves capital efficiency
• Accelerates de-risking and commercialization
• Mitigates exploration risk
• Flexibility to generate new prospects
• Preserves cash flow for development projectsp p j
NYSE: DVN www.devonenergy.com Slide 14
Permian Basin OverviewOil Opportunities
Net risked resource: 2.8 BBOENEW MEXICO OKLAHOMA
Risked locations: >8,000
Net acreage: 1.5 million basin-wide
TEXAS
MidlandNorthwestern
New
Mex
ico
Texa
s
Eastern
Shelf
Q2 2012 net production: 59 MBOED(76% liquids)
A ti it t g ti g l l t
MidlandBasinShelf
WolfberryBone Spring& Delaware
Shelf
Cline ShaleActivity targeting several play types
Expect >30% oil growth in 2012
20 operated rigs
Central BasinPlatform
MidlandWolfcamp(Delaware)
20 operated rigs
2012 capital: ≈$1.4 billion
2012 plans: Drill >300 wellsOzona ArchDiablo
Conventional Wolfcamp(Midland)
NYSE: DVN www.devonenergy.com Slide 15
2012 plans: Drill >300 wells
NYSE: DVN
Ozona ArchDiabloPlatform
Permian Basin Oil Development Projects
oNW Sh lf
Development OverviewDevelopment OverviewL i k hi h i il l
WolfberryGaines Dawson
Lea
Eddy
New
Mex
ico
Texa
s
NW Shelf • Low-risk, high-margin oil plays• Multi-year drilling inventory
• 16 operated rigs
Midland
Andrews MartinBone Spring& Delaware
Bone Spring/DelawareBone Spring/Delaware• 185,000 net acres (2012 plans: Drill ≈110 wells)
• High-impact wells (Best wells: IP’s >1,000 BOED)Midland
MidlandEctorWinkler
Ward
LovingWolfberryWolfberry• 160,000 net acres (2012 plans: Drill ≈100 wells)
• Upside: Downspacing and Wolfcamp h i l l i i
Conventional
UptonCrane
Ward
Reeves
horizontal exploitation
Other Conventional ActivityOther Conventional Activity• Exploit Central Basin Platform targets
S k d il Pecos
• Stacked oil pays(Tubb, Wichita-Albany, Strawn, Clear Fork & others)
NYSE: DVN www.devonenergy.com Slide 16
Permian Basin Oil Exploration Projects
Exploration OverviewExploration Overview
Gaines Dawson Borden Scurry Fisher
• Potential, high-impact resource plays(Unrisked resource: >3 BBOE net to Devon)
• 2012 plans: Drill ≈40 wells
• 4 operated rigs
Midland
Andrews Martin Howard Mitchell Nolan
Cline Shale
4 operated rigs
Cline ShaleCline Shale• JV acreage: 556,000 net acres
(Net to Devon: 389,000 acres)
MidlandEctor Glasscock SterlingCoke
TomGreenU t
Crane
• Stacked pay potential
• Encouraging initial well result
MidlandMidland--Wolfcamp ShaleWolfcamp Shale
Wolfcamp Shale(Midland Basin)
Green
Irion
SchleicherCrockett
ReaganUpton MidlandMidland Wolfcamp ShaleWolfcamp Shale
• JV acreage: 94,000 net acres (Net to Devon: 66,000 acres)
• Well results continue to improve Crockett
• Testing longer laterals (Extending to >7,000’)
NYSE: DVN www.devonenergy.com Slide 17
MississippianLight-Oil Exploration
K
SumnerHarper
Barber
Kingman
Cowley
Sedgwick
Net acreage: 545,000 (400,000 net acres outside of Sinopec JV)
High-margin exploration playOklahoma
Kansas
Osage
KayGrant
AlfalfaWoods
High margin, exploration play
Early results in-line with expectations
Creek
GarfieldMajor
Payne
PawneeNoble
Risked resource potential: >800 MMBOE
Stacked pay potential (Woodford)
Logan
Lincoln
Creek
Devon Acreage
D /Si JV A
7 operated rigs
2012 plans: Drill >50 wellsDevon/Sinopec JV Acreage
NYSE: DVN www.devonenergy.com Slide 18
Devon’s Thermal Oil Position SAGD Development
Field characteristicsField characteristicsJ kfi h
• Low F&D• Flat production profile• Long reserve life >20 years
Jackfish 2
Jackfish 3
Jackfish
JackfishJackfish• Top-tier operating performance• Q2 2012 net production: 33 MBOPD
Jackfish 2Jackfish 2
• Q2 2012 net production: 18 MBOPD• Reach peak facility capacity in 2013
Jackfish 3Jackfish 3• Construction ≈40% complete
PikePike• Up to five SAGD development phases
Jackfish (100% WI)
Pike (50% WI)
Access Pipeline• Up to five SAGD development phases• First regulatory application filed in June
NYSE: DVN www.devonenergy.com Slide 19
Long-Term Production OutlookThermal OilNet Barrels Per Day
175,000
150,000
Net Risked Resource: ≈1.4 BBO
51,100
NYSE: DVN www.devonenergy.com Slide 20
Q2 2012 2020
Cana Woodford ShaleLiquids-Rich Gas Development
Net risked resource: 11.4 TCFEOKLAHOMA
Dewey Blaine Risked locations: ≈5,400
Net acreage: 244,000
L lt b d 21%
TEXAS
Custer
Canadian
Low average royalty burden: 21%
Q2 2012 net production: 280 MMCFED
2012 40% f d ti i li id
Washita
Cana Plant
2012e program: >40% of production is liquids
Expanding gas processing facility:• 30 MBPD of NGL capacity
Significant undrilled liquids-rich inventory• ≈3,000 locations
2012 plans: Drill 200 wellsCaddo Grady
NYSE: DVN www.devonenergy.com Slide 21
2012 plans: Drill ≈200 wells
Barnett ShaleLiquids-Rich Gas Development
Net risked resource: 14.8 TCFE
Ri k d l ti 5 000Jack Wise Denton
Net acreage: 624,000
Low average royalty burden: 18%
Risked locations: ≈ 5,000
Denton
Bridgeport Plant
Low average royalty burden: 18%
Q2 2012 net production: 1.32 BCFED
2012e program: >30% of production is liquids
ParkerPalo Pinto DRY GAS≈ 181,000 net acres
LIQUIDS RICH 2012e program: >30% of production is liquids
Significant free cash flow
Liquids-rich drilling inventory: ≈2,500 locationsHood
Tarrant
Johnson
Ft. Worth
LIQUIDS-RICH≈443,000 net acres
Liquids rich drilling inventory: 2,500 locations
2012 plans: Drill ≈300 wells
JohnsonErath
Hill
OKLAHOMA
Hill
TEXAS
www.devonenergy.com Slide 22
Artificial Lift TodayRenewed focus at Devon
• Oil and liquid rich resource playsq p y
• Horizontal wellbore configurations
• Increasing volumes of completion fluids
• Tighter margins (especially in older gas fields) requires increase in
operational efficiency
NYSE: DVN www.devonenergy.com page 23
Artificial Lift ChallengesLiquid Rich Environment
Horizontal laterals either toe-up, toe-down, flat, undulated or a
combination of all four drilling scenarios.
Preferred for artificial lift – Toe-up
Worst for artificial lift – Undulated
Longer laterals (7,500’ -10,000’) plus tighter turns
Gas break o t iss es d e to liq id rich environment; operating at or near Gas break out issues due to liquid rich environment; operating at or near
bubble point of the reservoir fluids in some reservoirs
Sand production especially a problem with early use of ESP’s
NYSE: DVN www.devonenergy.com page 24
Artificial LiftMethods to Handle Gas Problems
Use of new down hole gas separators on rod pumped wells instead of “Poor
Boy” gas anchors. Down hole separators are improving pump efficiency and
reducing gas locking issues.
Drilling a sump system when running ESP’s on liquid rich wells with high GOR Drilling a sump system when running ESP s on liquid rich wells with high GOR
ratios. Allowing pumps to run more efficiently and with less down time due to
gas locking.
NYSE: DVN www.devonenergy.com page 25
Artificial LiftSump System for an ESP
Devon Energy Corporation
Surface Csg @ ~500'
Wellbore schematic showing sump system with horizontal liner for frac
Packer set in Intermediate string for frac
5 000' L l
Intermediate Csg with window cut
~5,000' Lateral
Cemented liner
~4,000' TVD
NYSE: DVN www.devonenergy.com page 26
Perf and plug for frac~10‐12 frac stages
Whipstock set in intermediate casing to mill window
Artificial LiftSump System for an ESP
Devon Energy Corporation
Surface Csg @ ~500'
Wellbore schematic showing sump system with horizontal liner an ESP installed
2 7/8" 6.5 # L‐80 8rd Tbg String
~5,000' Lateral
Intermediate Csg with window cut
Cemented linerPerf and plug for frac10 12 f t
~4,000' TVD
NYSE: DVN www.devonenergy.com page 27
~10‐12 frac stagesWhipstock set in intermediate casing removed for ESP installationin sump
ESP assy ‐ motor, pressure gauge package, seal unit, gas separator & pump
Artificial LiftFuture Needs in Liquids Rich Plays
Understanding multiphase flow in long laterals with multiple entry points and
varying pressures.
What is the best way to drill a lateral for producing with artificial lift.
Downhole multiphase pumping capabilities.
Better erosion control when pumping frac sand.
Improve nodal anal sis models for hori ontal wells; better critical velocit Improve nodal analysis models for horizontal wells; better critical velocity
models.
NYSE: DVN www.devonenergy.com page 28
Decision support systems have enabled effective
utilization of Artificial Lift applications
Impact of Decision Support Systems (DSSs) on Field ManagementHow DSSs Accelerate Effective Decision- Potential Impact on Field
Deploy reporting tools that identify well anomalies quicker
How DSSs Accelerate Effective Decisionmaking?
Potential Impact on Field Operations
• Inc Resource Utilization• Improve Environment, Health
and Safety record
DSS A l t
Utilize analytical tools to identify anomalies before they happen
• Reduce lease operating expenses (e.g. hydrate analyses)DSSs Accelerate
Effective Decision-making
y pp
Upgrade analytical capabilities of the field personnel
• Reduce downtime (use critical rates to identify liquid loading
bl t )
analyses)
the field personnel
Enhance collaboration between d i l & i
problems, etc)
• Accelerate production (performance based on potential
production personnel & engineers(p pand not on recent average, proper application of AL)
page 29NYSE: DVN www.devonenergy.com
Example #1: Advanced analytics have enabled Artificial
Lift Selection Process based on well operating conditions
LIQUID LOADING WORKFLOW PROCESS STEPSa
00 4
GLR ( bbl/cf )
0 314 628
c
WASHAKIE
Evaluate performance of well vs. target
Identify & prioritize
a
b00 4
00 4
Well 1
Well 10
Well 100
Well 102
Well 103 Well 105
Well 106
Well 107Well 108
Well 109
Well 11
Well 110
Well 111
Well 112
Well 113
Well 114
Well 116
Well 117
Well 118Well 119Well 12
Well 120
Well 122
Well 123
Well 125
Well 126
Well 127
Well 128
Well 129
Well 13
Well 130
Well 132
Well 133
Well 134Well 135
Well 136
Well 137
Well 138
Well 139
Well 14
Well 140
Well 141
Well 142
Well 145
Well 146
Well 149
Well 15
Well 150 Well 151 Well 152
Well 153
Well 154
Well 156
Well 157
Well 158
Well 159
Well 16
Well 160
Well 161 Well 162
Well 163
Well 164
Well 165
Well 166
Well 167
Well 168
Well 169
Well 17Well 170
Well 171
Well 172
Well 173Well 174
Well 175
Well 177
Well 178
Well 18
Well 180
Well 181
Well 183Well 184
Well 185
Well 186
Well 188
Well 189
Well 19
Well 190
Well 191
Well 192Well 193
Well 194
Well 196
Well 197
Well 199
Well 20
Well 200Well 201
Well 202
Well 203
Well 204
Well 205
Well 206
Well 208
Well 209
Well 21Well 210
Well 211
Well 212
Well 213
Well 214
Well 215
Well 216
Well 217
Well 218
Well 219
Well 22
Well 223
Well 224
Well 225
W ll 227
Well 228
Well 229
Well 23Well 230
Well 231
Well 232
Well 234
Well 235
Well 236Well 238
Well 24Well 25
Well 26
Well 27Well 28
Well 29
Well 3
Well 34
Well 35
Well 36
Well 37
Well 38
Well 39
Well 41Well 42
Well 43
Well 44
Well 45
Well 48
Well 49
Well 5
Well 50
Well 51
Well 52
Well 53
Well 54
Well 55
Well 56
Well 58
Well 59
Well 6
Well 60Well 61
Well 62
Well 63
Well 64
Well 65
Well 66
Well 67Well 68
Well 69
Well 7
Well 70
Well 72
Well 73
Well 74
Well 76
Well 77
Well 78Well 79
Well 8
Well 80
Well 82Well 84
Well 85
Well 86
Well 88
Well 90 Well 91
Well 92
Well 93
Well 94
Well 95
Well 97
Well 98
Well 99
Identify & prioritize underperforming wells
Utilize GLR to recommend initial AL technique
cb
00 4Well 101Well 104
Well 115
Well 121Well 124Well 131
Well 137Well 143
Well 144Well 148
Well 176Well 179
Well 182Well 187
Well 195
Well 198Well 2
Well 207
Well 214
Well 220Well 221
Well 222Well 226Well 227
Well 233Well 237
Well 30Well 31Well 32
Well 33
Well 36Well 4
Well 40
Well 46 Well 47
Well 57
Well 71
Well 72
Well 75
Well 81
Well 83 Well 87Well 89 Well 9
Well 92Well 96
d
initial AL technique
Water cut analysis to fine tune recommendation
d
BENEFITS• Consistent approach based on analytics as opposed to experience• Most optimal method applied for liquid loading
RISKS • Availability of accurate and updated targets
page 30NYSE: DVN www.devonenergy.com
Example #2: Enabled proactive surveillance of “on-target”
wells that are “almost-loading” using critical rate calculations
“ALMOST LOADING” WORKFLOW
WASHAKIE
Review daily gas rate versus critical gas rate
PROCESS STEPS
Review list of wells that are “almost loading”
Utilize GLR/WC analysis from liquid loading workflow to recommend AL technique
BENEFITS• Proactive approach to identify and take action on wells before
they liquid load
RISKS • Critical rate equation based on assumptions might not apply to all wells
page 31NYSE: DVN www.devonenergy.com
Lesson Learned: Success is 80% People and Processes
and the rest is Technology
Key Lessons Learned
Address people and process issues: These aspects pose crucial significance for the successful implementation of Decision Support model and so, consequently should be properly considered during the design and implementation program.
Extensive engagement of the asset: Regular meetings, telephone conversations with communities to understand their demands and achieve their “buy-in” of the concept.
Asset Ownership: Local management owns the process.
Establish benefits framework. Benefits should be tracked and discussed with the relevant stakeholders
Understand impact on support infrastructure: Analyze existing hardware/software/processes for Understand impact on support infrastructure: Analyze existing hardware/software/processes for potential changes.
32
Innovation – The Key to Success
We usually find oil in new places with old ideas. Sometimes, we find y f p foil in an old place with a new idea, but we seldom find much oil in an old place with an old idea.
Several times in the past we have thought that we were running out Several times in the past we have thought that we were running out of oil, when actually we were running out of ideas.
Parke A. DickeySeptember 15, 1958
QUESTIONS?