q3 2014 dvn operations report finals2.q4cdn.com/.../2014/...report-final_v001_b22r1n.pdf ·...

IR Contacts Table of ContentsQ3 Results Overview & Outlook ….………………………………………….. 3Core Assets:

Permian Basin …....……………………………………………………………… 5Eagle Ford ………….………………………………………………………….…… 8Heavy Oil …………….……………………………………………………………… 11Anadarko Basin …….…………………………………….……………………… 13Barnett Shale ………….……………………………………………………..….. 15

Emerging Assets:Rockies Oil ………….………………………….………………………………….. 16Mississippian‐Woodford ……….…………………………………….……… 17

Email: [email protected]

Howard J. ThillSenior Vice President, Communications and Investor Relations405‐552‐3693

Scott CoodyDirector, Investor Relations405‐552‐4735

Shea SnyderDirector, Investor Communications405‐552‐4782

Q3 2014 OPERATIONS REPORTNovember 4, 2014

NYSE: DVNdevonenergy.com

INVESTOR NOTICES

Q3 2014 OPERATIONS REPORT 2

Forward‐Looking Statements: Information provided in this report includes “forward‐looking statements” as defined by the Securities and Exchange Commission.Forward‐looking statements are often identified by use of the words “forecasts”, “projections”, “estimates”, “plans”, “expectations”, “targets”, “opportunities”,“potential”, “outlook”, and other similar terminology.” Such statements are subject to a variety of risk factors. A discussion of risk factors that could cause Devon’sactual results to differ materially from the forward‐looking statements contained herein are outlined below.The forward‐looking statements provided in this report are based on management’s examination of historical operating trends, the information which was used toprepare reserve reports and other data in Devon’s possession or available from third parties. Devon cautions that its future oil, natural gas and NGL production,revenues and expenses are subject to all of the risks and uncertainties normally incident to the exploration for and development, production and sale of oil, gasand NGL. These risks include, but are not limited to, price volatility, inflation or lack of availability of goods and services, environmental risks, drilling risks, politicalchanges, changes in laws or regulations, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks identified in our Form 10‐K and our other filings with the SEC.

Specific Assumptions and Risks Related to Price and Production Estimates: Prices for oil, natural gas and NGL are determined primarily by prevailing marketconditions. Market conditions for these products are influenced by regional and worldwide economic conditions, weather and other local market conditions.These factors are beyond Devon’s control and are difficult to predict. In addition to volatility in general, Devon’s oil, natural gas and NGL prices may varyconsiderably due to differences between regional markets, differing quality of oil produced (i.e., sweet crude versus heavy or sour crude), differing Btu contents ofgas produced, transportation availability and costs and demand for the various products derived from oil, natural gas and NGL. Substantially all of Devon’srevenues are attributable to sales, processing and transportation of these three commodities. Consequently, Devon’s financial results and resources are highlyinfluenced by price volatility.Estimates for Devon’s future production of oil, natural gas and NGL are based on the assumption that market demand and prices for oil, natural gas and NGL willcontinue at levels that allow for profitable production of these products. There can be no assurance of such stability. Most of Devon’s Canadian production of oil,natural gas and NGL is subject to government royalties that fluctuate with prices. Thus, price fluctuations can affect reported production. Estimates for Devon’sfuture processing and transport of oil, natural gas and NGL are based on the assumption that market demand and prices for oil, natural gas and NGL will continueat levels that allow for profitable processing and transport of these products. There can be no assurance of such stability.The production, transportation, processing and marketing of oil, natural gas and NGL are complex processes which are subject to disruption due to transportationand processing availability, mechanical failure, human error, meteorological events including, but not limited to, hurricanes, and numerous other factors. Thefollowing forward‐looking statements were prepared assuming demand, curtailment, producibility and general market conditions for Devon’s oil, natural gas andNGL will be substantially similar to those of 2013, unless otherwise noted.

Assumptions and Risks Related to Capital Expenditures Estimates: Devon’s capital expenditures budget is based on an expected range of future oil, natural gasand NGL prices as well as the expected costs of the capital additions. Should actual prices received differ materially from Devon’s price expectations for its futureproduction, some projects may be accelerated or deferred and, consequently, may increase or decrease capital expenditures. In addition, if the actual material orlabor costs of the budgeted items vary significantly from the anticipated amounts, actual capital expenditures could vary materially from Devon’s estimates.

Assumptions and Risks Related to Marketing and Midstream Estimates: Devon cautions that its future marketing and midstream revenues and expenses aresubject to all of the risks and uncertainties normally incident to the marketing and midstream business. These risks include, but are not limited to, price volatility,environmental risks, mechanical failures, regulatory changes, the uncertainty inherent in estimating future processing volumes and pipeline throughput, cost ofgoods and services and other risks.

Q3 RESULTS OVERVIEW & OUTLOOK


TOTAL COMPANY Q3 STATS(1)Q3 2014 Q3 2013

Production:Oil (MBOD) 216 150NGL (MBLD) 138 110Gas (MMCFD) 1,716 1,673MBOED 640 538

E&P Capital (in millions): $1,308Operated Rigs (at 9/30/14): 42

(1) Excludes non‐core divestiture assets.

Oil Production Exceeds Expectations

Oil production from Devon’s retained asset base averaged 216,000 barrels per day. This is 44% higher compared to the third quarter of 2013, surpassing the high end of the guidance range by 6,000 barrels per day. This outperformance was driven by the Eagle Ford and Jackfish complex.

The most significant growth came from the company’s U.S. operations, where oil production increased 77% year over year. This growth is largely attributable to Devon’s Eagle Ford and Permian Basin operations.

With this strong growth in high‐margin production, oil and NGL accounted for 55% of Devon’s retained asset production mix. Overall, net production from Devon’s retained asset base increased 19% year‐over‐year to 640,000 Boe per day.

Q3 2013 Q3 2014

Total Oil Production(1)(MBOD)

150

216

44%Growth

U.S. Canada

Portfolio Transformation Complete

Devon’s transformed portfolio is focused in some of the most attractive North American resource plays. This formidable asset base consists of a world‐class Eagle Ford development, a high‐quality Permian Basin position, top‐tier heavy‐oil projects and strong liquids‐rich gas optionality.

34%

21%

45%

Q3 2014 Production Mix(1)

Oil NGL Gas(1) Excludes non‐core divestiture assets.

Rockies Oil

Anadarko Basin

Barnett Shale

Mississippian‐Woodford

Eagle Ford

Permian Basin

Core AssetsEmerging Assets

Heavy Oil

Q3 RESULTS OVERVIEW & OUTLOOK


Portfolio Transformation Complete (continued)

On August 29, Devon closed the $2.3 billion sale of its U.S. non‐core assets, officially completing the portfolio transformation announced last November.

In less than a year the company has transformed its portfolio through three significant steps: an accretive Eagle Ford entry, the creation of EnLink Midstream, and the sale of non‐core properties in both the U.S. and Canada exceeding $5 billion.

Midstream Operations & Results

The company’s newly constructed Victoria Express Pipeline in the Eagle Ford and Access Pipeline expansion project that services its SAGD heavy oil operations began full operations in the third quarter.

These strategically located pipelines are likely candidates for dropdown into EnLink Midstream beginning as early as next year.

Marketing and midstream operating profit reached $219 million in the third quarter. This strong result exceeded the top end of company guidance and represented a 68% increase compared to the third quarter of 2013.

Raising 2014 Production Outlook; Capital Plans Unchanged

Based on strong year‐to‐date results, Devon is raising the midpoint of its 2014 production guidance from retained assets by 3% to 617,000 Boe per day, while staying within its original capital projection of $5.0 to $5.4 billion.

This represents top‐line production growth of 14% compared to 2013. On a value or price equivalent basis, utilizing an oil‐to‐natural gas conversion ratio of 20 to 1, top‐line production growth is expected to approximate 23% year over year. This growth is driven by the company’s U.S. operations, where light‐oil production from retained properties is expected to grow by more than 70% in 2014.

Through the first nine months of 2014, Devon has spent ≈72% of its E&P capital budget of $5.0 to $5.4 billion.

BOE Production(1)(MBOED)

(1) Excludes non‐core divestiture assets.

Preliminary 2015 Outlook: Capital Efficient Growth

Devon’s focus on high‐margin development plays positions the company for 20% to 25% oil production growth and mid‐single digit top‐line growth on a retained‐property basis. The company can deliver this attractive production growth with E&P capital spending similar to that of 2014. Detailed production and capital guidance will be provided at a later date.

Access PipelineVictoria Express PipelineSpent(2)($B)

% of Budget

Q1 2014 $1.2 23%

Q2 2014 $1.3 24%

Q3 2014 $1.3 25%

Sept YTD $3.8 72%

2014 E&P Capital

(2) Excludes Eagle Ford & Cana‐Woodford acquisitions.

2013 2014e

539

614 ‐ 620

14%Growth(6:1)

23%Growth(20:1)

PERMIAN BASIN

Q3 2014 OPERATIONS REPORT

PERMIAN BASIN Q3 STATSQ3 2014 Q3 2013

Production:Oil (MBOD) 56 49NGL (MBLD) 19 15Gas (MMCFD) 136 109MBOED 98 82

E&P Capital (in millions): $336Operated Rigs (at 9/30/14): 21

5

Net production averaged a record 98,000 Boe per day, a 20% increase compared to the third quarter of 2013. Light‐oil accounted for nearly 60% of total production.

Oil production in 2014 is once again expected to increase ≈20% compared to the previous year. Devon is one of the largest producers in the Permian, and since 2009 the company has increased oil production by 175% or roughly 23% on a compounded annual growth rate.

Heavy rains in the Northern Delaware Basin curtailed production during the quarter by approximately 2,500 Boe per day (≈60% oil). Minor flood damage to local infrastructure is expected to impact fourth‐quarter production by around 3,000 Boe per day (≈60% oil).

The Permian’s pre‐tax cash margin reached $44 per Boe during the quarter, remaining one of the highest‐margin assets in the company’s portfolio.

2009 2010 2011 2012 2013 2014e

Permian Oil Production Growth(MBOD)

20

≈55

≈175%Growth(CAGR: 23%)

PERMIAN BASIN


Raising Bone Spring Type Curve

Devon continued to achieve outstanding performance from its Bone Spring horizontal program in southeast New Mexico. During the quarter, 13 new development wells were brought online with 30‐day production rates averaging almost 900 Boe per day, of which 80% was light‐oil.

Initial production rates from these Q3 development wells exceeded the company’s type curve by more than 50%.

Based on strong results over the past several quarters, Devon is raising its 2014 Bone Spring development type curve expectations. Initial production rates for development wells brought online for the remainder of 2014 are expected to be more than 30% higher than the previous estimates (table/chart below).

New Completion Design Provides Further Upside Potential

Devon has successfully appraised significant portions of its multi‐zone position in southeast New Mexico and is sharpening its development focus while optimizing its completion design.

In the Bone Spring play, the company is testing industry leading sand volumes ranging from 1,500 to as high as 2,500 pounds per lateral foot. This compares to the historical completion design of around 600 pounds per lateral foot.

Preliminary results from these larger completions indicate significantly improved initial production rates, higher EURs and enhanced rates of return compared to the previous completion design.

Devon expects to accelerate the implementation of larger completions across its Delaware Basin development program. With continued success, this could lead to additional type curve improvements in 2015 across Devon’s multiple plays in the Delaware Basin.

575

Previous Revised

30‐Day IP Rates(BOED)

Revised 2014 Bone Spring Development Type Well

>30%Increase

Delaware Basin Downspacing

Of the company’s 5,000 risked undrilled locations across its Delaware Basin positon, 3,500 are in the Bone Spring play. This inventory conservatively assumes 4 to 5 wells per risked, drillable section.

To help optimize future development schemes and prove up additional inventory, the company plans to test tighter well spacing of up to 8 Bone Spring wells per section in the first half of 2015.

These downspacing wells will also utilize the company’s new larger completion designs in an attempt to increase recovery factors and further enhance rate of return.

750+

Successful First Test in Northern Midland Wolfcamp Trend

Devon successfully commenced production on its first well in Martin County targeting the Wolfcamp B.

Initial 24‐hour production from the Glass 12 3H averaged approximately 1,500 Boe per day, of which more than 80% was light‐oil (map next page). Expected recoveries are around 600,000 Boe.

Key Modeling Stats

30‐Day IPBOED

750+

EURMBOE

450+

D&C Cost $6 ‐ $7 MM

Oil / NGL% of Production

65% / 20%

WI / NRI 71% / 56%

LOE ($/BOE) $14

PERMIAN BASIN


Southern Midland Wolfcamp: Joint Venture Delivers Capital Efficient Growth

Devon’s 2014 drilling is focused on developing its 122,000 net acres inside the joint venture area. Across this acreage, the company’s joint venture partner currently funds 70% of Devon’s capital requirements.

This capital efficient drilling program increased average net production to 15,400 Boe per day. This represents an increase of more than 150%, or 9,400 Boe per day, compared to the third quarter of 2013.

At September 30, 2014, ≈$165 million of the initial $1 billion of drilling carry remained. Devon expects to exit 2014 with ≈$80 million of carry remaining.

Devon exited the quarter with 8 operated rigs running across its net acreage in Reagan, Irion and Crockett counties.

Successful First Test in Northern Midland Wolfcamp Trend (continued)

Devon expects to add a 2nd operated rig in the fourth quarter.

The company has 15,000 net acres located in the south central portions of Martin County prospective for multiple Wolfcamp zones and has identified roughly 200 undrilled locations.

EAGLE FORD


EAGLE FORD Q3 STATSQ3 2014 Q3 2013

Production:Oil (MBOD) 46 NANGL (MBLD) 14 NAGas (MMCFD) 107 NAMBOED 78 NA

E&P Capital (in millions): $426Operated Rigs (at 9/30/14): 3 (17 including JV rigs)

Net production averaged a record 78,000 Boe per day in the third quarter, with oil accounting for approximately 60% of total production.

The company exited the quarter averaging 87,000 Boe per day, an increase of 76% compared to Devon’s first month of ownership in March 2014.

This prolific production growth is also achieving the highest margin of any asset in the company’s portfolio. In the third quarter, pre‐tax cash margin in the Eagle Ford totaled $55 per Boe.

2014 & 2015 Production Targets On Track

In 2014, the company remains on track to deliver on its previously announced Eagle Ford production guidance of 70,000 to 80,000 Boe per day for its 10 months of ownership during the year.

75

100

2014e 2015e

(1) Midpoint of estimated net production from March through December (10 months of ownership).

Production Results to Date(MBOED)

Multi‐Year Production Outlook(MBOED)

>

(1)

Q4 Production To Benefit From Accelerated Completion Activity

At the end of September, 130 wells were drilled and waiting to be brought online. In an effort to reduce this inventory, 4 new completion crews are being added to accelerate activity in the fourth quarter and first quarter of 2015.

In aggregate, 9 completion crews will be running across the company’s Eagle Ford position by year end. This higher activity is expected to reduce the uncompleted well count by more than 50% in early 2015.

The accelerated completion activity is expected to increase Devon’s Eagle Ford production to a range of 85,000 to 95,000 Boe per day in the fourth quarter.

49

87

March 2014 September2014

76%Growth

>30%Growth

EAGLE FORD


2014 & 2015 Production Targets On Track (continued)

Devon projects these assets will achieve an average rate in excess of 100,000 Boe per day in 2015.

World‐Class Development Results In DeWitt County

The company’s world‐class development in DeWitt County continued to deliver some of the highest rate‐of‐return wells in North America.

Devon added 39 new wells to production, with 30‐day production rates averaging in excess of 1,300 Boe per day, of which approximately 70% was oil.

At the end of the quarter 14 rigs were running across Devon’s 50,000 net‐acre position in DeWitt County.

Upside Initiatives Underway in DeWitt County

In June, the company began implementing a production optimization program. This initiative is improving production rates through an engineered approach that analyzes well performance data (pressures and temperatures) and tailors a unique choke management plan to manage well pressure and to maximize value for each well.

Early results from the program indicate an immediate improvement in production rates without any evidence of degrading EURs.

With continued success, these production optimization practices will be applied across the play to new well activity and potentially lead to type curve improvements in 2015.

Additionally, the joint venture technical teams continue to engineer improved completion designs that could potentially increase production rates, EURs and returns. This promising initiative is currently being tested, and updates will be provided in upcoming quarters.

First Upper Eagle Ford Well In Progress

In addition to Devon’s Lower Eagle Ford development program, the company has identified Upper Eagle Ford potential across the majority of its 82,000 net acres across DeWitt and Lavaca County.

Devon has reached TD on its first Upper Eagle Ford well in the third quarter, the Medina 2H, on 100% working interest acreage in northeast DeWitt County. The Medina 2H is currently being completed (map below).

In total, 5 Upper Eagle Ford wells are expected to be spud by year‐end, with activity split between DeWitt and Lavaca counties (map below).

If commercially successful, this could meaningfully expand the company’s inventory and resource potential in the Eagle Ford play.

EAGLE FORD


Encouraging Results in Lavaca County

Third‐quarter activity was highlighted by 7 notable wells (operated and non‐operated) in western Lavaca County. Initial 24‐hour production from these wells averaged approximately 2,000 Boe per day. These wells further derisk the company’s 32,000 net acres in Lavaca County (map right).

Devon currently has 11 wells awaiting completion in Lavaca County and expects to spud or participate in 12 additional wells by the end of 2014.

The company is currently running 3 operated rigs in this emerging play.

HEAVY OIL


Net oil production in Canada averaged 80,000 barrels per day, a 9% increase compared to the third quarter of 2013. This strong result exceeded the midpoint of the company’s guidance range by 7,500 barrels per day.

The majority of this outperformance is due to better than expected performance at Jackfish 2 and 3. The deferral of a facility turnaround at Jackfish 1 resulted in incremental net production of about 3,000 barrels per day during the quarter.

Overall, gross production from the Jackfish complex averaged a record 64,000 barrels per day, a 20% increase compared to the third quarter of 2013. After accounting for royalties, net production averaged 53,000 barrels per day.

Jackfish 1 Exceeds Name‐Plate Capacity

Gross production exceeded name‐plate capacity averaging 36,000 barrels per day in the third quarter or 27,000 barrels per day, net of royalties.

The facility turnaround was deferred until mid‐2015 due to advancements with ongoing plant maintenance techniques and processes. The company is working toward lengthening the time between future facility turnarounds for all its Jackfish projects beyond the historic maintenance cycle of once every two years.

Jackfish 2 Production Advances

Gross production averaged 26,000 barrels per day in the third quarter. After royalties, net production was 24,000 barrels per day, an 8% increase compared to the second quarter of 2014.

This record production was driven by the ramp up of one new well pad and the optimization of existing pads.

HEAVY OIL Q3 STATSQ3 2014 Q3 2013

Production:Oil (MBOD) 80 73NGL (MBLD) ‐ ‐Gas (MMCFD) 26 17MBOED 84 76


HEAVY OIL


Jackfish 3 Achieves First Oil

Devon commenced steam injection on July 13th. Net production averaged 1,600 barrels per day during the third quarter.

The company expects Jackfish 3 to exit 2014 producing around 10,000 barrels per day. Peak facility capacity of 35,000 barrels per day is anticipated around year‐end 2015.

Jackfish Complex to Generate Significant Free Cash Flow

The completion of Jackfish 3 begins an era of free cash flow from Devon’s Jackfish complex.

In aggregate, the three Jackfish projects have the potential to generate around $1 billion annually of free cash flow, after maintenance capital.

Front End Engineering Design Work Continues at Pike

In 2015, net capital spending at Pike will be approximately $250 million as the company drills additional stratigraphic core wells to further understand reservoir characteristics and perform final front end engineering work.

Upon the completion of the engineering work, expected in the 4th quarter of 2015, the company will finalize a work plan and take the project to its board for consideration (map right).

Lloydminster Delivers Solid Results

Net production from Devon’s other Canadian assets, primarily Lloydminster, averaged 31,000 Boe per day, of which 86% was oil. The company expects these assets to generate approximately $200 million of free cash flow in 2014, after capital expenditures.

ANADARKO BASIN


ANADARKO BASIN Q3 STATSQ3 2014 Q3 2013



Net production averaged a record 98,000 Boe per day, a 17% increase compared to the third quarter of 2013. Liquids in the Anadarko Basin increased 30% year‐over‐year and now account for 45% of total production.

Raising Cana‐Woodford Type Curve Expectations

Record production from the Cana‐Woodford play was the key contributor to strong growth in the Anadarko Basin. Production from Cana increased to 71,000 Boe per day, a 25% increase compared to the year‐ago quarter.

Devon brought 7 Cana‐Woodford wells online during the quarter. Initial 30‐day rates from these wells averaged 1,440 Boe per day, of which 50% was liquids. These high‐rate wells exceeded the company’s type curve by more than 50%.

Recently enhanced completion design drove these outstanding results. The new design uses 70% more proppant, twice the frac stages and tighter perf clusters (graphic below).

Based on the strong results from these completion changes, Devon is now raising its type curve in the core of the Cana‐Woodford play. Initial production rates are now expected to be around 30% higher, while costs have increased less than 3% (table/chart right).

920

1,200

Previous Revised

30‐Day IP Rates(BOED)

Revised Cana‐Woodford Core Type Well

30%Increase

Key Modeling Stats

30‐Day IPBOED

1,200

EURMMBOE

1.7

D&C Cost $8.2 MM

Oil / NGL% of Production

10% / 30%

WI / NRI 51% / 40%

LOE ($/BOE) $4

ANADARKO BASIN


Cana‐Woodford’s STACK Optionality

In June, the acquisition of 50,000 net acres increased the company’s Cana‐Woodford position to roughly 280,000 net surface acres. Of this amount, roughly 200,000 net acres are in the condensate and NGL window of the play with multi‐stack pay potential.

The company recently spud its first two STACK wells targeting the Meramec formation (map right). Both wells are expected to be completed in the fourth quarter. Devon plans to participate in up to 6 additional Meramec wells by the end of the first quarter 2015.

Accelerating Cana Activity

Due to the highly competitive economics at Cana, the company plans to accelerate drilling activity to more than 10 rigs (including non‐operated activity) by the first quarter of 2015.

Rates of return from this accelerated drilling program are expected to be competitive with some of the company’s better oil development opportunities in its portfolio.

Granite Wash

Net production averaged 21,000 Boe per day. Liquids increased 9% year‐over‐year to 12,000 Boe per day, accounting for 58% of total production.

The company brought a high‐rate well targeting the Hogshooter interval online in the third quarter. Initial 30‐day production from the Lee Hefley 1H averaged 2,100 Boe per day, of which nearly 90% was oil and NGL.

Devon has 66,000 net acres across its Granite Wash position prospective for multiple formations.

BARNETT SHALE


BARNETT SHALE Q3 STATSQ3 2014 Q3 2013

Production:Oil (MBOD) 2 2NGL (MBLD) 54 57Gas (MMCFD) 896 1,009MBOED 205 226


Net production averaged 205,000 Boe per day. Liquids production increased to 27% of total Barnett Shale production.

The Barnett Shale represents significant gas optionality in Devon’s portfolio with a deep inventory of quality, undrilled locations.

Maximizing Base Production

In this liquids‐rich gas play Devon is focused on maximizing base production through optimizing existing well performance.

Successful optimization initiatives include: utilizing artificial lift, reducing line pressures and minimizing downtime.

Controllable production downtime has declined to just one‐half percent.

Low Cost Play Generates Significant Free Cash Flow

Pre‐tax cash margin in this low cost play is expected to exceed 70%, generating approximately $1 billion of free cash flow in 2014 (table below).

2014e ($B)

Upstream Revenue $1.8

Operating Expenses ($0.5)

E&P Capital ($0.3)

Free Cash Flow $1.0

ROCKIES OIL


ROCKIES OIL Q3 STATSQ3 2014 Q3 2013



Net production averaged 22,000 Boe per day. Oil production from this emerging opportunity increased 23% compared to the third quarter of 2013.

Accelerating Development Activity

Appraisal drilling to date has identified approximately 1,000 risked oil locations across the company’s Powder River Basin position. Roughly 75% of these are associated with the Parkman formation.

With this inventory, Devon has shifted its 4‐rig program to focus on more aggressively developing its most economic Parkman and Turner opportunities.

Drilling activity for the quarter was highlighted by 6 development wells targeting the Parkman and Turner formations in Campbell County, Wyoming. Initial 30‐day production from these wells averaged 1,080 Boe per day, of which 85% was light oil.

8

10

Q3 2013 Q3 2014

Rockies Oil Production(MBOD)

23%Growth

MISSISSIPPIAN‐WOODFORD


MISSISSIPPIAN‐WOODFORD Q3 STATSQ3 2014 Q3 2013



Net production averaged a record 21,000 Boe per day, a 136% increase, compared to the third quarter of 2013.

Oil and NGL accounted for nearly 75% of total production.

Future Activity Focused on Development Opportunities

Devon plans to reduce activity in the Mississippian‐Woodford from 6 rigs at the end of the quarter to 2 rigs in the fourth quarter.

The 2‐rig program will develop the company’s Logan County focus area (63,000 net acres).

To date, development results in the focus area have met or exceeded type‐curve expectations.

The company also continues to evaluate other promising areas across the joint venture acreage.

Sinopec JV Delivers Capital Efficient Growth

Devon’s 2014 drilling program is focused on appraising its 182,000 net acres inside the joint venture area with Sinopec. Across this acreage, Sinopec funds 70% of Devon’s capital requirements.

At September 30, 2014, ≈$280 million remained of the initial $1.6 billion of drilling carry. Devon expects to exit 2014 with ≈$160 million of carry remaining.

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