Florida Energy Conference
Shale Revolution Presentation
October 29, 2012
Devon Today
Proved reserves: 3.0 billion BOE
(42% liquids)
Q2 2012 production: 679 MBOED
Production mix:
22% oil
15% NGLs
63% natural gas
Significant midstream business
2012e operating profit: ≈$385 million
Enterprise value: $25 billion
NYSE: DVN
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Slide 2
North America Natural Gas
Production
BCFD
4.3
3.0
2.8
2.6
2.5
2.4
1.7
ExxonMobil
Chesapeake
EnCana
Anadarko
ConocoPhillips
Note: Production based on second quarter 2012 reported results.
NYSE: DVN
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page 3
BP
1.6
Shell
1.5
Apache
Larger than you might think…
Enterprise value
US$, billions
FedEx
Allstate
Marriott
General Motors
Best Buy
Southwest Airlines
$0
$5
$10
$15
$20
Source: Enterprise value as stated on Yahoo! Finance on Jan. 3, 2012.
NYSE: DVN
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page 4
$25
$30
DVN Shale Revolution
Shale Evolution:
•
•
•
•
A Look Back
Technology’s Impact
US Shale Plays
Efficiency
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page 5
Look Back to Early 2000 Natural Gas View
• In 2003, Alan Greenspan stated that the US will become a major importer of LNG – Wall
Street Journal
2003 Projection of US LNG Imports
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2002
2003
2004
2005
2006
LNG Import Projection
2007
2010
2011
Actual
Source: EIA, Devon
NYSE: DVN
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page 6
2012
Shale Drilling Evolution
Traps vs. Shales
Fracture stimulation 5,000’ – 15,000’ below the surface
Hydrocarbon Trap
Migrating
Hydrocarbons
Shale
Organic Rich
Source Layer
Frack
Porous & Permeable
Reservoir Layer
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page 7
Impermeable
Sealing Layer
North American Shale Gas Plays
Impact of Shale Gas Plays
• Shale play development has been the primary driver in U.S. Lower 48 supply.
Sources: EIA, Potential Gas Committee, Ziff Energy
NYSE: DVN
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slide 8
U.S. shale gas production
Major U.S. shale plays
Barnett
Fayetteville
Arkoma Woodford
Haynesville
Marcellus
Eagle Ford
Ohio Utica
35
30
BCFD
25
20
15
10
5
0
2008
2009
2010
2011
2012
2013
2014
2015
Source: Wood Mackenzie (data through July 2012)
NYSE: DVN
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Slide 9
2016
2017
How Technology Ramped Up Growth
Barnett Shale Average Annual Production (BCFD)
5.5
5.0
Total Field
Production
2009
> 4.9 BCFD
4.5
4.0
3.5
3.0
Horizontal Technology
Light Sand Fracture Technology
2.5
2.0
1.5
Barnett Recognized in 1981
Devon Acquires
Mitchell
Currently
1.1
1.0
0.5
0.0
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Devon
Other
Source: IHS Energy. Gross wellhead production by operator.
NYSE: DVN
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page 10
Devon alone
has increased
its estimated
resource base
approaching 5X
since 2002.
Horizontal Drilling Technology
Fracture
Stimulation
Shale Reservoir
Frac Barrier
Water Bearing Fm.
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slide 11
Barnett Shale
Pad development
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page 12
Rigs Continue to Drill New Wells Faster,
Despite Increasing Well Lateral Lengths
Wells
3.5
Feet
10,000
New Wells/Rig/Month
Total Length
9,000
3.0
8,000
2.5
7,000
2.0
6,000
1.5
5,000
1.0
4,000
0.5
3,000
Marcellus Fayette
Barnett
2Q11
Marcellus Fayette Barnett
2Q12
13
Devon – Shale Revolution
Infrastructure Revolution
• Pipeline Expansion
• Storage Increase
• Stable Price Environment
NYSE: DVN
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page 14
Major pipeline infrastructure updates
2009 to 2012
Recent capacity additions (Bcfd)
Rockies Express
1.80
Midcontinent Express
1.80
Gulf Crossing
1.70
SESH
1.00
Fayetteville/Greenville
1.30
Total
7.60
Committed capacity additions (Bcfd)
ETC Tiger (Haynesville)
2.40
Enterprise (Haynesville)
2.10
Regency (Haynesville)
1.10
Gulf South (Haynesville)
.50
Centerpoint (Haynesville)
.30
Transco (Marcellus)
.75
Texas Eastern (Marcellus)
.45
Tennessee (Marcellus)
.35
Transco (S.E. & Florida Mkts.)
.56
FGT (Florida Markets)
.82
Trans Canada Bison (Rockies)
.48
El Paso Ruby (Rockies)
Total
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page 15
1.50
11.31
Marcellus Take-away Capacity Projects
Owner
Project
New In Service 4Q11
Capacity
(MMCF/D)
Completion
Date
Status
1,455
Dominion
Appalachian Gateway
484
3Q12
In Service
Kinder Morgan
Tennessee Northeast Supply Diversification
250
4Q12
Under Construction
Spectra
TEAM 2012
200
4Q12
Under Construction
National Fuel
Northern Access Expansion
320
4Q12
Under Construction
TransCanada
Eastern Mainline Expansion
446
4Q12
Under Construction
Scheduled in Service 2012
1,700
Millennium
2012 Expansion
150
1Q13
FERC EIS Approval
NiSource/UGI
PennStar Pipeline
500
4Q13
FERC Application
Kinder Morgan
Tennessee Northeast Upgrade Project
636
4Q13
FERC Approval
Spectra
Tetco NJ/NY Expansion Project
800
4Q13
Under Construction
Williams
Transco Northeast Supply Link
250
4Q13
FERC Application
Kinder Morgan
Tennessee MPP Project
240
4Q13
In Development
Spectra
Tetco Uniontown to Gas City Expansion
300
4Q13
Open Season
Scheduled in Service 2013
2,876
Williams
Transco Northeast Connector
100
2Q14
Signed Agreements
Williams
Atlantic Access Pipeline
1800
4Q14
50% Capacity Signed
Spectra
TEAM 2014
1400
4Q14
43% Capacity Signed
Spectra
Ohio Pipeline Energy Network (OPEN)
1000
4Q14
In Development
Scheduled in Service 2014
TOTAL UNDER DEVELOPMENT
4,300
8,876
Does not include gathering or shorter intra-regional projects.
16
Natural Gas Storage
1999 to 2015
•
•
Storage Capacity has increased by roughly .5 TCF over the last 10 years
Storage Capacity is expected to increase by another .5 TCF by 2015
Source: Wood Mackenzie
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page 17
Gas price stability
As supply grows, price remains low, stable
Lower 48 gas supply has grown by 20 Bcfd since 2000, up 50%
•
Driven by shale and infrastructure development post 2005
•
Result: lower, more stable pricing
U.S. Lower 48 Gas Production (BCFD)
Henry Hub FOM Index Price ($/MMBtu)
U.S. Lower 48 Gas Supply (BCFD)
65
60
16
Hurricanes Katrina & Rita
Strong global economy
Price run-up with crude oil
14
12
Cold weather
55
10
50
8
45
6
40
4
35
2
30
0
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page 18
Henry Hub FOM Index ($/MMBtu)
70
What’s Next
Stable Prices have Revitalized US Industrial Sector
• Steel Industry
• “Cheap Natural Gas Gives Hope to the Rust Belt” – Wall Street
Journal
• 10 New Plants Planned with 2 additional expansions
• Fertilizer Plants
• 9 Plants in the making - (1 New, 4 Restarts, 4 Expansions)
• Ethylene Crackers and Petrochemical Expansion
• 31 Plants coming on line (17 New, 5 Restarts, 9 Expansions)
• Gas to Liquids (GTL)
• 4 GTL Plants in the planning process
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page 19
America’s “New” Natural Gas:
Choice, Reliability, Competition, Price Stability
• 100+ years of natural gas supply – and growing with technology
• New shale gas resources:
– Efficiency Gains
– Pad Drilling
– Longer Laterals
– Rig Efficiencies
– Long-term supply stability
– Wells produce for 40 - 50 years or more
• Expanding technology to additional resources – What’s Next??
• New resources onshore are easier and less expensive to develop - Efficiencies
• Pipeline and storage infrastructure to deliver gas on a reliable basis
Bottom line:
Greater energy and economic security; more stable, predictable prices
NYSE: DVN
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page 20