Market Overview

Devon Energy Announces Final Step to Complete Transformation to U.S. Oil Growth Company



  • Pursuing separation of its Canadian and Barnett Shale assets
  • Expect to complete separation by end of 2019
  • Share-repurchase authorization increased to $5 billion
  • Quarterly dividend increased 13 percent
  • Committed to at least $780 million in annual cost reductions

Devon Energy Corp. (NYSE:DVN) today announced that the board of
directors has authorized the company to pursue the separation of its
Canadian and Barnett Shale assets to complete its transformation to a
high-return U.S. oil growth business. Devon will evaluate multiple
methods of separating the assets, including a potential sale or
spin-off. The separation will allow the company to focus on its
top-tier, high-return U.S. oil assets and is aligned with Devon's
previously announced long-term strategic plan.

"With our world-class U.S. oil resource plays rapidly building momentum
and achieving operating scale, the final step in our multi-year
transformation is an aggressive, transformational move that will
accelerate value creation for our shareholders by further simplifying
our resource-rich asset portfolio," said Dave Hager, president and CEO.
"New Devon will emerge with a highly focused U.S. asset portfolio and
has the ability to substantially increase returns and profitability as
we aggressively align our cost structure to expand margins with this
top-tier oil business. The New Devon will be able to grow oil volumes at
a mid-teens rate while generating free cash flow at pricing above $46
per barrel."

The company expects to complete the separation of its Canadian and
Barnett Shale assets by the end of 2019. Devon has hired advisors for
each asset, and data rooms for Canada and the Barnett are expected to be
open by the second quarter of 2019. The company anticipates using
potential proceeds from the separation of these assets to maintain
target debt levels of 1.0-to-1.5 times EBITDA and to continue Devon's
industry-leading share repurchase activity.

Share-Repurchase Program Increased to $5 Billion and Dividend Raised
13 Percent

Devon also announced today that its board of directors authorized a $1
billion increase to the company's previously announced $4 billion
share-repurchase program, bringing the total repurchase program to $5
billion. The authorization for the repurchase program expires on Dec.
31, 2019. As of Feb. 18, 2019, Devon had completed $3.4 billion of
repurchases under the program, totaling approximately 90 million shares.

All purchases will be made in accordance with applicable laws from time
to time in open-market or private transactions, depending on market
conditions, and may be discontinued at any time. At the current share
price, this program covers nearly 30 percent of the company's
outstanding common stock.

Additionally, the company's board of directors approved a 13 percent
increase in its quarterly common stock dividend beginning in the second
quarter of 2019. The new quarterly dividend rate will be $0.09 per
share, compared to the prior quarterly dividend of $0.08 per share.

Commitment to $780 Million in Annual Cost Reductions

With Devon's new, narrowed focus as a U.S. oil business, the company is
committed to aligning the cost structure by taking steps to deliver at
least $780 million in sustainable annual cost savings by 2021. The
cost-reduction plan includes a number of actions to achieve more
efficient field-level operations and improvements in drilling and
completion costs while better aligning personnel with the go-forward
business. Approximately 70 percent of the estimated cost reductions are
expected to be accomplished by year-end 2019, with the remaining savings
realized in 2020 and 2021.

"Devon is taking aggressive, meaningful and decisive steps to improve
our operational and corporate cost structure," said Jeff Ritenour,
executive vice president and chief financial officer. "The combination
of selling higher-cost assets and bringing online new lower cost
production, along with our commitment to at least $780 million in annual
cost-reductions, is expected to drive down per-unit cash costs more than
20 percent by 2021."

To underscore the commitment to achieving targeted results, the standing
reserves committee of the board of directors will expand its scope of
work to include oversight and measurement of progress toward the targets
alongside management. The committee is composed of three independent
board members, each with strong operational backgrounds.

Positioned for Significant Margin Expansion and Sustainable Long-Term

New Devon's business is characterized by core of the core positions with
significant operating scale in four basins: the Delaware, STACK, Powder
River and Eagle Ford. In the fourth-quarter of 2018, these assets
delivered light-oil production growth of 20 percent year over year, with
total production averaging 296,000 oil-equivalent barrels (Boe) per day.
New Devon has operating margins that are 57 percent above the total
company average in 2018 and has demonstrated well productivity that has
exceeded the industry average by approximately 40 percent over the past
three years.

With the steps announced today, the company's highly concentrated U.S.
oil business is expected to generate 13 to 18 percent oil growth in
2019, with 10 percent less upstream capital than 2018, and is
self-funded at $46 oil prices (assuming flat service and supply pricing
relative to 2018). With this plan, New Devon is now positioned to
deliver substantially higher price realizations, significantly improved
per-unit costs, superior operating margins and sustainable long-term
growth through its deep inventory of high-caliber oil growth

Detailed 2019 Guidance and Three-Year Performance Targets

More detailed information regarding Devon's retained U.S. oil assets is
available within its fourth-quarter 2018 earnings materials available at
Included within these documents are operating and financial metrics by
key asset, detailed guidance for 2019 and updated three-year performance
targets for the business.


Devon has retained J.P. Morgan Securities LLC and Goldman Sachs to
assist the company in exploring strategic alternatives for its Canadian
business. Devon has retained Jefferies as financial advisor to assist
the company in exploring strategic alternatives for the Barnett Shale.

Forward-Looking Statements

This release includes "forward-looking statements" as defined by the
Securities and Exchange Commission (SEC). Such statements include those
concerning strategic plans, expectations and objectives for future
operations, and are often identified by use of the words and phrases
"expects," "believes," "will," "would," "could," "continue," "may,"
"aims," "likely to be," "intends," "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
press release 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: our ability to successfully
complete the separation transactions in a timely manner or at all; the
amount of proceeds received (if any) in such separation transactions,
and the ultimate use of those proceeds; our ability to realize the
anticipated cost savings and other benefits with respect to the retained
business; changes in commodity prices, market conditions or other
circumstances that could negatively impact the company's ability to
complete the stock repurchase program or maintain our quarterly
dividend; and any of the other risks and uncertainties identified in our
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 release are made as of the date of this release, 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.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding
and producing oil and natural gas. Based in Oklahoma City and included
in the S&P 500, Devon operates in several of the most prolific oil and
natural gas plays in the U.S. and Canada with an emphasis on achieving
strong returns and capital-efficient, cash-flow growth. For more
information, please visit

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