Devon Energy’s Delaware Basin Water Management Program

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Devon Energy’s Delaware Basin WaterManagement ProgramJeff Sawyer, P.E.Produced Water WorkshopCarlsbad, New MexicoMay 24, 2016NYSE: DVNdevonenergy.comJeff Sawyer and Ken Nichols

Agenda Introduction – Devon Overview Past Water Management Case Studies 2015 Water Management Case Study– Strategic Drivers– Regulatory Considerations– Water Infrastructure– Water Treatment– Timeline Continued progress Preparation for the future2

Introduction2015 Devon Overview3

Water Stress MapHydraulic Fracturing & Water Stress: Water Demand by the Numbers – Shareholder, Lender, and Operator Guide to Water Sourcing. Ceres 2014.4

Case Study 1 – North TexasBarnett flowback analysis100000900008000070000TDS (PPM) Drivers – Disposal capacity, water scarcity Chemical pretreatment – clean brine– Remove solids, iron, oil, polymer– 10,000 bpd capacity per unit Distillation– Vaporizes water and condenses it - clean,distilled water– Remaining concentrate removed for disposalor utilized for as “kill fluid”– 2,500 bpd capacity per unit Regulatory engagement - RRC Multiple sites over nearly a decade of activitythrough 20000Cumulative flowback (Bbls)Denton County SouthDenton County NorthJohnson County25000

Case Study 2 - Anadarko Drivers – drought, truck trafficHigh quality produced waterSettling, DisinfectionCentralized facility– Saltwater Disposal Well– 500,000 bbl storage pondAutomated monitoringPipeline network– 8”-12” fiberglass– Approximately 35 milesRegulatory engagementMaintained operations during dry periods– 2012-2014

Case Study 3 – Midland PBTX East Drivers - Water scarcity, disposal capacityBrackish groundwater wellsClO2 treatment of produced waterCovered brackish frac ponds42,000 bbl ASTs for recycleLayflat hose for transferSome permanent collection addedAutomated monitoringData management pilotNear zero fresh water demand 2013-2014

2015 Case Study – DriversDelaware Basin New Mexico High Cost and Risk High Water Demand Freshwater Scarcity– No Surface Water Available– High Competition forGroundwater High Cost of Trucking and Disposal8

Recycling RegulationsDelaware Basin New Mexico NMOCD Rule 34– Developed to encourage the recycling and reuse of produced water,drilling fluids, and other liquid oil field waste.– Authorizes the storage of produced water in double lined earthenimpoundments.– Permit by Rule– Before Rule 34, large ASTs required lengthy permitting process to storeproduced water.9

Environmental ProtectionDelaware Basin New Mexico Pre-Construction Environmental SiteAssessments Double-lined Impoundments Real-Time Leak Detection Between Liners Hydro Test all Primary Liners Before Initial Use Bird Deterrents* Liner System DetailFreshwater Hydro Testing New ImpoundmentLeak Detection System with Real Time Notification* Bird Diverter Device10

2015 - InfrastructureDelaware Basin New Mexico 6 Completed Impoundments 7 Proposed Future Locations Permanent pipeline infrastructure being developed 3rd party and Devon-owned11

Water TreatmentClean Brine Standard Removal of oil residual Removal of TSS Removal of Iron Bacteria Reduction Turbidity 10 NTURaw PWClarified PWClean BrineWaste Sludge Treatment Targets Vary Depending on Useand Storage Method Waste is Either Pressed into Solids forLandfill or Disposed into SWD12

2015 Case Study - TimelineDelaware Basin New Mexico2012 Devon begins permitting forinitial reuse pilot in Delawarebasin and runs initial reuse pilotDecember 2013 Devon runs 2nd reusepilotFebruary 2014 Devon’s 1st full scalereuse project, usinglarge AST’s2014March 2015 Devon reused 67 million gallons(1.6 mm bbl) New Mexico allowsproduced water storagein impoundments(NMOCD rule 34)May 2015 Devon applied for first permitfor produced water storageimpoundment under rule 34August 2015 1st reuse project started usingimpoundmentsNovember 2015 Devon had 5 water treatmentfacilities (capacity 50,000bwpd)2015 Devon reused 145 million gallons(3.5 mm bbl)2016 Devon will continue to reusewater and pilot new technologieswhere feasible YTD 80% of completions wateris recycled produced water13

Industry TrendsINDUSTRY TRENDSBENEFITSImproving Fracturing ChemistryIncreasing use of non-fresh waterInnovation in Treatment TechnologyIncreasing feasibility of produced waterreuseIncreasing Water Conveyance SystemsReducing truck trafficNew Water Storage DesignsProvides flexibility and reliability whenusing non-fresh waterIncreasing TransparencyImproves relationships with stakeholdersDedicated Water StaffImproves water management, planningtechnical support and gy-water-initiative14

Devon Water Management TeamPreparing for the future Dedicated Staff – Operations Excellence Water Team Tactical and strategic goals Focus areas to reduce cost and risk– Stakeholder Engagement– Standards– Technology– Planning15

Thank you

basin and runs initial reuse pilot. 2012 Devon runs 2. nd. reuse pilot. December 2013 Devon’s 1. st. full scale reuse project, using large AST’s. February 2014 New Mexico allows produced water storage in impoundments (NMOCD rule 34) March 2015 Devon reused 67 million gallons (1.6 mm bbl) 2014 Devon applied for first permit .

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