Devon Energy Corporation and Crosstex Energy Joint Conference Call to discuss Creation of New Midstream Business Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Arun Jayaram - Credit Suisse - Analyst : Good morning. John or Jeff, I was wondering if you could kind of highlight -- went through a lot of this morning -- kind of the benefits of this transaction relative to the IPO process and just talk to us about the benefits you see from doing this relative to the previous path that you were going down.

Question: Arun Jayaram - Credit Suisse - Analyst :

Question: Arun Jayaram - Credit Suisse - Analyst : Okay. Jeff, as we think about Devon's stand-alone or the E&P segment, can you just walk us through some of the key modeling things we should be thinking about? Obviously, there would be an impact on your LOE I was just wondering if you could maybe highlight some of the key modeling things we should be thinking about.

Question: Arun Jayaram - Credit Suisse - Analyst : Okay, thank you very much for that.

Question: Stephen Maresca - Morgan Stanley - Analyst : Good morning, everybody, and congrats on the transaction. First, just to make sure I am clear, there is going to be no increase in debt at the GP, XTXI, or XTEX from this? They are not assuming any debt; not issuing any debt? Then on slide 17 you had a footnote, leverage metrics include 15% material project credit. Just wanted to understand what that was as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. to discuss Creation of New Midstream Business

Question: Stephen Maresca - Morgan Stanley - Analyst : Okay.

Question: Stephen Maresca - Morgan Stanley - Analyst : Yes, yes. But on the first point, just to be clear, there is no increase in debt at all; this is just an equity transaction? There is no new assumed debt here?

Question: Stephen Maresca - Morgan Stanley - Analyst : Okay. Then my follow-up, just some thoughts on the potential future drop of the other 50% of holdings. Would that be something that you would think to do soon? Would it be all at once or something you would parcel out in pieces over time?

Question: Stephen Maresca - Morgan Stanley - Analyst : Okay. That is my one and follow-up, so I will get back in queue. Thanks, guys.

Question: Doug Leggate - BofA Merrill Lynch - Analyst : Thanks, good morning. Congratulations, everybody. I guess the first one; (inaudible) suggesting that EBITDA ex good synergies. Can you help us understand order of magnitude what you expect the synergies could ultimately be and what the timeline for delivery is? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. to discuss Creation of New Midstream Business

Question: Doug Leggate - BofA Merrill Lynch - Analyst : Great, thank you for that. And I guess specific to Devon -- guys, I'm not sure who wants to take this one -- but your guidance on midstream EBITDA is a little higher up than the $420 million that you are putting, I think Jonathan mentioned, that was going into this. So can you help us understand what happens to the balance of the EBITDA and ultimately its intention to drop that into the MLP (technical difficulty) joint venture (inaudible). I will leave it there, thank you.

Question: Doug Leggate - BofA Merrill Lynch - Analyst : That is helpful, guys. Thanks. I think that is my two, thank you.

Question: Darren Horowitz - Raymond James - Analyst : Barry, John, and everybody, congratulations on the transaction. Mike, a couple of financing questions for you. The first, with regard to that more flexible balance sheet and lower cost of capital that you alluded to, how do you view the benefit on a return on invested capital basis, say, over a three- to five-year period? Is it a situation where at the MLP you think that you can pick up an incremental 200 or 300 basis points? I would love your thoughts there.

Question: Darren Horowitz - Raymond James - Analyst : Okay. Then my follow-up question, more from a strategic perspective. Downstream within liquids it looks like there is a pretty good value arbitrage opportunity, of course, to continue building up assets at the GP possibly and then selling them down to the LP. And I'm thinking beyond that access pipe, certainly on a pro forma basis with more of a Mont Belvieu presence and greater downstream opportunity, how do you think about expanding the NGL value chain further down to the petchems and possibly even leveraging that footprint for LPG or ethane export or anything that you can do along the Gulf Coast?

Question: Darren Horowitz - Raymond James - Analyst : Thank you and congratulations again, guys.

Question: Harry Mateer - Barclays Capital - Analyst : Good morning. First question, can you just talk about what Devon's targeted long-term hold might be in the GP and MLP entities? I mean, presumably you will still have control of the overall complex just from your GP stake. Can you sell down your MLP position and what are the tax implications associated with doing that?

Question: Harry Mateer - Barclays Capital - Analyst : Got it, thank you. Then on the 2.1 times leverage number that is cited in the release; is that just taking Crosstex MLP's current total debt? Are there any other adjustments to get to that number?

Question: Harry Mateer - Barclays Capital - Analyst : Great, thank you.

Question: Bob Morris - Citigroup - Analyst : Thank you. John, you mention that 95% of the margin would be from fixed fee contracts, but previously most of Devon's contracts with their midstream business were a percent of proceeds. So is it correct that you have renegotiated all the -- or most or much of the contracts between Devon and the midstream internally there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. to discuss Creation of New Midstream Business

Question: Bob Morris - Citigroup - Analyst : Will you then be giving new or updated guidance on Devon's individual line items like LOE or items that are affected on Devon's standalone as a result of those contract renegotiations?

Question: Bob Morris - Citigroup - Analyst : Right, but there will be some impact. It will be reflected in some change or alteration to that guidance when it does come out.

Question: Bob Morris - Citigroup - Analyst : Yes, at a constant commodity price, right. No, I get it. That makes sense. That answered my question. Thank you.

Question: John Herrlin - Societe Generale - Analyst : Thank you. Following up on the question on the fixed fee contracts, is the new agreement materially different, John, than what you had mentioned in the S-1 for the spin before?

Question: John Herrlin - Societe Generale - Analyst : That is fine. Could you give us a little background for how this came about, because first you were going to spin it out; now you are doing an effective merger? Could you go through how this happened?

Question: John Herrlin - Societe Generale - Analyst : Okay, great. One last one for me. John, how will this change your marketing operations, or will it not at all?

Question: John Herrlin - Societe Generale - Analyst : Thank you.

Question: John Edwards - Credit Suisse - Analyst : Good morning, everybody, and congratulations on the transaction. One of my questions here is just how is it going to work as far as future midstream developments at Devon? Would those go at the Devon level and then drop down? And if also you can give us an idea of the magnitude of future midstream capital expansion plans going forward.

Question: John Edwards - Credit Suisse - Analyst : All right, that is helpful. Then just, I guess for -- my one follow-up here is if you could talk a little bit about, Barry, what the thought process is as far as what will happen with the E2 assets?

Question: John Edwards - Credit Suisse - Analyst : All right, thank you. I will get back in queue. Thank you.

Question: Adam Leight - RBC Capital Markets - Analyst : Thanks for taking my question. Can you discuss your long-term leverage strategy; is that 2.1 times plus or minus where you would expect to be?

Question: Adam Leight - RBC Capital Markets - Analyst : Have you gotten any guidance from the rating agencies on what it would take for you to actually receive an investment grade rating?

Question: Adam Leight - RBC Capital Markets - Analyst : Okay, thanks.

Question: T.J. Schultz - RBC Capital Markets - Analyst : Just following up on, I guess, John's question on organic growth for the new MLP. Barry, can you get any more granular on the organic opportunity set, discussing potential CapEx ranges in 2014, or maybe just higher level as you support of Devon's upstream portfolio? Where the organic opportunities best present themselves over the next three to five years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. to discuss Creation of New Midstream Business

Question: T.J. Schultz - RBC Capital Markets - Analyst : Great, thanks. Mike, the MLP distribution (technical difficulty) implies I think you said equal to or greater than $1.47. I think the reference in the presentation was distribution to be in the high split, so maybe if you can just reconcile that; how you distribute ramp in distributions and hitting those split levels?

Question: T.J. Schultz - RBC Capital Markets - Analyst : Just talk about the split level, how it could be in the high splits.

Question: Sharon Lui - Wells Fargo Securities - Analyst : Good morning. Congratulations also on the transaction. Just a follow-up I guess on the growth CapEx questions that you have been getting. So for the Devon assets as a standalone in the IPO, did you -- was there a number given for the potential opportunity set there?

Question: Sharon Lui - Wells Fargo Securities - Analyst : That is correct.

Question: Sharon Lui - Wells Fargo Securities - Analyst : Okay. I guess just looking at the contracts that Devon is providing for the five-year minimum gathering commitments and processing commitments, can you maybe just talk about those minimums relative to the current volume?

Question: Sharon Lui - Wells Fargo Securities - Analyst : Okay. For both gathering and processing?

Question: Sharon Lui - Wells Fargo Securities - Analyst : Okay, okay. Then I guess in terms of the other midstream assets at Devon, you mentioned that there are some Canadian businesses. Does it make sense to drop-down those assets into the MLP over time?

Question: Sharon Lui - Wells Fargo Securities - Analyst : Have you quantified, I guess, what is the related EBITDA tied to those assets?

Question: Ethan Bellamy - Robert W. Baird - Analyst : Good morning. This is Ethan Bellamy actually. Does the addition of the Crosstex infrastructure anywhere change the economics for any of Devon's PUDs or acreage? Any expected change to the drill program?

Question: Ethan Bellamy - Robert W. Baird - Analyst : Okay. Then can you -- some housekeeping items, like are there any FTC issues, breakup fees, equity lockups, and maybe what kind of deal-related expenses we would see modeled in G&A?

Question: Ethan Bellamy - Robert W. Baird - Analyst : All right, thanks.