Devon Energy Corporation

Welcome to Devon Energy's first quarter 2022 conference call. At this time, all participants are in listen-only mode. This call is being recorded. I'd now like to turn the call over to Scott Coody, Vice President of Investor Relations. Sir, you may begin.

Good morning, and thank you to everyone for joining us on the call today. Last night, we issued an earnings release and presentation that cover our results for the quarter and updated outlook. Throughout the call today, we'll make references to the earnings presentation to support prepared remarks, and these slides can be found on our website. Also joining me on the call today are Rick Moncrief, our president CEO, Clay Gaspar, our chief operating officer, Jeff Rittenour, our chief financial officer, and a few other members of our senior management team. Comments today will include plans, forecasts, and estimates that are forward-looking statements under U.S. securities law. These comments are subject to assumptions, risks, and uncertainties, that could cause actual results to differ from our forward-looking statements. Please take note of the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Rick.

Thank you, Scott. Great to be here this morning. We appreciate everyone taking the time to join us on the call today. As we all know, it's been an extraordinary time in the world, including energy markets over the past few months. While no one could have accurately predicted the timing or the wide-ranging impact of the recent geopolitical events. I can assure you that our team at Devon deeply understands the importance of our role in providing energy security to the U.S. We take pride in providing our great nation a reliable, safe, and cost-advantaged source of energy. The first quarter operational results are yet another example of the resolve and dedication to our mission here at Devon. Our people overcame multiple bouts of extreme winter weather and fought through the challenges of a tight supply chain to not only meet but exceed oil production targets for the quarter. We were also able to keep a lid on inflation and deliver these volumes in a very cost-effective way. This type of tough and resilient performance is what defines us. And I want to congratulate the entire Devon team for getting the job done the right way amid some very challenging conditions. Now turning to slide five, The first key message I want to convey is that the execution of our discipline operating plan resulted in yet another quarter of impressive financial results. This was highlighted by Devin's earnings and cash flow growing at healthy double-digit rates versus last quarter. Our capital was in line with our plan, and our free cash flow increased 18% over the prior period. We grew our quarterly dividend to a new record-high payout of $1.27 per share. Our buyback program further amplified per share growth, and our rock solid investment grade balance sheet only continued to strengthen. These results continue to demonstrate the power of our disciplined business model, our focus on growing cash margins, and the benefits of our differentiated cash return framework. On slide six, My second key message today is that we are staying true to the game plan we laid out earlier this year and are well on our way to achieving our capital objectives for 2022. With our budgeted activity, Devon is one of the most active operators in the US with 19 operated rigs running and our team is working hard to maximize our production. As I touched on earlier, in the first quarter we delivered more volumes to the market than projected in our plan And this strong execution positions us to produce 570 to 600,000 BOE per day for the full year of 2022. This level of output makes us one of the largest producers in the US, and we're laser focused on reliably delivering these essential barrels to the market in a capital efficient manner. Now looking beyond the current year, I want to emphasize there's no real change to how we'll manage our business. To ensure we are excellent stewards of capital, We believe that fairly consistent activity through the cycle is the best pathway to optimize efficiencies and returns. To execute on this foundational principle, our discipline strategy moderates Devon's production growth from zero up to as much as 5% in any given year. Today's heightened pricing from recent geopolitical events does not impact our capital allocation strategy. I can assure you that we will continue to be very thoughtful and closely evaluate how the geopolitical landscape influences market fundamentals. Even with today's higher prices, we simply must consider the continued steep backwardation in strip pricing, the ongoing supply chain challenges, and the economic uncertainty resulting from the crisis in Ukraine. The third key point I want to make today is that our financially driven strategy is designed to reward shareholders with higher cash returns in this constructive price environment. This is demonstrated on slide eight with the attractive yield that Devon's fixed plus variable dividend policy offers compared to other segments of the equity market. In fact, at today's pricing, our yield is six times higher than the average company that's represented in the S&P 500 index. With this market-leading dividend payout, We have seen a tremendous benefit to our shareholder base over the past several quarters by attracting dividend-oriented funds, value investors, pensions, family offices, retail, and we're even beginning to see evidence of growth investors. Furthermore, we've also seen a significant change among the culture of our employees who all own our stock and look forward to that quarterly dividend check just as much as you do. Now, another way we're returning cash to shareholders is by repurchasing our stock. As you can see on slide nine, since we commenced the program last November, we have executed $891 million of share repurchases. This activity has reduced our outstanding share count by 3% at a cost basis that is about 25% below current trading levels. With the board now expanding our share repurchase program by 25%, up to $2 billion, we can be active buyers of our stock throughout the rest of this year. We will be thoughtful, disciplined, and convicted with this buyback activity, but I can assure you that we will take full advantage of any pullbacks and look for opportunities, especially to buy dips. At current levels, we feel that we are fundamentally undervalued and are at the start of a multiple expansion for our equity that should translate into true value creation for shareholders. Turning to slide 11, my final key message for you today is that we expect a strong financial and operational performance we have been delivering to be sustainable for years to come. My confidence comes from the quality of our asset portfolio, the depth of our inventory, the diversity of our product mix, and the talented team we have assembled. These competitive advantages are further reinforced by our unwavering commitment to capital discipline through the cycle, the transparent cash return framework we have instituted, and the rock-solid balance sheet we possess. Now, importantly, the market agrees with this view and has been rewarding us with an increasing share price for the advantage traits over the past year. However, with many investors that are possibly new to our story, we believe it is still very early in this structural bull market. Devin's strong stock performance over the past year is largely a bounce back from the generational lows we experienced during the COVID crisis. This is evidenced by energy's weighting in the S&P 500 index of only 4% compared to the long-term average of closer to 10%. As you can see on the box to the right, we believe our attractive return profile and valuation compared to the broader market will be another catalyst for our share price appreciation as more and more investors discover Devon's unique investment proposition. Furthermore, with our geographic and commodity mix diversity, We have the ability to benefit on all fronts. And with that, I will now turn the call over to Clay to cover our operational highlights for the past quarter. Clay?