Devon Energy Corporation

Ladies and gentlemen, welcome to Devon's Energy's second quarter earnings conference call. At this time, all participants are in a listen-only mode. This call is being recorded. I'd now like to turn the call over to Mr. Scott Cuddy, 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 second quarter and our outlook for the remainder of 2023. 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 and CEO, Clay Gaspar, our chief operating officer, Jeff Rittenhour, 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 materially 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. Pleasure to be here this morning. We appreciate everyone taking the time to join us. Devon's second quarter performance can be defined as another one of solid execution on all fronts as our business continued to strengthen and build operational momentum throughout the quarter. The attractive per share growth we've consistently delivered quarter after quarter demonstrates the efficiency of our disciplined business model, the quality of our Delaware-focused asset portfolio, and the team's execution capabilities and benefits of our cash return framework. The chart on slide four provides a very compelling visual of this success, showcasing our impressive track record of value creation. Since we unveiled the industry-first framework in late 2020, we have deployed $12 billion towards dividends, share buybacks, debt reduction, and accretive bolt-on acquisitions. The cumulative value of these actions equates to nearly two times the value of Devon's pro forma market capitalization from just a few years ago. As you can see from our diversified actions to date, we have carefully designed our cash return framework to be nimble with the flexibility to allocate free cash flow across multiple avenues to optimize financial results through the cycle. Importantly, this disciplined execution has been rewarded by the market with our equity performance achieving the highest return of any stock in the entire S&P 500 over this period. Now let's go through some of our second quarter highlights and operating trends in greater detail. Beginning with production, the team did a great job growing oil volumes by 8% on a year-over-year basis this past quarter. This result surpassed midpoint guidance expectations and for us set a new all-time high oil production record for the company by averaging 323,000 barrels per day in the quarter. Additionally, this volume growth was supported by an infrastructure that includes several strategic midstream assets that we have selectively invested in through the years and have taken equity stakes in an effort to to enhance the result from our core EMP operations. A key driver of this record setting result was higher completion activity in the Delaware Basin. By leveraging the benefits of a temporary fourth frac crew and consistently improving cycle times, we were able to bring online 76 new Delaware wells in a quarter, which was a few more than we originally planned due to efficiency gains. Importantly, the well productivity from this batch of wells in Delaware was excellent and included a Wolf Camp B appraisal success that strengthens the depth and quality of our resource in the area. We also had a successful redevelopment test in the Eagleford and advanced a handful of other interesting appraisal projects across our diversified asset base that it reinforces our confidence in the resource upside that currently exists. across our portfolio. Looking ahead, with higher levels of completion activity in the second quarter, we expect our production profile to continue to strengthen the upcoming third quarter. A good visual of this operational momentum can be seen on slide seven with oil volumes expected to grow to a range of 322,000 to 330,000 barrels per day in the upcoming quarter. As I touched on earlier, The capital spending to drive this growth trajectory was a touch ahead of expectations due to very strong execution from our drilling and completion teams that brought forward activity into the quarter. Clay will spend time and cover this topic later, but I am extremely proud to share that we've set several operational records at both the basin and company level contributing to the record setting drilled and completed feet per day metrics we have achieved year to date. In addition to our strong operating efficiencies, our business is also beginning to benefit from service cost deflation as contracts are refreshed. This is driven by reduced activity from natural gas-focused companies and private producers over the past few months, resulting in improved availability of services and cost deflation in virtually every category. Although this is a very dynamic environment, we've observed the most downward pressure to date in the areas of tubulars, rig rates, fuel, and other miscellaneous drilling services that will begin to positively impact our cost structure as we enter the end of this year. We also anticipate price movement with pressure pumping, which is our largest cost category in the very near future. While it's still somewhat premature to say what and set what our firm outlook for 2024 is, our expectations for deflationary trends should continue. We have the potential for meaningful savings from peak well costs as pricing improvements could gradually flow through our cost structure over the next year or so. With a free cash flow model that our business generated, we had another great quarter of cash returns. We returned $462 million to shareholders through our fixed plus variable dividend, which we have paid out now for 12 consecutive quarters. We also have an active buyback program that resulted in the repurchase of nearly 4 million shares over the past three months. We believe this balance between dividends and buyback offers investors the powerful combination of an attractive yield and steady per share growth through the cycle. Now moving to slide 11, with the progress that our business has made year to date, we are well on our way to meeting the capital objectives associated with our 2023 plan. The momentum we have established places us on track to deliver a production per share growth rate of approximately 9% for the year. Importantly, The activity required to fund this growth is self-funded at a $40 WTI price, or approximately half of where we are today, and is delivering returns on capital employed greater than 20% at today's commodity prices. While once again it is too early to provide firm guidance for next year, the trajectory of our business sets us up for a strong outlook in 2024 as well. Given current market fundamentals, we plan to invest at levels that will sustain our productive capacity and any improvements that we see from lower service costs will accrue to our shareholders in the form of higher free cash flow generation. This disciplined pursuit of value over volume positions us to continue to deliver another year of differentiated cash returns and highly competitive returns on invested capital versus the broader market. And now with that, I'll now turn the call over to Clay to cover our operational highlights. Clay? Thank you, Rick, and good morning, everyone.