Devon Energy Corporation

Welcome to Devon Energy's first quarter 2024 conference call. At this time, all participants are in lesson learning mode. This call is being recorded. I'd now like to turn the call over to Mr. Scott Coody, Vice President of Investor Relations. Sir, you may begin.

Good morning, and thank you for joining us on the call today. Last night, we issued an earnings release and presentation that covered Devon's results for the first quarter and our outlook for the remainder of 2024. Throughout the call today, we will 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. It's a pleasure to be here this morning. We appreciate everyone taking the time to join us. By all measures, Devon delivered an outstanding set of results in the first quarter that surpassed the operational and financial targets we had set by a wide margin. This start to 2024 demonstrates the impressive momentum that we've quickly established, setting the stage for our business to continue to strengthen. At this time, I want to personally thank our employees, our service providers, and our infrastructure partners in helping us get 2024 off to a great start. For the remainder of my comments for today, I will focus on the drivers of our first quarter outperformance and the factors underpinning our improved outlook for the remainder of the year. So to start off on slide six, let's do a quick review of our first quarter results where we had several noteworthy highlights. Starting with production, our delivered volumes came in about 4% higher than planned for the first quarter, averaging 664,000 BOE per day. This production beat was across all products and driven by three key factors. First, and the most significant contributor to this performance, was the excellent well productivity we achieved from the 100 plus wells we placed online during the quarter. On average, these high impact wells exceeded our top curve expectations with strong well productivity in the Delaware Basin once again driving our results. Overall, this activity achieved initial production rates that were more than 20% higher than those that we placed online last year. As we progress through this year, I anticipate that these strong recoveries will continue. Secondly, another key factor that drove production higher in the quarter was the improved cycle times we delivered across our drilling and completion operations. Clay will go into much more detail a little later, but simply put, these efficiency gains allowed us to bring forward activity in the quarter and captured more days online than we had planned. that was a factor that positively contributed to our performance during the quarter was the easing of infrastructure constraints across our Delaware basin assets. This improvement was directly related to the steps we've taken, along with our third-party partners, to invest in the build-out of incremental gas processing, compression, water handling, and electrification. These crucial capacity additions have positioned us to achieve better run times for our base production and allow us to deploy more activity to the core of this world-class basin. Another notable achievement from the quarter was this team's effective cost management. This was demonstrated by delivering operating costs that were 3% lower than guidance and capital expenditures that were in line with expectations, even with an accelerated pace of activity. This positive start to the year puts us in a great position to deliver better cost efficiencies in 2024 especially if we realize incremental savings from deflation as we go through the year. Cutting to the bottom line, the team's comprehensive execution across all aspects of the plan resulted in our 15th consecutive quarter of free cash flow, showcasing the durability of our plan to consistently create value through the cycle. With this free cash flow, we continue to reward shareholders through our cash return framework, which was led by stock buybacks and supplemented by another attractive dividend payout. Now, moving ahead to slide 12, and with a strong operational performance achieved year to date, we are raising guidance expectations for the full year of 2024. As you can see on the top left, a key contributor to this improved outlook is our 2024 production target, increasing by 15,000 BOE per day, or 2%. to a range of 655,000 to 675,000 DOE per day. To reiterate what I touched on earlier, these higher volume expectations are due to the better than expected well performance achieved year to date and our confidence in the quality slate of projects that we have lined up over the course of this year. Importantly, we are delivering this incremental production within the confines of our original capital budget of 3.3 to 3.6 billion dollars. This level of investment is expected to maintain a steady production profile for about 10% less capital compared to last year. This program is fully funded at an ultra-low breakeven of around $40 per barrel, which equates to one of the lowest breakeven levels of any company in the industry. With our approved four-year outlook, we are now positioned to generate greater than 15% more free cash flow in 2024 versus last year, at today's pricing levels. This translates into attractive free cash flow yield of 9%, which is nearly three times higher than what the broader market can offer. With this growing stream of free cash flow, we remain unwavering in our commitment to our capital discipline and will seek to reward shareholders with higher cash returns. With our flexible cash return framework, we will allocate our free cash flow toward the best opportunity, whether that be buybacks or dividends. Given that the equity market is still heavily discounting valuations in the energy sector, we plan to continue to prioritize share buybacks over the variable dividend to capture the incredible value that Devon offers at these historically low valuations. So, in summary, 2024 is off to an excellent start. We delivered on exactly what we said we would do and much more in the first quarter. Our business continues to get better and build momentum And this is reflected in our improved outlook for the year. And with the current valuations in this space, the best thing we can do is buy back our stock to capture this value. It's going to be a great year for Devin, and the team is energized to build upon this strong start. And with that, I'll now turn the call over to Clay. Clay?