Devon Energy Corporation

Welcome to Devon Energy's third quarter 2025 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 Mr. Chris Carr, Director of Investor Relations. You may begin.

Good morning, and thank you for joining us on the call today. Last night, we issued Devon's third quarter earnings release and presentation materials. Throughout the call today, we will make references to these materials to support prepared remarks. The release and slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, Chief Executive Officer, Jeff Rittenhour, Chief Financial Officer, John Raines, SVP Asset Management, Tom Hellman, SVP E&P Operations, and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this call will include forward-looking statements as defined under U.S. securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay. Thank you, Chris.

Good morning, everyone, and thank you for joining us. Let's begin with slide two. With outstanding execution and innovation from every part of our organization, Devon delivered another outstanding quarter. I'm proud of our team's performance. We exceeded the midpoint of guidance on every key metric, including production, operating costs, and capital. These results mark our strongest performance of the year, highlighting the exceptional quality of our assets and our unwavering commitment to operational efficiency and cost control. Building on this performance, we continue to advance our business optimization plan, firmly on track to generate an incremental billion dollars of annual pre-tax free cash flow. As we enter the fourth quarter, we have already achieved more than 60% of our target. underscoring both the effectiveness and urgency of our approach. These initiatives go beyond cost reductions. They are fundamentally reshaping our business by enhancing margins and boosting capital efficiency across our portfolio. The output of these compounding efforts show up in our strong preliminary outlook for 2026, which Jeff will discuss in more detail. Despite persistent macro headwinds, these achievements directly contributed to our resilient free cash flow, as we returned over $400 million to shareholders in the quarter and retired $485 million of debt, demonstrating our focus on delivering meaningful value to our shareholders. Beyond business optimization, we continue to unlock significant value throughout our portfolio. While getting into the details on a later slide, our teams have capitalized on a multitude of opportunities to drive additional value for the organization. Collectively, these achievements reinforce Devon's momentum and position us exceptionally well for the remainder of 2025 and into 2026. Let's flip to slide four and take a deeper look at the quarter. Our relentless focus on production optimization continues to drive our outperformance. With oil production exceeding the midpoint of guidance by 3,000 barrels per day, the outstanding efforts of our teams to reduce artificial lift failure rates and improve work-over efficiencies resulted in a 5% reduction in operating costs compared to the start of the year. Additionally, effective cost management drove our capital investment 10% below the first half run rate. These accomplishments, combined with other ongoing initiatives, led to robust free cash flow of $820 million in the third quarter and enabled us to deliver substantial cash returns to our shareholders. Moving to slide five, our consistent track record of discipline execution and tireless pursuit of capital efficiency is evident. Quarter after quarter, we drive meaningful improvements to our outlook. This momentum is reflected in our updated guidance, where we've raised our full year production expectations every quarter this year, while reducing capital by $400 million since our preliminary guidance. These are not isolated wins. They result directly from our steadfast commitment to operational excellence, our culture of continuous improvement, and a rapid adoption of leading edge technologies across our portfolio. Now looking at slide six, this continuous improvement is also resulting in top tier performance versus our competitors. Our well productivity stands in the upper echelon of our peers, reflecting the strength of our asset portfolio and the execution of our teams across every basin. On the right hand side, our disciplined approach to capital allocation is evident in our industry leading capital efficiency, setting us apart in a highly competitive space. These achievements highlight the power of our advantage portfolio and the rigor of our capital allocation process and the ability of our people to drive superior results. And with our extensive inventory, we are well positioned to continue this strong performance moving forward. Turning to our business optimization initiative, highlighted on slide seven, our teams are outperforming expectations and delivering results well ahead of schedule. We have already captured more than 60% of our ambitious $1 billion target. When we originally launched this initiative, our focus was for year-end 2025, was $300 million in value uplift. As shown on the left side of the slide, we are on pace to double that milestone this year alone. This exceptional progress is highlighted this quarter by our significant progress in capital efficiency and production optimization on the right side. And we are fully confident in our ability to deliver these substantial cash flow improvements as we advance towards 2026. Driving this rapid progress is our outstanding execution. With greater visibility and confidence in our 2025 full-year production volumes, we anticipate a sustainable increase in free cash flow of $150 million resulting from incremental 20,000 VOE per day above our initial baseline when this initiative began. This reflects further acceleration from our outlook from last quarter, highlighting the urgency of our efforts. When we announced the plan in April, we recognized that the market wouldn't immediately price the aspirational billion dollars of incremental free cash flow in our share price. We knew we would have to earn it. While the plan is still in flight, I'm encouraged that Devon stock is starting to feel a bit of relative appreciation to our peers. That said, I believe that we have much more ground to gain, and I look forward to earning that value in time. Slide eight showcases key examples of the initiatives our teams are pursuing to meet targets in each category. These represent some of the most impactful efforts currently underway. As our teams proactively implement these initiatives, we remain confident in our ability to achieve our targets and maintain clear line of sight to our objective. Turning to slide nine, I'd like to highlight several portfolio optimization actions we've taken on this year. which are delivering an uplift of over a billion dollars to enterprise NAV. Importantly, these gains are in addition to the improvements through our ongoing business optimization initiatives. Early in the year, we signed an agreement to dissolve our joint venture in the Eagle Ford, giving us control of our development and the ability to reduce well costs and significantly enhance returns. In Q2, we completed the sale of the Matterhorn pipeline and subsequently acquired the remaining interest in Cottondraw Midstream. Last quarter, we executed two strategic gas marketing agreements that expanded our natural gas sales portfolio into premium markets. In Q3, we acquired approximately 60 net locations in New Mexico for $170 million, increasing our runway of high return opportunities in Delaware. And finally, we've benefited from the WaterBridge IPO which now provides a public marker for our investment, valued at greater than $400 million. These actions showcase our team's initiative and strategic thinking to create shareholder value. As we execute our business plan, we will seek further opportunities to optimize capital allocation, efficiency, costs, and asset mix. We remain committed to continuous improvement, innovation, and technological leadership taking decisive steps to strengthen our operations and deliver strong shareholder returns. With that, I'll hand the call over to Jeff.