Devon Energy Corporation

Welcome to Devon Energy's fourth 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 fourth quarter and year-end 2025 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 investor section of the Devon website. Joining me on the call today are Clay Gaspar, President and Chief Executive Officer, Jeff Rittenour, 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 conference call will include forward-looking statements as defined under U.S. securities laws. These statements involve risk 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 thanks for joining us. Today we'll focus on Devon's strong fourth quarter and full year 2025 results. Before diving into those very impressive results, I also want to cover the highlights of our recently announced merger with Cotera Energy. I'm incredibly excited about this merger and what it means for our shareholders. The combination of these two outstanding companies creates a clear path to superior value creation that neither company could achieve independently. The merger unites complementary portfolios with substantial and overlapping positions across the best U.S. shale basins. At the heart of this combined portfolio is a world class position in the Delaware Basin, which will generate more than half of our total production and cash flow, backed by a decade plus of top tier inventory. Beyond the Delaware, the geographic diversity and balanced commodity mix provides strength throughout the volatility of the commodity price cycle. The scale and operational overlap of our combined platform will unlock substantial value. By implementing best practices, optimizing our cost structure, and maximizing our infrastructure utilization, we will capture significant synergies. In total, we expect to deliver a billion dollars in annual pre-tax run rate synergies by year end 27. To be clear, these synergy targets are incremental to our business optimization program and reflect true operational and efficiency gains. And importantly, If there are any net reduction in activity levels, these capital savings will be incremental to our announced billion-dollar target. I want to emphasize that we have a strong record of delivering on these business optimization wins. Our proven framework and experience will be leveraged to identify, deliver, and communicate these merger synergies. Another critical benefit to this transaction is the enhanced free cash flow generation from the pro forma company. With this uplift, we plan to accelerate capital returns to shareholders through higher dividends and expect a significant new share repurchase authorization to deliver cash returns consistent with best-in-class peers. Bottom line, this transformative merger checks all the boxes and positions us to be an industry leader that delivers differentiated value to investors. With that strategic perspective, let's now turn back to Devon's impressive fourth quarter and full year 2025 results, which demonstrate the strong operational and financial momentum that we're bringing to this combination. Let's turn to slide four for a deeper look on how our discipline execution delivered another quarter of exceptional results. As you can see displayed on the left, Beating on production, operating costs, and capital results in an impressive free cash flow for Q4. Our production optimization efforts drove oil above the top end of the guide, fueled by strong new well performance and outstanding base production management. Operating costs significantly improved from the start of the year, reflecting enhanced reliability and relentless operational efficiency. Capital spending Capital spending finished 4% better than guidance as we continue to capture drilling and completion efficiencies through advanced technology and a culture of continuous improvement. Combine these efforts translated into $700 million of free cash flow, positioning us to return substantial value to shareholders. I want to emphasize that these results are not just one-off isolated wins. They are direct outcomes of discipline execution across our entire portfolio. This consistency is evident in our full year performance and reflects the effectiveness of both our strategy and our team. I also want to quickly highlight our impressive reserve performance for 2025. Our capital program achieved a reserve replacement rate of 193% of production at an F&D cost of just over $6 per BOE. While a single year of reserves booking should never be viewed as a sole measure of success, This result provides compelling evidence that the quality and sustainability of our advantage multi-basin portfolio. Turning to slide five, you can see how our focus on operational excellence and discipline execution culminated in outstanding full year 2025 results. Our track record speaks for itself. Quarter after quarter, we drove meaningful improvements to our outlook. Since our preliminary guidance we delivered an incremental 9,000 barrels of oil per day while reducing capital spend by nearly $500 million. These results reflect a sustained commitment to margin enhancement, technology adoption, and continuous improvement across our entire organization. The impact is clear. Capital efficiency improved by more than 15% from our preliminary 2025 outlook, enabling us to extract more value from every dollar invested. Turning to slide six, as we've showed many times in the past, our capital efficiency results rank consistently among the very best in the industry. On the left-hand side of the slide, our well productivity stands more than 20% above pure average. On the right side, Devon's capital efficiency outperforms industry by 13%. Together, leading well productivity and capital efficiency translate directly into the strong free cash flow generation that powers our cash return framework. Turning to slide seven, another critical driver of Devon's strong performance is our business optimization program. In less than a year, we have captured 85% of our billion dollar target, and we are firmly on track to achieve the remaining savings during 2026. As an aside, I think it's important to remind you that this goal is focused on sustainable free cash flow. The progress of this goal will manifest in multiples of this dollar amount to our enterprise value. This outlook of continued progress is supported by several key catalysts. The planned term loan repayment in the third quarter will deliver $50 million in annual interest savings. At the same time, We are accelerating the implementation of AI-enabled artificial lift optimization and advanced analytics well beyond the pilot programs that we've mentioned on prior calls. Additional benefits will come from operating cost improvements through condition-based maintenance and enhanced drilling and completion cycle times. Beyond these initiatives, we have more than 100 active workstreams focused on driving sustained base production gains while reducing the capital required for our maintenance programs. Most importantly, this initiative has fundamentally transformed how we operate. Continuous improvement and the accountability are embedded into our culture, empowering our teams to deliver sustainable value well beyond the initial target. Business optimization is no longer a program with an end date. It has become core to how Devon operates every single day. Turning to slide eight, as we discussed last quarter, parallel to driving incremental value out of the day-to-day business, we are also regularly evaluating opportunities to rationalize our portfolio to enhance shareholder value. Throughout 2025, we executed on strategic transitions, transactions via midstream marketing, and leasing that collectively delivered over a billion dollars of value uplift to our enterprise NAV. To be clear, these gains are in addition to the improvements from our business optimization initiative. New this quarter, I wanted to highlight our continued investment in Fervo Energy. We recently participated in their Series E funding round, bringing our investment to approximately 15% in this innovative geothermal energy company. Servo is pioneering next-generation geothermal technology, and we see compelling strategic and financial opportunities in this partnership. It leverages our core skills of geoscience expertise, land leasing, horizontal drilling and completions, and subsurface production and recovery skills, while positioning Devon in a power-generating sector with significant growth potential. With that, I'll now hand the call over to Jeff.