DEVON ENERGY CORP/DE Q3 FY2024 earnings call

• Delivered strong operational and financial results, with total production averaging an all-time quarterly record of 728,000 barrels of oil equivalent per day. • Raised full-year 2024 production guidance to ~730,000 BOE per day. • Generated $786 million of free cash flow in the third quarter and returned $431 million to shareholders. • Closed the Grayson Mill transaction, enhancing position as one of the largest U.S. producers. • Focused on operating excellence, capital efficiency, and maintaining financial strength and flexibility for 2025.

The Delaware Basin was the primary contributor to earnings, with approximately 60% of capital allocated to this basin. It achieved record basin-level production volumes of 488,000 BOE per day, a 6% growth rate compared to the previous quarter, fueled by 55 new wells targeting the Wolfcamp formation and others. The Williston Basin saw the Grayson Mill acquisition, with production expected to sustain at around 100,000 BOE per day in 2025, and it adds 500 undrilled locations, enhancing free cash flow profile.

• Expect 2025 total production to average around 800,000 BOEs per day, nearly 5% higher than previously communicated. • Anticipate record oil volumes in 2025, averaging around 380,000 barrels per day. • Capital spending expected to be between $4 billion and $4.2 billion for 2025. • Plan to use up to 70% of free cash flow as cash payout for shareholders and continue share repurchases.

• Commodity price volatility, which may cause actual results to differ from forecasts. • Market uncertainties that could impact production and financial performance. • Operational risks related to inventory management and potential bottlenecks in natural gas egress.

Q: Could you highlight drivers of uptick in well productivity in the Delaware Basin?

A: Clay noted assumptions on cost, productivity from well placement, completion design, and sequencing, with upside from secondary zones.

Q: Any self-help opportunities to improve capital efficiency in the Bakken?

A: Clay mentioned instant wins in infrastructure, capital program, and debundling, with potential for more synergies from team collaboration.

Q: Thoughts on M&A strategy?

A: Rick stated a combo path of organic and inorganic growth, with inorganic including tuck-in deals and asset acquisitions like Grayson Mill.

Q: Permian gas question on Matterhorn and Blackcomb?

A: Jeff said Matterhorn is online with 90% of molecules flowing to Gulf Coast, and team has protected against pricing dislocation.

Q: Debt reduction plans?

A: Jeff said plan to take out maturities as they come due, with $2.5 billion target over next few years.

Q: LOE and GPT costs going forward?

A: Clay said 4Q guide is starting point, with focus on efficiency and mitigating downtime.

Q: Completion efficiencies and e-frac deployment?

A: Clay said all options are on the table, evaluating opportunities and e-fleet participation.

Q: Inventory backlog and Permian inventory?

A: Clay said 10-year inventory runway in basins, with more confidence in front five years.

Q: Return of capital strategy?

A: Jeff said fixed dividend first, then share repurchases, with option to adjust based on market dynamics.

Q: Grayson Mill value and inventory?

A: Rick said confident in transaction, with long-term inventory and no regrets.

Q: Permian CBR project and future opportunities?

A: Clay said focus on balance of returns, inventory, and NPV, with potential for larger projects and productivity improvement.

Q: Midstream assets from Grayson Mill?

A: Clay said confident in Grayson midstream assets, with value in portfolio and no immediate divestiture plans.

Q: Capital allocation to other assets in 2025?

A: Clay said directionally similar, with Williston footprint shift, and more detail in February call