DEVON ENERGY CORP/DE Q4 FY2024 earnings call

• Operational Excellence: Record volumes, strong free cash flow generation ($3B in 2024, $738M in Q4), $2B returned to shareholders, dividend increased to $0.24 per share.
• Acquisitions: Williston Basin acquisition performing nicely.
• Eagle Ford: Dissolution of partnership with BPX expected to yield cost savings and improved control.
• Capital Efficiency: Strong capital performance, lower per-unit expenses boosting margins and free cash flow.
• Natural Gas Portfolio: Significant upside from natural gas pricing, marketing efforts to capitalize on demand.
• Operational Efficiencies: ~15% improvement in feet drilled and completed feet per day in 2024, expected to continue in 2025.

Devon Energy Corporation had outstanding operational performance. Fourth quarter oil production reached an all-time high of 398,000 barrels per day. Free cash flow for the fourth quarter was $738 million, with $444 million returned to shareholders. Proved reserve replacement ratio was 154%. In the Eagle Ford, Devon and BPX dissolved their partnership in the Blackhawk field, with Devon holding ~46,000 net acres and ~700 undrilled locations remaining. The Grayson Mill assets acquisition in the Williston Basin is performing well, with ~$50 million in capital and expense savings identified. In the Anadarko Basin, the JV with Dow was extended for another 49 drilling locations. Revenue contribution details: Oil production was a key driver, with the Eagle Ford and acquired assets contributing significantly.

• 2025 Outlook: Bumping 2025 production to 815,000 BOE per day (383,000 bbl oil per day), capital investment $3.9B ($200M lower than previous soft guidance), expecting >$300M additional free cash flow.
• Delaware Basin: >50% of capital investment, 14 rigs and 3 completion crews, ~265 gross wells, focus on multi-zone projects.
• Rockies/Williston Basin: ~3/4 of capital spend directed towards Williston, ~$50M in savings identified, extending JV with Dow in Anadarko.
• Dividend and Share Repurchase: Quarterly dividend increased to $0.24, ~$200M to $300M quarterly share repurchases, targeting 70% cash return payout to shareholders from free cash flow.

• Tariffs: Uncertainty around tariffs, but impact on capital program estimated at less than 2%.
• Commodity Price Volatility: Impact on equity volatility due to debt in capital structure.
• JV Disagreements: Previous differences in JV approaches with BPX, though now resolved.

Q: Scott Hanold asks about Grayson Mill inventory duration and comparison with legacy box.

A: Clay Gaspar responds that Grayson filled inventory hole, productivity improved, and runway continues to expand with nearly a decade of opportunity in Williston Basin including Grayson.

Q: Neal Dingmann asks about organic vs M&A strategy.

A: Clay Gaspar responds that primary focus is on organic value creation through small land trades, technology application, etc., with potential for M&A if right opportunity arises.

Q: Neil Mehta asks about Eagle Ford partnership dissolution.

A: Clay Gaspar responds that dissolving the JV allows saving >$2M per well, controlling pace, and has mutual win-win benefits.

Q: Arun Jayaram asks about Eagle Ford sequential performance and cash return focus.

A: Clay Gaspar notes D&C efficiency drove sequential volume increase, and Jeff Ritenour discusses cash return is a function of driving breakevens lower and reevaluating share repurchase range.

Q: Paul Cheng asks about Eagle Ford refracs and Delaware production cadence.

A: Clay Gaspar states they are pro-refrac but market not excited, and John Rains discusses Delaware Basin oil mix consistency and Wolfcamp B allocation increase.

Q: Roger Read asks about Eagle Ford refracs.

A: Clay Gaspar states they have huge refrac inventory and see tremendous value creation from it.

Q: Kevin McCurdy asks about 2025 capital plan changes.

A: Clay Gaspar responds that gains in Williston and BPX dissolution were key factors in lowering 2025 capital guidance.

Q: John Freeman asks about natural gas price flexibility in plan.

A: Jeff Ritenour states gas portfolio offers optionality and marketing team is actively assessing opportunities.

Q: Doug Leggett asks about balance sheet importance vs dividends/buybacks.

A: Jeff Ritenour states it's all of the above, with priority on balance sheet and cash returns to shareholders.

Q: Matthew Portillo asks about Anadarko inventory and Permian oil mix.

A: Clay Gaspar and John Rains discuss Anadarko JV extension and Permian oil mix consistency.

Q: Paul Cheng asks about CapEx cadence and well stream.

A: Jeff Ritenour states capital is generally consistent with first quarter likely highest and trending down over time.