DEVON ENERGY CORP/DE Q1 FY2025 earnings call

Strategic Priorities: Executing on high - quality portfolio through operational excellence, maintaining financial strength, returning value to shareholders, and cultivating a culture of success. ### First Quarter Performance: Devon delivered a very strong first quarter driven by operational excellence and financial discipline. ### Delaware Basin: Expanded implementation of Simulfrac across the asset, achieved 7% increase in drilling speeds year - to - date, reduced rig count from 14 to 11 in the second half of the year, and maintained productive capacity. ### Eagle Ford: Successfully closed the partnership dissolution with BPX, saw significant drilling improvements on Devon - operated pads with over 40% increase in drilling speeds and nearly 50% reduction in costs. ### Business Optimization Plan: Aims to enhance operating margins, boost capital efficiency, and increase free cash flow generation through actions like lowering drilling and completion costs, renegotiating contracts, reducing corporate cost, and integrating technology across operations.

Devon's first quarter performance was strong. Oil production exceeded the upper limit of the guidance range, reaching 388,000 barrels per day, driven by stronger - than - anticipated base performance in The Rockies and outstanding early well results in the Eagle Ford. Core earnings totaled $779 million or $1.21 per share, EBITDAX was $2.1 million, and operating cash flow was $1.9 billion. The Delaware Basin saw operational improvements with Simulfrac utilization up to 60% in the 2025 program, drilling speeds increased by 7% year - to - date, and the rig count was reduced. In the Eagle Ford, the dissolution of the partnership with BPX was completed, with drilling speeds on Devon - operated pads increasing by over 40% and costs nearly halved.

2025 Outlook: Increased full - year oil production outlook to 382,000 - 388,000 barrels per day. Reduced full - year capital investment by $100 million to a range of $3.7 billion to $3.9 billion. ### Long - term: Expect to achieve $1 billion pretax free cash flow in sustainable annual improvements by year - end 2026, with the full run rate $1 billion pre - tax free cash flow improvement in 2027. ### Liquidity: Intends to use excess free cash flow to build liquidity and retire upcoming debt maturities, and expects the sale of interest in Matterhorn pipeline to close late in the second quarter and enhance cash position.

Commodity Price Volatility: Dynamic headwinds in the market related to commodity price cycles pose a risk to actual results differing from forecasts. ### Operational Uncertainties: Possible technical problems and challenges in implementing business optimization plans and operational improvements, as well as uncertainties from market dynamics changing.

Q: Neil Mehta asked about the confidence interval around achieving cost reductions and fleshing out buckets like commercial opportunities.

A: Clay Gaspar, Jeff Ritenour, and John Raines responded. Jeff Ritenour talked about commercial opportunities in the Delaware with renegotiated contracts reducing fees on gathering, processing, transportation, and fractionation. John Raines discussed production optimization initiatives like LOE optimization through condition - based maintenance and smart gas lift calibration.

Q: Arun Jayaram asked about clarifying comments on lower GP&T rates in the Delaware and incremental midstream investments.

A: Clay Gaspar and others responded. Clay Gaspar talked about the material impact of lower GP&T rates specific to the Delaware's NGL business and the objective evaluation of midstream assets for potential monetization.

Q: Paul Cheng asked about technology adoption in business optimization and production in the Delaware Basin.

A: Trey Lowe talked about technology adoption including investment in industrial systems, real - time analytics, and AI, and John Raines responded about the Delaware Basin's production, including well cadence and productivity.

Q: Scott Hanold asked about macro trends and share buybacks.

A: Clay Gaspar and Jeff Ritenour responded. Clay Gaspar talked about the macro environment and when Devon might reevaluate plans, and Jeff Ritenour stated that share buybacks will continue in the $200 million to $300 million range.

Q: Kalei Akamine asked about Permian Basin productivity and midstream asset opportunities.

A: John Raines and Clay Gaspar responded. John Raines talked about Permian Basin productivity, and Clay Gaspar discussed midstream asset opportunities.

Q: John Freeman asked about reinvestment rates and capital trades.

A: Clay Gaspar responded about reinvestment rates and the value creation from capital trades.

Q: Betty Jiang asked about cost optimization and asset flexibility.

A: Clay Gaspar and others responded. Clay Gaspar talked about cost optimization and asset flexibility considerations.

Q: Kevin MacCurdy asked about rig count and commodity mix.

A: Clay Gaspar responded about rig count and commodity mix considerations.

Q: Matthew Portillo asked about Rockies program capital.

A: John Raines and Tom Hellman responded about Rockies program capital and cost improvements.