The operator introduces the conference call and turns it over to Scott Coody, Vice President of Investor Relations. Coody thanks everyone for joining and mentions the earnings release and presentation that cover the results for the quarter and updated outlook. He also introduces the other members of the senior management team who will be speaking. Coody reminds listeners that the comments made during the call are subject to assumptions, risks, and uncertainties. Rick Muncrief, President and CEO, then takes over and focuses on the trajectory of the business for the remainder of 2023 and steps being taken to improve capital efficiency in 2024. He mentions the company's strong production growth rate in the third quarter and attributes it to their assets in the Delaware Basin, acquisitions, and share repurchases.

Devon's total volumes were within the guidance range, but oil volumes were slightly lower due to well performance and infrastructure constraints. The company has a plan to address these constraints and expects strong financial performance in the fourth quarter. Despite challenges, Devon is on track to have one of its best years in terms of returns and free cash flow. Going into 2024, the company's focus remains on per share growth and maximizing free cash flow while also investing in the future.

The company has incorporated their learnings from the past year and made changes to lower service costs and improve capital allocation. They have outlined their improved outlook for 2024, which includes maintaining production levels and a disciplined approach to adding incremental barrels into the market. They plan to invest $3.3-3.6 billion in capital to achieve this production profile, which represents a 10% improvement from 2023. The majority of their spending will be focused on the Delaware Basin, with a higher mix of activity in multizone Wolfcamp developments. They also plan to high-grade capital activity in other key assets and limit activity in the Williston Basin and Eagle Ford.

Devon has refined their capital allocation strategy and expects to see a 5-10% improvement in well productivity in 2024. They also anticipate improved service costs and a 20% growth in free cash flow at $80 WTI pricing. This translates into an attractive 11% free cash flow yield, which is 3 times higher than the broader equity markets. The company plans to target a cash return payout of 70%, with a focus on growing their fixed dividend. They will also consider stock buybacks and improving their balance sheet. Devon's current stock price presents an opportunity for buybacks, which may result in a lower variable payout in the near term. Clay Gaspar will now provide an update on the company's recent operational performance.

During the quarterly meeting, the focus will be on Delaware Basin operations and plans to improve capital allocation and efficiency in the next year. The Delaware Basin accounted for 60% of the company's capital spending and saw strong well productivity with an average of 3,000 Boe per day. Production growth was slightly hindered by storms, but the impacted infrastructure and wells are back online. Three notable projects were highlighted, including the Bora Bora project with 30-day rates of 4,600 Boe per day and the CBR 17 development with 30-day rates of 4,100 Boe per day, enabled by a recent 3,000-acre trade.

The company's key trade has allowed them to pursue extended reach laterals, adding millions of dollars in net present value. The Haflinger project has also been successful, with plans to bring forward opportunities for co-development in the future. The third quarter saw high productivity and improved cycle times in the Delaware Basin. The company believes they can continue to improve efficiencies in the upcoming year.

The company is excited about their plan to drive improved well productivity in the Delaware Basin, with a focus on high-impact Wolfcamp zones in the core of the play. They expect a 10% increase in productivity in 2024 and have identified a decade's worth of risked inventory in the area. Third-party evaluations also confirm the company's large inventory and high-quality resources with significant upside potential.

In the third quarter, Devon's revenues and expenses were in line with expectations, with high natural gas prices and lower tax rates driving an earnings beat. Operating cash flow was $1.7 billion, generating $843 million in free cash flow. The company used this free cash flow to pay off debt and increase liquidity. Going forward, they plan to allocate 30% of free cash flow to strengthen their financial position. Shareholder returns also increased, with a 57% increase in the dividend and a $3 billion share repurchase authorization in place.

In the past year, the company has repurchased 400 million shares for a total of $2.1 billion and plans to decrease its outstanding share count by up to 9%. Despite a temporary pause in repurchase activity, the company views buybacks as an important tool for compounding per share growth for investors. Moving forward, the company plans to target 70% of free cash flow for cash returns to shareholders, with a focus on share repurchases and a growing fixed dividend. The CEO reiterates the company's commitment to improving capital efficiency, leveraging their Delaware Basin asset, and creating sustainable value through the cycle. The company also emphasizes their disciplined approach to per share value creation and flexible cash term framework. The call is now open for Q&A.

The speaker is answering a question from an analyst about the steps the company is taking to improve productivity in the Bakken and North Dakota. They mention focusing on the capital program and assessing their resource base as ways to build inventory. The analyst also asks about the company's latest thoughts on inventory depth in North Dakota, but the speaker does not answer that part of the question.

In this paragraph, the speaker discusses how they have been able to build inventory organically and mentions the value of their staff. They also mention spending money to assess resources and making changes to improve well development and productivity. The speaker is then asked about the possibility of a variable dividend and M&A, but does not provide a direct answer. They do mention recognizing the opportunity to transfer value from debt to equity and have not ruled out the variable dividend despite focusing on buybacks.

The speaker, Jeff Ritenour, discusses the company's focus on share repurchases and maintaining financial strength. He mentions their commitment to reducing debt and growing the fixed dividend, but also acknowledges the disconnect between the company's equity price and business fundamentals. The company plans to lean towards share repurchases in the near-term, but does not rule out the possibility of a variable dividend. The next question is from Nitin Kumar, who praises the company's refocused energy on the Permian region.

In this paragraph, Rick Muncrief and Clay Gaspar discuss the potential locations in the Delaware and how much of that inventory is focused on the New Mexico Wolfcamp area. They estimate that about two-thirds of their rigs are in that area, and it parallels their inventory split. They also mention that they plan to do more assessment work in 2023 and leverage their learnings for activity in 2024. Nitin Kumar asks a follow-up question about industry consolidation, but Rick does not answer it directly.

Neil Mehta asked about the cadence of production for Devon, noting that Q4 and Q1 were softer and then ramping up over the year. He asked about the confidence level in this ramp and specifically about oil production, which has been uncertain this year. Rick Muncrief responded, saying that they have a high bar and are disciplined in their approach, and that they support consolidation in the sector. He also mentioned that they see opportunities in share repurchases.

The speaker discusses the company's plans for the fourth quarter and first quarter, including the impact of a fourth frac crew and lower activity. They also mention their upcoming call with the board to discuss their long-term plans and how they are considering different factors such as deflation and capital allocation.

The company is pleased with its plan to focus on the Delaware Basin and reduce activity in other basins. They are confident in their deflation numbers and are striving to exceed expectations. They continue to face infrastructure constraints in the Delaware Basin, but have made improvements and are working closely with third-parties to stay ahead of them.

The company is pleased with their progress in the Permian basin but is now focused on electrification. A windstorm in July caused damage to power lines and third-party infrastructure, highlighting the tightness of the infrastructure in the active basin. The company has budgeted for about 400 wells next year and is working with third-party companies to stay ahead. The lack of infrastructure in the Permian was not a surprise, but the company is actively working to improve it.

Rick Muncrief discusses the changes and build-out plans for 2023, focusing on reducing flaring and staying ahead of disruptions. He also mentions the challenges of operating on federal land in New Mexico. Clay Gaspar explains the delay in high-grading the multi-zone Wolfcamp wells in this core area and mentions the assessment work that was done to understand co-development.

The speaker discusses the various infrastructure concerns in the Delaware Basin, including electricity, compression, processing, takeaway, and water. They mention that they have done numerous tests and are constantly evaluating the best business decision. They also mention that they are applying what they have learned to future projects and are high-grading their inventory. However, they note that there is a constant need to address infrastructure concerns as they arise, such as gas takeaway, compression, and water management.

The company is facing challenges with meeting the high demand for electricity in the dynamic Permian Basin, but they see these challenges as opportunities and have strategies in place to address them. They are also pleased with the progress of midstream providers in building capacity and are confident in the future.

The speaker discusses the growth of the Mexican market and how the Permian Basin is well-suited for it. They also mention potential bottlenecks in the cycling process. The speaker then asks Jeff to elaborate on the framework used to determine the decision to focus on buybacks rather than variable dividends. Jeff explains that they have internal models and consider how peers are trading, and they currently believe that share repurchases are the best option.

Clay Gaspar discusses the company's game plan for the next 12 months and their decision to be more aggressive with share repurchases. He also mentions that the company has learned from down spacing tests in the Eagle Ford and is continuously finding ways to extract more oil. However, there have been some regional differences in the results.

The company is seeing positive results from their efforts to improve production and efficiency. There was a decrease in activity during the quarter, but this was due to overall activity and not individual well results. The company is encouraged by their continued exploration and development in the area. In terms of capital allocation, the company is scaling back in the Anadarko region but remains optimistic about the gas market.

The company plans to maintain a three-rig program in 2024, but may drop back to one rig if necessary to focus on returns. They are also looking for ways to decrease well costs in the Powder asset. The company expects oil production to bounce back to current levels by the end of 2024 and the 2024 CapEx range may be a good proxy for maintenance CapEx at that time.

The speaker struggles with the concept of maintenance capital, but believes that their current investments will lead to future value. They expect to see maintenance capital with some growth in 2025. In the Eagle Ford, they are working towards a more efficient operation with two rigs and are finalizing their plans with their JV partners. They anticipate seeing an increase in capital efficiency due to their inventive projects.

The speaker discusses the importance of balancing short-term wins with longer-term value creation in order to improve their assets. They also mention the lessons learned from the RimRock acquisition, including the benefits of Devon's approach to spacing and the impact of uncontrollable factors like weather.

The speaker discusses the challenges faced in the Williston area due to severe weather and how it affected their capital program. They acknowledge their mistakes and express their commitment to continue working in the area, citing their past success and potential for future improvement. They also mention their focus on innovation and increasing recovery factor in the next two to five years.

Jeff discusses the importance of stimulation design and an integrated approach in extracting value from their assets. He mentions their focus on refracs and other methods to increase recovery, potentially doubling their resource. He also talks about the challenges and improvements in the handoff process for acquisitions, emphasizing their high standards and commitment to ESG. The question from Paul Cheng is not included in the paragraph.

In response to a question about the company's underperforming stock and the possibility of buybacks, CFO Jeff Ritenour explains that the company's first priority was to maintain a cash balance above $500 million, which they have now achieved. As a result, they were not able to buy back shares in the third quarter, but they plan to do so in the future. Regarding oil production for next year, Ritenour states that the company's new baseline is around 315,000, which is slightly lower than previous expectations. This is due to the company's focus on maintaining sustainable production levels.

During a conference call, Rick Muncrief, CEO of Devon Energy, explains that the company's decision to reduce its production guidance from 320 to 315 reflects a new baseline based on real-world constraints and weather issues. He also mentions that the previous consensus was that 320 was achievable, but the company believes 315 is a more accurate baseline. The call ends with the Investor Relations team thanking everyone for their interest and inviting further questions.

This summary was generated with AI and may contain some inaccuracies.