The operator introduces the Devon Energy's First Quarter 2024 Conference Call and hands it over to Scott Coody, the Vice President of Investor Relations. Coody thanks the participants and introduces the other members of the senior management team. He mentions that comments made during the call are subject to risks and uncertainties. Rick Muncrief, the President and CEO, expresses his gratitude for the successful first quarter and acknowledges the efforts of the employees, service providers, and infrastructure partners.

In the second paragraph, the speaker discusses the drivers of their company's first quarter outperformance and the factors that have led to an improved outlook for the rest of the year. They highlight several noteworthy achievements, including a 4% increase in delivered volumes, excellent well productivity, improved cycle times, and easing of infrastructure constraints. These results were driven by factors such as high-impact wells, efficiency gains, and investments in infrastructure.

The team's effective cost management and strong operational performance have led to a positive start to the year, resulting in the 15th consecutive quarter of free cash flow. As a result, the company is raising its guidance for the full year of 2024, with a 2% increase in production target and a maintained capital budget. This program is fully funded and has one of the lowest breakeven levels in the industry.

Devon had a strong first quarter, exceeding targets for production and capital efficiency. This was due to excellent well productivity, improved cycle times, and outstanding base production results. The company has an improved outlook for the year and plans to generate a higher free cash flow yield. They will prioritize share buybacks over dividends to capture the value of the company at historically low valuations. The team is energized and looking forward to building upon this strong start.

The speaker discusses the positive business momentum of Devon and highlights the company's Delaware Basin activity, which accounted for 65% of their capital investment for the quarter. They operated a program of 16 rigs and 4 completion crews and saw a production growth of 5%. They also mention 3 impressive projects that were the biggest drivers of their outperformance, including the Van Doo Dah project and the CBR 1510 project, which achieved high initial flow rates.

In the Delaware Basin, a project has reached an unprecedented level of productivity, with expected recovery of over 2 million barrels of oil equivalent per well. An appraisal well in the Thistle area exceeded expectations and has derisked 50 locations. The company plans to incorporate more Wolfcamp B wells into future developments. The 2024 plan in the Delaware is off to a great start with expected improvements in well productivity and efficiency gains. The adoption of simul frac and high-grading of rig fleets have contributed to compressed cycle times and lower well costs. The company expects this momentum to continue throughout the year.

Slide 10 and 11 showcase the recent infrastructure build-out in the Delaware Basin and Enverus' large inventory of top producers in the basin. The company also has a diversified portfolio in other oil and liquids-rich basins in the United States, including the Eagle Ford and Williston Basin. In the Eagle Ford, the company has improved capital efficiency and achieved a 7% oil growth rate while spending 13% less capital. In the Williston Basin, production increased 9% in the quarter and is expected to generate up to $500 million in cash flow for the company. The company also has a presence in the Powder River Basin.

In 2024, the company plans to bring online 10 Niobrara wells in Converse County to refine spacing and optimize completions designs. They also plan to reduce activity to 2 rigs in the Dow JV area and bring online the majority of activity in the second half of the year to capture higher gas prices. The first quarter had strong production results and the second quarter is expected to have volumes between 670,000 and 690,000 BOE per day. The company is proud of their team's capital-efficient results and looks forward to executing their plan for the rest of the year.

The expected growth in the company is driven by increased completion activity in the Delaware Basin, with a focus on Southeast New Mexico. The company remains confident in their budget for the year, with a slightly higher spending in the first half due to Delaware completion activity. The recent rise in oil prices has positively impacted their cash flow. The company has been successful in controlling field level costs and generated $1.7 billion in operating cash flow during the quarter. They used their free cash flow to prioritize share repurchases, totaling $2.5 billion since the program's inception in late 2021.

In the first quarter, Devon has exceeded expectations and is on track for a successful year. They have increased their production guidance for 2024 and are seeing efficiency gains and strong results from their Delaware asset. This will lead to higher free cash flow and increased cash returns for shareholders. Additionally, they have a strong financial position with a low debt-to-EBITDA ratio and plans to retire maturing debt. Overall, Devon is performing well and has a positive outlook for the future.

The company plans to prioritize repurchasing shares due to its strong value proposition and deep resource base. They have seen success in various areas, such as Wolfcamp B and Eagle Ford, and have made improvements in infrastructure in the Delaware Basin. The team is confident in their guidance for the second half of the year, as they have already made good progress in the first quarter.

The company will continue to monitor their progress and provide updates. They are feeling positive about their operations in the basin and other core areas. The company is seeing good results from their refrac program in the Eagle Ford and are considering expanding it to the Bakken. They have refined their techniques and are seeing favorable results compared to new well construction. In the Williston Basin, results are more mixed but the company remains encouraged.

The speaker discusses the company's focus on creating value from their resource opportunities and mentions the shift towards share buybacks as the best use of their free cash flow due to the underperformance of their shares in the market. They plan to continue this strategy in the future.

The company is currently spending $200-275 million per quarter and expects this pace to continue. They also anticipate a potential decrease in capital spending. The company is confident in their share repurchase program. The pipeline, Matterhorn, is expected to come online at the end of the third quarter, which will help with the current pressure on local gas prices. The company has not had any issues moving their molecules despite recent volatility in Waha pricing. They move two-thirds of their gas out of the basin and have hedged 15% of their Delaware gas. The remaining exposed gas is mostly first month.

The speaker clarifies that the company has seen improvements in productivity in New Mexico due to a combination of drilling and completion efficiencies and infrastructure investments. They are unable to provide specific numbers, but expect these improvements to continue in the future.

In a recent conference call, Rick and Nitin discussed the reasons for the company's outperformance, citing well productivity, efficiency, and improved operations. They also addressed the possibility of further M&A activity, with Rick expressing confidence in the company's current portfolio and stating that they have a high bar for potential acquisitions. He also highlighted the quality of their portfolio compared to their peers.

The company's game plan is to be at the top of the leaderboard in terms of capital efficiency and to generate free cash flow for shareholders. They have participated in consolidation efforts in the past and have developed a strong portfolio. The company expects smoother production in the second half of the year due to improved productivity and a front-loaded capital plan. They also anticipate potential D&C deflation in the future.

Clay Gaspar and Scott Gruber discuss the potential deflation in the rig and frac markets due to the migration of equipment from the Haynesville to other regions. Gaspar mentions that they have factored in 5% deflation from 2023 to 2024 and may see more deflation due to efficient drilling and completion. However, they are reiterating their capital range and are still seeing efficiency gains in their drilling opportunities. Neal Dingmann asks about the '25 plan and Gaspar explains that they are reverting back to similar proportions as before.

The approximate portfolio ratio of New Mexico to Texas, overall Delaware Basin to the rest of the company, is expected to be commensurate with the norm in 2024. This is a return to steady state after a slight anomaly in 2023. The company remains excited about the depth of inventory in Anadarko and Eagle Ford and is constantly evaluating new opportunities. The wells being brought online in the Delaware Basin are performing better than expected, leading to optimism about future performance. The company is focused on continuously improving recoveries and operational efficiency.

Roger Read from Wells Fargo asks about the company's plans for cash usage, specifically whether they will pay down debt or use it for other purposes such as share repurchases or acquisitions. Jeff Ritenour responds that the company remains committed to maintaining a strong balance sheet and building cash reserves to handle upcoming debt maturities. They will continue to focus on improving capital and completion efficiencies, as shown on Slide 9.

Clay Gaspar and Roger Read discuss the impact of deflation on rig rates and frac costs in the current environment. Gaspar believes that completions have a bigger impact than rig rates, but they are also seeing deflation in steel costs which is helping to control overall well costs. They are focused on efficiency gains in footage per day, but also evaluate service providers based on their capabilities and cost.

Kevin MacCurdy congratulates the company on their good quarter and asks about their production trajectory. Clay Gaspar mentions that it's too early to talk about 2025, but they always expect to improve efficiency and extract more resources. Kevin also asks about their midstream investments and when they plan to monetize them. Rick Muncrief responds that they will consider monetization when midstream multiples are favorable and align with their strategy.

The speaker asks a question about the potential for continued strong performance from Devon Energy, despite the company's reluctance to make public commitments. They also inquire about the relationship between well performance and infrastructure constraints.

The speaker discusses the challenges of operating in the Delaware basin and the constraints caused by infrastructure build-out. They also mention the importance of well productivity and completions efficiency in achieving outperformance. The complexity of the basin, with multiple landing zones, adds to the difficulty of developing the resource.

The speaker discusses the success of the company's recent quarter and mentions the team's performance and their efforts to minimize infrastructure constraints and reduce flaring. They clarify that the 60% well performance refers to new wells brought online, while the 20% refers to existing wells that are also outperforming expectations. The speaker then shifts to discussing the Bakken, stating that it has also seen improvements due to high grading and the company's focus on targeting specific areas and spacing. They mention that in the past, they may have pushed too hard in the area, but have since slowed down.

The company has a valuable asset in the Delaware Basin that allows them to be more efficient with their capital. They are taking a more selective approach to drilling, waiting for all the necessary factors to align before bringing new wells online. This may result in some fluctuations in production quarter-to-quarter, but overall, production should remain relatively flat. The Williston Basin continues to be a strong asset for the company, providing a steady stream of cash flow.

The company is focusing on the Wolfcamp B zone in the Permian Basin, which has shown success in a different area. They plan to continue developing this area and have identified 50 locations for future drilling. They are also considering other zones for potential drilling. In the Anadarko Basin, they have reduced drilling to two rigs due to the current commodity price environment.

The speaker was asked about their thoughts on the 60 to 70 [indiscernible] for the year and the potential for accelerating assets in a more constructive gas price environment in the future. They mentioned their partnership with Dow and the possibility of accelerating if the right opportunity presented itself, but currently the gas market is challenging. They will continue to run two rigs in the Dow JV area and potentially extend the partnership. They also discussed their LNG strategy and marketing of gas molecules on a global scale.

Jeff Ritenour, speaking on behalf of Devon, provided an update on the company's interest in the LNG market and their conversations with Delfin. He mentioned that they are actively pursuing opportunities to gain exposure to the LNG market, particularly in the Gulf Coast and Louisiana, where they are well positioned to take advantage of the demand. He also stated that they are in talks with multiple parties and will continue to pursue opportunities in the LNG market. The call has now concluded.

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