Devon Energy held their second quarter conference call, with Rosy Zuklic, Vice President of Investor Relations, leading the call. The company reported strong results, driven by their Delaware-focused operating plan, leading to record oil production, expanding EBITDA, and strong cash returns to shareholders. Cost management was effective, resulting in lower than expected capital expenditures. The company also made an accretive acquisition of Grayson Mill to strengthen their asset portfolio.

The company had a successful second quarter, surpassing guidance expectations with a 9% increase in per-share volumes. This was driven by record-high oil production and sustained stock repurchase efforts. The Delaware Basin saw exceptional performance with the addition of a temporary fourth frac crew. Other areas such as the Eagle Ford, Powder River Basin, and Williston also contributed to the volume beat. The team was able to control costs through effective supply-chain management and improved cycle times, resulting in lower well costs and higher project-level returns. As a result, the company has raised its production guidance for the second time this year, solely based on its legacy portfolio.

Devon expects to increase their production to 680,000 BOE per day in 2024, a 5% increase from their initial budget. The acquisition of Grayson Mill in Williston Basin strengthens their outlook and makes them one of the largest oil producers in the US. This transaction nearly triples their production and expands their inventory in the Williston Basin, providing them with 10 years of Bakken project inventory. This acquisition is expected to create significant financial value and add to their earnings and free cash flow. They have also expanded their share repurchase program and expect free cash flow to be additive to their dividend payout in 2025. Overall, Devon's outlook for 2025 is strong with double-digit growth in both oil and free cash flow.

In the fourth paragraph of the article, the speaker discusses the positive impact of basins on the company's performance and provides guidance for the future. They also congratulate the team for their impressive results and commitment to safety and environmental standards. The speaker then moves on to discuss the company's franchise asset, the Delaware Basin, which drove their outperformance in the second quarter. They clarify that the production beat was largely due to the outperformance of new wells and base production, rather than faster drilling and completion times. The company brought online over 60 wells during the quarter, achieving average 30-day rates of over 2,800 BOE per day and projected recoveries of $1.3 million BOE per well.

The Delaware basin is delivering strong returns and driving the company's improved production outlook due to excellent well productivity and base production performance. Infrastructure constraints in New Mexico have eased, allowing for increased capital investments in high-quality inventory. The company's well design and co-development of intervals in the Wolfcamp A and B formations have been successful. The Delaware wells consistently rank in the top quartile of industry peers, reflecting the team's focus on operational excellence and performance optimization. The company has also achieved impressive operating efficiencies, with a 12% gain year-over-year in drilling efficiency and ongoing innovation in the drilling system.

The company is using technological applications to improve various aspects of their operations, resulting in a 6% improvement in completion and a 12% production growth in their Eagle Ford, Anadarko, and Powder River Basin assets. These improvements have been achieved through fit-for-purpose simul-frac operations, leading-edge reservoir and frac modeling, and a focus on small but critical areas like logistics. These operational improvements have also contributed to improved safety metrics. The company plans to continue applying these learnings and their culture of continuous improvement to their remaining wells. In the Eagle Ford, strong redevelopment results have led to production growth, while the joint venture with Dow has driven solid returns and double-digit production growth in the Anadarko Basin.

Devon is expecting to see continued benefits from their partnership with Dow and is evaluating opportunities for expansion. In the Powder River, they are making progress in assessing the Niobrara development and plan to refine development spacing and reduce well costs. The recent Grayson Mill acquisition in the Williston Basin will greatly increase their position in the basin and they plan to maintain an oil-weighted production of around 100,000 BOE per day with an incremental capital investment of $600 million. They will provide an update on their optimized development strategy for this asset in the future. Overall, Devon is confident in their ability to deliver industry-leading results.

Jeff Ritenour, the financial officer of Devon, reported on the company's second quarter financial performance. Core earnings increased significantly compared to the previous year, resulting in operating cash flow of $1.5 billion. The company ended the quarter with a strong cash position and low debt ratio. 70% of excess cash was returned to shareholders through a combination of buybacks and dividends. The company plans to continue its cash return strategy, with a bias towards share repurchases over variable dividends. Third quarter oil production is expected to be strong, and capital spending is forecasted to remain flat before decreasing in the fourth quarter.

In summary, the company had a successful second quarter with record oil production and efficient cost management. As a result, they have raised their production guidance and anticipate strong growth and free cash flow in the coming years. They plan to use this cash to prioritize share repurchases and reduce debt, positioning them well for future success.

During the Q&A portion of the call, Rosy Zuklic thanks Rick for his presentation and opens the floor for questions. The first question, asked by Arun Jayaram, is about activity in the second half of the year for Devon. Clay Gaspar responds, stating that the first half was benefited by the fourth frac crew and activity will be relatively flat in the second half. He also mentions that working interest has been fluctuating in the Delaware and is difficult to manage in addition to other important factors.

The speaker discusses the company's performance and outlook for the first quarter and the rest of the year, mentioning a potential increase in spending and a strategy session with the Board. They also address a question about the company's future capital program and mention that they are not yet ready to provide a 2025 outlook. The speaker expresses confidence in the company's direction and discusses the potential for continued success.

The speaker is discussing a decision point where they had to choose between throttling back capital and focusing on volume, or keeping the capital the same and exceeding volume expectations. The decision was made to focus on volume, as the team wanted to show their expected performance and was concerned about potential downstream constraints. The team also made adjustments throughout the year, such as releasing a frac crew and high-grading rigs, to optimize their operations.

The speaker discusses the increased productivity per rig and frac crew in 2025 and how it will impact capital and net wells. They mention staying within a 0% to 5% range and managing capital, and express confidence in their current capital guide range. The speaker also mentions the recent acquisition of Grayson Mill and their focus on integrating it into the company. They maintain a high bar for potential M&A opportunities. Another speaker compliments the company's results.

In a recent conference call, Neal asked Rick and Jeff about their thoughts on capital allocation, specifically regarding buybacks versus variable dividends. Rick believes that their current stock price presents a great opportunity for buybacks, and Jeff confirms that their bias is towards leaning in on share repurchases. He also mentions that the upcoming acquisition of Grayson Mill will allow for even more share repurchases. Neal then asks about future activities in the Anadarko and PRB plays, specifically for Clay's thoughts and expectations.

The speaker is responding to a question about Anadarko's returns and how they compare to other plays. They mention their partnership with Dow in the Anadarko Basin and their investments in the Powder River play. They also mention their focus on share repurchases and their potential for a larger acquisition, which could involve using equity. They state that share repurchases are their base case and they will only consider using equity for a larger acquisition if certain metrics are met.

The speaker discusses the unpredictability of transactions and the company's focus on accretion and strengthening through acquisitions. The use of equity in transactions is dependent on the specific situation, but the company's bias is to buy back shares. The speaker also mentions the Bakken operations.

The speaker, Clay Gaspar, is excited about the potential of refracs in the Eagle Ford shale and mentions that the company has had success in this area. He also mentions that they have tried refracs in other areas with mixed results. Gaspar sees refracs as a way to supplement base production and bring out more resources in their basins. He believes it will be an important tool in their portfolio.

The speaker, Clay Gaspar, responds to a question about the company's well counts and rig count for the second half of the year. He explains that the rig count is a byproduct of the team's efficiency and they are more focused on maintaining productivity and capital efficiency. The speaker also mentions the upcoming start of Matterhorn and how it will positively impact the company and the sector as a whole.

The speaker discusses the Blackcomb pipeline and the company's excitement to be a part of the project. They mention the potential for the pipeline to move molecules away from Waha and towards Matterhorn, which could result in improved LNG pricing. They also mention the risk of backup of molecules being transferred from Waha to Katy, but state that the marketing team has done a great job in managing the value chain and maximizing prices. The speaker also mentions the company's ability to move gas to Southeast markets and their confidence in their commitments and future prospects. The questioner asks about the Blackcomb pipeline and relates it to feedback they have received about the company's inventory not being differentiated enough from peers. They note that the company continues to sign new pipelines, including Matterhorn and Blackcomb, which shows a real commitment.

The speaker is asked about the company's plans to meet their obligations in 2026 and what this means for their Permian oil growth. They respond by saying that they are confident in their ability to meet these commitments, as they expect gas production to continue growing in the Delaware Basin. They also mention having a strong inventory position and point to slide 11 for third-party data on their inventory.

The team is focused on unlocking the potential of the white part of the bar on the curves, which represents upside potential. As they drive down costs and improve efficiencies, more resources can be recovered and the white spot becomes part of their inventory. They have confidence in their position in the Delaware Basin and are willing to sign long-term deals and underwrite pipelines. They have not recently transacted in the Permian due to their disciplined approach, but they have a strong ground game in the area. There is operational momentum year-to-date.

The speaker is discussing the sustainability of improvements in cycle time and well productivity in the first half of the year. They mention that operational improvements are easier to factor into future forecasts, while productivity gains are harder to predict. They also mention that the company is constantly updating their forecast and that there is continued upside in productivity, but they want to ensure they can achieve their goals. The speaker also mentions that they are able to predict and capture improvements in operational timing and casing design, but well performance is harder to predict. The speaker also mentions that the company is guiding for higher CapEx in 2024, which includes increased activity, but it is difficult to determine the cost benefits of efficiency gains in the Permian.

Clay Gaspar, Chief Operating Officer of Devon Energy, responds to a question about cost deflation and operational improvements during a conference call. He mentions that they had previously forecasted 5% deflation gains from 2023 to 2024, but they have been able to make even more improvements. However, these gains are being offset by operational improvements, but both have a positive impact on project economics. Clay also notes that these improvements are sticky and will benefit future opportunities for the company. The next question is from Charles Meade of Johnson Rice, who comments on the recent Grayson Mill deal and how some people view it as non-core. Devon Energy's CEO Rick Muncrief responds to this comment.

The speaker discusses the evolution of the Williston Basin and how what was once considered Tier 2 has now become core due to efficiencies and cost control. They also mention the potential for even greater returns and the excitement of having 3,000 acres to develop and explore in the future.

The speaker thanks Kevin for his question and confirms that the Eagle Ford was the bigger driver of the company's recent success. They mention that the company beat expectations across the board and that they made efficiency gains in addition to the redevelopment wells in the Eagle Ford.

The company's teams are performing well in different areas, including Williston, Delaware, and Eagle Ford. The Eagle Ford assets, which are run in partnership with another company, had a particularly good quarter due to increased activity and potential. The company is seeing cost savings per foot in all areas, but the Permian has a competitive advantage due to the large number of rigs and frac crews. However, applying these learnings and scale to areas like Powder, where there is only one rig and a part-time frac crew, is more challenging.

Clay Gaspar discusses the potential for cost savings and efficiency in the Powder River Basin and the company's efforts to export learnings from other areas to improve operations. He also addresses the challenge of balancing activity levels and capital in the basin and mentions the company's focus on continuous improvement.

The speaker discusses the potential of the Powder, a complementary asset that will benefit from the success of other basins. They plan to have one to two rigs in the Powder, focusing on productivity and cost efficiency. They are confident that costs will come down and they will achieve the full potential of the Powder. The speaker also mentions that they have time to derisk the play and there is no rush to invest capital in the Powder.

The speaker discusses the value of their portfolio and how it may not be reflected in their share price currently, but will be a valuable part of their overall return of capital to shareholders in the future. They mention their annual strategic board meeting where they plan 10 years ahead and evaluate their various opportunities, including the potential for the Powder River Basin in the second half of the decade. They also mention their focus on unlocking potential in the Delaware Basin in the front half of the decade. The speaker is pleased with the steady progress they are seeing. They also briefly compare the costs of their Grayson asset to their legacy Bakken asset.

The paragraph discusses the differences between Devon's Grayson and legacy positions. The Grayson position offers more running room and potential for enhanced oil recovery, while the legacy position has better rock quality. The well costs are expected to be similar, but the Grayson position may have slightly less oil cut percentage but better margins due to infrastructure control. The speakers are excited about the potential of the Grayson position.

The paragraph is thanking the audience for joining the call and invites them to reach out to the Investor Relations team for any further questions. The operator then thanks everyone for participating and ends the call.

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