DVN - Earnings call transcript Q4 2017 | Devon Energy Corporation

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Operator

Good morning. Welcome to Devon Energy's Fourth Quarter and Full Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is being recorded. I'd now like to turn the call over to Mr. of President Vice Coody, Investor Relations. Scott may you begin. Sir,

Scott Coody

package hope Thank financial the had detailed good operations This and guidance release, I you, morning. everyone data night. chance last disclosures report. were has our and that earnings forward-looking and operational released includes to review our

thoughts sure sure we available to everyone refer Additionally, prepared supplement remarks to for make remarks. the will on that number aware These prepared With I today, is call are our can today's our and website, we make to slides slide our I next how we we the and our want everyone have along. perform President to follow on then slides call, during that so direction and will of to have items over to XXXX the Hager. our Vision few and over cover years. preliminary turn CEO, branded the his Dave as the expect Devon, a strategic which business call Dave three our provide will

Vaughn, Tony Officer, with financial results, commentary our key our Operating Dave, review we'll remarks Jeff up our by Following Chief our a Ritenour, Officer. detailed our operational production of with other wrap prepared fourth along And strategy will on Financial then quarter provide themes. Chief

expectations results control. materially. many of statements to are forecasts, to guarantees and that would subject law. estimates questions may statements which are answers and number actual Turning slide our are U.S. assumptions, will like answers performance and comments a These and securities plans, differ I future of These of that risks you are beyond to uncertainties, comments not on today and X. to remind contain this under call forward-looking

our please Form related and that, For President to And factors to CEO, the turn these risk with a call Hager. Dave see over review our statements, I will XX-K. of

David A. Hager

Thank good you, morning everyone. and

our strategic results comments our direction today for XXXX fourth the will Tony the mentioned later cover which and outlook the several we Vision. over quarter Scott next As on branded focus earlier, years, in XXXX as of will Devon call. My have

However, a a have before that a on, prepared repurchase we into authorized not I program. remarks, we questions lot that and to of address get have received share my is I want why topic

Let be clear. me

generate operations programs, will reward our and dividends more cash higher we shareholders opportunistic As through through divestiture share we asset our and buybacks.

is all authorized our of our cash for this billion the maintain positions balance our now. a absolutely program a near-term Devon STACK priority? in today of to not a world-class and associated development positively portion top-tier right reduce this our near-term type levels possess prices order price and our we certainly and cycles. through top have sheet However, Commodity announcement, Delaware to shifting through and more is go down, a the is to cycles steadier to critical and full value execute but mode, measured our priority on could correct it up with that development programs. will is couple dollar stock business. development upstream balance With significant use program we repurchase optimize it to with Why debt associated our returns to move large plan respond consistent activity share had our And while all

that prices, XXXX, shareholder year. this increasing in performing high current is I asset coupled stating am with with business confident the there of during and commodity be Our will at continuation a imminent very level, sales returns

billion This properties delivering our the expect programs I $X.X development change and dramatic attractive shifting Devon plays, reached for With of approximately U.S. X. the state developments returns. low-risk STACK. capital efficiency with step a slide this wells focused core while than top-tier Delaware In an can plan to our full-field company. With greater concentrated majority economic resource point and has that of the to confidently capital Delaware development, in our we inflection the to in assets upstream Moving in as corporate-level world-class development our amount to in very capital STACK deliver XXXX focused a bring in XXXX, of similar high-return XX% more plan invest allows in on we to than online us investment. a

scenario production roughly in our is compared Additionally, this pricing. XXXX self-funded to XX% drive capital XXXX. plans basis, are program oil a On WTI expected at our growth planning base of of asset retained to $XX U.S.

Importantly, the than is be exit greater XXXX U.S. the average. to this. clear and higher throughout trajectory do year production to oil profile Devon's I on the than XXXX XX% of rates at expected steadily want advance

could We in shortage and have no portfolio to rates if much optimize growth line our at production definitely our opportunities higher attractive capital with within XXXX top we grow allocation. of chose highly

the while in believe investment and fundamentally correct the cycles year. delivering growth. Devon's we in flow efficiently maximize capital-efficient differently cash capital opposed committed through are given However, and any are our We strategy absolutely space expand program one steadier that doing valuation more E&P allocation measured as to business maximize to and returns to to optimizing corporate-level a marketplace in business maximum pursuing is our all the production growth we

I capable business business basis. excited multi-year delivering Devon's improving and is XXXX slide more the in of outlook to profitability much a on is about strong, Turning am X, expanding our returns while very

I with cover guide and underpin our model get years. the that before to do business or over principles However, our underline behavior I the performance the several want strategic will our specific three-year into associated next plan, targets

business, optimize flow productivity wedge. First, base of production our to upstream to of the will leading deploy we continue to technologies maximize expand and steadily cash the our

cost will we the business out are to per-unit a maximizing aggressively requires we value also can of to top a flow significant improve most depletion work while get that priority, We cash barrel And every in produced. reinvestment. is our cash

efficiency, of Devon, positioned space. advantages competitive ability With only through stretch improvements Basin but our going continuous we assets and dramatic and capital recoveries the one dollar the winners value at and we selling efficiency multi-zone our are at our momentum development increase net present techniques in every improvement portfolio not asset highly our to less our simplifying Delaware rapidly substantially in top and And With building dynamic, forward. this Delaware the improved operations. deliver scale, this investment and Basin operating Given assets. capital to efficient separate industry-leading are by will competitive and STACK acreage further our more of to also is STACK, losers competitive committed

market not ensure the we patient only and assets appropriate for and the our While allow bring assets will we into shareholders. be sell, of at conditions which value we to we'll forward currently sell right price go as to details evaluating are the

Another further improve our critical investment-grade strength. objective is financial to

times Our goal WTI and ratio the a is of sustained $XX to maintain X.X debt-to-EBITDA to environment. achieve X.X ratio price in a net

As XXXX I Jeff our touched to amounts Vision our increasing in to returning provide of intent targets return on later to will and shareholders. both of our call, the shareholders cash the commitment debt begin of on more to the very important is another strategic cash details call.

X, we $X supporting these a targets key under Moving perform we performance the several targets Hub Keep next and XXXX expect mind, to years. $XX the flat Vision showcasing we're advance with our slide to how over simply WTI strategic business Henry in three our price principles to expect deck.

actions will capital all they and to do, optimize when our evolve, will As recalibrate returns and we efficiency. conditions we industry know,

within oil plan, this foremost, funded the XX%. disciplined years at we year attractive around growth corporate-level be and In this production we period. over three XX% a to this returns, with price flow per drive Delaware deliver to in annually of total and conjunction scenario, by over expect production returns oil Under time these will STACK, First U.S. expect capital than greater $XX excess next WTI operating burdened game capital fully with programs in advancing the XX% of our corporate point. requirements cash our

savings, is approximately production, another through savings to translate enhance costs, cost expense lower structure interest structure. component profitability In of key another our These through a for improvement into $XX XX% attractively and to to flow price overhead expect strategy per-unit business and business deck an combined of addition upstream a operating production given we oil than will our cash advantaged high-value with growth of declining portfolio, of to growth By able cost XX%. cost we WTI Put cash annually of grow more Delaware aggressive sustainable a basis expand the Devon's on be our XXXX, STACK, flat improved the XXXX. combination way, will our pricing. strong by in at

well. the at next over $X.X upside free also prices would as three $XX we torque higher to generate We be WTI have the cash flow able cumulative billion pricing, At of to years. will tremendous

portfolio. also are As the Delaware we value shareholder and build maximize asset in mass by to simplifying working STACK, our we critical

our in see of asset range years. and assets targets resource-rich asset potential could capitalization. generation $X excess market Combining of our of total with few up XX% at Given free in sale base, monetize requirements next a Devon's very years planned pricing, cash excess to $XX we our cash three our to fashion measured the flow inflows billion these the thoughtful in over of WTI over current next capability the noncore capital

and cash during opportunistic through shareholders share itself this our again, I dividends manifests XXXX will As higher beyond, reward flow buybacks. emphasize and excess we

X. to Moving slide

into XXXX, incentives is to positive the are management our underway Another shareholders. steps return-oriented of measures at Devon Devon our compensation incorporate packages. In we two taking will align initiative further that with

you include by drilling in all be measure return As burdened employed, corporate our can will on costs, the slide, G&A, measures calculate one capital, capital while other will calculate which programs. Both technology land returns on and returns the see corporate other cumulative initiatives. all will current

in over reporting. going provide improve Tony shareholder-friendly on of commentary in Tony? will such initiatives point, these our improved would our operations. transparency are call to as Vaughn advance initiatives environmental for on results future to calls. business we this At additional sustainability I that turn other the Additionally, will updates the I XXXX

Tony D. Vaughn

begin good production and prepared some my slide On additional to quarter today morning fourth our like X, around providing remarks by Dave, everyone. results. context Thanks, I'd

quarter multiple production day was attributable due of our oil tie-ins the to shortfall in issues timing impact non-operated from non-operated within quarter. activity thirds this associated developments pad was STACK. nearly primarily production in well by within to per U.S. with limited timing U.S. volume XX,XXX Two the of the near-term for barrels of partners In driven oil timing by aggregate, STACK. of volumes Our the these the the oil

shortfall an reservoir to related operated of performance increase be the quarter well to the our To production fourth the in was the the or clear, than issue abundantly XX our day, approximately rates now January. drove early this in BOEs behind more the in current non-operated activity in spike per of to in STACK The wells XXX,XXX us, is Importantly, of STACK with not quarter compared than average. non-operated tie-in greater XX% daily activity. fourth pace

our best In fact, quarter, in some XX-year were history. Devon's in the of fourth the well operated results

XX barrier Our franchise XX-day top plan our growth X,XXX from averaged with track assets with operated BOE assets greater volumes ramp-up XXX,XXX Delaware to the wells per the from rates quarter of two early the two than by grow the our currently per of and those greater is Basin XXXX, in XX% on in day. initial approaching production in in production is the Combined XXXX. BOEs day oil than

Moving to slide X.

talked we As to we XXXX the Basin during development. our assets by growth from length world-class XX% have Delaware our transition expect today, is and in driven full-field about STACK the plus

the Importantly, Delaware our multi-zone schemes in the leverage will and in the activity this of economic upcoming the of development STACK. year core majority

this per on pay see innovative than further concept development XXXX, convert approach with we this leading-edge this development already in Basin, we of drill way at developments. that traditional these project. faster from best completion day our XX approximately results by cost cash the per centralized have As in to underway. can up development, capital XX savings this pad to efficiencies several of the projects facilities, achieved well you is On projects and Anaconda project slide cost X, our more of at support scheduled with Delaware flow multi-zone Early savings slide, to that stack the production. processing concept, benefits conviction with These compared and leading-edge reached efficiently the stages $X million this multi-zone the times, driven initial were

expect well cost very In at addition Anaconda production at day. to was the for result reached Anaconda XX-day Average future rates attempt, XX-well Overall, well per but also program X,XXX $X million with our per definitely productivity BOEs per to first great well savings, a improve strong. we the projects.

XX%. feet of nearly early an the X,XXX second fact, nearly at and more example on by projects Anaconda continuous Boomslang the to several in per is XX-well expect in productivity operations achieved reached news Delaware improvement next other Completion are this have quarter. Boomslang the we that Boomslang, multi-zone time to drill record in rig In breaking our day, the underway, previous report project project, and Delaware, positive

in initial This from of prior Coyote are well. drilling XX, an in productivity have Showboat leasehold feet schedule, drilling slide translating to represents is Drilling the in area, per compared which day, January, ahead XX-hour progressing. multi-zone day. our X-well of drilling operations is seen turning results than IP area. achieving efficiency $XXX,XXX with currently ongoing, X,XXX To is well a project, XX% activity we XX-well historical per of development well times the productivity encouraging. improvement by savings into compared very the Coyote also our This drilled the Coyote date Now Showboat, to the project XX%, at play. as operations operations but per for per X,XXX with in exceeding of of are average XX% of well Completion oil. STACK work At improving that rig average by BOEs have west our in program day, far highest from to flowing the in Coyote back, also drilling about the concluded also at X,XXX project development positive this now the shown more BOEs much the is single as over of course to initial results,

component a strong So XX, see, or capital ensure of be operational our development and off critical underway both chain at work to execution key our On the STACK great Devon is this Basin is services start. that slide the as you supply that full-field plans. of a should can efforts not overlooked and to in and supplies underestimated certainty are deliver planning the on to Delaware

Permian long-term plans and development market and providers. service rigs for capital has XXXX. asset, services the Basin, XXXX the supply secure each plans right unquestionably is allowed The strategy, at competitive pressure rates in chain below-market especially tight the relationships along pumping Devon disciplined prices to proactively top designed in at our with team While a our multi-year we with to now, have on secured hedging execute opportunity

under business, of contract on drilling the execute we program. rigs the On the to side our had need we XXXX

gradually multi-zone the year XX fact, we rigs, with entered XX rig we rigs. plan year reduce to In around our XX due the associated developments, and count about our to at to exit to efficiencies at

are day While inflation. savings industry efficiencies. this our the business and side rates and offset in to will see the contracting more Delaware services, we some strategy drilling-related of drilling our In in our increases through cost will efficiencies expected Basin improving and aggregate, generate than STACK on

marketplace pumping. Another is tightness in of key pressure the area

utilize have Within our with secured the Delaware crews. in Basin largely horsepower and to plans we requirements XXXX, seven dedicated STACK,

chemicals majority horsepower, raw contracts and diesel, sand have the have for of place to last-mile addition in requirements, water, XXXX. In we also the in logistics our

significant in projects Our result will savings completion from services debundling efficiencies and strategy cost XXXX. multi-zone our of in

for requirements across than our our have total business, during of all of place XX% overall, agreements in we capital more phases XXXX. So

industry we believe XXXX, expect mid be do in somewhere are to our and costs. the Delaware than service gains digits to the these in high to inflation While in STACK efficiency single projected we more offset higher cost

we with have good that and is of marketing flow work area on done assurance. our lot Another a

turn our our good $XX Bottom Delaware upfront the a These around I to million. basis line, of in hedges well work positioned have WTI. of Jeff. STACK. production with personnel, with and a in and are call Canada, half market. in at And that, we tranche firm have approximately chain from marketing attractive are transportation production covering covering we will off We significant both currently our the And operations, $XXX tight over supply planning this worth hedges

Jeffrey L. Ritenour

Tony. Thanks,

context remarks to Vision our my discuss the in execution our the and I'd financial today, For like next our prepared within strategy. financial XXXX steps priorities of highlight the of

of and to very year near the future flexibility we comes tremendous increase hand of We have the meaningfully to finalize County As balance our slide expect billion divestiture it exited this cash with our financial $X.X to once XX, in additional in you the full-field see Johnson our on amount transition in will priority with these position. in assets With can when we operational is company. Growth Barnett. these to overall capital for the our operating regards and Delaware early-stage Devon's drive margins allocation, on plans first and STACK the fund assets development. as capital along efficiencies to higher

growth $XX capital for deck. through both at Importantly, our the flow company fund and maintenance XXXX we price a operating to within WTI requirements cash expect

and we strength. financial to of key end, target times financial this peer-leading leverage To to priority X.X X have a investment-grade ratio Another is debt-to-EBITDA. achieve maintain set

With of balances, cash County our reach we proceeds range XXXX. targeted expect Johnson divestiture the ratio to in early addition our the to

will liquidity, Dave we debt begin cash and our repurchase his utilizing targeted on strong us mentioned annual to XX% in outstanding of hand our a achieve expense cash debt. Given portion absolute go-forward for the comments. opening tender savings help interest cost will reduce This

finalize size but billion XXXX. $X.X tender debt coming will this to initiative our as absolute of We expect weeks, in initial and as the debt during reduce by I much our timing

environment. repurchases committed a our we against to Beyond debt-to-EBITDA targeted priorities, initial ratio additional net will debt remain sustain repurchase, our other balance this will but $XX debt financial WTI price in

goal Another steadily financial shareholders to share excess and of grow is policy sustainably the dividend. the and to critical dividend dividends component From a is our repurchases. our return through pay strategy flow of cash perspective,

of to at operating WTI a upstream flow planning $XX of targeting manageable are We scenario cash payout pricing. X% of our our base ratio XX%

a we buybacks or or special from sales cash shareholders with through windfall a to prices, addition In potentially to reward commodity asset share dividend. expect the dividend, quarterly opportunistic excess from higher

as manifest beyond. tax ability our have flow enhanced the cash recent and this to on provide law in to XXXX more favorable disclosures U.S. to We updates to tax shareholders in in future in reform. cash future. The excess Shifting briefly topic the will changes and Devon were return

Canada went to material entries results, from impact our rate impact efforts While of noise did tax legal XXXX in the full cost legal In recognize lot And and transferred provides operations you the results finally, tax tax accounting efforts cash U.S. hours accounting year asset foreign change successful and of accounting reform comparability making flow tax to significantly high-margin Canadian the into believe tax methodology generated free reform resulted at greater taxes, future, our successful here work not in benefits, Devon the to will back year base. some can from to the a tax and accounting our for of will to that going reform help positively several and this in be and A or to their better quarter entity our the conversion on U.S. efforts. full fund fourth Outside effective do see materially hard expense deferred the the repatriate ability our transparency want entity to quarter in team peers. policy. we restructuring driving our XXXX The financial efficiently forward. performance restructuring our the tax our into reduce reform, current to of growing, end. long completed We including I the in earnings

to assets. efficiency core the of superior us capital highlight expect change our the we forward, Going help

the call on We annual turn quarterly a to reported changes have of methodology. successful disclosure our the that a the With supplemental back Scott. a basis to efforts included and XXXX over website as highlights for I'll result that, on conversion packet

Scott Coody

to question Please open the one to follow-up. Q&A yourself and Jeff. a We'll now. Thanks, call limit

take can you have first that, you With operator, questions, permits. we'll question. time our If reprompt as any further

Operator

from of from of Our first comes America Bank line Merrill Doug question the Lynch. Leggate

Your line is open.

Doug Leggate

everybody. Good morning Thanks.

David A. Hager

morning, Good Doug.

Doug Leggate

related leaning ask where either get towards I potential two the to a several Dave, for what opine what's the former. you the we're on you in asset the don't and guess, second development Because want your is going or And just potential forward? strategic the been Delaware, got I'm specific going the asset on follow-up, looks we years. I'm just but plays little quick of core please. have, issue wonder understand things, Powder I've target sales, to I my billion in thing fits like I sale, it's to I And it is, River EnLink is sales the asset a to bit outlook. be to in could And particularly a whether EnLink part curious outlook the that $X us over if see you role same primed next that development

David A. Hager

very for assets the STACK off, clear that the Sure, two and going Doug. first key Devon the play. Well forward it's are core Delaware

that, growth the are that there We Eagle still anybody's, for going they're some have have the having capital Barnett, other in going EnLink. and we that few do the years. years. for the as are oil as we Powder few as drive And the and the areas, take of they you results of mentioned, good next as next positions to Outside assets company are the Ford including outstanding in well bulk in heavy great to the

we We good going going regard scale think growth potential and to STACK some the opportunities there not some in the well, drilling opportunity. Delaware. there's there But in the like be Niobrara to We to the wells there. a the the Turner. and of reach as see the it's we're drilling we're again, in Specifically Powder,

And STACK get our have Delaware. it the two I'm all trying whether of in be the trying can we too. other specific just on we're and through base, not to important understand around we So obviously, optionality at going get. a not the assets And E&P most change than value reason but or time this all the – we to minuses coy – to market pluses the and are we that maximize more But And and midstream the optionality. conditions to describe be a the asset. obviously have the lot I'm that

not have one a we when the conditions is of shareholders, and best we really announce change lot market way don't so in of strategic the And decision optionality or the think. other interest to a

we this. And the we once for we shareholders. that there. do authorizing you So lot accomplish this, way ways can reiterate a return to have of a when that optionality us There's to could value to again be look

Doug Leggate

with that strategic be the way the company, can all the you an answered guess there retaining mean, where things I out, lay can role metrics, you go the and also along question still I is some deconsolidated EnLink of a appreciate this option that in guess the number, of debt you the I detailed the about three-year while flow is kind reasonable the leave is Thanks. But at by should been at basis follow-up share necessary a on cumulative you least you acquire? answer. know for I'll thinking terms XX% the EnLink the in Dave. timeline I we And about with my and XX% buyback, EnLink while, you'd that rabbiting that of scale could strategic a on buybacks? cash And number when generate. I've look that specifically, be in just the control there. the consolidation it discount,

Jeffrey L. Ritenour

Hey, Doug. In in financial to Ritenour. end Jeff up This going long our maintain as control, standpoint results. is as accounting consolidating the an financials, deconsolidation, from to regards we're we

position, whereas today but any sell-down as you sit only deconsolidation driven to short would relinquishment don't the really we a guys of a actually control board be we'd where near-term weren't in know. by units, of expect position a control, So on a have not at of which see to that ultimately we be

the million, relates near term. year. an E&P is thesis about you've consolidation to to overall basis From funding the a that see portion our that like say $XXX heard each in on don't year. material an $XXX annual as a EnLink, investment. us we towards So The a many times, as distributions budget That investment we million goes amount capital receive it

in on of the that, So operational areas. again, synergies you have our core and top

the Delaware on we business in in from to synergies In specifically, today. there isn't assets, grow is have so both obviously just EnLink EnLink's an today. Permian, standpoint. and and the much Delaware, the not the an North there with to with significant STACK So us relationship in play overlap is operational starting important our Texas,

Doug Leggate

Does it mean comes that. And to I'll the Thank right? sale? be you. be the X% down at clear, equity control that level to just that for GP, Jeff, could leave from the interest

Jeffrey L. Ritenour

we You're our The little ownership that the that that, own XXX% over of deems entity. the general a GP. of exactly come control right. control managing complicated And does from partner, member more it's of than in the which really,

Doug Leggate

Right. Thanks, guys.

Operator

next question Paul from line of Our comes from the Macquarie. Grigel

line - Macquarie guys. open. Capital Paul is Hi. Your Good Inc. morning, Grigel (USA),

calculations? Just management transparency incentive changes additional addition that those moving really plan there question. forward we wanted return expect how on focus Are to should to in two-part the second, of a the should And here, calculation the within alongside we expect? element view

David A. Hager

Hi, yeah, that, to be glad answer Paul.

for these our bonuses. for First off, yeah, in the are incorporated going to that use we be our balanced pool scorecard

per typically. the of we there couple each be a pre-tax balanced a have important have we'll be typically replace in we're You there We're more that scorecard, out what of we important will these a historically. measures as XX% that BOE balanced scorecard. fixed measure We measures take that tell adds in with in out taking out haven't to exact the taking most had these to currently, represent And and we will although these. represent I of those measures percentages that XX% that us couple going margin view measure going of can to our our the you see reserve cash

taking standpoint the the a have as XX% the be can has the focus you some transparency, total are you focused think six been always the what place and But targeting. expect to as we we math think that I this we no it see even of question this tell calculation. that as just but I that are the within in intensified far in that something provide it, dramatically there's as on report tried would And months. company, last XX% So to I is company as conversations operations behind to transparency the actual our important to from this, internally can at I

the the describe We so you We've cash a And employed much that the how of gets statements. as that we'll detailed measure, the certainly can understand how could then we're here put complicated, straight measure proxy the calculating going going little calculating are. We of are return the easily you give It to one is those possible laid in formula we what will it. about capital targets be now. but off something measures. as on that that out financial

check it can yourself. And so you

really The of other measurement, measure, the goes productivity which to the is asset wells. the that return all-in

provide And going every there, but curve our of wells we reserve details which to the all year. drill into tied of actually so course that it'll be is the every report, decline audited we're not of of

And these so all to and give costs corporation. overhead the accurate comprehensive much in includes as will with with as a very measure the feel transparency – we industry associated costs anybody all numbers. again be around very associated going that it's that And

Macquarie as what be This I like those what fallacy we important understand kinds are about for them Paul we're think's and we returns even (USA), what is frankly can. XXX%. transparency know going XX% most about We the a So a to provide kind - much of and as as lot Inc. within on returns to That's where we That's changing shareholders. we were Grigel or of you to talking getting of of as of that productivity. that's guidance to XXXX the your those generating No. things. coming Capital of well-level but that's go either talk guidance well as a terrific. as the thoughts may the risking moving mentioned large XXXX non-op actually guidance non-op could follow-up, of on timing of the as That's some one curious you guidance forward great. You XXXX laid how as out be well risking the they the risked some through guess guys I forward, the pads? are

David A. Hager

what those wells obviously XX our off But into might the was guidance. to were we approximate guidance little I plugged more and took with it operators that production that's on turn details. bit And a over Tony we guidance. for we on our miss then Yeah, kick by provided this and the disappointed QX

it's taken think If proportion outside say XXXX. guess you In lesson thought or production operated. bit have significant versus hindsight, tell much learned so well, volumes just look with We key but that know you other more that going were to we to taken at we you is being those look we wells. production. non-operated in XXXX forecasting certainly, the activity can our places in I And of going our as STACK the conservative the make conservative our can XX% our a the is we've things STACK around wells. is on a in outstanding, our guidance. a though didn't of operated outside-operated taken sure more the little there. large to come operated was measured more non-operated happen of to are that pads I some but we I overall, all we approach to confidence expectations a to approach when doing have Again, we happened have that appropriate,

take more it, So want to detail that? Tony, on you

Tony D. Vaughn

bet, Dave. Yeah, you

Just working have to probably in of projects, and We're a on projects at think you what multi-zone little XX some you these roughly our STACK to Delaware. add we maturity said, level look work those between about plans. XX bit if to I

we have a lot gate stage doing. of into we're very what disciplined process a have transparency We that

operating to of of efficiencies the keep and them to But we pads. we projects think trying lumpy so here. that might we that these about don't about can large get we the have XX like really number production of facilities we're in be and going report, or You have and these a centralized of reap scale batch see when are we the size extremely and of And of XX utilizing we benefits business. the this highlighted projects out greater XXXX in way just doing want (XX:XX) kind impacting right on our offshore wells to operations the were the is seen

even the execute, us see or you when spades in side So project It's right And three and to two on of on and convey is a all fracking we've scaling three appropriately. execute. where this there gotten are starting have over it business, facilities. the competitive to this side. one and through these on project park these the the cost business seeing the and efficiencies can some when The there, remarks, the in going per not utilize we we're execute we as rigs, done in XXXX a peaking that on hard drilling on we side facility now, zipper four efficiencies the side explain wells, the and one project. well Showboat synergies to in just great of And see we're drilling drilling of and prepared the we're wells the is pretty good business. is saw And and really, here that get cost we of on have side portion which that the but completion on be just job we together. the to time continue our rigs we're I the of large savings for my improving also location mentioned

the answer we is this to So think go.

commented we've think the are maturity done that work that. commented is the on where here We early very on I of the XX%. in present to believe I we've think that still with think pleased we uplift in these on value our the these. we've we execute ability And past we're

this about excited we're So our of business. part

David A. Hager

royalties add, little the be because guidance really really happened that higher experiencing up number going Paul, a very company, very, we prices. below average too, might Street our What more average oil that we go caused is our to was to a Canada, I first Street we're total of WTI higher bit XXXX had. where recently in it just the that close rolled as when

They're from probably we're so based out to a, prices. prices. on WCS understand, the going based as are be And you not going there royalties on WTI

little (USA), guidance increase And that's oil to Capital Street it. a so Macquarie I our so. the And expectation production X% we based color, caused we royalties very to are to Inc. X% overall taken around all conservative assumption think on have what really from average year fall helpful going that's think Paul appreciate those bit I No, or the that, on and throughout think Grigel - was. more a where below

Operator

of comes Our from Portillo line the TPH. Matt from question next

line open. Your is

Matthew Merrel Portillo

Good morning, Dave and team.

David A. Hager

Good morning, Matt.

Matthew Merrel Portillo

few in highlight years? question cost operating by savings terms the you initiatives costs, potential the the the some show your about on next to of the years to level. release, cost XX% over a working Just cash reduce Could those and the start up of might where next your you're trends over in on about you talk

David A. Hager

going going Sure, growing about anticipate to one $X to to we're be per that Several are BOE we that's and is things contribute be to that, volumes. different that. obviously from Matt, reducing going which our of

grow those basis sure well. the areas LOE And volumes, are both absolute very going there. of initiatives have in to you areas do And G&A costs are taking not where we to so really our hard the can scope that those as maximizing both increasing as down. improve we be so we're at make coming to we efficiency going we really of our or the an we on on see see as tell looks per-unit also I

also. debt We coming so going paydown, the and to cost interest down. also about that's anticipate talked Jeff the has

That's I improvement about as mix have we future, as in So side you part those changes, we move three we we oil our improvement. of of per production $X per more revenue on at our might mix put barrel more $X see see it. also mix also in anticipating, a to mention the and BOE as just flat about we're all the all together, oily prices. that

So $X per-unit improvement all a the told, on about basis.

Matthew Merrel Portillo

asset of remind your question in line that the the regards the and state next to capital thank thoughts acreage asset just northern in at years Great, the is And just exposure south side Delaware Basin current on of the business. given over follow-up Could in around point? this allocation you. the my you us Ward focus County,

Jeffrey L. Ritenour

area of rundown state Mexico. XXX,XXX XX% of have position, we about surface about a as Just acres, north our line of Delaware that's New the overall and in

you that on but So XX,XXX counties area. Texas all we of mostly directionally, XX,XXX the those to acres. have in concentrated are Not referenced, side, that in the

David A. Hager

little a bit And can the little $X expand talked I divestitures. here, we if your about of asset question bit on billion a

the overall once And areas, plan, And our more we'll first like you with get we is we're portfolio that in we us in that mentioned, phase the part process that divestiture Barnett, QX. that but had of But wish complete and that think so that done is that this putting that that XXXX. of by billion we which plan or have and right finalizing only And Matt, end of as on of do could call, County can here. of we, billion are that see the impact that the from us in executing about going incremental and very plan see that, $X divestments, We strategy. together from $X confident of around on cleanup do the minor we of you'll at accomplished And frankly divestments. the been time we we include way production. more look the by that's corner once here we to completed Johnson

as us areas again to growth our would get billion strategic And and that's more an STACK primary number. that, makes up at get I've $X that into look are beyond basis. when about everything that that we it's Delaware. And really the the we'll then So decisions. And on the opportunistic else the sense beyond said,

Matthew Merrel Portillo

you Thank very much.

Operator

of comes from Research. next Bob question Our the Brackett Bernstein from line

line Your is open.

Robert Alan Brackett

about with over strategy. happy something you'd up the level you Eagle some Ford that sort you clean of you your the non-op non-op is the question in and non-op. that's Are of have My time? It a STACK, in or hits bit activity

Jeffrey L. Ritenour

we're generally Bob, I think and happy.

what XX% of a a the large spend, that production tune on right. cause concentrated, volumes company, much we're you just so with our in if to be of total and one of remember a I look to about of the component, that's very operate OBO less company are If really non-op portion And really the to STACK capital the and the we we happen operators the the in happens know play that's STACK you the this it's at concentrated basis, component team, on than OBO our XX% like numbers basis doing. do certainly It operated component be miss.

so with deepest ample of have meetings we participate technical any of in have We lot library a inventory of data try activity just in STACK the help the side. the the operators probably have We to in those. a on We of to us operated STACK.

past working The there's years had having work we've that. So what crews Eagle couple few Eagle it's rigs don't, completions, in a is we see boost the Ford we rate, similar to completion the and the we're couple with to and in tends side pretty to us been of dramatic new on in rigs in Ford. of frac we're The true And STACK over of in And have decline that year. steep on back the prepared operating Ford. a field see when a BHP this we when you some way the that there, put and the us. that's component is relationship a benefits business helping Eagle to the

bounce a back on So we to up. the saw Eagle to going it's a Ford, but little decline moving of QX from QX bit really

good We So and from operators happy. a we lot those operators. we're I think got learn

David A. Hager

that Yeah, Bob, the hear you're in Hutchings, thing who wells than bit going operator any to play. Wade But comment STACK to all of is the that. our to ask STACK participate more we manages think business, a I'm other in little on going I

activity, see we've you fact the when that so operated not hiccups. our And had any

our play, level. operate some we of very and of us activity, working of have interest wells outstanding results. high wells very that of really on produce at large some to a huge outside, the All amount one OBO allows benefits amount from a the drilled that our wells are in we really get a data That's high it performed of that having

more So Wade can you a expand little on that bit detail?

Wade Hutchings

Happy Dave. to,

many biggest most has ultimately for into thing control is We how generally would STACK determine scenario. is our an the how on We're wells multiple see pilots and per with the participating OBO many XXXX, the to for up value in that back investments STACK. there the to note the compartments out of I own accelerated Meramec We're of us our answer wells which of. wells trying compartment stand we ideal the development with operators accelerating in really that investments, marginal learning the that scenario. basis. we you development are think actually several the and a bulk get we'll look But happy in reservoir key makes that results to we development And I we critical the to elect financial today in see learnings. trying appropriate thing that today really up come make we're in reservoir because been the key operated STACK are in

get going the And so we very development move large today. into again, for how a I'd just of to in full-field accelerating reiterate, we're learnings amount STACK value on our

Robert Alan Brackett

clear. That's Thanks great. details. the Okay, for

Operator

Brothers. next of Tuohy the from Campbell question line Jeffrey from comes Our

open. is line Your

Jeffrey L. Campbell

Good morning.

David A. Hager

Morning.

Jeffrey L. Campbell

taking can it Dave, discuss the commitment goal of Devon aspirational making Looks increased to And is is question my your when how to it an right, in plan to approvals was there's if you these like you you're multiyear particular shape X I in what X,XXX sounds approach with your that the BLM with wondering, BLM. which up development. and going inventory. to I to a it's permits, approves quarter. read like first master development just MDPs from the X regard MDPs the

David A. Hager

as have all well we And the our activities Rick also today of here in Rick glad. Rockies Gideon. as our handles activities. be Delaware Sure, room

think so answer eminently will. more than familiar to he'll with thorough let a I I all – and I'm this And give you going Rick he's

So Rick?

Richard A. Gideon

take so cetera. a not plan at permits on overall these you, subsurface, takeaway, Thank can et but When that just is get the battery, surface Dave. look MDPs, we we right-of-way,

time. more what in In cover a NEPA, all BLM area it surface helps doing we is do the do the timely So the able one can permits manner. be to to at this,

to XX we is approved, approved. APD. Once a have by the approval, the it work statute them, that commitment works on very have those Upon we get from closely BLM very So the then good with relationship. you days after

Jeffrey L. Campbell

Okay.

thing not. a roll on Is you works? like to going BLM, think So this approvals terms to which shouldn't from multiyear you being maybe to and ones and it which really the then more an sort annual want like get move then the ones decide that from when of of of way It's in that's year, year thing. you'll

Richard A. Gideon

always see how see for a best prioritizing for plan, as success. rock. do the planning find we asset, could section. prioritized best the some multi we we're And for are will our information, is change into per minimal wells But horizon horizons. certain so the we we whether go these as to field, the the we out plan for Well, parts for plan takeaway, of many plan the portions drilling in of MDPs our battery, you you right-of-way, on more included, When

you'll the within see so best we're some of parts each changes of But our prioritizing And MDPs. those field.

Jeffrey L. Campbell

to other helpful. Seawolf, Okay, well Boomslang, could is My I Anaconda yeah, projects, major question you using as any that's an whatever you example, of but mean your refer like.

zones. three wells developed in You XX landing

the overcapitalizing what and development in you not I'm that like many Anaconda that balance to you've wells trying and said future between a while multi-zone What the more is project how of about and all of size infrastructure. efficiencies, centralization do zones how things talked a in drill well. batches? expect to advantage I'm in sense many you the created kinds get trying vision it a of million You to saved how get $X

David A. Hager

Rick's that going question handle to so. again,

Richard A. Gideon

planning, hear we're this utilize both drill-to-fill, STACK. Delaware you the the and for batteries, term, and utilize these may and us a I'll build we As

back these, same even that section different of we or these we as we reutilize independent that dependent the can are section. wells Anaconda, sections zones back in that when regime back, come obviously a that we Bone As We've of that you come we look some that we area. it's at the developed the battery pressure the already where can of Springs not drill. at, section sharing and rest the in Leonard. an finish reutilize to for same come to But take the or in on next can battery Depending when

more move battery of see as even that you'll forward. use So centralized we

Jeffrey L. Campbell

Okay.

to useful in necessarily is, to the that a it point just the not (XX:XX)? infrastructure the one hear tied is we parasitized So be about, project to way be might but able

David A. Hager

I Yeah, think that's way think to the it. about

doing, still a are not that map, around a developments developments If lot you these these on immediately at there of it are that developed. areas look we're yet

And be so as as can develop those we other infrastructure this well. areas used

Jeffrey L. Campbell

very That's you. helpful. great. Thank Okay,

Operator

next of comes line Rice. from Our question Meade the from Charles Johnson

is Your open. line

Charles A. Meade

team. to you Good morning, and your Dave,

David A. Hager

Charles. Morning,

Charles A. Meade

over, about I this But wanted X,XXX apologize Tony a to were it back about ask you I of long you pre-completion. it how well. question, Coyote. but touched wonder if barrel I have fit this, if a and go if I that And and specifics some any missed could well a I differently result Presumably, that someone else day at on the kind pre-drill what of believe was but versus lateral, expecting talk or of may it. completed talked you

David A. Hager

more questions have or you five four if it could obviously bit we're it's do you but going We well But, have to a about it about it. out of more? lot wells Wade, nobody talk to No, want, talked about no, else a want little a good but great here.

Wade Hutchings

Sure, happy to.

BOE on Coyote X,XXX around frankly, released ended that in day. well part that online. is there we're northwest Marie encouraging development referencing a actually the is quarter, the the properties. The very X,XXX is per of a in XX-hour very of results. in Faith well the So, That the close lower seeing in with in Meramec to reservoir has IP play. well. day It's BOE we're area results Charles, XX-day this just the up is Again, a fourth excellent first another well project we is IP, And what come but just that It kind Meramec. that of well target our

Coyote coming area. to two And then rest you'll years wells to the online similar projects so come online, we the other see look that in next over the forward of size of one and

Charles A. Meade

that if driver in this be it. the right that Thank the that more for to an I area, detail. you message, pad? this least being view than is anomaly, properties you getting likely reservoir at for excellent representative big the Am Got

David A. Hager

your and change some a porosity I'm Well That answer going a and let little start Tony has chime of and bit here, can me, this that answer than in and or Wade it conventional Meramec little bit to plays, off – an is some permeability. unconventional too. different

that than about drill anticipated. and increase think to to be when similar it hydrocarbons you have has a EUR you so And amount that, recover wells of able to actually your you may less originally

actually there we're have So as such we is highly find a think less well I but maybe out going be bit to to where going Extremely we're originally productive this, EURs our little going than to also. anticipated. wells, higher density areas

you from much a wells. EUR that's you you shale standpoint, the reservoirs really so the may between as But story. in And that differently capital have have a may not bit the news a opportunity to some you little see when of good than increase where interference to think the about probably your efficiency

section, it to that's that's little a say, on Wade, some going at people than may But very may when six per less that sometimes positive as because be think wells may I So, develop amount we areas Because a this Because rather to you're recover a drill important. four to bit? hydrocarbons, a have similar per you concept actually to wells section in that just we're here, look hear wells. going of want on it really be. negative. a okay, people Well, expand

Wade Hutchings

reservoir would do mapped all their on change each they across noting Yeah, Meramec at team one across these that here of think the sense. a targets expand by I reservoir geographic the I Devon in And the quality has play.

done next then in where a we are develop the the to And most still feel determine, have landing But more is job identify trying been got one We the of core the years, we optimally little we've over these quality. a what couple been so best of of work the potential in to that's as zones quality that field each have good the And best to play, appraising bit last reservoir of question zones. reservoir each zones. enough to do. of like which those is how the we've

that Some return one the the take we of invest lower Dave these those and count want than a ultimately of phenomenon the to others that of seeking ultimately wells sections, are well section to every of get layer in. per We may described. out because most determining precise per of number

Tony D. Vaughn

process of Barnett Eagle little X,XXX a you. or in the high-level We've just about been Woodford in bit been involved thought a involved XXX the add Ford optimization to wells. wells. Charles, to in wells. to XXX We've you continued We've probably after talked XXX

up So so can as optimize and get this we as to is try value. business. we as blocked and position much get can, Wade try on to our science core data And said, a and acreage we

plays. see you advantage blocks these so have And is for Devon, large acreage are these heart great this is a an storyline that just of we contiguous that in of the

Charles A. Meade

wrong of agree Tony, lot instincts Dave, that you. I goes helpful Wade the way. a people's And all from of that's and color

confirm seems might Is I out or really the traffic be contrast the your guess or follow-up. and but a a get got whole the this EUR add. that emerging curious quick or you get can one just if to in time. disconfirm it the there's XX something color lost wells one outside like to a from I'm don't I play delayed, this trying the just Last belabor is section. well You'd that little operated rather that point, idea remarkable seems that's thing, that. something drill the I mean to the STACK, one But that jam maybe like and some operator? more Because what guess of to in operations

Tony D. Vaughn

operators data was varied. you deferred these see one This from just really And a projects as the wasn't five some because competent the in collecting on six this for got acquisition. to read lot more a not large issue of play would I slightly Charles, know describing, It of probably of doing projects You play the was operators is, of some different data or the be the operator. and happened systemic play. it is what Wade in so

together these wells. work here not well projects, offsetting our do operators of and really bash the Some best to

we alter So operations. understand sections when our that operations have completion and will of their one and we'll offset, operators

that together this of bit all try little working to a we're there's So to value. maximize

a systemic So I as wouldn't read this issue.

is a actually issue. think I pretty positive

this quarter a right little particular be just If in XX-well talking program about at in the happened the is Just it even borderline. earlier happened bit wouldn't quarter, we it.

Charles A. Meade

color, you. Tony, thank That's helpful

Operator

Our next Heikkinen question Heikkinen of the Energy from David Advisors. line from comes

open. is line Your

David Martin Heikkinen

taking my and morning Good thanks guys, for question.

asset guidance could and the Just something looking doesn't what talking at cash detailed. barrel the that check Barnett a beyond margin margin be, sale, sales an Wanted and you cash $X could to asset be expansion. include additional that things about expansion already like your

David A. Hager

Absolutely.

Jeffrey L. Ritenour

modeled the forecast divestitures that any out. Yeah, into we we have in not laid

David Martin Heikkinen

up could to say did of you back your you market And cap? Perfect. XX% buy

Jeffrey L. Ritenour

No.

to I commentary, in were that divestitures develop equate XX% essentially cap. proceeds market suggesting of could three-year Dave's the from cash what was cumulative we we over with think would flow our the that period, married

David Martin Heikkinen

guys. Okay, cool. Thanks

Operator

over the presenters. our I'll back turn conference to now

Scott Coody

at myself We're we've Devon right. Chris we'll the hour. again, any people's and interest We out Once hesitate time to to I questions, today, soon. everyone's of the and most in you appreciate now but to at your time or do talk reach to think top today, Carr. got us not appreciate All

Operator

This concludes today's conference call.

disconnect. You may now

Scott Coody	Devon Energy Corp.
David A. Hager	Devon Energy Corp.
Tony D. Vaughn	Devon Energy Corp.
Jeffrey L. Ritenour	Devon Energy Corp.
Wade Hutchings	Devon Energy Corp.
Richard A. Gideon	Devon Energy Corp.
Doug Leggate	Bank of America Merrill Lynch
Paul Grigel	Macquarie Capital (NYSE:USA), Inc.
Matthew Merrel Portillo	Tudor, Pickering, Holt & Co. Securities, Inc.
Robert Alan Brackett	Sanford C. Bernstein & Co. LLC
Jeffrey L. Campbell	Tuohy Brothers Investment Research, Inc.
Charles A. Meade	Johnson Rice & Co. LLC
David Martin Heikkinen	Heikkinen Energy Advisors LLC

Devon Energy (DVN) 21 Feb 182017 Q4 Earnings call transcript