DVN - Earnings call transcript Q1 2021

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Operator

Welcome to Devon Energy's First Quarter 2021 Earnings Conference Call. [Operator Instructions]. This call is being recorded. I would now like to turn the call over to Mr. Scott Coody, Vice President of Investor Relations. begin. may you Sir,

Scott Coody

our quarter thank today. everyone an Last that will for and and the outlook. on today, call from earnings joining the materials. to cause Jeff under and statements. presentation we statements other the results our to Comments call risks assumptions, call I'll night, cover our you estimates senior and morning, Financial risk forward-looking over today uncertainties for Throughout Ritenour, actual forward-looking to us release and CEO; Good of team. note we the make SEC our subject differ call our on Gaspar, prepared forward-looking With are Rick. Also our Clay and references U.S. Chief joining presentation earnings President today and few slides Officer; in these me to securities results our our filings support earnings the Officer; cautionary are and website. Muncrief, Rickhard our can management of forecasts could and and that to members on that, factors Operating Chief law. language a to take remarks, Please be our the will that turn issued found provided These plans, include are our comments

Richard Muncrief

here are exactly we shareholders. our delivering the disciplined of for creating a highly Scott. has go-forward assets closing now a It to strategy Devon maximize today. merger morning. you, complete With X taking to what We since suite on premier to between be the a It's team us join our the advantaged energy our and and of this been is this Thank possesses good that certainly and time energized U.S. platform, promised. powerful appreciate integration efforts everyone company merger months WPX, nearly value and

aggressive quarterly results capital these and going each of for shareholders strategic reduction returning just only higher is dividends strategic to objectives beginning. cost free advance significant program, Devon is the are excellent as our to this the synergies, and with and through an plan. progress year be have in The our We capturing we generating to evidenced we continue value on made our maintenance is of executing debt. cash flow It

our shareholders leverage we're through returning of margin policy. fixed-plus-variable X% in cycle, We're driven that a favorable exactly commodity fundamentals. demand and grounded that from fundamentals supply maintaining production your the line of would cash we demand business margin capital, stewards not expansion many possibly dividend that prioritizing X% company are pursuing cash right recognize below via only flow. is value Slide value of in structure. times the leaner levels limiting maturing energy any to must Turning attention be to is Devon leg cash excellent investors in greater dynamics innovative why in to creation To shareholders. X. growth. signaling We're generation We're levels has of for of to new model story, your to a With fully substantially low safety. And Devon, top optimize successful business production With free the scale our moderating to the and review we what next of our this must production reinvestment going corporate rates a like of deploy I We're over strategy financially flow E&P model our establish doing. forward. growth maximize At growth prioritizes To cost ensure correct are more earnings to in conditions. a for industry, traditional the we model to a strategy

operating we feel change. framework. are at to possibilities Our takes it's team cash for stop a this contemplating time pride that the talking disciplined I and capital quickly of on Devon the in this delivering growth. about personally the with will historic production and more this great embrace talented leading model generation necessary industry the industry employed, cycle, High behavior and reduced return not determine of winners returns cash outsized reinvestment flow rates

would on jumping quarter. Now And the exactly as I X. we Slide to ahead remarks, promised first in on what we touched my opening briefly delivered in we do

continue Our to just our cost. flow over to XX% cash reduce and margins, disciplined expanded limited of reinvestment substantially corporate take rates to plan we steps we

As differentiator been reduction. our for This chart the shareholders is of generating graph dividends to clear Devon. capital is return cash more a allocation with business you can than bar toward the has to of deployed on capital our XX% see right, the debt excess and the

$X.XX owners Board variable able first of to allocation Looking through dividend Based capital received approved of returns versus is a of Xx the our flexibility accelerate that than and specifically conjunction represents year. were period to with share. when evidenced has This quarter the cash market year more we ago. conditions the implemented dividend, first regular in shareholders results, our providing through the a in of of were payout and uniquely generous policy their variety fixed cash initial benefits company this dividend process, framework quarter which at return fixed-plus-variable dividend dividend innovative per earlier This across our quarter framework, the last our dividend. March on to cycle. The our the in us fixed-plus-variable payout another we is thoughtful same this designed to increase a foundational XX%

actions was enhance through investment-grade closing of of efforts expect Since $X.X value to year-end. the have strength. retired $XXX In recent year-to-date, ahead debt we Jumping million on XX. to nearly of debt we debt. our by repurchase our our of net financial With authorized our half program. debt-to-EBITDA addition target have our to Xx reach Slide already merger, And we the executed billion to way and returned dividend, to reduce our another shareholders we

I that our clear be want winter scaled production operations was While to first to are cash free of substantial quarter amounts limited to due generate severe weather, flow.

cash in price. better. to on yield yield Specifically, attractive today's are The even highly flow flow at free free a gets story cash we spot XXXX, track deliver

you line, and absorbed the this for it of today's On us building markets. that cash side to our it assuming evident until at return XX, unique an a case Slide yield dividend To With by perspective. rates upside comparison our a payout. flow from showcasing a red that proposition recover, and basis estimated year-end have world is of both growth intention assuming run value becomes projects point, of this OPEC+ model, pricing. capital represented synergies. by we've at cost fundamentals If and we growth powerful a dividend XX% spare yield business feel stream, I in free look demand unhedged oil on cash capacity XX% dividend pricing, and simple reiterate excess WTI no important with to This a cash that to offers included $XX variable allocating I in effectively want momentum, is the XXXX the demonstrate Devon is at highlight flow

in today. see virtually asset market implied to peers, superior not slide, can compared highly any on is to Devon's is class you but vastly the dividend differentiated yield sector As the other only and

Importantly, a more than just is yield play. Devon

The I shareholders methane to quality near sustainable the to our go our deliver to We topic Devon's Chief environmental for on gas operations forward that we And integration emissions, will have to turn plan Officer, that, will In of reward briefly come. guidance to years with our specific other our operating to per strategy future, over performance depth more very is share to within on ahead improve targets upon issue Operating of final touch our This many priorities. and Clay, rates portfolio plan. of with to I'll growth include key want intensity and our highlights. the resource formal progressing call cover recent the reduce greenhouse measures. disclosure

Clay Gaspar

Thank you, acknowledge organization work the poured our good into first this and to that everyone. morning, hard merger. has Rick, I want

ideas to it the enterprise. office, External go-forward again, setting some taking the very great X integrating the to challenges the February's complexity. listening to coming resolve historical Our of aside the processes. a has the field assets team. combine made progress of here tested each right the event knew in companies, To strong to exercise. was storm team that, organization, certainly compounded offices, bias has best new then seen together and We have to our not a of to examples forces be time to for substantial easy I'm major was our proven I've find of pandemic, corporate solution winter way valuable on our practices and pile evaluate the the

name the in of we as incredible displays practices have communities. exemplifies employees balance best are with benefit each continue greater organization helping capacity with that of portfolio excited once pleased Devon leadership, I'm a out, turned and I'm that we from to in legacy innovation the personal I and sacrifice of the making. only we incredible their saw I of progress the As culture other's saw it refine. Devon, about company sheet. future in and rock-solid exceptionally the an for good. again, our but also not expanded This many the

low-risk first oriented second driven Spring pads with our development again, of discuss area, the the force Wolfcamp be the Basin Slide operational our commenced can the forma on that year-over-year in Stateline Let's will production production behind was the quarter. Basin come program Once Delaware which on production flip roughly blend Delaware we'll to XX, XX higher-margin projects, have Bone completions. for activity by for was production accounted the of a wells focused XX% a the several strong world-class capital This in a big asset. basis. X/X In we quarter, on and pro result that and our quarter, Wolfcamp driving which grew performance

County. XX-day achieved BOE was of the targeting oil program activity execution our overall our Noodle This the capital rates by X,XXX XX% Danger quarter, in of project was Southwest day Wolfcamp per well lateral development, While new the headlined in average with cut. the Upper X-mile excellent a

in capital pregeral capital higher significantly on than below our invested XX% the Importantly, expectations, returns planned. driving cost came

peak Another these County on have Due Upper thoroughbred Wolfcamp commenced this the our first only X,XXX activity rates but outstanding completion to remaining XX area. we wells are production quarter development The and in coupled but X day. key project for exceeding well timing, have these intervals. wells, per with bird Eddy the BOE being was online thus Stateline codeveloped -- X that us brought in X thoroughbred wells been current far, with

which acreage, state that like to X/X I'd we fair cover the Delaware for and our regulatory profile positive to strong total I accounts upcoming is production growth of flow leasehold. this final have a on cash it's update item the regarding Delaware in federal think sight our our The about to of line quarter. slide

drilling As XX-day to the aggregate permits, you land we aware, regulatory though This many on Even right with the years for drilled, issued team's earlier federal news inventory at year, is our capital plan. March netting X we pace. have year about the of restricted any that positive an about drilling the lapsed, planning, the for XXX reverting permits. a highly the ability operations What wells we've And engaged on policymakers this involved. of period In and current line proactive that drilling develop are has than encouraging for period. is Interior retain order navigated in our be forethought a 'XX. maximize new our lapsed federal without full directive this collaborative that approval and we leases is value with and to and effectively that order federal the permitting more of with expectations, impact stakeholders day-to-day since through on all we've XX-day more continue or received XX to to ensure will we even Department

XX. Slide to Moving

in quarter. build the of the We our trend continue to excellence operational during upon Delaware

improving industry the in you see declined best drilled results chart, on the and a the completed first rank can $XXX our once per represent and in left-hand very lateral again among to cost XX% the As foot These steadily across quarter. just all from ago. the performance designs, leading-edge Shifting by technology the D&C years differentiated facets chart. This completion improvement times, middle to of is and refined cycle of the value deployment chain. few a underpinned

of with of evidenced rate barrel is value the first meaningfully field XX% act to urgency and to focus our disposal, where results level improve change, positive This across To LOE improved recurring costs several including cost out year-over-year. quarter get produce. continue categories, expense of structure this in chemicals, reduced have our we water to also materially contract achieve our labor. compression sense cash order every by most We we a

improvement. additional the year. savings expansion remainder further of throughout generate expect I The team will and capturing ahead, is Looking identifying the work hard margin at that

to XX. Turning Slide

Anadarko we And put headquarters. literally, X are Chemical. asset funded long work in operator down spotlight Rick joint have like corporate to officially from Basin, is the the rigs today team our with XXXX, million made carry. with back years. the Dow a interest has this couple Another I'm and exchange earns basin. in last our it's I'd in I Dow venture to this improvements right in histories just our basin Both road in we deal very where with of by a with locations way of that XXX undrilled formed Dow in with on promoted of half late $XXX partnership By drilling impressed this our great background, the where for

targeted improvement, spacing returns on carry, will of for Dow will targeting X the in reduce factors associated confidence per our and have with full will and the from value resource mix take steps and the to of of that have benefits the XX the year opportunities. Devon to of drill Woodford JV the When we be in from wells the commencement unit a to and track also I Year-to-date, you is scalable and cost the many will with up up this full repeatable first continuing Meramec message JV. that the extract encountered play. here operational these the severe with rates for improve on the combine of that XXXX. these all play addition for are first our we we way XXXX, X, Slide core in even the we quarter, on exceptional. wells In drilling lastly, drilling our Wells weather to of well And winter incentive midstream to achieving are capital spud key liquids-rich the positive objectives returns is

is to expect to midpoint oil projects. due of spend we Delaware specifically a timing the some of quarter, Looking at slightly XXX,XXX with the of capital the midstream per that coupled second barrels production be day, and completions, elevated the

effect in portfolio projects of typically from a this, number can capital would events sometimes pads one out the Although quarter. and like smooth stack of larger fall

a fall to more quarter, second will the Following rate. capital back nominal

industry a $XX-plus gains see with results. synergy the inflationary should projections we we will will We capital will This best the call Jeff to over of for on forward. the continue I pressure our to to in turn much our work into work continue path that, the as And additional that offset now commentary in financial environment. our

Jeffrey Ritenour

Thanks, Clay.

our the and step return beyond sustainable cash supplemental financial approximately up I dividend pricing. a payout XX% increased dividend earlier XX% our mid-cycle dividend. today, we've that of build This up upon implemented intended dividend history year, execution designed tradition, of policy on will At free at this shareholders. targeted shareholders, Devon, willingness cash our the have financial that fixed of made variable dividend evaluate XX% this To financial fixed pay years of this flow in the flow steps average a X, is at is is cash consecutive to returning and and a legacy For on year. long priorities our our our variable more accelerate of a operating has we differentiating a and Slide and The to framework. and paid paying quarterly and quarterly we ability cash of Beginning strategy key share than per on to component strategy of a $X.XX highlight of per at basis. a be XX for next variable cover quarterly plus rate fix fixed part our is strategy. an game the of return sustainable the progress a to distribution rate of a level excess to dividend to cash of dividend The is

earlier, As concept. theoretical just on an Rick touched this isn't interesting

to in are our dividend initial dividend on financial this on And Both plus June year $X.XX with approved the in our fourth performance dividend the XX% payable fixed-plus-variable XX are first to shareholders. and fixed results. We paid per increase our we this $X.XX per of quarterly variable quarter executing of of framework, the share variable of this share. the in fixed Board March and year, share our quarter $X.XX on strong dividend a based per

X. to Turning Slide

In addition financial to higher dividend payouts, priority strengthen Devon debt another of for repayment to the strategic further has investment-grade been position. our

notes. million towards $XXX initiative outstanding So this far we've progress made of year, retiring this significant by

balance XXXX callable great acted in breakeven our reduce to overall run nearly next barrel. not of $XXX our intent is our notes $XX in Today, debt by in step interest our will our plan improvements. bondholders these shape, on annual While redeem done lowering notifying expense combination, we're efforts rate sheet further by of the million In making reduction we June. million, per

With over the debt-to-EBITDA to by debt target execution our of and after debt year-end, retirement XX% approximately of of with years our reach our to portfolio the XX average pace these plan, maturing debt maturity extend we're actions on Xx XXXX. net

Turning to Slide X.

focus Another is this job great previously capabilities generating raising year-to-date. integration flow now target will going a area And that updated as increase in the by to represents forward XXXX. enhance a has initiative savings of merger-related team compared capturing we million year-end cost X% synergies. advancing done a issued cash Devon's result, savings cost of This guidance. our to are our $XXX The target

XXXX [indiscernible] clear purchasing Delaware the sight making X back with next the of call is material about driven outlook, and of cost of is the While all capital synergies by has And savings over a PV-XX of remaining uplift capturing very have categories. across of of impactful Overall, strong to and I'll benefits year outlook the The into targets XX% years Rick gains been for improved these to line synergies XX% power million the and the our $X.X some enhanced Basin. that, now cap. Devon, turn $XXX capture roughly our we're of billion comments. by or progress in efficiency This full to we market year-end. incorporated in closing

Richard Muncrief

Thank key X would the by exactly do. the is what his of companies on Great delivering we you, is complete, reiterating is Jeff. I integration that job. team to and to and the message, promised close like

cash prioritized flow free have growth. We over

We have above beyond and captured and identified cost plan. synergies our

that flow higher a other compares have we've reduce we're free steps class market any shareholders some virtually and taken to dividends, debt. in entire favorably rewarding with to the cash We the aggressively asset

Our focused excellent team future an XXXX Devon. to Scott with back This energized turn in that, and shaping call to year be Q&A. just is is And very for is the beginning. now up for I will is bright. over the Devon's

Scott Coody

Rick. Thanks,

will call Instructions]. to your first We now open take that, [Operator With operator, we'll Q&A. question. the

Operator

Instructions]. [Operator

Your first from question with comes JPMorgan Arun Jayaram Securities.

Arun Jayaram

let you. me with Rick, start

interest. is, getting the just in do XXXX, But of organic of shareholders Permian larger cash marketplace. around incoming seeing opportunities balancing One where particular, been standpoint, allocation your other renewal the think questions the CapEx plus look the development capital A&D questions opportunities. or some to at it, beyond in about we've call getting a In of to thoughts portfolio you opportunities some a couple how Devon's we've returning been you from your as balance and and heads

Richard Muncrief

second this shaping really that's XXXX. a see into to And right Arun, quite now, great something to momentum we'll of contemplating. really We're half. going half on year always we're second up Yes, the is focused strong XXXX. going be But be

the capital later take As year. started yet. That plan, that not the far working place throughout will at as we've

now, still on momentum really with investors it's think back in I us into I know generating we're be really shareholders. a free focused to suffice flow that that. a getting think great bit focus, for say having And keen on I early. to that cash XXXX. But to and So right little are interested

around going I consolidation question think that's the second is part of on. your maybe some

taken a months. place over have last the You few that quite transactions have seen few

record been I on support we we've saying think of we're that.

and looking needs continues industry do. bar When Reeves County a have that of we Mexico Inter Devon some bar just the as organic can just to in phenomenal up. Delaware, you of and had just County, amount Texas, to high running Eddy at the think go we've as Lea Loving opportunities and room. see But have, a we New specifically, and County, I just that start you far

be that. in have or we the playing assets And on that thoughtful plan. role other for of that, we and And a are about so very us to just have our all key company go-forward top the

today. we kind that's So of where are

Arun Jayaram

moratorium approvals? in as Great. the Great. do would you noted what more XX business the my permit characterize terms BLM? as how usual than at kind And of view you're ongoing since you Clay, lapsed. permit of this follow-up, approval seeing Or you

Clay Gaspar

mean the spot. the mean work the Yes, as little administration business figure bit Arun, we I from they're including to of they're with counterparties, a from closely would say a right? I tough it's in and a lots Department little BLM, to tough of Interior. directives of very say usual, trying out I still

our transitional phase. would making say a of continuing -- a on as we're we've good proven I working prior out doesn't very with deter in supportively we've pinch. experienced. from we in I very advantageous ourselves that's think in partner, don't be them, be so ability that our we proactive our and to seen focus So very that And you a aggressively a sure to are that that disruption bit -- But as short-term in or business still find the had

little usual, everybody's business a look sake. from bit that away for So I still we're forward we think but to as

Operator

Your Bank next of with question is from Doug America. Leggate

Doug Leggate

had guys, on. mute I Sorry, the button

I deck. you're if getting place same to us as wonder to through And could with cash that on if you to numbers Jeff, you see if tell wanted slide free yield -- could start walk to. you I I So trying I wonder some flow the that on have the the -- I I'm

a a production at billion, us these a $XX Slide flow on XX, in for you WTI XX% basically If that, WTI. NGLs. says basically, You're XXX,XXX us the midpoint cash about And and math showing showing charts is yield and cap I together, day you're assumption night do barrels about of Can billion those you or deny sensitivity, or free that, math breakeven are that $X.X the words, is by on capital suggests right? through you today? is I your which cash it means what confirm And is divide close flow. In about if $XX. free to was last do $XX $XX senior it think your implied a oil that market below be you're price XX% put other sustaining breakeven something,

Jeffrey Ritenour

which demonstrate eliminate of capture although on we synergies, here you yields experiencing, that, by is, see Doug, put caveat that all burdened in you you're were synergies can The on you that exactly and No, of we've hedges that the cash generate. obviously, try this we the that those and a to it's construct. we've forward we kind are Yes. right. of that's the hedges can that some basis, slide, one slide eliminated, we've commodity the we I'll together powerful. by in And think -- When when bars, the denoted make, currently the analysis. assumed the go-forward you also on eliminate at And we're year. captured what you flow incredibly obviously, higher do think these can prices about the the are going current power free the the model all what business burdened from that's But current this

Doug Leggate

clear, Rick I is your the sure Dave said $X the I'm to breakeven get and trying that make to both had before But think underlying to I'm lower number. mid-XXs. than I was want be just that. actually understanding what to in

Jeffrey Ritenour

lower to the going XXs. pushing that's Yes, low to that's We're right. mid- improve. NGL as prices And go to

Doug Leggate

is, keep valuation to then simple. follow-up My it. I'm obviously, it's Got trying very look,

of Your the for basins. question an capital it at of inventory we business can very can I about when can you you move a correction. that you mix capital? long do realize look But how starting think different a how sustain you then simple your XXX,XXX, when a valuation business $X.X excel, becomes billion long around type point for discussion, And is today, as sustainable is basically of

Jeffrey Ritenour

I'll on inventory. Doug, the Clay Yes, weigh let in

Clay Gaspar

quantifiable on And Yes, level, inventory, together substantial had we're of legacy inventory. a multiple opportunities the at in would it's you would Doug, real numbers know we X% make these the we're companies working And language. evolve. But what sure high the say, call I pulling -- X% same I years this still of both to inventory. maturing to we think of run as many how continue window, forward talking

techniques very sure So are. ready to, any in additional to X tests at the make are the may inventory which then of those we projects, next of happens say, to one look those completion And we span, closely spacing kind that invest understanding take XX-year that we to that those years and right of maturing X down in coming years.

we'll number work that to continue real closer I but we and towards method. that to tight a talk about can -- in get we refine say probably will consistent range, it's would So XX-year a a

Doug Leggate

the I Hopefully, That's to, get appreciate see I'm really helpful. to answers, but you trying what guys.

Clay Gaspar

strong great inventory balance it's low exceptionally sheet. breakeven, exceptionally Yes. The got is news. summary a and good lot of exceptionally We've

So environment. good that for a pretty makes

Richard Muncrief

directionally quickly. think it's would give Yes, I I'll just just this team in up maybe get is But we'll that Rick. think Doug, quarter, correct, another real I view bit. I is. clarity weigh a I that a tighten continue and your that around and breakeven little to little where you'll think more

Operator

next question from Sachs. Goldman with Neil Mehta is Your

Neil Mehta

of a assume XX% the XX kind into layer the XX% point? at at double want to kind is that dividend guess scenario starting variable a flow program accrues cash of you're see else low equal. I back still here, XXXX WTI. the at talking that about XX% here. fixed, you will the when be to I dividend yield Or Rick, talk yield that where on one WTI, at Yes. free yield, that do all Slide digits Plus, about stick as $XX extent in down swing capital? I $XX flow in want you to And bridge sort so you to math, you that of I look free cash to out growth X% sustaining as to And dividend, a we're yield. whether running math is right, a And

Richard Muncrief

Yes.

I some at the way. think We -- you're right numbers on. definitely I what it look imply. of numbers mean, same that's the those

closely you. So we I align with think

I balance optionality. almost the about no key stunning have we'll continuing good to could strengthen The beyond. I think of we with helped. And to sheet. us, shape. a word that's and I coming word key think for optionality. the as think just down is just in that It's yield we already And think balance me think, from aggressively But kind have pay the debt company. some doubt I XXXX for and There's is

I you should very, at free The substantial very absolutely But you flow a at kind dividend. directionally, were right these levels think of cash and variable now. the to correct. gives yield it look we pay ability

Neil Mehta

would And little a take fundamentally your sense? more what needs from business you actually running in world Rick, to are sort if switching of program, business that makes your for free terms growth, a the of be flow to operate for to cash looking changed. saying high for approach. so maintenance-type bar framework make very that the Or scenarios is to Does see do That sense? few that very and where growth-oriented scenario, it has you that appropriate the

Richard Muncrief

It does.

being I spot with on free think flow priority. cash #X absolutely we our for the generation are us,

that about the as growth we probably, I And As see still September, we framework we laid that transaction intact. future, growth we you is about we back company land. out to as X% up last concerned, as where different is think, is announced still sensitivities, the is think when is think this far

approaching of oil day, insignificant as growth. at X% growth you're barrels that's a not So XXX,XXX -- a

that something that the is But if so you And from have. just cash that optionality to corresponding flow contemplate. think a comes about is we thing has great to

Operator

Your is question next Jeanine Wai with from Barclays.

Jeanine Wai

is return by My track leverage The question just to on of year-end. first on Xx reach capital. is

macro balance to is cash time from past, in Your constructive the cash, target that, you've sheet generating less. in free flow. the extent leverage, or talked the good or incremental the And all shape and you're looks good that

position just variable? more means you'll year? then in So you the it's to the base lessen And burden? to situation, be generally dividend the potentially up contemplating to the would a think XX% do visiting revisiting maybe the this reconsider next buybacks attractive a in on payout on more You'd look that seriously base And XX% start because dividend?

Jeffrey Ritenour

is Janine, Yes, Jeff. this

think spot on. I you're

continue balance about at we've As we as we this this announced we're additional down year, million in our $XXX with cash the where the the reduction into excess path that at generate past, to We're the plan year, targets. sheet of good we forecasting Xx to sooner. debt-to-EBITDA about is if debt end the be the kind talked feel announced today, free well on to net of target reaching really flow execute not and

to pricing believe oil to kind considering your environment So we that we and things that structural his maybe talking normalized about question, threshold when kind as I then pricing we'll mentioned you the like thought being think good us But earlier flow Board we Rick the on and to near-term is in we fixed the that if the sheet this into variable balance comments, $XX that that you pricing macro dividend incremental well. dividend even some the If variable increase to year we suggest threshold ratio X% range. in normalized kind fixed that reevaluate historically, of normalized beyond to $XX And cash is. will there's, year. is XX% XX% fixed start feel absolutely really tell payout of more as of about in is -- of should way see cash dynamic to a what be in change, in see then mentioned, as we about on than putting that's dividend, we to you're certainly later in pricing, the $XX from that so would a of and where $XX higher most to which the I dividend. an level, dividend cash think likely us would the XX% reevaluate the next the the about or

Jeanine Wai

Okay. that. then to follow-up Great. We're Arun's our a looking second on question. is question forward And maybe

great right bar very high a portfolio strong a because got operations now. You've and have you

things results so like a to with competitive Is evaluating framework left financial patient? philosophical. existing to And room starts time? you I or to financial a your strict maybe able with financial the a bit cash capital question as on think over you'll running the down guess more rate inflation still of for inorganic industry maturing opportunities. of horizon. costs enough change sufficient little be are as flow a our deal of you there do have is little remain do You for that free with accretion efficiency think in is reason Is accretion a well that enough reason Or slow on still a either

Richard Muncrief

David it. me, well. way see see is it Harris weigh absolutely with financial as I David I in accretion have here is the But may Jeanine, is critical.

your So two the it's directions. latter really of

but executing just do very cost our to For only have wonderful well. base. -- throughout us, there's inventory. throughout asset We opportunities some overall do we see improve structure, a We're our not EURs and

a don't how That's to any we it. do to be change. high put lot disciplined. to I out so But way to And have bar. things of And there. Dave, a going you there's that not want we're weigh I know going you know in very very, differently? see talk And else

David Harris

years, last the about Jeanine, the the for operational factors. consistently several to front effectively this component Yes, thinking pretty compete the as said, be accretion fit towards move would But and to for synergies also about and financial how portfolio opportunities. think within of David. for margin need capital. opportunities. number is an inventory of one of Certainly, queue the possibility We'd important Clearly, we a would of is it's we've strategic expansion the

So Rick have act highlighted And Jeff all Clay those it's a and things. and balancing as across here.

We to going have a continue today the improve forward. of business, going lot to confidence both as in and it's

going what And and bar to the balancing we discipline as those high factors. that's we're the have about so think drives

Operator

Heikkinen next with Energy David Your Advisors. Heikkinen from is question

David Heikkinen

balance about that into and has going time? you you payout guys like, well, But think think how flow about free you up come some works question cap and do the you cash sustainability. easily, Board about free how if and think XX% XX% does your the As it stunning, variable that sheet now whatever yield, said, of Rick, I increasing that for as could cash over today XX% think flow the the

Richard Muncrief

Well, thing and be from shareholders, I and think, look to Jeff, certainly Dave do. touched weight that's our do, Board on hearing in? disciplined, that's right that that's also thoughtful, I but feedback seeing briefly, want be you the We'll If we'll open-minded. to at Jeff, but the I mean, thing we're the will think that. to

Jeffrey Ritenour

mean, to maintenance mentioned fundamentally we a on net to and to flow. David, we lower. averse I we're would I before, not of that we're lower. taking in as the of that given just We only We're averse an and net debt comments to our we're shareholders. cash capital thing generating to cash Xx need executing, belief amount position target, of not significant add But my focused but we're driving free build is continuing the enviable how cash program that earlier the to debt-to-EBITDA our even return obviously

threshold back returns to shareholders. options and discuss increase think likely debate to to cash and Board to And other I consider will opportunity the continue that so that get then it's our

David Heikkinen

bank Have like at Yes. soon you in sustainability in? you dividend of do get priced you And get had I and with payout, shareholders, have variables about of percent some discussions they have will any range all down talked now as this X%, X to? what you've you talked Or June. or all? your in X-type getting mean, the at into those you the yield price

Jeffrey Ritenour

in hopefully to got likely honestly, of only start to attention been a it's X sight really got we've to this this clarity not lot just of these excited but conversations think of the our of lot of But frankly, some and that from at we line X think belt that our those kind David, And some point it forward time. in haven't -- going that to of have point. Yes, haven't a conversations on under we of I get deserves. investors gather I'm we'll at forward. looking

David Heikkinen

Your stock clearly isn't yet. there

Operator

Kumar from Wells Fargo. Your Nitin with is next question

Nitin Kumar

bit -- on off start drag. to going hedges were of a I'm Rick, a

I or think $X a last I the in equivalent $X you saw almost night were that paying first quarter. barrel

Xx you As to Devon being closer strategy. on hedging a the your fixed-plus-variable strategic debt and future the of is you're at at What obviously, target, great get level?

Richard Muncrief

question. that's I a think

more close off obviously, XX, the rearview mirror, it on a bought pandemic. timely, -- picture when months commodity to a with I kick think out. the tape stark a very I But considering and look in it's it want if it ago, let little Jeff and much you're XX was you

So honestly. in. place as companies had We such both I a quite companies, legacy think a lot in ourselves, of weighed actually defense,

look things. And time. it the with we investment in if all ended thing on at and you flows, some But leaving to the the think, cash was so kept sorts so up that protect And you're do, confidence mirror, right we of some to some with community speak. rearview hedges you table, money the

look we sheet the as about that we of all we oil barrels scale much XXX,XXX where a now balance As approaching obviously, have those forward, it's shrink, have a new day, talked the world you things.

a different We view past. what the than in taking we are have

that minus -- level. outlook. on of typically or legacy we've the historically, the little now it's be that sheet, may think it hedged in plus companies Time like But flows, think to story. above pin balance below time, it's it's both far. cash the been I a be that different But where to thus I or with XX% a to bit

that? what Jeff, add So would you to

Jeffrey Ritenour

balance the really I is, generation to again, where is add sits good, The we and think, you flow your sheet would on Yes. capability the free nailed thing cash only it. I Rick, question feel today. is No,

kind of on back half hedged. XX% year, the roughly we're this So think I of

maybe move We around oil. to into really to you those hedged. more XXXX, comfortable feel reiterate Rick's think just we're hovering And it XX% as point. levels then As relates I with

we see And sit don't us add you'll meaningful so how based in on way and a the think hedges balance sheet. I today where

Nitin Kumar

help where can't helpful. I have force. That's now, notice be Devon's and dead lot mind, but the just now? also, take of on of long-term consolidation does the the I X with the a those want assets basins I future or to But and going a maybe the Podwer mean, growing that. how There's but topics XX% ask, my fit We've long-term right is the to capital River on do right touched different And Great. Devon I tact a but Delaware. you of Anadarko Basin X don't strategy? fit for

Richard Muncrief

said, we cash a in question. Every focus flow one we X good we're assets the are that of with And have that year that's the generation No, think have. role playing of right now, free we've as I integration. the a

change or are I things think it. assets with about in There the JV we're could some And we talked Dow the doing Anadarko and that your that now Chemicals. and really -- test even right that minds with that as some Clay so make great have returns also

really sheet, look Nitin, need our our always cash we we'll we good free portfolio. generation we We want thoughtful at, I'd to balance do something and to it's if with additional, really with good be So say, optimization. feel feel and but portfolio flow really

Operator

next question with Scotiabank. is Your Paul Cheng from

Paul Cheng

XX,XXX feet increasingly, well. lateral your going about to Rick, just they're one competitors drill largest talked of the

until people like XX,XXX they thought only optimum. the But that I think most are it is differently. seems recently XX,XXX suggesting to up

here? you to that, that's for improve opportunity wondering that? and just much have a guys do length view your your So efficiency you an on in improve And lateral whether of

Richard Muncrief

going Yes, one. to let that I'm Clay handle

Clay Gaspar

question, X-mile companies Thanks say of both a have for Paul. I would Yes. wells legacy history the well. as

I On productive the tell Williston was that the side, sometimes Basin. be. was it third to the should WPX level that you it more that, in can mile

looked at we our draining if effectively we third wondering head were we really mile. And sometimes, and that scratched it,

situational we I the that towards as move analysis say was that So it standard. didn't a would

Obviously, on a it competitive. And productive. when the to the accretive Delaware industry mile development. seeing cost over led on really Basin, be that, is that you what we're flipping has X-mile is really to Now very very side And do. to nice combine that some procedures shows Devon third

we absolute be about a Once mile. statement, but X area, it a development a situation, a the an talk a X for show it But from synergy. in flow difficult there's is that organize to something never switch synergies. is land. cash can Now there's will you up model of an immediately backdrop This

Once it some were that that break me. the plan on with had our or we We want mile because and miles two side have that of were experimenting we teams that here. experience X basin really didn't developments the we've the some And we of come risk -- the existing confident X going the So X,XXX were a -- felt in excuse basis stuff, into WPX to to best development. that X,XXX-foot the miles from calendar companies, we developments, was together. merged wells X-mile the

have were X-mile able we experience couple that dozen quality, very to Now a development. immediately, flipped we good to that to really of we and high state operations area, apply the line

being feel drill side, that And effective. from challenge. not where technology say, third very proven think I mile is my draining stimulating effectively that biggest the In we would I the to the third that So the and it's mile. legacy experience from Devon comfortable very in mind, we've appropriate, able it's

that. I and So great question, appreciate

Paul Cheng

may your you said be wells portfolio Clay you of next into the do think to push years what several the able And in over that percentage X-mile?

Clay Gaspar

a I Texas setup towards X-mile the the scenario kind side. development. far development of the it but on said, number, of Devon working pretty I the would fairly on side, other couple some of the know don't I especially of dozen exact put low. a our We're we on areas, have Like kind along of

would X-mile And those will this trade toolbox. future but that relatively think in the be to development. it's stack maybe into so But could small a at that where those a great remain of had looking point, I amount we appropriate, opportunities, have our or going tool to we I say it's it for

Richard Muncrief

federal one units, add, lines. Lea don't of this is are in with our the federal hard Yes. have Paul, Rick. and exposure sometimes I County, internal and may Eddy that you units those things

nicely to sets So really lateral. up you drill the X-mile it

that. early beyond too still to to land it's our -- XXXX would I for just areas to say -- really about that something some plans. that's do us But and conducive So talk in position is

Paul Cheng

about Rick, consolidation Devon. trend Right. And from you position the on talk and touched the of have

curious with prices. I the that trend you mega down. get XX-month a performance willingness everyone share much is When the difference sort that, demand you for the to still that, have alive your sell Just commodity and I substantially stronger of big kicking that consolidation -- do come is mean, the sense to or and mean, the and or peers, talk happy

trend the consolidation the standpoint, meantime? be open that may from So in

Richard Muncrief

been transactions back a the Well, really for and last trend really has I to back-to-back been hard was trend. think -- in then September, consolidation seen -- deals. straight-line it's it's you million We've the little I'll $XXX just asset quiet. the been to time, I'd since -- a back, few been draw just most that done. to it. saw happen attractive range, a go million hard And -- transactions pretty $XXX X few have it -- of those to have say of level a that And have then But that the to little a

talk that it's peers it consolidation, -- far And depends think thing probably on a we see our our as it of degree. to. as for But healthy you'll I probably said, we've continue think which long one it's to industry. I some

Operator

question next Dingmann from Securities. Your with is Truist Neal

Neal Dingmann

to you down that those was do on And the focused if get Upper Noodle in what it mean, you Clay, could just Yes, I about but Rick, results, talk didn't bit, costs you there to And little wasn't others? can it more the guys that? I'd the if well a project. cost. be Danger continue remiss I ask just Wolfcamp? even continue this specifically, Clay like did just

Clay Gaspar

exciting. pretty It's

XXXX is of you combined pretty But the the from opportunity and front. that that Just much show the particular so because drilled remarkable. without in think completed We if was really about that D&C on cost reduction in a XX% -- we're more from pad, much there's back those much more synergies quarter-over-quarter it's -- about really trend companies. that and talking

design, As next are completion big facility is tested and of right few kind a opportunity. I being things huge combined look forward design now, in happening quarters, opportunity, the blended that and what's

is that and subsurface blending see couple each of we trying been mentioned the I really the the associated to and our the that really think happens continue something great it right Devon I maintenance done are direction. we're And teams look very ramp Well watching relative of on that. in this. economies strategy across of to wells challenging that same Technology, the room, I we're has years a know The WPX, monitoring, our chemical notes, being bidding do companies the forward. on simple learning Rick in we be the associated synergistic Having differently. itself. and forward how supply board. I then scale I and house thinking has side improve ahead, opportunities somebody that that isolation Devon kind chain think looking earlier preventive ESG comparing had go X-mile the as in working valuable. really of because the head start think amazing we this strategies, about in with the can what have we very couple side, this able with WPX us studied in conversation ESG, of to knowledge say, exciting those the and ensuing a And studied for thinking fully existing wins that, what getting other, to wells studied to supercharged months, legacy to cameras more machine as and certainly, seeing articulate a in program, we've for work a just walk with doing and about Just this environmental and mentioned, challenging I XX/X, with move AI

Neal Dingmann

secondly, pretty has existing a WPX, it's you kind Williston were frank then, But particularly of a there. details. sort can know, that. asked, pretty little something potential cash around would could looking And year think Powder, a what guys been maybe I'm as then it's obviously, there's to at plan, you just decide some on sort I'm specifics really more Rick, take valuation a much it what tackle this there's talk just wondering, -- increased I has I on timing, there to wondering, certainly based but what activity talk sale of the just you the on locations free mean, and flow have you'd the of you been big little strong your you seems the Great is that I on I Powder, -- looking you this to obviously not want And mean, know drive just to generation recent, at about do? decisions recently. on there maybe thought Williston the pretty that. upside.

Richard Muncrief

number think, of base I in recently. Well, the you activity, you you've actually why one, see it's see the a transactions great some Bakken, and operating, up that's competitive seen pretty and

And that So we're seeing I we've get got we that We've a you drive home the out. asset day the really price margins team. an of day up and the from there. leverage shows in the And think up there improving just and flows. it said, always value crude have oil great cash as

But does been have important very do. We've it's and It other playing area. to now, the that us. very a basins a a of your our right of is very, it open for it out lot cash that, So inventory is cranking on not Neal, some question. role

we keep I need it. So think to

in think the the inverse of Powder almost that. is I the

to We opportunity very have the thoughtful. be

that other we be It's high We operators. you're from activity encouraged great going the there with rush. very things few a have about up position see cut to thoughtful, we're more to the can we're very And there. there. a have and of strategic asset, We I some think don't seeing of very

from them return, we'll we'll high our the that keep in low-risk well. very the so we learn pounding And meantime, have in portfolio. opportunities And as

those full comments are said, we of it. cash about about free the now. and as all the right that excited steam generating And say right of I'd we're we've it's now, So it's portfolio ahead summary have, with

Operator

Hanold question RBC with next Your Capital from Markets. is Scott

Scott Hanold

just divestiture being flow here, I to can be time, pretty you like hard it's comment, And free feel at that generation something I'm Bakken, point it hearing clarify, really correctly, is a that you assets. Yes. on specifically it'd but -- beat if if cash confirm in the strong this like

Devon then I'm So right to now it sense sell probably really that make generation cash flow free you story. Is to transitioned a doesn't hearing? since what

Richard Muncrief

is. It

Scott Hanold

the Okay. to it something would that proceed make scenario? that of doesn't point any sense? Is more similar it theoretically say, kind what that though, And where make it if you there like of special is a early would Barnett to happen, a Fair were did it does of would just speculation? be enough. look do a if where with, Or come, all point to with you type too what

Richard Muncrief

Yes.

I -- I think, early. questions some just your but it's simply are it kind too think just of fine,

Scott Hanold

Okay. Fair enough.

follow-up. quick a As

seem Or you in front? to don't allow and growth? back would getting see production current the your the But of the a in your end ahead sort performance all your little of results running today. year are little development on outstanding. ran and Or that XXX% in confidence grow your would has been CapEx save So little point you -- year to guys would would towards bit to market capital is If you production a continues, of bit of If you asset stunt I'm you to half to you spend bit that a have grow? want outperformance the outperformance? the to and just the oil mitigate capital of the your

Richard Muncrief

results, this say at I'd We're capital our great seeing it's see alter point plan. Yes. in track, good. we and It's probably our just to with on spend. don't we'll just and anything time looking stick

Clay Gaspar

all for same we going If not more for can limit. we're is production be to way, our production capital, another Said the that. make

times we that 'XX for And being I to you've of And as make so stick capital. the our a think those heard can. sure number possibly and with we're big today, thing investments efficient we

Operator

Your with final Johnson Rice. Charles question is from Meade

Charles Meade

about past you the you much of the too and looking I of maybe long increased waiting growth volumes. Or conversation actually X and on Is the and that radar? to CapEx doesn't risk thinking the just right of of now? rest 'XX. that the Rick, point back have Board to managing is increase and the sort something just your to maybe Rick, do question, and time team how this spend, there, the even gets your enter that

Richard Muncrief

Well, in Right Board of road. maybe that the that something about leader focusing on that I be what now, think down are is we that's dividend about spent we today, the our be the talking a has positioning lot and you'll that to have. company time just the we've talked framework

for We're I very and And watch Board this. pleased. think very to hope the our so. on We think rewarded we're going so our get equity, how We'll equity is certainly bullish performs. we

in what And Board now, years next We'll plenty our of in few right a outer on. But to the spot. that's good so time we're focused has about talk have quarters. been

Scott Coody

a right. everyone's Well, today. in any any Have Relations please Devon you to reach at team appreciate interest day. I good questions, hesitate out don't And Investor All time. if further have to the

Operator

This conference participating. for you call. concludes Thank

now may disconnect. You

Devon Energy (DVN) 5 May 212021 Q1 Earnings call transcript