Devon Energy(US:DVN)2023-08-02 20:27Financial Data and Key Metrics Changes - Devon Energy reported a record high oil production of 323,000 barrels per day, an 8% increase year-over-year, exceeding midpoint guidance expectations [24][35] - The company generated $1.4 billion in operating cash flow during the quarter and has delivered free cash flow for 12 consecutive quarters [35][61] - A total of $462 million was returned to shareholders through dividends, marking the 12th consecutive quarter of dividend payments [26][61] Business Line Data and Key Metrics Changes - In the Delaware Basin, 76 new wells were brought online, contributing to a production of 420,000 BOE per day, with a 9% increase in productivity compared to the previous quarter [29][31] - The Eagle Ford saw a 9% increase in productivity, with 29 gross wells placed online during the quarter, driven by strong well performance [31] - The Powder River Basin is focusing on appraising the Niobrara, with plans to test 4-well spacing later this year [33] Market Data and Key Metrics Changes - The company experienced service cost deflation due to reduced activity from natural gas-focused companies, leading to improved availability of services and cost reductions in various categories [6][15] - Oil pricing remained strong, with realizations near WTI benchmark levels, while natural gas and NGL realizations were weaker but expected to improve in the second half of the year [15][35] Company Strategy and Development Direction - Devon Energy is committed to a disciplined approach focusing on per share value creation over production volume growth, with a flexible cash return framework [4][62] - The company plans to invest at levels that sustain productive capacity while benefiting from lower service costs to enhance free cash flow generation [27][62] - There is an ongoing focus on capital efficiency, with improvements in drilling and completion efficiencies expected to contribute positively to financial results [10][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting full-year production guidance despite some lumpiness in quarterly results due to accelerated activity [40][46] - The company anticipates continued deflationary trends in service costs, which should provide meaningful savings in the future [26][27] - Management highlighted the importance of maintaining a balanced approach between dividends and stock buybacks to optimize shareholder returns [85] Other Important Information - Devon Energy repurchased $200 million of stock during the quarter, bringing the year-to-date total to approximately $750 million, with plans to repurchase about 9% of outstanding shares by the end of next year [16][26] - The company exited the quarter with $3.5 billion in liquidity and a low net debt-to-EBITDA ratio of 0.7x, well below the mid-cycle leverage target [61] Q&A Session Summary Question: Production profile for the back half of the year - Management reiterated confidence in the full-year guidance, noting that accelerated activity has pulled some production forward, leading to a consistent annual profile [40] Question: Water handling contracts in the Delaware - Management discussed the benefits of a new water handling joint venture, which will provide operational flexibility and offset additional operating costs [41] Question: Activity levels for 2024 - Management emphasized the importance of consistency in production and indicated that the fourth frac crew would be paused for about six months, with plans to resume in January [44][46] Question: M&A market and consolidation - Management acknowledged ongoing consolidation in the industry and expressed a disciplined approach to potential acquisitions, focusing on enhancing the company's durability [46] Question: Returns on refrac wells in the Eagle Ford - Management reported encouraging results from refrac wells, indicating that top-performing refracs could compete with new wells [49] Question: Gas production in the Anadarko and Williston - Management noted that gas production increases were driven by improved completion techniques and weather conditions, with ongoing efforts to enhance gas sales [50][58]