Q4 2021 Devon Energy Corp Earnings Call

Speaker 1: 2020.

Speaker 1: Importantly, we expect our dividend growth story to only strengthen in 2022.

Importantly, we expect our dividend growth story to only strengthened in 2022.

Speaker 1: As you can see on the bar chart, we're on pace to essentially double our dividend again in the upcoming year, which equates to around 8%. I would like to highlight that this attractive yield includes a substantial increase to our fixed dividend that we announced last night.

As you can see on the Bar chart, we are on pace to essentially double our dividend again in the upcoming year, which equates to around 8%.

I would like to highlight that disappear active yield includes a substantial increase to our fixed dividend that.

That we announced last night.

Speaker 1: This 45% increase in a fixed dividend reflects the confidence we have in our underlying business and financial performance as we head into 2022.

This 45% increase in the fixed dividend reflects the confidence we have in our underlying business and financial performance as we head into 2022.

Speaker 1: Now slide nine, I want to briefly showcase how our unique dividend policy offers a quite compelling alternative for yield seeking investors.

Now on slide nine I want to briefly showcase how our unique dividend policy offers a quite compelling alternative for yield seeking investors to.

Speaker 1: To demonstrate this point, we've included a simple comparison of our estimated dividend yield in 2022 compared to other commonly referenced yields in the financial market.

To demonstrate this point were included a simple comparison of our estimated dividend yield in 2022 compared to other commonly referenced yields in the financial markets as.

Speaker 1: As you can see, Devon's yield of 8% is approximately six times higher than the S&P 500 index and well in excess of the prevailing interest rate you can get from a 10-year treasury. While I fully acknowledge that these three instruments possess different risk and volatility characteristics, I believe it's important to highlight the outsized income that Devon offers in this yield-starved world we live in today.

As you can see Devon yield of 8% is approximately six times higher than the S&P 500 index and well in excess of the prevailing interest rate you can get from a 10 year treasury, while I fully acknowledge that these three instruments possess different risk and volatility volatility characteristics.

I believe it is important to highlight the outside outsized income that Devin offers in this yield starved world we live in today.

Speaker 1: On slide 10, in addition to our market leading dividend payout, we're also excited to announce that we are increasing our share repurchase authorization by 60% to $1.6 billion.

On Slide 10 in addition to our market leading dividend payout. We're also excited to announce that we are increasing our share repurchase authorization by 60% to $1 6 billion.

Speaker 1: At a multiple of less than five times cash flow, we believe our business trades at a substantial discount to the intrinsic value, especially given the structural improvements we've made to expand margins and returns.

At a multiple of less than five times cash flow, we believe our business trades at a substantial discount to the intrinsic value, especially given the structural improvements we have made to expand margins and returns.

Speaker 1: Given this favorable setup, we have put our money where our mouth is by aggressively repurchasing $589 million of shares just in the fourth quarter alone.

Given this favorable setup, we have put our money where our mouth is by aggressively repurchasing $589 million of shares just in the fourth quarter alone.

Speaker 1: With the board expanding the capacity of our repurchase program, we will continue to be opportunistic buyers of our stock throughout the upcoming year.

With the board expanding the capacity of our repurchase program, we will continue to be opportunistic buyers of our stock throughout the upcoming year.

And lastly.

Speaker 1: The diagram on slide 12, I believe, does a great job of summarizing what we've created here at Devon.

The diagram on slide 12, I believe does a great job of summarizing what we've created here at Devon.

Speaker 1: We've assembled a high quality asset portfolio and a team that is working incredibly hard to deliver on our commitment to expand margins and deliver growth and free cash flow, accelerate our cash returns with our market leading dividend payout, enhance per share growth with opportunistic buybacks and take consistent and meaningful steps to further enhance our financial strength.

We have assembled a high quality asset portfolio and a team that is working credibly hard to deliver on our commitment to expand margins and deliver growth in free cash flow.

Accelerate our cash returns with our market leading dividend payout.

Enhanced per share growth with opportunistic buybacks and take consistent and meaningful steps to further enhance our financial strength.

Speaker 1: While 2021 was a record year, we're only getting started. At Devon, we have the right mix of assets, proven management, the right team, and a shareholder-friendly business model designed to continue to lead the energy industry in capital disciplines and cash return.

While 2021 was a record year, we're only getting started at.

At Devon, we have the right mix of assets proven management, the right team and a shareholder business shareholder friendly business model designed to continue to lead the energy industry and capital disciplines and cash returns.

Speaker 1: And with that, I'll now turn to Clay for the call to continue and provide an overview of our recent operational results in upcoming capital plan. Clay. Thanks, Rick, and good morning, everyone. As Rick touched on, 2021 was a pivotal year for Devon that demonstrated the power of our asset portfolio and the capabilities of our talented organization.

And with that I'll now turn it to play for the call to continue and provide an overview of our recent operational results and upcoming capital plan.

Thanks, Rick and good morning, everyone as Rick touched on 2021 was a pivotal year for Devin that demonstrated the power of our asset portfolio and the capabilities of our talented organization.

Speaker 2: Across the portfolio, our team delivered results that exceeded production and capital efficiency targets, while continuing to drive down per-unit operating costs and improving margins.

Across the portfolio our team delivered results that exceeded production and capital efficiency targets, while continuing to drive down per unit operating costs and improving margins.

Speaker 2: Results matter. And while I don't take any of these accomplishments lightly, I'm equally proud of the way that we were able to accomplish these financial metrics.

<unk> matter and while I don't take any of these accomplishments lightly equal.

Equally proud of the way that we were able to accomplish these financial metrics.

Speaker 2: Overcoming the challenges of the merger, pandemic, and supply chain issues, we built a unified culture, took many best practices from both legacy companies, and were now poised for further leverage of those collective wins.

Overcoming the challenges of the merger pandemic and supply chain issues, we build a unified culture took many best practices from both legacy companies and we're now poised for further leverage of those collective wins.

Speaker 2: Now let's turn to slide 14 and we'll see how 2022 capital plan is designed to build upon the momentum that we've established this past year.

Now, let's turn to slide 14, and we'll see how 2022 capital plan is designed to build upon the momentum that we've established this past year.

The first key point.

Speaker 2: that is there is no change to the upstream capital budget of 1.9 to 2.2 billion dollars.

That is there is no change to the upstream capital budget of one nine to $2 2 billion.

Speaker 2: as we disclosed last quarter. While inflation is an absolute reality, our teams have done a good job of working with our service companies, mitigating escalations where we can, and quantifying the remaining impact of our forecast.

As we disclosed last quarter, while inflation is an absolute reality our teams have done a good job of working with our service companies mitigating Escalations, where we can and quantifying the remaining impact of our forecast.

Speaker 2: The great thing about a cyclical business is that if you're paying attention, you should have a pretty good idea of what the most critical things to focus on in anticipation of the next phase. At this point in the cycle, we're focused on listening to our service company partners and helping them help us be successful. In this very tight supply chain market, the key phrase we hear is predictable and reliable.

The great thing about a cyclical business is that if you are paying attention.

Should have a pretty good idea of what the most critical things to focus on in anticipation of the next phase at this point in the cycle. We are focused on listening to our service company partners and helping them help us be successful in this very tight supply chain market. The key phrase we hear is predictable and reliable.

Speaker 2: you'll notice that our 22 program looks quite a bit like our 21 program.

You will notice that our 22 program looks quite a bit like our 'twenty. One program. This has allowed us to telegraph to our service companies Midstream partners and other key stakeholders to expect more of the same.

Speaker 2: This has allowed us to telegraph to our service companies, midstream partners, and other key stakeholders to expect more of the same.

Speaker 2: That predictability allows them to plan their own supply chain work, and the reliability allows them to know that we're going to do what we say we're going to do. Relationships are one of our core values at Devon, and this listening and working with our critical partners is an example of that value in action.

That predictability allows them to plan their own supply chain work and the reliability allows them to know that we're going to do we say we're going to do.

Relationships are one of our core values of Devon, and this listening and working with our critical partners as an example of that value inaction.

Speaker 2: The relatively steady level of activity in 2022 is projected to sustain our production throughout the year, ranging from 570 to 600,000 DOE per day.

The relatively steady level of activity in 'twenty, two is projected to sustain our production throughout the year ranging from 570 to 600000 Boe per day.

Speaker 2: Now, let's turn to slide 15 where we can discuss our Delaware Basin asset, which we believe is the most capital efficient resource in North America.

Now, let's turn to slide 15, where we can discuss our Delaware basin asset, which we believe is the most capital efficient resource in North America.

Speaker 2: During 2021, we had great success with our capital program that resulted in production growth rate of 34% compared to our first quarter 2021.

During 2021, we had great success with our capital program that resulted in production growth rate of 34% compared to our first quarter 'twenty, one with high margin growth was driven by consistent execution and.

Speaker 2: This high margin growth was driven by consistent execution.

Speaker 2: and outstanding well productivity that was headlined by several memorable projects, such as Danger Noodle, Boundary Raider, and Thistle Cobra, to name a few. Each of these prolific projects eclipsed 30-day rates of more than 5,000 BOE per day on a per well basis.

An outstanding well productivity that was headlined by several memorable projects such as danger noodle boundary Raider and physical Cobra to name a few.

Each of these prolific projects Eclipse 30 day rates of more than 5000 Boe per day on a per well basis.

Speaker 2: exhibiting the world-class reservoir potential that resides in the Delaware Basin.

<unk> the World class reservoir potential that resides in the Delaware Basin.

Speaker 2: It's important to note that strong volume performance in 2021 was paired with excellent capital efficiency and substantial additions to our approved reserves. While I would never point to a single year of reserves booking as the measure of success, I would never point to a single year of reserves booking as the measure of success.

It is important to note that strong volume performance in 2021 was paired with excellent capital efficiency and substantial additions to our proved reserves, while I would never point to a single year of reserves booking as the measure of success.

Speaker 2: with consistent and reasonable conservative booking processes which we have, it can provide insight into the quality of the underlying asset.

With consistent and reasonable conservative booking processes, which we have it can provide insight into the quality of the underlying assets at.

Speaker 2: At year end, our approved reserves in the Delaware increased 18% on a pro forma basis, and these reserve additions replaced more than 200% of what we produced during the year.

At year end, our proved reserves in the Delaware increased 18% on a pro forma basis and these reserve additions replaced more than 200% of what we produced during the year.

Speaker 2: I find it especially impressive that our team added these reserves at an ultra-low F&D cost of only $5 per BOE.

And I find is especially impressive that our team added these reserves in an ultra low F&D cost of only $5 per Boe.

Speaker 2: This result is just another example how advantage and sustainable our resources in the Delaware Basin.

This result is just another example, how advantaged and sustainable our resources in the Delaware Basin.

Turning your attention to the map on the right.

Speaker 2: Turning your attention to the map on the right, you can expect more of the same from us in 2022. We have a great slate of projects lined up to execute on, and once again, most of our program will consist of the high impact opportunities focused on developing Upper Wolf Camp and Bone Springs Zones, and to a lesser degree, the Avalon targets as well.

Can expect more of the same from us in 2022.

We have a great slate of projects lined up to execute on and once again most of our program will consistent of the high impact opportunities focused on developing upper wolfcamp and bone spring zones and to a lesser degree the wolf excuse me the Avalon targets as well.

Speaker 2: To execute on this plan, we expect to run 14 rigs and four frat crews during the year. This capital activity will be diversified across our acreage footprint with sweet spots in southern Lee and Eddy Counties and State Line receiving most of the funding.

To execute on this plan, we expect to run 14 rigs and four frac crews during the year. This capital activity will be diversified across our acreage footprint with sweet spots in southern Lea and Eddy counties and Stateline, receiving most of the funding.

Speaker 2: Not only will this level of activity continue to grow Delaware production in 2022, but the benefits of our operating scale and best practices from the merger integration, we are well positioned to continue to improve our execution capabilities. Let's turn to the next slide.

Not only with this level of activity continuing to grow Delaware production in 'twenty, two but the benefits of our operating scale and best practices from the merger integration.

We're well positioned to continue to improve our execution capabilities.

Let's turn to slide 16.

Speaker 2: where we have display our strong track record of continuous improvement.

Where we have display our strong track record of continuous improvement.

Speaker 2: As you can see on the slide, with the efficiencies captured in the Delaware, the team has essentially doubled the productivity of our rig and frac equipment compared to just a few years ago.

As you can see on the slide with the efficiencies captured in the Delaware with team has essentially doubled the productivity of our rig and frac equipment compared to just a few years ago.

Speaker 2: The operational improvements have also meaningfully reduced our costs over time to about $550 per lateral foot in 2021, which competes very well with anyone else.

The operational improvements have also meaningfully reduced our cost over time to about $550 per lateral foot and 2021, which competes very well with anyone out there.

Speaker 2: As I look ahead to 2022, I expect our operational performance to continue to improve.

As I look ahead to 'twenty, two I expect our operational performance to continue to improve.

Speaker 2: Our team consistently is identifying new ways to leverage technology, operational breakthroughs and industry best practices.

Our team consistently is identifying new ways to leverage technology operational breakthroughs and industry best practices inflationary pressure in supply chain disruptions are a reality based on today's industry activity and commodity price projections, we've baked in around 15% higher costs than we saw in 2021.

Speaker 2: Inflationary pressure and supply chain disruptions are a reality. Based on today's industry activity and commodity price projections, we've baked in around 15% higher costs than we saw in 2020 e Hutchison's retelling and market profitability

Speaker 2: We have been and continue to be focused on consistency, planning, and staying out in front ahead of these and reacting to any unforeseen issues.

Have been and continue to be focused on consistency planning and staying out in front ahead of these and reacting to any unforeseen issues.

Speaker 2: this work will be even more critical as the market continues to tighten.

This work will be even more critical as the market continues to tighten.

Speaker 2: On slide 17, the next area I want to showcase is the momentum of building in the Anadarko Basin, where we have a concentrated 300,000 net acre position in the liquids-rich window of the play.

On slide 17, the next area I want to showcase its the momentum we're building in the Anadarko basin.

Where we have a concentrated 300000 net acre position in the liquids rich window of the play.

Speaker 2: With the benefits of our $100 million Dow JV carry, we drilled over 30 wells in 2021 and commenced the first production on 16 of those wells during the year.

With the benefits of our $100 billion Dow JV carry we drilled over 30 wells in 2021 and commenced the first production on 16 of those wells during the year.

Speaker 2: As you can see on the charts on the right, the initial capital efficiency is X.

As you can see on the charts on the right. The initial capital efficiency is excellent.

Speaker 2: With the benefit of state-of-the-art completion designs and appropriately upspaced developments, per-well capital costs have decreased by 25% versus legacy activity, and well productivity to date has exceeded the type curve expectations by 35%.

With the benefit of state of the art completion designs and appropriately up spaced developments per well capital cost have decreased by 25% versus legacy activity and well productivity to date has exceeded the type curve expectations by 35%.

Speaker 2: With this strong execution, the carried returns we're seeing from this activity will compete for capital with any asset in our portfolio.

With the strong execution that carried returns we're seeing from this activity will compete for capital with any asset in our portfolio.

Speaker 2: Given the success, we've elected to step up activity in the Anadarko Basin to three rigs in 22.

Given the success, we've elected to step up activity in the Anadarko basin to three rigs in 'twenty two.

Speaker 2: This program will result in around 40 new wells coming online in 2022, allowing us to maintain steady production profile throughout the year and harvest significant amounts of free cash flow.

This program will result in around 40, new wells coming online in 2022, allowing us to maintain steady production profile throughout the year and harvest significant amounts of free cash flow.

Speaker 2: Now let's turn to slide 18 and I'll cover a few points on the other assets that are creating huge value while flying under the radar.

Now, let's turn to slide 18, and I'll cover a few points on the other assets that are creating huge value while flying under the radar.

Speaker 2: Collectively, these assets generated more than a billion dollars of free cash flow in 2021, and we're on pace to produce a similar amount of free cash flow in 2022.

Collectively these assets generated more than $1 billion of free cash flow in 2021, and we're on pace to produce a similar amount of free cash flow in 'twenty two.

Speaker 2: Williston remains some of the best returns in our portfolio. The team has continued to unlock additional locations and has leveraged company best practices to significantly improve our ESG footprint.

Williston remains some of the best returns in our portfolio. The team is continuing to unlock additional locations and is leveraged company best practices to significantly improve our ESG footprint.

Speaker 2: Our Eagleford asset continues to deliver solid returns. The team is doing some very exciting work to unlock additional locations and a very significant refract attack.

Our Eagle Ford asset continues to deliver solid returns the team is doing some very exciting work to unlock additional locations.

And a very significant re frac potential.

Speaker 2: The powder is the basin with the most upside yet to unlock. Our team is making great progress in that regard. By driving laterals longer to three miles and rebooting the stimulation design, we're seeing very encouraging weld results.

The powder is a basin with the most upside yet to unlock our team is making great progress in that regard by driving laterals longer to three models and rebooting. The stimulation designs, we're seeing very encouraging well results I am proud of what these assets are delivering and I. Appreciate the team's hard work and effort that goes in.

Speaker 2: I'm proud of what these assets are delivering, and I appreciate the team's hard work and effort that goes into fulfilling this important role within our portfolio.

Fulfilling this important role within our portfolio.

Finally, let's turn to slide 19, where I'm excited to share some of our progress on the ESG front.

Speaker 2: Finally, let's turn to slide 19 where I'm excited to share some of our progress on the ESG front.

Speaker 2: As many of you are aware, we set aggressive emissions reductions targets last year that covered a myriad of near, mid, and long-term priorities.

As many of you are aware, we set aggressive emissions reductions targets last year that covered a myriad of near mid and long term priorities and.

Speaker 2: In addition to our to ensure organizational alignment, we directly tie progress on these targets to our annual compensation program. We've also dedicated a board committee to engage in our ESG goal setting process, performance and reporting.

In addition to our to ensure organizational alignment we directly tied progress on these targets to our annual compensation program. We've also dedicated a board committee.

<unk> engaged in our ESG goal setting process performance and reporting.

Speaker 2: Since the announcement of these environmental targets, we've taken immediate action and delivered results. We do not have finalized figures yet for this past year, but I can tell you our scope 1 and 2 GHG emissions will improve roughly by 20% in 2021 versus our 19 baseline, well ahead of that stated goals from this past summer.

Since the announcement of these environmental targets, we've taken immediate actions and delivered results. We do not have finalized figures yet for this past year, but I can tell you our scope one and two <unk> emissions will improve roughly by 20% in 2021 versus our 19 baseline well ahead of that stated with state of <unk>.

<unk> from this past summer.

Speaker 2: Two of the key successes on reducing overall emissions is reducing methane emissions and reducing flaring. In 2020, we reduced methane emissions by 47% and we reduced flaring by 33%.

Two of the key successes on reducing overall admissions is reducing methane emissions and reducing flaring.

In 2020, we reduce methane emissions by 47% and we reduce flaring by 33%.

Speaker 2: I expect this positive rate of change to continue. Looking specifically at point two, we have many visible catalysts that will drive important results, such as advancements in leak detection technologies, improved facility design, facility retrofits, wide-scale deployment of air-driven pneumatic controllers, and electrification of select field operations.

I expect this positive rate of change to continue.

Looking specifically at 2002, we have many visible catalysts that will drive important results such as advancing advancements in leak detection technologies improved facility design facility retrofits wide scale deployment of air driven nomadic controllers and electrification of select field operations.

Speaker 2: I believe that it's also important to point out that these efforts are focused on changes that will not only improve our ESG metrics, but will also improve our overall operation.

I believe that it is also important to point out that these efforts are focused on changes that will not only improve our ESG metrics, but will also improve our overall operations by focusing on these operational wins, we further align our organizational focus and excitement around ESG improvement and with that I'll turn the call over to Jeff for <unk>.

Speaker 2: By focusing on these operational wins, we further align our organizational focus and excitement around ESG improvement. And with that, I'll turn the call over to Jeff for the financial review. Jeff?

The financial review.

Speaker 3: Thanks, Clay. My comments today will be focused on the key drivers of our financial results in 2021, and also provide some insights into our 2022 outlook.

Thanks Clay my comments today will be focused on the key drivers of our financial results in 2021, and also provide some insights into our 2022 outlet.

Speaker 3: Beginning with production, our total volumes in the fourth quarter averaged 611,000 BOE per day, exceeding the midpoint of our guidance by 3%. This production beat was across all products, with the most significant outperformance coming from NGLs, where processing economics were exceptionally strong during the quarter.

Beginning with production our total volumes in the fourth quarter averaged 611000 Boe per day exceeding the midpoint of our guidance by 3%. This production beat was across all products with the most significant outperformance coming from Ngls, We're processing economics were exceptionally strong during the quarter.

Speaker 3: In the upcoming quarter, we expect production to approximate 570,000 BOEs per day. We expect this to be our lowest production quarter of the year due to winter weather downtime that reduced volumes by about 15,000 BOE per day.

In the upcoming quarter, we expect production to approximate 570000 Boe's per day, we expect this to be our lowest production quarter of the year due to winter weather downtime that reduced volumes by about 15000 Boe per day.

All winter related curtailments are back online and we expect no impact to our full year production estimates.

Speaker 3: All winter-related curtailments are back online, and we expect no impact to our full-year production estimates.

Speaker 3: Moving to expenses, our lease operating and GP&T costs exited 2021 at a rate of $7.25 per barrel.

Moving to expenses, our lease operating and <unk> costs exited 2021 at a rate of $7 25 per barrel.

Speaker 3: This result represents a 1% decline compared to where we started the year, but was slightly elevated compared to our forecast. As you might expect, we experienced moderate pricing pressures across several service and supply cost categories in the quarter.

This result represents a 1% decline compared to where we started the year, but with slightly elevated compared to our forecast as you might expect we experienced moderate pricing pressures across several service and supply cost categories in the quarter.

Speaker 3: And we are also incurred a non-recurring charge to GP&T expense in the Eagleford. Another key variance was higher workover activity, which contributed to our strong production results in the quarter. Overall, our exposure to higher value production coupled with a low cost structure expanded Devin's field level cash margin to $42.37 per barrel, a 14% increase from last quarter.

And we also incurred a non recurring charge to <unk> expense in the Eagle Ford.

Another key variance was higher workover activity, which contributed to our strong production results in the quarter overall, our exposure to higher value production, coupled with a low cost structure expanded devins field level cash margin to $42 37 per barrel, a 14% increase from last quarter.

Speaker 3: Jumping to corporate cost, we did a great job of improving this expense category in 2021. In aggregate, GNA and financing costs declined 31% year-over-year on a pro forma basis due to lower personnel cost and the company's ongoing debt reduction program.

Jumping to corporate cost, we did a great job of improving this expense category in 2021, and aggregate G&A and financing costs declined 31% year over year on a pro forma basis due to lower personnel costs and the company's ongoing debt reduction program.

Speaker 3: These structural improvements will carry over into 2022 and act as an ongoing annuity for years to come.

These structural improvements will carryover into 2022 and act as an ongoing annuity for years to come.

Cutting to the Bottomline Devins core earnings increase for the sixth quarter in a row to a $1 39 per share. This level of earnings momentum translated into operating cash flow of $1 $6 billion in the fourth quarter. After funding our disciplined maintenance capital program, we generated $1 1 billion.

Speaker 3: Cutting to the bottom line, Devin's core earnings increased for the sixth quarter in a row to $1.39 per share. This level of earnings momentum translated into operating cash flow of $1.6 billion in the fourth quarter. After funding our discipline maintenance capital program, we generated $1.1 billion of free cash flow in the quarter. This represents growth in free cash flow of more than 400% compared to where we started the year after closing the WPX merge fund.

A free cash flow in the quarter. This represents growth in free cash flow of more than 400% compared to where we started the year after closing the WPS merger.

Speaker 3: The top priority of our free cash flow is the funding of our dividend. As Rick covered earlier, in conjunction with our earnings report, we announced a fixed plus variable dividend of $1 per share that is payable in March and includes the benefit of our 45% raise to the fixed dividend. This payout represents the highest quarterly payout in Devens history.

The top priority of our free cash flow as the funding of our dividend as Rick covered earlier in conjunction with our earnings report, we announced a fixed plus variable dividend of $1 per share that is payable in March and includes the benefit of our 45% raise to the fixed dividend. This payout represents the highest quarterly payout and Devin.

<unk> history.

Speaker 3: Another avenue that we're returning cash to shareholders through is the execution of our share repurchase program. Since we initiated the program in November , we're off to a great start by repurchasing 14 million shares at a total cost of $589 million.

Another Avenue that we're returning cash to shareholders through is the execution of our share repurchase program. Since we initiated the program in November we're off to a great start by repurchasing 14 million shares at a total cost of $589 million.

Speaker 3: This equates to an average price of $42 per share, which is around a 25% discount to our current trading level.

This equates to an average price of $42 per share, which is around a 25% discount to our current trading levels with the board expanding our share repurchase program to $1 $6 billion. We now have roughly $1 billion remaining on this authorization and we expect to continue to Opportunistically buy back stock in 2020.

Speaker 3: With the board expanding our share repurchase program to $1.6 billion, we now have roughly $1 billion remaining on this authorization, and we expect to continue to opportunistically buy back stock in 2022.

Two.

Speaker 3: We also have returned value to shareholders through our efforts to reduce debt and improve the balance sheet. In 2021, we made significant progress strengthening Devin's financial position by retiring more than $1.2 billion of outstanding notes, and we achieved our net debt to EBIT.target ahead of plan, exiting the year at less than a turn of leverage.

We also have returned value to shareholders through our efforts to reduce debt and improve the balance sheet. In 2021, we made significant progress strengthening Devon financial position by retiring more than $1 2 billion of outstanding notes and we achieved our net debt to EBITDA target ahead of plan exiting the year at less than a turn.

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Speaker 3: At today's pricing, we expect our leverage to trend even lower in 2022, pushing towards a zero net debt balance by year end.

At today's pricing and we expect our leverage to trend even lower in 2022, pushing towards a zero net debt balance by year end.

And lastly, I do want to highlight that our disciplined strategy is also resulting in excellent returns on capital employed in 2021, we achieved a 20% return on capital employed and we are positioned for this measure to substantially increase in 2022. The strong rate of change we are delivering with <unk> combined with our cash return framework.

Speaker 3: And lastly, I do want to highlight that our discipline strategy is also resulting in excellent returns on capital employed. In 2021, we achieved a 20% return on capital employed, and we are positioned for this measure to substantially increase in 2022. The strong rate of change we are delivering with ROTI, combined with our cash return framework, further differentiates Devin versus other opportunities in the market today. With that, I'll now turn the call back to Rick for some closing comments.

Further differentiates Devon versus other opportunities in the market today.

With that I'll now turn the call back to Rick for some closing comments.

Speaker 1: Thank you, Jeff. Great job. In summary, 2021 was a banner year for Devon. We delivered on exactly everything we promised and then some.

Thank you Jeff great job.

In summary, 2021 was a banner year for Devon, we delivered on exactly everything we promised and then some.

Speaker 1: Now as we shift our focus to the upcoming year, I want to be clear that there is no change to our cash return playbook. It will be more of the same. We will be relentlessly focused on delivering high returns on capital employed, margin expansion, accelerating free cash flow growth, and returning excess cash to shareholders.

Now as we shift our focus to the upcoming year I want to be clear that there is no change to our cash return playbook. It will be more of the same we will be relentlessly focused on delivering high returns on capital employed.

Margin expansion accelerating free cash flow growth and returning excess cash to shareholders.

Speaker 1: Our talented team here at Devon take great pride in leading the industry in this disciplined operating framework. And when coupled with the development and deployment of new technologies, simply put, we are very energized and ready to roll.

Our talented team here at Devon take great Pride in leading the industry in this discipline operating framework and when coupled with the development and deployment of <unk> of new.

<unk> simply put we are very energized and ready to roll.

In 2022.

Speaker 1: I sincerely hope you can now appreciate how we've delivered on the vision that Dave Hager and I, along with our respective teams, had when we announced our merger in September of 2020. We wanted to create something truly special, and we feel that we've done just that. I will now turn the call back over to Scott for Q&A.

I sincerely hope you can now appreciate how we've delivered on the vision that Dave Hager and I, along with our respective teams had when we announced our merger in September of 2020.

We wanted to create something truly special and we feel that we've done just that.

I will now turn the call back over to Scott for Q&A.

Speaker 4: Thanks, Rick. We'll now open the call to Q&A. Please limit yourself to one question and a follow-up. This allows us to get to more of your questions on the call today. With that operator, we'll take our first question.

Thanks, Rick.

We will now open the call to Q&A. Please limit yourself to one question and a follow up this allows us to get to more of your questions on the call today with that operator, we'll take our first question.

Speaker 5: Thank you and just as a reminder, please press star 1 to ask a question. Our first question is from Aaron Jiram with JP Morgan. Your lines.

Thank you and just as a reminder, please press star one to ask a question. Our first question is from Aaron <unk> with Jpmorgan. Your line is open.

Speaker 6: Yeah, good morning. Perhaps for Jeff, I wanted to get more insights on the base dividend increase and how we should think about the mix of base and variable dividends in future periods because I believe historically you guys have targeted about 10% of CFO at, call it a mid-cycle price for the base dividends. So I want to get some thoughts on how that's evolving over time.

Yes, good morning.

Perhaps for Jeff I wanted to get more insights on the base dividend increase and how we should think about the mix of base and variable dividends.

In future periods, because I believe the historically you guys have targeted about 10% of <unk>.

<unk> at call it a mid cycle price for the base dividend. So wanted to get some thoughts on how thats evolving over time.

Speaker 3: Yeah, you better run thanks for thanks for the question. You're you're spot on, you know, historically, the way we've thought about that is kind of on a normalizing normalized price debt, kind of a mid cycle price deck, we've targeted kind of a five to 10% payout ratio of our cash flow for that fixed dividend. So as we discussed the fixed dividend raise that we announced this quarter with our board

Yes, you bet Arun. Thanks for thanks for the question Youre spot on you know historically the way we've thought about that as kind of on a normalizing normalized price deck kind of a mid cycle price deck, we've targeted kind of a 5% to 10% payout ratio of our cash flow for that fixed dividend. So as we discussed the fixed dividend raise that we announced this quarter with our board as we did them.

Speaker 3: As we did the math and worked through our model, we kind of centered in around a kind of a 7.5% payout ratio, again, specific to mid-cycle pricing. So as we move forward into the future, I think that's an area where you're going to continue to see us debate that with the board. And frankly, I think there's a high likelihood that we'll have the opportunity to grow that fixed dividend further as we move forward. And so it'll likely gravitate towards the higher end of that payout range, somewhere closer to 10% as we walk it forward.

Math and work through our model.

We kind of centered in around a kind of a seven 5%.

Payout ratio again specific to mid cycle pricing. So as we move forward into the future I think thats, an area, where youre going to continue to see us debate that with the board and frankly I think there is.

The high likelihood that will have the opportunity to grow that fixed dividend further.

As we move forward and so it will likely gravitate towards the higher end of that payout range somewhere closer to 10% as we walk walk it forward.

Great and my follow up is I had a question just the Permian in general.

Speaker 6: Great. And my follow up is I had a question just the Permian in general. One of the potential headwinds for the industry in terms of future growth will be gas takeaway.

One of the potential headwinds for the industry.

In terms of future growth will be gas takeaway, which I think today stands around 17 Bcf a day.

Speaker 6: which I think today stands around 17 BCF a day, that you guys grew your Permian production by over 30% from one queue.

You guys grew your Permian production by over 30% from.

<unk>.

Speaker 6: and your net production is approaching 600 million a day.

Net production is approaching 600 million a day. So I just wanted to see how as Devin position to manage this tightness that could occur in late 2023 or early 2024 with Permian takeaway.

Speaker 6: So I just wanted to see how is Devon positioned to manage this tightness that could occur in late 2023 or early 2024 with Permian takeaway.

Speaker 3: Yeah, you better run this is Jeff again. And you'll remember some of this from a few years ago, the last time we had tightness in the in the Permian basin, you know how we're set up and how we've managed it. We've also, you know, subsequent to the WPX merger is accrued to Devin's benefit the position that they had in place the legacy position that they had in place in the Permian. So today where we said is we have firm take away from the basin for our gas for the majority of the gas production that we have in basin.

Yes, you bet or and this is Geoff again.

Youll remember some of this from a few years ago. The last time, we had tightness in the Permian basin.

How we're set up and how we manage it we've also subs.

Subsequent to the WPS merger, it's accrue to devins benefit the position that they had in place the legacy position that they had in place in the Permian. So today, where we said is we have firm takeaway from the basin for our gas for the majority of the gas production that we have in basin with the remainder of this stays in base and you'll recall, where Arun we do term sales.

Speaker 3: With the remainder that stays in basin, you'll recall, Maroon, we do term sales for the large part with pretty large counterparties, which also have firm takeaway from the basin. So that combined, we feel really good about our ability to move the molecules out of the basin and don't foresee any issues with getting backed up and shutting in wells. I'll add to that, we're also evaluating the participation in a couple of the new projects that have been discussed, and as you're well aware, could probably come online in that 23, 24 timeframe. So we feel really good about being able to move the molecules and get them taken away from the basin. And then beyond just the takeaway, what I would highlight is obviously we do have some price exposure in basin for the sales that we do. And in that case, we've utilized basis swaps on just over 50% of our volumes there to help us manage that price exposure. Our marketing team has done a great job setting this up, making sure that we have the ability to move the molecules, and then going even a step further and helping us mitigate the price pressure we're likely to see as it's going to be volatile as the market evolves over the next couple of years.

For the large part with pretty large counterparties, which also have firm takeaway from the basin so that combined.

We feel really good about our ability to move the molecules out of the basin and don't foresee any issues.

With with getting backed up and shutting in wells I'll add to that we're also evaluating the participation in a couple of the new projects that have been discussed and as Youre, well aware could probably come online in that 'twenty three 'twenty four time frame. So we feel really good about being able to move the molecules and get them taken away from the basin and then beyond just the takeaway.

I would highlight is obviously, we do have some price exposure in basin for the sales that we do and in that case, we've utilized basis basis swaps on just over 50% of our volumes there to help us manage that price exposure. So our marketing team has done a great job kind of setting us up making sure that we have the ability to move the molecules and then.

And even a step further and helping us mitigate the price pressure, we're likely to see is it's going to be volatile as the market kind of evolves over the next couple of years.

Speaker 7: Thanks, Jeff.

Thanks, Jeff.

You bet.

Speaker 5: The next question is from Neil Mehta with Goldman Sachs. Your line is open.

The next question is from Neil Mehta with Goldman Sachs. Your line is open.

Speaker 8: Thank you and let me first by saying Rick, congratulations on an unbelievable 2021 being the best performer in the S&P is no joke. Well done. Thanks for having me. Look, my first question is about growth in the Permian and as one of the leaders in the region, we love your perspective. Are you seeing any warning signs of US growth accelerating prematurely as we still haven't gotten to the point?

Thank you and let me first by saying Rick Congratulations on a unbelievable 2021 being the best performer in the S&P is no jokes well done.

Okay.

My first question is about growth in the Permian and as one of the leaders.

In the region would love your perspective are you seeing any warning signs of U S growth accelerating pretty materially as we still haven't gotten clarity around Iran or do you think the discipline.

Speaker 8: Clarity around Iran or do you think the discipline is holding and are you not concerned about growth in the Permian relative to the global oil market? And what would it take for Devon to change its own strategy around prioritizing free cash flow over growth?

It's holding and are you not concerned about growth in the Permian relative to the global oil market and.

What would it take.

For Devon to change its.

Its own strategy around prioritizing free cash flow over.

Overgrowth.

Speaker 1: Yeah, Arun. I mean, yeah, Neil Scurry. That's a that's a good question. You know, when I think about the when I think about the Permian, you are seeing you continued growth there. I think most of the growth right now has been driven by many of the private operators.

Yes Arun.

Yes, Neil that's a that's a good question when I think about the.

Think about the Permian you are seeing.

Continued growth there I think most of the growth right now has been driven by many of the private operators.

Speaker 1: and recently saw Exxon and Chevron talk about ramping some volumes up. I believe they're probably going to be working down their duck inventory to some degree. But they've not invested as much as they traditionally had out there over the two or three prior years.

Recently saw Exxon and Chevron talk about ramping some volumes of I believe youre, probably going to be working down their DUC inventory to some degree.

But they have not invested as much as they traditionally had out there.

Two or three prior year or so.

Speaker 1: I do think you're going to continue to see growth in the Permian. I don't think it's unhealthy. I don't think it's out of, it probably is going to be the only place in the U.S. you truly even see much growth, to be honest with you, is the way I think we're looking at it.

I do think youre going to continue to see see growth.

In the Permian I don't think its unhealthy I don't think its out of out of it probably is going to be the only place in the U S. You're truly even see much growth be honest with you is is the way I think we're looking at it.

Speaker 1: As far as the lack of clarity around Iran, I think that's a good point you make. It's one of the reasons I believe that the market continues to be backwardated. If you look at the curve, it is such steep backwardation. That's the thing that, I'll just say, we really look at a lot when you start thinking about activity down the road. That's why we've been so focused on remaining very, very distant.

As far as the lack of clarity around the wrong I think that's I think that's a good point you make is one of the reasons I believe that the market continues to be backward dated if you look at the at the curve it as such steep backwardation and Thats the thing that.

I'll just say, we really look at a lot is when you start thinking about activity down the road. So that's why we've been so so focused on.

Remaining very very discipline, keeping our budget budgeted volumes flat.

Speaker 1: keeping our budget volume flat, operating in a maintenance capital standpoint. I think that's the right answer until we get some real clear indication that's otherwise.

Operating in a maintenance capital.

Standpoint, and I think thats the right the right answer until we get.

Some real clear indication that's otherwise so.

Speaker 1: Clay, you may add anything to that. Yeah, I appreciate that, Rick. What I was just going to add, remember that we are growing in the Permian. At the same time, we're keeping our overall production flat. And I think it's kind of, you have to watch the headlines and what's the overall trend. I believe that's the right mix for us with our assets, with our portfolio.

Well you may add anything to that yes, I appreciate that Rick when I was just going to add I remember that we are growing in the Permian at the same time, we're keeping our overall production flat and I think it's kind of you have to watch the headlines and what's the overall trend I believe that's the right mix for us with our assets with our portfolio.

Speaker 2: specific to Permian growth, because that's definitely the hot basin. That's where the marginal barrel comes from.

Specific to Permian growth, because that's definitely the hot basin, that's where the marginal barrel comes from there are natural governors I'm speaking kind of from an operations point of view.

Speaker 2: There are natural governors, I'm speaking kind of from an operations point of view, to prohibit unbridled growth. You know, I think about the supply chain things that obviously peppered throughout my earlier comments.

Prohibit unbridled growth I think about the supply chain things and obviously peppered throughout my earlier comments.

Speaker 2: There's also the takeaway issues Jeff was just talking about. There's some things that I think will keep that growth in check. Now, all that said, certainly I would expect continued growth in the Permian to offset declines from the other areas. Overall, we're staying with

There's also the takeaway issues, Jeff was just talking about there are some things that.

We will keep.

Keep that growth in check now all that said certainly I would expect continued growth in the Permian to offset declines from the other areas. Overall, we believe we are staying with.

Speaker 2: Overall maintenance capital, we believe, is the right approach for our shareholders, for our organization, and it seems to be working quite well so far. Thanks, Neil.

Overall maintenance capital. We believe is the right approach for our shareholders for our organization and it seems to be working quite well so far thanks Neal.

Speaker 8: Thank you. And the follow up is your perspective on the A&D markets. When the WPX transaction was consummated, oil prices were half of where they are right now. So, Rick, I'd be curious on your perspective if you see this more as a seller's market than a buyer's market until we get more commodity clarity.

Thank you and the follow up is your perspective on the A&D markets.

The WPS transaction was consummated at oil prices, where half of where they are right now so.

I'd be curious on your perspective, if you see this more as a seller's market than a buyer's market.

Until we get more commodity clarity.

Well.

Speaker 1: Well, you know, that's a that's that's always an interesting question. And today, you know, once again, I'll go back to the the curve. If you're if you're a seller, I mean, you're wanting to sell at today's price.

That's always an interesting question and today once again I'll go back to the curve if youre a seller youre wanting to sell at today's prices.

Speaker 1: you know, if you're a buyer, you have to honor that curve. And that's, it's kind of an interesting time. So that's why as we talked here among this management team and with our board, we felt like the clear thing for us to do is to double down on our share repurchases. As we, we think about assets that might be out in the market. Gosh, we just don't see anything that really competes with.

If youre a buyer you have to honor that curve and that's.

It's kind of an interesting time, so that's why.

As we talked here among this management team and with our board we felt like the clear thing for us to do is to double down on our share repurchases as we think about assets that might be out in the market.

Gosh, we just don't see anything that really competes with.

Yeah.

Speaker 1: you know what we have and so that's why we we've doubled down on it

What we have and so that's why we've doubled down on it. So I don't know how to answer that question Neal.

Speaker 1: So I don't know how to answer that question, Neil. If you're a seller right now, it could be a nice time to be selling if you can find someone that will honor.

If you're a seller right now it could be it could be a nice time to be selling if you can find someone that will honor.

Speaker 1: you know, today's commodity price and are truly convinced that we're going to see crude continue to go up even further. You know, there are people certainly predicting that, but that's not what the curve is illustrating today.

Today's commodity price and are are truly.

Are truly convinced that we're going to see crude continue to.

To go up even further.

People certain predicting that but that's not what the quarters illustrating today.

Thank you Rick.

Speaker 5: The next question is from Doug Leggett with Bank of America.

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

Thanks.

Speaker 1: Thanks, good morning. Good morning everybody. I guess this is for Jeff probably. I want to ask you about the break-even, Jeff. You're still showing a $30 price but a $2.50 gas price.

Good morning, still want hi, good morning, everybody.

I guess this is for Jeff probably all I want to ask you about the breakeven.

Youre still showing a $30 price, but a $2 50 gas price.

Speaker 1: And obviously there's a cash tax evolution going on. So I wonder if you could walk us through what's the evolution of the...

Obviously, there is a cash tax evolution going on so I wonder if you could kind of walk us through.

What's the evolution of the.

Speaker 1: the oil price break even. And to be clear, what I'm really driving at here is it seems to me that your gas price is probably a bit low, but your cash tax is helping you right now. Do those kind of offset each other as we go forward?

The oil price breakeven and to be clear, what I'm really driving at here is it seems to me that you are.

Gas prices, probably a bit lower but your cash taxes, helping you right now that those kind of offset each other as we go forward.

Speaker 3: Yeah, Doug, you're thinking about it right. Spot on. You know, as obviously with the assumptions that we made in the breakeven that we disclosed in the deck, frankly, gas prices are higher than that today and NGO prices are higher than that today. So I would tell you when when I do the back of the envelope math

Yes, Doug you are thinking about it right spot on is obviously with the assumptions that we made in the breakeven that we disclosed in the deck frankly gas prices are higher than that today in NGL prices higher than that today. So I would tell you and when I do the back of the envelope math.

Speaker 3: Set aside the cash taxes piece for a minute, we're actually frankly below that $30 level. And certainly that's all pre-hedges, right? So you factor in hedges, you factor in a different price environment, that changes a little bit. At Ballpark, we hover right around that $30 a barrel breakeven price.

Set aside the cash taxes piece for a minute, we're actually frankly below that $30 level.

And certainly that's all pretty hedges right. So you factor in hedges you factor in a different price environment that changes a little bit, but ballpark, we have a right around that $30 a barrel breakeven price.

On cash taxes, as an important going forward and we disclosed that back in the fall and and reaffirmed our guidance for that for 2022 as it relates to the cash taxes.

We think that the cash tax rate is probably going to be mid single digit somewhere $5 six 7%, depending on how prices shake out for the year.

And thats on our business that is call it $300 million to $400 million of cash taxes in the year and so that again, when we produce up to 100 million barrels of oil that adds a couple a couple of dollars per barrel to that breakeven prices as you alluded to.

Speaker 3: dollars per barrel to that break even price as you alluded to. So now on a normalized basis Jeff I guess post 2022 I'm assuming your NOLs are pretty much done so that's what I was getting at with if we used like say the forward strip for gas does that offset the cash tax leaving you pretty much still around 30 bucks? Yeah you bet and so just to give you the full picture on on the cash taxes and NOL you're spot-on we'll walk into this year with about 3.4 billion dollars of NOLs available to us we'll use up about call it two-thirds of that here.

Speaker 1: So on a normalized basis, Jeff, I guess post 2022, I'm assuming your Reynolds are pretty much done. So that's what I was getting at with, we used like say the forward strip for gas.

So on a normalized basis, Jeff I guess post 2022, I'm, assuming your Nols are pretty much done so.

That's what I was getting out with if we use let's say the forward strip for gas.

Speaker 1: Does that offset the cash tax, leaving you pretty much still around 30 bucks?

Does that offset the cash tax, leaving you pretty much still around 30 Bucks yeah, Yeah, you bet and so just to give you the full picture on the cash taxes and NOL youre spot on where we will walk into this year with about $3 4 billion of Nols available to us.

Speaker 3: Yeah, you bet. And so just to give you the full picture on on the cash taxes of NOL, you're spot on. We'll walk into this year with about $3.4 billion of NOLs available to us.

Speaker 3: We'll use up about, call it two-thirds of that here in 2022, which is going to allow us to deliver that mid-single-digit cash tax rate that I mentioned. Going forward, that will evolve as you would expect. Presuming that prices obviously stay at this level or move higher, your total tax rate kind of flips and you'll probably become two-thirds of that will be cash taxes, and then the remaining third will be your deferred tax piece. So somewhere in the ballpark of a cash tax rate of maybe 15% if you have $80, $90 oil moving forward beyond 2022.

We will use up about call. It two thirds of that here in 2022, which is going to allow us to deliver that mid single digit cash tax rate that I mentioned.

Going forward that will evolve as you would expect presuming that prices, obviously stay at this level or move higher.

Our total tax rate kind of flips and youll, probably become two thirds of that will be cash taxes.

And then the remaining third it'll be your deferred tax piece, so somewhere in the ballpark of a cash tax rate of maybe 15%. If you have kind of $80 $90 oil moving forward beyond 2022.

Speaker 1: Okay, thank you for the clarity. My follow up is a quick one, hopefully. If I look at the strip, Jeff, it's also for you, I'm afraid. Even with the 50% variable after the base dividend increase, you still got an enormous amount of cash. And you still, you've dealt with your balance sheet. So why there are a lot of concerns or the lack of visibility on sustaining the buyback for an extended period beyond 2022? It seems you've got the capacity to...

Okay. Thank you for the clarity my follow up so quick one hopefully if I look at the strip Jeff. It's also for you for it.

Even with the 50% variable.

The base dividend increase you still got an enormous amount of cash.

And you're still you've dealt with your balance sheet. So why why.

Theres a lot from sort of.

The lack of visibility on sustaining the buyback for an extended period beyond 2022, it seems you've got the capacity.

Speaker 3: Well, I would I would go we absolutely do. You're exactly right. And I would tell you our past behavior on this front is going to be a good indicator of what to expect from us in the future. You know, we haven't been shy about altering the framework, you know, on a go forward basis. As I mentioned earlier, I think you'll see more fixed dividend growth from us as the environment evolves and we get more comfort with some of the uncertainties that Rick highlighted in his in his last commentary. And then beyond that, going back to our board, as we just did this last quarter for another reload on on the share repurchase program. So I think you're going to see us continue to evolve the framework. I don't think you'll see us maturely move the variable dividend threshold to kind of the 50% level. We think that that's important to have that sense of clarity and transparency for our for our shareholders. But going forward, I think the fixed dividend can actually grow. And absolutely, the share repurchase is something that we'll continue to lean into. As we look at the share repo, you know, we we believe we continue to trade at a discount to the broader market, a discount to the historical multiples and a discount to our closest peers. So we're going to we're going to continue to be out there and be opportunistic about buying shares. And when we see the stock trade off on kind of an absolute and a relative basis, you'll you should expect to see us enter the market and get after it.

Well I would yes.

We absolutely do Youre exactly right and I would tell you our past behavior on this front is going to be a good indicator of what to expect from us in the future, we havent been shy about altering the.

The framework on a go forward basis as I mentioned earlier, I think youll see more fixed dividend growth from us.

As the environment evolves and we get more comfort with some of the uncertainties that Rick highlighted in his last commentary and then beyond that going back to our board as we just did this last quarter for another reload on the share repurchase program. So I think youre going to see us continue to evolve the framework I don't think youll see us materially move the variable.

Dividend threshold, the kind of the 50% level, we think that that's important.

To have that sense of clarity and transparency for our for our shareholders, but going forward I think the fixed dividend can actually grow and absolutely. The share repurchase is something that we'll continue to lean into as we look at the share repo.

We believe we continue to trade at a discount to the broader market a discount to the historical multiples in a discount to our closest peers. So we're going to we're going to continue to be out there and be opportunistic about buying shares and when we see the stock trade off on kind of an absolute and a relative basis, you'll you should expect to see us enter the market and get after it.

Speaker 1: Great stuff, thanks fellas.

Great stuff. Thanks Fellas.

Okay.

The next question is from Jeanine Wai with Barclays. Your line is open.

Speaker 5: The next question is from Janine Way with Barclays. Your line is open. Hi, good morning, everyone.

Hi, good morning, everyone. Thanks for taking our questions.

Our questions are on the Delaware, maybe the first one is on operational momentum can you just talk maybe about how the oil production should trend throughout the year. We know that Q1. There is some weather in there, but we're particularly interested in kind of the momentum heading into year end given the potential for corporate growth.

Speaker 9: Our questions are on the Delaware. Maybe the first one is on operational momentum. Can you just talk, Clay, maybe about how the oil production should trend throughout the year? We know that Q1, there is some weather in there, but we're particularly interested in kind of the momentum heading into year end given the potential for corporate growth in 23.

And 'twenty three.

Yes, thanks for the questions <unk>.

Speaker 2: Yeah, thanks for the question, Janine. Yeah, certainly we will see a depressed first quarter, and I'll speak corporately first.

Yes, certainly we will see a depressed first quarter and I'll speak Corporately first we should see a nice uptick we've got a pretty good slug of wells coming in at the end of the first quarter are really benefiting Q2, and then I think we will see kind of more ratable production for the balance of the year I think its similar as well.

Speaker 2: We should see a nice uptick. We've got a pretty good slug of wells coming in at the end of the first quarter really benefiting QT.

Speaker 2: And then I think we'll see kind of more routable production for the balance of the year. I think it's similar as we peel back in Delaware when you think about that kind of shape of the curve. So there should probably be a similar shape of the curve in Delaware. Obviously the numbers a little different.

Peel back in Delaware.

When you think about that kind of shape of the curve. So we should probably be a similar shape of the curve in Delaware, obviously, the numbers a little different.

Okay, Great maybe actually switching gears back to the balance sheet for a second here. So just to be clear we wanted to check on.

Speaker 9: Maybe actually switching gears back to the balance sheet for a second here. So, just to be clear, we wanted to tick on potential uses of cash in the future. So we just heard your commentary about, you know, potential to up the buyback if prices hold and things look good, that you don't necessarily want to revisit the 50% of free cash flow, but there's room for growth in the base dividend. When we look at the last...

Potential uses of cash in the future. So we just heard your commentary about.

Potential to up the buyback if prices fall and things like that.

Not necessarily want to revisit the 50% of free cash flow, but there is room for growth and that this dividend when we look at the last <unk>.

Speaker 9: source of or use of cash. I guess that's the balance sheet. And so it seems to us like there's limited opportunity to reasonably call any debt early beyond what you've laid out in the slide for 2023. So we just wanted to check if there's any other debt reduction that you can reasonably do. We know that there's some pretty punitive make-hold premiums and stuff like that. And so we're just trying to figure out how much cash could potentially go towards the buyback and the dividend since you can't really do too much more on the debt side.

Our use of cash I guess, that's the balance sheet and so it seems to us like there is limited opportunity to reasonably call any debt early beyond what you've laid out in the slide for 2023. So we just wanted to check is there any other debt reduction that you can reasonably do we know that there are some pretty punitive make whole premiums and stuff.

That and so we're just trying to figure out how much cash could potentially go towards the buyback and the dividend since you can't really do too much more on the debt side, yes.

Speaker 3: Yeah, you bet, Janine. No change to our game plan as it relates to, you know, our leverage position and the debt that we have outstanding. As you'll recall, what I walked through in the fall was that we've got about $400 million of callable debt at the end of this year, call it October of this year, and then another just under $600 million of maturities plus some more callable debt that that comes due in 2023. So our current base game plan is to take out that billion dollars of debt, you know, kind of on that timetable. And then as you move into 2024, there's another and 2025, there's another $500 million a year, roughly. So over the next, you know, call it three to four years, we think we can take another, you know, call it two, two and a half billion dollars of absolute debt out. That's our current game plan, obviously, depending on what rates do and how things shake out, we might alter that. But that's our current intention.

Yes, you bet Janine.

No change to our game plan as it relates to.

Our leverage position and the debt that we have outstanding as Youll recall, what I walked through in the fall was that we've got about $400 million of callable debt at the end of this year call. It October of this year and then another just under $600 million.

Maturities plus some more callable debt that comes due in 2023. So our current base game plan is to take out that $1 billion of debt kind of on that timetable and then as you move into 2024. There is another 2025, there is another $500 million a year roughly so over the next call. It three years to four years, we think.

We can take another call it $2 $5 billion of absolute debt out that's our current game plan, obviously, depending on what rates do and how things shake out we might alter that but thats our current attention.

Great. Thank you.

Speaker 10: You bet.

You bet.

The next question is from <unk> Kumar with Wells Fargo. Your line is open.

Speaker 5: The next question is from Nitin Kumar with Wells Fargo. Your line is open.

Speaker 2: All right. Good morning, Rick, and congrats on another successful quarter. You've come a long way since the merger, as you said in your prepared remarks. But, you know, you're generating about 60 dollars per barrel in free cash given your breakeven.

Hi, Good morning, Rick and congrats on another successful quarter, you've come a long way since the merger as you said in your prepared remarks.

But you are generating about $60 per barrel and free cash given your breakeven you have.

Speaker 2: You've talked about a market leading yield for income investors, but imagine well-held economics are pretty attractive at today's prices. So the question I have is how committed are you to sub 5% oil growth if commodity prices stay at today's levels into 2023 and beyond? And maybe when do you think you have the license to grow again?

<unk> talked about a market leading yields for income investors, but imagine well head economics are pretty attractive at today's prices. So the question I have is how committed are you to sub 5% oil growth if commodity prices stay at today's levels into 2023 and beyond and maybe when do you think you have the license to grow again.

<unk>.

Well that's a good question I think that in what I would just point to is.

Speaker 11: Well, that's a good question. You know, I think, Nitin, what I would just point to is, and I try to articulate this, you know, pretty routinely is, is we do put a lot of, we do put a lot of faith into the shape of the curve. And sometimes you can, you can debate where the absolute points on a curve are, but when you see such steep backwardation.

Tried to articulate this.

Pretty routinely is because we do put a lot of <unk>.

Put a lot of faith into into the shape of the curve and sometimes you can you can debate, where the absolute points on a curve or but when you see such steep backwardation.

Speaker 11: And you start thinking about trying to add activity. By the time you bring those barrels on, I mean, let's face it, it's going to be a while down the road. So we think for us.

And you start thinking about trying to add activity by the time you bring barrels on I mean, let's face it it's going to be a while down the road. So we think for us.

Speaker 11: You know the five percent that we laid out at the time of the

The 5% that we laid out at the time of the.

Speaker 11: The announcement of the merger still holds. That's the max. And we really, to be honest with you, there's so much uncertainty probably as you look out in the outer years. I think for us, we'll stick to our knitting and maintain that 5% growth.

The announcement of the merger is still is still holds.

What's the Max and we really to be honest with you.

There is there is so much uncertainty probably as you look out in the outer years, I think I think for us.

Stick to our knitting and maintaining that Max that 5% growth.

Great I think thats the answer because people wanted to hear.

Speaker 2: Great, I think that's the answer most people want to hear. Yeah, and Nitin, if I can, Nitin, let me just add one thing. I want to make sure that everyone on the call understands, you know, we are growing. When you start talking about the free cash flow per share growth, you know, we talked about 70% growth, and you just need to let that soak in for a few moments of this year over next year. So that's where we're going to focus on our growth, to be honest with you.

Yes.

If I can let me just add one thing I want to make sure that everyone. On the call are saying we are growing when you start talking about the free cash flow per share growth.

We talked about 70% growth and you just need to you need to let that soak in for a few moments on this.

This year over next year so that's.

Where we're going to focus on our growth to be honest with you.

Speaker 2: Great. I guess my next question is really for Clay, but, you know, the Eastern Delaware assets, the PRB, these are some of the newer assets in your portfolio. It's an abundance of riches, but they're not getting as much capital right now. So I just want to understand, how do those assets fit into the broader Devon inventory pile?

Great.

I guess my next question Israeli for clay, but.

The eastern Delaware assets to <unk> some of the newer assets in your portfolio.

Is it.

The abundance of riches, but theyre not getting as much capital right now so I just wanted to understand how good those assets fit into the broader Devin inventory pile.

Speaker 6: Yeah, thanks for the question. And I tell you, those teams are doing some great things.

Yes. Thanks for the question and I would tell you those teams are doing some great things we.

Speaker 6: We do have some capital allocated, some work. In fact, we have two rigs over in the eastern Delaware right now delineating a little bit more of that kind of eastern shelf flake.

We do have some capital allocated some work in fact, we have two rigs over in the eastern Delaware right now.

Linearity, a little bit more of that kind of the eastern shelf play.

Speaker 6: The opportunity you point to, the abundance of riches, is it just doesn't compete for the lion's share, the development, you know, where we're really turning the crank to generate substantial returns. But we're realists. I mean, we look down the curve and we say, OK, where do we need to invest those assessment dollars?

The opportunity to point to the abundance of riches as it just doesn't compete for the lion's share of the development, where we're really turning the crank to generate substantial returns, but we're realists and we look down the curve and we say, okay, where do we need to invest those assessment dollars to further delineate we're watching aggressive.

Speaker 6: to further delineate. We're watching, you know, aggressively across the fence.

Really across the fence.

Speaker 6: The Powder River Basin that you brought up is a great example of that. There's some really exceptionally good companies investing real dollars in that. We're participating. We're watching. It's a very relatively small percentage of our overall capital budget.

The powder River basin that you brought up is a great example of that there's some really exceptionally good companies investing real dollars in that we're participating we're watching is a very relatively small percentage of our overall capital budget, but as this as the prices continue to strengthen all of this stuff lights up and.

Speaker 6: But as the prices continue to strengthen, all of this stuff lights up and is very productive, full cycle, very strong returns, and will compete for capital at some point in our portfolio. And so I don't feel very rushed.

As very productive full cycle very strong returns and we will compete for capital at some point in our portfolio and so I don't feel very rushed to push it out of our portfolio.

Speaker 6: to push it out of our portfolio, if that was your question. I think there will be a great opportunity for this, for the shine, fund to shine on these assets in due time.

If that was your question I think there will be a great opportunity for this for the Shine Sunshine on these assets in due time.

Thanks, that's helpful.

Yes.

Speaker 5: The next question is from Paul Chang with Scotiabank.

The next question is from Paul Cheng with Scotiabank. Your line is open.

Speaker 12: Thank you. Two questions, please. The first one, I think, is for Jeff. Jeff, this year that you hatched about 20% of the world and a lot of those is legacy hatched, I think, from WPX.

Alright, thank you.

Two questions. Please.

First one I think just for Jeff Jeff.

This year that you hedge about 20% of the wall in my loft Oca's lacking.

So you had checking.

PX.

Speaker 12: Going forward with your balance sheet and with your cash flow model and the operating model,

Going forward with your partners.

Sure and with your cash flow model and the operating model.

Speaker 12: Is the 20% a reasonable level going forward that we should assume you guys are going to hedge or that there's a fundamental change maybe after these negative hedges that you guys no longer going to do hedges?

<unk> reasonable level going forward that we should assume you guys are going to add or that there's a fundamental change might be after this nicotine patches that you guys are no longer going to do hedges.

Yes, Thanks Paul.

Yes, you bet, Great question, and I would tell you it really no material change to our philosophy from what we talked about on the last call back in the fall just to give you a little bit of a foundation for where we sit today, we're roughly about 25% hedged on oil and about 30% 35% on gas.

Speaker 3: Yeah, you bet. Great question, and I would tell you really no material change to our philosophy from what we talked about on the last call back in the fall. Just to give you a little bit of a foundation for where we sit today, we're roughly about 25% hedged on oil and about 30-35% on gas.

That's an appropriate level, given our financial strength and the margin of safety that we have on with our low reinvestment rate of our kind of our base business model. So you've heard me talk about that in the past the thing Thats fundamentally changed in our business versus 234 years ago is in the past we were spending all of our all of our cash flow in an attempt to grow.

Speaker 3: the past we were spending all of our cash flow in an attempt to grow at double digit type rates, which was competitive with the broader sector. Today with the lower reinvestment ratio and the steady state level of activity, it just creates a margin of safety for us in our business to where even if prices pull back, it doesn't alter our activity. So you have heard me and Clay talk about it in the past. That's what really dilutes our returns, is when we have to yank around our operating activity from month to month or quarter to quarter. We try really hard not to do that. That's why we developed the steady state kind of maintenance capital level program. And it's really served us well. Obviously the Kami prices that we're experiencing today have been a nice tailwind as well. But as it relates to our hedging program, we feel like going forward, you'll see us hedge at this lower level, somewhere around the 30% level, whereas historically we might have been closer to 50% or north of that. So you'll still be hedging, but not abandoning the hedges because when they are... Yeah, absolutely. We......the hedge. Yeah, you bet. So our executive team, along with our marketing group who's responsible for executing the hedges for us, we meet every other week and we...

Ro.

Double digit type rate, which was competitive with the broader sector today with the lower reinvestment ratio in this steady state level of activity. It just creates a margin of safety for us in our business to where.

Even if prices pull back it doesn't alter our activity. So you have heard me and clay talk about it in the past that's what really dilutes. Our returns is when we have to yank around our operating activity from month to month or quarter to quarter. We try really hard not to do that that's why we developed a steady state kind of maintenance capital level program and it has really served us well.

Obviously, the commodity prices that we're experiencing today have been a nice tailwind as well, but as it relates to our hedging program, we feel like going forward Youll see us hedge at this lower level somewhere around the 30% level, whereas historically, we might have been closer to 50% or north of that.

Speaker 12: So you'll still be hedging, but not abandoning the hedges. Yeah, absolutely.

So would you still be hedging.

But not abandoning that because yeah, absolutely we are.

Speaker 3: Yeah, you bet. So our executive team along with our marketing group who's responsible for executing the hedges for us, we meet every other week and we debate what we're seeing in the market. We talk about not only the benchmark prices, but the prices that we're seeing in the individual basins as well. And we are actively monitoring that and evaluating whether or not we want to layer on additional hedges. And we do it in a variety of ways. You know, sometimes we use swaps.

Yeah, you bet, so our executive team along with our marketing group is responsible for executing the hedges for US. We meet every every other week and we debate what we're seeing in the market, we talk about not only the benchmark prices, but the prices that we're seeing in the individual basins as well.

And we are actively monitoring that and evaluating whether or not we want to layer on additional hedges and we do it in a variety of ways. Sometimes we use swaps here more recently, we've used pretty wide costless collars to help us mitigate that risk that we see in the market.

Speaker 3: Here more recently we've used pretty wide costless callers to help us mitigate that risk that we see in the market.

Speaker 12: The same question, just trying to go back into the powder with the base and the clay.

Alright.

Question, just trying to go back into the powder with the pace on that.

Speaker 12: things that you guys merge and that is a new asset to you and maybe some of your team.

It seems that you guys can merge and that that sets a new asset to you and maybe somewhat team.

So over the past 15 months or 18 months I wanted to ask you learn and how.

Speaker 12: So over the past 15 months or 18 months, what have you learned?

Speaker 12: Are we, are you guys going to take the approach that just let other people like Continental and maybe EOG going to say spend the money and then you just watch, or that you're going to take a more active role over the next, may not be this year, but over the next say two or three years? What's the approach that you guys going?

Are you guys going to take the approach that.

Other people.

Continental and maybe.

Yes.

<unk> going to say it spanned Monday, and then you just watch or that you're going to take a more active role at the next year, but over the next say.

Two or three years.

The approach that you guys are going to take here.

Speaker 6: Yeah, Paul, in my remarks, I talked a little bit about some of the work that we're doing the excitement around pushing the laterals a little longer.

Yes, Paul.

Remarks talked a little bit about some of the work that we're doing the excitement around pushing the laterals a little longer kind of rebooting. The completion design and we have a couple of wells that came on last year are watching and I can tell you, especially in today's strip. The returns are competitive they make they competitive competitive.

Speaker 6: kind of rebooting the completion design. And we have a couple of wells that came on last year watching, and I can tell you, especially in today's strip.

Speaker 6: The returns are competitive. They make competitive returns on a full cycle basis. They look really nice. Now, they're not competitive. They're not competitive.

Returns.

Full cycle basis, they look really nice now they are not competitive and amongst our our full portfolio, but they yield positive returns and so as we are able to continue that we have a handful of wells.

Speaker 6: and amongst our our full portfolio, but they yield positive returns. And so as we're able to continue that, we have a handful of wells.

Speaker 6: I believe half a dozen wells or so will be drilling this year. Again, pushing the laterals out, really watching the productivity side. I'm less concerned at this point on trying to drive down the cost side of the equation because I have full confidence once the team crosses that threshold that we could get to a development mode, those costs will come down.

Half dozen wells or so we'll be drilling this year again, pushing laterals out really watching the productivity side unless concerned at this point on trying to drive down the cost side of the equation because we have full confidence once the team.

Crosses that threshold that we could get to a development mode. Those costs will come down so really watching that productivity side seeing how this how these how this reservoir really reacts and I'm speaking specifically around the Niobrara and somewhat the Mallory as well, where you see a lot of the upside potential.

Speaker 6: So really watching that productivity side, seeing how this reservoir really reacts. I'm speaking specifically around the Niobrara and somewhat the Maori as well where you see a lot of the upside potential. But don't expect us to divert a whole lot of capital toward that asset in the near term.

But don't expect us to divert a whole lot of capital toward that asset in the near term.

Speaker 6: We are thrilled to see great companies like Continental and EOG and others continuing to invest in scale-up activity and that gives us really good confidence that we'll be able to continue to learn even with a very moderate capital program.

We are thrilled to see great companies like continental.

And others, continuing to invest and scale up activity and that gives us really good confidence that we'll be able to continue to learn even with a very moderate capital program.

Okay, just curious that in Eagle Ford that you guys formed that joint venture and turned out to be extremely successful.

Speaker 12: Okay, just curious that in EaglePod, that you guys formed a joint venture and turned out to be extremely successful, and you have someone that to help you and maybe accelerate the development. In part of the reason, does it make sense for you guys that trying to do something like that, or that this is something that is just such an early stage, you think you don't really don't know what you have and you want to keep 100% until you know before you decide what to do?

And you have someone that to help you and maybe accelerate that development.

In parallel with the basin. That's it makes sense for you guys that are trying to do something like that or that this is something that is such an early stage everything you told me. They don't know what you have in your water coupon <unk> as know before you decide what to do.

Speaker 6: Yeah, Paul, I think our JV that we executed in the MidCon is a great example of how to find

Yeah, Paul I think our JV that we executed in the mid Con is a great example.

How defined.

Speaker 6: how to allocate resource to a play that doesn't on a heads up basis compete today for capital, but you know you need to get that machine running. And so I think the Interdarca Basin is a great example of we needed to get money back to it, we brought in a partner, leveraged that relationship, and we have significantly outperformed on the well cost, we've significantly outperformed on well productivity, and that asset continues to drive towards competitiveness on a heads up basis.

How to allocate resource to a play that doesn't on a heads up basis compete today for capital, but you know you need to get the machine running and so I think the Anadarko Basin is a great example of we needed to get money back to it we brought in a partner leverage that relationship and we have significantly outperformed on.

On the well cost we've significantly outperform on well productivity and that asset continues to drive towards competitiveness on a heads up basis. The returns I can tell you today and in the strip environment are outstanding on a heads up basis powder is a little further.

Speaker 6: The returns, I can tell you today, in the strip environment are outstanding on a heads-up basis.

Speaker 6: Powder is a little further earlier in the mature cycle, I would say, from being able to cycle through that. But when we get to a point where we can go to a third party and say, here are the returns that we've exhibited on a routine basis.

Earlier in the mature cycle, I would say from being able to cycle through that but when we get to a point, where we can go to a third party and say here are the returns that we've exhibited in on a routine basis and there is there's meat on that bone available for them to come in and lever. Then we can take a leveraged approach just how we did in the Anadarko and scale.

Speaker 6: and there's meat on that bone available for them to come in and lever, then we can take a leveraged approach just how we did in the Anadarko and scale that into something that really could compete on a heads-up basis. So that's certainly a possibility. We're not quite there yet, but certainly something in our frame of view that we would be excited to explore at the right time.

That into something that really could compete on a heads up basis. So that's certainly a possibility we're not quite there yet, but certainly something in our.

Our frame a view that we will be exciting too excited to explore at the right time.

Thank you.

Speaker 5: The next question is from Matthew Portillo with TPH. Your line is open.

The next question is from Matthew Portillo with TBH. Your line is open.

Good morning, all.

Hey, Matt.

Speaker 8: Just a quick question maybe for Clay. I know that this has been a big focus for the organization of blocking up and getting contiguous acreage in the Permian. I was curious how much additional room do you think there is to run with continuing to progress the lateral length and what that might mean for the average lateral length in 2022 in the Permian? It continues to seemingly drive an improvement in capital efficiency here.

Just a quick question maybe for clay I know that this has been a big focus for the organization.

Blocking up and getting contiguous acreage.

In the Permian I was curious how much additional room do you think there is to run with continuing to progress the lateral length and what that might mean.

For the average lateral length in 2022 in the Permian It continues to seemingly drive an improvement in capital efficiency here.

Speaker 6: Yeah, Matt, that's definitely a tool when you're paying attention to average lateral length, you see the correlation between capital efficiency and lateral length. And that drives all the way through to the bottom line return. So we're excited about longer laterals. We have a healthy dose of three mile laterals in the mix for the Permian. But I would say by far most of our wells will be two mile wells.

Yes, Matt that's definitely a tool when you are paying attention to average lateral link.

See the correlation between capital efficiency and lateral length and that drives all the way through to the bottom line return. So we're excited about longer laterals, we have a healthy dose of three mile laterals in the mix for the Permian, but I would say most by far most of our wells will be two mile Wells. The challenge there is when you set up.

Speaker 6: The challenge there is when you set up the initial land development, a lot of times it's

The initial land development a lot of times it's.

Speaker 6: you're kind of locked in and so Retooling a development that's partially developed from two to three is a pretty challenging Opportunity as we move into some of the other areas that either haven't been fully developed or we're continuing to work the land work We will often you'll often see us push towards those three mile laterals. We've built a lot of confidence

You are kind of locked in and so re tooling of development. That's partially developed from two to three is a pretty challenging opportunity as we move into some of the other areas that either haven't been fully developed or we're continuing to work. The land work, we will often youll often see us push towards those three mile laterals, we've built a lot of confidence.

Speaker 6: in drilling those three mile laterals. I just mentioned the powder. We've done quite a few in the Williston and quite a few now in the Delaware. And as you as you point out, there's a whole lot of value creation efficiency associated with that. We're not done. Our land team is

<unk>.

In drilling those three mile laterals I just mentioned the powder, we've done quite a few in the Williston and quite a few now in the Delaware and as you as you pointed out theres a whole lot of value creation efficiency associated with that we're not done our land team has added every single day those like for like trades are hugely mutually beneficial.

Speaker 6: added every single day, those like-for-like trades are hugely mutually beneficial.

Speaker 6: And there's still opportunities out there. We're working on several right now. Hope to talk more about in the coming quarters. And just know every time we get one of those things done, that's more green lights for us to either develop on a two mile or a three mile. And in these price environments, to be honest, the returns kind of cap out and max out all the tools that we have on rate of return. So it's pretty awesome to watch. So a lot of good work going on there.

And there's still opportunities out there we're working on several right now hope to talk more about in the coming quarters and just know every time, we get one of those things done that's more green lights for us to develop either develop on a two mile or three mile and then these price environments to be honest.

Returns kind of cap out Max out all of those who will do we have on on rate of return. So it's it's pretty pretty awesome to watch so lot of good work going on there.

Perfect and then my follow up question just relate the Dow JV just wanted to check in on where we are from a development perspective I think the original deal was for 133 wells.

Speaker 8: Perfect. And then my follow-up question just relates to the Dow JV. Just wanted to check in on where we are from a development perspective. I think the original deal was for 133 wells. So, should we expect that, I guess, at the current pace to continue for the next few years? And then I guess with the strength in the commodity backdrop, do you see any further activity to either expand that existing JV or bring in new partners to continue to drive competitive rates of return with the Permian?

Should we expect that I guess at the current pace to continue for the next few years and then I guess with the strength in the commodity backdrop do you see any further activity to either expand that existing JV or bringing in new partners to continue to drive competitive rates of return with the Permian.

Speaker 6: Yeah. So we're about 30% to date on the Dow deal. We're scaling up activity a little bit relative in 21 relative to 22. So we'll be most of the way through end of 22, probably have a tail in 23. I can tell you, it's one of those deals you love to see where we're thrilled with it.

Yes, so we're about 30% to date on the Dow deal, we're scaling up activity a little bit relative in 'twenty, one relative to 'twenty. Two so we'll be most of the way through into 'twenty, two probably have a tail in 2003 I can tell you. It's one of those deals you'd love to see where we're thrilled with it was right the right.

Speaker 6: financial tool that we needed to apply to this great asset, and Dow on the other side is thrilled as well. So I would say the door is wide open to expand the conversation. There's a lot more acreage. We've got a tremendous position, but we also have to look at it and say, okay, where does this become essentially a competitive heads-up project for us?

Financial tool that we needed to apply to this great asset and Dow on the other side as thrilled as well so I would say the doors wide open to expand the conversation there is a lot more acreage we've got a tremendous position.

But we also have to look at it and say, Okay, where does this become essentially a competitive heads up project for us and when do we just funded.

Speaker 6: And when do we just fund it straight up? So anyway, it's a good problem to have. Really pleased with the team that worked, the business development team that put it together initially. This is just a real great success. And I hope to continue to model that where applicable. And maybe Powder is a place that could use this kind of opportunity in due time. Thank you. Thank you.

Right up so anyway.

A good problem to have really pleased with the team that work the business development team that put it together initially.

This is just a real great success and I hope to continue to model that where applicable and maybe powder is a place that could could use this kind of opportunity.

<unk>.

Thank you.

Thanks Vince.

John Freeman with Raymond James Your line is open.

Good morning, Thanks for squeezing me in.

Speaker 13: Good morning. Thanks for squeezing me in. The first question I had, just to follow up Jeff on what you were saying on the base of the fixed dividend. So just to be clear, the increase in that dividend was just a result of the payout ratio going higher and there was no change to y'all's mid-cycle pricing that that was based on.

The first question I had just a follow up Jeff on what you were saying on the.

So the fixed dividend.

So just to be clear that the increase in that dividend.

As a result of the payout ratio going higher and there was there was no change to your mid cycle pricing that that was baseball.

Speaker 3: Yeah, that's correct. That's the way we've thought about it is, as we've gotten, you know, further into the environment, and we've worked through the cost structure, obviously, over the last several years, but particularly post post merger, when we sat back and looked at our cost structure and what we thought was sustainable going forward based on our mid cycle pricing, we decided it made sense to move that. And you know, the fixed dividend higher based on that payout ratio that I talked about kind of roughly a seven and a half percent.

Yes, that's correct. That's the way we've thought about it is as we've gotten further into the environment and we've worked through the cost structure, obviously over the last several years, but particularly post post merger when we sat back and looked at our cost structure and what we thought was sustainable going forward based on our mid cycle pricing, we decided it made sense to move.

That.

The fixed dividend higher based on that payout ratio that I talked about kind of roughly a seven 5%.

Speaker 13: And Jeff, can you remind us of the mid-cycle price that you all are using? Is that still around like a $50 oil, $3 gas type level? No, it's higher than that. We've been using kind of $60, $65 oil for that.

And Jeff can you remind us is the mid cycle price and that you are using is that still around like a $50 oil $3 gas high level no. It's higher than that we've been using kind of 60 to $65 oil for that.

Speaker 13: And the gas price, is that around $3, $3, $2.50? Three, yeah, exactly.

And the gas price does that around $332 53.

Yes exactly.

Okay, Great and then just the last question for me.

Speaker 13: Okay, great. And then just the last question for me, I realized that the full year of 22 budget didn't change at all, but the one number that I don't think y'all had wouldn't have had completely dialed in at that point. Y'all were sort of estimating was on the non-op side. I think y'all were sort of thinking as a placeholder that would be 50 to 100 million. I'm just curious kind of where that's shook out given the big move in the commodity price since y'all last spoke three months ago.

I realize that the full year 'twenty two budget didn't change at all but the one number.

I don't think Youll had would have had completely dialed in at that point you are sort of estimating was on the non op side. I think you all are sort of thinking as a placeholder that would be 50 to 100 million I'm, just curious kind of where that shook out given the big move in the commodity price since you last spoke three months ago.

Yes, what I would say on that is remember we have a deal in place to cap that the.

Speaker 6: Yeah, what I would say on that is remember we have a deal in place to cap that, the non-op exposure in the Permian and so we're really only exposed in the other basins and so we feel like we're we have it that pretty well under control but clearly as activity picks up there's more pressure on that and we'll figure out how we manage that during the course of the year.

The non op exposure in the Permian and so we're really only exposed in the other basins and so we feel like we have.

Pretty well under control, but clearly as activity picks up there is more pressure on that and we'll figure out how we how we manage that during the course of the year.

Great Great job guys. Thanks.

Thanks, John .

Well it looks like we're at the end of our time slot today, we appreciate everyone's interest in Devon, and if you have any further questions.

Speaker 4: Well, it looks like we're at the end of our time slot today. We appreciate everyone's interest in Devon. And if you have any further questions, reach out to the investor relations team at any time. And once again, thank you for your time and have a good day.

Reach out to the Investor relations team at any time and once again.

Thank you for your time and have a good day.

Yes.