• Free Cash Flow: Generated $3 billion for the year, with $738 million in the fourth quarter.
• Shareholder Returns: Returned $2 billion for the year, including $444 million in the fourth quarter via dividends and share repurchases.
• Dividend Increase: Quarterly dividend increased to $0.24 per share, a 9% improvement over 2024.
• Oil Production: Reached an all-time high of 398,000 barrels per day in the fourth quarter.
• Cash Position: Increased to $850 million, up 25% from the previous quarter.
• Capital Investment: Expected to be $3.9 billion for 2025, $200 million lower than previous guidance.
• Production Outlook for 2025: Expected to deliver 815,000 BOE per day, including 383,000 barrels of oil per day.
• Natural Gas Production: More than 1.3 billion cubic feet per day, with revenue expected to more than double year-over-year.
• Net Debt-to-EBITDA Ratio Target: Aiming to drive below 1 times.

• Warning! GuruFocus has detected 4 Warning Sign with DVN.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Devon Energy Corp (NYSE:DVN) reported exceptionally strong results for the fourth quarter of 2024, with record oil production reaching 398,000 barrels per day.
• The company generated $3 billion of free cash flow, returning $2 billion to shareholders, and increased its quarterly dividend by 9% to $0.24 per share.
• The successful integration of the Grayson Mill assets and the Williston Basin acquisition contributed significantly to the company's performance.
• Devon Energy Corp (NYSE:DVN) has maintained financial strength with ample liquidity and low leverage, positioning itself well for future growth.
• The company has identified $50 million in capital and expense savings from the Grayson Mill asset, exceeding its synergy target.

Negative Points

• Despite strong performance, there is caution against extrapolating the fourth quarter's production run rate as it may not be sustainable every quarter.
• The dissolution of the joint venture with BPX in the Eagle Ford may present operational challenges as Devon Energy Corp (NYSE:DVN) takes full control.
• The company faces potential impacts from tariffs on materials used in wells, although currently estimated to be less than a 2% impact on the capital program.
• Devon Energy Corp (NYSE:DVN) has a significant portion of its capital structure as debt, which could amplify equity volatility depending on commodity prices.
• The company has a limited inventory depth of 10 years at current production rates, raising concerns about long-term sustainability without further acquisitions or discoveries.

Q & A Highlights

Q: Could you remind us of the inventory duration you see within the Grayson Mill asset and how that compares with your legacy assets? A: We were short on inventory before acquiring Grayson Mill, which filled that gap. We now have close to a decade of opportunity in the Williston Basin, including Grayson. The productivity and cost improvements have been significant, and we are running at a sustainable pace.

Q: Can you give us some background on the Eagle Ford split with BPX and how the allocation was decided? A: The split was mutually beneficial as both parties valued different assets more. We expect to save over $2 million per well with improved operational control and design, which significantly enhances returns.

Q: With the focus on Grayson Mill and operational efficiencies, do you anticipate more growth in the Rockies later in the year? A: We plan to keep Grayson Mill production flat with three rigs. The Powder River Basin will focus on science work to unlock potential, balancing growth and operational efficiency.

Q: Are you focusing more on organic growth versus M&A, and is buying back your own stock the optimal strategy? A: Yes, we see tremendous value in organic growth through operational improvements and technology application. While we remain open to consolidation, our primary focus is enhancing Devon's existing assets.

Q: Can you explain the rationale behind dissolving the Eagle Ford partnership and the expected value uplift? A: The dissolution allows us to save $2 million per well, enhancing NPV. Controlling the pace of operations and leveraging refrac opportunities are key value drivers. This move is mutually beneficial for both parties.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.