Devon Energy Corporation (DVN)

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Devon Energy Corporation (NYSE:DVN)

Q2 2014 Earnings Conference Call

August 06, 2014 11:00 AM ET


Vince White - VP, Communications and IR

John Richels - President and CEO

Dave Hager - COO

Tom Mitchell - EVP and CFO

Darryl Smette - EVP, Marketing, Facilities, Pipeline and Supply Chain


David Hickman - Hickman Energy Advisor

Doug Leggate - Bank of America Merrill Lynch

Brian Singer - Goldman Sachs

Arun Jayaram - Credit Suisse

Subash Chandra - Jefferies



Welcome to Devon Energy’s Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. After the prepared remarks we will conduct a question-and-answer session. The call is being recorded. At this time, I’d like to turn the conference over to Mr. Vince White, Senior Vice President of Investor Relations. Sir, you may begin.

Vince White

Thank you and welcome everyone to Devon’s second quarter earnings call and webcast. Before we get started, I want to make sure that everyone is aware that we have prepared a handful of slides to supplement today’s script. These are integrated with today’s webcast and they’re also available for download in PDF form on Devon’s home page For those that are not participating via webcast, we’ll make sure we refer to slide numbers during our prepared remarks so that you can follow along.

Today’s call will follow our usual format and I a few preliminary items to cover, then I’ll turn the call over to our president and CEO, John Richels for this comments, following John, Dave Hager, our chief operating officer will provide an operations update and we’ll wrap up the prepared commentary with a financial review by our CFO, Tom Mitchell.

After our financial discussion, we’ll have a Q&A session and we’ll conclude the call after about an hour and of course a replay will be available later today on our Web site. The investor relations team will also be available this afternoon should you have any follow-up questions. On the call today, we’re going to update some of our forward looking information. In addition to the updates that we are providing in the call, we will file a Form 8-K later today that will have details of our updated 2014 estimates. A copy of this updated 8-K will be available within the Investor Relations section of the Devon Web site as well.

The guidance we provide today includes plans, forecast, expectations and estimates which are forward-looking statements under U.S. Securities Law. These are of course subject to a number of assumptions, risk and uncertainties many of which are beyond the Company’s control. These statements are not guarantees of future performance and we’d invite you to see the discussion of risk factors relating to these estimates and our Form 10-K.

Also in today’s call, we’ll reference certain non-GAAP performance measures. When we use these measures we are required to provide specific related disclosures, those disclosures can be found on Devon’s website.

As many of you know I am retiring from Devon at the end of this week. I can honestly say that being a part of this organization for the last 21 years has been both a pleasure and a privilege. I am truly grateful to all my friends at Devon and in the investment community and the industry for making my time here so rewarding. So thank you.

At this point I’ll turn the call over to John Richels. John.

John Richels

Thank you Vince and on behalf of the Company and many people you have positively impacted over your career. I just want to take this opportunity to thank you. You’ve done a terrific job through the years and you have been a great friend and we wish both you and Marty a very happy and healthy retirement.

Now as many of you know with Vince’s retirement, Howard Thill has joined our team as Senior Vice President of Communications Investor Relations. Howard has a long history in the business with over 30 years of experience the last 12 and much the same role at Marathon Oil and previously at Phillips Petroleum. We’re very fortunate to have an individual of Howard’s experience join our team and we welcome Howard to Devon. I am sure that many of you will have the opportunity to meet with Howard over the coming months.

So let’s move to the results of the quarter. The second quarter was another outstanding one for Devon both operationally and financially as we continued to successfully execute on our strategic plan. As we point out on Slide 3, during the quarter we announced the sale of our non-core U.S. assets the final piece of our portfolio transformation. Since announcing this planned transformation just nine months ago we have taken three very significant steps to reconfigure our portfolio, the accretive Eagle Ford acquisition, the unique and innovative EnLink transaction and the sale of our non-core properties at very attractive prices.

Also during this time our drilling program has delivered impressive oil production growth through our focus on our reconfigured portfolio. This oil focused effort helped to deliver a 47% increase in cash flow this quarter compared to last year’s second quarter. And during the period we also completed number of major projects that we’ll discuss in more detail during the call.

So let’s take a look at some of these highlights in a bit more detail.

Looking at Slide 4, in the second quarter we achieved year-over-year oil production growth of 34% from our go forward asset base, reaching an average daily rate of 205,000 barrels per day. This growth was driven entirely by light oil production from our retained U.S. assets which increased an impressive 79% compared to the second quarter of 2013. This dramatic increase in U.S. oil productions largely attributable to growth from our world class operations in the Permian basin and in the Eagle Ford.

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