Q4 2025 Devon Energy Corp Earnings Call

February 18, 2026

Chris Carr: Slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, President and Chief Executive Officer, Jeff Ritenour, our Chief Financial Officer, John Raines, SVP Asset Management, Tom Hellman, SVP E&P Operations, and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this conference call will include forward-looking statements as defined under US securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay.

Speaker #1: Insides can be found in the investor section of the Devon website. Joining me on the call today are Clay Gaspar, President and Chief Executive Officer; Jeff Ritenour, Chief Financial Officer; John Raines, SVP Asset Management; Tom Hellman, SVP EMP Operations; and Trey Low, SVP and Chief Technology Officer.

Christopher Carr: Slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, President and Chief Executive Officer, Jeff Ritenour, our Chief Financial Officer, John Raines, SVP Asset Management, Tom Hellman, SVP E&P Operations, and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this conference call will include forward-looking statements as defined under US securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay.

Speaker #1: As a reminder, this conference call will include forward-looking statements as defined under U.S. securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast.

Speaker #1: Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay.

Speaker #2: Thank you, Chris. Good morning, everyone, and thanks for joining us. Today we'll focus our on Devon's strong fourth quarter and full year 2025 results.

Clay Gaspar: Thank you, Chris. Good morning, everyone, and thanks for joining us. Today, we'll focus on Devon's strong Q4 and full year 2025 results. Before diving into those very impressive results, I also want to cover the highlights of our recently announced merger with Coterra Energy. I'm incredibly excited about this merger and what it means for our shareholders. The combination of these two outstanding companies creates a clear path to superior value creation that neither company could achieve independently. The merger unites complementary portfolios with substantial and overlapping positions across the best US shale basins. At the heart of this combined portfolio is a world-class position in the Delaware Basin, which will generate more than half of our total production and cash flow, backed by a decade-plus of top-tier inventory.

Speaker #2: Before diving into those very impressive results, I also want to cover the highlights of our recently announced merger with Cotera Energy. I'm incredibly excited about this merger, and what it means for our shareholders.

Speaker #2: The combination of these two outstanding companies creates a clear path to superior value creation that neither company could achieve independently. The merger unites complementary portfolios with substantial and overlapping positions across the best U.S.

Speaker #2: Shale basins. At the heart of this combined portfolio is a world-class position in the Delaware Basin, which will generate more than half of our total production and cash flow.

Speaker #2: Backed by a decade-plus of top-tier inventory, beyond the Delaware, the geographic diversity and balanced commodity mix provide strength throughout the volatility of the commodity price cycle.

Clay Gaspar: Beyond the Delaware, the geographic diversity and balanced commodity mix provides strength throughout the volatility of the commodity price cycle. The scale and operational overlap of our combined platform will unlock substantial value. By implementing best practices, optimizing our cost structure, and maximizing our infrastructure utilization, we will capture significant synergies. In total, we expect to deliver $1 billion in annual pre-tax run rate synergies by year-end 2027. To be clear, these synergy targets are incremental to our business optimization program and reflect true operational and efficiency gains. And importantly, if there are any net reduction in activity levels, these capital savings will be incremental to our announced billion-dollar target. I want to emphasize that we have a strong record of delivering on these business optimization wins. Our proven framework and experience will be leveraged to identify, deliver, and communicate these merger synergies.

Speaker #2: The scale and operational overlap of our combined substantial value. By implementing best practices optimizing our cost structure and maximizing our infrastructure utilization, we will capture significant synergies.

Speaker #2: In total, we expect to deliver a billion dollars in annual pre-tax run-rate synergies by year-end '27. To be clear, these synergy targets are incremental to our business optimization program and reflect true operational and efficiency gains.

Speaker #2: And importantly, if there are any net reduction in activity levels, these capital savings will be incremental to our announced billion-dollar target. I want to emphasize that we have a strong record of delivering on these business optimization wins.

Speaker #2: Our proven framework and experience will be leveraged to identify and deliver and communicate these merger synergies. Another critical benefit to this transaction is the enhanced free cash flow generation from the pro forma company.

Clay Gaspar: Another critical benefit to this transaction is the enhanced free cash flow generation from the pro forma company. With this uplift, we plan to accelerate capital returns to shareholders through higher dividends and expect a significant new share repurchase authorization to deliver cash returns consistent with best-in-class peers. Bottom line, this transformative merger checks all the boxes and positions us to be an industry leader that delivers differentiated value to investors. With that strategic perspective, let's now turn back to Devon's impressive fourth quarter and full year 2025 results, which demonstrate the strong operational and financial momentum that we're bringing to this combination. Let's turn to slide 4 for a deeper look on how our disciplined execution delivered another quarter of exceptional results.

Speaker #2: With this uplift, we plan to accelerate capital returns to shareholders through higher dividends and expect a significant new share repurchase authorization to deliver cash returns consistent with best-in-class peers.

Speaker #2: Bottom line, this transformative merger checks all the boxes and positions us to be an industry leader that delivers differentiated value to investors. With that strategic perspective, let's now turn back to Devon's impressive fourth quarter and full year 2025 results.

Speaker #2: Which demonstrate the strong operational and financial momentum that we're bringing to this combination. Let's turn to slide four for a deeper look at how our disciplined execution delivered another quarter of exceptional results.

Speaker #2: As you can see displayed on the left, beating on production, operating costs, and capital result in an impressive free cash flow for Q4. Our production optimization efforts drove oil above the top end of the guide, fueled by strong new oil performance and outstanding base production management.

Clay Gaspar: As you can see displayed on the left, beating on production, operating costs, and capital results in an impressive free cash flow for Q4. Our production optimization efforts drove oil above the top end of the guide, fueled by strong new well performance and outstanding base production management. Operating costs significantly improved from the start of the year, reflecting enhanced reliability and relentless operational efficiency. Capital spending, capital spending finished 4% better than guidance as we continue to capture drilling and completion efficiencies through advanced technology and a culture of continuous improvement. Combine these efforts translated into $700 million of free cash flow, positioning us to return substantial value to shareholders. I want to emphasize that these results are not just one-off isolated wins. They are direct outcomes of disciplined execution across our entire portfolio.

Speaker #2: Operating costs significantly improved from the start of the year, reflecting enhanced reliability and relentless operational efficiency. Capital spending finished 4% better than guidance, as we continue to capture drilling and completion efficiencies through advanced technology and a culture of continuous improvement.

Speaker #2: Combine these efforts translated into $700 million of free cash flow positioning us to return substantial value to shareholders. I want to emphasize that these results are not just one-off isolated wins; they are a direct outcome of disciplined execution across our entire portfolio.

Speaker #2: This consistency is evident in our full-year performance and reflects the effectiveness of both our strategy and our team. I also want to quickly highlight our impressive reserve performance for 2025.

Clay Gaspar: This consistency is evident in our full-year performance and reflects the effectiveness of both our strategy and our team. I also want to quickly highlight our impressive reserve performance for 2025. Our capital program achieved a reserve replacement rate of 193% of production at an F&D cost of just over $6 per BOE. While a single year of reserves booking should never be viewed as a sole measure of success, this result provides compelling evidence that the quality and sustainability of our advantage multi-basin portfolio. Turning to slide 5, you can see how our focus on operational excellence and disciplined execution culminated in outstanding full year 2025 results. Our track record speaks for itself. Quarter after quarter, we drove meaningful improvements to our outlook.

Speaker #2: Our capital program achieved a reserve replacement rate of $193% of production at an F&D cost of just over $6 per BOE. While a single year of reserves booking should never be viewed as a sole measure of success, this result provides compelling evidence that the quality and sustainability of our advantaged multi-basin portfolio.

Speaker #2: Turning to slide five, you can see how our focus on operational excellence and disciplined execution culminated in outstanding full-year 2025 results. Our track record speaks for itself.

Speaker #2: Quarter after quarter, we drove meaningful improvements to our outlook. Since our preliminary guidance, we delivered an incremental $9,000 barrels of oil per day while reducing capital spend by nearly $500 million.

Clay Gaspar: Since our preliminary guidance, we delivered an incremental 9,000 barrels of oil per day while reducing capital spend by nearly $500 million. These results reflect a sustained commitment to margin enhancement, technology adoption, and continuous improvement across our entire organization. The impact is clear. Capital efficiency improved by more than 15% from our preliminary 2025 outlook, enabling us to extract more value from every dollar invested... Turning to Slide 6, as we've showed many times in the past, our capital efficiency results rank consistently among the very best in the industry. On the left-hand side of the slide, our well productivity stands more than 20% above peer average. On the right side, Devon's capital efficiency outperforms industry by 13%. Together, leading well productivity and capital efficiency translate directly into the strong free cash flow generation that powers our cash return framework.

Speaker #2: These results reflect a sustained commitment to margin enhancement, technology adoption, and continuous improvement across our entire organization. The impact is clear: capital efficiency improved by more than 15% from our preliminary 2025 outlook, enabling us to extract more value from every dollar invested.

Speaker #2: Turning to slide six, as we've showed many times in the past, our capital efficiency results rank consistently among the very best in the industry.

Speaker #2: On the left-hand side of the slide, our well productivity stands more than 20% above the peer average. On the right side, Devon's capital efficiency outperforms the industry by 13%.

Speaker #2: Together, leading well productivity and capital efficiency translate directly into the strong free cash flow generation that powers our cash return framework. Turning to slide seven, another critical driver of Devon's strong performance is our business optimization program.

Clay Gaspar: Turning to Slide 7, another critical driver of Devon's strong performance is our business optimization program. In less than a year, we have captured 85% of our billion-dollar target, and we are firmly on track to achieve the remaining savings during 2026. As an aside, I think it's important to remind you that this goal is focused on sustainable free cash flow. The program, the progress of this goal will manifest in multiples of this dollar amount to our enterprise value. This outlook of continued progress is supported by several key catalysts. The planned term loan repayment in Q3 will deliver $50 million in annual interest savings. At the same time, we are accelerating the implementation of AI-enabled artificial lift, optimization, and advanced analytics well beyond the pilot programs that we've mentioned on prior calls.

Speaker #2: In less than a year, we have captured 85% of our billion-dollar target and we are firmly on track to achieve the remaining savings during 2026.

Speaker #2: As an aside, I think it's important to remind you that this goal is focused on sustainable free cash flow. The progress of this goal will manifest in multiples of this dollar amount to our enterprise value.

Speaker #2: This outlook of continued progress is supported by several key catalysts. The planned term loan repayment in the third quarter will deliver $50 million in annual interest savings.

Speaker #2: At the same time, we are accelerating the implementation of AI-enabled artificial lift optimization and advanced analytics well beyond the pilot programs that we've mentioned on prior calls.

Speaker #2: Additional benefits will come from operating cost improvements through condition-based maintenance and enhanced drilling and completion cycle times. Beyond these initiatives, we have more than 100 active work streams focused on driving sustained base production gains while reducing the capital required for our maintenance programs.

Clay Gaspar: Additional benefits will come from operating cost improvements through condition-based maintenance and enhanced drilling and completion cycle times. Beyond these initiatives, we have more than 100 active work streams focused on driving sustained base production gains while reducing the capital required for our maintenance programs. Most importantly, this initiative has fundamentally transformed how we operate. Continuous improvement and the accountability are embedded into our culture, empowering our teams to deliver sustainable value well beyond the initial target. Business optimization is no longer a program with an end date. It has become core to how Devon operates every single day. Turning to Slide 8, as we discussed last quarter, parallel to driving incremental value out of the day-to-day business, we are also regularly evaluating opportunities to rationalize our portfolio to enhance shareholder value.

Speaker #2: Most importantly, this initiative has fundamentally transformed how we operate. Continuous improvement and the accountability are embedded into our culture empowering our teams to deliver sustainable value well beyond the initial target.

Speaker #2: Business optimization is no longer a program with an end date; it has become core to how Devon operates every single day. Turning to slide eight, as we discussed last quarter, parallel to driving incremental value out of the day-to-day business, we are also regularly evaluating opportunities to rationalize our portfolio to enhance shareholder value.

Speaker #2: Throughout 2025, we executed on strategic transitions transactions via midstream marketing and leasing that collectively delivered over a billion dollars of value uplift to our enterprise NAV.

Clay Gaspar: Throughout 2025, we executed on strategic transitions, transactions via midstream, marketing, and leasing that collectively delivered over $1 billion of value uplift to our enterprise NAV. To be clear, these gains are in addition to the improvements from our business optimization initiative. New this quarter, I wanted to highlight our continued investment in Fervo Energy. We recently participated in their Series E funding round, bringing our investment to approximately 15% in this innovative geothermal energy company. Fervo is pioneering next-generation geothermal technology, and we see compelling strategic and financial opportunities in this partnership. It leverages our core skills of geoscience expertise, land leasing, horizontal drilling and completions, and subsurface production and recovery skills, while positioning Devon in a power-generating sector with significant growth potential. With that, I'll now hand the call over to Jeff.

Speaker #2: To be clear, these gains are in addition to the improvements from our business optimization initiative. New this quarter, I wanted to highlight our continued investment in Fervo Energy.

Speaker #2: We recently participated in their Series E funding round, bringing our investment to approximately 15% in this innovative geothermal energy company. Fervo is pioneering next-generation geothermal technology, and we see compelling strategic and financial opportunities in this partnership.

Speaker #2: It leverages our core skills of geoscience expertise, land leasing, horizontal drilling and completions, and subsurface production and recovery skills, while positioning Devon in a power-generating sector with significant growth potential.

Speaker #2: With that, I'll now hand the call over to Jeff.

Speaker #1: Thanks, Clay. Turning to slide nine, Devon delivered another year of strong financial results. In 2025, we generated $3.1 billion in free cash flow, demonstrating the strength of our asset base and the effectiveness of our operational execution.

Jeff Ritenour: Thanks, Clay. Turning to Slide 9, Devon delivered another year of strong financial results. In 2025, we generated $3.1 billion in free cash flow, demonstrating the strength of our asset base and the effectiveness of our operational execution. This robust free cash flow enabled us to return $2.2 billion to shareholders through dividends, share buybacks, and debt retirement. We remain committed to growing our fixed dividend through the cycle. In 2025, we increased our quarterly dividend by 9% to 24 cents per share. Following the expected close of the Devon and Coterra merger and pending board approval, we plan to raise our fixed quarterly dividend by another 31%, reflecting our strong confidence in the combined company's ability to capture synergies and to deliver an enhanced cash return profile to shareholders.

Speaker #1: This robust free cash flow enabled us to return 2.2 billion dollars to shareholders through dividends, share buybacks, and debt retirement. We remain committed to growing our fixed dividend through the cycle.

Speaker #1: In 2025, we increased our quarterly dividend by 9% to 24 cents per share. Following the expected close of the Devon and Cotera merger and pending board approval, we plan to raise our fixed quarterly dividend by another 31%, reflecting our strong confidence in the combined company's ability to capture synergies and to deliver an enhanced cash return profile to shareholders.

Speaker #1: We're also focused on opportunistically reducing our share count and returning value through buybacks. Over the past year, we've reduced our shares outstanding by approximately 5% through disciplined repurchases.

Jeff Ritenour: We're also focused on opportunistically reducing our share count and returning value through buybacks. Over the past year, we've reduced our shares outstanding by approximately 5% through disciplined repurchases. Following the merger close and with board approval, we anticipate a new share repurchase authorization of more than $5 billion, providing significant capacity to deliver strong per share growth over the next several years. In addition to dividends and buybacks, we also possess an investment-grade balance sheet and excellent liquidity. We ended the year with $1.4 billion in cash and a net debt-to-EBITDA ratio of less than 1x. This financial strength provides flexibility to invest in high-returning opportunities while consistently returning significant capital to our shareholders. Lastly, I want to touch on our outlook. Looking specifically at Q1, we expect production to average around 830,000 BOE per day.

Speaker #1: Following the merger close and with board approval, we anticipate a new share repurchase authorization of more than $5 billion providing significant capacity to deliver strong per-share growth over the next several years.

Speaker #1: In addition to dividends and buybacks, we also possess an investment-grade balance sheet and excellent liquidity. We ended the year with $1.4 billion in cash and a net debt-to-EBITDA ratio of less than one turn.

Speaker #1: This financial strength provides flexibility to invest in high-returning opportunities while consistently returning significant capital to our shareholders. Lastly, I want to touch on our outlook.

Speaker #1: Looking specifically at the first quarter, we expect production to average around 830,000 BOE per day. This guidance reflects approximately 10,000 BOE per day of weather-related downtime in January.

Jeff Ritenour: This guidance reflects approximately 10,000 BOE per day of weather-related downtime in January. Even with this temporary disruption, our previously provided full year 2026 guidance remains unchanged. Upon the close of the merger, we plan to provide updated guidance for the combined entity. Before we open the call to questions, I want to note that today we would like to focus the Q&A on Devon's standalone results and outlook. As you can appreciate, we are limited in what we can discuss regarding the pending merger at this time. We expect to file our S-4 registration statement in the coming weeks, which will provide additional details on the transaction.

Speaker #1: Even with this temporary disruption, our previously provided full-year 2026 guidance remains unchanged. Upon the close of the merger, we plan to provide updated guidance for the combined entity.

Speaker #1: Before we open the call to questions, I want to note that today we would like to focus the Q&A on Devon's standalone results and outlook.

Speaker #1: As you can appreciate, we are limited in what we can discuss regarding the pending merger at this time. We expect to file our S4 registration statement in the coming weeks, which will provide additional details on the transaction.

Speaker #1: With that, operator, we'll take our first question. We kindly ask that each caller limit themselves to one question.

Clay Gaspar: ...With that, operator, we'll take our first question. We kindly ask that each caller limit themselves to one question.

Speaker #2: Thank you. If you would like to ask a question today, please do so now by pressing start, followed by the number one on your telephone keypad.

Operator: Thank you. If you would like to ask a question today, please do so now by pressing Star, followed by the number one on your telephone keypad. As a reminder, to allow everyone a chance to ask a question today, we request that you please limit yourself to one question per person. Our first question comes from Neal Mehta with Goldman Sachs. Neal, please go ahead.

Speaker #2: As a reminder to allow everyone a chance to ask a question today, we request that you please limit yourself to one question per person.

Speaker #2: Our first question comes from Neil Messer with Goldman Sachs. Neil, please go ahead.

Speaker #3: Yeah, morning, Clay. I'll try to stay on the standalone business here and just your perspective on the business optimization and where you are relative to the $1 billion of the pre-tax target.

Neil Mehta: Yeah, Morning, Clay. I'll try to stay on the standalone business here and just your perspective on the business optimization and where you are relative to the $1 billion of the pre-tax target. What are the key milestones you're focused on the first half of 2026? Of the buckets, which is the one that you feel you're most focused on as management team right now?

Speaker #3: And what are the key milestones you're focused on in the first half of 2026? Of the buckets, which is the one that you feel you're most focused on as a management team right now?

Speaker #4: Yeah, thanks for the question, Neil. We're really excited about the progress. We launched this thing a year ago, and I can tell you it was a bit aspirational. As we thought about how do we come up with all of these numbers, we knew that there was so much more potential to unlock.

Clay Gaspar: Yeah, thanks for the question, Neal. We're really excited about the progress. You know, we launched this thing a year ago, and I can tell you it was a bit aspirational as we thought about how do we come up with all of these numbers. We knew that there was so much more potential to unlock, but we didn't have a line-by-line, you know, attribution to each individual piece. And I can tell you, it's been really exciting to see the organization just really unlock around this. As we've talked about before, it's been a very heavy leaning on technology. I think we're just scratching the surface on some of that real potential. But as we mentioned in the prepared remarks, one year in, we're now at 85%. We have clear line of sight to being able to achieve the full $1 billion.

Speaker #4: But we didn't have a line-by-line attribution to each individual piece. And I can tell you, it's been really exciting to see the organization just really unlock around this.

Speaker #4: As we've talked about before, it's been a very heavy leaning on technology. I think we're just scratching the surface on some of that real potential.

Speaker #4: But as we mentioned in the prepared remarks, when you're in, we're now at 85%. We have clear line of sight to be able to achieve the full $1 billion.

Clay Gaspar: I think importantly, as we think about the skill set and the culture around identification, tracking, and communicating, I think that really translates into our next, our next challenge going forward, which we're incredibly excited about. I might ask Trey just to give some additional thoughts, as he's a little closer to this on a day-to-day basis.

Speaker #4: And I think, importantly, as we think about the skill set and the culture around identification, tracking, and communicating, I think that really translates into our next challenge going forward, which we are incredibly excited about.

Speaker #4: I might ask Trey just to give some additional thoughts, as he's a little closer to this on a day-to-day basis.

Trey Lowe: Appreciate the question, Neal. We, Clay mentioned this in our opening comments, that we now are up over 100 work streams that we're tracking, related to business optimization. We have a ton of confidence in what we see coming forward. Over the last few quarters, we've talked a lot about what we're doing in the production space, specifically with trials around gas lift optimization and a few other topics. What I can confidently say, and what we're really excited about at the team level, is a lot of the investments we've made in artificial intelligence and in the platforms that we've built over the last year, are really coming to fruition in the production space. We've seen those advantages already in the drilling results that we've had.

Speaker #5: I appreciate the question, Neil. Clay mentioned this in our opening comments—that we now are up over 100 workstreams that we're tracking. Related to business optimization, we have a ton of confidence in what we see coming forward.

Speaker #5: Over the last few quarters, we've talked a lot about what we're doing in the production space, specifically with trials around gas lift optimization and a few other topics.

Speaker #5: What I can confidently say and what we're really excited about at the team level is a lot of the investments we've made in artificial intelligence and in the platforms that we've built over the last year are really coming to fruition in the production space.

Speaker #5: We've seen those advantages already in the drilling results that we've had, but we're going to start to see over first quarter and second quarter a lot of the projects that we trialed in the second half of 2025 start to scale.

Trey Lowe: But we're gonna start to see over Q1 and Q2 a lot of the projects that we trialed in the second half of 2025, start to scale. And so as we scale these things, which all of these technologies are very scalable, we'll do that across the entire organization. We're gonna see a lot of benefits flow through on the production side, ultimately resulting in kind of our ability to lower capital long term, and we'll see improvements on the LOE.

Speaker #5: And so, as we scale these things—which all of these technologies are very scalable—we'll do that across the entire organization. We're going to see a lot of benefits flow through on the production side.

Speaker #5: Ultimately, resulting in kind of our ability to lower capital long-term, and we'll see improvements on the LOE.

Speaker #1: Thanks, guys.

Neil Mehta: Thanks, guys.

Speaker #2: Our next question comes from Neil Dingman with William Blair. Neil, please go ahead.

Operator: Our next question comes from Neil Dingmann with William Blair. Neil, please go ahead.

Neal Dingmann: Morning, Clay. Thanks for the time. My question's on the Delaware position, I guess, whether it's standalone or pro forma. I'm just wondering, with a larger upcoming position, I'm just wondering, is there plans to target even longer laterals and potentially up-space the wells to boost results? And then I'm just wondering, will you continue to be as active on the ground game there as you've been in recent months?

Speaker #3: Morning, Clay. Thanks for the time. My question's on the Delaware position, I guess, whether it's standalone or core format. I'm just wondering, with a larger upcoming position, is there a plan to target even longer laterals and potentially upspace the wells to boost results?

Speaker #3: And then I'm just wondering, will you continue to be as active on the ground game there as you've been in recent months?

Speaker #4: Yeah, thanks for the question, Neil. The Delaware basin is just an incredible piece of business. Stack of rocks and a great place to work.

Clay Gaspar: Yeah, thanks for the question, Neil. I. You know, the Delaware Basin is just an incredible piece of business, stack of rocks and a great place to work. And so incredibly excited about our current position and, and the pro forma position as well. What I would tell you is, you know, it, the truism of the best place to find oil is where you found oil before, continues to hold true. We think about additional landing zones, we think about innovative technology, we think about improving recovery, we think about flattening our base decline, lowering our downtime. All of these mechanisms that we are so excited about absolutely translate into this incredible position that we have in the Delaware Basin.

Speaker #4: And so, incredibly excited about our current position, and the pro forma position as well. What I would tell you is, the truism is: the best place to find oil is where you've found oil before.

Speaker #4: Continues to hold true. We think about additional landing zones. We think about innovative technology. We think about improving recovery. We think about flattening our base decline.

Speaker #4: Lowering our downtime. All of these mechanisms that we are so excited about absolutely translate into this incredible position that we have in the Delaware Basin.

Clay Gaspar: You know, as we go forward, you bet, we're gonna be in a very strong financial position to be opportunistic, as we have been. I think that continues. You know, in a position of strength, you know, how we think about those opportunities, I think we'll be in a great position to maximize those opportunities. So thanks for the question.

Speaker #4: As we go forward—you bet—we're going to be in a very strong financial position to be opportunistic, as we have been. I think that continues.

Speaker #4: In a position of strength, how we think about those opportunities, I think we'll be in a great position to maximize those opportunities. So, thanks for the question.

Speaker #3: Thanks, buddy.

Neal Dingmann: Thanks, buddy.

Speaker #2: The next question comes from Doug Liggett with Wolf Research. Doug, please go ahead.

Operator: The next question comes from Doug Leggate with Wolfe Research. Doug, please go ahead.

Doug Leggate: Thanks. Good morning, Clay. You're making it hard for us. Now, we all want to ask questions about the merger and all that stuff, but we'll try and behave ourselves and not do that this morning. So-

Speaker #5: Thanks, good morning. Clay, you're making it hard for us now. We all want to ask questions about the merger and all that stuff, but we'll try and behave ourselves and not do that this morning.

Speaker #5: So.

Speaker #4: Doug, we want to talk about it as well. I hear you.

Clay Gaspar: Doug, we wanna talk about it as well, so-

Doug Leggate: I do want to ask you a question about ex-

Clay Gaspar: I hear you.

Speaker #5: Yeah, well, I don't want to waste my question on something you're not going to answer. So I'm going to try something else. Exploration, Clay, you and I have talked about this before.

Doug Leggate: Yeah, well, is that, yeah, I don't want to waste my question on something you're not going to answer, so I'm going to try something else. Exploration, Clay. You and I have talked about this before, about perhaps the loss of collective capability on some of your peers. We're seeing speculation of perhaps, not so much speculation, that you guys are now looking internationally. I wonder if you could just frame for us, whether it's conventional or unconventional, domestic or international, what is the role of exploration in Devon? And if I may ask you to opine just on a broader issue, what does this say about the maturity of US shale, if indeed you are pursuing opportunities elsewhere?

Speaker #5: About the, perhaps, the loss of collective capability on some of your peers. We're seeing speculation—or perhaps not so much speculation—that you guys are now looking internationally.

Speaker #5: I wonder if you could just frame for us whether it's conventional or unconventional domestic or international, what is the role of exploration in Devon?

Speaker #5: And if I may ask you to opine just on a broader issue, what does this say about the maturity of U.S. shale, if indeed you are pursuing opportunities elsewhere?

Speaker #4: Yeah, that's a great question, Doug. I'm happy to talk about it. When I think about it, internally, we have some terminology we use around pillars.

Clay Gaspar: ... Yeah, that's a great question, Doug. I'm happy to talk about it. You know, when I think about it, you know, internally, we have some terminology we use around pillars. Pillar one is make Devon a better Devon, and that's clearly, you know, the focus around this business optimization. You know, all of the work we're doing with technology, leaning in efficiency, that just translates into everything else that we do, and importantly, buys us the creativity, the credibility to be able to consider things above and beyond just making Devon a better Devon. The pillar two is a little bit more organic in nature, and these are things that, you know, we mentioned Fervo on this call. We think about what the potential is from there. We've talked about exploration.

Speaker #4: Pillar one is make Devon a better Devon. And that's clearly the focus around this business optimization. All of the work we're doing with technology leaning in, efficiency, that just translates into everything else that we do.

Speaker #4: And, importantly, buys us the credibility to be able to consider things above and beyond just making Devon a better Devon. The pillar two is a little bit more organic in nature.

Speaker #4: And these are things that we mentioned Fervo on this call. We think about what the potential is from there. We've talked about exploration. We've clearly been interested in understanding the potential, not just here in the U.S., but around the globe.

Clay Gaspar: We've clearly been interested in understanding the potential, not just here in the US, but, you know, around the globe. But I would tell you, those are long-dated investments, long-dated relationship builds, things that we need to evaluate over time. And as we know, the best time to evaluate those are when you're in an incredible position of strength. And so I think about our portfolio today, the free cash flow that we just displayed in full year 2025, as I look forward to our capabilities, kinda going forward, this is exactly the right time for us to really think about leveraging not just our financial strength, but our operational strength.

Speaker #4: What I would tell you, those are long-dated investments, long-dated relationship builds, things that we need to evaluate over time. And as we know, the best time to evaluate those are when you're in incredible position of strength.

Speaker #4: And so I think about our portfolio today. The free cash flow that we just displayed in full year '25, as I look forward to our capabilities, kind of going forward, this is exactly the right time for us to really think about leveraging not just our financial strength, but our operational strength.

Speaker #4: And so, when I think about the skills that we have, and really exporting that or at least leveraging that into other opportunities, these things can be multiple years in the making.

Clay Gaspar: When I think about the skills that we have and really exporting that, or at least leveraging that into other opportunities, you know, these things can be multiple years in the making. What we wanna make sure that we are in position for is that, one, we really objectively understand the skills we currently have, how we evolve those over time, where business opportunities are in adjacent businesses or businesses that look slightly different than what we do today, and then really hunt for those opportunities where those kind of that Venn diagram overlaps, and be in a ready position to be able to capture those opportunities, albeit most of those will evolve over time, but be ready to capture those and be positioned for that opportunity when those do come up.

Speaker #4: What we want to make sure that we are in position is that, one, we really objectively understand the skills that we currently have, how we evolve those over time, where business opportunities are in adjacent businesses or businesses that look slightly different than what we do today, and then really hunt for those opportunities where that kind of Venn diagram overlaps, and be in a ready position to be able to capture those opportunities.

Speaker #4: Albeit most of those will evolve over time, but be ready to capture those and be positioned for that opportunity when those do come up.

Speaker #4: What I would tell you is, please don't mistake any work that we're doing for next decade opportunities to conflate anything of a lack of confidence in the near term.

Clay Gaspar: What I would tell you is, please don't mistake any work that we're doing for next decade opportunities to conflate anything of a lack of confidence in the near term. The confidence in the near term is exactly why we need to be doing things to think about the next decade for Devon and well beyond the positions that we're in today. Again, from an opportunity, a position of strength, that's exactly what we're doing, continuing to refine the skills that we have, think about things creative and beyond our current footprint, and then and be ready for when those stars do align, that we can jump right on them.

Speaker #4: The confidence in the near term is exactly why we need to be doing things to think about the next decade for Devon and well beyond the positions that we're in today.

Speaker #4: Again, from an opportunity position of strength, that's exactly what we're doing—continuing to refine the skills that we have, to think about things creative and beyond our current footprint, and then be ready for when those stars do align, that we can jump right on them.

Speaker #5: Can you confirm the Kuwait interest, Clay?

Doug Leggate: Can you confirm the Kuwait interest, Clay?

Speaker #4: Yeah, what I would tell you is we have explored interest in a lot of places. That's a long, long way from putting material dollars to work.

Clay Gaspar: Yeah, what I would tell you is we have explored interest in a lot of places. That's a long, long way from, you know, putting material dollars to work. What I would tell you is to really understand the potential that we have. You know, for example, the work that we're doing in resource plays domestically, clearly there will be opportunities internationally. For us to understand and evaluate where that potentially could fit in our long-term horizons, we absolutely need to be engaged in those conversations, getting our name out there, participating in that, so that we can understand the surface challenges, the kind of above-ground risks, and how do we quantify that and put it in context to other opportunities that we have.

Speaker #4: What I would tell you is to really understand the potential that we have for example, the work that we're doing in resource plays domestically, clearly there will be opportunities internationally.

Speaker #4: For us to understand and evaluate where that potentially could fit and our long-term horizons, we absolutely need to be engaged in those conversations—getting our name out there, participating in that—so that we can understand the surface challenges, the kind of above-ground risks, and how do we quantify that and put it in context to other opportunities that we have.

Speaker #4: So, while I'll avoid commenting on any one particular deal—because I think it's way too early for any of that—I can confirm that we are exploring a lot of different ideas and opportunities so that, one, we have a better kind of relative positioning, and an understanding of what will absolutely fit us best for our longer-term horizons.

Clay Gaspar: So while I'll avoid commenting on any one particular deal, because I think it's way too early for any of that, I can confirm that we are exploring a lot of different ideas and opportunities so that, one, we have a better kind of relative positioning and an understanding of what will absolutely fit us best for our longer-term horizons. Thanks for the question, Doug.

Speaker #4: Thanks for the question, Doug.

Speaker #5: Terrific. Thanks. Thank you.

Doug Leggate: Terrific. Thanks. Thank you.

Speaker #2: The next question comes from Clay Akamine with Bank of America. Please go ahead.

Operator: The next question comes from Clay Akamine with Bank of America. Please go ahead.

Speaker #6: Hey, good morning, guys. My question is on cash opex. I'm noticing that LOE plus GP&T on the full-year guide is lower. Is there any way you can talk about the cadence of the lower cost there and whether it's reflective of the GP&T optimization efforts on the NGO front?

Clay Akamine: Hey, good morning, guys. My question is on cash OpEx. I'm noticing that LOE plus GPNT on the full-year guide is lower than what Q2 2026. Can you kind of talk about the cadence of the lower costs there and whether it's reflective of the GPNT optimization efforts on the NDL front?

Kalei Akamine: Hey, good morning, guys. My question is on cash OpEx. I'm noticing that LOE plus GPNT on the full-year guide is lower than what Q2 2026. Can you kind of talk about the cadence of the lower costs there and whether it's reflective of the GPNT optimization efforts on the NDL front?

John Raines: Clay, Clay, this is John. You cut out a little bit, so jump in if I'm not answering your question. But just for the cadence on OpEx for the full year, you know, we've continued to make consistent improvements in our workflow, or workover optimization. We've consistently reduced our failure rates. That really contributed to a lot of the drop in LOE, plus GPNT for the full year. Going into Q4, we actually saw some tailwinds on some recurring items. Trey mentioned, and Clay mentioned in his comments, the condition-based maintenance approach. We're very early innings in that. We're starting to scale that. We've started changing some of our maintenance approaches in the Delaware Basin, and we've already seen some costs come out of the system, and so that contributed to the Q4 number.

Speaker #5: Clay, this is John. You cut out a little bit, so jump in if I'm not answering your question. But just for the cadence on opex for the full year, we've continued to make consistent improvements in our workflow, our workover optimization, we've consistently reduced our failure rates.

Speaker #5: That really contributed to a lot of the drop in LOE plus GPT for the full year. Going into Q4, we actually saw some tailwinds on some recurring items.

Speaker #5: Trey mentioned, and Clay mentioned in his comments, the condition-based maintenance approach. We're in the very early innings of that. We're starting to scale that. We've started changing some of our maintenance approaches in the Delaware Basin.

Speaker #5: And we've already seen some costs come out of the system, and so that contributed to the Q4 number from a power standpoint. We've also energized two microgrids in the Delaware Basin with that.

John Raines: From a power standpoint, we've also energized two microgrids in the Delaware Basin. With that, we're able to release a lot of site-specific generation. So just good blocking and tackling on the LOE front. About the time you cut out, I think you were talking about Q1. We do see an uptick there on LOE plus GPNT. Really, what's driving that is twofold. One, it's a little bit of a soft spot in our volumes for the year. As Jeff mentioned, we had the weather downtime that hit us in Q1. But then very specifically, we've got line of sight to just some higher workover activity in the Williston. That was mainly weather-driven, and then some workover activity in the Eagle Ford that was driven, or is driven by some well cleanouts. On the GPNT front...

Speaker #5: We're able to release a lot of site-specific generation, so just good blocking and tackling on the LOE front. About the time you cut out, I think you were talking about Q1.

Speaker #5: We do see an uptick there on LOE plus GP&T. Really, what's driving that is twofold. One, it's a little bit of a soft spot in our volumes for the year.

Speaker #5: As Jeff mentioned, we had the weather downtime that hit us in Q1. But then, very specifically, we've got line of sight to just some higher workover activity in the Williston that was mainly weather-driven.

Speaker #5: And then some workover activity in the Eagle Ford that was driven or is driven by some well cleanouts. On the GP&T front, you did see the drop-off in Q4.

John Raines: You did see the drop-off in Q4, and that is absolutely related to one of our new gathering and processing contracts going effective in the Delaware Basin. And so that's at a much lower rate, and you're seeing that contribute as well.

Speaker #5: And that is absolutely related to one of our new gathering and processing contracts going effective in the Delaware Basin. And so, that's at a much lower rate, and you're seeing that contribute as well.

Speaker #6: Sorry for dropping off, but you did answer the question, John. Thank you.

Phillip Jungwirth: Sorry for dropping off, but you did answer the question, John. Thank you.

Kalei Akamine: Sorry for dropping off, but you did answer the question, John. Thank you.

Speaker #5: Okay, thank

John Raines: Okay, thank you.

Operator: The next question comes from John Freeman with Raymond James. Please go ahead.

Speaker #2: The next question comes from John Freeman with Raymond James. Please go ahead.

Speaker #7: Yeah, thank you. Just following up on the last question on the opex side. It sounded like, Clay, maybe that when you talked about sort of the expanding of the automation of the artificial lift optimization, and I think you said that's sort of above and beyond what you all were contemplating previously, I'm just trying to get a sense.

John Freeman: Yeah, thank you. Just following up on the last question on the OpEx side. It sounded like, Clay, maybe that when you talked about sort of the expanding of the automation of the artificial lift optimization, and I think you said it sort of above and beyond what y'all had contemplated previously. I'm just trying to get a sense, does that mean that there's potential that y'all could, you know, ultimately exceed that kind of billion-dollar target, which is sort of whether it's that or some of the other catalysts that y'all sort of outlined on slide seven? I'm just trying to get a sense of what's left to be accomplished for the billion and if there's potential upside based on some of this.

Speaker #7: Does that mean that there's potential that you all could ultimately exceed that kind of billion-dollar target with just sort of whether it's that or some of the other catalysts that you all sort of outlined on slide seven?

Speaker #7: I'm just trying to get a sense of what's left to be accomplished for the billion and if there's potential upside based on some of this.

Speaker #4: Yeah, John, what I was really just trying to articulate and frame is that while we've achieved 85%, we have a great deal of confidence in being able to achieve the full $1 billion.

Clay Gaspar: Yeah, John, what I was really just trying to articulate and frame is that while we've achieved 85%, we have a great deal of confidence in being able to achieve the full $1 billion. Yet more to come on that particular topic. But that'll be something that'll unfold in the coming quarters. Just again, reiterating, you know, we haven't changed the billion-dollar target. I think what has changed is just kind of our approach that, you know, this is kind of how we work going forward, and there's so many, you know, smaller wins that just don't make the headlines, that I'm equally excited about.

Speaker #4: More to come on that particular topic. But that'll be something that'll unfold in the coming quarters. Just again, reiterating we haven't changed the billion-dollar target.

Speaker #4: I think what has changed is just kind of our approach, that this is kind of how we work going forward. And there are so many smaller wins that just don't make the headlines that I'm equally excited about.

Speaker #4: I see this kind of contagion around the organization in all parts of the company—really contributing and thinking differently about how they get their share of the contribution to this sustained free cash flow win.

Clay Gaspar: I see this kind of contagion around the organization and all parts of the company, you know, really contributing and thinking differently about how do they get their share of the contribution to this sustained Free Cash Flow win. And to me, that's just a winning culture. So, really feel confident in the $1 billion, and I feel equally confident that, there's more to come in regards to just the change in culture and innovativeness, that we're leaning towards.

Speaker #4: And to me, that's just a winning culture. So I really feel confident in the billion dollars, and I feel equally confident that there's more to come in regards to just the change in culture and innovativeness that we're leaning towards.

Speaker #7: Thanks, Clay. Well done.

John Freeman: Thanks, Clay. Well done.

Speaker #4: Thank you, John.

Clay Gaspar: Thank you, John.

Speaker #2: The next question comes from Arun Jayaram with JPMorgan. Please go ahead.

Operator: The next question comes from Arun Jayaram with JP Morgan. Please go ahead.

Speaker #5: Yeah, good morning, gentlemen. Clay, I was wondering if you could just maybe provide some insights around the 2026 program you're spending or plan to spend about $3.5 billion upstream.

Arun Jayaram: Yeah. Good morning, gentlemen. Clay, I was wondering if you could just maybe provide some insights around the 2026 program. You're spending or plan to spend about $3.5 billion upstream. How should we think about kind of capital allocation between regions outside of the Delaware? It looks like, you know, today you're operating about half of your rigs in the Delaware, but how should we think about capital allocation between the MidCon, Williston Basin, Eagle Ford, PRB?

Speaker #5: How should we think about kind of capital allocation between regions outside of the Delaware? It looks like today you're operating about half of your rigs in the Delaware.

Speaker #5: But how should we think about capital allocation between the Midcon, Williston Basin, Eagle Ford, PRB?

Clay Gaspar: Yeah. Arun, I would say directionally, think of it pretty similar to how we have been allocating. Clearly, don't want to get ahead of myself. Once we get the deal closed, that'll be a first order of business. You know, as I mentioned on the last call, really thinking about those opportunities around capital allocation and, and stepping up, the value creation there.

Speaker #4: Yeah, Arun, I would say directionally think of it pretty similar to how we have been allocating. Clearly, don't want to get ahead of myself.

Speaker #4: Once we get the deal closed, that'll be a first order of business. As I mentioned on the last call, really thinking about those opportunities around capital allocation and stepping up the value creation there.

Speaker #5: Understood. And my follow-up is, you guys have had some really good opportunities in terms of portfolio management, thinking about Matterhorn and your investment in Waterbridge.

Arun Jayaram: Understood. And my follow-up is just, you guys have had some, you know, really good opportunities in terms of portfolio management, thinking about Matterhorn, and your investment in Waterbridge. Clay, I was wondering maybe you could elaborate on the ownership position in Fervo Energy. You know, I think Fervo, we saw them at Baker Hughes' recent annual meeting, have some really unique technology in geothermal. But talk about, you know, the decision to invest in Fervo and, and value creation potential for, for Devon shareholders from that.

Speaker #5: Clay, I was wondering if maybe you could elaborate on the ownership position in Fervo Energy. I think Fervo—we saw them at Baker Hughes' recent annual meeting—has some really unique technology in geothermal.

Speaker #5: But talk about the decision to invest in Fervo and value creation potential for Devon shareholders from that.

Speaker #3: Yeah, thanks for the question, Arun. This is Trey. I've been a part of the kind of Fervo investment decision since we started at Devon.

Trey Lowe: Yeah. Thanks for the question, Arun. This is Trey. I've been a part of the Fervo investment decision since we started at Devon, and honestly, we originally got introduced to the team there through some of our technical contacts on the engineering and geoscience side. Fervo is a pioneer in the space with enhanced geothermal systems, and that basically means they're using horizontal drilling and multistage hydraulic fracturing to build out geothermal systems. And it looks a lot like what we have led the way on with subsurface interpretation and with how we've characterized, as an example, hydraulic fractures. And so we got to know them on a technical basis originally.

Speaker #3: And honestly, we originally got introduced to the team there through some of our technical contacts on the engineering and geoscience side. Fervo is a pioneer in a space with enhanced geothermal systems.

Speaker #3: And that basically means they're using horizontal drilling and multi-stage hydraulic fracturing to build out geothermal systems. And it looks a lot like what we have led the way on with subsurface interpretation and with how we've characterized, as an example, hydraulic fractures.

Speaker #3: And so we got to know them on the technical basis originally. Then we met the management team, got to know the founders really well.

Trey Lowe: Then we, you know, met the management team, got to know the founders really well, and ultimately, started to really see a lot of the things that we liked about what Fervo was doing, and wanted to support them and to better understand that geothermal business. That's led us over the last couple of years to where we are today, where we're now a 15% owner in the business and continue to be really enthusiastic about what they're doing. Operationally, they're having a lot of success. They continue to drive well costs down, and we've been supporting them with technical support throughout that process to help make their business better.

Speaker #3: And ultimately, started to really see a lot of the things that we liked about what Fervo was doing. And wanted to support them and to better understand that geothermal business.

Speaker #3: That's led us over the last couple of years to where we are today, where we're now a 15% owner in the business. And we continue to be really enthusiastic about what they're doing. Operationally, they're having a lot of success.

Speaker #3: They continue to drive well costs down. And we've been supporting them with technical support throughout that process to help make their business better.

Speaker #5: Great, thanks.

Arun Jayaram: Great. Thanks.

Speaker #2: The next question comes from Philip Youngworth with BMO. Please go ahead.

Operator: The next question comes from Philip Youngworth with BMO. Please go ahead.

Speaker #4: Thanks. Hi, good morning. I'll try not to ask this in relation to the merger, but Jeff will be heading up Commercial, which has become an increasingly important role for large EMPs.

Phillip Jungwirth: Thanks. Hi, good morning. I'll try not to ask this in relation to the merger, but Jeff will be heading up commercial, which has become an increasingly important role for large E&Ps. So the question's more just how do you see the commercial opportunity for Devon, standalone, and where's the current focus now for the company?

Speaker #4: So the question is more just, how do you see the commercial opportunity for Devon standalone, and where's the current focus now for the company?

Speaker #5: Well, I think that does kind of venture into an area we probably don't want to spend too much time on, but I can reiterate what we said on the last call.

Clay Gaspar: ...Well, I think that does kind of venture into, you know, an area we probably don't want to spend too much time on, but I can reiterate what we said on the last call. Once we get the company combined, the management team, the new board, I think it is, it's gonna be a really exciting platform to reevaluate, as I just mentioned, some things near term, like capital allocation, but also thinking about asset rationalization, thinking about some of these long-term opportunities. Remember, we're gonna have an incredible financial footprint, operational footprint, portfolio, and I think that just really opens up the door to a lot more possibilities.

Speaker #5: Once we get the company combined, the management team, the new board, I think it's going to be a really exciting platform to reevaluate, as I just mentioned, some things near term like capital allocation.

Speaker #5: But also thinking about asset rationalization, thinking about some of these long-term opportunities. Remember, we're going to have an incredible financial footprint, operational footprint, portfolio, and I think that just really opens up the door to a lot more possibilities.

Speaker #5: So without getting too far ahead of ourselves, I would just say the financial footwork, financial foundation is there. And we feel really good about that positioning and really opening the doors to additional opportunities.

Clay Gaspar: So without getting too far ahead of ourselves, I would just say the financial footwork, financial foundation is there, and we feel really good about that positioning, and really opening the doors to additional opportunities.

Speaker #4: Makes sense. Appreciate the answer.

John Raines: Thanks, guys. Appreciate the answer.

Phillip Jungwirth: Thanks, guys. Appreciate the answer.

Speaker #2: The next question comes from Charles Mead with Johnson Rice. Please go ahead.

Operator: The next question comes from Charles Mead with Johnson Rice. Please go ahead.

Speaker #6: Good morning, Clay. To you and the whole Devon team there. I don't intend to make this a post-deal question, but I acknowledge it may be.

Charles Meade: Good morning, Clay, to you and the whole Devon team there. I don't intend to make this a post-deal question, but I acknowledge it may be. But I wondered if you could talk about the dividend, how you chose that new level. It's a big bump. And, what the thought process is there to arrive at, you know, 31.5 is the right number.

Speaker #6: But I wondered if you could talk about the dividend, how you chose that new level. It's a big bump. And what the thought process is there to arrive at $0.315 as the right number.

Speaker #4: Yeah, I think it's a big bump from our side, from the Cotera side. It's basically on par with what they had been doing, and so I think that was kind of the foundation.

Clay Gaspar: Yeah, I think it's a big bump from our side. From the Coterra side, it's basically on par with what they had been doing. And so I think that was kind of the foundation. Now, obviously, again, this is all presupposing a little bit on what the new pro forma board will approve, but we've got it to is that $0.315, which, again, is a nice bump on our side. And then, you know, in combination, we also project that the board will approve a very substantial share repurchase program. I think that gives us a lot of latitude, in addition to being able to pay down some debt that's coming due.

Speaker #4: Now, obviously, again, this is all presupposing a little bit on what the new pro forma board will approve. But what we've got it to is that $0.315, which, again, is a nice bump on our side.

Speaker #4: And then, in combination, we also project that the board will approve a very substantial share repurchase program. I think that gives us a lot of latitude, in addition to being able to pay down some debt that's coming due.

Speaker #4: I think just gives us a great framework of opportunities to return this very significant free cash flow directly back to shareholders.

Clay Gaspar: I think just gives us a great framework of opportunities to return this very significant free cash flow directly back to shareholders.

Speaker #6: That's great. Thanks, Clay.

Charles Meade: That's great. Thanks, Clay.

Speaker #4: You bet, Charles.

Clay Gaspar: You bet, Charles.

Speaker #2: The next question comes from Paul Chang with Scotiabank. Please go ahead.

Operator: The next question comes from Paul Chang with Scotiabank. Please go ahead.

Paul Cheng: Thank you. Good morning, team. Clay, the Q4 Delaware result is really very impressive. I mean, you have lesser number of tier, and then production is actually higher than expected. Just want to see that how repeatable, or that there's some one-off item that we should be aware of, such as the timing of when the well come on stream. Anything that you can share on that? And also that the outperformance, how much is really coming from the new well, and how much is on the base operation doing better?

Speaker #5: Thank you. Good morning, team. The fourth quarter Delaware result is really very impressive. I mean, you have fewer number of tills, and then production is actually higher than expected.

Speaker #5: Just want to see how repeatable that is, or if there's some one-off item that we should be aware of, such as the timing of when the welcome is on stream—anything that you can share on that.

Speaker #5: And also, that outperformance—how much is really coming from the new well, and how much is from the base operation doing better?

Speaker #4: Hey, thanks for the question, Paul, because we did have an outstanding fourth quarter that's on the back of quarter after quarter performance there is a kind of an overall downdraft in cost structure.

Clay Gaspar: Hey, thanks for the question, Paul, because we, we did have an outstanding Q4. That's on the back of quarter after quarter performance. There is a kind of an overall downdraft in cost structure. That's efficiency, that's technology. There's also an updraft in productivity. And so thinking about how do we get more out of these, these precious resources that we, that we have in the portfolio today, and what you see in the Q4, is that really coming together. Well, quarter to quarter, it's always gonna vary just a little bit. I mean, you bring on these big pads, just a shift in a couple of weeks from beginning to a little bit later in the quarter, can manifest in different kind of near-term ebbs and flows.

Speaker #4: That's efficiency, that's technology. There's also an updraft in productivity. And so, thinking about how do we get more out of these precious resources that we have in the portfolio today.

Speaker #4: And what you see in the fourth quarter is that really coming together. Well, quarter to quarter, it's always going to vary just a little bit.

Speaker #4: I mean, you bring on these big pads, just a shift in a couple of weeks from beginning to a little bit later in the quarter.

Speaker #4: Can manifest in different kinds of near-term ebbs and flows. I would look at the overall quarter-over-quarter progress. And I think that I feel very confident in extending well into '26 and beyond.

Clay Gaspar: I would look at the overall quarter-over-quarter progress, and I think that I feel very confident in extending well into 2026 and beyond. I think that is what we're most excited about. This business optimization was really code for: How do we all get really hungry and really creative on that incremental value opportunity? I might turn to John and ask him his thoughts on the balance of new wells versus the base, the incredible base work that we're doing as well.

Speaker #4: I think that is what we're most excited about. This business optimization was really code for how do we all get really hungry and really creative on that incremental value opportunity.

Speaker #4: I might turn to John and ask him his thoughts on the balance of new wells versus the incredible base work that we're doing as well.

Speaker #5: Yeah, thanks, Clay. I mean, really the story is twofold. I mean, we did have some help from timing on the wedge. We had three incredible programs come on in the fourth quarter.

John Raines: Yeah. Thanks, Clay. I mean, really, the story is twofold. I mean, we did have some help from timing on the wedge. We had three incredible programs come on in Q4. The timing helped, but also the wells all outperformed, you know, our internal expectations there. You know, the well mix for us, it changes, quarter to quarter, but we had a pretty balanced well mix. These three programs, in particular, had a good balance of Wolfcamp B, Bone Spring, but also Wolfcamp A. So all of those things were contributing factors. But, Clay's right, we would be remiss not to talk about the base. Throughout the course of 2025, we saw a lot of production optimization through various projects on the base.

Speaker #5: The timing help, but also the wells all outperformed our internal expectations there. The well mix for us, it changes quarter to quarter. But we had a pretty balanced well mix.

Speaker #5: These three programs in particular had a good balance of both Can’t Be Known Spring, but also Wolfcamp A. So all of those things were contributing factors.

Speaker #5: But Clay's right, we would be remiss not to talk about the base. Throughout the course of 2025, we saw a lot of production optimization through various projects on the base.

Speaker #5: And all in all, for the full year, the base outperformed by about 5,000 barrels of oil a day. So, when you think about that type of contribution on the base, it's almost 2% of the base.

John Raines: All in all, for the full year, the base outperformed by about 5,000 barrels of oil a day. So when you think about that type of contribution on the base, it's almost 2% of the base. That's just a huge part of our business and an exceptional result and exceptional value to the company.

Speaker #5: That's just a huge part of our business, and an exceptional result—an exceptional value to the company.

Speaker #6: Hey, John, what's the underlying base decline rate in the Delaware right now for you guys?

Paul Cheng: Hey, John, what's the underlying base decline rate in the Delaware right now for you guys?

John Raines: If Paul, if you were asking about decline rates, right now, yes, our base decline rates right now, it's right in the mid-30%, 30% range.

Speaker #5: Paul, if you were asking about decline rates, right now, yes, our base decline rates right now, it's in the mid 30 percentage. 30% range.

[Analyst]: ... Does that change from previously, or that is still the same?

Speaker #6: Is that a change from previously? Or is that still the same? Because I would imagine, with your better base operation, your underlying decline rate should be lower, or should be less.

John Raines: No.

[Analyst]: Because I would imagine with your better base operation, your underlying decline rate should be lower or should be less.

Speaker #5: Yeah, I'd say we've had some tailwinds on the base. The decline rate itself hasn't changed dramatically year over year. Now, granted, we're call it one year into a lot of these production optimization projects.

John Raines: Yeah, I'd say we've had some tailwinds on the base. The decline rate itself hasn't changed dramatically year-over-year. Now, granted, we're call it one year into a lot of these production optimization projects. What I would tell you is our downtime is significantly lower. You know, historically, that was in the 7% range. You know, as we go into this year, we're looking at something inside of 5%. So that's really where you're seeing a lot of the base winds show up.

Speaker #5: What I would tell you is our downtime is significantly lower. Historically, that was in the 7% range. As we go into this year, we're looking at something inside of 5%.

Speaker #5: So that's really where you're seeing a lot of the base winds show up.

Speaker #6: Thank you.

[Analyst]: Thank you.

Speaker #5: Thank you.

John Raines: Thank you.

Speaker #2: The next question comes from Kevin McCurdy with Pickering Energy Partners. Please go ahead, Kevin.

Operator: The next question comes from Kevin McCurdy with Pickering Energy Partners. Please go ahead, Kevin.

Speaker #7: Hey, good morning. I wanted to stick on the Delaware productivity, as it was very impressive in Q4. Is there anything you can comment on the standalone 2026 program and how it compares to the 2025 program in terms of the zones you're targeting, the geography, and the forecasted productivity?

Kevin McCurdy: Hey, good morning. I wanted to stick on the Delaware productivity as it was very impressive in Q4. Is there anything you can comment on the standalone 2026 program and how it compares to the 2025 program in terms of the zones you're targeting, the geography, and the forecasted productivity? Thank you.

Speaker #7: Thank you.

Speaker #5: Yeah, great question. I'll hit on that at a high level. So, just top line, 2025 well productivity—2026 is going to look very similar to that.

John Raines: Yeah, great question. I'll hit on that at a high level. So just top line, 2025 well productivity. 2026 is gonna look very similar to that. You know, we moved more wholesomely into the multi-zone co-development in 2025. We're firmly into that development methodology, so you'll see very consistent well productivity in 2026. You know, when I think about the mix, you know, the one thing I would ask folks to consider is, I'm gonna talk about the full year, but these things can vary pretty significantly quarter to quarter. But as I think about the program, you know, about 90% of our activity is gonna be weighted to New Mexico.

Speaker #5: We move more wholesomely into the multi-zone co-development in 2025. We're firmly into that development methodology. So you'll see very consistent well productivity. In 2026, when I think about the mix, the one thing I would ask folks to consider is I'm going to talk about the full year, but these things can vary pretty significantly quarter to quarter.

Speaker #5: But as I think about the program, about 90% of our activity is going to be weighted to New Mexico. When I break that down a little bit further, kind of by area, we'll see a little bit of an uptick in Todd this year in the Delaware.

John Raines: When I break that down a little bit further, kind of by area, you know, we'll see a little bit of an uptick in Todd this year. In the Delaware, it's about 30%. Cotton Draw is about 25%. State Line is about 15%. Then the balance of that activity is really spread out across the remainder of the Delaware Basin. Zone mix is another thing. We've got a lot of diversity in the zones for 2026, just like we did in 2025. But just to break it down at a high level, we're about 40% Wolfcamp, we're about 45% Bone Spring, and about 15% Avalon. So all those things, very similar to 2025, and because of that, we're expecting pretty consistent year-over-year well productivity.

Speaker #5: It's about 30% Cotton Draws, about 25% State Lines, about 15%, and then the balance of that activity is really spread out across the remainder of the Delaware Basin.

Speaker #5: Zone mix is another thing. We've got a lot of diversity in the zones for 2026, just like we did in 2025. But just to break it down at a high level, we're about 40% Wolfcamp, we're about 45% Bone Spring, and about 15% Avalon.

Speaker #5: So all those things vary similar to 2025. And because of that, we're expecting pretty consistent year-over-year well productivity.

Speaker #7: Great detail. Thank you.

Kevin McCurdy: Great detail. Thank you.

Speaker #2: Our final question today comes from Matthew Portillo with TPH. Please go ahead.

Operator: Our final question today comes from Matthew Portillo with TPH. Please go ahead.

Speaker #8: Good morning, Clay and team. I actually had a question on the Bakken. Looking at the state data, you already have an impressive mix of three-mile laterals in the development program.

Matthew Portillo: Good morning, Clay and team. I actually had a question on the Bakken. Looking at the state data, you already have an impressive mix of 3-mile laterals in the development program. As you continue to shift more capital to the Grayson acreage, I was just curious, how that mix shift might change for 3- and 4-mile lateral development moving forward, and, and what that might mean for the break even of the asset base.

Speaker #8: As you continue to shift more capital to the Grayson acreage, I was just curious how that mix shift might change for three- and four-mile lateral development moving forward, and what that might mean for the break-even of the asset base.

Speaker #5: Yeah, Matt, great question. I mean, when you look back at 2025, admittedly, our lateral lengths were a little bit probably shorter than what we wanted, just given the layout of some of the units.

John Raines: Yeah, Matt, great question. I mean, when you look back at 2025, admittedly, our lateral lengths were a little bit probably shorter than what we wanted, just given the layout of some of the units that we had last year. So we averaged closer to about a 2-mile lateral in the Williston. As you fast forward into 2026, we're gonna average something closer to a 3-mile lateral. But when you look at the breakout, we are starting to introduce 4-mile laterals into the equation. We're actually drilling our first 4-mile pad right now. So the teams have continued to optimize the program for longer lateral develop. And of course, as you go longer, you're enhancing the economics of those programs, and the break evens are coming in pretty significantly.

Speaker #5: That we had last year. So we averaged closer to about a two-mile lateral in the Williston. As you fast forward into 2026, we're going to average something closer to a three-mile lateral.

Speaker #5: But when you look at the breakout, we are starting to introduce four-mile laterals into the equation. We're actually drilling our first four-mile pad right now.

Speaker #5: So the teams have continued to optimize the program for longer lateral development. And of course, as you go longer, you're enhancing the economics of those programs and the break evens are coming in pretty significantly.

Speaker #8: Thank you. It looks like we've kind of exhausted the question list. Thanks for your interest today, and if you have further questions, please reach out to the Professional Relations team.

Matthew Portillo: Thank you.

Chris Carr: It looks like we've kind of exhausted the question list. Thanks for your interest today. And if you have further questions, please reach out to the investor relations team. Have a good day.

Christopher Carr: It looks like we've kind of exhausted the question list. Thanks for your interest today. And if you have further questions, please reach out to the investor relations team. Have a good day.

Speaker #8: Have a good day.

Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.

Q4 2025 Devon Energy Corp Earnings Call

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