Good morning, and welcome to Devon Energy's Second Quarter 2011 Earnings Conference Call. [Operator Instructions] This 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.

Thank you, operator, and good morning, everyone. Welcome to Devon's second quarter 2011 earnings call and webcast. As usual, I'll begin today's call with a few preliminary items and then turn the call over to our President and CEO, John Richels for his perspective. Following John's remarks, Dave Hager, our Executive Vice President of Exploration and Production will provide the operations update and then Jeff Agosta, our Chief Financial Officer will finish up with a review of our financial results. We'll conclude with a Q&A period and we'll hold the call to about an hour. A replay will be available later today through a link on our homepage, that's devonenergy.com. During the call today, we're going to provide some minor updates to our 2011 forecast based on the actual results for the first half of the year and our outlook for the remainder of the year. In addition to the updates that we're going to give in today's call, we'll file an 8-K later today as is our usual practice that will provide details of our updated 2011 estimates. These updates can be accessed using the Guidance link on the Investor Relations section of Devon's website. Please note that all references in today's call to our plans, forecasts, expectations, estimates and so on are considered forward-looking statements under U.S. securities law. And while we strive to give you the very best estimates possible, many factors could cause our actual results to differ from our estimates. We'd encourage you to review the discussion of risk factors and uncertainties provided in the Form 8-K that we are filing today. Also on today's call, we will refer to certain non-GAAP performance measures. When we do that, we are required to provide certain related disclosures and those disclosures are also available on the Devon website. With those items out of the way, I'll turn the call over to President and CEO, John Richels.

Thank you, Vince, and good morning, everyone. Let me begin by stating the obvious. Devon's second quarter of 2011 was an excellent one. Our North American onshore production reached an all-time record, averaging 660,000 equivalent barrels per day. That's a 5% increase over the first quarter, continued focus on efficiency and cost control, mitigated industry inflation and the impact of a stronger Canadian dollar. In fact, our pretax cash costs per equivalent barrel were essentially flat compared to the previous quarter and the year-ago quarter. With production above our guidance, higher realized commodity prices and effective cost management, our second quarter adjusted earnings climbed 10% over the prior year quarter to $1.71 per diluted share and that exceeded the first call mean by $0.17. Cash flow before balance sheet changes reached $1.6 billion or $3.81 per diluted share surpassing the street mean estimate by $0.48. Net earnings including the gain on the sale of Brazil totaled a whopping $2.7 billion for the second quarter or $6.48 per diluted share. And during the second quarter, we repurchased 7.1 million shares for $584 million. To date, we have spent $2.6 billion of the $3.5 billion current authorization to repurchase 35.1 million shares. This represents almost 8% of our outstanding shares and those shares were acquired at an average price of roughly $74 per share. We remain on track to complete that repurchase program by the end of the year. In May, we closed our $3.2 billion sale of our Brazilian assets which essentially completes the strategic repositioning of Devon to a company focused entirely onshore in North America. Our total pretax divestiture proceeds exceeded $10 billion, with after-tax proceeds estimated to $8 billion. Currently, we have more than $6.5 billion of cash and short-term investments outside the U.S. that we have not…

Thanks, John. Good morning, everyone. We continue to see outstanding results from our 2011 E&P capital program. Our key development plays, including the Barnett, the Cana and Jackfish are all performing very well. We also remain very active in evaluating and de-risking the upside potential in our various emerging and new venture plays. With more than 90% of our 2011 E&P capital allocated towards oil and liquids-rich projects and with the solid results we have seen so far this year, we are well on our way to deliver liquids growth in the high teens in 2011. So let's take a look at some of the highlights for the quarter. Starting with our oil -- our thermal oil projects in Eastern Alberta, Jackfish continues to deliver industry-leading performance. During the second quarter, Jackfish 1 production averaged 31,000 barrels per day net of royalties. At Jackfish 2, we began injecting steam in the second quarter. All 4 pads are currently in the circulation phase of the process. As some of you may have recall from our recent SAGD school, this is the initial stage where steam is injected into both the injector and producer wells to begin warming the reservoir. Later this month, 3 of the pads will move into the partial SAGD phase and production will continue to ramp up. We exited the second quarter producing about 1,000 barrels per day net of royalties at Jackfish 2. At Pike, with data from nearly 400 wells and some 60 square miles of seismic, our SAGD team has begun engineering work on a 105,000-barrel per day facility for Pike 1. This would be essentially 3 Jackfish-sized facilities from a single plant site. You might recall we completed the resource evaluation for 2 of the 3 projects with last winter's stratigraphic drilling. Planning efforts…

Thank you, Dave, and good morning, everyone. Before we move into the financial review for the quarter, I would like to remind everyone my comments will be focused on results from continuing operations. In other words, our North American onshore business. With the close of Brazil, this will be the last quarter that contains significant activity within discontinued operations. For those of you interested in a more detailed review of our discontinued ops, we have provided supplemental tables in our news release. For today's call, I will limit my comments to those items that require additional commentary or were outside of our forecasted guidance range. The first item I will cover is our production for the quarter. In the second quarter of 2011, our reported production totaled 60.1 million oil equivalent barrels or 660,000 Boe per day. This result set a quarterly production record for our North American onshore operations and represents a robust 5% growth rate over the first quarter and a greater than 6% increase over the year-ago quarter. Additionally, our production exceeded the midpoint of our guidance range by roughly 10,000 barrels per day, in spite of deferring production from Cana due to tornado damage at our plant there. Our outperformance was driven by strong results from our core properties. Also, a gas royalty adjustment in Canada boosted reported second quarter production by about 7,000 barrels per day. Looking specifically at the liquids side of our business, our oil and natural gas liquids production averaged 220,000 barrels per day for the quarter, a 12% increase over the year-ago period. The most noteworthy year-over-year growth came in the U.S., led by strong growth from the Barnett, Cana and Permian basin, we increased our second quarter U.S. oil and NGL production by 22% over the second quarter of last…

On this session today, we have, not just the speakers, but our Executive Chairman, Larry Nichols is with us and as usual we'll ask each participant to limit his or her questions to one initial inquiry and one follow-up. Operator, we're ready for the first question.

[Operator Instructions] Your first question comes from the line of Doug Leggate of Bank of America.

I guess I'll direct this one to John. John, you've got an awful lot of options on the table, in terms of your -- what is a pretty exciting exploration program going forward. Assuming that at least several of those work, what would your capital priority be in terms of future capital expenditure, in terms of obviously you're still maintaining a lot of capital in the Barnett, particular, how would you look to flex the capital program, would the capital program go up or would you reprioritize within the portfolio? And I have a quick follow up, please.

Well, Doug, I mean, certainly, with our financial position where it is, we've got the ability to pursue a lot of opportunities. I think what we'll have to do is we're really excited about these new opportunities that we're pursuing. We'll have to see when we have more data, how they stack up one against another. Over a longer period of time having -- that's a high-class problem to have, or a high-grade problem to have, if we have that many opportunities, but we'll just have to see exactly what the economics look like. We are, as you mentioned, we're getting great economics and greater returns out of our Barnett Shale program. Even at $4.50 gas this year, that play is going to cash flow somewhere at $1.8 billion on $1 billion investment of capital and we're getting great results out of Cana and some of our other development programs. We'll just have to see how they all stack up and how much we want to invest to bring the value forward on these new opportunities.

Great. My follow-up is actually kind of a related question. It's maybe one for David, but the rig count, could you give us some ideas as to how you see the trajectory, let's say, through the balance of this year. I guess, included in the question, the drilling efficiencies that you're seeing from the existing rig count, is that improving? Because it looks like we're seeing some significant change in the context of your very production numbers.

Yes, Doug, I would say that for the rest of this year, we see our rig count staying essentially flat and we're still finalizing our plans, as we look forward to 2012. So I don't want to predate our process, internal process, here too much, but probably we're going to be looking at somewhat of a flat program next year also compared to this year. And on the efficiency side, yes, we're continuing to see increased efficiencies throughout our program and we're continuing to see it in the Barnett, we're seeing it in Cana. Obviously that's part of the reason we actually had a capital increase here, we announced a few weeks ago, because we're drilling so many more wells and we're keeping the rigs for the full year, then we're getting more wells drilled than we originally anticipated. But that is the good news, and we're taking those learnings on how to do that throughout our entire program including our new ventures area.

Your next question comes from the line of Scott Hanold from RBC Capital Markets.

Looking at the Utica Shale. Obviously a lot of cheddar on that and you guys indicated you saw some pretty encouraging things as you looked at your vertical core. Can you just, in generally, just talk about what specifically you see within that core that gets you excited and how you kind of compare some of the attributes versus some of the other liquids-rich plays you are involved in?

Well, I don't want to get too much into the specific analysis of it. But I can say, obviously, that we have a lot of experience in looking at a lot of shale plays throughout the U.S. and we understand what we need, in terms of what type of permeability is necessarily, especially in light of the fact that we are primarily in the oil window and it is a normally pressured oil window. It's not overpressured. So, obviously, you need a little bit higher perm in order to move the oil through, but I think we understand that and we know where the permeability is and we're encouraged. And the ultimate test, obviously, is to drill some horizontal wells out there and we don't have any horizontal wells, but we think we have a pretty good understanding from our vast numbers of horizontal wells we drilled throughout the North America that we understand the relationship pretty well and we're optimistic.

And then turning to the Permian, obviously, it seem like you continue to step up activity and you're seeing some good things there. What is your rig counts specifically in that area? And how many rigs do you think you're going to be operating in the Permian as you look into 2012?

We are currently running 19 rigs in the Permian and I can break those net rig count down for you in a little bit more detail. We have 5 rigs -- I think, I pretty well did it in the prepared remarks, but there are 5 in the Bone Springs, 5 in the Wolfberry, 3 in the Delaware horizontal program, 2 in the Avalon, 2 in the new Wolfcamp Shale play that I described in the Southern Midland Basin where we've assembled 65,000 acres and a couple of others that are drilling conventional oil plays within the basin. We see that program staying pretty flat going into next year, but we're very excited with the results that we have achieved with that. We'll have to see -- if we do have continued success, we might move the rig count up a little bit or limit it a little bit by the infrastructure availability out there and just as we need to mature the play. So it's possible, it might move up a little bit as we move into next year, I wouldn't see -- look for a doubling or anything like though of the rig count. But it's probably perhaps a small increase in the rig count moving into 2012.

Your next question comes from the line of Mark Gilman from the Benchmark Company.

Just a couple of quick things. David, you may have done this, but frankly you're just going too fast for me to possibly keep up. But I didn't hear you talk about any kind of recent drilling results in the Avalon?

Yes, when -- I didn't go through that in a lot of detail, Mark. I would say that what we're finding in the Avalon, so far, is that we are seeing strong gas rates in the Avalon. We are seeing, as we move from west to east in the Avalon, that we get -- that it becomes more liquids-rich and we haven't drilled as many wells in the central and eastern part of the play as we started our program in the Western. So right now we are moving into the part of the play that is more liquids-rich in the most economic part of the play and we really need to get some completions on that part of the play before I can talk in any more specifics.

Okay, Dave. My follow-up relates to what you think in terms of the liquids content of the program going forward into Barnett and the Cana? I mean, obviously the more recent wells are yielding a much higher liquids content than you've seen in your base production in the areas. Do you have any thoughts on what that looks like going forward?

Well, we talked about plant expansions in both those areas. And so, obviously, that gives you an idea that we have a deep inventory of liquids-rich opportunities in both those areas. In the Barnett, we probably have about 2,000 locations in the liquids-rich part of the play and we're getting outstanding economics in the liquids-rich part of the play, both in the Barnett and in Cana. And so we see -- and frankly in Cana, we have not drilled as much in the core of the Cana as we have around the core. That's the only area in the company where we have had to drill some wells in order to get it held by production. We focused part of our program on that versus infilling in the core which is very liquids-rich. So we see tremendous opportunities there also to infill the core. You've seeing how our downspacing projects have worked well, so we anticipate that we're going to have a strong liquids growth and that's part of the reason why we're expanding the plant in Cana as well.

If I could just follow up, what I'm trying to get a handle on is, at the margin, do you think the liquids rates that you're seeing in both those plays can be sustained at what we're seeing right now? Can they go higher? Are they likely to back off?

Mark, this is Vince. I'll give you a couple of observations. About 22% of the BTUs coming out of the Barnett right now are liquids. We are focusing our activity on the liquids-rich portions of the play. So if the relative economics continue to favor the liquids-rich portion, we would expect the percentage of our BTUs in the Barnett that are liquids to go up. Following the de-risking of the Cana, if the current -- the market conditions are similar to what they are now, that highly favor liquids-rich drilling over dry portions, then we would expect to increase the liquids yield, as a percentage of the total BTU stream out of the Cana just like in the Barnett.

And Mark, we talked from time-to-time about the fact that we were not going to increase our processing capacity in those areas for a short term because we want to make sure that we efficiently allocate that capital. And the fact that we're expanding our processing capacity in both of those plays shows you where we think that liquids volumes are going here in the next while.

Your next question comes from the line of Brian Singer from Goldman Sachs.

Following up on some of those Permian questions. With regards to the various Delaware Basin horizontal zones, you seemed to be getting good results out of the second Bone Spring in New Mexico, the third Bone Spring in Texas and you just discussed the Avalon here. Can you provide a bit more color on the first Bone Spring in New Mexico and then whether you see any of the 3 Bone Spring zones, along with the Avalon, commercially overlapping on your acreage?

Well the first Bone Springs is also perspective -- is perspective a little bit further to the north, basically as you move from north to south, you go from the prospectivity being in the first Bone Springs to the second Bone Springs. And then once you cross the New Mexico-Texas line there then the third Bone Springs is primary perspective on the Texas side. But there is some overlap though between the first and second Bone Springs. And so yes the first Bone Springs is perspective as well on the New Mexico side. It's not -- I don't want to give you the idea that it's strictly a resource play type though. It's the first and second Bone Springs are more channel sands, so you have to make sure that you stay in the channels. And then as you move down into Texas, those channels essentially splay out and they become like a deepwater depositional system and when you go off the shelf edge and that's where you get the really high rates in the third Bone Springs, once those channels splay out on the Texas side.

As a follow-up, when we look at the cash currently outside the U.S., can we talk a little bit more about potential capital allocation, how does your ability to repatriate that cash into the U.S. versus move it towards Canada impact your willingness to expand new venture acreage position versus buyback additional stock versus make larger acquisitions?

There's a lot of questions there, Brian, but, let me take a crack at that. I mean, right now obviously, as Jeff mentioned, we're still trying to sort out the income tax rules to see whether we could bring it back to the U.S. What it does do is to the extent that we allocate some of those funds in Canada, we've got a lot of projects there as well. We've got a very ambitious program for our thermal heavy oil. I'm excited about the growth there. It allow us to invest some funds at a -- that will create a higher return because they're not as opposed to bringing them back and paying the tax. So that's something that we're trying to work out, trying to figure out the optimal capital allocation between the U.S. and Canada. And with regard to share buybacks, unfortunately, I thought at one time it would be clever if we bought our shares back through our Canadian subsidiary, but the folks at the IRS have all that figured out as well and we can't do that with any advantage. But in terms of buying back our stock, we're going to do what we always have. And looking ahead, determine what's going to create the best debt adjusted share returns and best [ph] metrics for our shareholders and allocate that capital appropriately between our E&P opportunities and buying back stock. And as you know, we haven't been shy about that. We bought back about 20% of our stock in the last 6 or 7 years. So we'll have to see all of that sorts out over the next while. We're certainly hopeful that we're seeing, at least, some modicum of acceptance or positive indication of maybe being able to bring some of those funds back. Jeff, do you have any other comment?

Yes, I would just add, Brian, we're not inhibited in bringing that cash back. We're just really wanting to see how any potential changes to U.S. tax law may play out over the coming months to see if we can bring that back at an enhanced tax rate.

Your next question comes from the line of Scott Wilmoth from Simmons & Company. Scott Wilmoth - Simmons & Company International: You guys mentioned infrastructure constraints in the Permian. Can you give us more details on that and what your outlook is for the remainder of the year in 2012, in terms of Permian infrastructure?

Well, we see the infrastructure continue to expand throughout next year and the following year. There is particularly on the New Mexico side, there is really a lack of natural gas processing capability from the region and so you really can't ramp up the liquids-rich play significantly in the area where you're talking about the Avalon potential of New Mexico, so that is a constraint. The rest of the areas, I would not characterize really as being infrastructure constrained. I'd say it's more, it's just how quickly we can mature those plays and feel comfortable that we've properly de-risked the plays. Scott Wilmoth - Simmons & Company International: Okay, and then just following up on your 2012 rig count assumption, you said probably flattish for next year. Is that assuming a ramp-up in some emerging plays or is that if you have success, could that go higher?

Well it potentially could go higher with success, yes. And so we're committed, obviously, to balance though to stay -- to balance our opportunities against our -- stay in very strong financially also, and so we've got to put all of that together. And if we have significant success in these plays, we'd have to see, as John mentioned, just how we handle that situation, but there are a lot of options for us to bring value forward in the event that we have success in these plays through partnering relationships, et cetera. So there's a lot of different ways to solve that problem if that does occur.

Your next question comes from the line of David Tameron from Wells Fargo.

A couple of questions. Canadian -- I guess I got two questions, Canadian exploration can you talk -- you talked a little bit about the Viking, the Cardium and some of the Cretaceous stuff that you're doing, but can you talk -- give us a little more color what you're most excited about, maybe horizontal potential, are you going horizontal? Can you just give us more detail on that up in Canada?

Yes, we're excited about all of them. And frankly we're excited about the fact that we have 4 million acres in the Western Canadian Sedimentary Basin and we have done very little exploitation of those for liquids-rich and oil-type opportunities. So we see a very large number of opportunities that could emerge from there. The 3 that we've been traditionally highlighting so far this year are the Viking light oil potential that I mentioned, where we're going to have 1,000 to 2,000 locations across our acreage, 9,000 acres in Saskatchewan. The Cardium light oil play that -- where we have drilled a some wells in the Ferrier Area. But more importantly up in the Deep Basin, we think we have at least 80,000 prospective acres for the Cardium. And then also in the Deep Basin, we're going to be start drilling this fall what we call our Vertizontal Program where we are going to be taking wells that would go actually horizontal in the deepest zone, which will be the Cardomin [ph] and then also complete simultaneously in some of the vertical zones in some of the stacked pay areas. But in addition to that, we're drilling a number of different wells and a number of different play types up there that, with success, all of which could amount -- could be significant and I've got a whole list here of ones we could go through, but it's not worth going through all the details on all of them, but there's just a large number of opportunities, but we're just at the front end of evaluating all these.

Okay, all right, let me burn my follow-up on something else. John, you kind of alluded to it, but didn't directly answer the question or didn't answer the question I was looking for. What's the plans for 2012 share buyback?

We haven't made those plans yet, David. As we get into -- as we talked before, what we're trying -- what we're doing is -- there's always -- there's kind of a level of activity we have to have in the company, right? Which is just to maintain our organization capacity, our service sector capacity to meet our throughput commitments, our processing facility optimization, all of those things. After that, we want to be very thoughtful and dispassionate, frankly, in our views as to whether we're better off allocating funds to share buybacks or capital programs, and we want to allocate it to those areas that are going to create the best returns and the best debt adjusted share returns for our shareholders. Now as we get further through the year and we haven't obviously finalized or even come close to our 2012 capital budget, there are a lot of moving parts. And our view as to whether we ought to be buying our stock back rather than investing in our E&P programs is dependent on our stock price, on our view of commodity prices for the future, on our view of costs in the future and how that influences our per debt adjusted share metrics. So we'll have to -- we'll have to see how we -- what we do in 2012. 2011, we were really happy to be able to do a lot of each. And as Vince has mentioned before, we sold roughly 8% to 10% of the company for 23% of the enterprise value and significantly shrunk our balance sheet and that's creating some very good returns and good per-share accretion for our shareholders. So we'll just have to see, I can't give you a more definite answer than that because we're still in the early stages of determining what 2012 looks like.

Your last question comes from the line of Rehan Rashid of FBR Company. Rehan Rashid - FBR Capital Markets & Co.: Just a quick one, can we compare the Powder and the DJ Niobrara? Is it going to the same kind of variability you think to where we could...

It's a little too early to say on that. I think that as you are in the DJ Niobrara, you probably have a little bit more chalk in those, which would give you greater confidence that it's going to be brittle and will frac easier, so we think that's certainly a positive. There haven't -- the activity is slowly moving north in the Powder River Basin and there have been some positive results in the Powder River Basin, but it's still a little too early to know -- just the frac-ability of the reservoir is probably the biggest risk that exists up in the Powder River Basin, and as we and others drill more, we'll learn more about that. But we think overall it will work, but that's probably the biggest risk that sits out there. It's just how much -- when you have less chalk, you have other material in the Niobrara that will allow it to frac to the degree that it does in the DJ Basin. Rehan Rashid - FBR Capital Markets & Co.: Got it. And a follow-up, if I may. Just the new ventures activity as you pick up acreage all across the country, is there a common geological theme that you're focusing on that you can share?

Well, I'd say a common theme is that we want to get in, not so much geologically, but we want to get in -- we want to make money with these plays, is probably the most common theme, and so we get in early in these plays. We get very reasonable lease turns. We get very low -- we get low royalties. We get positions with scales so that if we have success, we can apply economies of scale and get the well cost down and we can create a lot of values. But our organization has the capability to evaluate a lot of different plays, so I don't think I'd say, I'd generalize as much on the geology as -- we're focused on making money.

Okay, it's the top of the hour. We'd like to thank everybody for participating in today's call and remind you that the Investor Relations staff will be around for the remainder of the day for any follow-up or for those that we didn't have a chance to get to in the question queue. Thanks for your participation.

And this concludes today's conference call. You may now disconnect.