Welcome to Devon Energy's First Quarter 2022 Conference Call. At this time all participants are in listen-only mode. This call is being recorded. I'd now like to turn the call over to Scott Coody, Vice President of Investor Relations. Sir, you may begin.

Good morning and thank you to everyone for joining us on the call today. Last night, we issued an earnings release and presentation that cover our results for the quarter and updated outlook. Throughout the call today, we will make references to the earnings presentation to support prepared remarks, and these slides can be found on our website. Also joining me on the call today are Rick Muncrief, our President and CEO; Clay Gaspar, our Chief Operating Officer; Jeff Ritenour, our Chief Financial Officer; and a few other members of our senior management team. Comments today will include plans, forecasts and estimates that are forward-looking statements under U.S. securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from our forward-looking statements. Please take note of the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Rick.

Thank you, Scott. Great to be here this morning. We appreciate everyone taking the time to join us on the call today. As we all know, it's been an extraordinary time in the world, including energy markets over the past few months. While no one could have accurately predicted the timing or the wide-ranging impact of the recent geopolitical events, I can assure you that our team at Devon deeply understands the importance of our role in providing energy security to the U.S. We take pride in providing our great nation, a reliable, safe and cost-advantaged source of energy. The first quarter operational results are yet another example of the resolve and dedication to our mission here at Devon. Our people overcame multiple bouts of extreme winter weather and fought through the challenges of a tight supply chain to not only meet but exceed oil production targets for the quarter. We were also able to keep a lid on inflation and deliver these volumes in a very cost-effective way. This type of tough and resilient performance is what defines us, and I want to congratulate the entire Devon team for getting the job done the right way amid some very challenging conditions. Now turning to Slide 5. The first key message I want to convey is that the execution of our disciplined operating plan resulted in yet another quarter of impressive financial results. This was highlighted by Devon's earnings and cash flow growing at healthy double-digit rates versus last quarter. Our capital was in line with our plan and our free cash flow increased 18% over the prior period. We grew our quarterly dividend to a new record high payout of $1.27 per share. Our buyback program further amplified per share growth and our rock solid investment-grade balance sheet only…

Thanks, Rick, and thanks to those listening in on our call today. As you can see from the results we issued last night, our team delivered another round of impressive operating results. I want to stress to you that I don't take these regular accomplishments for granted nor should it diminish the valiant work that the team does to make these consistent deliveries look easy. This is a technically challenging business that continues to get harder every day. I believe that our recipe for today's success will continue to deliver in the future. The foundation of that operational success is built on a high-quality portfolio. That foundation is brought to life by incredibly thoughtful and hard-working people. And that team is guided by a business model, as articulated on Slide 3 that provides a steady course for them to drive their efforts towards. Once again, this quarter, strong well productivity across the portfolio drove production to exceed the midpoint of the 1Q guide, while steady operational improvements allowed us to mitigate additional inflationary pressure and keep our cost structure in line with the full year plan. This comprehensive execution across all phases of our operations allowed the higher commodity prices to pass directly through our field level margins and generate the highest level of cash flow for Devon in nearly a decade. Now let's turn to Slide 13, where we can discuss our franchise growth asset in the Delaware Basin. In the first quarter, net production from the Delaware increased 27% on a year-over-year basis. This volume growth was driven by 52 high-impact wells brought online that were diversified across targets in the Avalon, Bone Spring and Wolfcamp formations. In aggregate, these wells achieved average 30-day rates of 2,800 BOE per day with an average oil cut of over 60%.…

Thanks, Clay. I’ll spend my time today covering the key drivers of our strong financial results for the quarter. And I’ll also provide some insights into our outlook for the rest of the year. Beginning with production, our total volumes in the first quarter average 575,000 Boe per day. This performance exceeded the midpoint of our guidance due to another strong quarter of well productivity in the Delaware Basin. We expect first quarter production to be our lowest production quarter of the year due to winter weather downtime that reduce volumes by 15,000 Boe per day. With these curtailments back online and more than 80 development wells scheduled to initiate first production, we expect Devon’s volumes to increase by around 3% to nearly 600,000 Boe per day in the upcoming quarter. Moving to expenses, our largest field level cost category lease operating and transportation cost totaled $7.44 per Boe in the quarter. This strong cost performance was 3% below guidance expectations and allowed us to hold our per unit cost essentially flat versus the year ago quarter. Although we are experiencing moderate pricing pressure across several service and supply cost categories, our team’s proactive planning and thoughtful cost management has mitigated these inflation pressures year-to-date. Overall, this strong cost performance couple with exposure to higher value production expanded Devon’s field level cash margin by 17% quarter-over-quarter to nearly $50 per Boe. We also continue to control corporate cost. In aggregate, G&A and financing costs declined 13% year-over-year due to merger related synergies and the company’s ongoing debt reduction program. These structural improvements will help our margins remain resilient to inflationary pressures as we progress through the year. Current tax adjusted for non-recurring items was 6% during the first quarter. Given, the higher commodity prices we are experiencing, we now expect…

Thank you, Jeff. Great job. I’d like to close today by reiterating a few things. Number one, the execution of our strategy is delivering impressive financial results you’ve just heard that. Number two, there’s no change or disciplined game plan in 2022. Number three, we are rewarding shareholders with record high cash payouts. And number four, we’re confident we can continually and sustainably deliver this kind of performance for years to come. Lastly, I’d like to reiterate once again, how proud I am of this team, the results they are delivering and the reliable energy we provide our great nation. The energy crisis we’re experiencing in certain regions across the globe is a stark reminder of how critical it is for the U.S. to have a clear and consistent energy policy to ensure our nation’s security and global leadership. Oil and natural gas will remain a core source of energy for decades to come. And this needs to be acknowledged and accepted with any energy transition policy discussions. This transition is not an event in time, but rather a multi-decade endeavor that will require enormous amounts of energy from all available sources to meet the world’s growing demand. Energy policy matters and if we misstep physics and economics will defeat platitudes and untethered ideologies over time. At Devon, we’re committed to doing our part by showing up to work every day to responsibly produce low cost, clean and reliable energy. We’re also dedicated to bettering the communities in which we live and work by supporting investments in public education, healthcare, infrastructure, and by providing high paying jobs to American families. I will now turn the call back over to Scott for Q&A. Thank you.

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

Thank you. [Operator Instructions] Our first question is from Arun Jayaram of J.P. Morgan. Your line is now open. Please go ahead.

Yes, good morning. My first question is just on cash return. The updated outlook is for dividends at $4.75 per share on Slide 7. And you highlighted two potential uses of cash, which would be the balance sheet to $1 billion over the next couple of years and then, call it, just over $1 billion left on the buyback authorization. So Rick or Jeff, what – given how you outlined maybe up to around $400 million in cash return through debt reduction this year, is it fair to say that there is enough cash to deliver on the full buyback this year?

Hi, Arun. This is Jeff. Yes, the short answer is absolutely, yes. And so as you know well, we continue to kind of evaluate each quarter the financial framework that we've laid out to The Street and obviously discussed it in great detail with our Board. Our first priority is always to make sure we feel comfortable with the leverage in the balance sheet. We're in great shape there. As I mentioned in my prepared remarks, we've got $400 million we'll take out later this year and then another $600 million into next year. And frankly, if you look beyond that in 2024 and 2025, we'll have the option to take down another $1.5 billion of debt if we so choose, as we work our way out into the future. But right now, given the strength that we have with the balance sheet, we're really focused on delivering on that fixed variable dividend commitment that we've made. And then beyond that, we're incredibly excited to buy back our shares given the current level that we see and kind of how we're trading not just versus our peers, but versus the broader market. We think there is a real opportunity to create some real value by buying back our shares. And so you're going to see us continue to lean into that as we work our way through the year and hopefully our track record is a pretty good indicator of our behavior, which is each quarter we've continually added to that and added to the capacity and our ability to go after that.

Great. And just my follow-up, we have seen over the last week or so, a couple of Permian gas takeaway projects being announced, KMI has gone open season on the pipeline and Whistler reached FID yesterday, I believe. So I was wondering if you could talk about what type of dilutions does Devon have in mind in terms of mitigating the risk of gas takeaway challenges next year just given production growth in the basin.

Yes. You bet, Arun. I think you and I discussed this question on the last quarterly call as well. Just as a reminder with – currently our setup and with our production out of the Delaware, about 50% of our current production in the Delaware we have firm takeaway that we own and control and move those volumes out of the Delaware Basin to the Gulf Coast. With the remaining 50%, about half of that, we actually sell to counterparties on term sale deals that actually have firm takeaway capacity as well out of the basin and then the remaining 25% of our production today actually sits there in basin. And so that's the current construct. For that, we do share the concern that the broader market does around takeaway for gas out of the basin as you move into 2023 and 2024. So we are actively evaluating different opportunities to move more of our gas out of basin if the value proposition makes sense as we work our way to that. From a price standpoint, again, 50% of that production is getting Gulf Coast pricing. And then the other 50%, the way we've been trying to manage that and mitigate any impact to differentials is through our hedging program. So you'll see in our hedging disclosure that we outlined last night, we have a significant amount of our production that's in basin, get in-basin pricing. We've actually hedged that for this year and well into 2023.

Thanks, Jeff.

Our next question is from Neal Dingmann of Truist Securities. Your line is now open. Please go ahead.

Good morning guys. First, Rick, just a question for you is on investor recognition. Specifically, I remember talking to you seem to suggest now that you guys think are being rewarded for the outsized dividends. And I'm just wondering, given how well the stock is done particularly well in 18 months, I know number one in S&P last year. What other areas do you think if you and Clay would talk about it other areas where you still think that investors might not be fully appreciated or appropriately rewarding you all yet?

Well, I still think – I think we've been rewarded to degree with our dividend framework, that strategy and the execution of that. I believe that investors are going to continue to reward us for the predictability, the transparency of what we're doing. But I still think, fundamentally, that when you look at – and I mentioned this in our prepared remarks is that we're fundamentally undervalued when you start looking at the multiples and the returns people are going to see from us over the next several years. And I think that's something that – it's not just us, but I think it is especially us, but it's not – we're not the only company. I think there needs to be just a fundamental change of thinking with all of us on what our expectations are when we consider our multiples relative to virtually any other sector in the broader market and I think it was a great setup. We're going to – you heard Clay give you some ideas on some – not only ideas, real examples of what we're doing from a creativity standpoint, addressing supply chain issues. You've heard Jeff talk about some things we've done on the gas takeaway. So many of these challenges, we always think that we're going to be a step to – ahead of the competition and it's not only the competition, but issues that are coming our way that could be problematic for us. So I think that all we need to do is just keep being ourselves and keep delivering, being transparent, and I think it's going to work out just fine. Clay, do you want to add anything else?

Yes. Neal, I would just add to that. I think what is undervalued in the story is the repeatability. This is not just a one quarter kind of splash. I think the business model, the depth of our portfolio, the quality of our portfolio and how those – the business model messes with that portfolio to create a sustainable return to the shareholder in a very tangible way, I think, still comes in time. I remember a little over a year ago as we issued our first variable dividend, there was a very positive reaction, but I think the consensus was, yes, give us a few quarters of repeatability and then we will be able to draw a line through the data points. I think now that line has been pretty established. And the remaining question is how far does it – can we extrapolate that line. And I think what we're continuing to show from our portfolio as we talk more about our ability to deliver in various phases of the cycle, I think that repeatability and longevity will soon come to be valued as well.

Yes, agree guys. I don't think your low-cost capital is even being considered as well. But lastly, just on the second question, could you talk about maybe asset allocation specifically, Clay, you talked about the repeatability. I'm just wondering given the entire move of the natural gas strip, any consideration of allocated more towards Anadarko? Or still is that just not competing in again? I know how good the Permian returns are. So again, it's a nice sort of challenge to have. I'm just wondering how – any outlook in that over there?

Yes. Thanks for bringing it up. I'm a big fan of Mid-Con and what the team there is doing. I think we are really significantly moving the derisking of that program. I think we'll continue to see dollars going to it in a very material way as they are this year. I don't see wholesale changes moving away from the Delaware. We have incredible depth of inventory there, and that's always shakes out at the high end. We stress test the portfolio in a number of different ways. We move gas relative to oil and what happens is you may reallocate inside the Delaware, but it continues to drive most of that investment of ballpark 70% to the Delaware Basin. Remember, we have some deeper gas – gassier options inside the Delaware that we barely have scratched the surface on. So it's – there's a lot of significant upside around the portfolio, but I don't see a wholesale change from us being a predominantly Delaware Basin focused organization.

Well said. Thanks guys.

Thanks, Neal.

Our next question is from Jeanine Wai of Barclays. Your line is now open. Please go ahead.

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

Good morning, Jeanine.

Maybe just following up on some of the – good morning. Maybe just following up on some of the other questions on natural gas. We've heard a lot of talk recently about the role of U.S. natural gas in the global market. You've got 560 a day coming out of the Permian, which is a good amount. You mentioned already that you had 50% of that going to the Gulf Coast and FTE. There's additional FTE that's getting announced. How are you seeing Devon's potential participation in the global gas market? We know it's not a short-term call kind of given LNG export capacity. But your Permian has got a long runway of inventory we heard from a peer this morning that the economics don't really look so good for LNG right now. So just wondering how you're thinking about that for Devon?

Hi, Jeanine. This is Jeff. Yes, thanks for the question. Yes, absolutely. You nailed it and highlighted that we've got a significant portfolio of gas, obviously, just under a Bcf a day. So it's something we think a lot about. We do think there's going to be opportunities to capture a better realized price for our gas longer term given the LNG dynamic. So that's something that we are actively evaluating and thinking about. Don't have anything to announce today, but certainly something you'll hear more from us about in the future as we get further into those opportunities and determine what makes the most sense.

Okay, great. And then maybe our follow-up is on the balance sheet. Jeff, you mentioned getting to zero net debt by year-end if prices hold but you're also not done paying off some debt early in 2022 and 2023. It's been pretty obvious over the past couple of years as a strong balance sheet as a strategic advantage. So is getting to net cash something that you're comfortable with maybe down the line? We have you actually getting there closer to the end of 2024, even with a healthy variable and buyback program. So is net cash either something you're comfortable with? Is that ultimately a goal? Or do you think it's really too inefficient use of the balance sheet? Thank you.

Yes, you bet, Jeanine. No. I mean, fundamentally, we want to get more and more cash back to shareholders. I think we've been pretty clear on that with our framework and finding ways to do that, creative ways to do that from quarter-to-quarter. So I think that will continue to be the mantra for us and the behavior that you'll see us pursue. From my seat, I'm never fussed with building cash. So I'm always happy about that and certainly gives us a lot of optionality and flexibility as we execute our game plan. But certainly, we're cautious given the inflationary environment we're in. Sitting on cash is probably not the most productive thing that we could do. So we're always actively evaluating different opportunities in different ways and debating those ways with the Board as to how to get more and more of that cash back to our shareholders. So that – I think you'll continue to see our framework evolve over time and – but certainly will be consistent with what we've outlined in the past.

Great, thank you.

Our next question is from John Freeman of Raymond James. Your line is now open. Please go ahead.

Good morning everyone.

Good morning, John.

The first question, we've been hearing everyone sort of talk about this earnings season, the supply chain issues that everybody is dealing with and sort of the tightness and the service side of things. And I'm just curious if sort of going through this, if it's caused any sort of changes and maybe the way that you all go about either securing raw materials, maybe having to plan further in advance. And with the service side of things, if there's any willingness to maybe look at – maybe longer-term contracts, maybe than you would have in the past given sort of a steady state level of activity that maybe isn't as sensitive to commodity swings that we maybe would have experienced in the past?

Hi, John. It's Clay. Thanks for the question. Yes, the answer is we do need to think about things differently. I can think of a number of kind of slight modifications to our normal course. And the first one that comes to mind is I love innovation. I love change. I love what's the next, what's the 1.1, what's the 1.2. If that 1.2 is working, how do we get to 1.3? What we've talked about internally here is the necessity out of being a little bit more sticky in our designs. As we think about facilities design is a perfect example, we may have that great next idea. And we just put that into practice and some – a brilliant mind from the field said, hey, if we just did it this way, be even better. In this environment, we need to be a little bit more sticky with our designs. And what I mean by that is working with our supply chain, telegraphing not just the normal 3 months or 6 months lead times but 9 and 12 months. So what you end up seeing is, and you don't see this on the external, but internally, instead of a 1.1, we may wait for a 2.0 innovation to make that next change. That's just a cost of the current situation. The other thing we're being very cognizant about our suppliers and very importantly, our supplier suppliers, one of the great questions I love asking of our partners is what's your potential supply constraint – supply chain constraint and how are you mitigating those? And so as we think about aligning with partners that have more and our service company partners who I'm talking about, as they have more sophisticated kind of vision into their own supply chain, that gives us greater confidence in aligning with them because if they fall short, that means we fall short and the whole thing falls apart. So there are several examples that we think about – as we talk, rig contracts are always a great proxy. As we think about interfacing with our rig contractors, we ask what's the well-to-well contract look like, what's a 6 month, 12 month, 24 months look like? And by talking company to company, you'll kind of get a feel for their – essentially their supply/demand curves internally and we'll make decisions on who do we think can complement one versus another. And what we're actually trying to do is blend a mix of short-term, mid-term and long-term contracts, so that we stay current in the market and also mitigate significant run-ups in a short period. So, there's a lot of things that are probably more normal course. In this part of the supply chain, this kind of hyper concern around supply chain, I think everything has kind of just dialed up to 11 about how we think about these things and really try and protect outside, downside.

That's great. Thanks, Clay. And if I guess if I just followed up on the operational side, it was nice to see the sand mine come online this quarter and you mentioned that there are some opportunities to duplicate that in the Anadarko and the Powder. I'd be interested sort of on the timing on those two fronts and then as well as if there's sort of an appetite to expand the Delaware sand mine above and beyond sort of what it's doing now is supplying 25% of your needs there?

Yes. Thanks for the question. This is just an example project of a lot of things we have kind of under the radar that we're working on to take a little bit more control and make sure that we have at least a baseload of supply. Sand is one of those things that nobody worries about until it's an issue and then it's a major, major issue. And so, owning the surface as we did kind of keeping an eye on the horizon, what everyone else is doing, we saw an opportunity here. And it's still – we're still – we've got start-up issues. We're still running this thing, just ramping up the activity. And so, I would say it's a little too early to talk about significant expansion, but really, really pleased about this as a project. As I think about – in the ESG world, I think about projects that are environmentally better, that are safer, that saves money that just absolutely do the right thing and then help us from a supply chain perspective. This was one that checks all the boxes. So really excited about it. As we talk about other basins, it's different in each basin. It's a pretty unique situation for us to own so much surface right in the middle of the heart of one of our biggest fields. We don't have that luxury in other areas. So you look at it a little bit differently, partnering with landowners or even partnering with sand contractors to make sure that we have that kind of this ability very close to our – the heart of our operations and still achieve at least most of the benefits associated with it.

Thanks, Clay. I appreciate the responses.

You bet. Thanks, John.

Our next question is from Matthew Portillo of TPH. Your line is now open. Please go ahead.

Good morning all. Thanks for taking my questions. The first one might be for Rick. Rick, you've been able to pull together a very impressive portfolio through M&A transactions at the right time through the cycles over the last couple of years. And I was just curious how you feel about the current M&A market from a bid-ask spread perspective and how that might compare to continuing to return capital via buybacks to shareholders here?

Yes. Good question, Matt. We talk about this all the time and certainly, Devon will always be a company that stays kind of in the know, so to speak and with what’s in the market doesn’t mean we’ll participate, but I can assure you we’ll have this some kind of an idea of valuations. From our standpoint, nothing really changes. I mean, we have – we’ve always had a real high bar of asset purchases or timing, even of sales. And nothing’s really going to change our framework. I mean, our number one priority is you've heard it, we’ve articulated several times today and that’s returning cash back to shareholders and returning value back to shareholders and really, really excited about our outlook. That’s why we’re so constructive on our share repurchase the program to be honest with you. We just think we’re fundamentally undervalued. And so once again that makes potential acquisitions more challenging because it fundamentally just has to be very accretive to us and we have to feel that it makes sense. And so nothing’s really changed from what you’ve seen over last several years, really.

Perfect. And then as a follow-up, just on natural gas, again. You obviously have the Dow JV, which has been a homerun. It looks like for both parties and juices the return profile for the Anadarko development program. Just curious more broadly speaking is there an opportunity to potentially form similar JVs going forward to pull forward some of your gassy your inventory and take advantage of the current improvement in the forward curve for both, I guess, natural gas as well as NGLs and some of the lighter streams on the hydrocarbon side.

Yes. That’s a good question. And it’s always something we could do, Matt, but I can tell you the Dow JV is really a nice setup for us. You mentioned the NGL exposure that is tremendous here in the Anadarko and Clay talks about how the team is getting more and more confident in those returns and certainly on a promoted basis, they’re absolutely phenomenal. They’re just really, really strong. When you start thinking about JVs and other areas where we have exposure to gas, I mean, the first place, we have most exposure to gas would be the Permian. Really. I don’t know that we have a strong appetite to do a lot of gas JVs down there right now. It just doesn’t seem like that makes a lot of sense for us. I think, we’re going to continue to focus on developing the high liquids where you’re 50%, 60% crude oil plus the NGL that’s where you’re going to get some real margins in juice your returns. So I think for us right now we got a great set up. I don’t see us really having a strong appetite with these kind of commodity prices to move into another gassy base and set up some type of a JV there. I don’t think that makes sense. So I think we’ll just really stick with what we have right now makes probably the most sense for us.

Thank you.

Our next question is from Doug Leggate of Bank of America. Your line is now open. Please go ahead.

Thank you. Good morning, everybody.

Hi, Doug.

If I made one on inventory and Jeff, I got, good morning. One on inventory and Jeff I got to talk about the variable. So I’ll do that a second if you don’t mind. So in your remarks, I think you talked about, you have got deeper gas opportunities in the portfolio. On Slide 20, you show us 2,500 – sorry, 4,000 locations in the current inventory and up to another 2,500. So my question is presumably that includes the gas sensitivity, and I guess the question I’m really trying to get to is that’s about a 15-year inventory, your current pace including the 2,500. How does Devon avoid being a third smaller five years from now on this inventory deck? [ph]

Hey, Doug, it’s Clay. I’ll take that one. So there’s a couple of things happening in the inventory. And remember we try and show this slide to give confidence around the next running decade. If I had to update the slide today, I’d say I feel very, as confident as I did a year ago in our one, or excuse me, one decade ability to deliver very high returns at very competitive cost structure. If you recall that slide is all based on a 33, excuse me, a $3 and $55 world. And so certainly as that commodity price runs up the whole quantification of those opportunities come up as well. And the quality of those opportunities come up. Now, remember, we’re still looking at other deeper horizons as an example in the Wolfcamp in the Permian that adds to that inventory, the work that we’re doing in the Powder that adds to that inventory. Some of these things that – some are represented in that upside piece, and then there’s additions that we didn’t even consider in the upside. What I would expect as we march through the years that this is kind of a rolling 10 years out in front of us. We’ll certainly look to augment. We’ve done a great, some great things in the path with bolt-on acquisitions, right in the heart of what we’re doing. Our land team continues to do a great job of trades that bolsters these numbers as well. And then of course, the kind of little E exploration kind of under positions that we already own also adds to these positions. So it’s a moving target, certainly commodity price helps. We’re not just relying on higher commodity price to add to the quantity and the quality of this portfolio look.

So just a clarification Clay. So the 2,500 additional, my read of it, that was the impact of the higher commodity deck. So are you suggesting there’s upside to the 6,500?

Yes, there is additional upside.

Okay. Thank you. My follow-up Rick is, is probably for you or for Jeff. But there’s been a lot of comment around you think your stock is undervalued. You’re getting a lot of help from gas today, obviously, and there’s other things going on but the whole sector. But your share price is pretty much flat since your oil price stock going up at the beginning of March. The renewable dividend – or the variable dividend will be paid out on the 30th of June. So that’s coming off your balance sheet, which is net negative for your equity, and you increased by 25%, but your variable dividend is even more than that. So my question is how does the commentary around how cheap our stock is dive with the continued commitment for an outsized variable distribution, which erodes you equity value, as opposed to really stepping into the buyback program?

I think just fundamentally, all the questions I think, some investors grapple with it, and quite honestly, we’ve debated over the last 12, 15 months is it either or we felt like most of the investors we felt like were giving us very, very candid feedback. They preferred that return of cash today rather than share repurchase. As we’ve gotten into it, Doug, I can tell you that we’ve become more and more convicted. We continue to debate this with internally here and with our Board. And we just feel fundamentally that the curve is heavily backwardated, but it’s been wrong. And that’s why you continue to see it come up. And this is not just the Ukraine, the horrible situation Ukraine driving. It certainly is we all know that it’s a factor, but we have become more and more convicted that share repurchases make a lot of sense for us. And – but it’s not just an either or it’s – we’re going to do both. And matter of fact, we’re not just doing both, we’re doing the third thing and that’s aggressively paying down debt. So all of this creates value to our shareholders. It makes the equity, I think, more, more valuable. And you start looking at the disciplined we’re employing. When I look at the equity performance, yes, it’s been great what we have done over the last 12 months. We’re excited about that. But I still think that at the end of the day, the story has just begun with energy. And I think we continue to get – that’s what makes a market, right? You have people that push back on thesis and people that push back on perspectives, but ours was that if we, it goes all the way back to the fundamentals of the merger that we announced 18 months ago. We felt like that it would make a lot of sense. We give us a lot of lot of runway to implement a variable dividend, which we both companies were very big fans of. But we were able to accelerate that. And as things that we saw the synergies, we saw the opportunity to set up for the continued execution, managing through these supply chains. And that’s why we just feel that fundamentally our equity is undervalued and that’s – that gives us the conviction to go out and buy it back. And so we’re going to have a multi-prong attack, and I think that’s the best thing we can do as a management team I believe.

I appreciate the answer, Rick. I guess what I’m saying is I think we prefer to see more of the permanence than the transitory stuff. But I will say one last thing. I think we’re all going to be calling [ph] you on platitudes and untethered ideologies. I love that expression. And [indiscernible] I think. Thanks so much.

Thanks. Thank you, Doug. Take care. Talk soon.

Our next question is from Charles Meade of Johnson Rice. Your line is now open. Please go ahead.

Good morning, Rick, Clay and Jeff, and the rest of the Devon folks on the call.

Hi, Charles.

My first question, this would be for you, perhaps for Clay. Thank you. Could you contrast for us the different ways you may be experiencing inflation across the Rockies, Mid-Con, Permian [indiscernible] Gulf Coast and maybe offer a thought or two on what bottleneck may be yet to emerge for you guys?

Clay, you want to answer that?

Sure. Happy to, yes. I think of inflation, we use it kind of as a holistic term. But it supply chain and importantly it’s people and any one of those can manifest in a headwind to our operations. And so kind of breaking those apart a little bit, thinking about supply chain, excuse me, let’s start with inflation. Just as a sense of rising prices, that’s one component of inflation. That’s actually one of the easier ones to manage. It’s a little – you can telegraph it a little bit more. You can mitigate with contracting alignment with suppliers. That’s pretty manageable in a sense. The harder part of inflation and I’ll stick to kind of that piece of it is maybe there’s a time component. If you’re having to go to your third or fourth or fifth favorite supplier, maybe there is a drag on maybe when that well starts up. That’s an inflationary component that is really hard to mitigate. Maybe there’s some standby time or you’re reaching for that, your favorite supplier, and they’re always available and no longer available. How do you bake that in into your time component of inflation? There’s one other component of inflation that can get you, and you think about this is more people related. It’s the newness or the dilution of the talent. When we’re contracting, we get a really run up in some of the best people in the industry. Most experience, you might have a day company person, and a night company person that are both 30-year people that are exceptionally good at what they do as that activity picks up. That dilution of talent also can cause a little bit of drag. We anticipate these things, we work with this. We always look for a safety potential…

Yes, I’ll rewind back just a little bit as we talk about weather, I really didn’t get to talk about it earlier. But in the first quarter, we had four weather events blow through the teams getting better and better overall. This was probably more Mid-Con and Permian related that manifested during the course of the first quarter to respond to that, to mitigate, make sure we’re avoiding any safety events, incidents, environmental incidents, protecting the wells and then getting them back on. And that was all baked into the first quarter results. We did have some downtime associated with that. As you mentioned in the second quarter, namely in the month of April, we had some fairly late spring, massive snow events, mainly in Williston, but it also hit a little bit into Wyoming, our Powder as well. We had the ranges I’ve heard from the field were 26 to 40 inches of snow over the course of just a couple of days. We had people completely snowed in to their house, not even able to get to the field to check on wells. The good news is with our modern operations, we’re able to remotely monitor wells, but you can only do that to a certain degree. We can remote shut in wells. We have cameras on location, so you can visually see if anything’s going on, except if the whole field’s covered in feet of snow. Then it’s hard to see even what’s going on. So we did have some downtime, very significant. We had a – the weather event I mentioned, and then the next weekend, we had to follow on another six inches of snow followed with some rain in Williston, a larger snow event in Wyoming. And I can tell you, the teams did a great job, no safety incidents to speak of, no significant environmental events to mention. We did have a production impact. And as you mentioned, it was – it’s all baked in. The 80%, I think that’s way overstated for our operations. I don’t know what the source of that information was, but we baked our production forecast in and accounting for all of this weather. And just great work by the team in our field. I mean, I can’t say enough about how great these guys are.

All right. I see that we’re at the top of the hour. We appreciate everyone’s interest in Devon today. And if you have any further questions, please don’t hesitate to reach out to the Investor Relations team at any time. Thank you and have a good day.

This concludes today’s call. Thank you for joining. You may now disconnect your line.