Scott Coody - Vice President of Investor Relations David Hager - Chief Executive Officer Tony Vaughn - Chief Operating Officer Jeff Ritenour - Chief Financial Officer.

Evan Calio - Morgan Stanley Bob Morris - Citi Ryan Todd - Deutsche Bank Doug Leggate - Bank of America Scott Hanold - RBC Capital Markets Arun Jayaram - JPMorgan David Heikkinen - Heikkinen Energy Jeffrey Campbell - Tuohy Brothers Biju Perincheril - Susquehanna.

Good morning and welcome to the Devon Energy’s Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is being recorded. I would now like to turn the call over to Mr. Scott Coody, Vice President of Investor Relations. Sir, you may begin..

Thank you, and good morning. I hope everyone has had the chance to review our third quarter financial and operational disclosures that were released last night. This data package includes our earnings release, forward-looking guidance and detailed operations report. With today's call, we are going to slightly modify the format of our prepared remarks.

As always, I will cover a few preliminary items. Then our President and CEO, Dave Hager, will provide his thoughts on the strategic direction of Devon. Following Dave, Tony Vaughn, our Chief Operating Officer, is going to cover the key operational highlights for the quarter.

And then we will wrap up our prepared remarks with a brief review by Jeff Ritenour, our Chief Financial Officer. Overall, this commentary should last around 15 minutes and then we will open the call to Q&A.

Before moving on, I would like to remind you that comments and answers to questions on the call today will contain plans, forecasts, expectations and estimates that are forward-looking statements under U.S. Securities Law. These comments and answers are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control.

These statements are not guarantees of future performance and actual results may differ materially. For a review of risk factors related to these statements, please see our Form 10-K. And with that, I will turn the call over to our President and CEO, Dave Hager..

Thank you, and good morning, everyone. As Scott mentioned, we are making some minor modifications to the format of the call today to provide Tony and Jeff the opportunity to convey key messages and technical insights about their respective areas of business.

My comments today will focus on the strategic direction of Devon over the next several years, which we have recently branded as our 2020 vision. The intuitive strategic plan is to accelerate value creation from our advantaged asset base by continuing to deliver industry-leading drill bit results while improving our financial strength.

With the 2020 vision, our top objective is to deliver attractive peer-leading returns on invested capital for our shareholders. While the disciplined pursuit of returns is not new at Devon, our 2020 vision will further refine our focus on maximizing full cycle returns at the corporate level.

In fact, at our November board meeting, we will discuss incorporating return-oriented measures into our compensation metrics for the upcoming 2018 budgeting cycle.

Our refinement and capital allocation will result in more measured and consistent investment through all cycles, positioning us to more efficiently expand our business over time while optimizing returns.

This balanced operating model is in contrast to the industry's historical behavior of aggressively chasing topline growth at the ultimate expense of shareholders. This is not a populist philosophy that we are paying lift service too.

We are absolutely committed to doing business differently in the E&P space, and we are taking the appropriate steps to become an industry leader with our disciplined approach to capital allocation. In short, we can lead and we will lead.

While having the right capital allocations critical to achieving our 2020 vision, it is equally important to possess the right asset portfolio and get the most of these assets with superior execution. And at Devon, we are truly advantaged with our world-class acreage positions and the STACK and the Delaware basin.

The quality and of these two franchised assets are unmatched in the industry with exposure to more than 30,000 potential drilling locations, concentrated in the economic core of these plays.

Not only of the STACK and Delaware basin assets two are the very best positioned plays on the North American cost curve, but Devon’s large, contiguous stacked pay acreage position in these basins provide us a multi-decade growth opportunity. And with this long runway of highly economic opportunities, we are executing at a very high level.

Over the past few years, Devon has the top well productivity of any U.S. operator, which is quite an accomplishment in this competitive space. And importantly, with these terrific wells, we are significantly enhancing returns by embracing leading technologies to improve drilling times, optimize completion designs and to increase our base production.

As we continue to advance our development programs and build additional operating scale in the STACK and Delaware basin, the next phase of our 2020 vision is to further high grade our resource-rich portfolio.

Given the massive opportunity we have in the STACK and Delaware plays, we see the potential to monetize several billion dollars of less competitive assets within our portfolio in a very thoughtful and measured fashion over the next few years.

Potential proceeds from these portfolio rationalization efforts would be balanced between further debt reduction, reinvesting in the core business and returning cash to our shareholders. We expect to emerge with a highly focused asset portfolio and enhance profitability as we transition to a much higher-margin barrel.

With our 2020 vision, we also plan to have a fortress balance sheet with a net debt to EBITDA target of 1.0 to 1.5 times by the end of the decade. Overall, these winning characteristic will allow Devon to deliver consistent, competitive and major growth rates along with top tier returns on capital employed.

And lastly, I'll finish my remarks with a few preliminary thoughts on our outlook for 2018. First and foremost, our capital program in the upcoming year is being designed to optimize returns, not production growth.

And while we do expect robust growth form our STACK and Delaware assets, this higher return in production growth was simply be an output of our outstanding asset base and strong execution.

While we are still working through the details of our budget, we are directionally planning on an upstream budget somewhere in the range of $2 billion to $2.5 billion in 2018. To be absolutely clear, we expect to deliver this capital spend within operating cash flow at $50 TWI and $3 Henry Hub.

With current strip pricing above this base planning scenario, we have no plans to modify our capital range and we would expect to generate free cash flow. And I cannot emphasize this enough.

This disciplined plan will represent a major inflection point for Devon due to a step change and improved capital efficiency as we shift our full field development in the STACK and Delaware basin and we leverage technology to lower our cost structure.

With this highly efficient capital program, we expect to bring online more than 25% more development wells in 2018 as compared to the 2017 program. This means both more wells online and a focus on our highest return place.

This high returning capital program is expected to increase oil production in the STACK and Delaware Basin by more than 30% in 2018. We will provide more detailed production guidance on other components of our production mix in the coming months, once we have better insight inside in the planned activity levels for our non-operated Eagle Ford asset.

And with that, I will turn the call over to Tony Vaughn for additional commentary on our operations..

Thanks, Dave, and good morning, everyone. My remarks for today will be focused on a few key operating things that are integral to the success of Devon's 2020 vision.

First, the prolific wells we are bringing online lead the industry in well productivity and reflect quality of our underlying asset base our STACK’s operating capabilities and our willingness to deploy cutting-edge technologies across our asset base. In the third quarter, the well productivity from our U.S.

resources plays was nothing short of outstanding. We commenced production on 50 new wells that achieved 30-day rates of greater than 2,100 BOEs per day. Importantly, we delivered these high-return wells with the capital investment that was below the low end of our guidance range for the third consecutive quarter.

The second key message I want to leave you with today is our capital efficiency will dramatically improve as we transition to fulfill development as we further leverage the technology to maximize performance.

With the size and the scale of our STACK and Delaware positions, our top priority is to efficiently comfort the resource associated with these world-class assets into production and cash flow.

To maximize the value of these stacked-pay reservoirs, our capital activity is shifting towards low-risk, multi-zone developments to increase capital efficiencies and recoveries on a per-section basis. Early results from this thoughtful leading-edge development concept were quite positive.

At the end of Corner project in the Delaware Basin, which is Devon's first multi-zone development, drilling time has improved 55% compared to historic results in this area.

We also attained significant efficiencies due to less smoke times, more repetitive operations, improved productivity from zipper fracs and we achieved supply chain savings by debundling our completion work. Overall, these improvements resulted in capital savings of approximately $1 million per well compared to traditional pad developments.

Also of note, we were able to compress the spud to first production cycle time at Anaconda to only 5.8 months. We will continue to leverage this advantage development scheme with a majority of our capital activity going forward.

In fact, we will have several multi-zone projects under development across STACK and Delaware by year end and I fully expect to report more positive results in n this topic next quarter. And finally, I'm excited about our supply chain efforts underway that will help ensure the certainty of execution with our future multi-zone projects.

And as we have discussed at length today, Devon has uniquely positioned to maintain and build operating momentum for the foreseeable future with our STACK and Delaware basin assets.

To profitably execute on this massive opportunity, we have integrated teams across Devon proactively securing equipment, crews, materials and takeaway capacity at competitive prices and flexible terms to ensure the resources and capabilities to execute on our capital plans.

A recent example of this integrated planning effort was our ability to lock in essentially all sand requirements for our capital programs through 2018 at rates significantly below market.

This accomplishment was achieved in a tight market and the advantage rates were secured by sourcing all fine sand requirements from regional sand mines in the southern U.S.

Due to substantially lower transportation cost, we expect total delivered cost from our regional stored sand to be around 30% less and the equivalent grades in northern white sand without any degradation in performance.

To provide additional flexibility with our operations, we have also secured appropriate amounts of local trans load capacity in both stack and Delaware to further improved final amount of logistics.

These are just a few of the many initiatives underway across Devon that will help enhance returns on the capital investment and the uncertainty of our ability to execute on these development projects. So to summarize, we are building a very progressive culture that emphasizes data-driven decision making and innovation across multi-disciplined teams.

This effort is consistently delivering best-in-class drill bet results, improvements in capital efficiency as we shift to multi-zone developments and we have planning efforts underway to ensure certainty of execution with our future activity. And now, I will turn the call over to Jeff for our financial overview..

Thanks, Tony. I would like to spend a few minutes today discussing Devon's financial strategy within the context of our 2020 vision and build upon the points made by Dave in his opening comments. A great place to start is with a review of our current financial position.

Our upstream currently at $6.9 billion of outstanding debt with no significant maturities prior to 2021. Devon also has excellent liquidity with $2.8 billion of cash on hand and an undrawn credit facility of $3 billion. In the coming months, we expect our financial strengths to be further enhance with the completion of our ongoing divestiture program.

This solid financial position provides a significant optionality as we move forward in pursuit of Devon's 2020 Vision. Our top near-term objective is to fund our operational plants in the STACK and Delaware basin as these early-stage assets transition to fulfill development.

Growth in these assets will drive additional operating and capital cost efficiencies along with higher overall margins for the company. This disciplined capital program will be funded directionally with an operating cash flow. In conjunction with funding our capital programs, we are also intent on reducing outstanding debt.

As Dave mentioned earlier, a critical component at Devon's 2020 Vision is the commitment to further improve our investment-grade financial strength. By the end of the decade, we expect to improve Devon's leverage metrics from 1.0 to 1.5 times net debt to EBITDA as compared to our current level of just below two times.

To be clear, we expect to achieve this goal with a reduction of absolute debt. We are not planning on higher commodity prices to deleverage our business. Given our strong liquidity, the first step in our debt reduction plan will be to utilize a portion of cash on hand to tender for outstanding debt.

We will finalize size and timing of our tender after we complete our 2018 capital budgeting process, but we expect to further reduce debt by at least $1 billion over the next year. Looking beyond 2018, the second phase of our debt reduction plan is tied to the progression of our STACK and Delaware development programs.

As these world-class assets build scale and become self-sufficient, we expect to take additional steps to high grade our resource-rich portfolio with the monetization of less competitive assets. Use of proceeds will include additional debt reduction, reinvestment in the core business and the return of cash to our shareholders.

So, in summary, achievement of Devon's 2020 Vision positions the company with a top tier balance sheet in the E&P space, facilitating consistent investment in our assets and optimal returns through all cycles. With that, I'll turn the call back over to Scott..

Thanks, Jeff. We will now open the call to Q&A. [Operator Instructions] With that, operator, we'll take our first question..

[Operator Instructions] First question comes from Evan Calio from Morgan Stanley. Evan, your line is open..

My first question, Dave. I know in your opening comments you talked about prioritizing improving the balance sheet near term to ensure execution under a range of commodity prices and have an active asset program.

How do you think about the potential return for cash to shareholders longer term on the back end of your Vision 2020 strategy? I am presuming capital efficiency will be higher in '18 with all bases in development mode and you'll have proceeds of several years’ worth of non-core asset sales on the book.

So can you give us kind of color on that the distribution strategy and that maybe longer or medium term period?.

Evan, yes, that's absolutely something we are considering in a medium and longer term.

Our short-term priority is to continue to build scale in the STACK and the Delaware basin and we have really optimized our capital program in 2018 to deliver what we consider the sweet spot of capital spend to deliver with the highest return as we focus our activities one on development activities with increased efficiencies with having higher -- significantly higher number of starts and completions, as I said in opening remarks, 25% or more than we had in 2017 as well as focusing those and the highest return areas in our portfolio.

As we build that scale, as we execute on the 2020 Vision with further several billion dollars of divestments, we do see that we will be paying down some debt to build a fortress balance sheet to allow us to certainly withstand any sort of weaker commodity price environment in any reasonable price range.

Beyond that, we do see in the medium and long term that we will be in a free cash flow generation plus potentially have proceed from the asset divestitures as those take place and we will be looking returning value to the shareholders in one way or the other. .

Great. I appreciate that. And second, I know you've introduced the preliminary CapEx guidance range to $2 billion to $2.5 billion is lower than expectations but soon to be looked appeared assume a 4Q run rate or annualized run rate.

On the other half of the picture, I believe you mentioned that a 25% more wells on a similar drilling dollar assumption, I mean can you give us kind of a base line of what that's assuming in 2017? I know there were some backlogs….

That could somewhere around 240 or so, approximately, wells drilled and completed in 2017. And put simply, Evan, it would be inaccurate to take our Q4 capital run rate and extrapolate that forward to all of 2018.

We have a handful of rigs that are working in Q4 in the Rocky -- one in the Rocky, one in the Barnett and a few others tests - few of one-off exploration ideas that will not be active in 2018. And so we will have a higher capital spend rate in Q4 2017 than we will average for each quarter in 2018.

And then our efficiency is really just what Tony went through in many ways that we're getting into development drilling, we are realizing efficiencies from that and we are concentrating more of our total E&P capital spend on development drilling.

So were getting more efficient, we’re putting more dollars into the development drilling and we're drilling the best return wells. So if you put all three of those factors together, that's why we feel really good about the program not just in 2018 but well beyond 2018.

We’re getting in development mode, quite simply and that can continue for a long time..

That’s great. I think a follow-up to that, to your comments. What percentage of the '18 wells would be drilled on multi-well pads versus 2017? I think I missed that..

Evan, it is something about two-thirds of our program in '18 will be on these multi-zone projects.

And I think a good readout on what Dave was talking about is really to go back and dissect the results that we had on really a serial number one, which was our Anaconda project in the Delaware Basin, and there we were able to reduce cost some 20% on a per-well basis just through the efficiency gains from these multi-zone concept..

The next question comes from the line of Bob Morris from Citi. Bob, your line is open..

I mean, you mentioned focusing on the STACK and the Delaware but perhaps the best returns on a limited programs that they have been in the pad of River Basin and the Rockies.

How does that fit into your program next year? And do you have the scale there or the runway to be able to accelerate that or it would be more there or how do you think about that within your portfolio?.

Well, you are right, Bob. We've drilled some really nice wells that’s still early on in the Powder River Basin, but that certainly provides additional strength and optionality to the overall portfolio.

I'll let Tony detail out the potential 2018 plans, but we're proud of what we've done so far and we have a lot of acreage that we have yet to evaluate there. It looks like we focused primarily in a shorter term on the turner as we described in the operations reports. But Tony want to detail it out a little further..

Well, just to add on what Dave said, Bob, we are doing some really outstanding work. You are seeing the returns on that. We have historically been focused on some of the shallow conventional horizons from the Teapot and Parkman and those offer some of the best returns we have seen, essentially 95% overall stream.

Now we are bringing on some of our turner wells. We think this is a more unconventional type play in the basin, perhaps a little bit more ubiquitous across our position. We have got a substantial permit there. In fact, we picked up about 100-plus permits from the Casper BLM office, which is quite unusual in terms of the pace of permits being approved.

So we have got the capacity to stand up additional rigs and repeat high-quality results. It's going to be a matter of going through the budgeting process this year and allocating capital to the best opportunities we have..

And how do you think about your footprint there? Is it somewhere that you think you could expand your footprint of all these tests working the different formations? Or is there enough running room there to really make this a core party out of portfolio?.

Bob, we have got 400-plus thousand acres in Powder, so we think we have got the position that we wanted.

You just really map out what would classified as Tier 1, it's something less than the 400,000 acres, but we have got a substantial portion of that locked up in between our position, our legacy position that we had on the north end of our play in Campbell County to the south end of our newly acquired position in Converse County.

There is some good work going on by EOG and into the south. There is some other good work going on by just speaking of few others. So we are really in the heart of the play and has the position that we like there..

Your next question comes from the line of Ryan Todd from Deutsche Bank. Ryan your line is open..

Maybe if I could ask one on each of your key core plays. In the Permian, it was a -- I guess starting out, what's the early impression.

You mentioned you drilled a three-mile lateral, any comments on what you saw there as a three-mile lateral potential for that to become a larger part of the program going forward within the multi zone development plans?.

You bet, Ryan. We are flowing that well backward, we don’t have the 30 days behind us to report on that. You will hear from us next quarter, but we are quite pleased with the results of what you have today. So really on an “opportunity going forward basis,” we got a three mile lateral in Delaware.

We also are in the process of preparing the flow back in three mile in the stacked play as well. I don’t know that this will displace all the 2 mile laterals that we are working on and established.

There is going to be some unique footprint opportunities that allow us to go to 3 miles and I think these first two wells are proving and giving us confidence that from an operational perspective. We can drill complement and flow back and a high quality well in 3 miles..

Any ideas on extending the 3 mile lateral and the stack as well or are you keeping the Permian for now?.

No, we got -- we are flowing back -- preparing to flow back our first 3 mile lateral in the STACK play right now. It’s early, so I can't report on that. But mechanically, the drilling operation went extremely well, very cost efficient to do this. We traded all of the way to the toe of the well and we are preparing to flow that well back.

So there is going to be some opportunities to fill in on our footprint to 3 mile concept, but a lot of our position is going to be more relegated to the 2 mile laterals..

And then maybe another follow-up on the STACK, a couple of things.

In the [cleaner] pie that was clearly the strong results, can you maybe talk a little bit more about what you learned on staking there and in the upper Meramac? And then you also said that was assigned winder in all new wells you're moving a little further, kind of pushing the boundary, is that further to the north and even to the east? Can you talk about maybe what you've seen in terms of the extent of the core of the play as you tested the boundaries a little bit?.

Ryan, we're pleased with the work that we're doing. I think you saw the report out on Fleenor work there and we're quite pleased with that. I think what we are trying to highlight there is while we got an exceptional flow back results on the flinger wells, we did this with a different cost structure than what we had historically done.

And ones that simply the cost going from the [indiscernible] anything about that, but it really is really associated with the modified completion design. So we're pleased with the work that we're doing on the east side of the play. I think, if you look at our '18 work, we're going to start moving that to the north and west portion of the play.

We're going to -- in fact we've already spread our second multi-zone project that we call the Coyote on the Northwest side of the play, and we've piloted some wells around there that we're quite pleased will be reporting on we'll be reporting on that in some time soon as well..

And Ryan, just to add a few more details there to Tony's comments, that was the Fleenor pilot was a stagger test within the Meramac 200.

So in that area, that's the thickest zone, and so ultimately we were trying trying to maximize recoveries in that very prosperous area, so once again very successful and we'll deploy those learnings to just the next multi-zone projects that we have, so just once again you're constantly retooling what you're doing and that's just going to be an input as we head towards -- show in other projects, so..

And your next question comes from the line of Doug Leggate from Bank of America. Go ahead, your line is open..

So, Dave, obviously this is little bit of a change from the cash inflow versus operating cash flow, I guess, that's the subtlety of your vision 2020.

So I guess my question is as you focus on the two core areas given I guess the increase in inventory what does it say about the asset sales definition in terms of what becomes noncore? And I'm specifically thinking about Tony's comments around the potter, because obviously while the returns are great the scale is not relative to the other areas.

So does that become a for-sale asset and just maybe some color on your thinking around scale and timing of executing our program?.

Well, first off, you're right.

We have made a subtle change what we say live within our cash flow from operations, and the reason for that is simply the strength that we're seeing both in terms of the capital efficiency that we're able to achieve as well as the returns we're able to achieve when we're focusing even more dollars into development side and in our highest return areas.

So it's really a very good new story that we are been able to spend lower capital dollars live within operating cash flow and deliver the kind of returns that we're which again we're focused on returns on production growth but we'll see strong production growth as a result.

Now as more specifically to the Powder River Basin, it's still early days in the Powder River Basin. We like the optionality that the Powder River Basin provides.

We see that the on a go-forward basis, as Tony said, we will be focusing more of our activity on the turner and we really need to see a more results from the turner to really understand was some certainly how does it compete for capital versus the STACK and the Delaware plays.

So we have a lot of optionality around and we have said we will divesting several million dollars of additional assets. It is because of the incredible strength of our portfolio that we have a lot of optionality that may come from.

We are certain that we are going to have areas throughout our portfolio that someone could come in and drill development wells that will achieve returns well above the cost of capital but not as good as we're going to get in our poor plays.

So that gives us a lot of optionality around where we decide to do those divestments from, and we haven't made a final decision on that and maybe one area or maybe a combination of acreage from a number of areas, but we are absolutely committed, though, to the vision that we have is just with the how we execute that vision we're still talking about..

My follow-up, Dave, it might be for you or might be for Jeff but it really goes to the net debt to EBITDA target and the relationship with EnLink I guess is the broader question.

In years gone by, you did sell down a little bit of EnLink that’s stopped obviously, but when you look at net debt, obviously you are consolidating EnLink debt, but you’re going to be going strictly intellectual about it, deconsolidating handling with also like the marketable securities and your definition of corporate net debt the recourse to Devon level? Sorry, for the lengthy question, I guess, but what’s trying to understand is what is our future relationship with EnLink? Like how does it factor into that net-debt target and do you look at it on a just Devon basis as oppose to the consolidated EnLink basis now we do there? Thanks..

Doug, this is Jeff. Yes, we think about it on and the targets that we've outlined are based on a Devon’s standalone basis. So we are not including the EnLink debt or the EnLink EBITDA in that calculation. .

What about the handling to equity as marketable securities?.

That is not included in the calculation either. Yes, if you are asking if we’ve reduced the debt for the value of the EnLink securities, we are not..

Okay, that's very clear.

As far as your relationship with EnLink goes going forward?.

Well, I can just add from a strategic level. First off, we like the relationship very much and we think they are doing an outstanding job and particularly supporting us in one of our key development areas in the STACK but also every area where we have common operations. So we like the relationship strategically.

Now whether we would ever consider a sell-downs or not, that’s certainly not on the table at this point. I would never rule it out. As there is always an option that we have out there where we certainly have no current plans around that..

Your next question comes from the line of Paul Grego [ph] from Macquarie. Paul, your line is open..

Dave, focusing on your comments around changes to management incentives, what should we expect on those changes? You mentioned that drilling rate of return as a potential metric, has there been a consideration for corporate returns level metrics like and RACE and then for any growth metrics will they be measured on a debt adjusted per share basis?.

Let me start this answer off then ask Jeff to fill in on the details he can give. Again, we have not made a decision on this. We need to discuss this with our board and make a final decision, but this give you our preliminary thoughts that we will be taking to our board.

The first comment I just want to make is we fully acknowledge that our industry in general has not delivered acceptable returns and we are absolute -- and I would include Devon in that, and we are absolutely committed on a go-forward basis to deliver acceptable returns at the corporate level to our shareholders, and that’s what this effort is all about is to make sure that we are delivering on that.

We are focusing our capital program in order to be able to accomplish it.

We have the asset base and we have the execution do it, but we are fully committed to provide one the right incentives internally to make sure that we deliver on that, and second, the transparency as best we can to the shareholders so that they can measure our effectiveness of doing this.

And as I said in the opening comments, we have the ability to lead in this area and we intend to lead it. So Jeff, can you maybe talk a little more detail about a couple of the metrics that we are considering at this point. And again, there is no final decision we will give you our thought process..

Yes, that’s right. As Dave said, it’s certainly something that we are still in discussion with our board about - well, we are going to lay out the spectrum of all the usual suspects that you would expect as it relates to these metrics. If I had to put them into two buckets, I would say one bucket is probably closer to a gap metric.

So things like ROCE, or a cash return on capital employed, the benefit there obviously is the transparency and the ease of calculation to those metrics directly off the financial statements, and then maybe a second bucket which is frankly what we think is probably closer to the reality of our returns on our capital program each year, which is more of an all end-- again a corporate return, all in capital -- not just drilling capital but all capital split by the company in any given year and then the future cash flows obviously that’s going to be generated from that capital spend.

That one, again as I said is we think, it's probably the better metric; however, it’s a little bit more difficult to provide the level of transparency I think that you and the investor of the universe would like to see. So we are waving and balancing each of those different options.

We will discuss that with the board as Dave said later this month and hopefully lane on a conclusion. I will add as you mentioned Paul, our analysis and our historical look at all these different metrics continues to suggest that a debt adjusted per share metric is the most highly correlated with equity returns in this space.

So I certainly think that whatever we land on we will have a flavor of that..

And again, just to be clear, on that second major that Jeff talked about which is our rate of return metric, we are thinking in terms of birding that as much as we can with all other cost we incur within the corporation, so you are getting that even though it's based on wells, it is really burden with all the costs that corporation, so look at more of a total corporate return from our capital program..

And then I guess as follow-up to that.

How do you guys consider the role of hedging as well as exploration within the 2020 vision and bouncing against both annual corporate return is well a longer run, ROIC or corporate return metric?.

First in regard to exploration. We are certainly in a great position where we have such a strong development inventory as we have right now. So there is not the need in the short term for exploration in order to accomplish certainly the 2020 vision.

Now if you look at longer term for the company, I think that you always have to be mindful that some level of exploration should be thought about in order to have a long-term sustainable company.

But certainly in the next few years the amount of capital that will be dedicated to exploration is going to be less than you might normally think for a company of our size. Now with regards to hedging, we think that hedging is an important part of the overall company business in order to make sure that we're delivering consistent results.

We also think it's important to give us confidence around the cash flow that we're going to have in a given year in order to execute it our capital program.

We have designed our hedging program for hedging out approximately a third of our volumes in the given year on just what we would call a systematic basis where we just take the existing prices in the market and hedge forward for a number of quarters on that basis.

And then we intend to roughly get around 50% overall hedge with the other 16%, 17% or whatever, and could very little bit from that but somewhere around that, on more an opportunistic basis. And we certainly with the strength that we've seen in the market recently that we're opportunistically hedging as we speak..

And your next question comes from the line of Scott Hanold from RBC Capital Markets. Scott, your line is open..

One follow-up question on the EnLink, the response you've provided. Can you tell us incrementally what other strategic benefits are there to be joined up within EnLink.

Do you have most of developments -- midstream developments done that you need in the STACK or is there still a lot of wood out there?.

There is still midstream development that’s ongoing. As we speak, we're certainly getting into the development program, but there certainly is build out quite a bit of midstream infrastructures still in front of us. And obviously, the hooking up up very large number of wells on a timely basis, it's important to delivering our returns..

So certainly through '18 and maybe into '19 strategic business revision would be joined, is that fair?.

No, I think that's certainly true, yes, there's a benefit there..

And my follow-up question would be related to again this thought on looking at being a little bit more balanced then potentially free cash flow positive in the future, and I think you guys made a point this year of really ramping up activity especially in the STACK and Delaware, for efficiency purpose.

And so those -- obviously those areas are at cash flow deficit.

I would imagine at the field level, can you just generally discuss when you look at -- the future monetization strategy would you look to really do that once those assets can support themselves because I think right now some of your -- the mature assets that don't get capital are actually free cash flow generative for those areas?.

Scott, this is Jeff. That's exactly right. I mean, I think the way we're thinking about it internally is we'd like to see the STACK and Delaware assets to get to a more mature level.

They’re relatively immature today in our portfolio, just by the nature of the assets, but as Tony described with the multi-zone development that we're going to head into much bigger way here in 2018, the capital efficiency and the cost efficiency that we're going to see in those assets, we expect them to reset kind of self-sufficiency point in the not too distant future and that will give us the confidence to embark upon a broader divestiture program that Dave described in his opening comments..

Okay, so that's self sufficiency point is probably in line with what you talk around the 2020 vision of modernizations is that right?.

Yes, that's right. I mean we certainly would expect to reach that point, again, assuming a commodity price environment of going to 50 in three environment but within our 2020 time frame. .

Your next question comes from the line of Arun Jayaram from JPMorgan. Your line is open..

Just perhaps the follow-up on that question, are there assets today outside of the Delaware and STACK that you have considered as core or perhaps you can describe the attributes of the assets that you think will remain in the portfolio and along basis?.

Well, the key attribute that we would look at is do they compete for capital in our portfolio and is there additional value that we can create by if there are development opportunities that may not compete in our portfolio, but that we could be paid for some of that upside from that development opportunity by someone else.

And so we will be looking at areas that and certainly all of our areas we feel what you are talking about the Eagle Ford, you are talking about Barnett the pattern they have some element and there may even be areas within the STACK and Delaware on a much smaller scale basis that we may not get to.

They are not absolutely core to us, but that we could look at divestment? Or these are not going to be large scale numbers but they are probably somewhere within those basins as well that not going to necessarily meet our return requirements just cause are the very high return capability of so many of our development opportunities.

So that's the key thing that we'd be looking at is we think the bulk of the value creation that we do in the company is when we can deploy capital a returns it's very far above the cost of capital and that's what we do in our key development areas.

If we aren’t doing that and we aren’t going to fund and perhaps someone else will see an opportunity there and pay us for the part of that opportunity..

And my follow-up, I just wanted to check or had a housekeeping question on Jackfish.

Just given the improvement in oil prices, do you expect any of those projects to reach a threshold where the royalties would increase in 2018, and also wanted to see if there is any turnaround scheduled at any of the three Jackfish projects in 2018?.

Arun, this is Tony. We do have -- we are working a turnaround one per year. So you saw us go through J3 and then previous to that J2, did a little bit of maintenance on J2 this year, so we will be back to a turnaround on J1 in summer of '18. We don’t expect a royalty change in 2018..

Then that change at all to given any of the three projects in '18?.

No..

And Arun, just a real quick just to provide some color there is obviously Jackfish one is post payout. That's been post payout for quite some time. Jackfish 2 and Jackfish 3 are pre payout, and based off current strip pricing, we wouldn’t expect those to be have any meaningful adjustments in royalty factors on that front until next decade..

The next question comes from the line of David Heikkinen from Heikkinen Energy. David, your line is open..

The highlights kind of in the release around a projected NPV uplift upgraded that 40% as you look forward to the STACK and Delaware kind of caught our eye, but can you help us understand kind of to find the starting point for where the NPV is in the STACK now and then how the 40% or more is there, and then same thing for the Delaware’s starting point so kind of know where you are going on that uplift for the multi-zone development?.

Dave, this is Tony. The comment about the 40% uplift in BB10 is really in comparison to a typical historic four or six-well pad. That’s just the delta that we see in front of us by utilizing this multi-zone concept. As we have mentioned before, we already saw 20% of the cost come out of the first project in the Delaware basin.

We really haven’t even optimized in my mind the opportunity in front of us. And you are starting to see the concept of more batch operations utilizing sputter rigs to get the surface whole drilled followed by the conventional drilling rig to drill the production string.

And the utilization, the centralized production facilities that will be equipped to handle production from multi pads have a drill to field type concept is a substantial boost. So if you just look at the typical work process and the game chart, this is the way that we are lining out all components of that and give you order to magnitude.

When you take a rig on typical Delaware basin well, you take the rig and move it to another pad to couple of miles away. It's an additional 3.5 days of nonproductive time until you are back moving a bit. And simply skating over for a multi-wheel pad, you have got about a half a day of down time.

So this is the type of work that we think is something we have been planning and talking about for two years. We are just now coming into this space, and again we think it’s a game-changer for the type of contiguous multi-zone switch spot type projects that we have..

I guess I'm going to try a little harder.

So if I think about a four or six well pad, I mean if we just think about NPV per well of kind of $15 million to $20 million bucks and you get 40% more than that on each set of four to six wells, in fact how it ends up flowing, I'm trying to get the hard numbers on the where the four to six well pads would have been, and this an NPV, incremental NPV beyond invested capital?.

David, this is Scott. A lot of numbers float around there and I think ii Ill honestly that I have a spreadsheet that it’d be very happy to walk through at my desk after the call. So just to maybe keep a little bit harsh strategic questions so that I can handle later on..

Your next question comes from the line of Jeffrey Campbell from Tuohy Brothers. Jeff, your line is open..

We have got a lot of capital allocation questions, so I thought to stick to a couple that are more we do with field. So I'm looking at the operation support.

I just want to referring to Slide 16, it shows number of interesting multi-zone projects with beginning with that condo at the top going down in the due, so I was just wondering because -- particularly because there is a number of different zones and multiple interval of all these different projects.

So any of these -- anything that you would still consider to be a delineation or project or a testing zone interference or anything in any way I wouldn't want to call exploratory, but something of that nature, are these all just purely development projects at this point for efficiency?.

These are all development projects, and we've done a lot of pilot work over the last couple of years, we feel like we have a really good understanding of the lateral space and requirements for the different zones that we work in. We're continuing to gain more insight into the vertical connectivity.

When you go into the Delaware Basin for instance, you've got about a dozen different known commercially productive horizons there. There's a pilot work we've established what we believe to be zones that are pressure dependent on each other and some that are independent of each other.

So we're utilizing that knowledge to really focus here on what we consider to be the high-return, low-risk development projects in front of us. That doesn't mean to say that we're not going to do a little bit of a spacing work or test zone in a column that we know to be pressure in communication with the rest of the column.

We're going to complete a little bit of that will happen. But for the most part in the Delaware Basin for 2018, you'll see about 90-plus percent -- maybe 95% of our capital spend will be on development..

And then returning to TRP, just earlier in the discussion it was mentioned that you guys have a very large acreage position there, but I'm just curious -- I think I understood Dave to said that going forward this is really going to be a concentration on the turn and of course you have the Super Mario project area laid out.

So I am wondering is as you really hone in on the return going forward, will it still contain enough resource to support a core play as well results pan out and what I'm thinking is illustration on Page 17 kind of shows that the Parkman, the Teapot, the Turner. They all seem to do sort of discreet in different portions of the acreage..

You're a little bit right. Now there are some vertical opportunities in the Turner.

There's a couple of different zones in the Turner that we look at, and there's a portion of the footprint here that'll have the traditional mulita-zone potential but not like you see in the Delaware Basin, but I would tell you that in addition to the key department Turner that we talked about there's a lot of activities that's happening in the deeper horizons, the Niobrara is the source rock here.

But there are some results happening just south of our footprint in the Niobrara. We got about eight producing Niobrara wells on our footprint that we acquired a couple of years ago, and on the per foot basis even though the wells the laterals were very short laterals and probably not frac with the knowledge that we have today, they're encouraging.

And so if you look at the Niobrara being ubiquitous across the play source rock there, moving that into a commercial development over the next few years would be a step change for the Powder. So there's some other zones that both Devon and other some of our peers are pursuing outside of the Turner and the Parkman..

Another way to describe it too is if you look at Page 18, you can see clearly the potential does exists there and the Turner was about 400 or so high quality locations, potential -- and this is very early on in the spacing test and weather is going to play out.

That way but that area could be significant, the other thing you have to think about too, and I'm not saying would or wouldn't consider this for monetization outside of some core area we defined in the pattern but you also want to know what's your potentially monetizing and what you have potentially given up and what their right value for that is to.

And so even though - and one of you -- and Tony described some potential, for instance , in the it is still exist up there and you want to have some idea for what that potential truly is in order to make sure you are getting the proper value for the shareholders before you would consider that..

I mean I think that's a great point, and if I could just follow-up it's just first time I'm aware that you guys are talking about the Niobrara, one word just to have something to visualize.

We are thinking about some areas that might the potential to have a DJ Basin type of setup where there is and A and B and the C or is it kind of essentially be one extra zone that could be added to the Turner or suff0x or whatever else you might mess around with?.

I think it's too early to define that.

I know the B and the C have been tested in the Basin , ut I'd say for our particular area we are doing to be some work in 2018 and start to understanding that and we've got a good technical team just map this southern port the southern work that has been ongoing and there is some new work that’s just north of thus that it is also helping us connect the docs in activity.

So a little bit early to define what this might look like..

And your next question comes from the line of Jamal [Indiscernible] from KPH & Company..

I know it's been touched on a little bit but just wanted to talk about the spending at operating cash flow again and if it's to be implied that this handling distribution are going to be used to cover the dividend and also just wanted to think about the delta between handling distribution, which are quite a bit higher than a dividend and how you all the think about that as that as they continues to pick up?.

Jamal, this is Jeff again. Yes, you’re exactly right. As Dave mentioned earlier, several difference and how we've described our going forward game plan which is to spin within operating cash flow, so that would meet the handling distributions would be on top of that.

But as you pointed, out we do have a dividend and the EnLink distributions more than offset that. So we are still between the two with that some incremental cash available. .

And then just quickly one to talk on at the Jacob's pad, that was whether mix in this release just kind of one to think off your updated thoughts in terms of development in 2018 for that pad specially given some of the ongoing spacing incurred by your partner?.

Yes, I think we're anxious to see some of the spacing test just south of our Jacob's and Lou. I think that's going to be very informative for us to continue to design work on our particular project. We've actually engineered the Jacob's project we've continued we are thinking about deferring that outside of the 2018 capital program.

Most of that thought process is really because the Merrimack and the STACK work were doing right now is so commercial and prolific.

And so it's the Jacob's and the Woodford are now getting displaced by the Merrimack type opportunities from a return perspective, and as we've mentioned before, we're setting up these multi-zone developments in the in both in the STACK and Delaware.

In fact, we have about 29 known projects identified that will get us through the next couple of years on these two basins alone. So we got it engineered and slavered as it competes but right now it's we are finding that we have got other opportunities that have higher returns that we will displace that..

And that’s some pretty important data that our partner and this development is going to be obtaining from their spacing test. It’s a pretty dramatic down-spacing with their testing there and if that works so we certainly want to know that before we commence on this Jacobs annually development..

Your next question comes from the line of Biju Perincheril from Susquehanna..

Jeff, just a quick follow-up question on the Fleenor pilot.

Is that the two wells in the 200-zone testing should have the optimum landing point? Or in that area, do you have sort of enough thickness to have two separate wells within the 200 zone?.

This is really testing the landing zone is the primary purpose of the test, and again, this is a staggered approach. We have seen some advantages by staggering even within the same specific interval. That just to settle difference tends to provide a better performance from the offset well.

So it was really a landing zone with a staggered concept, and then again we slightly modified our completion design there which really moved about $200,000 out the completion and still got the results that we posted here..

And those completion improvements, is that is replicated STACK or not.

Is there any of that built into the 2018 sort of preliminary plans you’ve provided?.

It will be. It’s a data point that we have here, so we will continue to work that. It happens to be with some of the product that we use during our completion process. So we got a data point now that was positive and will continue to better understand that. But those are the subtle opportunities that we are seeing across the board.

We have got a culture of innovation in the company that frankly we haven’t seen to-date that are exploring every component of our business, and it’s a some nation of a lot of settle changes like this that’s really heading up until that present value up-list, perhaps 40% on these type of projects..

We’re now at the top of the hour and there are several still in our queue. So if we did not hit your question today, please don’t hesitate to reach out Investor Relations team at any time today, which is obviously consisting with myself and Chris Carr. But we appreciate your interest in Devon and we will talk to you next time. Thank you..

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