Devon Energy (DVN) Q2 2020 Earnings Call Transcript

Devon Energy (DVN 0.98%)
Q2 2020 Earnings Call
Aug 05, 2020, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Unknown speaker

Due to an audio issue on the webcast, this replay only includes the Q&A portion of the conference call. Please visit Devon's website for a transcript of the prepared remarks from the Devon management team.

Paul Cheng -- Scotiabank -- Analyst

Hi, good morning, guys. I don't know if you can hear me because the voice is breaking up pretty bad on my home. I think two questions. One, can you tell us what's the mechanism of the $1.5 billion debt reduction since that you have no maturity? Is it going to be a tender or that you're just going to buy from the public market? And secondly on the special dividend and why we are not using that money for buyback given how cheap is the valuation the stock is currently in.

Thank you.

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Hi. Yeah. This is Jeff. So as it relates to the debt repurchase, the $1.5 billion that we've highlighted, our expectation is to do probably a mix between open market and tender.

That's going to be dependent upon market conditions. So we're going to evaluate the maturities across the curve and where the best value sits. And then we'll enact that as we work our way through the rest of this year and likely into next year as well, so it's likely going to be a mixed bag. We certainly want to see interest reduction -- excuse me, interest costs come down as we've highlighted as our new annual run rate, but we also are going to have a focus on reducing absolute leverage.

So it's going to be a balance between the two. As it relates to the special dividend, as I mentioned in my prepared remarks, which you all probably could not hear, the feedback from our investors has been incredibly clear. They're looking for a continuation of cash dividends from the space and specifically from Devon. And so we think with the work that we've done around our cost structure, lowering our breakeven, we're uniquely positioned within the sector to provide those cash returns to shareholders.

So it's really consistent with what we're hearing from our largest shareholders, and we're excited to move forward with not only our quarterly dividend but the potential for variable dividends as we move through the next couple of years and evaluate market conditions.

Paul Cheng -- Scotiabank -- Analyst

Jeff, can I just follow up that on the debt reduction? Do you have a timeline when you think you will complete it?

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Yeah. We're certainly going to look to do some of that here over the next several months, again, as market conditions allow, and then likely, some of that will move our way into 2021 as well. So again, it's going to be a function of the market conditions and what we see with how the debt's trading. We're also comfortable holding the cash on the balance sheet to the extent that the value proposition isn't there.

But the key point we want to make is that that cash is earmarked for debt repayment, so we are absolutely expecting to continue to lower our absolute leverage over time.

Paul Cheng -- Scotiabank -- Analyst

Thank you.

Questions & Answers:

Operator

Your next question comes from Arun Jayaram. Your line is open.

Arun Jayaram -- Credit Suisse -- Analyst

Yeah. Good morning. I was wondering if you could maybe elaborate on the $150 million reduction in sustaining capex from $1.1 billion to $950 million. Just help us think about the broad buckets that drove that pretty material climb there.

David Hager -- President and Chief Executive Officer

Arun, this is David. I think David Harris is going to have some good information around that.

David Harris -- Executive Vice President, Exploration and Production

Arun, this is David. Yeah. Thanks for the question. Yeah.

As you've noted, we've driven that 2021 maintenance capital level down about $150 million from our prior disclosure to a level that we think we can carry out in 2021 of about $950 million. In broad buckets, I would tell you that's equally split between capital efficiencies we're seeing particularly in the Wolfcamp, as well as the impact of lower decline rates. I'd note that a lot of the production outperformance we saw this year has come from the good focus we've had on our base production levels, and we continue to outperform from a base perspective. So those lower decline rates certainly give us a boost as we think about the maintenance capital we need to drive the business forward.

And then the other half would be service cost savings that we believe we have line of sight to here just given the environment we're in.

Arun Jayaram -- Credit Suisse -- Analyst

Got it. Got it. How much would you view that as, call it, sustainable in the future or more permanent, David?

David Harris -- Executive Vice President, Exploration and Production

Well, it's a good question. I would tell you, as I've told you in the past, I mean, we always look to try to make all of this as sustainable and as permanent as we can. Certainly, here in this part of the cycle from supply/cost perspective, we've seen some pretty material reductions. We believe we can capture that.

We haven't baked a lot of that that we don't have line of sight to and going forward. So I think it's consistent with what we think we're going to see here over the next 12 to 18 months.

David Hager -- President and Chief Executive Officer

Arun, I might just add that we've even seen some service cost reductions beyond what we've built into this at this point. So we're not building all of the leading-edge cost reductions that we have into this $950 million.

Arun Jayaram -- Credit Suisse -- Analyst

Great. Great. I guess my follow-up was just on -- appreciate the disclosure around your federal permit backlog in both the Delaware and the PRB. My understanding is that the permits are valid for two years, and you can get up to a two-year extension on those.

How, call it, automatic is that extension process?

David Hager -- President and Chief Executive Officer

Arun, you're correct. Our federal permits have a two-year initial term, and then they're eligible for a two-year extension period. Typically, it's a routine part of our business. We file for those extensions, say, three months out from when those permits will expire.

Typically, it's a very quick approval process. We've never been declined an extension, and importantly, the environmental assessments that underlie those permits are good for a period of five years.

Arun Jayaram -- Credit Suisse -- Analyst

Great. Great. And so you're saying today that under a sustaining-capex mode, that 75% of your contemplated activity over the next four years would be kind of with permits in hand? Is that the correct understanding?

David Hager -- President and Chief Executive Officer

Yeah. That's absolutely correct.

Arun Jayaram -- Credit Suisse -- Analyst

OK. Thanks a lot.

Operator

Your next question comes from Douglas Leggate with Bank of America. Your line is open.

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

Thanks, everyone. I don't know what magic wand you swung there, but it seems the audio is now fine, so thank you for getting that sorted out. Hopefully, you can hear me OK. Dave, you and I have gone backwards and forwards on this model for some time.

I just want to commend you guys for introducing what I think is a really differentiated model. And I'll be curious to see how this is received by the market. My question, however, is I wonder if you or Jeff could explain the mechanism by how you intend to share, I'll use your words from the last call, windfall cash flows with investors.

David Hager -- President and Chief Executive Officer

Well, I think, you know -- thanks, Doug. And we're very proud of the model, and we think it is the right business model. And certainly, we feel like we have moved this model quickly and probably as quick as anybody in the industry. And hopefully, others continue to follow it up with actions as we have already started to do here.

I think the first thing to keep in mind is that our breakeven is now -- that funds our maintenance capitals around $35 WTI. And we actually then funded the dividend, the normal dividend plus our maintenance capital around $39 WTI. So where you start really getting into the issue is when you start to balance our growth opportunities beyond -- if we're in an environment above $39 WTI, how do you balance that with the return of free cash flow to shareholders? And certainly, we're going to look at the economic climate that we're in at the time to make that call whether we would undertake select growth opportunities or whether we think it's better to return that cash to shareholders as we move above that. As we sit here today, we're obviously still in the middle of a global pandemic.

And so even though the strip is sitting there at currently somewhere right around $45 today, the way I would describe it is there's a big error bar on that strip. There's a lot of uncertainty associated with that strip at this point and how sustainable that is. So we are not, at this point, prepared to say, OK, it's $45 strip. Now, we're going to start going more into growth mode.

Our thought process is more we're going to stay closer to maintenance capital or at maintenance capital and return those incremental dollars to shareholders. Now, there may be an environment in the future where we don't feel as much risk as there is on oil pricing right now given the global pandemic that we're still under. So there may be at some point where we do start to -- as we get above $40 and toward $45, where we say we're going to mix in a little bit of growth and with the return to value to shareholders. But we're going to take into account all the economic conditions at the time on how to best make that judgment.

So it's not going to be an absolute formula. I think if you -- inevitably, I think whenever you try to live by an absolute formula, you will find that the formula doesn't work, as well as you wish it had. And so it's going to involve some level of business judgment, where our business judgment is right now that we feel it's more appropriate to fund at maintenance capital level and return at incremental dollars to the shareholder. But that could change at some point in the future.

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

I appreciate the answer, David. If I may offer a comment, I think there is a subtle difference in perception between a special dividend and a variable dividend. So presumably, you're talking about a variable dividend.

David Hager -- President and Chief Executive Officer

Yeah, yeah. We are talking about a variable dividend. And, yeah, I think we see there's a subtle difference, too. And a special is one -- it's really special when you actually do it.

And so that's why we call it special, and we've done it.

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

OK. So my follow-up is hopefully...

David Hager -- President and Chief Executive Officer

I'm being a little funny there for you.

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

Yes. Capital allocation, Dave, if you're slowing down the growth rate up to 5%, how does that change your capital allocation across the portfolio? And I guess it's really a question about high-grading inventory. I'm just wondering if the incremental drilling activity sees another upward reset in productivity and capital efficiency because you're obviously slowing down the activity level as well. I'll leave it there.

Thank you.

David Hager -- President and Chief Executive Officer

Well, I think you can look for us to continue to drive more capital efficiency into the business in general. You're seeing how we're continuing to drive down the drilling and completion costs and improve the capital efficiency in the Delaware Basin. If you look at the stack play, we've done a couple of things there where we have really redesigned our wells. And when we go back out there, that we feel that we're going to be drilling and completing those wells for significantly less than when the last time we were out there.

In addition, we did the transaction with Dow where we brought in promoted capital, where essentially, we'll be paying one-third of our costs in a given well for 50% of our working interest. So that is certainly going to drive capital efficiency. Eagle Ford, we work very closely with BP to drive the efficiency there and really the economics on the remaining development inventory, as well as the redevelopment opportunities we're seeing are very capital efficient. And finally, we're learning an awful lot about the Powder River Basin, particularly in the Niobrara.

And we have really just been in appraisal mode up there so far. So as we go into full development in the Powder River Basin, you will see those well costs potentially move down dramatically as well. So absolutely, in a sense, we'll be high grading by drilling the best opportunities, but all of these opportunities are going to continue to improve because of the measures that we have been executing on internally.

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

And, guys, congrats again. Thank you.

Operator

Your next question comes from Neal Dingmann with Truist Securities. Your line is open.

Neal Dingmann -- Truist Securities -- Analyst

Dave, you guys talked a lot about these cash dividends. I mean, my question is around sort of the debt and production growth levels. So I just want to make sure to clear. Is there a certain level you want to get debt down to and sort of a certain minimum level of production growth you'd like before sort of considering these more frequent variable dividends? Or how should we think about that?

David Harris -- Executive Vice President, Exploration and Production

Well, I tried to say -- first, on the debt, I mean, our target in mid-cycle pricing is get to that EBITDAR down around 1.0 or less. Now, we're not quite there yet, and we're probably going to need a little bit better pricing to do it. On the variable dividend, so I tried to lay out that it's going to depend somewhat on our perception of the economic outlook as to how much we want and our confidence in forward pricing as to how much we would just return cash to shareholders versus invest in a limited amount of growth opportunities up to 5%. And I tried to highlight that we're going to assess that at the time.

Right now, we're not particularly confident in the economic outlook on prices. It may prove better, but we're still in the middle of a pandemic, so there's a lot of uncertainty around it. So we'd be leaning more toward the cash return side of it right now.

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

So, Neal, this is Jeff. But just one thing I would add is a distinction for Devon versus some of our peers is we have the cash on hand to accomplish our debt objectives, our target debt levels. So any free cash flow that we generate can then go back to shareholders, as Dave articulated. A lot of other folks in the sector are going to have to generate free cash flow and then try to accomplish their lower leverage objectives.

But we're in a unique position with the cash that we have on hand. We can take care of that and then generate free cash flow with the lower breakevens that we've created and return that to shareholders.

Neal Dingmann -- Truist Securities -- Analyst

No, great clarification. The cash is certainly obvious for you all. It gives you a lot of options. And then just one follow-up.

Dave, you mentioned with the strip, it doesn't cause you to think about boosting activity and sort of with this whole -- ties in with this plan you've been talking about. But I'm just thinking if the strip does get up to a certain point where you have more confidence behind that, would the focus essentially still initially just be Delaware? Or would you start looking more at the Eagle Ford, Powder, Anadarko, etc.?

David Harris -- Executive Vice President, Exploration and Production

Neal, this is David Harris. I think as we move into 2021, I think you'll continue to see us have a capital program with a pretty heavy Delaware emphasis. But I do think you'll see us bring back some activity across all three of those areas and take advantage of the diversity in the portfolio and, as Dave alluded to, the high-quality opportunity set we have across those areas as well.

Neal Dingmann -- Truist Securities -- Analyst

Great details. Thanks, guys.

Operator

Your next question comes from Jeanine Wai. Your line is open.

Jeanine Wai -- Barclays Investment Bank -- Analyst

Hi, good morning, everybody. I hope you can hear me.

David Hager -- President and Chief Executive Officer

Yeah. We hear you fine. Hope you can hear us now.

Jeanine Wai -- Barclays Investment Bank -- Analyst

OK. We got you. So I guess my first question is on the reinvestment framework. And apologies if you addressed this in your prepared remarks, but the 70% to 80% target for capex to cash flow, you mentioned this is at a mid-cycle price.

What mid-cycle price are you using? And could you provide any color on the price band or the sensitivities that you looked at around various reinvestment and payout ratios?

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Hey, Jeanine. This is Jeff. Yes. So when we talk about mid-cycle pricing, we generally talk about $50 oil.

So that reinvestment ratio that we talk about, the 70% to 80%, it obviously really kicks in when you get to those sorts of levels. Prior to that, again, as Dave has articulated, we're going to be focused on the maintenance capital and generating free cash flow and returning that to shareholders. But once you get to those higher levels of WTI pricing, given our low breakevens, we do think that it makes sense to limit our reinvestment to that 70% to 80% kind of level. And effectively, we can accomplish all of our objectives of the 5% growth, our quarterly dividend, and generating free cash flow when you get to that kind of mid-cycle-type pricing.

Jeanine Wai -- Barclays Investment Bank -- Analyst

OK. Great. Thank you for that clarification. My follow-up is just moving to the Delaware and all that activity.

Maybe following up on Arun's question on the federal. In maintenance mode, it looks like you've mitigated a significant amount of risk in the Delaware through a lot of good forward permitting. But can you talk about in terms of the well productivity? How does this vary between your federal and nonfederal acreage?

David Harris -- Executive Vice President, Exploration and Production

Jeanine, it's David. Yes. As we've said before, although about 55% of our acreage in the Delaware is federal, certainly, as you think about the core of Lea and Eddy Counties, that's where some of our highest return opportunities are. And so that's why we wanted to highlight, from a permitting standpoint, of those 400 or so permits that we expect to have by the fall in the Delaware, about half of those include our drilling program for the next two years.

So they're specific to those programs and what we would expect to see. And so I would expect that you'll continue to see us lean on that permit inventory, drill those wells and then supplement it with state wells where we can and need to.

Jeanine Wai -- Barclays Investment Bank -- Analyst

Thank you very much.

Operator

Your next question comes from Matt Portillo with TPH. Your line is open.

Matt Portillo -- Tudor, Pickering, Holt & Co. -- Analyst

Good morning all.

David Hager -- President and Chief Executive Officer

Good morning, Matt.

Matt Portillo -- Tudor, Pickering, Holt & Co. -- Analyst

Two asset-specific questions. Just curious as you look out into 2021. With the improvement in the gas forward curve, curious how you're thinking about capital allocation to the stack, specifically with the carrier that you have with the Dow JV.

David Harris -- Executive Vice President, Exploration and Production

Matt, it's David. We were scheduled to begin that activity this year. Obviously, with what we've seen from a pandemic and a commodity-price standpoint, we've deferred that activity. We're currently working with our partner and would contemplate restarting that activity in 2021.

I think that our best guess based on those discussions and sort of how we would see that plan laying out is probably something like a two-rig program in 2021 potentially to prosecute the initial stages of the Dow partnership.

Matt Portillo -- Tudor, Pickering, Holt & Co. -- Analyst

Perfect. And then just a follow-up question. Your partner in the Eagle Ford laid out a pretty significant strategy shift over the next 10 years. And I was just curious how you guys are thinking about capital allocation to the Eagle Ford with that as the backdrop.

David Hager -- President and Chief Executive Officer

Well, we work very closely with BP on the capital allocation there, and so far, we've remained aligned. I will say I think probably better to hear this from BP, but I think, overall, they're extremely happy with that asset and feel that's one of the best assets they've picked up and, if not the best, they picked up in the BHP transaction. So I would think that even though they're having a strategy shift, I would suspect that this is one that's going to continue to be highlighted within their portfolio. So far, we have not seen any significant alignment issues with them around that.

Obviously, if there's some point they don't consider that asset to be very valuable in their portfolio, we'd love to talk to them about that as well. But right now, I can tell you we remain very aligned.

Matt Portillo -- Tudor, Pickering, Holt & Co. -- Analyst

Thank you very much.

Operator

Your next question comes from Scott Hanold. Your line is open.

Scott Hanold -- RBC Capital Markets -- Analyst

Yes. Thanks. Question on the 2021 plan in the DUCs. And so how should we think about that? I mean, do you all expect to work through the DUCs in 2021? Or what are those decision points?

David Hager -- President and Chief Executive Officer

Well, we're still finalizing our 2021 capital allocation. So it'd be a little premature to say how much. I do know that we'd have 22 DUCs down in the Eagle Ford that have been there that we've docked in the second quarter. And so those are definitely going to be drawn down in early '21, which will give us a really good start to 2021 production.

I think beyond that, the level at which we may consider drawing down that inventory, we're going to have to -- we're working on that right now and deciding how much we may consider doing that. For the most part, I think you would consider that to just be normal working level of DUCs that you would -- always going to have some inventory, but there probably are a few that we could draw down if it seems appropriate.

Scott Hanold -- RBC Capital Markets -- Analyst

Right. Right. So just to clarify. I think it was roughly 100 DUCs.

Some of that, you would include normal work in inventory. Is that right?

David Hager -- President and Chief Executive Officer

That's right. That's right.

Scott Hanold -- RBC Capital Markets -- Analyst

Yeah, yeah. OK. Fair enough. And then with regards to the special dividend, and correct me if I'm wrong, the way you guys laid it out, it doesn't sound like it's going to be highly consistent going forward once you start to initiate it and that it could be off and on, I guess, depending on your view of the commodity and the macro and some other things.

Is that a fair statement? Or are you guys designing this to be something shareholders can understand we're going to get something this quarter, we don't know what it is, but you're going to have some sort of a plan for that?

David Hager -- President and Chief Executive Officer

Well, make no mistake that we are very dedicated to the cash return model to shareholders. And I feel that, frankly, we're the first ones to actually take action with a special or variable dividend. There are probably a couple of different cases where you can do this. And we use the words synonymously, frankly.

One is in this case, where we have some extra cash we're anticipating because of the Barnett sale. The other is, I believe, probably Pioneer talked about this morning, and certainly, we're going to be doing the same thing, is as we generate excess cash flow from our ongoing business, that we will be returning that to shareholders as well. Now, are we going to be absolutely formulaic around that approach and say we're going to do so much every quarter? No, we're not saying that. But when we are confident that we've generated excess cash flow in the right business environment beyond what we need as a company, and again, we're limiting our growth to 5%, then you can look for us to return that cash to our shareholders.

We're just not being so specific as to say exactly how it might be. Now, Jeff, I know, may have a few additional comments or some thoughts that he's had around this as well.

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

So, yes, Scott. No, I think Dave said it well. The one thing I would add is obviously, our traditional quarterly dividend is going to return cash to shareholders throughout the year. And then as Dave articulated, depending on market conditions, we'll evaluate what makes sense at the time as it relates to the variable dividend.

But our expectation is, again, I would just point you to our breakeven levels, and you all can use whatever price deck you prefer. But as we've articulated, with the breakeven that we have in our maintenance capital level, we should be generating free cash flow into the foreseeable future. And our game plan is to return that to shareholders via the dividend, both dividends, the quarterly traditional dividend, and the special. As it relates to timing, obviously, we'll debate that with our board.

Our board meets multiple times throughout the year, at least quarterly, and evaluate what makes sense based on the market conditions and the other objectives we're trying to achieve at the time.

David Hager -- President and Chief Executive Officer

And you might look at Slide 13 in our operations report, too. That also shows what amounts of free cash flow we could yield at maintenance capital at various WTI prices. So just as Jeff said, we anticipate that there is going to be significant free cash flow and that we would look to return that to shareholders.

Scott Hanold -- RBC Capital Markets -- Analyst

Understood. Thank you.

Operator

Your next question comes from Nitin Kumar with Wells Fargo. Your line is open.

Nitin Kumar -- Wells Fargo Securities -- Analyst

Good morning, gentlemen, and thanks for taking my questions. I guess a lot of ground has been covered on this cash return side. You did mention in your slides that the buyback is still a component of -- share buyback is a component of your cash return. Can you help us understand the prioritization of how you are looking at the different avenues for shareholder return?

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Yeah. Nitin, this is Jeff. You're right. Certainly, in the past, we've utilized the share buyback approach as a way to return cash to shareholders as well.

As I said -- and I appreciate you didn't hear them given our audio difficulties, but in our prepared remarks, the feedback that we've got from shareholders has been pretty loud and clear and consistent around cash returns and cash dividends. And so going forward, our absolute expectation is to return the cash versus -- excuse me, to return cash via the dividend versus the stock buyback.

Nitin Kumar -- Wells Fargo Securities -- Analyst

Great. That's helpful. And then this is going to be for you as well, Jeff. But on Slide 12, you've talked about the financing cost reductions of $75 million, but you also mentioned about $125 million in reductions from LOE and GP&T.

Granted there may be many moving parts here, but just could you help us understand what are the targets? And how are you improving your LOE? And then particularly, I'm interested in how you're improving your GP&T going forward.

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Yeah. And I'm happy to answer that. The $125 million of LOE and GP&T cost reduction that we highlighted, about $65 million of that is an MVC that we have in Oklahoma and our stack asset...

David Hager -- President and Chief Executive Officer

Volume commitment.

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Sorry, minimum volume commitment that we have in Oklahoma is rolling off in 2021. So that's about half of that $125 million. And then beyond that, frankly, we're seeing lower costs in all of our categories. David mentioned some of this earlier.

He can add more detail. But whether it be chemicals, compression, our teams have done a great job as we've changed our level of activity and our cadence of work to really work hard to lower the cost. Some of that, of course, is the benefit of the deflation that we've seen here lately. But what we're really seeing from the teams is an ability to lock some of that in and, again, we believe keep those lower cost sustainable into the future.

I'll let Dave add any color that he may have.

David Harris -- Executive Vice President, Exploration and Production

Yes. Jeff, I think you covered it well. I think what I would tell you is from an operating perspective on the LOE side, we always start with trying to reduce downtime as best we can. We've got our decision support centers that feed us data on our operations on a real-time basis.

And so not only are we able to respond more quickly to downtime events, in many cases, we're able to predict them and get in front of them. And so that's keeping our operations up and running, as always, the first order of business. It varies a little bit by area how we attack the line items just given the nature of the different assets, but Jeff, I think, covered it well. Certainly, compression costs, chemical costs across both the Anadarko and the Eagle Ford are things that we're focused on pretty heavily and the Rockies.

We're piloting some additional technology opportunities to automate the way we work. So far, those have allowed us to cut our downtime in half year over year while improving those costs and our environmental performance. And so there, we believe we've got a stretch target there to get our recurring LOE in the Rockies down from something on the order of $6.50 down to the mid-fours. So we believe there's a step change there that we can continue to get.

And then in the Delaware, obviously, those types of things as well, but we've got a lot of important infrastructure there from both a water standpoint and otherwise that we're leveraging to manage our costs and keep those down.

Nitin Kumar -- Wells Fargo Securities -- Analyst

Thank you so much.

Operator

Your next question comes from Brian Singer. Your line is open.

Brian Singer -- Goldman Sachs -- Analyst

Thank you. Good morning.

David Hager -- President and Chief Executive Officer

Good morning, Brian.

Brian Singer -- Goldman Sachs -- Analyst

I wanted to follow up on that growth outlook. And it's really just to ask if they were an above mid-cycle scenario, i.e., price is above $50, is the 5% still the max growth outlook? So any price, 5% would be the max you would consider. And then as you think...

David Hager -- President and Chief Executive Officer

Yes.

Brian Singer -- Goldman Sachs -- Analyst

OK. And then I guess as you think about the impact of having a growth rate that's maybe a little slower than it was at some time, does that impact or maybe even limit the consideration that Devon would have to either participate in or be a part of M&A and consolidation?

David Hager -- President and Chief Executive Officer

Well, I'd say M&A, consolidation is something that we obviously recognize there can be benefits out there. There's too much overhead sitting in the entire E&P system. And to the extent that which there can be some consolidation and eliminate some of that overhead and also, in many cases, capture operational synergies that may exist between various companies, there could be some benefit there. So I don't really see that the limitation of the growth rate has a significant impact one way or the other.

I think, frankly, many of the companies are pivoting to the same model that we are. I think we're just a little more advanced with the implementation of this model than they are, so I think this is a strategy that can make sense with acquisitions if there could be something that would be appropriate. And just on the -- I gave the very quick answer, one-word answer of yes on limited to 5% growth rate. That is absolutely the answer.

The rationale behind that, I think, we all understand is that why does it -- it just doesn't make any sense for our industry to grow at a much higher rate than the demand for the product is. And we count on OPEC to cut supplies to bail us out on prices. And so I think hopefully, everyone is learning their lesson on that. And frankly, I think the industry is learning their lesson on that, so that's why it's just so straightforward for us to answer it the way I did.

Brian Singer -- Goldman Sachs -- Analyst

Fair enough. And then my follow-up is with regards to base decline rates. Assuming you're at that 5% or lower growth level, how do you see the evolution of your corporate base decline rate? And can you talk about where you've been most effective in managing that base decline here more recently?

David Harris -- Executive Vice President, Exploration and Production

Brian, it's David. As we've talked about previously, as we came into 2020, our decline rate was probably in the high-30s percent on oil and the low 30% on a BOE basis. I think as we roll forward a year, we would expect that that oil decline rate moves to the low 30s and on a BOE basis into the mid-20s or so. And then really, I would say from a base-production standpoint, it's become a big emphasis for us across all of our asset areas.

I think all of our teams have done an excellent job arresting base declines and accretively deploying workover capital and some creative solutions to try to shallow these decline rates out as much as we can. And certainly, as we move into this cash return model with a more moderate growth rate, that's an extremely important part of the business that maybe people took for granted in times past, but I can tell you our teams certainly don't.

Brian Singer -- Goldman Sachs -- Analyst

Great. Thank you.

Operator

[Operator instructions] Your next question comes from Brian Downey with Citigroup. Your line is open.

Brian Downey -- Citi -- Analyst

Good morning. Thanks for taking the questions. From the prepared remarks on Slide 9, you're understandably still restricting flowback on newer wells due to market conditions. I'm curious if that experience has changed how you're thinking about early time initial flowback or pressure management on a go-forward basis, if there are any surprise learnings throughout that whole process during the quarter.

David Harris -- Executive Vice President, Exploration and Production

Hey, Brian, it's David. It's good to talk to you again. No, I wouldn't say that there's been any surprises or any differences in terms of how we would approach that. Certainly, as we think about flowback strategy, that's an important part of how we develop our asset.

And so from time to time, we do experiment with that a bit. Certainly, as we're doing some appraisal work, we'll have projects where we're restricting flowback for interference testing and the like but no big or shattering changes or revelations that you should expect in terms of how we conduct the business.

Brian Downey -- Citi -- Analyst

OK. So sort of back to normal in the second half of the year, we should anticipate on the completions there.

David Harris -- Executive Vice President, Exploration and Production

Yeah, I think that's right.

Brian Downey -- Citi -- Analyst

Appreciate it.

Scott Coody -- Vice President, Investor Relations

All right. It looks like we're at the top of the hour, and I think we've got through all the questions. We appreciate everyone's interest in Devon today. And once again, given some of the audio issues we've had, we'll send out the prepared remarks to our audience.

And then we'll also post them on the website for everyone's convenience for viewing. If you have any other further questions as well, please don't hesitate to reach out to the investor relations team at any time. Thank you and have a good day.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

Unknown speaker

Paul Cheng -- Scotiabank -- Analyst

Jeff Ritenour -- Executive Vice President and Chief Financial Officer

Arun Jayaram -- Credit Suisse -- Analyst

David Hager -- President and Chief Executive Officer

David Harris -- Executive Vice President, Exploration and Production

Douglas Leggate -- Bank of America Merrill Lynch -- Analyst

Neal Dingmann -- Truist Securities -- Analyst

Jeanine Wai -- Barclays Investment Bank -- Analyst

Matt Portillo -- Tudor, Pickering, Holt & Co. -- Analyst

Scott Hanold -- RBC Capital Markets -- Analyst

Nitin Kumar -- Wells Fargo Securities -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

Brian Downey -- Citi -- Analyst

Scott Coody -- Vice President, Investor Relations

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