Good day ladies and gentlemen, and welcome to Devon Energy's Second Quarter 2008 Earnings Conference Call. At this time all participants are in a listen-only mode. After the prepared remarks we will conduct a question-and-answer session. This call is being recorded. At this time I'd like to turn the conference over to Mr. Vince White, Vice President of Communications and Investor Relations. Sir, you may begin. Vince White – Vice President of Communication and Investor Relations: Thank you operator, good morning everyone and welcome to Devon’s second quarter 2008 conference call and webcast. Our Chairman and CEO Larry Nichols will not participate in todays call due to the death last Sunday of his father John Nichols, instead, our President John Richels will begin with his perspective on the quarter and Steve Hadden, Senior Vice President of Exploration & Production will review the operating highlights and John will return and conclude with the financial review. At that point, we will open the call up to your questions, and as usual we will ask that you hold your questions to one with one followup per participants. We will try to keep the call to about an hour and a replay will be available later today through our link on the hompage. During the call today we’re going to update some of our 2008 forecast and estimates based on actual results for the first half of the year and our current outlook for the second half of the year. In addition to the update that we’re going to give on todays call we would be filing an 8-K later today that will provide the details of our completed updated estimates for 2008. Please note that all references in today's call to our plans, forecasts, expectations and estimates are forward-looking statements under US Securities…

Thanks Steve. I plan to take you through a quick analysis of the key drivers that shaped our second quarter financial results and review how these factors impact our outlook for the second half of the year. As a reminder, we reclassify the assets, liabilities and results of operations in Africa as discontinued operations for all accounting periods presented. I will focus my comments on our continuing operations which will exclude the results attributable to Africa. So beginning with production, as I indicated during the opening comments, in the second quarter, we produced 58.5 million equivalent barrels or approximately 643,000 barrels equivalent per day. In the first quarter conference call, we told you that due to our contractual increase in the Azeri government share of production on the ACG unit, we expect that our companywide second quarter production to be flat with the first quarter. However, the second quarter outperformance of our North American onshore properties resulted in production coming in about 0.5 million barrels better than our forecast. This gave us our ninth consecutive quarter of production growth. The payout at ECG also impacted the comparison to the year ago quarter. Comparing second quarter 2008 results and the second quarter 2007 (audio gap) once again that onshore segment produce the strongest growth led by the Barnett Shale in East Texas US onshore production grew by 16% or 55,000 barrels per day over the second quarter of last year. Canadian production also strengthened up approximately 4% over the second quarter of 2007 due to the ramp up of production from our Jackfish Side B and Lloydminster projects. The growth we delivered in the first half of 2008 is significantly less than the growth that we expect for the full year. Based upon our year-to-date results and the 2008 impact of…

(Operator Instructions). And your first question will come from the line of Tom Gardner from Simmons & Company. Please proceed.

Good morning everyone.

Good morning.

Hey over in the Groesbeck area, are you still -- you know, given the success you had there to date, are you still looking at 6 bcf ultimate recovery and 150 locations, I already see that opportunity getting bigger overtime?

You know, Tom, we are seeing a relatively better performance that that planned number in these more recent wells. We haven’t really adjusted our model upwards yet. But if we continue to see those results we probably would. We are also in the Boseyer wells that we are drilling, we will drill about 15 this year and probably about the same number next year, and we are also doing some work on some -- there is some Boseyer line potential, significant Boseyer line potential in first horizontal field that has significant running room well over a 100 locations and we are just working through those pieces. So we think we will see those results continue this year and next year we are optimistic about that model moving up, but we haven’t adjusted it up yet.

Thanks for that. And one other question on the Lower Tertiary, my understanding is that the completion technology needs to improve to make the economics attractive, I think it has something to do with being able to complete the entire section. Can you give us an update on how that effort to improve technology is progression and what Devon's involvement in it has been?

Yeah Tom, I won't speak specifically about some of the specific prospects, because obviously we are keeping some of that technology and that development proprietary, but and within the partnership, but I will tell you that the current view we have on the completion still put all of our discoveries in the solid economic window with solid finding and development costs and we think we will get good production response in economic development. And we are moving forward with those developments starting with Cascade. With Cascade we are going to start drilling that second producing or the first producing well very soon. Devon is working actively that we have a few different vendors and we have some technology folks in order to optimize. It’s more of an optimization of those completions as opposed to a hurdle which shows they are currently uneconomic and we need to make them economic. So we are working with some of the major service providers, both with Cascade, but also with our partnership at Jack and St. Malo and the other discoveries that we have to move those forward. So our view is not that it’s uneconomic at this point and there is a threshold we have to clear in order to make it economic or desire as I think most of our partners is to optimize to get the best economics moving forward.

Thank you. I appreciate the detail.

Your next question will come from the line of David Heikkinen from Tudor Pickering Holt. Please proceed.

Good morning guys and a lot of good information on the call. Thanks for that. When you think about the Haynesville and 73 TCF of gas in place and increasing the resource the potential from 2.1 billion barrels to 8.5 billion barrels, I want to make sure, first I got those numbers right that’s a big increase?

Yes, that’s correct.

How do you think about then 11% of that’s cap, how aggressive can you get with your share repurchase program moving forward? What's the optimal debt balance versus buying a stock with that much resource?

Dave, its John. I think on that point -- obviously, we are buying some of the stock back today with something other than just our free cash flow, because we repatriated a lot of funds and brought the proceed to disposition from the African divestitures back. As we ramp up our -- and so there is room for us to do some of each frankly. As we move forward and Steve can speak better to the pace or acceleration of that program going forward, it will ramp up in the kind of an orderly fashion. We won't suddenly increase that to a dramatic amount because you have got a lot of other issues that you have to deal with from operational point of view as we bring that up. We have been in a fortunate position over the last few years to being able to fund our capital program to a) increase our dividend every year for the last five years, pay down our debt and buyback stock and we remain and able to do that. As far as the appropriate debt level is concerned, we always thought that what's important to us to be a good investment grade credit and when our investment grade credit, we would rather be kind of a midlevel investment grade credit than a bottom level investment grade credit because there are enough things to concern yourself about in this business that we don't want to be one step away from dropping off that investment grade latter. So it's important for us to be investment grade and in kind of a mid cycle on a mid cycle basis or a in a mid cycle context that probably means a debt to cap in the 30 somewhere. So we certainly have a lot of room to not only deploy the funds that we have brought back, the free cash flow that we are going to generate, but we got a lot of capacity on the balance sheet and a lot of balance sheet strength to help us out over the next few years as we develop our portfolio.

Dave, this is Vince. I might add to that that as we optimize growth on a debt adjusted share basis, we are dealing with a constantly evolving view of both what of course our share prices are unknown as we go forward, but also we are constantly updating our view of what our portfolio can do with incremental capital or by reducing capital. And so it's hard to point to a specific debt level that make sense under all circumstances.

What do you think a reasonable or optimized growth level on a debt adjusted basis is for Devon now with the increased guidance that you have just put out?

Well, it's entirely dependent upon the commodity price environment and we show that in our March call that even under commodity price outlook that is significantly below the current strip, we could deliver growth on a compound annual basis in the low to mid teens and on a debt adjusted share basis and so that remains within our grasp. And obviously we are looking at 10% growth or better for next year based on the numbers we just gave. That's top line growth. You are adding the share of repurchases that we are able to make with free cash flow and it will move the needle up.

Okay. And then just one specific question. On the 483,000 acres, how much of that is held by production already in the Haynesville?

There is -- a majority it is held by production.

Fee acreage.

Or fee acreage, right. We have held by production acreage of course we have got significant position in East Texas and then we have fee acreage. So we are not feeling too much under the pressure of the clock as far as lease terms. We also are pushing hard to continue to lease in the area that’s why we are keeping information relatively tight to the best here and a goal we have is to add something probably in the neighborhood of another -- as much as another 100,000 acres to that number that we just put out. And I will point out that 483,000 acres is only about 64% of Devon's total acreage in East Texas and North Louisiana.

Okay. Thanks guys.

Thanks David.

Your next question will come from the line of Brian Singer from Sachs.

Thank you and good morning.

Good morning Brian.

Following up on one of the questions. You just spoke to some extent but I guess when you think about commodity prices and oil, Rockies gas, North American natural gas, your stock price level, can you put any numbers to where you could say X level of gas price and Y level of oil price, you would shift capital more into oil versus natural gas or more into share repurchase versus drilling?

David, that’s a very very tough question to answer. We got as you know, we got large portfolio opportunities and I think we have talked before about the fact that we have – and we got fairly sophisticated portfolio modeling process so that we can ensure that every time we spend another dollar we’re putting at to – were reallocating at on the basis that’s going to create the most value and create the most growth on a per debt adjusted share basis. So its very specific to the areas I couldn’t – I don’t think really point to a specific commodity price, but let me give an example, when Canada got its expensive as of debt and foreign exchange rate went against thus as much as a bit that Lyoldminster prospect was still one of the prospect that gave us the highest rates of the return notwithstanding that was in that kind of cost environment and that wouldn’t have been the case on some other oil projects necessarily. So its very prospect dependent and really talk to answer that question.

Okay, thanks. Secondly there is been various commentary on the pace of growth industry wide in the Barnett Shale, and various areas within that seeing either plate owing or potentially taking. Can you speak to regionally within Devon’s acreage this in the Barnett how you see the growth trajectory over the next few years?

Well, we mentioned earlier Barnett that we got 7500 risk locations, and the great thing about the Barnett Shale is that is not only does it deliver great economics, it is very repeatable. And when we look at that inventory we see a 10 year repeatable inventory of growth for Devon. There are e inventory of durable opportunities for Devon and we see growth continuing well into the around the middle of the next decade. So – and we see more of a slowing of growth than we see a peak or plateau as you lookout even for the next three to five years.

Brian this is Vince. I am going to add that – it really comes as now surprised us and in fact you may have heard to say over the last year that we were expecting Devon to demonstrate differential performance in the Barnett Shale relative to our peers and that’s really related to the fact that is the first we were able to get the largest invest acreage position in the play you know, some of the fringe areas that we decided not to participate and I think some of the other players in the Barnett have decided that doesn’t compete well with other capital opportunities, in Devon’s case the vast majority of the 7500 gross locations that Steve mentioned or in the very best parts of the place. So we will continue to grow our production while others may not be able to.

Great thank you.

Your next question will come from the line of Joe Allman from J.P. Morgan.

Yes, good morning everybody. Could you comment on a takeaway issues that you are preparing for related to the Barnett Shale and in competition with the takeaway to passive with the Haynesville Shale another East Texas and other regional place?

Yeah Joe this is Darryl Smette, as it relates to the Barnett we haven’t place a number of film transportation agreements that – and we are currently working on more that will allow us to move all about production as we now see it including the forecast these people have provided just how they can drill that production. So we continually worked that, as you know we also have around midstream business. So we feel very comfortable, we are able to move our gas in well ahead to the main market centers, and beyond the market centers we think we have an upfront transportation already lined up that we are in the final stages of putting together we will be able to move that gas all the way to end use market. As it relates to the Haynesville obviously, as you’ve heard Steve say and John say, this is an emerging play, I mean, we have high hopes for the Haynesville, we think that has some really good characteristics, but its still emerging. There is a lot of unknown there yet. What we can tell you as we have about. We as an industry have about 8 bcf of pipeline takeaway capacity and I am not talking gathering, I am talking mainline capacity take gas to market. There is about 7 bcf about that the subscribes, and there is about a bcf of available capacity is on subscribe. In talking with the pipelines our current number suggest that t we could add additional capacity of about 1.5 bcf over the next two years. So that’s about 2.5 bcf of available capacity within 24 months. Once that occurs if the industry is successful and Devon is successful you would have to look at some Greenfield projects out of that area, most of those Greenfield project area estimation would take anywhere from 24 months to 48 months to complete. We're actively looking at some of those projects right now. But at least in the Barnett we feel we're covered and feel good about what is going on in the Haynesville in terms of industry takeaway capacity, but there is a lot that happened in the Haynesville yet, but right now we feel pretty good about the position we're in.

Even though you guys are covered, you think in a couple of years there could be some bottlenecks for some different players with these competing plays; is that right?

Well I don't think there will be bottlenecks we know what the existing capacity is and we know what the existing capacity would be with the projects that could come on in the next say 18 months. But we don't know that how fast things are going to ramp up. As we said, it's very early in this play and the results that we have seen and the results that other parties in the Haynesville area have look forward suggest that this is going to be a very robust area. But there is still a lot of work yet to is, as Steve indicated, I mean, our people are constantly looking at this project and so we just have a lot of work yet to do as an industry, but assuming that that work is successful, there probably are going to have to be some additional Greenfield projects two and three years down the road.

It’s helpful. And Darryl while I have you – I have noticed that the Rockies differentials have narrowed recently. Can you comment on that?

Well, it kind of depends on where you start and where you end up. I mean, they're pretty volatile as you know. But yes, if you compared to last year at this time we were trading at about a 450 differential yesterday, we’re trading at about 250 differentials that they have in the road, a lot of that is directly dependent upon of course the rest pipeline that went into service in January. There is other pipeline projects that are going on now and of course we're waiting to the shoulder month we're going to see some more pipeline repairs going on. So we could see those differentials widen a little bit. But over the course of the last year definitely we’ve seen differentials narrow out there and we expect its going to remain volatile but they should -- our hope is and based on our analysis, we don't think we'll, over a long period see the $4 and $5 differential we saw last year.

Okay. Very helpful. And then different topic Haynesville Shale you mentioned you got some production online, can you comment on what you're seeing so far?

We're really keeping that relatively queue. We do have wells on production and we're completing additional wells as we speak. We've got the 12 penetrations I talked about. We've got quite a bit of whole core material and we're going through very methodically as we did in the Barnett Shale and really to looking at our position, looking at our opportunities to acquire additional acreage and categorizing it much like we did in the Barnett Shale as far as primary position and some of the better positions in the play, the emerging positions that are good but not proven and then the speculative areas that we think may or may not have some potential but are willing to put some capital at risk to acquire some of those reasonable cost and reasonable NRIs. And so it's really an accumulation things and because we are still actively acquiring leaseholds, we're not talking about the production range.

Got it. And then Steve, are you willing to give any details on the rocky mountain shale plays, the two that you have got under way?

No not at this point I will tell though we continue to get wells down. And again it's the same -- a bit of the same story as we've gotten additional wells down. We've gotten core geology is looking very good and that’s why you see our unrisk potential continuing to increase there.

Okay. Very Helpful.

And obviously Joe, we're still accumulating acreage positions there and we would shoot ourselves in the foot if we talked about that too much at this point.

Understood thank you everybody.

Operator can we have the next question?

Yes your next question will come from the line of Eric Hagen from Merrill Lynch.

Hey guys all of mine have been answered. Sorry about that.

Okay Thanks Eric.

And your next question will come from the line of Mark Gilman from Benchmark Company.

Good morning guys. Can you give us an idea of what the per acre cost was on your recent acquisitions in the Haynesville and Horn River?

Actually -- I'll tell you that it's very competitive and relatively low to some of the other numbers you've heard out there. Again because we're still actively and there are still additional lease sales to come in Canada, we're not really talking about those numbers specifically.

Okay Steve, let me try another one. There seems to be increasing industry talk about what I guess with the unitize St. Malo and Jack developments scheme. Can you give me your thoughts on that and comments on the distance between the two?

Yeah absolutely it is a St Malo and Jack within about 20 miles of each other and we are going to a very discipline process with partners at St. Malo and Jack where we look at the options in it optimize the economic efficiency about operation. One other leading options there is a combined development between the two and obviously with that kind of proximity there are synergies on these very large capital projects that could deliver some very good value. So the teams are working together to joint – development teams are working together to go through those options make sure you understand all the technical issues in the cost and performance issues and come up with the optimized development scenario but little leading scenarios is a combined development of Jack and St. Malo.

And Mark just to remind you and then show you how far along those integrated project teams are in doing this evaluation. We are still hoping that we are going to bring this forward in 2009 for sanctioning and that will keep us on schedule with the first production of we talked about previously and probably 2013 or something like that. So we well along in terms of doing a lot of this analysis.

John, Steve does this saying anything about free standing potential of the two?

No, it doesn’t, it really is driven exclusively by efficiency, by both capital efficiency and economic efficiency. It doesn’t say anything as it relates to what we see relative to what we expect to define initially.

Just to want one more if I could for John I am not sure I understand the logic with respect to the extendable debentures on the Chevron side and you – they comment at I think we want to optimize the evaluated position. Would you elaborated on your thinking a little bit on that?

Sure you might remember Mark that – that wasn’t code language you give me there that all its just that if you would give the just give the stock back to the debenture holders you know we have very – because we inherited these from PennZenergy in 1999 we have a very low basis in that stock and so we are trying to do and that would trigger a tax obligation or tax liability and we talked about that in the past, but we are also working on some other alternatives that hope we are little bit more inventive and so, in the interim we are going to redeem those debentures with cash.

Okay guys thanks a lot.

Okay operator we got – we take one more question.

Your last question will come from a line of Fletcher Stern from Diamondback Company.

Good morning guys.

Good morning.

Everybody hear me okay.

Yeah.

I was having phone problems early. Okay just curious on the natural gas and the crude oil derivative positions. You say you had a -- was it $1.2 billion adjustment which partially was realized and some as mark-to-market. Curious what the mark-to-market exposure was again?

Yes, the market to market –

912.

970 million ore something like that as a June 30. If you were to mark-to-market as of the close of business yesterday there would be no exposure.

It would actually be a gain.

It would actually be a gain.

Okay. That's where I'm leading with this. Current strip price for example just the calendar, 9 Henry hub net gas strip was roughly 1250 and a month later now it's down 25% at 950. Are you entertaining any -- the idea of securing – unwinding some of those hedges given the pretty dramatic move down and specifically in natural gas. I don't know what the mixture in your mark-to-market set aside is there between natural gas and crude oil, but crude oil has had a modest decline relative to natural gas. I'm just curious if you could comment on potential unwinding of ledges?

Yeah this is Darryl again. We just to put perspective. We have relatively little oil hedges its about 20,000 barrels a day, and it’s only to the end of carrier 2008. On our natural gas hedges again we only have four months to go there. We do have discussions now then above on lining them. So far we have made the decision not to online the 2008 hedges and we’ve made the decision not to online the 2009 hedges that are in place which are about 300 million a day and they’re all collars. So we continue to have discussions about that which is not unusual, we have discussion every week when we have our weekly executive committee meeting, so far we have not made the decision on any of those of positions, and with only four months we have to go in the year, you know, I would have to say that the chance that we are online and majority on lined and majority of those would be pretty small.

Okay, thank you very much.

John, do you have any closing comments.

Just a few closing comments thanks for being here this morning. I would just like to summarize our second quarter 2008 and reiterate the fact this is one of the best in Devon’s history. We had another quarter of record earnings and cash flow. We increase production for the ninth consecutive quarter and expect additional growth for the foreseeable future. We also increase our production outlook for the second half of 2008 and fairly, significantly for 2009. We completed the bulk of our efforts and divestitures and eliminated $2.6 billion in debt in preferred stock. We recommenced our share repurchase program and we unveiled the leading position in the Haynesville Shale Play. So with that thanks again for being here and we will talk to you again in the few months.

Thank you for your participation in todays. This concludes the presentation and you may now disconnect. Have a wonderful day.