Devon Energy reports 3Q19 results
Published by Nicholas Woodroof,
- Operating cash flow totalled US$597 million, a 22% increase compared to the second quarter.
- Free cash flow generation reached US$56 million in third quarter.
- US$100 million midstream transaction executed in Delaware Basin.
- Share-repurchase programme decreased outstanding share count by 28% since 2018.
- Third-quarter oil production increased 19% year-over-year, exceeding guidance.
- Raised full-year 2019 oil production guidance for 3rd time this year.
- Capital efficiency improved with no change to 2019 capital spending plan.
“The third quarter featured exceptional execution across all aspects of our strategic plan reflecting our unwavering commitment to deliver attractive financial returns, improve capital efficiency and grow shareholder distributions,” said Dave Hager, president and CEO. “Furthermore, our advantaged multibasin portfolio is built to last, with significant capital allocation flexibility designed to deliver both highreturn oil growth and increasing amounts of free cash flow in an environmentally responsible manner.”
Total net production from Devon’s retained assets averaged 325 000 boe/d during the third quarter. Oil production averaged 148 000 bpd, a 19% increase from the same period a year ago. This result exceeded the company’s midpoint guidance by 3% or 4000 bpd due to strong well productivity and timing of completions in the Delaware Basin.
For the third quarter, Devon’s upstream revenues totalled US$1.1 billion. The company’s realised price during the period, including commodity hedges, was US$27.73/boe, compared with the prior quarter of US$27.84/boe. This lower price realisation reflects lower crude, natural gas, and natural gas liquids pricing, offset by growth in higher-margin oil production and cash settlements on commodity hedges.
Production expense averaged US$9.37/boe in the third quarter. Including costs reclassified to discontinued operations, production costs declined 19% compared to the year-ago quarter. The improved result was driven by lower lease operating expenses across Devon’s retained US asset portfolio, decreased production taxes and the exit of higher-cost Canadian assets from Devon’s portfolio.
Corporate costs also declined during the quarter. General and administrative (G&A) expenses totalled US$107 million in the third quarter. Including costs reclassified to discontinued operations, Devon’s G&A expense improved 27% year-over-year. The lower G&A costs were primarily driven by reduced personnel 2expense. Interest costs (including discontinued operations) were reduced US$20 million year-over-year due to the company’s ongoing debt-reduction programme.
Operating cash flow totalled US$597 million from continuing operations, a 22% increase compared to the previous quarter despite lower commodity prices. This level of cash flow funded third-quarter capital requirements of US$541 million, resulting in US$56 million of free cash flow.
Devon continues to maintain a strong balance sheet, with investment-grade credit ratings and excellent liquidity. The company’s US$4.7 billion liquidity position includes US$1.7 billion of cash (inclusive of restricted cash) and an undrawn US$3 billion unsecured credit facility. During the quarter, Devon redeemed US$1.5 billion of debt with cash on hand. At 30 September 2019, the company’s total debt outstanding was US$4.3 billion, with no maturities until late 2025.
Through 31 October 2019, Devon had repurchased 147 million shares, or approximately 28% of outstanding shares since 2018, at a total cost of US$4.8 billion, under its US$5 billion authorisation. In the third quarter, the company completed US$550 million of share repurchases and returned US$35 million of additional capital to shareholders through its quarterly dividend.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/06112019/devon-energy-reports-3q19-results/
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