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Devon (DVN) Tops Q3 Earnings Estimates, Raises Guidance

Zacks Equity Research

Devon Energy Corp. DVN reported third-quarter 2019 adjusted earnings per share of 26 cents, which surpassed the Zacks Consensus Estimate of 19 cents by 36.8%.

Quarterly revenues of $1,847 million surpassed the Zacks Consensus Estimate of $1,567 million by 17.9%. However, total revenues declined 14.3% from the year-ago reported figure.

The top-line performance reflects lower contribution from marketing businesses and a decline in realized prices of hydrocarbons compared with the prior-year period.

Devon Energy Corporation Price, Consensus and EPS Surprise

Devon Energy Corporation Price, Consensus and EPS Surprise

Devon Energy Corporation price-consensus-eps-surprise-chart | Devon Energy Corporation Quote

Highlights of the Release

Total production (including divested U.S assets) in third-quarter 2019 touched 428,000 barrels of oil equivalent per day (Boe/d), a tad higher than the year-ago figure. Excluding production from divested assets, third-quarter total output was 325,000 Boe/d. Strong output from its Delaware assets boosted overall production.

Third-quarter oil production was 148,000 Boe/d, which is above the guided range of 141,000-147,000 Boe/d and 19% higher than the year-ago level.

Devon is progressing well with cost-saving initiatives and has lowered total expenses in the reported quarter by 23.8% year over year to $1,653 million. Its exit from higher-cost Canadian assets helped Devon in lowering expenses.

The company continues to advance the $5-billion share repurchase plan. Devon repurchased an aggregate of 147 million shares under the program for $4.8 billion. It expects to complete the repurchase program by the end of this year, which will surely have a positive impact on earnings. The company repurchased shares worth $550 million during third-quarter 2019.

Realized Prices

Total realized prices — including cash settlements — were $27.73 per Boe in the reported quarter, down 6.1% year over year.

Financial Health

As of Sep 30, 2019, the company generated cash and cash equivalents of $1,375 million, down from $2,414 million recorded on Dec 31, 2018. As of Sep 30, 2019, its long-term debt amounted to $4,295 million, almost in line with $4,292 million on Dec 31, 2018.

Devon’s cash flow from operating activities in third-quarter 2019 was $597 million compared with $560 million in the year-ago period.

Devon estimates total oil production from retained assets for the fourth quarter of 2019 within 154,000-160,000 barrels per day. Total production in the quarter is expected in the range of 420,000-448,000 Boe/d.

It expects year-over-year growth in 2019 U.S. oil production in the range of 20-21%, indicating a 550-basis point improvement from original expectation.

Devon has lowered its view for 2019 G&A expenses to the range of $460-$470 million and financing costs to $245-$255 million. When compared with earlier expectations, the G&A and financing cost guidance represents a 17% and 22% decline, respectively.

It expects 2020 oil production to improve in the range of 7-9% from 2019 levels. In 2020, the company expects to lower shares outstanding by 6-8% from 2019 levels.

Other Releases

WPX Energy Inc.’s WPX third-quarter 2019 earnings of 9 cents per share missed the Zacks Consensus Estimate of 11 cents by 18.2%.

Murphy Oil Corporation MUR reported third quarter 2019 adjusted earnings of 36 cents per share, which beat the Zacks Consensus Estimate of 22 cents by 63.6%.

Occidental Petroleum Corporation OXY reported third-quarter 2019 earnings of 11 cents per share, lagging the Zacks Consensus Estimate of 41 cents by 73.2%.

Zacks Rank

Devon Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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