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Devon Energy Corp. (DVN - Free Report) reported second-quarter 2016 adjusted earnings per share of 6 cents, while the Zacks Consensus Estimate was a loss of 22 cents. In second-quarter 2015, the company reported earnings of 78 cents per share.
Second-quarter results were better than market expectations, thanks to the company’s cost saving initiatives and a marginal improvement in commodity prices during the second quarter.
On a GAAP basis, the company reported a loss of $3.04 per share compared with a loss of $6.94 per share in the year-ago quarter. The difference between operating and GAAP figures in the reported quarter was due to asset impairment of $1.91, restructuring and transaction costs of 3 cents, deferred tax asset valuation allowance of 91 cents and foreign currency adjustments of 25 cents.
Devon’s quarterly revenues of $2.49 billion surpassed the Zacks Consensus Estimate of $2.27 billion by 9.7%. However, total revenues were 26.7% lower than year-ago revenues of $3.4 billion.
Highlights of the Release
In the second quarter 2016, Devon’s total production averaged 644,000 barrels of oil-equivalent (boe) per day, down 4.4% from the year-ago level.
Total production in the reported quarter came primarily from its core assets, which touched 545,000 boe per day. Production from core assets exceeded the mid-point of the guidance by 6,000 boe per day, driven by solid contribution from STACK, Delaware Basin and Canadian operations.
At the field level, the company is effectively controlling its costs. Thanks to its initiatives, lease operating expenses (LOE) were down 26% year over year to $416 million.
Realized oil prices in the quarter were $41.56 per barrel, down 20.9% from $52.52 per barrel in the year-ago quarter. Realized prices for natural gas were down 34.3% to $1.40 per thousand cubic feet (Mcf) from $2.13 per Mcf in the year-ago quarter.
Total realized prices in the second quarter, including cash settlements, were $17.97 per boe, down 46.7% year over year due to lower commodities prices.
Financial Health
As of Jun 30, 2016, the company had a cash balance of $1,723 million, down from $2,310 million as of Dec 31, 2015.
Long-term debt as of Jun 30, 2016, was $12,357 million compared with $12,056 million as of Dec 31, 2015.
Devon’s cash flow from operating activities in second-quarter 2016 was $335 million compared with $1,101 million in second-quarter 2015.
Capital expenditure was $489 million, lower than $1,432 million a year ago.
Guidance
Devon Energy estimates total production from its core assets for the third quarter of 2016 in the range of 560,000–590,000 boe per day. The company now expects 2016 total daily production in the range of 598,000–623,000 boe, up from the previous expectation of 531,000–555,000 boe.
Capital expenditure (capex) in the third quarter is expected in the range of $340–$420 million. The company raised its 2016 capex guidance to the range of $1,370 million to $1,645 million. The 2016 capex budget was increased by $200 million at both ends to fund E&P activities.
Devon’s 2016 E&P capital investment is estimated in a $1,100 million to $1,300 million range and, for the third quarter, it is expected in a range of $275 million to $325 million.
Devon Energy further lowered its 2016 LOE outlook by $150 million to a range of $1.6 billion to $1.7 billion. The company expects its field-level costs, which include both LOE and production taxes, to decline by $600 million in 2016 from 2015 levels. Devon now anticipates G&A expenses to decline to a range of $600 million to $650 million for the full year.
Other Company Releases
Anadarko Petroleum Corporation reported second-quarter 2016 adjusted loss of 60 cents per share, narrower than the Zacks Consensus Estimate of a loss of 77 cents.
TOTAL S.A. reported second-quarter 2016 operating earnings of 90 cents per share, easily surpassing the Zacks Consensus Estimate of 75 cents by 20%.
Chevron Corp. (CVX - Free Report) reported second-quarter 2016 operating earnings of 49 cents per share, higher than the Zacks Consensus Estimate of 31 cents by 58%.
Our View
Devon Energy was able to beat second-quarter estimates primarily due to its cost saving initiatives, which helped the company to overcome the challenges of a soft commodity price environment.
Devon’s focus on high-quality North American properties has led to robust oil output. We expect continued strong production from the Eagle Ford and Delaware Basin assets and Canadian heavy oil operations to help it to maintain its production levels.
Devon’s streamlining operations have taken the shape of divesture of non-core assets. Year to date, the company has signed agreements to divest non-core assets worth $3.2 billion, exceeding its divesture target of $2–$3 billion for 2016. The company intends to utilize these proceeds to lower its existing debts and make strategic investments in high-quality resource plays.
Oil prices staged a comeback during the second quarter from historic lows. However, most of the gains have lately been eaten away by new production hitting the market, bringing the prices down.
Notably, cost-saving initiatives of the company are also in full force and are expected to generate total savings of nearly $1,000 million from 2015 levels, a big positive amid challenging circumstances.
Devon Energy currently has a Zacks Rank #2 (Buy).
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Devon (DVN) Beats Q2 Earnings & Revenues, Ups 2016 View
Devon Energy Corp. (DVN - Free Report) reported second-quarter 2016 adjusted earnings per share of 6 cents, while the Zacks Consensus Estimate was a loss of 22 cents. In second-quarter 2015, the company reported earnings of 78 cents per share.
Second-quarter results were better than market expectations, thanks to the company’s cost saving initiatives and a marginal improvement in commodity prices during the second quarter.
On a GAAP basis, the company reported a loss of $3.04 per share compared with a loss of $6.94 per share in the year-ago quarter. The difference between operating and GAAP figures in the reported quarter was due to asset impairment of $1.91, restructuring and transaction costs of 3 cents, deferred tax asset valuation allowance of 91 cents and foreign currency adjustments of 25 cents.
Revenues
Devon’s quarterly revenues of $2.49 billion surpassed the Zacks Consensus Estimate of $2.27 billion by 9.7%. However, total revenues were 26.7% lower than year-ago revenues of $3.4 billion.
Highlights of the Release
In the second quarter 2016, Devon’s total production averaged 644,000 barrels of oil-equivalent (boe) per day, down 4.4% from the year-ago level.
Total production in the reported quarter came primarily from its core assets, which touched 545,000 boe per day. Production from core assets exceeded the mid-point of the guidance by 6,000 boe per day, driven by solid contribution from STACK, Delaware Basin and Canadian operations.
At the field level, the company is effectively controlling its costs. Thanks to its initiatives, lease operating expenses (LOE) were down 26% year over year to $416 million.
DEVON ENERGY Price, Consensus and EPS Surprise
DEVON ENERGY Price, Consensus and EPS Surprise | DEVON ENERGY Quote
Realized Prices
Realized oil prices in the quarter were $41.56 per barrel, down 20.9% from $52.52 per barrel in the year-ago quarter. Realized prices for natural gas were down 34.3% to $1.40 per thousand cubic feet (Mcf) from $2.13 per Mcf in the year-ago quarter.
Total realized prices in the second quarter, including cash settlements, were $17.97 per boe, down 46.7% year over year due to lower commodities prices.
Financial Health
As of Jun 30, 2016, the company had a cash balance of $1,723 million, down from $2,310 million as of Dec 31, 2015.
Long-term debt as of Jun 30, 2016, was $12,357 million compared with $12,056 million as of Dec 31, 2015.
Devon’s cash flow from operating activities in second-quarter 2016 was $335 million compared with $1,101 million in second-quarter 2015.
Capital expenditure was $489 million, lower than $1,432 million a year ago.
Guidance
Devon Energy estimates total production from its core assets for the third quarter of 2016 in the range of 560,000–590,000 boe per day. The company now expects 2016 total daily production in the range of 598,000–623,000 boe, up from the previous expectation of 531,000–555,000 boe.
Capital expenditure (capex) in the third quarter is expected in the range of $340–$420 million. The company raised its 2016 capex guidance to the range of $1,370 million to $1,645 million. The 2016 capex budget was increased by $200 million at both ends to fund E&P activities.
Devon’s 2016 E&P capital investment is estimated in a $1,100 million to $1,300 million range and, for the third quarter, it is expected in a range of $275 million to $325 million.
Devon Energy further lowered its 2016 LOE outlook by $150 million to a range of $1.6 billion to $1.7 billion. The company expects its field-level costs, which include both LOE and production taxes, to decline by $600 million in 2016 from 2015 levels. Devon now anticipates G&A expenses to decline to a range of $600 million to $650 million for the full year.
Other Company Releases
Anadarko Petroleum Corporation reported second-quarter 2016 adjusted loss of 60 cents per share, narrower than the Zacks Consensus Estimate of a loss of 77 cents.
TOTAL S.A. reported second-quarter 2016 operating earnings of 90 cents per share, easily surpassing the Zacks Consensus Estimate of 75 cents by 20%.
Chevron Corp. (CVX - Free Report) reported second-quarter 2016 operating earnings of 49 cents per share, higher than the Zacks Consensus Estimate of 31 cents by 58%.
Our View
Devon Energy was able to beat second-quarter estimates primarily due to its cost saving initiatives, which helped the company to overcome the challenges of a soft commodity price environment.
Devon’s focus on high-quality North American properties has led to robust oil output. We expect continued strong production from the Eagle Ford and Delaware Basin assets and Canadian heavy oil operations to help it to maintain its production levels.
Devon’s streamlining operations have taken the shape of divesture of non-core assets. Year to date, the company has signed agreements to divest non-core assets worth $3.2 billion, exceeding its divesture target of $2–$3 billion for 2016. The company intends to utilize these proceeds to lower its existing debts and make strategic investments in high-quality resource plays.
Oil prices staged a comeback during the second quarter from historic lows. However, most of the gains have lately been eaten away by new production hitting the market, bringing the prices down.
Notably, cost-saving initiatives of the company are also in full force and are expected to generate total savings of nearly $1,000 million from 2015 levels, a big positive amid challenging circumstances.
Devon Energy currently has a Zacks Rank #2 (Buy).
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