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Devon Energy (DVN) Up 9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Devon Energy (DVN - Free Report) . Shares have added about 9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Devon Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Devon Energy Tops Q1 Earnings Estimates, Cuts '20 View

Devon Energy Corp.  reported first-quarter 2020 adjusted earnings per share of 13 cents against the Zacks Consensus Estimate of a loss of 18 cents. In the comparable year-ago quarter, the company had reported earnings of 36 cents per share.
 
Revenues

Total revenues of $2,087 million surpassed the Zacks Consensus Estimate of $1,539 million by 35.6%. Moreover, the top line improved from the year-ago figure of $1,079 million by 93.4%.

Highlights of the Release

Total net production from Devon Energy’s retained assets in first-quarter 2020 touched 348,000 barrels of oil equivalent per day (Boe/d), exceeding the guided range of 328,000-342,000 Boe/d. Oil production averaged 163,000 barrels per day, which increased 155.6% on a year-over-year basis, courtesy of strong well productivity in the Delaware Basin.

Total production expenses in the first quarter were $318 million, increasing 12.4% year over year.

Financing cost in the quarter was $65 million, up 8.3% from the year-ago period.

Realized Prices

Realized oil prices in the quarter were $49.73 per barrel, down 10.4% from $55.48 in the year-ago figure. Realized prices for natural gas were down 32% to $1.57 per thousand cubic feet from $2.31 in the prior-year quarter.

Total oil equivalent realized prices — including cash settlements — were $28.63 per Boe, down 15.5% year over year.

Financial Highlights

As of Mar 31, 2020, the company had cash and cash equivalents of $1,527 million, up from $1,464 million on Dec 31, 2019. The company exited the first quarter with $4.7 billion of liquidity and no near-term debt maturities.

As of Mar 31, 2020, long-term debt amounted to $4,295 million, up from $4,294 million on Dec 31, 2019.

Devon Energy’s net cash from operating activities from continuing operations in first-quarter 2020 was $529 million, up 21.1% from the year-ago period.

The company invested $38 million to repurchase 2.2 million shares of its common stock in the early first quarter but suspended the share repurchase program to preserve liquidity amid the novel coronavirus-induced economic crisis.
 
Guidance

Devon Energy estimates total production for second-quarter 2020 in the range of 302,000-328,000 Boe/d. The same for 2020 is expected in the range of 300,000-319,000 Boe/d. The company’s existing hedges will safeguard 90% of the expected 2020 oil production of $42 per barrel.  

Capital expenditure for 2020 is expected within $950-$1,050 million, down 45% from the original guidance. For the second quarter, it anticipates to invest within $200-$2550 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 53.58% due to these changes.

VGM Scores

At this time, Devon Energy has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Devon Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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