Upcoming AWS Coverage on EOG Resources Post-Earnings Results
LONDON, UK / ACCESSWIRE / February 22, 2017 / Active Wall St. announces its post-earnings coverage on Devon Energy Corp. (NYSE: DVN). The Company announced its fourth quarter and fiscal 2016 financial results on February 14, 2017. The oil and gas exploration Company returned to profit as compared to the year earlier quarter and surpassed top- and bottom-line expectations. Register with us now for your free membership at:
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One of Devon Energy's competitors within the Independent Oil & Gas space, EOG Resources, Inc. (NYSE: EOG), announced on January 17, 2017, that it will host a conference call to discuss Q4 and full year 2016 results on Tuesday, February 28, 2017, at 10 a.m. ET. AWS will be initiating a research report on EOG Resources in the coming days.
Today, AWS is promoting its earnings coverage on DVN; touching on EOG. Get our free coverage by signing up to:
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Earnings Reviewed
For the three months ended December 31, 2016, Devon generated revenue of $3.35 billion compared to revenue of $2.89 billion in Q4 2015, also beating Wall Street's forecasts of $2.79 billion.
Devon's reported net earnings totaled $331 million, or $0.63 per diluted share, in Q4 2016 compared to net loss of $4.53 billion, or $11.12 per share, in Q4 2015. Adjusting for items, the Company's core earnings were $131 million, or $0.25 per diluted share, in the reported quarter. These strong earnings result exceeded analysts' consensus estimates of $0.19 per share.
The Company's improved profitability in Q4 2016 was attributable to higher commodity prices and an improved cost structure. These factors also strengthened Devon's operating cash flow to $536 million in Q4 2016. Combined with proceeds received from asset sales, the Company's total cash inflows for the reported quarter reached $1.8 billion.
Production Details
During Q4 2016, Devon's reported oil production averaged 244,000 barrels per day. With the shift to higher-margin production, oil accounted for the largest component of the Company's product mix at 45% of total volumes. Total Companywide production in Q4 2016 reached 537,000 oil-equivalent barrels (Boe) per day, exceeding the midpoint of guidance by 2,000 Boe per day.
The majority of the Company's production was attributable to its US resource plays, which averaged 396,000 Boe per day during Q4 2016. Led by results from the STACK, Delaware Basin and Eagle Ford assets, the Company's initial 90-day production rates in the US has increased for the fourth consecutive year, advancing more than 300% from 2012.
In Canada, Devon's heavy-oil operations also delivered impressive results with net oil production averaging 139,000 barrels per day in the reported quarter. The Company's Canadian oil production increased 14% on a y-o-y basis.
Reserve Report
As on December 31, 2016, Devon's estimated proved reserves were 2.1 billion Boe, up 3% increase compared to the Company's retained asset portfolio in FY15. At year-end, the Company's higher-margin, liquid reserves totaled 1.1 billion Boe, or approximately 55% of total reserves.
Devon's US operations proved reserves increased 7% to 1.6 billion Boe. Devon's capital programs within the US added 275 million Boe of reserves during FY16. This represents a replacement rate of approximately 175% on a retained asset basis. The Company noted that excluding property acquisition costs, these reserves were added at a finding cost of only $5 per Boe added during the year.
Lease Operating Costs Improved 42%
Devon's Lease operating expenses (LOE) totaled $367 million for Q4 2016 and were 4% below the midpoint of guidance. The $1.1 billion sale of Access Pipeline in Canada added $28 million of incremental LOE during Q4 2016. The strong fourth-quarter result was driven by the Company's US asset portfolio, where LOE costs improved by 42% to $236 million from peak rates in early 2015. In aggregate, Devon's cost-savings initiatives achieved $1.3 billion of operating and G&A expense reductions in FY16. The Company expects these cost savings to be sustainable in FY17 due to structural improvements and efficiency gains within its field operations and corporate support groups.
EnLink Report Card
Devon's midstream business generated $212 million of operating profit in Q4 2016, driven entirely by the Company's strategic investment in EnLink Midstream. For FY16, EnLink-related operating profit expanded to $879 million, up 6% on a y-o-y basis.
For FY17, Devon projects EnLink's midstream operating profits will advance to a range of $900 million to $950 million. Devon has a 64% ownership in EnLink's general partner (ENLC) and a 24% interest in the limited partner (ENLK). As per the day of the press release, the Company's ownership in EnLink has a market value of approximately $4 billion and is expected to generate cash distributions of around $270 million annually.
Operations Report
On October 6, 2016, Devon completed the sale of its 50% interest in the Access Pipeline for USD $1.1 billion. This accretive transaction officially completed Devon's $3.2 billion non-core asset divestiture program.
Devon noted that the majority of divestiture proceeds were utilized to retire $2.5 billion of debt through tender offerings and repayments in H2 2016. As a result of the debt-reduction efforts, the Company expects its recurring, go-forward financing costs to decline by around $120 million annually. Devon exited Q4 2016 with $2 billion of cash on hand and an undrawn credit facility of $3 billion.
Outlook
In FY17, Devon is expecting to increase activity in its US resource plays to as many as 20 operated rigs by year end. The Company expects to invest between $2.0 billion and $2.3 billion of E&P capital in FY17. Devon's upstream capital plans are expected to drive 13% to 17% oil production growth in the US during FY17.
Stock Performance
On Tuesday, February 21, 2017, the stock closed the trading session at $45.06, climbing 2.01% from its previous closing price of $44.17. A total volume of 4.97 million shares have exchanged hands, which was higher than the 3-month average volume of 4.42 million shares. Devon Energy's stock price rallied 5.24% in the last three months, 1.92% in the past six months, and 125.34% in the previous twelve months. The stock currently has a market cap of $23.61 billion and has a dividend yield of 0.53%.
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