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Devon Energy (DVN) Q2 Earnings Lag Estimates on Higher Costs

Zacks Equity Research
Updated

Devon Energy Corp. DVN reported second-quarter 2018 adjusted earnings per share of 34 cents, lagging the Zacks Consensus Estimate of 37 cents by 8.1%.

On a GAAP basis, the company incurred a loss of 83 cents per share against the year-ago quarter’s earnings of 41 cents. The difference between operating and GAAP figures in the reported quarter was due to the impact of $512 million from one-time items.

Devon Energy Corporation Price, Consensus and EPS Surprise
 

Devon Energy Corporation Price, Consensus and EPS Surprise | Devon Energy Corporation Quote

Revenues

Devon’s quarterly revenues of $2,249 million lagged the Zacks Consensus Estimate of $3,989 million by 43.6%. Total revenues were up 3.9% from the year-ago figure of $2,165 million.

This year-over-year improvement in total revenues was primarily due to strong contribution from the Marketing businesses.

Highlights of the Release

In the second quarter of 2018, total production touched 541,000 barrels of oil equivalent (Boe) per day. The actual production was within the expected range of 524,000-549,000 Boe per day. U.S. production was 409,000 Boe per day, courtesy of strong contribution from the company’s Delaware and STACK assets.

During the reported quarter, total expenses of Devon increased 39.4% year over year to $2,730 million. The year-over-year rise in expenses was due to higher production, exploration and marketing costs.

Devon’s board of directors authorized a $3-billion increase in its previously announced $1 billion share-repurchase program. With this increase, the total repurchase program is presently valued at $4 billion. During the second quarter, the company repurchased shares worth $428 million.

Realized Prices

Realized oil prices in the quarter were $44.63 per barrel, up 17.7% from $37.92 a barrel in the year-ago quarter. Realized prices for natural gas were down 15.7% to $2.14 per thousand cubic feet (Mcf) from $2.54 per Mcf in the prior-year quarter.

Total realized prices, including cash settlements, were $29.13 per Boe, up 16.8% year over year due to higher prices of commodities.

Financial Health

As of Jun 30, 2018, the company generated cash and cash equivalents of $1,460 million, down from $2,642 million on Dec 31, 2017. As of Jun 30, 2018, long-term debt was $5,790 million compared with $6,749 million on Dec 31, 2017.

Devon’s cash flow from operating activities in second-quarter 2018 was $269 million compared with $586 million in the year-ago quarter. Capital expenditure was $602 million, higher than $434 million in the prior-year quarter.

Guidance

Devon reiterated its U.S. oil production for 2018 to be 16% higher than the 2017 level (up from the previous guidance of 14%), driven by strong contribution from its resource-rich assets.

Devon estimates total production from its assets in the third quarter of 2018 within 517,000-541,000 Boe per day. Full-year production is expected in the range of 519,000-541,000 Boe per day.

Capital expenditure (capex) in the third quarter of 2018 is anticipated within $570-$630 million. 2018 capex is expected between $2.33 billion and $2.55 billion.

Other Releases

Anadarko Petroleum Corporation APC reported second-quarter 2018 earnings of 60 cents per share, lagging the Zacks Consensus Estimate of 54 cents by 10.0%.

Newfield Exploration Company NFX reported second-quarter 2018 earnings of 94 cents per share, beating the Zacks Consensus Estimate of 81 cents by 16.1%.

Cabot Oil & Gas Corporation COG reported second-quarter 2018 earnings of 13 cents per share, lagging the Zacks Consensus Estimate of 19 cents by 31.58%.

Zacks Rank

Devon currently has 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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