Devon Energy Beats on Earnings - Analyst Blog

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Devon Energy Corp. DVN reported first-quarter 2014 adjusted earnings per share of $1.34, higher than the Zacks Consensus Estimate by 6.3% and the year-ago number by a whopping 103%.

On a GAAP basis, the company reported earnings of 79 cents versus a loss of $3.34 per share in the year-ago quarter. The difference between the operating and GAAP number of 55 cents in the reported quarter was due to the impact of different one-time charges and expenses totaling $223 million.

Revenue

Devon's quarterly revenues of $3.72 billion surpassed year-go revenues of $1.97 billion by 89% and the Zacks Consensus Estimate of $2.86 billion by 30.3%.

The sharp top-line upside was due to an increase in high-margin oil production and improved price realizations for all products sold by the company.

Highlights of the Release

Devon's total production of oil, natural gas and natural gas liquids averaged 691,000 oil-equivalent barrels (Boe) per day in the first quarter of 2014. Excluding assets earmarked for divestiture, total production in the first quarter averaged 563,000 Boe per day, up 7% year over year.

The increase in oil production from the Permian Basin and Eagle Ford assets helped boost overall production.

Total operating expenses in first quarter 2014 decreased 20.7% to $3.04 billion from $3.83 billion in first quarter 2013.

Realized Prices

Realized oil prices in the quarter were $75.65 per barrel, up 21.4% from $62.32 per barrel in the year-ago quarter. Realized prices for natural gas liquids were up 10.5% to $31.13 per barrel from $28.17 per barrel in the year-ago quarter.

Natural gas price realization was up 28.5% year over year to $3.97 per thousand cubic feet (Mcf) from $3.09 per Mcf in the year-ago quarter.

On the whole, total realized prices in the first quarter were $39.52 per barrel of oil equivalent (boe), up 29.3% year over year.

Financial Health

Devon's cash flow from operating activities in first quarter 2014 was $1.4 billion compared with $1 billion in the year-ago period.

As of Mar 31, 2014, the company's cash balance totaled $2.03 billion versus $6.06 billion as of Dec 31, 2013.

Long-term debt as of Mar 31, 2014, was $11.74 billion versus $7.96 billion as of Dec 31, 2013.

Capital expenditure in first quarter 2014 was $1.58 billion, lower than the year-ago investment of $1.92 billion. However, in first quarter 2014 the company invested $5.93 billion to acquire new assets.

Other Company Releases

EOG Resources Inc. EOG posted net earnings of $1.40 per share in first quarter 2014, surpassing the Zacks Consensus Estimate of $1.17 by 19.7%.

EQT Corporation EQT posted earnings of $1.35 per share in the first quarter, surpassing the Zacks Consensus Estimate by 64.6%.

SM Energy Company's SM first-quarter 2014 earnings were $1.58 per share, beating the Zacks Consensus Estimate by 6.0%.

Our View

Devon kept alive its earnings steak in the first quarter thanks to strong oil production and better realized prices.

Devon is working on its strategy to divest non-core assets in the U.S. and Canada and focus on the reserve rich onshore U.S. assets. As part of this strategy, the company divested its conventional gas assets in Canada. Net proceeds of $2.7 billion will help Devon to bring down outstanding debts.

In addition, Devon announced in the first quarter that it will invest roughly $1.1 billion in the Eagle Ford shale to drill 200 wells. Given the increasing domestic demand for oil and natural gas, the decision to expand operation in this oil rich shale seems appropriate.

Devon Energy currently holds a Zacks Rank #3 (Hold).



DEVON ENERGY DVN: Free Stock Analysis Report

EOG RES INC EOG: Free Stock Analysis Report

EQT CORP EQT: Free Stock Analysis Report

SM ENERGY CO SM: Free Stock Analysis Report

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