Market Overview

Devon Energy Reports First-Quarter 2018 Results



  • Raising full-year 2018 oil production outlook
  • High-rate Boundary Raider wells set Delaware Basin record
  • STACK Coyote development delivers prolific production rates
  • Showboat project online 40 days ahead of plan
  • G&A and interest savings to reach $175 million annually
  • $1 billion share-repurchase program underway

Devon Energy Corp. (NYSE:DVN) today reported operational and financial
results for the first quarter of 2018. Also included within the release
is the company's guidance outlook for the second quarter and full-year

"Devon delivered oil production at the high end of guidance and
accelerated efficiency gains across the portfolio in the first quarter,"
said Dave Hager, president and CEO. "Our performance was highlighted by
commencing production on the highest-rate wells in the 100-year history
of the Delaware Basin and efficiencies at our STACK Showboat project,
which resulted in savings of $1.5 million per well and first production
40 days ahead of plan.

"Based on our strong year-to-date results and the confidence we have in
our Delaware and STACK focused capital programs, we are raising our
full-year oil production outlook," Hager said. "Importantly, we are
delivering this incremental production with lower costs. We expect
per-unit lease operating expense to decline 5 to 10 percent by year-end,
and we are on pace to reduce G&A and interest costs by $175 million

Operating Cash Flow Increases 11 Percent

In the first quarter of 2018, Devon's operating cash flow totaled $804
million, an 11 percent increase from the fourth quarter of 2017. Devon
reported a net loss totaling $197 million, or $0.38 per diluted share,
in the first quarter. The quarterly loss was attributable to a $312
million charge related to the early retirement of debt. Adjusting for
this one-time charge and other items securities analysts typically
exclude from their published estimates, the company's core earnings were
$108 million, or $0.20 per diluted share, in the quarter.

Delaware and STACK Driving 2018 Oil Production Guidance Higher

Overall, total production averaged 544,000 oil-equivalent barrels (Boe)
per day in the first quarter. Oil accounted for the largest component of
the product mix at 46 percent of total volumes.

The majority of Devon's production was attributable to its U.S. resource
plays, which averaged 413,000 Boe per day. The strongest performance in
the U.S. was driven by the company's Delaware and STACK assets, where
combined oil production increased 16 percent compared to the prior
quarter. This robust growth drove U.S. oil production to the top end of
guidance, averaging 122,000 barrels per day for the quarter.

Based on strong year-to-date results, Devon is raising its 2018 guidance
for U.S. oil production. With the production raise, the midpoint of the
company's guidance for 2018 U.S. oil production now represents an
estimated growth rate of 16 percent compared to 2017, up from the
previous guidance of 14 percent. The improved outlook is driven by a
combination of improving well productivity in the Delaware and STACK and
efficiency gains compressing cycle times with development projects.

High-Rate Boundary Raider Wells Set Delaware Basin Record

The company's development programs across its U.S. resource plays had
another strong quarter of performance. In the Delaware, new well
activity was headlined by two massive Boundary Raider wells that
achieved a combined 24-hour initial production rate of approximately
24,000 Boe per day (80 percent oil). These are the highest-rate wells
brought online in the history of the Delaware Basin.

In the STACK, Devon commenced production on 12 high-rate wells that
averaged initial 30-day rates of 3,500 Boe per day (55 percent oil). The
most prolific STACK wells for the quarter belonged to the four wells
from the Coyote development that delivered average 30-day rates of 4,400
Boe per day.

For additional details on well results and other information about
Devon's E&P operations, please refer to the company's first-quarter 2018
operations report at

Showboat Project Online 40 Days Ahead of Plan

Devon's upstream capital was $664 million in the first quarter, 2
percent above the guidance range. This variance was driven primarily by
efficiencies achieved at the company's STACK Showboat project, where
first production was achieved approximately 40 days ahead of plan,
resulting in an acceleration of capital spend.

The efficiencies at Showboat were driven by a 30 percent improvement in
drilling time and the doubling of completion stages per day compared to
prior activity in the area. Overall, these operating improvements
delivered cost savings of $1.5 million per well at Showboat.

With the better than expected efficiencies compressing cycle times
across development projects and pulling forward activity, Devon now
expects its capital to trend toward the high end of its 2018 guidance of
$2.2 billion to $2.4 billion. The accelerated activity due to
efficiencies will benefit both the 2018 and 2019 production profile.

Upstream Revenue in U.S. Advances and EnLink Profitability Expands

The company's upstream revenue in the U.S. totaled $1.0 billion in the
first quarter, a 36 percent improvement compared to the fourth quarter
of 2017. Contributing factors to the strong revenue growth were higher
commodity price realizations and growth in higher-margin, light-oil

In Canada, upstream revenues totaled $302 million in the first quarter.
The company benefitted from Western Canadian Select (WCS) basis swaps on
approximately 50 percent of its estimated Canadian oil production in the
first quarter, generating cash settlements of $97 million.

Devon's midstream business generated operating profits of $277 million
in the first quarter, increasing 42 percent year over year. This growth
was driven by the company's investment in EnLink Midstream. Devon has a
64 percent ownership interest in EnLink's general partner (NYSE:ENLC)
and a 23 percent interest in the limited partner (NYSE:ENLK). In
aggregate, the company's ownership in EnLink has a market value of
approximately $3 billion and is projected to generate cash distributions
of $270 million in 2018.

Regional Basis Swaps Provide Price Protection

The company currently has about 60 percent of its expected oil and gas
production protected for the remainder of 2018. These contracts consist
of collars and swaps based off the West Texas Intermediate (WTI) oil
benchmark and the Henry Hub natural gas index. Additionally, Devon has
entered into regional basis swaps in an effort to protect price
realizations across its portfolio in the U.S. and Canada, including
attractive WCS and Midland basis oil hedges. The volume and pricing
details associated with the company's hedges are provided in the tables
within this release.

Per-Unit Production Expense to Improve Throughout 2018

Devon's production expense totaled $543 million, or $11.08 per Boe, in
the first quarter, in line with guidance. New revenue recognition
accounting rules were implemented in the first quarter, resulting in a
$62 million increase to production expense. The new accounting rules
changed the way certain processing fees are presented for natural gas
and natural gas liquids. These fees were historically presented as
reductions to revenue but are now recorded to production expense. This
change had no impact on earnings or cash flow.

With growth in high-margin and low-cost production in the Delaware and
STACK, per-unit production expense is projected to decline 5 to 10
percent by year-end 2018.

G&A and Interest Savings to Reach $175 Million Annually

The company's general and administrative expenses (G&A) totaled $226
million in the first quarter. Subsequent to quarter-end, with workforce
and non-personnel related cost reduction initiatives ongoing, the
company expects G&A expense to decline by 15 percent in the second
quarter. On an annualized run-rate basis, the company expects G&A
savings of approximately $110 million.

Net financing costs totaled $431 million in the first quarter. Excluding
the $312 million charge attributable to the early retirement of debt,
net financing costs for the first quarter were $119 million. With the
retirement of high-coupon debt in the first quarter, the company expects
to reduce net financing costs by approximately $64 million on an annual

In aggregate, these G&A and interest-reduction initiatives position
Devon to lower its costs by approximately $175 million annually.

Successful Tender Activity Reduces Upstream Debt

Devon's financial position remains exceptionally strong, with
investment-grade credit ratings and excellent liquidity. The company
exited the first quarter with $1.4 billion of cash on hand. In March,
the company successfully repurchased $807 million of debt, reducing the
company's consolidated debt to $10.0 billion. Excluding non-recourse
EnLink obligations, Devon's stand-alone net debt is $4.7 billion.

Share Repurchase Program Reaches $204 Million; Dividend Increased 33

In the first quarter, Devon announced that its board of directors
authorized a $1.0 billion share-repurchase program of the company's
common stock. As of the end of April, Devon had repurchased 6.2 million
shares under the program at a total cost of $204 million, with an
average share purchase price of $33. Devon expects to complete the stock
repurchase program by the end of 2018.

The company's board of directors also recently approved a 33 percent
increase to its quarterly common stock dividend to $0.08 per share,
compared to the prior rate of $0.06 per share. The new quarterly
dividend rate is effective in the second quarter of 2018.

Divestiture Program Achieves $1.1 Billion of Asset Sales

To further focus its resource-rich portfolio, Devon is targeting asset
divestiture proceeds in excess of $5 billion. In March, Devon advanced
this divestiture goal by announcing the sale of its Johnson County asset
in the southern portion of the Barnett Shale position for $553 million.
The transaction is expected to close during the second quarter.

In a separate transaction within the Barnett, the company formed a
partnership with DowDupont ("Dow") in April. Under this arrangement,
Devon will monetize half its working interest across 116 gross undrilled
locations for an approximate $75 million payment from Dow spread over
the next five years. With this agreement, Devon will also drill and
operate up to 24 wells per year, with volumes dedicated to the EnLink
gathering and processing infrastructure.

Overall, these two Barnett transactions, combined with other recent
asset sales, have increased total divestiture proceeds over the past
year to $1.1 billion.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to
reconcile non-GAAP (generally accepted accounting principles) financial
measures to the related GAAP information. Core earnings and core
earnings per share and other items referenced within the commentary of
this release are non-GAAP financial measures. Reconciliations of these
and other non-GAAP measures are provided within the tables of this

Conference Call Webcast and Supplemental Earnings Materials

Also provided with today's release is the company's detailed operations
report that is available on the company's website at
The company's first-quarter conference call will be held at 10 a.m.
Central (11 a.m. Eastern) on Wednesday, May 2, 2018, and will serve
primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This release includes "forward-looking statements" as defined by the
Securities and Exchange Commission (SEC). Such statements include those
concerning strategic plans, expectations and objectives for future
operations, and are often identified by use of the words "expects,"
"believes," "will," "would," "could," "forecasts," "projections,"
"estimates," "plans," "expectations," "targets," "opportunities,"
"potential," "anticipates," "outlook" and other similar terminology. All
statements, other than statements of historical facts, included in this
press release that address activities, events or developments that the
company expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such statements are subject to a number
of assumptions, risks and uncertainties, many of which are beyond the
control of the company. Statements regarding our business and operations
are subject to all of the risks and uncertainties normally incident to
the exploration for and development and production of oil and gas. These
risks include, but are not limited to: the volatility of oil, gas and
NGL prices; uncertainties inherent in estimating oil, gas and NGL
reserves; the extent to which we are successful in acquiring and
discovering additional reserves; the uncertainties, costs and risks
involved in oil and gas operations; regulatory restrictions, compliance
costs and other risks relating to governmental regulation, including
with respect to environmental matters; risks related to our hedging
activities; counterparty credit risks; risks relating to our
indebtedness; cyberattack risks; our limited control over third parties
who operate our oil and gas properties; midstream capacity constraints
and potential interruptions in production; the extent to which insurance
covers any losses we may experience; competition for leases, materials,
people and capital; our ability to successfully complete mergers,
acquisitions and divestitures; and any of the other risks and
uncertainties identified in our Form 10-K and our other filings with the
SEC. Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this release are made as of the date of
this release, even if subsequently made available by Devon on its
website or otherwise. Devon does not undertake any obligation to update
the forward-looking statements as a result of new information, future
events or otherwise. The SEC permits oil and gas companies, in their
filings with the SEC, to disclose only proved, probable and possible
reserves that meet the SEC's definitions for such terms, and price and
cost sensitivities for such reserves, and prohibits disclosure of
resources that do not constitute such reserves. This release may contain
certain terms, such as resource potential, potential locations, risked
and unrisked locations, estimated ultimate recovery (or EUR),
exploration target size and other similar terms. These estimates are by
their nature more speculative than estimates of proved, probable and
possible reserves and accordingly are subject to substantially greater
risk of being actually realized.
The SEC guidelines strictly
prohibit us from including these estimates in filings with the SEC.
Investors are urged to consider closely the disclosure in our Form 10-K,
available at
You can also obtain this form from the SEC by calling 1-800-SEC-0330 or
from the SEC's website at

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding
and producing oil and natural gas. Based in Oklahoma City and included
in the S&P 500, Devon operates in several of the most prolific oil and
natural gas plays in the U.S. and Canada with an emphasis on achieving
strong returns and capital-efficient cash flow growth. For more
information, please visit






Quarter Ended
March 31, 2018
Oil and bitumen (MBbls/d)
U. S. 122
Heavy Oil 129
Retained assets 251
Divested assets
Total 251
Natural gas liquids (MBbls/d)
U. S. 91
Divested assets 6
Total 97
Gas (MMcf/d)
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