“Devon’s top priority in 2016 is to protect the balance sheet.” Dave Hager, CEO and President.
Layoffs will total 1,000 including 700 in OKC.
Company’s debt reaches $7.7 billion.
4th quarter losses hit $4.5 billion.
Devon’s unloading more assets involving 600 other employees.
That 50-story Devon Tower in downtown Oklahoma City was rattled Tuesday by news of layoffs and billions of dollars in debt. As Oklahoma City-based Devon Energy unveiled fourth quarter 2015 reports showing a net loss of $4.5 billion and debt approaching $8 billion, the company also started the series of layoffs it announced last month to employees. An estimated 1,000 employees are being let go including 700 at the Oklahoma City headquarters.
“Devon has begun its previously announced employee reductions and expects to complete the process at its Oklahoma City headquarters by midday Thursday,” said John Porretto, Media Relations Manager in a statement on Tuesday. “At field-level offices, the company expects to complete notifications Feb. 22.”
He said the company took the actions because of what he called the “current commodity price environment.”
“The company must reduce expenses across the entire organization to maintain its financial flexibility and competitiveness,” added Porretto. The layoffs represent a reduction in the first quarter of 2016 of nearly 20 percent. The company said another 600 employees will be impacted by the sale of non-core upstream assets. The majority of the divestiture impact will be at the field level.
How serious was it for the company? The company ended 2015 with net debt of $7.7 billion but under a debt-maturity schedule, it will have no debt maturities until December 2018. And the company said the weighted-average cost of Devon’s outstanding debt is only 5 percent.
“Devon’s top priority in 2016 is to protect the balance sheet,” said Dave Hager, president and CEO of Devon. “We are tailoring activity to current market conditions and are prepared to adjust capital plans throughout the year to ensure we balance capital investment with cash inflows.”
In addition to the sale of upstream assets, Hager said the company plans a reduction of G and A (general and administrative) costs of nearly $800 a year. The company will also reduce its dividend by 75 percent.
“With the challenging industry conditions, Devon continues to be highly focused on delivering meaningful cost reductions and efficiency gains across our asset portfolio,” said Hager. The efforts drove down field level operating costs nearly $400 million in 2015.
The company announced in December plans to divest $2 billion to $3 billion of non-core Exploration and Producgton properties as well as 50 percent interest in the Access pipeline.
Otherwise, the company announced core earnings of $319 million or $0.77 per dilulted share.
The operating cash flow totaled $1.1 billion inthe quarter which was a 12 percent increase compared to the fourth quarter of 2014. For the full year of 2015, the company had operating cash flows of $5.4 billion. But combined with the $761 million of cash from the sale of EnLink units and asset divestitures, Devon’s total cash inflows reached $6.1 billion for the year.
