Devon Energy’s Rick Muncrief says it’s time other energy firms followed his company’s policy of how it’s returning more cash to shareholders.
During Devon’s earnings call this week, Muncrief, named President and Chief Executive Officer in January credited the company’s first-quarter net income of $213 million, compared to a loss in the same period a year earlier, to its fixed-plus-variable dividend policy.
“I personally feel it’s time for industry to stop contemplating and talking about the possibilities of a cash return model and more quickly embrace this necessary change,” he told investors and others.
“High returns on capital employed, reduced reinvestment rates and cash flow generation will determine the winners in this cycle, not the historic behavior of delivering outsized production growth.”
The Oklahoma City-based company said it had profit of 32 cents per share. Earnings, adjusted for one-time gains and costs, were 45 cents per share.
Muncrief said it was only the beginning for Devon and he predicted it will be an “excellent year” for Devon as the company continues to advance its strategic plan.
The company leader also made it clear the firm’s powerful cash flow stream will not be interrupted by allocating capital to growth projects until demand side fundamentals recover.
Muncrief teased investors and others during the earnings call.
“In the very near future, we plan to issue more specific guidance on Devon’s go forward environmental priorities. This disclosure will include formal targets to reduce greenhouse gas emissions, methane intensity rates and our strategy to improve upon other key performance measures,” he said while offering no other hints about what’s to come for Devon.
Devon’s first quarter report also revealed how much of its oil production is in the Delaware Basin where there was a 19% year-over-year improvement, according to Clay Gaspar, Devon’s Chief Operating Officer.
Devon commenced production on 52 wells in the quarter and two-thirds of them were in the Wolfcamp.
Gaspar pointed to new well activity that was headlined by Devon’s Danger Noodle project in Lea County, New Mexico. The 2-mile lateral development targeted the Upper Wolfcamp and achieved average 30-day rates of 5,100 barrels of oil equivalent a day.
Gaspar said the company is focused on an 11 well thoroughbred development in Eddy County, New Mexico. First production on two of the wells commenced and their peak rates exceeded 4,000 BOE per day. The remaining 9 wells are being brought online.
Devon leadership also indicated the company successfully emerged from the 60-day suspension issued by the Department of Interior of permitting on federal land. Nearly a third of Devon’s leasehold in the Delaware Basin sits on government land.
Gaspar said the company not only came out of the restricted permitting, but since then, the firm also received approval on more than 50 new drilling permits.