“Devon’s third quarter results were outstanding.” Rick Muncrief
With that statement, Devon Energy’s CEO Rick Muncrief summed up the third quarter results for the Oklahoma City-based oil and gas company.
Devon’s earnings totaled $844 million in the quarter compared to $92 million last year while earnings per share were $1.24, up from the 25 cents a year ago. Its adjusted earnings were $739 million or $1.08 per share for the quarter.
The company’s revenue amounted to $3.47 billion, three times better than the $1.07 billion in the same period 2020.
“—we are delivering on exactly what our shareholder-friendly business model was designed for, and that is to lead the energy industry in capital discipline and cash returns,” said Muncrief in an earnings call held this week.
He suggested improved earnings should be the routine for Devon in the coming years, thanks to its strategy in the Delaware Basin of West Texas—one that he called a “clear differentiator for Devon.”
“With this advantaged portfolio, we possess a multi-decade resource opportunity in the best position plays on the U.S. cost curve. And with this sustainable resource base, we are positioned to win multiple ways with our balanced commodity exposure. While our production is leveraged to oil, nearly half our volumes come from natural gas and NGLs, providing us with meaningful revenue exposure to each of these valuable products.”
Muncrief pointed to what he labeled another batch of excellent wells in the Delaware Basin which resulted in volumes 5% above Devon’s guidance. Nearly 70% of the company’s inventory is in the Delaware.
Devon achieved an 8-fold increase in its free cash flow and improved financial strength by reducing net debt by 16% in the quarter.
But Muncrief also told investors not to expect Devon to flood the market with oil. That won’t happen he said until demand side fundamentals sustainable recover “and it becomes evident that OPEC+ spare oil capacity is effectively absorbed by the world market. ”
As for the Delaware Basin, that’s where 80% of Devon’s capital was deployed, explained Clay Gaspar, Chief Operating Officer for Devon. The company is running 13 operated rigs and 4 frac crews in the Basin and brought on 52 wells in the third quarter.
“The 4-well Miller project is an up spaced Woodford development in Canadian County and is off to a great start with both DNC costs and well productivity outperforming pre -drill expectations. Initial 30-day rates averaged 2700 BOE per day and completed well cost came in under budget at around $8 million per well,” Gaspar said during the conference call.
“—the strength of natural gas and NGL pricing, the performance we’re seeing in the Anadarko Basin will likely command relatively more capital than it did in ’21,” he added.
Up in the Williston, Devon expects to generate more than $700 million of 2021 free cash flow