Oklahoma City’s Devon Energy Corp. reported its first quarter 2018 earnings included an operating cash flow of $804 million but a net loss of $197 million due to the early retirement of $312 million debt.
However, the company said the core earnings were still $108 million or 20 cents a diluted share for the quarter. Still, oil production hit historic highs in the company’s different exploration sites.
“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.”
As a result, Devon is raising its full-year oil production outlook along with an expected lower cost of production. Hager said the per-unit lease operating expense could drop 10 percent by the end of the year, thus cutting costs by $175 million a year. And the company’s guidance will be a 16 percent growth rate compared to 2017, up from the 14 percent.
The oil production in the STACK and Delaware basin led to total production for the company of 544,000 oil-equivalent barrels a day for the first. Oil accounted for 46 percent of the total volumes. The oil production just in the STACK and the Delaware Basin was up 16 percent and drove the company’s U.S. production to an average of 122,00 barrels a day for the quarter.
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.
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.
