Oklahoma City’s Devon Energy reported a major improvement in its second quarter earnings compared to one year ago when it reported a loss. The firm said reported net earnings for the second quarter 2019 totaled $495 million or $1.19 per diluted share.
Devon Energy reported that adjusting for items securities analysts usually exclude from published estimates, the firm’s core earnings were $180 million or 43-cents a diluted share. But its overall revenue was $1.92 billion, short of what Wall Street analysts had predicted. They felt the firm would post revenue of $2.22 billion.
“Devon is executing at a very high level on all aspects of our strategic plan,” said Dave Hager, president and CEO. “Our second-quarter performance was highlighted by improving well productivity and capital efficiency that drove oil production above the high end of guidance with a total capital investment well below forecast.”
“With the positive business momentum we have demonstrated year-to-date, we are raising our full-year oil production outlook for the second time this year,” said Hager. “And importantly, we are delivering this incremental volume growth with lower capital and operating costs, positioning Devon to generate higher free cash flow in the second half of the year.”
Devon stated that its light-oil production from its assets averaged 142,000 barrels a day which is a 13 percent increase over the second quarter of 2018. The production exceeded midpoint guidance by 5,000 barrels a day.
Within Devon’s diversified U.S. onshore portfolio, the strongest asset-level performance was achieved by the company’s Delaware Basin operations in southeast New Mexico. Production from this world-class play increased 58 percent year over year, driving volumes in the Delaware to 120,000 oil-equivalent
barrels (Boe) per day.
A key growth driver was 28 new wells brought online in the state-line area that averaged initial 30-day rates of approximately 2,100 Boe per day per well, of which 70 percent was oil. Given the strong operational momentum achieved in the Delaware Basin, Devon is raising its 2019 U.S. oil production outlook for the second time this year. The midpoint of the company’s updated guidance represents an estimated oil growth rate of 19 percent compared to 2018, a 400-basis point improvement compared to original budget expectations.
In addition to strong production results, Devon maintained discipline and continued to achieve capital efficiencies across its retained U.S. oil business. This success was reflected in the company’s secondquarter capital spending, which was 9 percent below midpoint guidance, or $478 million. The most significant drilling and completion efficiencies were attained by the company’s Wolfcamp program in the Delaware Basin and infill development activity in the STACK play.
Due to these positive operating trends, Devon is lowering its E&P capital investment expectations by $50 million to a range of $1.8 billion to $1.9 billion in 2019. The reduced investment is driven primarily by drilling and completion efficiencies realized year-to-date. In an effort to further optimize returns, the company has also elected to reallocate approximately $50 million of STACK capital to the Delaware and Powder River in the second half of 2019.