01—Abstract
Summary
Summary of the 10-K filed February 19, 2020. Cited figures are marked; the original filing is the authoritative source.
Devon Energy Corp. (DVN) reported its 2019 fiscal year-end results, highlighting a strategic shift towards a U.S. oil-focused portfolio.
The company successfully divested its Canadian assets for $2.6 billiona and announced the sale of its Barnett Shale assets for $770 million, sharpening its focus on core U.S. oil plays: the Delaware Basin, STACK, Powder River Basin, and Eagle Ford. This portfolio transformation is expected to improve production growth, price realizations, and field-level margins. Financially, Devon made significant strides in strengthening its balance sheet, reducing debt by $1.7 billion in 2019.
The company also returned capital to shareholders by increasing its quarterly dividend by 12.5%b and repurchasing a substantial amount of its common stock. Despite a net loss from continuing operations primarily due to divestiture-related charges and non-cash adjustments, the company demonstrated operational efficiency gains, reduced costs, and maintained a strong liquidity position with ample credit availability heading into 2020.
02—Key points
Key Highlights
- Completed transformation to a U.S. oil company with the sale of Canadian assets ($2.6 billion) and announcement of Barnett Shale divestiture ($770 million).
- Reduced consolidated debt by $1.7 billion in 2019, strengthening the balance sheet.
- Increased quarterly dividend by 12.5% and repurchased a significant amount of common stock, indicating a commitment to shareholder returns.
- Improved capital efficiency, reducing capital expenditures by approximately 10% while increasing oil production by 21% in 2019.
- Achieved annualized G&A savings of approximately $240 million through workforce reductions and other cost-saving initiatives.
- Ended 2019 with $1.8 billion in cash and $3.0 billion in available credit, demonstrating strong liquidity.
- Continued focus on operational efficiency and cost reduction to expand margins and drive higher-margin oil production.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Devon Energy Corp lost $0.06.
- Revenue$6.22B100.0%
- Cost of revenue−$2.81B45.2%
- Gross profit$3.41B54.8%
- Operating costs−$3.49B56.1%
- Operating income−$79.0M1.3%
- Interest, other & tax−$276.0M4.4%
- Net income−$355.0M5.7%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 19, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $6.22B$8.90B | −30.1% |
| Cost of Revenue | $2.81B$4.32B | −34.9% |
| Gross Profit | $3.41B$4.58B | −25.5% |
| Operating Income | -$79.00M$714.00M | −111.1% |
| Interest Expense | $260.00M$287.00M | −9.4% |
| Net Income | -$355.00M$3.06B | −111.6% |
| EPS (Basic) | $-0.89$6.14 | −114.5% |
| EPS (Diluted) | $-0.89$6.10 | −114.6% |
| Shares Outstanding (Basic) | 401.00M494.00M | −18.8% |
| Shares Outstanding (Diluted) | 401.00M497.00M | −19.3% |
05—Questions
Frequently Asked Questions
What were Devon Energy's major strategic moves in 2019?
In 2019, Devon Energy significantly reshaped its asset portfolio by selling substantially all of its Canadian oil and gas assets and operations for $2.6 billion and announcing the sale of its Barnett Shale assets for approximately $770 million. This strategic pivot aimed to concentrate on its four core U.S. oil plays: the Delaware Basin, STACK, Powder River Basin, and Eagle Ford.
How did Devon Energy manage its debt and return capital to shareholders?
Devon Energy strengthened its financial position by reducing its consolidated debt by $1.7 billion in 2019, primarily using proceeds from divestitures. The company also demonstrated its commitment to shareholder returns by increasing its quarterly cash dividend by 12.5% and actively repurchasing its common stock, utilizing $4.8 billion of its $5.0 billion repurchase authorization by the end of 2019.
What is the company's outlook and strategy for 2020?
For 2020, Devon Energy plans to invest approximately $1.7 billion to $1.85 billion, with over half allocated to the Delaware Basin. The strategy focuses on capital efficiency, disciplined capital allocation, growing higher-margin oil production (targeting 7.5% to 9.0% U.S. oil growth), funding dividends, and returning excess cash to shareholders. The company aims to maintain its cost structure improvements and capital discipline throughout the year.
What were the main drivers of the company's financial performance in 2019 compared to 2018?
In 2019, Devon Energy reported a net loss from continuing operations of $79 million, a decrease from the $714 million net earnings in 2018. This shift was largely impacted by divestiture-related costs and non-cash items, including a $0.6 billion asset impairment related to the Barnett Shale disposition and a $0.4 billion hedge valuation loss. While production volumes increased by 11%, lower commodity prices (WTI, Henry Hub, and Mont Belvieu indices) negatively impacted realized prices, contributing to the decrease in earnings.
06—Continue