10-KPeriod: FY2019

DEVON ENERGY CORP/DE Annual Report, Year Ended Dec 31, 2019

Filed February 19, 2020For Securities:DVN

Summary

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 billion 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% 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.

Financial Highlights

45 data points
Beta

Revenue

$6.22B

54.8% Gross Margin

Net Income

-$355.00M

-5.7% Net Margin

EPS (Diluted)

$-0.89

Total Assets

$13.72B

Cash & Equivalents

$1.46B

Free Cash Flow

$2.01B

Financial Statements
Beta
Revenue$6.22B
Cost of Revenue$2.81B
Gross Profit$3.41B
Operating Income-$79.00M
Interest Expense$260.00M
Net Income-$355.00M
EPS (Basic)$-0.89
EPS (Diluted)$-0.89
Shares Outstanding (Basic)401.00M
Shares Outstanding (Diluted)401.00M

Key Highlights

  • 1Completed transformation to a U.S. oil company with the sale of Canadian assets ($2.6 billion) and announcement of Barnett Shale divestiture ($770 million).
  • 2Reduced consolidated debt by $1.7 billion in 2019, strengthening the balance sheet.
  • 3Increased quarterly dividend by 12.5% and repurchased a significant amount of common stock, indicating a commitment to shareholder returns.
  • 4Improved capital efficiency, reducing capital expenditures by approximately 10% while increasing oil production by 21% in 2019.
  • 5Achieved annualized G&A savings of approximately $240 million through workforce reductions and other cost-saving initiatives.
  • 6Ended 2019 with $1.8 billion in cash and $3.0 billion in available credit, demonstrating strong liquidity.
  • 7Continued focus on operational efficiency and cost reduction to expand margins and drive higher-margin oil production.

Frequently Asked Questions

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.

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.

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.

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.