10-QPeriod: Q1 FY2017

DEVON ENERGY CORP/DE Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 3, 2017For Securities:DVN

Summary

Devon Energy Corporation's Q1 2017 filing shows a significant financial recovery compared to the prior year, driven by a substantial increase in commodity prices and improved operational efficiency. The company reported net earnings of $565 million, a stark contrast to the $3.06 billion loss in Q1 2016. This turnaround was supported by a nearly 95% increase in realized prices per barrel of oil equivalent (Boe), coupled with a 18% reduction in total production volumes, indicating a strategic focus on higher-margin assets and cost control. Operational highlights include a 17% sequential quarter growth in U.S. oil production, particularly in the STACK and Delaware Basin areas. The company also continues to refine its strategy by announcing its intent to divest approximately $1 billion in non-core upstream assets, aiming to accelerate the transition to higher-margin production and strengthen its financial position. Devon's liquidity remains strong, supported by a healthy cash balance and credit facility, with no significant debt maturities until 2021. Management expresses confidence in its financial capacity to invest in its core resource plays and maintain its investment-grade credit ratings.

Financial Highlights

44 data points
Beta

Revenue

$2.40B

Net Income

$303.00M

12.6% Net Margin

EPS (Diluted)

$0.58

Total Assets

$28.64B

Cash & Equivalents

$2.12B

Free Cash Flow

$726.00M

Financial Statements
Beta
Revenue$2.40B
Operating Expenses$2.84B
Operating Income$706.00M
Net Income$303.00M
EPS (Basic)$0.58
EPS (Diluted)$0.58
Shares Outstanding (Basic)519.00M
Shares Outstanding (Diluted)522.00M

Key Highlights

  • 1Significant financial turnaround with net earnings of $565 million in Q1 2017, compared to a net loss of $3.06 billion in Q1 2016.
  • 2Commodity prices saw a substantial increase, with realized prices per Boe jumping by 95% year-over-year, significantly boosting revenues.
  • 3Total production decreased by 18% year-over-year, reflecting a strategic shift towards higher-margin assets and improved capital efficiency.
  • 4Announced intent to divest approximately $1 billion of non-core upstream assets to focus on higher-margin production and strengthen financial position.
  • 5Strong operating cash flow generation ($834 million) funded capital expenditures, indicating improved operational performance.
  • 6Maintained strong liquidity with approximately $5.1 billion in cash and credit facility capacity, and no significant debt maturities until 2021.
  • 7Investment-grade credit ratings from major agencies (BBB from S&P, BBB+ from Fitch, Ba1 from Moody's) were affirmed or upgraded.

Frequently Asked Questions

The primary driver is the significant increase in commodity prices, particularly for oil and natural gas. This led to a nearly 95% rise in realized prices per barrel of oil equivalent (Boe), substantially boosting revenues and turning a large loss into a significant profit.

Devon Energy has strategically reduced its total production by 18% year-over-year. This is in line with their focus on capital efficiency and a shift towards higher-margin production assets, as evidenced by the 17% sequential quarter growth in U.S. oil production in key plays like STACK and Delaware Basin.

Devon Energy announced its intention to divest approximately $1 billion of non-core upstream assets, primarily in the Barnett Shale. The proceeds from these divestitures are planned to be reinvested in their core U.S. resource plays and used to strengthen their investment-grade financial position, accelerating their transition to higher-margin production.

Devon Energy has a strong liquidity position, with approximately $5.1 billion in cash and available credit facility capacity. Total debt has decreased by 17% year-over-year. The company has no significant debt maturities until 2021 and maintains investment-grade credit ratings, indicating financial stability and flexibility.