10-QPeriod: Q1 FY2020

DEVON ENERGY CORP/DE Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 6, 2020For Securities:DVN

Summary

Devon Energy Corp. (DVN) reported a significant net loss of $1.816 billion for the first quarter of 2020, a substantial increase from the $317 million loss in the same period of 2019. This widened loss was primarily driven by a massive $2.67 billion asset impairment charge recognized in the current quarter, largely attributed to the severe downturn in commodity prices caused by the COVID-19 pandemic. Total revenues also saw a significant increase, more than doubling to $2.087 billion from $1.079 billion year-over-year, driven by higher upstream revenues. However, this was overshadowed by a surge in total expenses, which more than doubled to $4.194 billion due to the aforementioned impairments. In response to the unprecedented market volatility, Devon implemented significant cost-saving measures, including a 45% reduction in its 2020 capital expenditure outlook. The company also temporarily suspended its share repurchase program to preserve liquidity. Despite the challenging market conditions, Devon maintained substantial liquidity with $1.7 billion in cash and $3.0 billion in available credit, and no significant debt maturities until 2025. The company's strategic focus remains on protecting financial strength and delivering shareholder value amidst the ongoing economic uncertainty.

Financial Highlights

45 data points
Beta

Revenue

$2.09B

72.3% Gross Margin

Net Income

-$1.82B

-87.0% Net Margin

EPS (Diluted)

$-4.82

Total Assets

$11.14B

Cash & Equivalents

$1.53B

Free Cash Flow

$104.00M

Financial Statements
Beta
Revenue$2.09B
Cost of Revenue$578.00M
Gross Profit$1.51B
Operating Income-$1.69B
Interest Expense$65.00M
Net Income-$1.82B
EPS (Basic)$-4.82
EPS (Diluted)$-4.82
Shares Outstanding (Basic)377.00M
Shares Outstanding (Diluted)377.00M

Key Highlights

  • 1Reported a substantial net loss of $1.816 billion for Q1 2020, compared to a $317 million loss in Q1 2019.
  • 2Recognized a significant asset impairment charge of $2.67 billion in Q1 2020 due to the sharp decline in commodity prices driven by the COVID-19 pandemic.
  • 3Total revenues more than doubled to $2.087 billion from $1.079 billion year-over-year, largely due to increased upstream revenues.
  • 4Total expenses more than doubled to $4.194 billion, primarily driven by the large asset impairment.
  • 5Reduced 2020 capital expenditure outlook by 45% and temporarily suspended share repurchases to preserve liquidity.
  • 6Maintained robust liquidity with $1.7 billion in cash and $3.0 billion in available credit.
  • 7The company is actively managing its production and hedging strategies to navigate the volatile commodity price environment.

Frequently Asked Questions

The primary driver for the significant net loss of $1.816 billion in the first quarter of 2020 was a substantial asset impairment charge of approximately $2.67 billion. This impairment was a direct consequence of the severe downturn in oil and gas commodity prices, exacerbated by the COVID-19 pandemic and related market volatility.

Devon Energy has implemented several measures to address the volatile market. These include a significant reduction in its 2020 capital expenditure budget (by 45%), temporary suspension of its share repurchase program to preserve liquidity, evaluation and shut-in of marginal wells, and continued hedging of its production to mitigate downside price risk.

Despite the net loss, Devon maintained a strong liquidity position with $1.7 billion in cash and $3.0 billion in available credit capacity under its Senior Credit Facility as of March 31, 2020. The company also has no significant debt maturities until the end of 2025, providing a stable debt outlook.

Yes, the results reflect discontinued operations related to the Canadian business sold in June 2019 and the Barnett Shale assets, for which a sale agreement was amended in April 2020 with an expected closing date of December 31, 2020. The ongoing sale of Barnett Shale assets resulted in an incremental asset impairment of $179 million in Q1 2020 due to amended terms.