10-QPeriod: Q3 FY2020

DEVON ENERGY CORP/DE Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:DVN

Summary

Devon Energy Corp./DE (DVN) filed its 10-Q for the period ending September 30, 2020, reporting a net loss attributable to Devon of $92 million for the third quarter of 2020, a significant improvement from the $109 million net loss in the same period last year. This turnaround, despite a challenging economic environment marked by the COVID-19 pandemic and volatile commodity prices, highlights the company's resilience and strategic adjustments. The company has been actively divesting non-core assets, notably completing the sale of its Barnett Shale assets on October 1, 2020, which is expected to improve its financial position and focus. Financially, the company experienced a substantial asset impairment charge of $2.7 billion in the first quarter of 2020, largely due to the commodity price downturn. However, for the nine months ended September 30, 2020, total revenues were $3.5 billion, down from $4.6 billion in the prior year, reflecting the impact of lower commodity prices. Despite these headwinds, Devon has maintained a strong liquidity position with $4.9 billion in liquidity at the end of the third quarter, including $1.9 billion in cash. The company also announced a significant strategic development: an all-stock merger of equals with WPX Energy, expected to close in the first quarter of 2021, aiming to create a leading unconventional oil producer with enhanced shareholder returns.

Financial Highlights

43 data points
Beta

Revenue

$1.07B

Net Income

-$92.00M

-8.6% Net Margin

EPS (Diluted)

$-0.25

Total Assets

$10.33B

Cash & Equivalents

$1.71B

Free Cash Flow

$223.00M

Financial Statements
Beta
Revenue$1.07B
Operating Income-$2.47B
Interest Expense$65.00M
Net Income-$92.00M
EPS (Basic)$-0.25
EPS (Diluted)$-0.25
Shares Outstanding (Basic)377.00M
Shares Outstanding (Diluted)377.00M

Key Highlights

  • 1Reported a net loss of $92 million for Q3 2020, an improvement from the prior year's comparable period.
  • 2Completed the sale of Barnett Shale assets on October 1, 2020, for $490 million plus contingent payments.
  • 3Recorded a substantial asset impairment charge of $2.7 billion in Q1 2020 due to commodity price volatility.
  • 4Announced an all-stock merger of equals with WPX Energy, expected to close in Q1 2021, to form a larger, more efficient entity.
  • 5Maintained strong liquidity, ending Q3 2020 with $4.9 billion, including $1.9 billion in cash.
  • 6Operating cash flow for the first nine months of 2020 was $1.1 billion, supporting capital expenditures and dividends.
  • 7Reduced capital expenditures by 45% for 2020 compared to the original budget due to the challenging macro-economic environment.

Frequently Asked Questions

In Q3 2020, Devon Energy reported a net loss of $92 million ($0.25 per share), compared to a net earning of $109 million ($0.27 per share) in Q3 2019. While this represents a net loss in the current quarter, the company experienced significant asset impairments and divestitures impacting the year-over-year comparison. The company's revenue for Q3 2020 was $1,067 million, down from $1,746 million in Q3 2019.

The announced all-stock merger of equals with WPX Energy is a significant strategic move expected to create a leading unconventional oil producer in the U.S. It aims to accelerate Devon's transition to a cash-return business model, enhance operational and corporate synergies, and potentially lead to reduced financing costs and improved shareholder returns through a fixed plus variable dividend strategy.

The COVID-19 pandemic significantly impacted Devon Energy by causing unprecedented volatility and a material decline in commodity prices in early 2020. This led to a swift and sharp drop in oil and gas prices, which in turn necessitated a reduction in capital investment by 45% for 2020. The pandemic also contributed to a significant asset impairment charge of $2.7 billion in Q1 2020. The company has implemented safety measures to protect its workforce and ensure business continuity.

Devon Energy has been actively divesting non-core assets. The company completed the sale of its Barnett Shale assets on October 1, 2020, for $490 million in net proceeds, with potential for up to $260 million in contingent earnout payments. In 2019, the company completed the sale of its Canadian operations for $2.6 billion. These divestitures are part of a strategy to streamline operations and focus on core assets.