10-QPeriod: Q2 FY2021

DEVON ENERGY CORP/DE Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 4, 2021For Securities:DVN

Summary

Devon Energy Corp. reported strong financial results for the second quarter and the first six months of 2021, largely driven by the successful completion of its merger with WPX Energy in January 2021. The company saw a significant increase in total revenues, primarily due to higher oil, gas, and NGL sales, reflecting improved commodity prices and increased production volumes, particularly from the Delaware Basin. Net earnings have swung from a substantial loss in the prior year period to a significant profit, demonstrating the positive impact of the merger and the recovery in energy markets. Cash flow from operations has also seen a dramatic improvement, enabling the company to repay debt and return capital to shareholders through dividends. Devon's liquidity remains strong, with substantial cash on hand and ample borrowing capacity.

Financial Highlights

44 data points
Beta

Revenue

$2.42B

Net Income

$256.00M

10.6% Net Margin

EPS (Diluted)

$0.38

Total Assets

$20.07B

Cash & Equivalents

$1.35B

Free Cash Flow

$589.00M

Financial Statements
Beta
Revenue$2.42B
Operating Income$477.00M
Interest Expense$98.00M
Net Income$256.00M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)671.00M
Shares Outstanding (Diluted)673.00M

Key Highlights

  • 1Net earnings for the six months ended June 30, 2021, were $477 million, a significant turnaround from a net loss of $2.48 billion in the same period of 2020.
  • 2Total revenues for the six months ended June 30, 2021, were $4.47 billion, up from $2.48 billion in the prior year period, driven by increased oil, gas, and NGL sales.
  • 3The company generated $1.69 billion in cash flow from operating activities for the first six months of 2021, compared to $679 million in the same period of 2020.
  • 4Following the merger with WPX Energy, which closed on January 7, 2021, Devon has focused on a cash-return business model, including a fixed plus variable dividend strategy.
  • 5Devon repaid approximately $1.2 billion of senior notes in the first half of 2021, strengthening its balance sheet.
  • 6Production volumes, particularly in the Delaware Basin, saw substantial increases, with combined production (MBoe/d) rising 58% year-over-year for the first six months.
  • 7The company exited the second quarter of 2021 with $1.5 billion in cash and $3.0 billion in available credit, indicating strong liquidity.

Frequently Asked Questions

The merger with WPX Energy, completed on January 7, 2021, significantly boosted Devon's financial performance. This is evident in the substantial increase in revenues, production volumes (especially from WPX's former assets in the Delaware and Williston Basins), and a sharp swing from a net loss in the prior year to a net profit. The merger also contributed to increased operating cash flow and enabled debt reduction.

Devon has shown a remarkable recovery in profitability. For the six months ended June 30, 2021, the company reported net earnings of $477 million, a dramatic improvement from a net loss of $2.48 billion in the same period of 2020. This turnaround is attributed to higher commodity prices, increased production volumes, and cost synergies from the WPX merger.

Devon has adopted a 'fixed plus variable' dividend strategy. The fixed dividend is currently $0.11 per share quarterly, with the company targeting approximately 10% of operating cash flow for this component. Additionally, a variable dividend may be paid out, up to 50% of excess free cash flow. In the third quarter of 2021, Devon announced a total dividend of $0.49 per share, comprising a fixed portion of $0.11 and a variable portion of $0.38.

Devon is actively managing its debt and maintaining strong liquidity. In the first six months of 2021, the company redeemed approximately $1.2 billion of senior notes. As of June 30, 2021, Devon had $1.5 billion in cash and cash equivalents and $3.0 billion of available credit under its Senior Credit Facility, with no debt maturities until August 2023, indicating a healthy financial position.