On November 5, 2024, Devon Energy Corp (DVN, Financial) released its 8-K filing detailing the financial and operational results for the third quarter of 2024. Devon Energy, a prominent oil and gas producer with significant operations in the Permian Basin and other key U.S. shale plays, reported net earnings of $812 million, or $1.30 per diluted share. However, when adjusted for items typically excluded by analysts, core earnings were $683 million, or $1.10 per diluted share, falling short of the analyst estimate of $1.26 per share.
Operational Highlights and Challenges
Devon Energy's production in the third quarter averaged 728,000 barrels of oil equivalent (Boe) per day, a 3% increase from the previous quarter. This growth was primarily driven by the Delaware Basin, which accounted for 67% of the company's total volumes. The company placed 108 gross operated wells online, with an average lateral length of 10,000 feet, contributing to the production increase.
Despite the production growth, Devon faced challenges with lower realized prices, averaging $40.71 per Boe compared to $44.29 in the prior quarter. This decline was attributed to reduced crude and natural gas liquids benchmark pricing and regional gas price differentials in the Delaware Basin due to infrastructure constraints.
Financial Achievements and Strategic Moves
Devon Energy generated $1.7 billion in operating cash flow, marking an 8% increase from the previous quarter, and achieved $786 million in free cash flow. The company utilized this cash flow to retire $472 million of debt and fund its acquisition of Grayson Mill Energy, which is expected to enhance its asset portfolio and production capabilities.
Devon's strategic acquisition of Grayson Mill Energy, completed on September 27, 2024, added 307,000 net acres and 500 undrilled gross locations in the Williston Basin, positioning the company for future growth. This acquisition is anticipated to contribute significantly to Devon's production in the fourth quarter and beyond.
Income Statement and Balance Sheet Insights
Devon's upstream revenues for the third quarter totaled $2.7 billion. The company's production costs, including taxes, averaged $11.39 per Boe, a 7% decrease from the previous period, driven by more efficient operations and lower lease operating expenses.
Devon's financial position remains robust, with investment-grade credit ratings and cash balances of $676 million. The company's outstanding debt stood at $8.9 billion, with a net debt-to-EBITDAX ratio of 1.1 times, reflecting a strong balance sheet.
Return of Capital and Future Outlook
Devon declared a fixed quarterly cash dividend of $0.22 per share, payable on December 30, 2024. The company also repurchased $295 million of common stock during the quarter, continuing its commitment to returning capital to shareholders.
Looking ahead, Devon has revised its fourth-quarter production forecast higher, expecting a range of 811,000 to 830,000 Boe per day, driven by the Grayson Mill acquisition. The company plans to focus on strengthening its balance sheet and maintaining capital discipline in the face of fluctuating commodity prices.
“Devon delivered another quarter of strong operational and financial results, showcasing the strength of our disciplined strategy,” said Rick Muncrief, president and CEO. “The Delaware Basin continues to be a great contributor to our success.”
Devon Energy's strategic moves and operational efficiencies position it well for future growth, despite current market challenges. Investors and stakeholders will be keenly watching how the company navigates the evolving energy landscape and capitalizes on its recent acquisitions.
Explore the complete 8-K earnings release (here) from Devon Energy Corp for further details.
