Devon's (DVN) Q4 Earnings Lag Estimates, Expands Reserves

Devon Energy Corp. (NYSE:DVN) reported fourth-quarter 2017 adjusted earnings per share of 38 cents, lagging the Zacks Consensus Estimate of 60 cents by 36.7%.

On a GAAP basis, the company reported earnings of 35 cents per share, down from the year-ago quarter’s earnings of 41 cents. The difference between operating and GAAP figures in the reported quarter was due to a gain from tax reforms and restructuring, while asset impairment charges and deferred tax asset valuation allowance offset the gains.

Devon Energy Corporation Price, Consensus and EPS Surprise

Devon Energy Corporation Price, Consensus and EPS Surprise | Devon Energy Corporation Quote

Revenues

Devon’s quarterly revenues of $3,983 million surpassed the Zacks Consensus Estimate of $3,499 million by 13.8%. Total revenues were up 41.8% from the year-ago figure of $2,808 million.

This year-over-year improvement in total revenues were primarily due to strong contribution from its Upstream business, and Marketing and midstream businesses.

Highlights of the Release

In the fourth quarter of 2017, total production touched 548,000 barrels of oil equivalent (Boe) per day. The actual production was lower than the expected range of 551,000-571,000 Boe per day. In the quarter, net production in the United States was limited by nearly 9,000 barrels per day primarily due to the timing of well tie-ins associated with non-operated activity in the STACK.

Devon’s midstream business generated operating profits of $272 million, expanding 35% year to date. This growth was driven entirely by Devon’s strategic investment in EnLink Midstream.

The company, through its successful drilling initiatives has expanded its 2017 proved reserves by 5% to 2.2 billion Boe. Liquid reserves in 2017 increased to 1.2 billion Boe, driven by a 32% increase in U.S. oil reserves.

Realized Prices

Realized oil prices in the quarter were $42.21 per barrel, up 20.9% from $34.90 per barrel in the year-ago quarter. Realized prices for natural gas were up 11.2% to $2.48 per thousand cubic feet (Mcf) from $2.23 per Mcf in the prior-year quarter.

Total realized prices, including cash settlements, were $27.78 per Boe, up 19.9% year over year due to higher prices of commodities.

Financial Health

As of Dec 31, the company generated cash and cash equivalents of $2,673 million, up from $1,959 million as of Dec 31, 2016. Long-term debt was $10,291 million compared with $10,154 million as of Dec 31, 2016.

Devon’s cash flow from operating activities in fourth-quarter 2017 was $725 million compared with $468 million in the year-ago quarter. Capital expenditure was $799 million, higher than $593 million from the prior-year quarter.

Guidance

Devon estimates total production from its assets in the first quarter of 2018 in the range of 530,000-554,000 Boe per day. Full-year production is expected in the range of 552,000-576,000 Boe per day.

Capital expenditure (capex) in the first quarter of 2018 is anticipated within $585-$700 million. 2018 capex is expected in the range of $2.33-$2.61 billion.

Devon expects its U.S. oil production for 2018 to be 25% higher than the 2017 level, driven by strong contributions from its resource-rich assets.

Devon’s Exploration & Production capital program in 2018 is expected to range within $2.2 billion to $2.3 billion.

Peer Releases

Anadarko Petroleum Corporation (NYSE:APC) reported fourth-quarter 2017 earnings of 18 cents per share, beating the Zacks Consensus Estimate of 3 cents by a whopping 500%.

Noble Energy, Inc. (NYSE:NBL) incurred adjusted earnings of 32 cents per share for the fourth quarter of 2017, beating the Zacks Consensus Estimate of 4 cents by a whopping 700%.

Occidental Petroleum Corp. (NYSE:OXY) reported fourth-quarter 2017 earnings of 41 cents per share, beating the Zacks Consensus Estimate by a penny.

Zacks Rank

Devon has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>