A month has gone by since the last earnings report for Devon Energy Corporation (DVN). Shares have lost about 7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Devon Energy Beats on Q4 Earnings, Gives '17 View
Devon Energy reported fourth-quarter 2016 adjusted earnings per share of $0.25, beating the Zacks Consensus Estimate of $0.19 by 31.6%. Quarterly earnings, however, dropped 67.5% from the year-ago tally of $0.77.
On a GAAP basis, the company reported earnings of $0.63 per share, while the year-ago quarter figure reflected a loss of $11.12. The difference between operating and GAAP figures in the reported quarter was due to asset impairment of $0.19, gain of $0.87 on asset sales, deferred tax valuation allowance of $0.03, early retirement of debt charges of $0.22 and foreign currency adjustments of $0.11.
Revenues
Devon Energy’s quarterly revenues of $3,350 surpassed the Zacks Consensus Estimate of $2,770 million by 20.9%. Total revenue was also up 16.1% from the year-ago figure of $2,886 million.
Revenues for the full-year 2016 came in at $12,197 million, beating the Zacks Consensus Estimate of $11,010 billion by 10.8%. Yearly revenues, however, dropped 7.2% from the year-ago figure of $13,145 million.
Highlights of the Release
In the fourth quarter of 2016, total production touched 537,000 Boe per day, down 21.2% year over year, taking in to account the divested assets production was down 10.6% year over year
At the field level, the company is effectively controlling costs. Thanks to its initiatives, lease operating expenses (LOE) were down 23.4% year over year to $367 million. The decline in LOE was primarily due to improved power and water-handling infrastructure, declining labor expense and lower supply chain cost.
Operating income in the reported quarter was $637 million. In the year-ago quarter, the company had incurred operating loss of $5,425 million.
Realized Prices
Realized oil prices in the quarter were $34.90 per barrel, down 35% from $53.67 per barrel in the year-ago quarter. Realized prices for natural gas were down 9% to $2.23 per thousand cubic feet (Mcf) from $2.45 in the year-ago quarter. Total realized prices in the fourth quarter, including cash settlements, were $23.17 per boe, down 21.3% year over year due to lower commodities prices.
Financial Health
As of Dec 31, 2016, the company had a cash balance of $1,959 million, down from $2,310 million as of Dec 31, 2015.
Long-term debt as of Dec 31, 2016 was $10,154 million, compared with $12,056 million as of Dec 31, 2015. The company used divesture proceeds to repay debts and strengthen its balance sheet.
Devon Energy’s cash flow from operating activities in fourth-quarter 2016 was $536 million, compared with $1,071 million in the year ago quarter. Capital expenditure was $671 million, lower than $1,079 million a year ago.
Guidance
Devon Energy estimates total production from its assets in the first quarter of 2017 and full-year 2017 to be in the range of 535,000–555,000 boe per day and 539,000–561,000 boe per day, respectively.
Capital expenditure (capex) in the first quarter of 2017 and full-year 2017 is expected to be in the range of $525–$595 million and $2,285–$2,690 million, respectively.
Devon Energy further has provided its 2017 first-quarter and full-year LOE outlook in the range of $350–$400 million and $1,500–$1,600 million, respectively.