Devon Energy unveils plan to reward its shareholders
Oil production will grow by more than 25 percent per year in Devon Energy Corp.’s two largest oil fields while the company generates $2.5 billion in cumulative free cash flow, according to a three-year outlook the company unveiled Tuesday.
The forecast also calls for Devon to generate a rate of return of more than 15 percent and sell up to $5 billion in noncore assets by 2020. Devon executives said the plan positions the company for a sustainable increase of cash to shareholders.
“Devon has reached an inflection point by building operating momentum across its U.S. resource plays and has successfully transitioned these world-class assets into full-field development,” CEO Dave Hager said in a statement.
“With our disciplined multiyear plan, Devon will accelerate value creation through the pursuit of capital-efficient, cash-flow growth and portfolio simplification, not top-line production growth.”
The plan calls for the company to repay up to $1.5 billion of debt. Executives then would “return excess cash flow from operations or divestitures to shareholders through both opportunistic share buybacks and dividend growth,” the company said.
Devon’s drilling efforts will continue to center on northwest Oklahoma’s STACK field and the Delaware Basin in southeast New Mexico and west Texas. The plan is designed to generate “substantial amounts of free cash flow” at domestic benchmark West Texas Intermediate crude oil prices of more than $50 a barrel, the company said.
West Texas Intermediate crude oil closed at $61.90 a barrel Tuesday.
For 2018, Devon
executives said the company will spend between $2.2 billion and $2.4 billion on capital expenditures. The budget is designed to boost U.S. production growth by 14 percent in 2018.
2017 production figures, earnings
Production in Devon's top two fields already has increased to 195,000 barrels of oil equivalent per day so far in the first quarter, up 10 percent from the fourth quarter of 2017 and up 20 percent from the full-year 2017 average, the
company said.
Overall, Devon produced 548,000 oil-equivalent barrels per day in the fourth quarter, including 246,000 barrels per day of oil, up from total production of 537,000 equivalent barrels per day and oil production of 244,000 barrels per day.
Devon's fourth-quarter production was limited by about 9,000 barrels a day because of the timing of well tie-ins from non-operated wells in the STACK, the company said.
Devon received an average price of $42.21 per barrel of oil and $2.48 per thousand cubic feet of natural gas in the fourth quarter, up from $34.90 oil and $2.23 natural gas in
the year-ago period.
Also on Tuesday, Devon executives said the company generated a profit of $183 million, or 35 cents a share in the fourth quarter, down from $207 million, or 41 cents a share in the fourth quarter of 2016. Revenues increased to $3.98 billion, up from $2.81 billion one year ago.
Adjusting for one-time items, Devon reported core earnings of $199 million, or 38 cents a share.
For the full year, Devon posted a profit of $898 million compared to a loss of $1.06 billion one year ago. Revenues were $13.9 billion, up from $10.3 million in 2016.
Devon ended 2017 with $2.7 billion in cash on hand and net debt of $7.7 billion.