Chart in Focus: Devon Energy’s Realized Price Effectiveness
Devon Energy’s realized price effectiveness
Realized price effectiveness tells us that Devon Energy’s (DVN) realized price for 1Q17, without hedging benefit, was ~68% above its production cash cost and ~13% above its total production cost for the same quarter.
Sequentially, DVN’s 1Q17 realized price effectiveness in terms of cash cost increased from ~26% in 4Q16 to ~68% in 1Q17. This higher realized price effectiveness in terms of cash cost can be attributed to the ~10% sequential increase in DVN’s 1Q17 total realized price.
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Realized price effectiveness
Realized price effectiveness is defined as the excess or shortfall of the realized price to the cost item, scaled by cost item.
In 1Q17, DVN’s peer Diamondback Energy (FANG) reported realized price effectiveness in terms of production cash cost of ~350%. Diamondback Energy operates in the Permian Basin.
Realized price = Oil and gas revenue scaled by total production
Production cash cost = LOE (lease operating expenses) + production and ad valorem taxes + transportation expenses + G&A (general and administration) cash expenses + interest cash expenses
Total production cost = Cash cost + DD&A (depletion, depreciation and amortization)