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Analyzing Devon Energy's Performance in 2Q17

PART:
1 2 3 4 5 6 7 8
Part 3
Analyzing Devon Energy's Performance in 2Q17 PART 3 OF 8

Devon Energy Didn’t Achieve Sequential Production Growth

Production beat

For 2Q17, Devon Energy (DVN) reported total production of 536 Mboepd (thousand barrels of oil equivalent per day), which is above the mid-point of its 2Q17 production guidance range of 519 Mboepd–540 Mboepd. According to Devon Energy’s 2Q17 press release, the company attributed its better-than-expected production to “operational momentum in our U.S. resource plays and accelerating efficiency gains across our portfolio.” Also, the record-setting well results across US resource plays helped Devon Energy beat its US oil production guidance.

Devon Energy Didn&#8217;t Achieve Sequential Production Growth

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Production growth

Sequentially, Devon Energy’s 2Q17 production is ~5% lower compared to its 1Q17 production of 563 Mboepd. On a YoY (year-over-year) basis, Devon Energy’s 2Q17 production is ~17% lower compared to its 2Q16 production of 644 Mboepd. Devon Energy’s steep decline in YoY production can be attributed to its non-core assets divestiture program. It sold non-core upstream assets that were producing ~73 Mboepd. Devon Energy sold the assets in 2Q16 and 3Q16.

According to Devon Energy’s 4Q16 earnings press release in February 2017, it expected that 4Q16 production of 537 Mboepd would mark a low point. However, its 2Q17 production was below that level.

Devon Energy’s peer ConocoPhillips (COP) reported total production of 1,425 MBoepd in 2Q17, which ~8% lower compared to its 1Q16 production of 1,546 Mboepd.

2Q17 production

For 2Q17, Devon Energy reported crude oil and bitumen production of 238 thousand barrels per day, natural gas liquids production of 97 thousand barrels per day, and natural gas production of 1,208 MMcf (million cubic feet) per day. Compared to 2Q16, Devon Energy’s crude oil and bitumen production fell ~8%, natural gas liquids production fell ~26%, and natural gas production fell ~21%, respectively. According to Devon Energy’s 2Q17 operations report, oil (crude oil and bitumen) is its highest margin product.

Production guidance

Devon Energy plans to accelerate the growth in its high margin oil production in 2017. In 2017, Devon Energy expects to drive its crude oil (USO) production growth by 13%–17% compared to 4Q16. For fiscal 2017, Devon Energy expects its total production volume to be 539 Mboepd–561 Mboepd.

For 3Q17, Devon Energy expects its total production volume to be 526 Mboepd–546 Mboepd.

In the next part, we’ll look at how Devon Energy’s lower production impacted its operating cash flow and free cash flow.

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