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Point72 Asset Management Lowers Its Stake in Devon Energy

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Point72 Asset Management and Devon Energy 

Point72 lowered its stake in Devon Energy (DVN) by selling 1,664,900 shares. The fund held 1,044,900 Devon Energy shares. It accounted for 0.45% of the fund’s total 4Q14 portfolio.

Devon Energy is part of the Energy Select Sector SPDR Fund (XLE). It accounts for 1.69% of XLE. It also accounts for 4.35% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

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About Devon Energy

Devon Energy is a leading independent energy company. It’s engaged primarily in the exploration, development, and production of oil, natural gas, and NGLs (natural gas liquids). Devon produces over 1.6 billion cubic feet of natural gas per day. It produces more than 130,000 barrels of NGLs per day. As of December 31, 2014, Devon had proved reserves of 2.8 billion barrels of oil equivalent.

In 2014, it combined all of its US midstream assets with Crosstex Energy (XTXI) and Crosstex Energy LP (XTEX) to form a leading integrated midstream business. This midstream business focuses on providing gathering, transmission, processing, fractionation, and marketing to NGL, crude oil, and condensate producers. Devon also has majority ownership in EnLink Midstream Partners LP (ENLK) and EnLink Midstream LLC (ENLC).

Devon started operations as a natural gas producer. However, with the number of acquisitions, the company is shifting its focus to oil.

Devon’s “exceptional” fourth quarter production

For 4Q14, Devon Energy reported a net loss of $408 million, or $1.01 per share—compared to a profit of $207 million, or $0.51 per share, in 4Q13. It includes non-cash goodwill impairment charges of $1.9 billion. The charges are related to the acquisition of “conventional gas assets in Canada, that Devon no longer owns. This non-cash impairment was related to the recent drop in oil prices.” Its revenue was $6 billion—compared to $2.62 billion in 4Q13.

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During 4Q14, total production increased 20% YoY (year-over-year) to 664,000 barrels of oil equivalent per day. It exceeded the company’s guidance range by 9,000 barrels of oil equivalent per day. It was driven by a 48% YoY increase in oil production. Oil production was 239,000 barrels per day, or bpd. It exceeded the top range of the guidance. The significant growth came from Eagle Ford Shale assets.

For full-year 2014, the net earnings were $1.6 billion, or $3.93 per share—compared to a net loss of $20 million, or $0.06 per share, in 2013.

On March 5, Devon Energy declared a 2Q15 dividend of 0.24 per share.

Decline in capital spending

Devon Energy decreased its E&P (exploration and production) budget by 20%. Amid the decline in oil prices, many oil companies reduced their spending for 2015. Devon Energy expects to increase oil production by 20%–25% in 2015.

In the next part of this series, we’ll discuss Point72’s position change in Valeant Pharmaceuticals.

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