What Is Devon Energy’s 2016 Guidance?



Devon’s operational highlights

Devon Energy’s (DVN) net production volume from its core assets in fiscal 2015 was 560 Mboe/d (thousand barrels of oil equivalent per day). This represents a ~15% year-over-year growth. DVN’s 4Q15 net production volume from core assets was 571 Mboe/d. This represents a ~7% year-over-year growth.

Oil production from core assets in 4Q15 was ~247 Mboe/d, representing a year-over-year growth of 26%. Going forward, Devon plans to direct its investments toward these “core assets.”

The formerly gas-heavy producer has been ramping up its oil production, which has driven its overall production. Oil production growth in 4Q15 was driven by growth in the Delaware Basin and Rockies in the US and the Jackfish 3 project in Canada.

DVN’s fiscal 2016 production from core assets is estimated to be between 516 and 540 Mboe/d. These lower levels compared to fiscal 2015 production will be driven by lower gas volumes. Exploration and production (E&P) capex in 2016 is estimated to be 75% lower than the 2015 E&P capex.

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Devon’s cost guidance

Devon’s field-level operating costs including lease operating expenses (or LOE) and production tax declined by 20% in 4Q15 versus 4Q14. DVN’s 4Q15 LOE, which make up a large chunk of its field-level operating costs, decreased by 18% on a per-unit basis versus 4Q14. DVN expects field-level costs to decline by an incremental $300 million to $400 million in fiscal 2016.

Many upstream companies have been taking similar steps to reduce production costs and capex in response to lower energy prices. Newfield Exploration (NFX) expects its LOE to be 25% lower in 2015 versus 2014. Apache’s (APA) LOE was down 18% in 3Q15 versus 3Q14. ConocoPhillips’ (COP) operating cost guidance for 2016 is 12.5% lower versus 2015. These companies make up ~7% of the Energy Select Sector SPDR ETF (XLE).


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