uploads///DVN Q Cash Flows

Analyzing Devon Energy’s Free Cash Flow Trends

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Apr. 20 2016, Updated 1:04 p.m. ET

Devon Energy’s revenues and operating cash flows

In 4Q15, Devon Energy’s (DVN) total operating revenue was ~$2.9 billion, ~52% lower compared to 4Q14. DVN’s lower operating revenue in 4Q15 was the direct result of lower realized prices for crude oil and natural gas production.

In 4Q15, DVN reported an OCF (operating cash flow) of ~$1.1 billion, which was ~12% higher than its OCF of ~$963 million in 4Q14. The increase was primarily due to gains from derivatives settlements.

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Devon Energy’s free cash flow trend

As seen in the above chart, DVN reported negative free cash flow (or FCF) in 1Q15 and 2Q15, but its FCF turned positive in 3Q15. In 4Q15, DVN reported FCF of ~$2 million.

Due to the steep downward trend in energy prices, most S&P 500 (SPY) energy companies have reported negative FCF. Hess (HES), Southwestern Energy (SWN), ConocoPhillips (COP), and Occidental Petroleum (OXY) reported -$312 million (or -$1.1 per share), -$50 million (or -$0.13 per share), -$541 million (or -$0.44 per share), and -$224 million (or -$0.3 per share), respectively, in FCF in 4Q15.

FCF helps a company to enhance its shareholder value. It can be used to pay dividends, buy back stock, or repay debt. FCF is calculated by subtracting capital expenditure (or capex) from OCF.

DVN’s capex

In 4Q15, DVN spent ~$1.1 billion in capex, which was in accordance with its capex guidance and ~51% lower compared to 4Q14. In 2015, DVN spent ~$5.3 billion in capex, ~60% less than in 2014.

In 1Q16, Devon Energy expects its capex to be in the range of $450 million–$525 million.

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