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Devon Energy’s Production Guidance, Management Strategies for 1Q16

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Devon Energy’s production guidance for 1Q16

For 1Q16, Devon Energy (DVN) expects total production in a range of 657–693 MBoe (thousand barrels of oil equivalent) per day. The midpoint of the 1Q16 production guidance is 675 MBoe per day, which is ~1.4% lower when compared with Devon Energy’s production volumes in 1Q15. Sequentially, Devon Energy’s production guidance is lower by ~1%, when compared with 4Q15.

Upstream companies Occidental Petroleum (OXY) and Diamondback Energy (FANG) have reported respective year-over-year increases of ~10% and ~46% in their 4Q15 total production. Murphy Oil (MUR) reported an ~23% year-over-year decrease in its 4Q15 total production.

The SPDR S&P Oil and Gas Exploration and Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.

For 1Q16, DVN expects crude oil production in a range of 272–287 MBoe per day, natural gas liquids production in a range of 129–139 MBoe per day, and natural gas production in a range of 1,537–1,600 MMcf (million cubic feet) per day.

For 4Q15, Devon Energy’s production mix was ~41% crude oil, ~20% natural gas liquids, and ~39% natural gas. According to DVN’s 4Q15 operations report, crude oil is its highest margin product. Murphy Oil and Occidental Petroleum also have similar liquids percentages in their production mix.

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Devon Energy’s production guidance for 2016

For 2016, DVN expects total production volume in a range of 597–634 Mboe per day, a midpoint decrease of ~6% from its 2015 production of 560 MBoe per day. For 2016, Devon Energy expects crude oil, natural gas liquids, and natural gas production to decline by ~3%, ~6%, and ~9%, respectively.

Devon Energy’s capital program

Due to the current low crude oil (USO) (UWTI) (DWTI) and natural gas (UNG) (UGAZ) (DGAZ) price environment, Devon Energy’s top priority is to protect its balance sheet and to manage its capital program to be within cash flows.

For 1Q16, Devon Energy expects its total capex to be in the range of $450 million–$525 million. For 2016, DVN expects its E&P (exploration and production) capital investments to range from $900 million–$1.1 billion, a decrease of ~75% percent from 2015. For 2016, Devon’s other non-E&P capital requirements are projected at ~$300 million.

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