Devon Energy’s production mix
As seen in the below chart, Devon Energy’s production mix for 1Q16 was ~42% crude oil, ~20% natural gas liquids, and ~38% natural gas. This means that Devon Energy (DVN) is tilted toward liquids production. Its total liquids production is ~62%.
Typically, upstream companies with more liquids production have better operating margins. According to DVN’s 1Q16 operations report, crude oil is its highest margin product.
Devon Energy’s production mix trend
Devon Energy’s quarterly crude oil percentage in its production mix has increased from ~18% in 1Q11 to ~42% in 1Q16, with an average rate of increase of ~5% quarter-over-quarter. In 1Q16, the crude oil percentage in production mix increased by ~6% when compared with 1Q15.
Other upstream companies from the S&P 500 (SPY) that have higher liquids percentage in their production mix are Energen Corporation (EGN), Occidental Petroleum (OXY), Murphy Oil (MUR), and Noble Energy (NBL). Respectively, these companies contain ~78%, ~75%, ~72%, and ~47% liquids in their production mix.
The volatility in oil prices also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
Devon Energy’s realized prices
Excluding the effect of hedges, Devon Energy’s (DVN) average realized crude oil and bitumen price in 1Q16 was $20.06 per barrel, down by ~43% from $35.17 per barrel in 1Q15.
For 1Q16, Devon Energy’s average realized price for natural gas liquids production fell by ~27% to $6.84 per barrel compared to $9.40 for the same period in 2015.
For 1Q16, DVNs average realized price for natural gas production decreased by ~38% to $1.53 per thousand cubic feet compared to $2.45 per thousand cubic feet for the same period in 2015.
Devon Energy’s lower realized prices were compensated partially by its gains on commodity derivatives. We will study DVN’s hedges in the next part.