Devon Energy Crushes 1Q08

We're long here. Long and happy. This is the pre-call note (see earnings call transcript).

Devon Energy (DVN)'s 1Q Numbers:

• EPS of $2.74 vs $2.33 Street Consensus,
• CFPS of $5.79 vs $4.55 expected,
• Production of 640 MBOEpd vs 631.5 MBOEpd in 4Q07 (from non-divested properties)
• LOE inched up 7% YoY

Guidance: None given but look for them to certainly re-affirm 2008 guidance on the conference call; here is the prior guidance:

• 2008 was - 240 to 247 MMBOE vs retained production comp of 223 from 2007
• 2009 was 259 to 274

Operations Update: Not a lot of details in the release, but here are the highlights.

Barnett Shale Update:

• Still the biggest producer and lease holder in the play
• Production average 995 MMcfedp in 1Q08, up from a YE07 exit rate of 950 MMcfepd (0.95 Bcfepd),
• now over the 1 Bcfgpd mark
• in the Gooseneck area, they had 3 horizontal wells IP at 19 MMcfepd. Wow. There are going to be lots of questions on the call about this. They had 100% WI in two of these and 93% in the third.

Lower Tertiary Trend, Deepwater Gulf of Mexico:

Progress Being Made At Jack and St Malo Discoveries. Chevron subsea general manager Randall Kubota, yesterday confirmed at the Offshore Technology Conference that a full front-end engineering and design study will be launched this summer for the Jack and St Malo ultra-deep discoveries in the Gulf of Mexico. Devon has 25% of Jack and 22.5% of St Malo.

No word on the Chuck Prospect - first DVN operated Lower Tertiary trend test, 39.5% working interest, and has been drilling for the better part of a year now.

Canada Update: oil sands and another play mentioned but scant details.

Brazil - Polvo Update - did not get an update here either. Probably some news on the conference call.

Valuation: Devon is only trading at 6x 2009 CFPS estimate of $20.64 and I would expect it to add multiple as the firm continues to lengthen reserve life.

Comments

[User 170120:]

on verge of a breakout

2008 May 08 08:40 AM

[babsheen:]

please tell me what, mboe mmboe mmcfrdp cfps loe stand for.

2008 May 08 10:51 AM

[Brian A. Davis:]

What do you like as a selling point of PQ. I have PQ 10/20s.

Secondly, do you see an advantage for domestic oil when it is priced against foreign oil? Do domestics have better profit margins?

2008 May 10 06:50 AM

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2008 May 10 07:41 AM

[saifl:]

hey einstein still shorting NG?
Went through all your arguments...and saw lots of data and lots of graphs and lots of worthless pieces of information on NG.
That said your analysis on individual companies make a lot more sense.

2008 May 10 11:22 AM