Devon Energy: Deleveraging Is The Top Priority
Richard Zeits • 11 Comments
Richard Zeits • 11 Comments
Devon Has Come A Long Way, But Doesn't Seem Done Yet
Stephen Simpson, CFA
Stephen Simpson, CFA
Tue, Jul. 12, 2:11 PM
- Wolf Infrastructure, the midstream oil and gas company backed by Canada's largest pension plan, is near a deal to buy Devon Energy’s (DVN +6.5%) 50% stake in the Access Pipeline in western Canada, Bloomberg reports.
- The deal values DVN’s stake in the pipeline at as much as C$1.5B ($1.2B) and could be announced as early as his week, according to the report; MEG Energy (OTCPK:MEGEF), DVN’s partner in the pipeline, also is said to be trying to find a buyer for its 50% stake.
- A deal would mark the third purchase in a month for Canada pension-backed companies in western Canada, as oil and gas companies look to shore up their balance sheets amid the current commodities price rout.
Tue, Jul. 5, 3:18 PM
- Devon Energy (DVN -3.7%) is reiterated with a Buy rating but at a raised $45 price target, up from $41, at Deutsche Bank, which views DVN as holding one of the deepest, highest quality, and still underappreciated asset portfolios among its E&P coverage.
- While the market has wrestled with the overhang of debt and legacy cost structure, Deutsche Bank believes that DVN's better than expected execution on asset sales, peer-leading leverage to the next $10/bbl move in crude and advantaged exposure to the Delaware Basin and STACK provide a visible, revisions-driven path toward the firm's eventual bull case for the shares at $69.
Mon, Jun. 20, 2:25 PM
- Marathon Oil (MRO +10.4%) powers higher after snapping up P-E-backed PayRock Energy for $888M, increasing its footprint in Oklahoma's prolific STACK oil play.
- MRO expects internal rates of return for the new addition of 60%-80% before taxes at a WTI price of $50/bbl.
- CEO Lee Tillman says MRO would ratchet up drilling activity if crude prices held above $50/bbl for a while, and that the Oklahoma oil region is profitable enough that it can compete for capital against the company’s other oil plays.
- SunTrust analysts consider ~60% of Payrock’s position to be in the core STACK, and estimates the core acreage value at ~$15K/acre, which appears in line with recent transactions.
- The firm also thinks MRO's move is good news for core STACK players Newfield Exploration (NFX +0.5%), Cimarex Energy (XEC +1.3%), Continental Resources (CLR +1.2%), Devon Energy (DVN +4.6%) and Chesapeake Energy (CHK +3.3%).
Wed, Jun. 15, 5:32 PM
Wed, Jun. 15, 4:53 PM
- Pioneer Natural Resources (NYSE:PXD) agrees to acquire ~28K acres in the Midland Basin for $435M from Devon Energy (NYSE:DVN), an increases its FY 2016 capital spending outlook to $2.1B from $2B.
- PXD says current net production in the acreage is ~1K boe/day (~70% oil), and expects before-tax internal rates of return on the wells to exceed 50%.
- PXD says the acquisition and its improving outlook for oil prices enable it to increase its horizontal rig count in the northern Spraberry/Wolfcamp to 17 rigs from 12, with the first rig to be added this September and two rigs added in each of October and November.
- Based on running 17 rigs during 2017, PXD expects to deliver a production growth rate of 13%-17% in that year, with Spraberry/Wolfcamp area production growth of 28%-32%.
- To fund the deal, PXD announces a public offering of 5.25M common shares, with an underwriters option to purchase up to an additional 787.5K shares; shares -2.5% AH.
Tue, Jun. 7, 1:08 PM
- Devon Energy's (DVN +2.2%) sale of nearly $1B in non-core assets located in the Granite Wash and east Texas areas and the Midland Basin brings the total assets sold to ~$1.3B of the company’s $2B-$3B asset sale goal, and Wunderlich analysts believe DVN has now sold some of its difficult-to-divest assets much more quickly than expected.
- Before the latest sale news, the firm thought the Access Pipeline deal would be announced within the new few weeks followed by other tougher asset sales around July and August, so it now feels even more confident that the remaining Midland asset sales will get done.
- The latest asset sales were gassy, but Wunderlich says the Midland Basin production still to be sold is 50% oil, which should command higher pricing; also, DVN should have little trouble selling 15K net acres in Martin County, and DVN's data room is active with participants even in areas with fewer transactions comps.
Tue, May 3, 6:58 PM
- Devon Energy (NYSE:DVN) +2.4% AH after reporting a narrower than expected Q1 loss, helped in part by a 36% Y/Y decline in expenses, while operating revenue fell 34% to $2.13B.
- DVN says its average sales prices during Q1 were $20.06/bbl for oil and $1.66/Mcf of natural gas, down from $56.29 for oil and $2.96 for natural gas in the year-ago quarter.
- DVN's Q1 oil production averaged 285K bbl/day, up from 272K bbl/day in Q1 2015 and outpacing the midpoint of previous guidance by 5K bbl/day; the company raises the midpoint of its FY 2016 production guidance by 15K boe/day to 629.5K boe.
- Lease operating expenses, which is DVN's largest field-level cost, fell 21% Y/Y to $7.13/boe and was $6M below the bottom end of guidance; G&A costs were $194M, down 23% Y/Y and on pace to save the company ~$500M/year.
- DVN says it reduced its workforce by 20% during Q1, resulting in $234M in charges.
- Now read Devon Energy started with Buy rating at Wunderlich
Wed, Apr. 27, 11:27 AM
- Devon Energy (DVN +3.8%) is initiated with a Buy rating and $40 price target at Wunderlich,
- The firm says DVN's portfolio has been transformed following several non-core asset sales in recent years and a few more left to go; within a short span of time, the STACK has emerged as a driver for the company along with the Eagle Ford and the Delaware Basin.
- In addition to the attractive asset base, the firm sees DVN as catalyst-rich with asset divestitures, downspacing tests, expansion of the Second Bone Spring, delineation of the STACK, exploration of the Powder River Basin, continued efficiencies across all plays, and dropdowns of additional midstream assets.
- Now read Devon Energy: This time, it really is different
Tue, Apr. 19, 11:24 AM
- Devon Energy (DVN +5.2%) is upgraded to Overweight from Equal Weight with a $36 price target at Morgan Stanley, which says the recent stabilization in the oil price increases the likelihood the company will be successful with asset sales and allows the market to "focus on E&P future upside to medium-term commodity price recovery and operating leverage."
- The firm thinks DVN shares likely will outperform other E&P, since the company has significant operating and financial leverage and has a path to de-lever in 2016 via asset sales, which would mitigate a key overhang that has pressured shares.
- Stanley also likes DVN's exposure to the STACK, which it believes is one of the fastest improving unconventional plays.
- Now read Devon Energy upgraded to Buy at Evercore ISI
Fri, Apr. 1, 11:49 AM
- Devon Energy (DVN -4.7%) says it plans to close its office in Houston resulting in the loss of 60 jobs, just weeks after announcing it would lay off ~1,000 employees.
- The combined cuts will reduce DVN's workforce by 20% in Q1, marking a total cut of ~25% over the past 12 months.
- Maersk Oil (OTCPK:AMKAF) says it also will close its Houston office and lay off 60 employees and contractors; the office had more than 200 local employees in 2014.
Tue, Mar. 1, 9:51 AM
- Marathon Oil (MRO -6.3%) opens sharply lower after upsizing its public offering to 145M common shares and pricing it at $7.65/share; MRO's original offering had totaled 135M shares.
- MRO says it intends to use the proceeds to strengthen its balance sheet and fund part of its capital program.
- While the offering represents a 20% dilution to MRO shareholders, it is a far better choice than adding to its $7.3B long-term debt load, according to TheStreet.com's Jim Collins.
- Energy companies have issued nearly $11B in equity YTD, with MRO just the latest to issue equity within the past two weeks following Devon Energy (DVN -3.6%), Enbridge (ENB -1%) and Newfield Exploration (NFX -0.9%).
Fri, Feb. 26, 1:10 PM
- Chevron's (CVX -0.1%) Aa1 credit rating is placed on review for a downgrade at Moody's, which predicts negative free cash flow this year and next, and possibly even into 2018.
- Moody’s expects CVX's negative free cash flow exceeding $15B in 2016, despite the company's planned 25% capex cut, after recording negative free cash flow of ~$16B in 2015.
- Newly downgraded at Moody's: Occidental Petroleum (OXY +1.2%) to A3, EOG Resources (EOG -2.3%) to Baa1, ConocoPhillips (COP +4.5%) to Baa2, Apache (APA +5.1%) to Baa3, Marathon Oil (MRO +5.5%) to Ba1, Devon Energy (DVN +4.6%) to Ba2 and EnLink Midstream Partners (ENLK +4.9%) to Ba2.
- Earlier: Exxon's AAA rating affirmed by Moody's but outlook turns negative (Feb. 25)
Mon, Feb. 22, 3:21 PM
- Bernstein analyst Bob Brackett tags Chesapeake Energy (CHK +17%) and Encana (ECA +5.6%) as the E&P stocks that could cause the most pain for investors going forward.
- CHK already has suffered plenty, but Brackett writes thinks it has the highest risk of bankruptcy in his coverage universe, and the current stock price "essentially shuts it out of the equity market,” while ECA is most likely to issue equity and see its credit rating cut to junk status.
- Meanwhile, Brackett thinks EOG Resources (EOG +3.8%) is the safest play due largely to a returns-oriented culture and relative conservatism in the early part of this cycle, while ConocoPhillips (COP +4.4%) and Devon Resources (DVN +9%) already have made their big moves - a big dividend cut and an equity raise, respectively - which relieves the pressure on management to take further drastic steps.
Thu, Feb. 18, 9:22 AM
Thu, Feb. 18, 7:47 AM
- Devon Energy (NYSE:DVN) -6.8% premarket after upsizing its public offering to 69M common shares, with an underwriters option to purchase an additional 10.35M shares, and pricing the offering at $18.75/share.
- The offering, first announced after yesterday's close, originally was sized at 55M shares.
- RBC Capital cuts its price target on DVN to $35 from $50, noting that management seemed to imply in its Q4 earnings call that an equity raise was not necessary, but the offering looks like a reaction to current market conditions and improves liquidity for an oil price recovery (Briefing.com).
Wed, Feb. 17, 4:14 PM
- Already sharply lower in regular trading, Devon Energy (NYSE:DVN) -6.5% AH after announcing a public offering of 55M common shares, with an underwriters option to purchase up to an additional 8.25M shares.
- DVN says it plans to use the proceeds for general corporate purposes, including bolstering its liquidity position, reducing indebtedness and funding its capital program.
Devon Energy Corp. is an independent energy company, which is engaged primarily in exploration, development and production of oil, natural gas and natural gas liquids. Its operations are concentrated mainly in Canada and the United States. It also owns natural gas pipelines, plants and treatment... More
Sector: Basic Materials
Industry: Independent Oil & Gas
Country: United States
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