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Devon Energy: Entering 2020 On A Firm Footing

Mar. 06, 2020 12:45 PM ETDevon Energy Corporation (DVN)11 Comments
Sarfaraz A. Khan profile picture
Sarfaraz A. Khan


  • Devon Energy has reported $171 million of free cash flows for Q4-2019.
  • DVN has reshaped its portfolio by focusing only on high-margin US oil properties, which has helped bring its cash flow break-even level down to $46.50/bbl.
  • The company can achieve double-digit growth in oil production in 2020 with lower CapEx while generating free cash flows.
  • Devon Energy has a favorable debt maturity profile, robust liquidity, and has covered more than 40% of this year's estimated oil production with hedges.

Devon Energy (NYSE:DVN), the diversified shale oil driller, ended last year on a strong note by reporting free cash flows for the fourth quarter and it seems well prepared to withstand the current tough oil price environment. After high-grading its portfolio, Devon Energy can now generate free cash flows even as oil prices trade below $50 a barrel. The company has also covered a significant part of its future oil production with hedges, which minimizes its exposure to oil price weakness. The company also has a decent balance sheet, which bolsters its ability to withstand weak oil prices for an extended period.

Image courtesy of Pixabay

Earnings Recap

Devon Energy recently released its fourth-quarter results. The company produced 340,000 boe per day from retained assets in Q4-2019, including oil production of 160,000 bpd, depicting gains of 15.3% and 28% respectively on a year-over-year basis. The growth was led in large part by the 84% increase in oil and NGL production from the Delaware Basin to 116,000 bpd (72% oil, 28% NGL). Due to strong well productivity and a favorable completion schedule in the Delaware Basin, the company exceeded the midpoint of its oil production guidance by 3,000 bpd.

Devon Energy's realized oil prices fell by 1.1% to $55.46 per barrel and the realized price for the total production on an oil-equivalent basis fell by 6.1% to $32.72 per boe. The company earned an adjusted profit of $128 million, or $0.33 per share, and operating cash flows of $579 million. The cash flows funded the capital expenditures of $408 million and the company ended the period on a strong note with free cash flows of $171 million.

Looking Ahead

The oil price environment is looking tough, with the price of the US benchmark WTI crude falling from more than $60 a barrel at

This article was written by

Sarfaraz A. Khan profile picture
Hey there, I'm Sarfaraz A. Khan - a seasoned financial writer and investor with a passion for uncovering hidden gems. I have a deep understanding of fundamental analysis and I specialize in writing about mid-cap and small-cap companies that are poised for significant growth. My investment philosophy is heavily influenced by the strategies of legendary investors like Warren Buffett and Benjamin Graham. I look for investment opportunities in companies that have strong fundamentals and can grow substantially over the long-term. I'm not afraid to venture into other areas of the market either. While I primarily write about mid and small-cap stocks, I also delve into ETFs and economic trends occasionally. I always aim to provide a balanced view and discuss risk factors in my articles so investors can make better decisions. Although I've been away from Seeking Alpha for a while, I'm excited to get back to writing and sharing my expertise with the community. Moving forward, you can expect to see two to three articles a week from me. When I'm not analyzing stocks or writing about finance, I enjoy reading about history, religion, science, economy, and following the latest developments in the energy and technology sectors.

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Comments (11)

@Sarfaraz A. Khan Agree with @Meg's Dad, please update
"Mr Market", rightly or wrongly, seems to doubt their ability to survive, based on trading since this article was published.
Not sure why Devon is down 50%. They have a good balance sheet. Are their costs that high? CTL should be down 100% if this is down 50%.
Pulled the trigger at 8.85 today.

Not 18.85....8.85. Also bought SLB at 17.00. Ridiculous prices today.  

Yes they could fall lower, but do you seriously think so? These are priced like they’re going bankrupt. Like the banks in fall 2008.

I wish I bought C for $5 or GS for $15. I’m not letting this oil collapse pass me buy.
will they survive ? how much % is ng after sale ?
their ebitdax just took a huge hit with oil plunging, from 2.4b to 1.4b i figure. they have 200mm interest. they need to cut capex to the bone. 1.8b make it 1b.
Little, Einstein profile picture
Firm footing .. on a shaky ground. Never thought this could sink so much when for example COG has held up so well.
DexterDude profile picture
I exited DVN some time ago, 2017. I have been a fan for a long time but don't see a favorable environment for the near term. Excess supply for the foreseeable future and with the global economy entering a recession, I wouldn't place bets on DVN at this time. I agree they have cleaned up the balance sheet but there are too much downside risk imho.
Hoping for any commodity related stock to gain any strength in a market facing the COVID-19 "Economic Inactivity" environment is really just another attempt on catching a falling knife. Good luck your going to need it I do believe.
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