By Debroop Roy
(Reuters) - Oil and gas producer Devon Energy Corp beat quarterly production estimates on Tuesday on the strength of its U.S. shale assets and forecast a strong year ahead, sending its shares up 6 percent after the bell.
The Oklahoma-based company also said its board had authorized sale of its assets in Canada and in the gas-rich Barnett shale patch in the United States, to turn Devon into a pure-play oil producer.
"The New Devon will be able to grow oil volumes at a mid-teens rate while generating free cash flow at pricing above $46 per barrel," Chief Executive Dave Hager said.
On Tuesday, U.S. light crude futures were trading at $56.09 a barrel.
Stifel Nicolaus and Co analyst Derrick Whitfield said investors have long asked for Devon to shed its non-shale assets to drive growth. "Its top-line metrics will materially improve as a result of the divestiture," he said.
The company expects to complete the sale by the end of 2019.
In 2019, the company expects a growth of 13 to 18 percent in its oil business, while spending 10 percent less on exploration and production than it did in 2018, the company said https://s2.q4cdn.com/462548525/files/doc_financials/quarterly/2018/q4/Q4-2018-DVN-Supplemental-Tables.pdf.
Devon is among several oil producers to invest in the SCOOP and STACK regions, a fast-growing shale oil play in the Anadarko basin that has attracted investment from crude producers expanding beyond the Permian.
In the STACK region, the company produced 126,000 boe/d during the quarter, up from 114,000 boe/d in the year-ago quarter. Its production in the Delaware basin rose 49 percent to 84,000 barrels of oil equivalent per day (boe/d) from a year earlier.
The Delaware basin of the oil-rich Permian shale field is among the largest in the region.
For the quarter ended Dec. 31, the company reported production of 532,000 barrels of oil equivalent per day (boe/d), while analysts had expected 527,060 boe/d, according to IBES data from Refinitiv.
Higher production resulted in a bigger profit. Net income for the company rose to $1.15 billion or $2.48 per share, from $304 million or 35 cents per share, a year earlier.
Adjusting for certain items, the company earned $46 million or 10 cents per share in the quarter.
The company's shares were up 6.3 percent at $30.10 in after-market trading.
(Reporting by Debroop Roy in Bengaluru; Editing by Shinjini Ganguli)