A month has gone by since the last earnings report for Devon Energy (DVN). Shares have added about 1.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Devon Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Devon Energy Q2 Earnings Beat Estimates, Revenues Miss
Devon Energy Corp. reported second-quarter 2023 earnings of $1.18 per share, which outpaced the Zacks Consensus Estimate of $1.17 by 0.8%. The bottom line, however, declined 54.4% from the year-ago quarter’s earnings of $2.59 per share.
Total revenues for the quarter totaled $3,454 million, which missed the Zacks Consensus Estimate of $3,805 million by 9.2%. The top line also decreased by 38.6% from the year-ago quarter’s figure. Despite year-over-year improvement in production volumes, softness in commodity prices impacted the top line.
Net production for the reported quarter totaled 662,000 barrels of oil equivalent per day (Boe/d), up 7.5% year over year. Actual production volume came in toward the upper end of the guidance range of 643,000-664,000 Boe/d. Strong performance from Eagle Ford, Anadarko Basin and Williston Basin boosted year-over-year production volumes.
Natural gas liquids production increased 5.1% year over year to 164,000 barrels per day (Bbl/d). Oil production amounted to 323,000 Bbl/d, up 7.7% on a year-over-year basis, primarily due to higher oil production in Eagle Ford.
Realized oil prices for the quarter were $71.74 per barrel, down 25.1% from $95.80 in the year-ago period. Realized prices for natural gas liquids were $17.79 per barrel, down 55.8% from $40.28 in the prior-year quarter.
Realized gas prices were $1.66 per thousand cubic feet, indicating a 67.2% deterioration from $5.06 a year ago.
Total oil equivalent realized prices, including cash settlements, were $42 per barrel of oil equivalent, down 35.1% year over year.
Total production expenses were $719 million, up 1.4% from that recorded in the corresponding period of 2022.
In the second quarter, Devon repurchased 3.8 million shares at a total cost of $200 million. Since the inception of the share repurchase program in late 2021, the company has repurchased 39.6 million shares at a total cost of $2.1 billion.
DVN’s free cash flow for the quarter totaled nearly $326 million. Financing costs amounted to $78 million, down 7.1% from $84 million in the year-ago period.
As of Jun 30, 2023, the company had cash and cash equivalents (including restricted cash) of $488 million compared with $1,454 million as of Dec 31, 2022. Total liquidity as of Jun 30, 2023, was $3.95 billion, including cash and credit facility.
As of the same date, long-term debt amounted to $6,169 million, down from $6,189 million as of Dec 31, 2022.
Devon Energy’s net cash from operating activities was $1,405 million in the second quarter compared with $2,678 million in the year-ago period. Capital expenditures totaled $1,079 million compared with $573 million in the corresponding period of 2022.
The company expects total production of 658,000-680,000 Boe/d in the third quarter of 2023. Devon expects its third-quarter oil production volume in the range of 322,000-330,000 Boe/d. Our model currently projects oil volume of 322,300 Boe/d for the third quarter.
The production volume is anticipated in the range of 643,000-663,000 Boe/d for the entire year. Our model projects total production of 652,400 Boe/d, with 420,400 Boe/d expected from Delaware Basin.
Capital expenditure is projected in the band of $855-$925 million and $3,600-$3,800 million for third-quarter and full-year 2023, respectively. Our model projects capital expenditures of $869.5 million and $3,723.3 million for third-quarter and full-year 2023, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Devon Energy has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Devon Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Devon Energy belongs to the Zacks Oil and Gas - Exploration and Production - United States industry. Another stock from the same industry, Range Resources (RRC), has gained 2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Range Resources reported revenues of $586.32 million in the last reported quarter, representing a year-over-year change of -44.6%. EPS of $0.30 for the same period compares with $1.27 a year ago.
For the current quarter, Range Resources is expected to post earnings of $0.32 per share, indicating a change of -76.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +2% over the last 30 days.
Range Resources has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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