Devon Energy (DVN) Up 12.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Devon Energy (DVN). Shares have added about 12.3% 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 drivers.
Devon Energy Q4 Earnings & Revenues Surpass Estimates
Devon Energy Corp. reported fourth-quarter 2023 earnings per share (EPS) of $1.41, outpacing the Zacks Consensus Estimate of $1.39 by 1.4%. The bottom line, however, declined 15.1% year over year.
In 2023, EPS was $5.71, declining 31.3% from $8.31 in 2022.
Revenues
Total revenues for the quarter were $4.1 billion, which surpassed the Zacks Consensus Estimate of $3.87 billion by 5.9%.
However, the top line decreased by 3.6% from the year-ago quarter’s figure. Despite year-over-year improvements in production volumes, softness in commodity prices impacted the top line.
Total revenues in 2023 were $15.3 billion compared with $19.2 billion in 2022.
Production
Net production for the fourth- quarter totaled 662,000 barrels of oil equivalent per day (Boe/d), up 4.1% year over year. Actual production volume exceeded the upper end of the guided range of 640,000-660,000 Boe/d. Strong performance from Delaware Basin boosted year-over-year production volumes.
Natural gas liquids production increased 14.2% year over year to 169,000 barrels per day (Bbl/d). Oil production amounted to 317,000 Bbl/d, up 0.3% on a year-over-year basis, primarily due to higher oil production at Delaware Basin.
Realized Prices
Realized oil prices (including cash settlements) for the quarter were $76.98 per barrel, down 0.6% from $77.44 in a year ago. Realized prices for natural gas liquids were $19.67 per barrel, down 19.1% from $24.32 in the prior year.
Realized gas prices were $2.02 per thousand cubic feet, reflecting a 49.6% decline from $4.01 a year ago.
Total oil equivalent realized prices, including cash settlements, were $45.07 per barrel of oil equivalent, down nearly 11% year over year.
Other Highlights
Total production expenses in fourth-quarter 2023 were $759 million, up 6.2% year over year.
Devon Energy has repurchased 5.2 million shares at a total cost of $234 million in fourth-quarter 2023 from its $3 billion share-repurchase program. The company is on course to reduce its outstanding shares by 9%.
Production costs, including taxes, averaged $12.46 per barrels of oil equivalent (Boe) in the quarter. This low-cost structure coupled with the benefits of high-margin production resulted in field-level cash margins of $32.47 per Boe in the reported-quarter.
Management increased fixed dividend by 10% to 22 cents per share, making fixed-plus-variable dividend to 44 cents. This resulted in annualized dividend of $1.76.
Financial Highlights
As of Dec 31, 2023, the company had cash and cash equivalents (including restricted cash) of $0.87 billion compared with $1.45 billion as of Dec 31, 2022. Total liquidity as of Dec 31, 2023, was $3.9 billion, including cash and credit facility.
As of Dec 31, 2023, long-term debt amounted to $5.7 billion, down from $6.2 million as of Dec 31, 2022.
Devon Energy’s net cash from operating activities was $1.73 billion in the fourth quarter compared with $1.91 billion a year ago. Capital expenditures, excluding acquisitions, totaled $910 million, marking a 13.2% increase from the previous quarter.
Guidance
In January, severe winter weather led to unplanned power outages and production disruptions across the company’s portfolio. These weather-related curtailments are estimated to reduce first-quarter production by 2%. Due to these curtailments, Devon Energy expects first-quarter production to be approximately 640,000 Boe per day (48% oil).
The company expects total production volumes in 2024 in the range of 640,000-660,000 Boe/d. Capital expenditure is projected in the band of $3.3-$3.6 billion for 2024.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -12% due to these changes.
VGM Scores
At this time, Devon Energy has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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, Northern Oil and Gas (NOG), has gained 11.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Northern Oil and Gas reported revenues of $543.4 million in the last reported quarter, representing a year-over-year change of +21.9%. EPS of $1.61 for the same period compares with $1.43 a year ago.
Northern Oil and Gas is expected to post earnings of $1.29 per share for the current quarter, representing a year-over-year change of -26.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.2%.
Northern Oil and Gas has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Devon Energy Corporation (DVN) : Free Stock Analysis Report
Northern Oil and Gas, Inc. (NOG) : Free Stock Analysis Report
