The company reported fourth quarter results after the close yesterday of $0.63
per share, excluding items, which fell in-line with expectations.
On the top line, revenues rose 41.8% year/year to $3.98 billion, which easily
The company also announced a three-year outlook and 2018 guidance.
The stock is mainly down today because the company's fourth quarter guidance fell short of its own mid-point forecast and because of disappointing guidance.
Devon's net production averaged 548,000 Boe per day in the fourth quarter of 2017. Of this total, oil production in the quarter totaled 246,000 barrels per day, which was 14,000 barrels per day below the company's midpoint guidance.
In the fourth quarter, net production in the U.S. was limited by approximately 9,000 barrels per day primarily due to the timing of well tie-ins associated with non-operated activity in the STACK. This timing issue has been resolved with the tie-in of more than 50 non-operated wells around year end in the STACK.
In early 2018, production growth has accelerated in the company's Delaware Basin and STACK assets, with current daily rates from these assets approximating 195,000 oil-equivalent barrels (Boe) per day. The combined daily production rates from these two franchise growth assets represent greater than a 10 percent increase compared to the fourth quarter of 2017 and nearly a 20 percent increase compared to the full-year 2017 average.
The substantial increase in daily production is driven by higher operated completion activity in the Delaware Basin and tie-in of more than 50 non-operated wells in the STACK around year end. In aggregate, these two high-growth assets remain on plan to increase oil production by greater than 35 percent in 2018 compared to 2017.
Importantly, Devon's operated well activity in the fourth quarter across its U.S. resource plays was delivered on plan with outstanding well productivity results.
The company said it had reached an inflection point by building operating momentum across its U.S. resource plays and has successfully transitioned these world-class assets into full-field development. In 2018 and beyond, with its low-risk development programs focused in the economic core of the Delaware Basin and STACK plays, the company expects to deliver a dramatic step change in capital efficiency, achieve attractive corporate-level returns and generate substantial amounts of free cash flow at prices above our base planning scenario of $50 WTI pricing.
For 2018, the company expects to see oil equivalent production fall in the range of 552-576 MBoe/day, which would come in 14% higher than 2017. In the first quarter, the company expect to see production of around 530-554 MBoe/d.
Some highlights in its three-year outlook includes:
- Greater than 15% corporate-level rates of return
- $2.5 billion of cumulative free cash flow through 2020
- Delaware and STACK oil production CAGR of greater than 25%
- Per-unit cash cost savings of approximately 15 percent by 2020
- Potential to monetize more than $5 billion of non-core assets
- Positioned for sustainable increase of cash to shareholders
Aside from its plan to focus on reducing $1.5 billion of debt from its upstream business, the company plans to return excess cash flow from operations or divestitures to shareholders through both opportunistic share buybacks and dividend growth.