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Devon Energy posts $642 million fourth quarter net loss tied to sale of natural gas asset but grows oil production

A pump jack produces oil from a Devon Energy well in the Delaware Basin of southeastern New Mexico. [THE OKLAHOMAN ARCHIVES]
A pump jack produces oil from a Devon Energy well in the Delaware Basin of southeastern New Mexico. [THE OKLAHOMAN ARCHIVES]

Devon highlighted growing oil production rates and announced it expects to see per-share growth during the coming year as it released its earnings results for the final quarter of 2019 and full year after markets closed Tuesday.

While the company posted net losses for the fourth quarter and year of $642 million and $355 million, respectively (tied to a non-cash impairment charge related to the divestiture of its Barnett Shale assets), it tabulated its cash flow from continued operations at $579 million in the final quarter and more than $2 billion for the entire year.

The company reported a net loss of $642 million, or $1.70 per share, on total revenues of about $1.6 billion in the final quarter of the year.

For 2019, it posted a net loss of $355 million, or 89 cents per share, on total revenues of $6.2 billion.

The company’s reported fourth-quarter earnings before interest, taxes, depreciation, amortization and drilling and completion costs (EBITDAX) was $657 million.

Its EBITDAX earnings for the entire year was about $2.4 billion.

The company stated its core earnings for the final quarter of 2019 was $130 million, or 33 cents per share. Officials said that beat Wall Street’s consensus estimate by a penny.

The non-cash impairment charge related to the Barnett Shale divestiture impacted the company’s bottom lines for the quarter and year by $748 million, they said.

“As natural gas prices declined, the value of the asset declined as well,” said Dave Hager, Devon’s CEO. “It was a one-time, accounting-related event.”

Hager stressed, however, that Devon’s sale of the Barnett Shale asset completes its transformation into an oil-focused exploration and production company.

The release noted Devon increased its fourth-quarter oil production to an average 160,000 barrels per day, up 28%, year-over-year, while holding upstream capital spending during the same period to $373 million, or 6% below its midstream guidance.

It also posted improved lease operating expenses and general and administrative costs for the period.

Operationally, the company posted its largest rates of fourth quarter total production growth (year-over-year) in its Delaware Basin (up 82%) and Powder River Basin (up 54%) fields.

Its production in the Delaware Basin averaged 154,000 barrels of oil (equivalent) daily, driven by 36 high-impact wells it brought to production during the period that targeted the Wolfcamp, Bone Spring and Leonard Shale targets.

“Our Delaware position is among the best held by anyone out there,” Hager said. “It really is proving out to be the highest-quality play in the United States, in terms of production on those wells.”

Its production in Powder River Basin averaged 27,000 barrels of oil (equivalent) daily, driven by 19 new wells. Officials said the company continues to appraise production potential from its Niobrara Shale play there, noting that it plans to double its drilling activity in the play this year.

The company’s free cash flow in the fourth quarter of 2019 was $171 million, officials said.

“A consistent theme throughout 2019 was the steady improvement in well productivity and capital efficiency that drove oil production above guidance for four consecutive quarters, while keeping our total capital investment below forecast,” Hager stated as part of the release.

“In addition to the strong operating performance, we made substantial progress building per-share value through our share repurchase program, and we have built a strong balance sheet by reducing debt by more than 75% from peak levels a few years ago.”

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›