Devon Energy Corp. (DVN) reported fourth-quarter 2013 adjusted earnings per share of $1.10, a penny above the Zacks Consensus Estimate and 49% higher than the prior-year quarter.
On a GAAP basis, the company reported earnings of 51 cents per share versus a loss of 89 cents per share in the year-ago quarter. The difference between the operating and GAAP number of 59 cents in the reported quarter was due to the impact of one-time charges and asset impairment totaling $240 million.
The company incurred a GAAP loss of 6 cents per share in 2013 versus a much wider loss of 52 cents in 2012.
Revenue
Devon’s quarterly revenues of $2.62 billion surpassed year-ago revenues of $2.58 billion by 1.7% but fell short of the Zacks Consensus Estimate of $2.69 billion by 2.7%.
Full-year 2013 revenues came in at $10.39 billion, exceeding year-ago revenues of $9.5 billion by 9.4% but missing the Zacks Consensus Estimate of $10.5 billion by 1.1%.
Highlights of the Release
In 2013, Devon produced 252.9 million barrels of oil equivalent (boe), 3.2 million boe higher than 2012 levels. The total oil production in the reported quarter increased 17% year over over. The increase in production was primarily due to a 32% year-over-year rise in oil production from the Permian Basin.
Devon’s pre-tax cash costs totaled $14.96 per boe in 2013, a 4% increase from the year-ago level. The rise in unit cost was due to higher oil production.
Total operating expenses in 2013 increased 4.5% to $9.8 billion from $9.4 billion in 2012. The increase can be attributed to higher Lease operating expenses and Marketing and midstream operating expenses.
Realized Prices
Realized oil prices in the quarter were $74.78 per barrel, up 0.6% from $74.32 per barrel in the year-ago quarter. Realized prices for natural gas liquids were up 1.8% to $28.54 per barrel from $28.03 per barrel in the year-ago quarter.
Natural gas prices during the quarter remained at depressed levels. Natural gas price realization was down 2.4% year over year to $3.25 per thousand cubic feet (Mcf) from $3.33 per Mcf in the year-ago quarter.
Total realized prices in the fourth quarter were $35.24 per barrel of oil equivalent (boe), up 5.4% year over year, primarily due to higher oil and natural gas prices.
Reserves
At year-end 2013, Devon’s proved reserves were 2.96 billion equivalent barrels (BBoe). The company exited the year with an oil reserve of 837 million barrels.
During the year, extensions and discoveries through successful drilling, combined with price revisions related to higher natural gas prices, increased proved reserves by 355 million Boe. Divestitures and revisions other than price however lowered proved reserves by 103 million Boe in 2013.
Financial Health
Devon’s cash flow from operating activities in 2013 was $5.4 billion compared with $4.9 billion in 2012.
As of Dec 31, 2013, the company’s cash balance totaled $6 billion versus $4.6 billion as of Dec 31, 2012.
Long-term debt as of Dec 31, 2013, was $7.95 billion versus $8.45 billion as of Dec 31, 2012.
Capital expenditure in 2013 was $6.75 billion, lower than the 2012 level of $8.2 billion.
Other Company Releases
Anadarko Petroleum Corporation (APC) posted net earnings of 74 cents per share in fourth quarter 2013, missing the Zacks Consensus Estimate by 2.04%.
Murphy Oil Corporation’s (MUR) adjusted earnings from continuing operations were 67 cents per share, missing the Zacks Consensus Estimate by 40.2%.
Occidental Petroleum Corporation’s (OXY) fourth-quarter 2013 pro forma earnings were $1.72 per share, beating the Zacks Consensus Estimate by 1.8%.
Our View
Devon was able to keep its earnings streak alive. Devon Energy has surpassed our earnings expectation riding on strong production and better realized prices.
During the year the company was able to repatriate $4.3 billion of foreign cash to the U.S. at an estimated effective tax rate of 4%, which had a positive impact on the company's balance sheet.
The company also took a bold step in the reported quarter to enhance its position in the Eagle Ford Shale by acquiring GeoSouthern Energy for about $6 billion in cash. Spiraling oil and natural gas demand worldwide has prompted the company to acquire these assets. The acquired assets are expected to contribute $800 million in free cash flow from 2015 and increase further going forward.
Devon Energy currently holds a Zacks Rank #3 (Hold).
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