Devon Energy has reported financial and operational results for the third-quarter 2023. 

Highlights

• Production per share increased 10 percent year-over-year in the third quarter
• Delaware Basin well productivity improved more than 20 percent versus first half of 2023
• Operating cash flow increased 23 percent compared to the second quarter to $1.7 billion
• Free cash flow more than doubled quarter-over-quarter to $843 million
• Fixed-plus-variable dividend increased by 57 percent versus second quarter to $0.77 per share
• Balance sheet strengthened with debt reduction and cash balances increasing to a total of $761 million

“Devon’s performance once again demonstrates the strength of our disciplined operating strategy, leading to another quarter of strong financial growth,“ said Rick Muncrief, president and CEO. “This growth was highlighted by production per share increasing 10 percent over the past year and we more than doubled our free cash flow during the quarter, reaching our highest level of the year.” 

“Our strong free cash flow generation allowed us to reward shareholders with a 57 percent increase to our dividend payout, and we took important steps to strengthen our balance sheet by retiring debt while building cash balances during the quarter. 

“Looking ahead to 2024, we plan to refine our capital allocation by further concentrating investment in the Delaware Basin,“ Muncrief commented. “By shifting more capital to the core of this world-class basin and high-grading activity across our diversified portfolio, we expect to deliver a step-change improvement in capital efficiency, and we are well positioned to generate growth in free cash flow that can once again be harvested for shareholders.”

Financial results

Devon reported net earnings of $910 million, or $1.42 per diluted share, in the third quarter of 2023. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $1.1 billion, or $1.65 per diluted share, a 40 percent increase from the prior quarter.

Devon’s operating cash flow totaled $1.7 billion in the third quarter. With capital reinvestment rates at 52 percent of cash flow, Devon generated $843 million of free cash flow in the quarter, a more than two-fold increase versus the second quarter.

In the third quarter, the company took steps to strengthen its financial position by retiring $242 million of outstanding debt. The company also increased its cash on hand by $273 million in the quarter to a total of $761 million. Outstanding debt declined to $6.2 billion and the company’s net debt-to-EBITDAX ratio was 0.7 times.

Operating results

Devon’s capital activity in the third quarter averaged 24 operated drilling rigs and 5 completion crews across its asset portfolio. This level of activity resulted in 81 gross operated wells being placed online, with an average lateral length of 9,300 feet.

Capital spending excluding acquisitions totaled $896 million in the third quarter, a 12 percent decrease from the previous quarter. The decline in capital was driven by the timing of completions in the Delaware Basin, where the company temporarily reduced activity to 3 completion crews in the second half of the year.

Production averaged 665,000 oil-equivalent barrels (Boe) per day in the third quarter, representing an increase of 8 percent year over year. This result was 1 percent below midpoint expectations due to select well performance in the Williston Basin and temporary constraints in the Delaware. Oil totaled 321,000 barrels per day in the quarter, which was 48 percent of total volumes. 

Devon’s operating performance was driven by its Delaware Basin asset, which accounted for 66 percent of the company’s production at 440,000 Boe per day. This production result represents a growth rate of 5 percent compared to the year-ago period, driven by 59 gross operated wells being placed online during the quarter. Average 30-day production rates from this activity reached 3,000 Boe per day, representing a 20 percent-plus improvement in well productivity from the first half of 2023. 

Production costs, including taxes, averaged $12.37 per Boe in the quarter. This low cost structure, coupled with the benefits of higher commodity prices, expanded field-level cash margins by 18 percent quarter-over-quarter to $34.73 per Boe.

Outlook

Devon’s fourth quarter capital is expected to range from $870 million to $930 million. With this level of investment, the company expects to bring online around 100 gross operated wells during the quarter. Fourth-quarter production is expected to range from 640,000 to 660,000 Boe per day, with oil production approximating 315,000 barrels per day. This decrease in production from the third quarter is driven by declines in the Williston Basin and timing of completions in the Delaware Basin. 

In 2024, the company plans to sustain oil production at around 315,000 barrels per day, with total volumes approximating 650,000 Boe per day. Capital requirements are expected to decline approximately 10 percent from 2023 levels to a range of $3.3 billion to $3.6 billion. This program is estimated to be funded at pricing levels below $40 per barrel.

KeyFacts Energy: Devon Energy US country profile