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Devon Energy Second Quarter 2021 Results

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foot. In addition to capital efficiencies, the company continued to lower its operating costs, with production expenses declining 20 percent year over year to $7.58 per Boe.

Powder River Basin: Production averaged 24,000 Boe per day, of which 76 percent was oil. During the quarter, Devon dropped its drilling rigs in the basin and limited activity to bringing 4 new wells online. The average completed well cost for this activity, targeting the Parkman and Turner formations, was $5.9 million. For the remainder of 2020, the capital program is focused on appraisal work in the emerging Niobrara oil play. A key upcoming project is the Steinle pad, a 3-well spacing test targeting the Niobrara “B” interval. The Steinle pad is expected to commence production in the third quarter.

Eagle Ford: Second-quarter net production averaged 53,000 Boe per day, an 8 percent increase compared to the second quarter 2019. The company brought online 13 development wells in the quarter, averaging 30-day rates of 2,300 Boe per day. Completed well costs for this activity averaged $6.6 million. Devon and its partner are not currently operating drilling rigs or completion crews in the play. The partnership has 22 high-impact uncompleted wells in its inventory and expects to resume capital activity around year-end.

Anadarko Basin: Net production averaged 90,000 Boe per day. The company’s operational focus during the quarter was concentrated on optimizing base production and reducing controllable downtime across the field. Devon does not currently operate drilling rigs or completion crews in the basin.

Financials

Devon reported a net loss of $670 million, or $1.78 per diluted share, in the second quarter. The quarterly result was negatively impacted by a $593 million unrealized change in the fair value of the company’s derivative position due to higher futures commodity pricing. Adjusting for items analysts typically exclude from estimates, Devon had a core loss of $66 million, or $0.18 per diluted share. The company’s operating cash flow in the second quarter totaled $150 million, with EBITDAX reaching $325 million.

Devon’s financial position continues to remain exceptionally strong with excellent liquidity and low leverage. The company exited the second quarter with $1.7 billion of cash (inclusive of restricted cash) and an undrawn credit facility of $3 billion. At the end of the quarter, Devon had an outstanding debt balance of $4.3 billion with no outstanding debt maturities occurring until late 2025.

Strategic Initiatives Update

In a separate press release issued today, Devon announced the accelerated closing of its Barnett Shale divestiture to Oct. 1, 2020, from the previously anticipated date of Dec. 31, 2020. The company also provided details on the next phase of its strategic plan. These strategic initiatives include the board declaring a $100 million special dividend and a plan to reduce G&A and other cash costs by $300 million annually. In addition, Devon intends to use surplus cash to repurchase up to $1.5 billion of debt.

Updated 2020 Guidance

Devon is lowering its full-year 2020 E&P capital expenditure guidance to a range of $950 million to $1 billion, a $25 million reduction compared to prior midpoint expectations. This improvement is driven by capital efficiency gains in the Delaware Basin. For the third quarter of 2020, the company expects to invest approximately $175 million to $225 million of upstream capital.

In conjunction with the improved full-year capital spending outlook, Devon is raising its full-year oil production forecast in 2020 to a range of 148,000 to 152,000 barrels per day due to strong base production performance across its diversified asset portfolio. In the third quarter, due to timing of completion activity, the company expects oil production to decline to a range of 138,000 to 143,000 barrels per day.

Additionally, the company is lowering its 2020 expense outlook across most cash cost categories. The improved cost structure is driven by expectations of lower production costs coupled with further reductions in G&A expense.