Riding the momentum of last month’s $5 billion North Dakota asset acquisition, Oklahoma City-based Devon Energy announced record oil production and net earnings of $844 million for the second quarter, as detailed in a report released on Tuesday.
Historically focused on natural gas, the independent energy producer reported a breakthrough quarter with daily oil production reaching 335,000 barrels. This significant increase is largely attributed to the July 8 acquisition of Houston-based Grayson Mills Energy.
This acquisition has allowed Devon to enhance its oil and natural gas output from North Dakota’s renowned Williston Basin, which includes the prolific Bakken Shale formation.
Companywide, Devon’s total production averaged 707,000 oil-equivalent barrels per day in the second quarter, reflecting a 7 percent increase compared to the same period last year.
Devon reported earnings of $1.41 per share, surpassing Wall Street expectations of $1.29, marking the fourth consecutive quarter that Devon has exceeded analyst estimates.
“In July, we took an important step to further strengthen the quality and depth of our portfolio with the acquisition of Grayson Mills,” said Rick Muncrief, Devon’s president and chief executive officer. “These assets are an excellent addition to Devon, expanding our oil production, project inventory, and operating scale.”
Muncrief added, “Based on our solid performance for the first half of 2024, we now expect our full-year 2024 production guidance to be 5 percent higher than our original outlook.”
For the second time this year, Devon is raising its production forecast, now expecting up to 688,000 barrels of oil equivalent per day, with capital spending estimated at about $3.8 billion.
In addition to increased oil production, Devon reported operating cash flow of $1.5 billion and free cash flow of $587 million.
The company also repurchased 5.2 million shares of common stock at a total cost of $256 million as part of an ongoing share repurchase program that began in 2021. To date, Devon’s buyback program has repurchased 54.7 million shares at a total cost of $2.7 billion. On Tuesday, Devon announced its board of directors increased share-repurchase authorization by 67 percent to $5 billion.
Jake Dollarhide, co-founder and chief executive of Tulsa-based Longbow Asset Management, praised Devon’s acquisition strategy, noting that Devon, already one of the nation’s largest natural gas producers, is now also a leading oil producer.
Dollarhide also emphasized Devon’s efforts to manage debt, a common challenge for many independent oil and gas producers. Devon financed 35 percent of the Grayson Mills acquisition with its own stock while covering the remaining $3.25 billion with a combination of cash on hand and debt.
Alongside its stock buyback program, Devon announced plans to strengthen its balance sheet through an aggressive debt reduction effort, committing up to 30 percent of its annual free cash flow to reduce $2.5 billion of debt over the next two years.
“Devon is a solid company,” Dollarhide said. “It puts its money where its mouth is with the acquisition of additional oil and gas assets, as well as with its stock buyback program. It’s a great investment, and I would say, if you don’t already have their stock, you should get some.”
