Source: Devon Energy Corp.
Devon Energy Corp
recently held a conference call with analysts and investors to
. The hour-long call featured a deep dive into the company's
results as well as its future plans. Here are the five most
important highlights of what management said on the call.
The good times continue to roll
The second quarter was another outstanding one for Devon
both operationally and financially as we continued to
successfully execute on our strategic plan.
-- CEO John Richels
Devon Energy had four major highlights in the second quarter.
It finished the portfolio transformation that it announced late
last year by selling the last of its noncore natural gas assets
. The company also continued to turn its focus to oil and
delivered 79% year-over-year U.S. oil production growth. That oil
focused growth increased its operating cash flow by 47% over the
prior year. And finally, the company completed three major
projects -- Jackfish 3, the Access Pipeline, and the Victoria
Express Pipelines -- that will help to grow cash flow in future
quarters. This is why Richels called the quarter outstanding both
operationally and financially.
Aggressive focus on liquids continues
With the aggressive transformation of our North American on
shore portfolio, total liquids production is expected to
approach 60% of Devon's go forward production by year-end, and
that's up from just over 30% a few years ago.
-- John Richels
Last quarter 43% of the company's production was natural gas,
however, natural gas only accounted for 27% of the company's
revenue. By focusing on growing its liquids production Devon
Energy is earning more money on a barrel of oil equivalent basis.
In fact, in just the past year its pre-tax cash margins per
barrel of oil equivalent have grown 40% due to the increase in
liquids production. Those margins should head even higher as
Devon Energy continues to focus on pushing liquids production
Source: Devon Energy Corp.
Laser focused on operational improvements
Our solid execution in the quarter resulted in strong oil
production growth driving an impressive increase in our
operating cash flow. We are laser focused on the key drivers of
outstanding operational performance, including driving down
drilling times, optimized completion designs and very efficient
production operations. Continuous improvement in each of these
areas and others will provide incremental value in each of our
-- COO Dave Hager
Devon Energy is laser focused on improving its operations
because it is yielding real results. One example of this is seen
from optimizing its completion designs in the Cana-Woodford,
which included a new completion design that has nearly doubled
the amount of frac stages and sand used in each well. This
enhancement is paying off:
Source: Devon Energy Corp Investor Presentation
As the above slide demonstrates, well costs are in-line with
expectations, however, the company has improved its 30-day
initial production rates by 35% while also improving its
estimated ultimate recovery per well by 15% -- both of which
really improve the company's returns as it can create more value
per dollar invested.
The Eagle Ford shale is better than expected
We could not be more pleased with the performance we have
seen from this world-class asset. And we have already
identified several promising opportunities that can further
enhance well economics and boost our drilling inventory.
-- Dave Hager
Last quarter, the Eagle Ford Shale produced 65,000 barrels of
oil per day, or BOE/d, which was in-line with expectations. This
was despite the fact that 8,000 BOE/d of production was
constrained due to issues with a third-party gathering system.
This strong production is enhanced by the fact that it carries
margins of $60 per BOE, which is the best in its portfolio and
nearly double the $30.47 per BOE margins the company delivered as
a whole last quarter. On top of that the company now sees upside
opportunities in the upper Eagle Ford, which wasn't an area it
ascribed any value to when it acquired its position.
Key takeaways from the CEO
Let me leave you with a few key takeaways from today's call.
First, we have dramatically improved our portfolio in a short
period of time. Devon emerges with a formidable portfolio
that's on track to deliver attractive high margin production
growth for many years to come. As evidenced by our second
quarter results, our pursuit of high margin production is
significantly expanding our margins and profitability. And
finally the commitment to our top strategic objectives that you
heard us talk about often, which is to optimize long-term
growth and debt adjusted cash flow per share has never been
stronger. As we deliver on our growth expectations we are
poised to create significant value for our shareholders in the
-- John Richels
Bottom line here, Devon Energy is in the best position it's
ever seen and only expects to get stronger as it continues to
develop its assets and grow production that creates value for
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5 Things Devon Energy Corp's Management Wants You
originally appeared on Fool.com.
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