Devon Energy's earnings per share in first-quarter were higher than
the Zacks Consensus Estimate, thanks to strong oil production and
better realized prices of the product sold. Devon is working on its
strategy to divest non-core assets in the U.S. and Canada and focus
on the reserve rich onshore U.S. assets. Devon divested its
conventional gas assets in Canada and will utilize net proceeds of
$2.7 billion to pay down outstanding debts incurred for acquiring
Eagle Ford assets. Devon decided to strengthen its operation in
Eagle Ford. In addition, the acquisition of acreage in
Cana-Woodford will further boost its liquid production going
forward. Formation of the new midstream MLP business with Crosstex
will benefit the company given the increasing oil and gas drilling
activities in the U.S. However, the cyclical demand for oil,
natural gas and NGL, along with volatility in prices, could weigh
on its profitability. We retain our Neutral recommendation.
Oklahoma City, OK-based Devon Energy Corporation is an
independent energy company engaged primarily in exploration,
development and production of oil and natural gas. The company's
oil and gas operations are mainly concentrated in the onshore areas
of North America, including the U.S. and Canada.
Besides the exploration and production (E&P) business, Devon
has marketing and midstream operations, primarily in North America.
The marketing and midstream business includes selling gas, crude
oil and natural gas liquids (NGL) constructing and operating
pipelines storage and treating facilities and natural gas
processing plants. These midstream facilities are used to transport
oil, gas, and NGLs and process natural gas. Over the last few
years, Devon's capital spending has been primarily directed towards
expanding and developing its oil and liquid-rich assets to achieve
a more balanced portfolio.
Earlier, Devon reported its financials under the two segments:
U.S. and Canada. With creation of EnLink in first-quarter 2014, the
company considered EnLink as an operating segment. Currently, Devon
has three reporting segments - U.S., Canada and EnLink.
The U.S. operations are spread in Permian Basin, Mid-Continent,
Rocky Mountains and Gulf Coast.
The Canadian holdings are located in the central and southern
plains of Alberta and Saskatchewan, northwestern Alberta and
northeastern British Columbia, Lloydminster region, the Horn River
basin and the Deep Basin.
The EnLink segment is engaged in midstream activities. It is a
combination of all the U.S. midstream assets of Devon and the
properties of the former Crosstex Energy, Inc. and Crosstex Energy,
L.P. The segment consists of two entities - EnLink Midstream, LLC
and EnLink Midstream Partners, LP, and collectively known as EnLink
Midstream. The segment has operations in the Barnett, Permian
Basin, Cana and Arkoma Woodford, Eagle Ford, Haynesville, Gulf
Coast, Utica and Marcellus Shales. It has wide array of asset base,
including around 7,300 miles of gathering and transportation
pipelines, 12 processing plants and 6 fractionators. EnLink segment
also has barge and rail terminals and product storage
At the end of 2013, Devon had proved reserves of approximately
2.96 billion barrels of oil equivalent (BOE), of which about 52%
were natural gas and the rest were liquids. Out of the total
reserve 87% belonged to the company's core and emerging properties
and the rest to non-core properties. In 2013, Devon's combined
production volume was 692.9 thousand BOE per day, 2% higher than
the 2012 level.
Devon Energy Corporation (DVN): Read the Full
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