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Another Earnings Beat from Devon - Analyst Blog

By: Zacks.com
Posted: 11/6/2013 12:08:00 PM
Referenced Stocks: DVN;ECA;MLP;NBL;XTEX

Oil & gas company Devon Energy Corp . ( DVN ) reported third-quarter 2013 adjusted earnings per share of $1.29, 8.4% higher than the Zacks Consensus Estimate of $1.19. The results also surpassed the prior-year results of 88 cents by 46.6%.

The year-over-year growth was driven by higher production and better realized prices of its products sold.

On a GAAP basis, the company reported earnings of $1.05 per share versus a loss of $1.80 in the year-ago quarter. The difference of 24 cents between the GAAP and operating number in the reported quarter was due to a one-time loss of 21 cents from oil, gas and NGL derivatives and another 3 cents from asset impairments, restructuring costs and losses from other financial instruments.

Revenues

Devon's quarterly revenues of $2.72 billion surpassed the Zacks Consensus Estimate of $2.70 billion by 0.5% and year-ago revenues by 45.8%.

Revenues improved year over year primarily due to higher revenues from oil, gas and NGL sales and Marketing and Midstream segments. Oil, gas and NGL sales increased 34.7% year over year, while Marketing and Midstream revenues increased 23.2%.

Highlights of the Release

Total average daily production in third quarter 2013 was 690.8 thousand barrels of oil equivalent (Mboe), exceeding year-ago production by 1.85%. The improvement was primarily due to better performance of oil and natural gas liquids from the comparable year-ago quarter.

Total expenses in the reported quarter were $2.07 billion (excluding asset impairments and restructuring costs), increasing 9.3% from the year-ago level.

Realized Prices

Realized oil prices in the quarter were $86.51 per barrel, up 13.7% from $76.11 per barrel in the year-ago quarter.  Natural gas price realization was up 7.3% year over year to $3.24 per thousand cubic feet (Mcf) from $3.02 per Mcf in the year-ago quarter.

Realized prices for natural gas were down 2.4% to $26.25 per barrel from $26.89 per barrel in the year-ago quarter.

Total realized prices in the third quarter were $36.72 per barrel of oil equivalent (boe), up 15.7% year over year.

Financial Health

As of Sep 30, 2013, the company's cash balance totaled $4.32 billion versus $4.63 billion as of Dec 31, 2012.

Devon's cash flow from operating activities in third quarter 2013 was $1.60 billion, higher than $1.36 billion recorded in the year-ago quarter.

Capital expenditure in the reported quarter was $1.69 billion versus $1.96 billion in the year-ago quarter.

Long-term debt as of Sep 30, 2013 was $7.95 billion, declining from $8.5 billion as of Dec 31, 2012.

Other Company Releases

Encana Corp. ( ECA ) posted net earnings of 20 cents per share in third quarter 2013, beating the Zacks Consensus Estimate of 15 cents by 33.3%.

Noble Energy Inc. ( NBL ) reported adjusted earnings per share of 97 cents for the third quarter 2013, beating the Zacks Consensus Estimate of 96 cents by 1.04%.

Our View

Devon Energy posted a positive earnings surprise in the last five quarters. Undoubtedly, the focus on oil and liquid generation, which is its highest margin product, is providing solid returns for the company.

The company's decision to form a Master Limited Partnership (MLP) will help it to unlock value of its midstream assets. The company will form this MLP jointly with Crosstex Energy LP ( XTEX ).

Devon Energy currently retains a Zacks Rank #3 (Hold). With a market cap of $25.90 billion, the company has 5,700 full time employees.



DEVON ENERGY (DVN): Free Stock Analysis Report

ENCANA CORP (ECA): Free Stock Analysis Report

NOBLE ENERGY (NBL): Free Stock Analysis Report

CROSSTEX EGY LP (XTEX): Free Stock Analysis Report

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