OKLAHOMA CITY – Feb. 27, 2024 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the fourth-quarter and full-year 2023.
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Devon Energy Wells Drilled 2023
CEO PERSPECTIVE
“Devon exited 2023 with positive momentum, delivering a solid quarter of execution that surpassed our operational and financial targets,” said Rick Muncrief, president and CEO. “This performance rounded out another year of accomplishment, headlined by record-setting oil production and $2.7 billion of free cash flow generation. These achievements allowed us to reward shareholders with an impressive cash-return yield of 10 percent, balanced between buybacks and dividends.”
“Looking ahead to 2024, we have designed a plan to deliver a step-change improvement in capital efficiency. By allocating additional capital to the core of the Delaware Basin and high-grading activity across our diversified portfolio, we expect to efficiently sustain our oil production for roughly 10 percent less capital.
“This disciplined plan prioritizes value over volume and is expected to result in another year of differentiated cash returns versus the broader market. The board’s approval of a 10 percent increase to the fixed dividend further underscores our confidence in the plan and the underlying financial strength of our business,” Muncrief commented.
FINANCIAL RESULTS
Devon reported net earnings of $1.2 billion, or $1.81 per diluted share, in the fourth quarter of 2023. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $902 million, or $1.41 per diluted share.
Operating cash flow totaled $1.7 billion in the fourth quarter, representing the highest quarterly amount of the year. This level of cash flow funded Devon’s capital requirements and resulted in $827 million of free cash flow in the quarter. For the full-year 2023, operating cash flow totaled $6.5 billion and free cash flow reached $2.7 billion.
The company’s investment-grade financial position continued to strengthen in the fourth quarter with cash balances increasing by $114 million to a total of $875 million. The company exited the year with outstanding debt of $6.2 billion and a net debt-to-EBITDAX ratio of 0.7 times.
RETURN OF CAPITAL
Based on the fourth-quarter financial performance, Devon declared a fixed-plus-variable dividend of $0.44 per share, payable on March 28, 2024, to shareholders of record at the close of business on March 15, 2024. The dividend payout consists of the board’s approval to increase the fixed dividend by 10 percent to $0.22 per share and a variable distribution of $0.22 per share.
The company also accelerated the return of capital to shareholders through the continued execution of its $3 billion share-repurchase program. In the fourth quarter, Devon repurchased 5.2 million shares at a total cost of $234 million. With this repurchase program, the company is on track to reduce its outstanding share count by up to 9 percent.
OPERATING RESULTS
Devon’s capital activity in the fourth quarter averaged 24 operated drilling rigs and 6 completion crews across its asset portfolio. This level of activity resulted in 100 gross operated wells being placed online, with an average lateral length of 9,900 feet. Total capital spending, excluding acquisitions, was $940 million in the fourth quarter. This result was 1 percent above the company’s guidance range due to cycle time improvements that accelerated activity and timing of midstream spending.
Production averaged 662,000 oil-equivalent barrels (Boe) per day in the fourth quarter, with oil averaging 317,000 barrels per day.
Production exceeded the top end of the company’s guidance range due to better than planned well performance across the portfolio. For the full-year 2023, record-setting oil volumes drove total production 8 percent higher year over year.
Devon’s fourth-quarter operating performance was driven by its Delaware Basin asset, which accounted for 65 percent of the company’s production at 433,000 Boe per day. This production result represents a growth rate of 6 percent compared to the year-ago period, driven by 62 gross operated wells being placed online. Initial production rates from this activity averaged 2,700 Boe per day, with average per-well recoveries estimated at 1.5 million oil-equivalent barrels.
Production costs, including taxes, averaged $12.46 per Boe in the quarter. This low-cost structure, coupled with the benefits of highmargin production resulted in field-level cash margins of $32.47 per Boe.
Devon exited the year with estimated proved reserves of 1.8 billion Boe. Proved undeveloped reserves accounted for 22 percent of the total. Extensions and discoveries from the company’s drilling program added 322 million Boe of reserves in 2023, equating to a replacement rate of 134 percent of production. The capital costs to deliver these extensions and discoveries totaled $3.7 billion, resulting in a finding and development cost of $11.47 per Boe.
2024 OUTLOOK
Devon has reaffirmed its previously issued outlook for production and capital in 2024. The company plans to sustain oil production at around 315,000 barrels per day, with total volumes approximating 650,000 Boe per day. The capital requirements to deliver this production are expected to decline approximately 10 percent year-over-year to a range of $3.3 billion to $3.6 billion.
Due to the addition of a fourth Delaware completion crew in January, the company’s capital program in 2024 is expected to be weighted towards the first half of the year. As a result of this activity timing, first-quarter capital spending is estimated to range from $915 million to $965 million.
In January, severe winter weather across the company’s portfolio led to unplanned power outages and production disruptions. These weather-related curtailments are estimated to reduce first-quarter production by 2 percent. Due to these curtailments, Devon expects first-quarter production to approximate 640,000 Boe per day (48 percent oil).
The company has successfully restored the affected production across all its operating areas and does not expect this weather-related downtime to impact production targets for the full-year 2024.
Additional details of Devon’s forward-looking guidance are available on the company’s website at www.devonenergy.com.
CONFERENCE CALL WEBCAST AND SUPPLEMENTAL EARNINGS MATERIALS
Also provided with today’s release is the company’s detailed earnings presentation that is available on the company’s website at www.devonenergy.com. The company’s fourth-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, February 28, 2024, and will serve primarily as a forum for analyst and investor questions and answers.
ABOUT DEVON ENERGY
Devon Energy is a leading oil and gas producer in the U.S. with a premier multi-basin portfolio headlined by a world-class acreage position in the Delaware Basin. Devon’s disciplined cash-return business model is designed to achieve strong returns, generate free cash flow and return capital to shareholders, while focusing on safe and sustainable operations. For more information, please visit www.devonenergy.com.
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