Devon Sees Slight Drop in Q4 Profit but Hits Operating, Spending Targets

Devon Energy Corp. reported a $1.15 billion net income for the fourth quarter of 2023, just below the $1.20 billion reported for the corresponding quarter a year prior.

The company said in a statement that its operating cash flow totaled $1.7 billion for the fourth quarter, representing the highest quarterly amount of the year.

“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.”

Devon’s capital activity in the fourth quarter averaged 24 operated drilling rigs and six completion crews. 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, 1.0 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 per day (boepd) in the fourth quarter, with oil averaging 317,000 barrels per day (bpd), exceeding the top end of the company’s guidance range due to better-than-planned well performance across the portfolio.

Devon said that for the full year 2023, record-setting oil volumes drove total production 8.0 percent higher year over year.

“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”, Muncrief said.

Devon reaffirmed its previously issued outlook for production and capital in 2024. The company plans to sustain oil production at around 315,000 bpd, with total volumes approximating 650,000 boepd. 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, according to the company.

It noted that 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 2.0 percent, the company said. Due to these curtailments, Devon said it expects first-quarter production to approximate 640,000 boepd (48 percent oil).

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