Yahoo Finance Why Is Devon Energy (DVN) Down 5.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Devon Energy (DVN). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Devon Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Devon Energy Beats on Q1 Earnings, Raises 2024 View
Devon Energy Corp. reported first-quarter 2024 earnings per share of $1.16, outpacing the Zacks Consensus Estimate of $1.10 by 5.5%. Strong production volumes and efficient cost management allowed the company to enjoy the benefit of rising oil prices during the quarter.
GAAP earnings per share in the reported quarter were 94 cents compared with $1.81 in the year-ago quarter. The difference between GAAP and operating earnings in the first quarter was due to a 22-cent impact of fair value changes in financial instruments.
Revenues
Total revenues for the quarter were $3.56 billion, which lagged the Zacks Consensus Estimate of $3.61 billion by 0.6%.
The top line decreased by 5.9% from the year-ago quarter’s figure.
Production
Net production for the first quarter totaled 664,000 barrels of oil equivalent per day (Boe/d), up 3.6% year over year. Actual production volume exceeded the guidance of 640,000 Boe/d. Strong performance from Delaware Basin and Williston Basin boosted year-over-year production volumes.
Natural gas liquids production increased 10.7% year over year to 165,000 barrels per day (Bbl/d). Oil production amounted to 319,000 Bbl/d, down 0.3% on a year-over-year basis due to lower contributions from Anadarko and Williston Basin.
Realized Prices
Realized oil prices (including cash settlements) for the quarter were $75.15 per barrel, up 1.3% from $74.22 a year ago. Realized prices for natural gas liquids were $20.73 per barrel, down 14.1% from $24.12 in the prior-year quarter.
Realized gas prices were $1.62 per thousand cubic feet, reflecting a 34.4% decline from $2.47 a year ago.
Total oil equivalent realized prices, including cash settlements, were $43.91 per barrel of oil equivalent, down nearly 5.9% year over year.
Other Highlights
Total production expenses in first-quarter 2024 were $751 million, up 8.4% year over year.
Devon Energy has repurchased 4.7 million shares at a total cost of $205 million in the first quarter from its $3 billion share-repurchase program. Since the inception of the buyback program in late 2021, the company has repurchased 49.5 million shares at a total cost of $2.5 billion.
Production costs, including taxes, averaged $12.43 per barrels of oil equivalent (Boe) in the quarter. This low-cost structure, coupled with the benefits of high-margin production, resulted in field-level cash margins of $31.09 per Boe in the reported quarter.
Management declared a fixed-plus-variable dividend of 35 cents per share. This resulted in an annualized dividend of $1.40.
Financial Highlights
As of Mar 31, 2024, the company had cash and cash equivalents (including restricted cash) of $1.14 billion compared with $0.87 billion as of Dec 31, 2023. Total liquidity as of Mar 31, 2024, was $4.1 billion, including cash and credit facility.
As of Mar 31, 2024, long-term debt amounted to $5.66 billion, down from $5.67 billion as of Dec 31, 2023.
Devon Energy’s net cash from operating activities was $1.74 billion in the first quarter compared with $1.67 billion a year ago. Capital expenditures totaled $894 million, down 11.7% from the previous quarter.
Guidance
The company added a fourth Delaware completion crew in January. As a result of this activity timing, second-quarter production is expected to increase to a range 670,000-690,000 Boe per day and capital spending is estimated at nearly $950 million.
Courtesy of strong first-quarter results, Devon is increasing its full-year 2024 production forecast by 2% to a range of 655,000-675,000 Boe per day from the prior guidance range of 640,000-660,000 Boe/d. This incremental production in 2024 is expected to be delivered without an increase in capital.
Devon reiterated its capital expenditure in the band of $3.3-$3.6 billion for 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Devon Energy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Devon Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Devon Energy is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Viper Energy Partners (VNOM), a stock from the same industry, has gained 2.8%. The company reported its results for the quarter ended March 2024 more than a month ago.
Viper Energy reported revenues of $205.39 million in the last reported quarter, representing a year-over-year change of +21.6%. EPS of $0.52 for the same period compares with $0.53 a year ago.
For the current quarter, Viper Energy is expected to post earnings of $0.43 per share, indicating a change of -8.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Viper Energy. Also, the stock has a VGM Score of D.
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