Devon Energy has reported financial and operational results for the first-quarter 2024.

Highlights

• First quarter production averaged 664,000 oil-equivalent barrels per day, exceeding guidance by 4 percent
• Delaware Basin production increased 5 percent year over year, driving results that were favorable to guidance
• Capital activity highlighted by 20 percent-plus improvement in Delaware Basin well productivity year over year
• Operating cash flow totaled $1.7 billion and free cash flow reached $844 million in the first quarter of 2024
• Repurchased 4.7 million shares of common stock at a total cost of $205 million in the first quarter
• Declared fixed-plus-variable dividend payout of $0.35 per share based on first quarter results
• Balance sheet continued to strengthen with cash balances increasing $274 million to a total of $1.1 billion
• Year-to-date operating performance drives improved production and financial outlook in 2024

“By all measures, Devon delivered an outstanding set of results in the first quarter that demonstrated the comprehensive execution we achieved across every element of our disciplined strategy,” said Rick Muncrief, president and CEO.

“This success was showcased by excellent well productivity and efficiency gains from our Delaware-focused program that drove volumes above guidance by a wide margin. Furthermore, our operating margins benefitted from the team’s efforts to drive per-unit costs lower than plan, allowing us to capture the full benefit of rising oil prices during the quarter. 

“Based on the impressive operating momentum we have established year to date, we have raised our second quarter and full-year 2024 guidance. This improved outlook raises production targets and increases free cash flow projections, which will enhance our ability to accelerate the return of capital to shareholders,” Muncrief added.

Financial results

Devon reported net earnings of $596 million, or $0.94 per diluted share, in the first quarter of 2024. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $730 million, or $1.16 per diluted share.

Devon’s operating cash flow totaled $1.7 billion in the first quarter, a 4 percent increase versus the year-ago period. This level of cash flow funded all the company’s capital requirements and resulted in $844 million of free cash flow for the quarter. 

The company’s investment-grade financial position continued to strengthen in the first quarter with cash balances increasing by $274 million to a total of $1.1 billion. The company exited the quarter with outstanding debt of $6.1 billion and a net debt-to-EBITDAX ratio of 0.7 times.

Return of capital

Based on the first quarter financial performance, Devon declared a fixed-plus-variable dividend of $0.35 per share, payable on June 28, 2024, to shareholders of record at the close of business on June 14, 2024. The dividend payout consists of the fixed dividend at $0.22 per share and a variable distribution of $0.13 per share.

The company also returned capital to shareholders through the continued execution of its share repurchase program. In the first quarter, Devon repurchased 4.7 million shares at a total cost of $205 million. Since program inception in late 2021, the company has repurchased 49.5 million shares, at a total cost of $2.5 billion.

Operating results

Devon’s capital activity in the first quarter averaged 24 operated drilling rigs and 7 completion crews across its asset portfolio. This level of activity resulted in 102 gross operated wells being placed online, with an average lateral length of 9,300 feet. 

Production averaged 664,000 oil-equivalent barrels (Boe) per day in the first quarter, exceeding the company’s guidance by 4 percent. Results were driven by better-than-planned well productivity, cycle time improvements that brought forward activity and the easing of infrastructure constraints in the Delaware Basin. Devon’s oil production totaled 319,000 barrels per day in the quarter, which was 48 percent of total volumes. 

Upstream capital spending was at the bottom end of the company’s guidance range in the first quarter totaling $842 million. This represents a 3 percent decrease in upstream spending compared to the fourth quarter of 2023. Midstream, carbon and corporate capital totaled $95 million in the quarter. 

Devon’s first quarter operating performance was driven by its Delaware Basin asset, which accounted for 66 percent of companywide volumes at 437,000 Boe per day. This production result represents a growth rate of 5 percent compared to the year-ago period, driven by 59 gross operated wells being placed online during the quarter. Average 30-day production rates from this activity reached 3,200 Boe per day, representing a 20 percent-plus improvement in well productivity versus the year ago period. 

Production costs, including taxes, averaged $12.43 per Boe in the first quarter. This low-cost structure, coupled with the benefits of high-margin production resulted in field-level cash margins of $31.09 per Boe.

2024 Outlook 

Based on the strength of first quarter results, Devon is increasing its full-year 2024 production forecast by 2 percent to a range of 655,000 to 675,000 Boe per day. This incremental production in 2024 is expected to be delivered without an increase in capital spending. The company expects to deliver this improved production outlook with capital spending in a range of $3.3 billion to $3.6 billion, a 10 percent decline versus 2023. 

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, second quarter production is expected to increase to a range of 670,000 to 690,000 Boe per day and capital spending is estimated to approximate $950 million for the quarter.

KeyFacts Energy: Devon Energy US country profile