Devon Energy (DVN) Q3 Results - Nov 3

[dan_s]

Devon Energy Reports 46 Percent Increase in Operating Cash Flow and Record Free Cash Flow
Generation in Third-Quarter 2021

OKLAHOMA CITY – Nov. 2, 2021 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the
third-quarter 2021. Supplemental financial tables and forward-looking guidance are available on the company’s website at
www.devonenergy.com.
KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
• Fixed-plus-variable dividend increased by 71 percent to $0.84 per share
• Board authorizes a $1 billion share buyback, representing 4 percent of the company’s market capitalization
• Delaware Basin drove third-quarter results that were favorable to guidance on production and costs
• Operating cash flow increased 46 percent from the prior quarter to $1.6 billion < Beat my forecast of $1.3 billion operating cash flow.
• Disciplined capital allocation limited reinvestment rates to 30 percent of cash flow
• Free cash flow generation accelerated to $1.1 billion, an 8-fold increase from the fourth quarter of 2020
• Balance sheet strengthened with cash balances increasing by $782 million to a total of $2.3 billion

Devon reported net earnings of $838 million, or $1.24 per diluted share, in the third quarter of 2021. Adjusting for items
analysts typically exclude from estimates, the company’s core earnings were $733 million, or $1.08 per diluted share. < Compares to my forecast of $584 million net income or $0.86 per share.

CEO PERSPECTIVE
“The power of Devon’s asset portfolio and disciplined cash-return strategy was evidenced by another quarter of operational and
financial outperformance,” said Rick Muncrief, president and CEO. “The team’s outstanding execution, coupled with an improved cost
structure, has allowed us to fully capture the benefits of rising commodity prices and deliver robust growth in free cash flow.”
“With this free cash flow, we are delivering on our commitment to accelerate the return of cash to shareholders with a 71 percent
increase in the dividend and we have continued to strengthen our investment-grade balance sheet.”
“As a result of our improving financial outlook, I am excited to announce the next step in our cash-return strategy with the
authorization of a $1 billion share-repurchase program,” Muncrief added. “While our market-leading dividend will remain the top
priority for free cash flow, this program provides us with another avenue to opportunistically return value to shareholders and
enhance per-share results.”
“Looking ahead to the remainder of this year and into 2022, we will continue to prioritize free cash flow over volume growth,”
Muncrief commented. “With our operations successfully scaled to generate strong cash flow growth, we have no intention of
pursuing production growth until it is clear that market fundamentals have sustainably recovered, and worldwide spare oil capacity is
effectively absorbed.”
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My valuation of $50 will be going up. I will update my forecast/valuation model for Devon this weekend.

[mkarpoff]

Management was absolutely giddy on the conf. call. Reminded me of a frat party the day after final exams were over.

[dan_s]

Devon did not exist when I went to work for Hess in 1983 and now the company is generating over $1 billion of cash flow per quarter. It is an AMAZING success story.

[dan_s]

Stifel's take:
Devon Energy Corporation (DVN, $41.98, Buy; Target $51.00) - Announces $1B
share repurchase program and 71% increase to quarterly dividend - Derrick Whitfield

- We view this release as positive. The positives include: i) a total equivalent and oil
production beat (4.9% and 2.7% above), ii) better than expected Q421 production
guidance, iii) exceptional well results across the portfolio, and iv) the expansion of
shareholder-friendly programs to include a $1B share repurchase program (~4%
of market cap). The negatives include: i) higher than expected Q321 capex and
Q421 capex guidance, and ii) lower than expected implied 2022 preliminary oil
production guidance. We caution investors to note the incremental 2H21 capex is
due to efficiencies pulling forward activity and the consensus estimate for 2022 oil
production is well within the implied guidance range. Net-net, Devon's expansion of
its peer-leading return of capital plan and strong quarterly production guidance should
overshadow higher than expected capex for 2H21.