Energy Prospectus

Devon’s reported net earnings totaled $228 million or $0.43 per diluted share in the third quarter. Adjusting for items that securities analysts typically exclude from their published estimates, the company’s core earnings totaled $242 million or $0.46 per diluted share, exceeding analyst consensus estimates. < Adjusted EPS compares to my forecast of $0.37. - Dan

Highlights

Production exceeds midpoint of hurricane-adjusted guidance
50 high-rate wells brought online with average rates exceeding 2,100 Boe per day
Capital expenditures were 12 percent below guidance year to date
Divestiture program reaches $420 million of asset sales
Free cash flow increases cash balance to $2.8 billion
“We continue to deliver outstanding well productivity from our U.S. resource plays as we execute on our development plans,” said Dave Hager, president and CEO. “During the quarter, we had some of the best drill-bit results in Devon’s history with 50 new wells averaging 30-day rates in excess of 2,100 Boe per day. Importantly, we delivered these prolific wells with a capital investment that was below the low end of our guidance range for the third consecutive quarter.”

“With these strong results, we remain on track to achieve our 2017 exit rate production targets, and we are positioned to deliver attractive, high rate-of-return growth in 2018,” said Hager. “A key driver of our operational momentum is the advancement of multi-zone development activity across our world-class STACK and Delaware Basin opportunities. With several projects underway, this cutting-edge development technique will optimize per-section recoveries, while improving capital efficiencies by 20 percent.”

If you are not familiar with the STACK Play in Oklahoma then get familiar real quick. At $50 oil the well-level economics are OUTSTANDING. - Dan

Devon continued to advance its development programs across its U.S. resource plays and exited the third quarter with 19 development rigs running. With this increased activity, the company commenced production on 50 high-rate wells that averaged initial 30-day rates of more than 2,100 Boe per day (50 percent oil).

This strong drill-bit productivity was highlighted by 14 new Meramec wells brought online in the STACK play that achieved average 30-day rates of greater than 2,300 Boe per day (55 percent oil). The Delaware Basin also delivered several high-rate oil wells. This activity was headlined by four new Bone Spring wells around the state-line area of southeast New Mexico that attained 30-day rates of 1,750 Boe per day (75 percent oil).

These high-rate development wells showcase Devon’s asset quality and outstanding execution that has generated best-in-class well productivity in North America. Based on publicly available data over the past year, Devon’s 90-day production rates from new wells have achieved the highest rates of any U.S. onshore operator.

Devon’s midstream business generated operating profits of $242 million in the third quarter, expanding by 9 percent on a year-to-date basis compared to 2016. This growth was driven entirely by Devon’s strategic investment in EnLink Midstream.

Devon has a 64 percent ownership in EnLink’s general partner (ENLC) and a 23 percent interest in the limited partner (ENLK). In aggregate, the company’s ownership in EnLink has a market value of approximately $3.4 billion and is expected to generate cash distributions of approximately $270 million annually.

I have updated my forecast model for Devon Energy. My valuation increases to $54.00/share and I could easily justify a higher valuation since this company is generating a lot of free cash flow. Based on my forecast, if oil averages $50/bbl in 2018 and gas & NGL prices stay relatively the same, Devon will generate more than $1.5 Billion in free cash flow in 2018.

Wall Street keeps saying they want free cash flow, well here it is.

Devon is a big company and more complex than the rest of the "Elite Eight", so it takes more effort to figure it out. < This is why you pay me the Big Bucks.
Just focus on the OUTSTANDING results they continue to report in STACK and the Delaware Basin.

They had some issues caused by Hurricane Harvey, but they are all resolved. Q4 s/b "kick ass good" if commodity prices stay where they are today. I think they will be higher than what I'm using in my forecast.

Devon Energy Sees 40% NPV Improvements in the Delaware Basin

https://www.oilandgas360.com/devon-ener ... s-delaware