Devon Energy (DVN) Update - April 27

[dan_s]

Note received from BofA Equity Research this morning.

DVN is expected to announce 1Q21 results on Tuesday, May 4th after the market close – noting this is the first quarter since the WPX merger closed on Jan 7th We expect EPS of $0.36, ahead of consensus of $0.31, with production of ~500 Mboe/d, at the top end of guidance (485-499 Mboe/d ). Key items to watch include:

• Outlook. DVN has guided 2021 spending of $1.72bn - $1.98bn with FY production of 529 -559 Mboe/d (280 -290 Mbbl/d oil), adjusted for the sale of its Wind River assets. Longer term, management has indicated that it will moderate reinvestment to 70 -80% of operating CF with growth of ‘no more than 5%’ annually.

• For the combined company management projects a pre divided c/flow break-even of ~$32/bbl by 2022 and potential to move into the upper $ 20s overtime ; watch for updates on accelerating synergy delivery on the call.

• Balance sheet. DVN continues to target 1x net debt / EBITDA ratio which appears achievable in 2022 based on our projections. It is also on track to complete half of its plans to repurchase ~ $1.5bn in debt which should finish up this quarter.

• Portfolio rationalization. DVN has acreage in the Permian, the Anadarko Basin, the Bakken, the Eagle Ford and the Powder River Basin. Given that we have seen some recent activity in the A&D market including the company’s recent sale of the Wind River assets, we will look for management’s latest thoughts on potential further portfolio rationalization.
---------------------------
MY TAKE: Devon should get a big revenue boost from higher NGL prices. Today they produce over 120,000 bbls per day of NGLs. My valuation of $36/share will be going up if their Q1 results and fresh guidance confirm my forecast model assumptions.

[Fraser921]

WOW, I didn't realize they had that much liquids. Wall street boys will wake up soon on liquid impacts, something Ive been watching very closely

[dan_s]

It is a lot harder to get an accurate reading on each company's NGL prices. U.S. petrochemical business is booming and gets almost no coverage. EOG and XEC also produce a lot of NGLs.