Devon Energy (DVN) Q2 Preview - July 11
Posted: Mon Jul 11, 2022 10:06 am
From RBC Capital Markets with my comments in blue.
Note that Devon has been moved from the Sweet 16 to our High Yield Income Portfolio
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July 11, 2022
Devon Energy Corporation
Quarterly Check-Up: 2Q22
Our view: We think 2Q22 operational and financial results should be
inline to slightly above guidance midpoints. The 2Q22 declared quarterly
variable dividend should be around $1.24/share, up from $1.11/share in
1Q22, based on the 50% payout of excess FCF. We think the key investor
debates are whether management will increase the variable payout, if the
overall dividend yield is strong enough at strip commodity prices that have
weakened, and the longer-term inventory depth and need for M&A.
Key points:
• Our EPS/CFPS estimates of $2.34/$3.54 are unchanged following our < Inline with my Q2 forecast.
recent update for our increased commodity price forecast which included
final 2Q22 benchmark commodity prices, and other changes to our
model. Our estimates are a touch above the $2.25/$3.53 consensus,
but we expect estimates come up when models are updated for final
commodity prices. There is also at least one estimate that appears too
low skewing Consensus a bit.
• The midpoint of guidance implies $2.30/$3.50 for EPS/CFPS assuming no
changes to the prior period share count. We assume slightly better price
realizations and a lower share count related to some buyback activity.
• We model production at 597 Mboe/d (295 Mb/d oil), inline with the < Compares to my production forecast of 587,500 Boepd.
consensus estimates, and up 4% sequentially. Our estimates are above
the midpoint of the 585-605 Mboe/d (289-296 Mb/d oil) guidance.
• We expect 2Q22 capital spending at $595 million, near the midpoint of
the $570-640 million guidance and the $604 million consensus estimate.
• We estimate a cash hedge loss of $515 million for the quarter
Note that Devon has been moved from the Sweet 16 to our High Yield Income Portfolio
----------------------------
July 11, 2022
Devon Energy Corporation
Quarterly Check-Up: 2Q22
Our view: We think 2Q22 operational and financial results should be
inline to slightly above guidance midpoints. The 2Q22 declared quarterly
variable dividend should be around $1.24/share, up from $1.11/share in
1Q22, based on the 50% payout of excess FCF. We think the key investor
debates are whether management will increase the variable payout, if the
overall dividend yield is strong enough at strip commodity prices that have
weakened, and the longer-term inventory depth and need for M&A.
Key points:
• Our EPS/CFPS estimates of $2.34/$3.54 are unchanged following our < Inline with my Q2 forecast.
recent update for our increased commodity price forecast which included
final 2Q22 benchmark commodity prices, and other changes to our
model. Our estimates are a touch above the $2.25/$3.53 consensus,
but we expect estimates come up when models are updated for final
commodity prices. There is also at least one estimate that appears too
low skewing Consensus a bit.
• The midpoint of guidance implies $2.30/$3.50 for EPS/CFPS assuming no
changes to the prior period share count. We assume slightly better price
realizations and a lower share count related to some buyback activity.
• We model production at 597 Mboe/d (295 Mb/d oil), inline with the < Compares to my production forecast of 587,500 Boepd.
consensus estimates, and up 4% sequentially. Our estimates are above
the midpoint of the 585-605 Mboe/d (289-296 Mb/d oil) guidance.
• We expect 2Q22 capital spending at $595 million, near the midpoint of
the $570-640 million guidance and the $604 million consensus estimate.
• We estimate a cash hedge loss of $515 million for the quarter