Devon Energy (DVN) Q2 Results - Aug 7

[dan_s]

Devon's Q2 results beat my forecast. Devon has a very aggressive stock buyback underway (see last paragraph), that should raise the multiple of operating cash flow that I use to value the stock.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

• Net earnings of $844 million, or $1.34 per diluted share; core earnings of $885 million, or $1.41 per diluted share < My Q2 forecast was $779 Adjusted Net Income.
• Second quarter oil production reached an all-time high of 335,000 barrels per day, exceeding guidance by 3 percent < Very Good!
• Delivered second quarter operating cash flow of $1.5 billion and free cash flow of $587 million
• Strengthened the balance sheet with cash balances reaching $1.2 billion
• Declared fixed-plus-variable dividend payout of $0.44 per share based on second quarter results
• Repurchased 5.2 million shares of common stock at a total cost of $256 million in the second quarter
• Raised full-year 2024 production outlook for second consecutive quarter
• Board of directors increased share-repurchase authorization by 67 percent to $5 billion
• Announced strategic acquisition on July 8, enhancing scale and transforming Williston Basin business

CEO PERSPECTIVE

“Devon delivered a strong second quarter driven by record oil production and effective cost management,” said Rick Muncrief,
president and CEO. “Our outstanding operational performance was highlighted by excellent well productivity in the Delaware. We also
saw improved cycle times across the entire company, setting multiple drilling and completion records.

“Based on our solid performance for the first half of 2024, we now expect our full-year 2024 production guidance to be 5 percent
higher than our original outlook. This improved production outlook coupled with our disciplined capital plan strengthens our free cash
flow generation capabilities.

“In July, we took an important step to further strengthen the quality and depth of our portfolio with the acquisition of Grayson Mill in
the Williston Basin. These assets are an excellent addition to Devon, expanding our oil production, project inventory and operating
scale.

“Importantly, as a result of our improved outlook and recent acquisition, we expanded our share-repurchase authorization by 67
percent to $5 billion. This upsized program provides us additional runway to further compound per-share growth as we continue to
execute on the tenets of our disciplined business model,” Muncrief added.

FINANCIAL RESULTS

Devon reported net earnings of $844 million, or $1.34 per diluted share, in the second quarter of 2024. Adjusting for items analysts
typically exclude from estimates, the company’s core earnings were $885 million, or $1.41 per diluted share.

Devon’s operating cash flow totaled $1.5 billion in the second quarter, a 9 percent increase versus the year-ago period. The company
funded its capital requirements and had $587 million of free cash flow for the quarter.

The company’s investment-grade financial position continued to strengthen in the second quarter with cash balances reaching $1.2
billion. Devon exited the quarter with outstanding debt of $6.1 billion and a net debt-to-EBITDAX ratio of 0.6 times.

RETURN OF CAPITAL

Based on the second quarter financial performance, Devon declared a fixed-plus-variable dividend of $0.44 per share, payable on
Sept. 30, 2024, to shareholders of record at the close of business on Sept. 13, 2024. The dividend payout consists of the fixed dividend
at $0.22 per share and a variable distribution of $0.22 per share.

The company also returned capital to shareholders through the continued execution of its share repurchase program. In the second
quarter, Devon repurchased 5.2 million shares at a total cost of $256 million. Since program inception in late 2021, the company has
repurchased 54.7 million shares, at a total cost of $2.7 billion.

Given this substantial progress and the expected free cash flow accretion from the recent Grayson Mill acquisition, the company has
increased its share-repurchase authorization by 67 percent to $5 billion. The expanded authorization extends through mid-year 2026.