Devon Energy (NYSE: DVN) reported first-quarter adjusted earnings of $1.04 per share, narrowly missing Wall Street expectations by two cents, as a sharp decline in natural gas prices offset strong oil production and cost controls ahead of its merger with Coterra Energy.
"Devon delivered another strong quarter, beating guidance across major value drivers, including oil production and capital," CEO Clay Gaspar said in a statement. He added that the company is on track to achieve its $1 billion free cash flow improvement target ahead of schedule.
The Oklahoma City-based producer’s results were a mix of operational strength and commodity price weakness. While oil production hit the upper end of forecasts, the company’s average realized price for natural gas fell 32.2% to $1.68 per thousand cubic feet. The company generated $816 million in free cash flow on capital spending of $848 million, which was 6% below its guidance midpoint.
The earnings report comes just before Devon is set to close its all-stock merger with Coterra Energy (NYSE: CTRA), a transaction approved by shareholders on May 4. The combined firm, which will keep the Devon Energy name, is expected to be a dominant producer in the Delaware Basin and aims to generate $1 billion in annual pre-tax synergies by 2027.
For the second quarter on a standalone basis, Devon guided for total production between 851,000 and 868,000 barrels of oil equivalent per day. Management said it will provide a full-year outlook for the combined company in mid-June.
The results show the challenge facing gas-exposed producers, but the impending merger with Coterra is the market’s primary focus. Investors will watch for the new combined company’s full-year guidance in mid-June and details on its expanded shareholder return program, which is expected to include a new buyback authorization of over $5 billion.
This article is for informational purposes only and does not constitute investment advice.
