Devon Energy Reports Third-Quarter 2015 Results

• Produced Company record 282,000 barrels of oil per day
• Exceeded oil production guidance for fifth consecutive quarter
• Raised oil production growth for the second time in 2015
• Reduced lease operating expenses 14 percent year over year
• Decreased G&A costs by 8 percent from second quarter
• Improved 2015 capital and operating cost outlook

OKLAHOMA CITY--(BUSINESS WIRE)-- Devon Energy Corp. (NYSE: DVN) today announced core earnings of $316 million, or $0.76 per diluted share, for the third quarter of 2015. This level of earnings generated cash flow from operations of $1.6 billion in the third quarter, a 41 percent increase compared to the second quarter of 2015.

“Devon delivered another outstanding operational performance in the third quarter,” said Dave Hager, president and CEO. “Our strategy of operating in North America’s best resource plays, coupled with a focus on delivering best-in-class execution, continues to generate top-tier results. Across our asset portfolio, well performance has consistently exceeded type curve expectations through higher production rates, declining capital costs and lower operating expenses.”

“Based on these strong results, we are raising our full-year oil production outlook for the second time this year,” Hager said. “And we are delivering this incremental production growth with significantly lower costs. We are now on pace to save around $1 billion of capital and operating costs in 2015 versus original expectations.”

“Looking ahead, we will continue to take the appropriate actions to preserve operational momentum and protect our balance sheet,” Hager said. “Our teams will maximize the value of production by aggressively pursuing cost reductions and we will maintain the flexibility of our capital programs. The advantage of having minimal long-term commitments allows us to dynamically allocate capital to our highest-returning areas while balancing investment with cash flow.”

On a reported basis, due to non-cash, asset-impairment charges, Devon had a net loss of $3.5 billion, or $8.64 per diluted share, for the third quarter of 2015. This compares with third-quarter 2014 reported net earnings of $1.0 billion, or $2.47 per diluted share.

Record Oil Production Exceeds Guidance for Fifth Consecutive Quarter

Devon delivered record oil production of 282,000 barrels per day, a 31 percent increase compared to the third quarter of 2014. This result surpassed the top end of guidance by 2,000 barrels per day, marking the fifth consecutive quarter the Company has exceeded oil production expectations.

The majority of Devon’s record-setting oil production was attributable to its U.S. resource plays, which are delivering the Company’s highest margins. U.S. oil production averaged 161,000 barrels per day in the third quarter, an increase of 18 percent compared to the third quarter of 2014. Growth in U.S. production was largely attributable to the Company’s Eagle Ford, Delaware Basin and Rockies assets. In the third quarter, Devon’s world-class Eagle Ford assets continued to deliver prolific well results. Net production in the Eagle Ford averaged 113,000 oil-equivalent barrels (Boe) per day, a 43 percent increase year over year. The Company also had another quarter of strong production results from its stacked-pay position in the Delaware Basin, where net production increased to 61,000 Boe per day in the third quarter, a 32 percent increase compared to the year-ago period. Another key contributor to Devon’s growth for the quarter was a 61 percent increase in oil production from its Rockies assets. Driven by development drilling in the Power River Basin, oil production in the Rockies averaged 16,000 barrels per day in the third quarter.

In Canada, Devon’s heavy-oil operations also delivered impressive production growth. In total, the Company’s heavy-oil production increased to a record 121,000 barrels of oil per day in the third quarter. Driven by the ramp-up of the Jackfish 3 facility to nameplate capacity four months ahead of schedule, Canadian oil production increased 52 percent compared to the third quarter of 2014.

Total production of oil, gas and natural gas liquids averaged 680,000 Boe per day during the third quarter. This result exceeded the top end of the Company’s guidance by 4,000 Boe per day and represents a 6 percent increase compared to the third quarter of 2014. With the strong growth in high-margin production, oil is now the largest component of the Devon’s product mix at 41 percent of total production.

Devon Raises Full-Year Production Outlook

Based on strong operating results year to date, Devon has raised its 2015 oil production guidance by 2 percent to a mid-point of 276,000 barrels per day. This marks the second time in 2015 the Company has increased its oil production outlook. Total oil production growth in 2015 is now expected to range from 31 to 33 percent. Due to the improving outlook for oil production, the Company has also raised its top-line production growth guidance for 2015 to a range of 8 to 10 percent.

Full-Year Capital Savings to Reach $500 Million

In addition to higher production, Devon is also benefiting from lower capital spending. The Company’s 2015 E&P capital program, excluding acquisitions, is now expected to range from $3.8 to $4.0 billion, a $100 million decrease compared to previous guidance. Combined with additional non-E&P capital savings, Devon’s total 2015 capital spending is expected to be $150 million lower than previous guidance. As a result of these additional savings, Devon has now reduced its 2015 capital spending guidance by $500 million compared to its original expectations issued in February.

Operations Report Highlights

For additional details on Devon’s E&P operations, please refer to the Company’s third-quarter 2015 Operations Report at www.devonenergy.com. Highlights from the report include:

• Bone Spring basin type curve raised
• Leonard Shale program delivers excellent results
• Eagle Ford delivers record-setting well results
• Jackfish 3 reaches nameplate capacity ahead of schedule
• Meramec appraisal success expands potential

Hedges Increase Upstream Revenue; EnLink Profit Expands

Revenue from oil, natural gas and natural gas liquids sales totaled $1.3 billion in the third quarter of 2015, with oil revenue accounting for nearly 70 percent of total upstream revenues. This increased oil sales weighting was attributable to the Company’s substantial growth in both U.S. and Canadian oil production.

Cash settlements related to oil and natural gas hedges increased revenue by more than $600 million, or approximately $10 per Boe, in the third quarter. At the end of September, the Company’s remaining commodity hedges had a fair-market value of approximately $650 million.

Devon’s midstream business generated operating profits of $212 million in the third quarter, bringing the year-to-date total to $630 million. The majority of this profitability was attributable to the Company’s investment in EnLink Midstream. Year-to-date, EnLink-related operating profits have expanded by 15 percent compared to the same period in 2014.

Lease Operating Expenses Decline 14 Percent; Lowering Full-Year Cost Outlook

The Company has several cost-reduction initiatives under way that positively impacted third-quarter results. Field-level operating costs, which include both lease operating expenses (LOE) and production taxes, declined 18 percent compared to the third quarter of 2014 to $9.59 per Boe.

The most significant operating cost savings came from LOE, which is Devon’s largest field-level cost. LOE declined 14 percent compared to the year-ago period to $8.14 per Boe and was 9 percent below the low end of Devon’s guidance range. These LOE cost savings were realized across all regions of the Company’s portfolio.

Devon also realized significant general and administrative (G&A) cost savings in the third quarter. G&A expenses totaled $198 million, or $3.17 per Boe, an 8 percent improvement compared to the second quarter of 2015, and this strong cost performance was 7 percent below the low end of guidance.

Based on year-to-date cost savings, Devon now anticipates its field-level operating costs and G&A to decline to around $13.80 per Boe for the full-year 2015. These declines represent incremental savings of around $150 million based on the Company’s most recent guidance. Compared to Devon’s original guidance in February, this implies a full-year cash cost savings of around $550 million.

Balance Sheet and Liquidity Remain Strong

Devon’s financial position remains exceptionally strong with investment-grade credit ratings and excellent liquidity. The Company exited the quarter with net debt, excluding non-recourse EnLink obligations, totaling just over $7 billion. Devon had cash balances of $1.8 billion at quarter end, and has no borrowings under its $3.0 billion senior credit facility.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Core earnings and net debt are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided later in this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post an operations report to its website at www.devonenergy.com. The Company’s third-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Nov. 4, 2015, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; unforeseen changes in the rate of production from our oil and gas properties; uncertainties in future exploration and drilling results; uncertainties inherent in estimating the cost of drilling and completing wells; drilling risks; competition for leases, materials, people and capital; midstream capacity constraints and potential interruptions in production; risk related to our hedging activities; environmental risks; political changes; changes in laws or regulations; our limited control over third parties who operate our oil and gas properties; our ability to successfully complete mergers, acquisitions and divestitures; and other risks identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential and exploration target size. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The Company is the second-largest oil producer among North American onshore independents. For more information, please visit www.devonenergy.com.

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index.

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Source: Devon Energy Corporation