| Can Devon Energy (DVN) Withstand Low Commodity Prices? | |
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On Aug 10, 2015, we issued an updated research report on Devon Energy Corporation DVN. Devon is benefiting from the transformational steps taken during 2014. However, the ongoing softness in commodity prices and the highly competitive oil and gas industry could have an adverse impact on Devon’s operations and financial performance.
Devon Energy, a Zacks Rank #3 (Hold) stock, reported mixed results in the second quarter with its earnings per share beating the Zacks Consensus Estimate and total revenues lagging the same. The ongoing weakness in commodity prices is preventing the company to realize the full benefits of higher production of oil and gas from its North American properties.
Devon’s deep and diversified portfolio, primarily composed of unconventional resources, reflects significant long-term growth potential. Consistent investments made by the company over a period of time are helping it to sustain its strong performance despite the lowered E&P budget for 2015. Devon’s 2015 E&P budget is in the range of $3.9 billion to $4.1 billion. The company lowered its total capital expenditure guidance by nearly $350 million from the one provided at the beginning of 2015. The decline in capex is not going to affect its oil production growth outlook of 25% to 35% for the year.
Devon has resorted to cost-saving initiatives to support its margins in this difficult commodity price environment. As a result of cost containment measures, Devon’s field level operating costs, which include both lease operating expenses and production taxes, declined 8% year over year to $11.05 per barrel of oil equivalent (Boe). Devon expects field-level operating costs and general and administrative expenses to decline to around $14.50 per Boe for 2015 – this implies full-year cost savings of around $400 million.
The company’s second-quarter results were lower than expected primarily due to weak commodity prices. The softness in commodity prices is expected to prevail for the best part of the year, affecting Devon’s profitability. In the second quarter of 2015, oil, gas and NGL sales contributed nearly 47% of total revenues, significantly lower than the 59% contribution in the year-ago quarter.
Devon Energy operates in a highly competitive oil and gas industry. Some of the competitors in this industry are financially stronger than Devon with more resources at their disposal. This might limit Devon’s capacity to apply for new drilling rights or acquire properties. Besides the financial muscle, a wide global presence of its competitors enables them to cope with the falling price environment more effectively than Devon.
Some better-ranked stocks in the same industry include Linn Energy, LLC LINE, Cobalt International Energy, Inc. CIE and QEP Resources, Inc. QEP, each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DEVON ENERGY (DVN): Free Stock Analysis Report QEP RESOURCES (QEP): Free Stock Analysis Report COBALT INTL EGY (CIE): Free Stock Analysis Report LINN ENERGY LLC (LINE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
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Devon Energy Corporation
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CODE : DVN |
ISIN : US25179M1036 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Devon Energy is a and oil producing company based in United states of america. Devon Energy holds various exploration projects in Canada. Its main exploration property is JACKFISH OIL SANDS PROJECT in Canada. Devon Energy is listed in United States of America. Its market capitalisation is US$ 27.0 billions as of today (€ 25.3 billions). Its stock quote reached its lowest recent point on August 18, 1995 at US$ 10.00, and its highest recent level on February 22, 2008 at US$ 99.19. Devon Energy has 525 000 000 shares outstanding. |