Devon Energy Corp raised its full-year oil output forecast and beat estimates for quarterly profit on Tuesday, as the U.S. oil and gas producer drilled more in Delaware basin and sold it at higher prices while keeping a tight lid on expenses.
The company recorded a 5 per cent rise in prices for oil sold at $56.68 per barrel in the quarter due to better hedging and at a time when U.S. light crude prices averaged about 11.8 per cent lower than a year earlier.
Excluding hedging, the company’s realized price for oil was down nearly 13 per cent. Oil producers typically hedge to lock in a price, guaranteeing a fixed amount for their output.
Devon said it has hedged about 75 per cent of oil and gas that it expects to produce in the second half of 2019.
“We see the company being able to continue to grow oil production at a strong rate, while reducing its break-even oil price with aggressive cost-cutting efforts,” Edward Jones analyst Jennifer Rowland said in a note.
Its output from the Delaware basin in the oil-rich Permian field surged 58 per cent to 120,000 barrels of oil equivalent per day (boepd) in the second quarter, while total expenses fell 30 per cent to $1.68 billion in the quarter. Total production fell 3.7 per cent to 512,000 boepd in the quarter, but beat analysts’ estimates of 509,690 boepd, according to IBES data from Refinitiv.
The company, which has been divesting non-core assets to pare its debt and become a pure-play U.S. oil producer, also cut its full-year capital expenditure guidance by $50 million to a range of $1.8 billion to $1.9 billion.
The company said the midpoint of its 2019 production outlook now represents an estimated oil growth rate of 19 per cent, up from its previous guidance of 17 per cent, the company said.
Devon’s net income attributable to shareholders was $495 million, or $1.19 per share, in the second quarter ended June. 30, compared with a loss of $425 million, or 83 cents per share, a year earlier.
Adjusting for certain items, the company earned 43 cents per share compared with analysts’ expectation of 34 cents per share.