Company Reports

Devon Energy's total production of 1,668 thousand barrels of oil equivalent/day slightly underperformed the guidance midpoint of 1,675 mboe/d. Operating unit costs of $9.37 were a bit below the guidance midpoint of $9.50, as was capital spending of $1.46 billion. The stock declined 1% on Nov. 6.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil, Barnett Shale, and Eagle Ford interests, and merging with WPX Energy in 2021 and Corterra in 2026. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken and Appalachian basins.

Devon announced it's selling its Eagle Ford assets to Crescent Energy for $4.2 billion. The 90,000 net acres in the basin represent roughly 4% of Devon's net production on a barrel of oil equivalent basis, and a similar proportion of Devon's total net acres, by our estimates.

Activist Toms Capital has pushed Devon to explore strategic alternatives, including a potential sale of the company. Toms joins a litany of other exhortations, including Kimmeridge, who've pushed Devon to quicken the pace of asset sales and better articulate a strategy following its Coterra merger.

Devon's second-quarter production reached 1,359 mboe/d, while oil totaled 503 mboe/d, both at the top end of guidance. Production costs (including production and property taxes) averaged $11.27 per boe, while lease operating expense of $5.06 fell below annual guidance expectations.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil and Barnett Shale interests, and merging with WPX Energy in 2021 and Corterra in 2026. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken and Appalachian basins.

Devon's second-quarter production reached 1,359 mboe/d, while oil totaled 503 mboe/d, both at the top end of guidance. Production costs (including production and property taxes) averaged $11.27 per boe, while lease operating expense of $5.06 fell below annual guidance expectations.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil and Barnett Shale interests, and merging with WPX Energy. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken. Previously, Canadian heavy oil and the Barnett Shale made up 40%-50% of its production.

Devon posted total production of 833 mboe/d, a 2% decrease sequentially, though in line with guidance. Field-level cash margin (USD/boe basis) of $27.78 rose nearly 27% sequentially, while nontax operating costs came in slightly higher than expected. The stock declined 6% on the trading day.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil and Barnett Shale interests, and merging with WPX Energy. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken. Previously, Canadian heavy oil and the Barnett Shale made up 40%-50% of its production.

The United Arab Emirates announced it will leave The Organization of the Petroleum Exporting Countries after six decades of membership effective May 1.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil and Barnett Shale interests, and merging with WPX Energy. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken. Previously, Canadian heavy oil and the Barnett Shale made up 40%-50% of its production.

Over the March 14-15 weekend, the US conducted large-scale strikes on Kharg Island, according to NBC News. The island houses Iran's critical crude export terminal, which ships over 90% of Iran's crude exports. We understand that the strikes focused on military targets and avoided oil infrastructure.

On March 10, a CNN source report said Iran has begun laying mines in the Strait of Hormuz. The strait is the world's most important maritime route, as about 20% of global crude volumes pass through it. While not extensive, nearly 15 million barrels per day of crude production are stranded there now.

A March 6 New York Times analysis revealed that at least 10 merchant vessels have been attacked in the Strait of Hormuz, the Persian Gulf, and the Gulf of Oman. The latter two bodies of water connect to the strait.

The US has agreed to provide insurance backstops and naval escorts for commercial vessels transiting the Strait of Hormuz amid Iran's sustained attacks on ships in response to US-Israeli strikes launched over the weekend. In response, Brent prices declined a bit to the upper-70s.

On Feb. 28, the US and Israel launched strikes on Iran with the goal of regime change. Brent benchmark oil prices had risen over 7% by March 2 morning trading.

The US has assembled a massive force of jet fighters and aircraft support to the Middle East. Negotiations over Iran's enrichment of uranium haven't yielded a resolution between the two nations. President Donald Trump indicated he will decide in 10 days whether to begin kinetic strikes against Iran.

Devon posted a strong fourth quarter, with total production of 851 mboe/d exceeding our expectations by 1%, while lease operating and gathering, processing, and transportation unit costs of $8.60 moving appreciably below what we earmarked, as did capital expenditures of $870 million.

In 2018, Devon Energy embarked on a series of shrewd capital allocation moves that included selling its EnLink Midstream interest, divesting its Canadian heavy oil and Barnett Shale interests, and merging with WPX Energy. This allowed Devon to recycle cash by shedding interests that were either noncore or higher on the cost curve. Recycled cash allowed Devon to meaningfully pivot toward the Delaware and enjoy newfound exposure in the Bakken. Previously, Canadian heavy oil and the Barnett Shale made up 40%-50% of its production.