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Devon Energy(DVN) - 2023 Q2 - Quarterly Report

Production and Financial Performance - Second quarter oil production totaled 323 MBbls/d, exceeding the plan by 1%[153] - Total production volumes increased by 9% to 322 MBbls/d for oil and 12% to 1,042 MMcf/d for gas compared to the same period in 2022[172] - The Delaware Basin accounted for 65% of total oil production in Q2 2023, with a slight decrease of 1% from Q1 2023[156] - Net earnings for the six months ended June 30, 2023, were $1.7 billion, down from $2.9 billion for the same period in 2022, reflecting a significant decrease[171] - Devon's net earnings for Q2 2023 were reported at $698 million, compared to $1,938 million in Q2 2022, marking a decline of approximately 64%[230] - Devon's earnings attributable to the company for the first half of 2023 were $1.70 billion, down from $2.93 billion in the same period of 2022, indicating a decrease of about 42%[224] Cash Flow and Expenses - Generated $1.4 billion of operating cash flow in Q2 2023 and $7.1 billion for the past twelve trailing months[153] - Total operating cash flow for the first six months of 2023 was $3.08 billion, a decrease of 31% compared to $4.52 billion in 2022[190] - Production expenses increased by 4% to $719 million in Q2 2023, primarily due to higher LOE and gathering, processing, and transportation costs[162] - Production expenses totaled $1.412 billion for the six months ended June 30, 2023, a 5% increase from $1.347 billion in 2022, primarily due to a 42% rise in lease operating expenses[177] - General and administrative expenses increased by 11% to $198 million, driven by a rise in non-labor costs[182] Earnings and Margins - Second quarter earnings attributable to the company were $690 million, or $1.07 per diluted share[153] - The realized price for unhedged oil decreased by 28% to $73.02 per Bbl, while the realized price for unhedged gas fell by 65% to $1.77 per Mcf, contributing to a $2.8 billion decrease in earnings[174] - Field-level cash margin decreased to $29.45 per BOE in Q2 2023 from $34.42 per BOE in Q1 2023[164] - Devon's Field-Level Cash Margin for the first half of 2023 was $3.76 billion, down from $5.93 billion in the same period of 2022, reflecting a decrease of about 37%[230] - The company's EBITDAX for Q2 2023 was $1.73 billion, a decrease from $2.83 billion in Q2 2022, representing a year-over-year decline of approximately 39%[230] Share Repurchase and Dividends - The company completed approximately 68% of its authorized $3.0 billion share repurchase program, repurchasing approximately 39.6 million shares for about $2.1 billion[153] - The company repurchased approximately 13.9 million shares for $745 million in the first half of 2023, compared to 9.0 million shares for $548 million in 2022[196] - A fixed dividend of $0.20 per share was established in the first quarter of 2023, with total dividends for the first six months amounting to $1.06 billion, down from $1.50 billion in 2022[198] - The company plans to pay a total cash dividend of approximately $314 million in the third quarter of 2023, consisting of a fixed dividend of $0.20 and a variable dividend of $0.29 per share[214] Tax and Regulatory Considerations - The effective income tax rate rose to 22% in Q2 2023 from 18% in Q1 2023, influenced by the new CAMT tax planning[170] - The effective income tax rate for the first half of 2023 was 20%, down from 22% in the same period of 2022[188] - The company continues to assess the potential impact of the 15% Corporate Alternative Minimum Tax (CAMT) enacted in 2022, which may affect its cash tax liabilities depending on future operating results[219] - The company anticipates continued analysis of tax planning strategies in light of the new CAMT regulations[170] Debt and Financial Position - As of June 30, 2023, Devon had total debt of $6.4 billion, with an average fixed interest rate of 5.8%[233] - The company has approximately $3.0 billion of available borrowing capacity under its Senior Credit Facility as of June 30, 2023[208] - Devon has commodity derivatives that cover a portion of its estimated production for the last six months of 2023 and for 2024 and 2025, with a potential $125 million impact from a 10% change in forward curves[232] - The company’s credit rating from Standard and Poor's is BBB with a stable outlook, indicating a solid financial position[209] Gains and Asset Dispositions - The company recorded a $64 million gain within asset dispositions related to the difference between fair market value and book value of assets contributed to the Water JV[169] - The company recorded a $64 million gain from asset dispositions related to the Water JV in Q2 2023[185] Future Expectations - Capital expenditures for the first six months of 2023 amounted to $2.09 billion, representing approximately 68% of operating cash flow, an increase from $1.11 billion in 2022[193] - Capital expenditures for the remainder of 2023 are expected to range from $1.6 billion to $1.8 billion[216] - The company believes it has not undergone an "ownership change" in the first half of 2023, but the recent merger increased the likelihood of such a change occurring in the next year[218] - The company received distributions from investments of $17 million in the first half of 2023, compared to $23 million in 2022[195]