Devon records Q1 net loss of $1.8 billion, expects to curtail 10,000 b/d in Q2
Due to the ongoing price volatility, Devon Energy Corp. expects to curtail 10,000 b/d in the year’s second quarter due to low commodity prices, while for the full-year, oil production is expected to remain essentially flat compared to 2019. The company is lowering its 2020 expense outlook by $250 million to $1.65 billion.
The outlook came as part of the company’s first quarter results. For the quarter, the company reported a net loss of $1.8 billion attributable to $2.8 billion of non-cash impairment charges due to asset evaluations associated with current business conditions. Adjusting for this charge and other items analysts typically exclude from estimates, Devon’s core earnings were $48 million. Operating cash flow from continuing operations totaled $529 million in the first quarter, a 21% increase compared to the same period a year ago.
Capital spending in the first quarter was $391 million, 12% below midpoint guidance. Upstream revenue, excluding derivative valuation changes, totaled $908 million in the first quarter, a 5% decrease compared to first-quarter 2019 due to lower commodity prices.
As noted Mar. 30, 2020, the company cut its capital expenditures by $800 million for full-year 2020 (OGJ Online, Mar. 30, 2020). The revised capital outlook of $1 billion represents a reduction of nearly 45% compared to the original capital budget. For the second quarter, it expects to invest $200-250 million for an average oil production of 145,000-155,000 b/d.
Production
Net production from retained assets for the first quarter averaged 348,000 boe/d. Oil production averaged 163,000 b/d, a 15% increase from the same period a year ago. This result exceeded midpoint guidance by 3,000 b/d due to strong operating results in the Delaware basin.
Net production in the Delaware basin averaged 162,000 boe/d, a 51% increase compared to first-quarter 2019. First-quarter volume growth was driven by 32 new wells averaging 30-day rates of 2,500 boe/d (67% oil).
Net production in the Powder River basin averaged 29,000 boe/d, of which 74% was light oil. In the quarter, Devon brought online 14 new wells at an average completed well cost of $6.4 million. The capital program was highlighted by appraisal work in the Niobrara oil play. The Tillard 36-4X, targeting the Niobrara B interval, positively responded to increased stimulation and a slower flowback approach to deliver an average 90-day rate of 1,200 boe/d (85% oil).
First-quarter net production in the Eagle Ford averaged 50,000 boe/d. The company brought online 30 wells in the quarter, with completed well costs averaging $6.4 million. This activity was highlighted by a 4-well redevelopment spacing test targeting the Upper Eagle Ford interval. This 4-well test attained average 30-day rates of 2,000 boe/d per well (60% oil) and confirmed spacing potential of up to 12 wells per section in the Upper Eagle Ford.
Net production in the Anadarko basin averaged 98,000 boe/d. New well activity in the quarter was limited to 4 operated wells targeting the Meramec formation in Kingfisher County. These development wells averaged 30-day rates of 1,200 boe/d.