Devon recorded stronger quarterly growth and plans to devote more into the Permian Basin

Devon Energy only grew stronger in the fourth quarter of 2023 with record-settling oil volumes and net earnings of $1.2 billion or $1.81 per share.

The Oklahoma City company released its earnings report following the close of markets on Tuesday showing adjusted core earnings of $902 million or $1.41 a share. It had operating cash flow of $1.7 billion in the quarter, the highest quarterly amount for all of 2023.

The cash flow not only funded Devon’s capital requirements but resulted in $827 million of free cash flow in the qurter. For all of 2023, Devon had operating cash flow totaling $6.5 billion and free cash flow of $2.7 billion.

“Devon exited 2023 with positive momentum, delivering a solid quarter of execution that surpassed our operational and financial
targets,” said Rick Muncrief, president and CEO.

From the leadership perspective, it resulted in a cash-return yield of 10% for shareholders. But times call for a change in funding as well, as Muncrief indicated.

“Looking ahead to 2024, we have designed a plan to deliver a step-change improvement in capital efficiency. By allocating additional capital to the core of the Delaware Basin and high-grading activity across our diversified portfolio, we expect to efficiently sustain our oil production for roughly 10 percent less capital.”

These are some of the highlights of the quarter for Devon.

Fourth-quarter production exceeded top end of guidance range, averaging 662,000 oil-equivalent barrels per day
• Delaware Basin production increased 6 percent year over year, driving results that were favorable to guidance
• Record-setting oil volumes drove an 8 percent increase in total production during 2023
• Repurchased 5.2 million shares of common stock at a total cost of $234 million in the fourth quarter
• Balance sheet continued to strengthen with cash balances increasing $114 million to a total of $875 million
• 2024 outlook reaffirmed with capital objectives designed to improve efficiency and drive per-share growth
• Board approved a 10 percent increase to the fixed quarterly dividend

During the fourth quarter, Devon averaged 24 operated drilling rigs and 6 completion crews. It resulted in 100 gross operated wells put online with an average lateral length of 9,900 feet. The company reported $940 in capital expenditures.
Production averaged 662,000 oil-equivalent barrels (Boe) per day in the fourth quarter, with oil averaging 317,000 barrels per day.

For the full-year 2023, record-setting oil volumes drove total production 8 percent higher year over year. Devon’s fourth-quarter operating performance was driven by its Delaware Basin asset, which accounted for 65 percent of the company’s production at 433,000 Boe per day.

This production result represents a growth rate of 6 percent compared to the year-ago period, driven by 62 gross operated wells being placed online. Initial production rates from this activity averaged 2,700 Boe per day, with average per-well recoveries estimated at 1.5 million oil-equivalent barrels.

Devon exited the year with estimated proved reserves of 1.8 billion Boe. Proved undeveloped reserves accounted for 22
percent of the total. Extensions and discoveries from the company’s drilling program added 322 million Boe of reserves in
2023, equating to a replacement rate of 134 percent of production. The capital costs to deliver these extensions and
discoveries totaled $3.7 billion, resulting in a finding and development cost of $11.47 per Boe.

For 2024, Devon plans to sustain oil production at around 315,000 barrels per day, with total volumes approximating 650,000 Boe per day. The capital requirements to deliver this
production are expected to decline approximately 10 percent year-over-year to a range of $3.3 billion to $3.6 billion.

Due to the addition of a fourth Delaware completion crew in January, the company’s capital program in 2024 is expected to be
weighted towards the first half of the year. As a result of this activity timing, first-quarter capital spending is estimated to range
from $915 million to $965 million.

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