Devon Earnings Climb as Coterra Merger Expands Output
Production reached 1.359 million barrels of oil equivalent a day, the top end of Devon’s guidance.
Oil-and-gas producer Devon Energy Corporation (DVN) reported $1.911 billion in second-quarter net earnings as its combination with Coterra Energy expanded production and cash flow.
The May 7 merger close reshaped Devon’s quarterly trajectory. EBITDAX rose 82% from the first quarter to $3.478 billion and nearly doubled from a year earlier, while oil production increased 30% sequentially to 503,000 barrels a day.
GAAP earnings were $2.03 a diluted share, up from $0.19 in the first quarter. Core earnings rose to $1.479 billion, or $1.57 a share, from $641 million, or $1.04 a share. Adjusted operating cash flow increased 48% sequentially to $2.924 billion, and adjusted free cash flow rose 47% to $1.655 billion.
The larger operating base lifted capital expenditures to $1.269 billion from $848 million, though spending remained 2% below the company’s guidance midpoint. Devon held its reinvestment rate at 43% as the increase in cash flow kept pace with higher accrued capital spending.
A higher realized commodity price also supported the quarter. Devon received $41.30 per barrel of oil equivalent, compared with $39.70 in the first quarter, and field-level cash margin widened to $30.03 per barrel of oil equivalent. Lease operating expense declined to $5.06 per barrel of oil equivalent, while gathering, processing and transportation expense increased to $3.16.
Regional margins strengthened in the Eagle Ford and Rockies but edged lower in Anadarko. The newly reported Marcellus region contributed a field-level cash margin of $6.89 per barrel of oil equivalent following the Coterra combination.
The transaction also raised costs and leverage. Devon recorded $246 million of restructuring and transaction expenses, while net debt increased to $10.379 billion and trailing net-debt-to-EBITDAX rose to 1.2 times.
Devon kept its full-year guidance unchanged and expects third-quarter production of 1.660 million to 1.690 million barrels of oil equivalent a day. The company continues to target at least $1 billion in annual pre-tax merger synergies by the end of 2027, including about $600 million during 2027.
The company raised its quarterly fixed dividend 33% to $0.32 a share and established an $8 billion repurchase program. Devon bought back $197 million of stock during the final seven weeks of the quarter.