Devon Energy Corp. (DVN) has reported better-than-expected third-quarter 2021 earnings. The company has also increased its fixed-plus-variable dividend.
The Oklahoma-based energy company posted adjusted earnings of $1.08 per share, which surpassed the Street’s estimate of $0.93 per share. Devon had reported an adjusted loss of $0.04 per share in the same quarter last year.
Total production stood at 608,000 oil-equivalent barrels (Boe) per day, up 86.5% year-over-year. The production also exceeded guidance by 5%. Delaware Basin production volume and better-than-expected base production performance across the portfolio drove the results.
Delaware Basin production stood at 409,000 Boe per day, up 39% year-over-year. Devon reported revenues of $3.5 billion, compared to $1.1 billion in the same quarter last year.
While the company’s adjusted EBITDAX came in at $1.63 billion, its capital expenditures stood at $474 million. Adjusted free cash flow was $1.1 billion, the highest quarterly amount in Devon’s 50-year history. (See Devon stock charts on TipRanks)
Guidance
The CEO of Devon, Rick Muncrief, said, “Looking ahead to the remainder of this year and into 2022, we will continue to prioritize free cash flow over volume growth. With our operations successfully scaled to generate strong cash flow growth, we have no intention of pursuing production growth until it is clear that market fundamentals have sustainably recovered, and worldwide spare oil capacity is effectively absorbed.”
For the fourth quarter of 2021, the company projects total oil production to be in the range of 583 million Boe per day to 601 million Boe per day. Total capital expenditures are anticipated in the range of $465 million to $535 million.
Capital Deployment
Meanwhile, Devon’s board of directors has announced an increased fixed-plus-variable dividend of $0.84 per share, up 71% from the prior quarter. The new dividend will be paid on December 30 to shareholders of record as of December 10.
As part of its cash-return strategy, the company also disclosed the authorization of a $1 billion share repurchase program of its common stock through year-end 2022.
“While our market-leading dividend will remain the top priority for free cash flow, this buyback program provides us with another avenue to opportunistically return value to shareholders and enhance per-share results,” Muncrief commented.
Wall Street’s Take
Shares of Devon have skyrocketed 335.5% over the past year and the stock scores a Strong Buy consensus rating based on 14 Buys and 4 Holds. The average Devon price target of $45 implies 7.2% upside potential.
Smart Score
Devon scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. (See Top Smart Score Stocks on TipRanks)
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