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DEVON ENERGY CORP/DE (DVN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record oil volumes (398 Mbbl/d) and strong total production (848 Mboe/d), driving $1.66B operating cash flow and $738M free cash flow; fixed dividend raised 9% to $0.24 and ~$301M of buybacks executed .
  • Management said Devon beat Street consensus for the fifth straight quarter; Eagle Ford timing/productivity and Williston (Grayson Mill) were key contributors to outperformance and lower per-unit costs (LOE+GP&T 10% below guidance) .
  • 2025 outlook improved: production raised ~2% to 805–825 Mboe/d while capex was lowered ~5% to $3.8–$4.0B, implying higher capital efficiency and more free cash flow vs the prior outlook per company commentary .
  • Strategic updates: dissolving BPX Eagle Ford JV (Devon to >95% WI) expected to save >$2M per well; Rockies integration ahead of plan with ~$50M cost/expense savings and ~$600k D&C savings per well identified to date .
  • Potential stock catalysts: improved 2025 guide (higher volumes, lower capex), dividend raise, and visible cost/efficiency gains (Eagle Ford JV dissolution, Rockies synergies), balanced against higher interest expense tied to Grayson Mill financing .

What Went Well and What Went Wrong

  • What Went Well

    • Record oil production (398 Mbbl/d) and total production (848 Mboe/d), exceeding guidance; Eagle Ford volumes up ~23% QoQ on strong D&C execution and timing .
    • Cost discipline: production costs including taxes averaged $11.30/boe (10% below guidance), supporting $738M FCF in Q4 and $2.96B FCF in 2024 .
    • Strategic execution: dissolved BPX JV in Eagle Ford (>$2M D&C savings per well); Rockies/Grayson Mill integration delivering ~$50M annualized savings and ~$600k per-well D&C gains; CEO quote: “exceptionally strong results… generating significant free cash flow” .

  • What Went Wrong

    • Realized price per boe declined sequentially to $40.32 (from $40.71 in Q3) on lower crude benchmarks (partially offset by higher NGL/gas), limiting revenue uplift vs production growth .
    • Financing costs rose to $123M (up $35M QoQ) driven by debt issuances for Grayson Mill—headwind to net income despite operating strength .
    • Continued leverage step-up from the acquisition (net debt ~$8.04B; 1.0x net debt/EBITDAX) vs prior-year levels; while still investment-grade, deleveraging remains a 2025 priority .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Street Consensus (S&P Global)
Total Revenues ($MM)$4,145 $4,024 $4,403 N/A (unavailable)
Net Earnings ($MM)$1,161 $825 $653 N/A (unavailable)
Net Earnings Attributable to Devon ($MM)$1,152 $812 $639 N/A (unavailable)
Diluted EPS (GAAP)$1.81 $1.30 $0.98 N/A (unavailable)
Core EPS (Non-GAAP)N/A$1.10 $1.16 N/A (unavailable)
EBITDAX ($MM)$1,888 $1,853 $2,131 N/A (unavailable)
Volumes & PricingQ4 2023Q3 2024Q4 2024Street Consensus (S&P Global)
Total Production (Mboe/d)662 728 848 N/A (unavailable)
Oil Production (Mbbl/d)317 335 398 N/A (unavailable)
Realized Price incl. Hedges ($/boe)$45.07 $40.71 $40.32 N/A (unavailable)
Production Costs incl. Taxes ($/boe)N/A$11.39 $11.30 N/A (unavailable)
Cash Flow & CapitalQ4 2023Q3 2024Q4 2024
Operating Cash Flow ($MM)$1,737 $1,663 $1,664
Capital Expenditures, ex Acq. ($MM)$940 $878 $926
Free Cash Flow ($MM)$827 $786 $738
Cash Balance ($MM)$875 $676 $846
Net Debt ($MM)$5,280 $8,208 $8,037
Net Debt/EBITDAX (x)0.7x 1.1x 1.0x
Share Repurchases ($MM)$234 $295 $301
Dividends Paid ($MM)$488 $272 $143

Segment production (Mboe/d)

AssetQ4 2023Q3 2024Q4 2024
Delaware Basin433 488 474
Rockies74 79 191
Eagle Ford72 75 92
Anadarko Basin79 82 87
Other4 4 4
Total662 728 848

Notes: Management cited Q4 production outperformance vs guidance driven by Eagle Ford well timing/productivity and Williston contribution; LOE+GP&T 10% below guidance . Q4 realized price declined QoQ due to lower crude benchmarks, partly offset by higher NGL/gas prices .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Production (Mboe/d)FY 2025N/A (company indicated prior outlook)805–825 Raised ~2% vs prior outlook
Oil (Mbbl/d)FY 2025N/A380–386 N/A
Total Capital ($B)FY 2025N/A (company indicated prior outlook)$3.8–$4.0 Lowered by ~$0.2B (~5%) vs prior outlook
Total Production (Mboe/d)Q1 2025N/A805–825 New quarterly guide
Oil (Mbbl/d)Q1 2025N/A380–386 New quarterly guide
Total Capital ($MM)Q1 2025N/A$980–$1,045 New quarterly guide
LOE & GP&T ($/boe)Q1 2025N/A$8.90–$9.30 New quarterly guide
LOE & GP&T ($/boe)FY 2025N/A$8.80–$9.20 New annual guide
Financing costs, net ($MM)Q1 2025N/A$120–$130 New quarterly guide
Financing costs, net ($MM)FY 2025N/A$450–$490 New annual guide
Total income tax rateQ1/FY 2025N/A~20% New guide
Fixed Dividend/ShareQ1 2025 onward$0.22$0.24 (+9%) Raised

Q4 2024 actual vs Q4 2024 guidance (issued on Nov 5): production 848 Mboe/d vs 811–830 guided (beat); upstream capex $872MM vs $870–$920MM guided (in line) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Williston/Grayson Mill integrationQ2 announced $5B acquisition; share repo authorization increased to $5B; raised FY24 production; plan for Q3 close . Q3 closed; +~110 Mboe/d expected in Q4; early contribution; retired $472M debt .Contributed 117 Mboe/d and 63 Mbbl/d to Q4 avg; identified ~$50M savings and ~$600k/well D&C savings; inventory runway strengthened .Positive synergy realization/scale.
Eagle Ford JV dissolution (BPX)Not highlighted previously.Agreement to dissolve JV; Devon to >95% WI; >$2M per well D&C savings; ~700 undrilled locations remaining (550 in Blackhawk) .Structural cost reduction, control/efficiency.
Cash returns & dividend policyQ2 fixed+variable $0.44; buybacks $256M; authorization raised to $5B . Q3 fixed $0.22, no variable; buybacks $295M; deleveraging actions .Raised fixed dividend to $0.24; ~$300M buybacks in Q4; target up to 70% of FCF to shareholders at strip .Emphasis on fixed dividend + buybacks; steady deleveraging.
Midstream/takeaway & pricingQ3 realized price pressured by Permian gas differentials; infrastructure constraints noted .Delaware takeaway robust across oil/gas/NGL; no roadblocks; improved pricing past 6 months .Improving realizations/logistics.
Natural gas strategy/optionalityLimited detail in prior materials.Marketing diversified; LNG/industrial/data center demand opportunities under assessment; revenue uplift with higher gas prices expected .Option value increasing with gas price tailwinds.
Tariffs/supply chainNot discussed prior.Potential tariffs modeled as <2% capex impact if implemented .Manageable macro headwind.
Technology/operationsQ2/Q3: cycle-time/drilling/completion records in Delaware .~15% YoY improvement in drill/complete feet per day; multi-zone developments to sustain inventory .Continued efficiency gains.

Management Commentary

  • CEO Rick Muncrief: “Devon ended 2024 with exceptionally strong results… outstanding operational performance… generating significant free cash flow… Board approved a 9 percent increase to the fixed dividend… confidence in the energy outlook and Devon’s future free cash flows” .
  • CEO (incoming) Clay Gaspar: “For the fifth quarter in a row, we have again beaten consensus… Q4 oil production reached an all-time high of 398,000 bpd… we leaned into our share repurchase program… cash… about $850 million” .
  • Gaspar on Eagle Ford JV: “We are confident we can save more than $2 million in D&C cost per well… control of go-forward development significantly enhances returns” .
  • CFO Jeff Ritenour: “Targeting up to 70% cash return payout… fixed dividend increasing to $0.24; $200–$300M per quarter for buybacks… aim to drive net debt-to-EBITDA below 1x” .
  • CFO on gas marketing: “Large portion of Delaware gas has access to Gulf Coast markets… assessing LNG, power producer and data center supply opportunities” .

Q&A Highlights

  • Williston/Grayson Mill runway and execution: approaching ~a decade of opportunity in Rockies; cost reductions and productivity sustaining flatter declines; 3-rig plan targets stable output with strong returns .
  • Eagle Ford BPX dissolution: mutually accretive split; Devon expects >$2M per-well savings based on side-by-side D&C comparisons; added control over pace and design; refracs remain valuable but cadence may slow given higher-return drilling .
  • Delaware midstream/takeaway: multi-year effort yields sufficient gathering/processing/takeaway and water logistics; no current bottlenecks .
  • Capital returns vs balance sheet: framework prioritizes first 30% of FCF to balance sheet; with stronger efficiencies, buyback cadence could be reevaluated upward; $2.5B debt-reduction target underway .
  • Macro/tariffs: even aggressive tariff scenarios modeled at <2% impact to 2025 capex .
  • 2025 cadence: frac crews ~6; 1Q capex likely highest, trending down through year .

Estimates Context

  • S&P Global consensus EPS and revenue for Q4 2024 were unavailable at time of writing due to data-access limits. Management stated Devon “again beaten consensus” for the fifth consecutive quarter, implying a Street beat qualitatively this quarter .
  • Implication: Given higher volumes vs guidance, lower per-unit costs, and realized pricing slightly down QoQ, we expect upward estimate revisions to 2025 production and FCF, with modestly higher interest expense modeled from acquisition financing (Street data to confirm when available) .

Key Takeaways for Investors

  • Production/FCF flywheel: record oil volumes, improved 2025 guide (higher volumes, lower capex) and >$700M quarterly FCF underscore capital efficiency improvements—likely supportive of higher buyback cadence in 2025 if strip holds .
  • Structural cost reductions: Eagle Ford JV dissolution and Rockies synergies provide tangible, recurring D&C and opex benefits, lowering breakevens and underpinning dividend safety .
  • Balanced capital allocation: fixed dividend raised to $0.24; buybacks of $200–$300M/quarter targeted, with ongoing deleveraging toward <1x leverage .
  • Gas optionality: diversified marketing and potential LNG/data center offtake create upside torque if gas price momentum sustains, while oil remains primary value driver .
  • Execution edge: multi-zone Delaware development and 15% efficiency gains point to durable inventory quality and margin support through the cycle .
  • Watch items: realized prices remain sensitive to crude benchmarks; interest expense elevated from acquisition financing; track delivery on cost-savings and Eagle Ford execution post-JV dissolution .
  • Near-term catalysts: finalized Eagle Ford JV dissolution (April close), continued Rockies synergy capture, potential updates to buyback cadence as efficiencies materialize .

Appendix: Prior-quarter reference points (for trend analysis)

  • Q3 2024: Revenue $4,024MM; diluted EPS $1.30; core EPS $1.10; production 728 Mboe/d; realized price $40.71/boe; production costs incl. taxes $11.39/boe .
  • Q2 2024: Revenue $3,917MM; diluted EPS $1.34; production 707 Mboe/d; realized price $44.29/boe; fixed+variable dividend $0.44; buybacks $256MM; raised FY24 production outlook; announced Grayson Mill deal .

Estimates note: S&P Global consensus values were unavailable at time of drafting due to data-access limits; where estimate columns show “N/A,” values will be updated when accessible.