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Devon Posts $1.57B Loss But Beats Expectations

Devon Energy Corp posted a net loss of US$1.57 billion for the second quarter, lower than the US$2.8-bilion loss for the same period last year, after slashing expenses and completing asset sales.

Adjusted for asset impairments, Devon Energy’s core earnings came in at US$33 million, or US$0.06 per share, in April to June. Analysts at Thomson Reuters had expected a loss of US$ 0.19 per share.

Oklahoma-based Devon said on Tuesday that its leased operating expenses (LOE), its largest field-level cost, dropped 26 percent annually to US$416 million, mostly due to lower labor expenses and lower supply chain costs.

In seeking higher cost savings, however, the group also slashed the sum of dividends paid on common stock to US$33 million, compared to US$98 million paid in dividends for the second quarter of 2015.

During the second quarter this year, Devon completed its asset divestiture program, with total asset sales reaching US$3.2 billion, topping the US$2 billion-US$3 billion guidance range. The group will use most of the proceeds to cut debt and increase investments in U.S. resource plays such as STACK and the Delaware Basin, president and CEO Dave Hager said in the company statement.

Devon’s net production was 644,000 barrels of oil equivalent per day (boepd), down from 674,000 boepd for the second quarter last year. Still, due to the retention of Midland assets and other minor operating interests, Devon raised the mid-point of its 2016 production guidance by 18,000 boepd, or 3 percent, with oil output guidance up 4 percent, or 10,000 boepd.

Devon reiterated the US$200-million increase in its upstream capital investment program that it had announced in June. The group sees upstream capex at between US$1.1 billion and US$1.3 billion for full-2016 and will invest the incremental capital in the STACK and Delaware Basin, expecting to potentially add as many as 7 operated rigs in the second half this year. Devon expects the higher capex to increase production early next year.

The group’s second-quarter earnings announcement comes days after the supermajors reported losses or slumping profits, blaming low crude prices and weak refining margins. Exxon missed estimates by a wide margin, Chevron swung to a loss, and Shell shocked (no pun intended) analysts with a 72-percent plunge in profits, which missed forecasts by more than US$1 billion.

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By Tsvetana Paraskova for Oilprice.com

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