Devon Energy rises on Q2 production beat and raise, led by ‘superb’ Delaware Basin work

Devon Energy (NYSE:DVN) +3.7% in Wednesday’s trading after beating Q2 adjusted earnings expectations and raising full-year oil production guidance.

Q2 net income jumped to $844M, or $1.34/share, from $596M, or $0.94/share, in Q1, as oil production reached an all-time high 335K bbl/day, topping guidance by 3%.

Q2 total production popped nearly 7% Y/Y and 6% Q/Q to 707K boe/day, well above Devon’s (DVN) previous Q2 projection of 670K-690K boe/day; at the company’s core Delaware Basin operations, output rose to 461K boe/day from 420K boe/day in the prior-year quarter.

“Based on our solid performance for the first half of 2024, we now expect our full-year 2024 production guidance to be 5% higher than our original outlook,” CEO Rick Muncrief said, with output projected at 677K-688K boe/day.

On the earnings conference call, Muncrief called the company’s Delaware Basin production performance “superb” and said wells brought online this year are on track to be 10% more efficient than in 2023, according to OilPrice.com.

As a result, Devon’s (DVN) Q2 capital spending of $890M was down from nearly $1.02B in the year-ago quarter and well below the $915M-$985M guidance from three months ago; for Q3, the company anticipates capex of $870M-$930M.

Devon (DVN) said the integration of Williston basin assets of Grayson Mill Energy, which it agreed to acquire last month in a $5B deal, will add ~100K boe/day in 2025 production and raise the company’s annual capex budget by ~$600M.

Devon’s (DVN) “big production beat” and production guidance raise should prompt “a modestly positive market reaction, assuming 4Q capex doesn’t run hot later in the year,” says Citi analyst Scott Gruber, who rates the stock a Buy.