Devon Energy Corp. announced core earnings of $320 million, or $0.78 per diluted share, for the second quarter of 2015. This compares with first-quarter 2015 core earnings of $89 million, or $0.22 per diluted share.
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Revenue from oil, natural gas and natural gas liquids sales totaled $1.6 billion, an 18 percent increase compared to the first quarter of 2015.
The revenue growth was attributable to the increase in higher margin U.S. oil production combined with improved oil price realizations. These factors resulted in second-quarter oil sales increasing to more than 70 percent of Devon’s total upstream revenues.
Cash settlements related to oil and natural gas hedges increased revenue by nearly $500 million, or $8 per Boe in the second quarter. At the end of June, the company’s remaining commodity hedges had a fair-market value of approximately $850 million. This attractive hedging position represents 55 percent of forecasted oil production and 45 percent of expected natural gas production for the remaining two quarters of 2015.
Devon’s midstream operating profit reached $225 million, which exceeded the company’s guidance and was 16 percent higher than the first quarter of 2015. The increase in operating profit was driven by growth from EnLink Midstream.
The company has several cost reduction initiatives underway that positively impacted second-quarter results. Field-level operating costs, which includes both lease operating expenses and production taxes, declined 8 percent compared to the second quarter of 2014 to $11.05 per Boe. These cost savings were realized across all regions of Devon’s asset portfolio.
Significant general and administrative (G&A) cost savings also were achieved in the second quarter. G&A expenses totaled $212 million, which was below the low end of guidance and a 16 percent decline compared to the first quarter.
Based on year-to-date cost savings, Devon now anticipates its field-level operating costs and G&A to decline to around $14.50 per Boe for the full-year 2015. Compared to original guidance, this implies a full-year cost savings of around $400 million.
Operating cash flow in the second quarter, excluding the consolidation of EnLink Midstream, reached $1 billion. Combined with the sale of the Victoria Express Pipeline, EnLink secondary offering proceeds and EnLink partnership distributions, Devon’s second-quarter cash inflows totaled $1.3 billion.
Devon’s financial position remained exceptionally strong with investment-grade credit ratings and cash balances of $1.7 billion at the end of the quarter. The company’s net debt, excluding non-recourse EnLink obligations, totaled $7.6 billion. ■