Analysts Build Bearish Sentiment On Devon Energy's Q4 Miss, Softer FY23 Outlook

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  • Shale oil producer Devon Energy Corp's DVN Q4 missed consensus estimates for profit due to a hit to production from severe cold weather in the U.S.
  • For 2023, the company forecasted production of 643,000 to 663,000 barrels of oil equivalent per day. The company's output averaged 636,000 boe per day in Q4.
  • Devon said its expenses increased by 1% in 2022, driven by higher personnel costs in the reported quarter.
  • It also expects total capital investment between $3.6 billion and $3.8 billion in 2023, with higher spending in the first half due to a temporary fourth frac crew in the Delaware Basin
  • The company also hiked its quarterly dividend by 11%.
  • Excluding hedges, Devon said its realized price slightly rose to $53.66 from $53.12 for Q4.
  • RBC Capital Markets says softer than expected outlook, particularly in 1H23, a meaningfully lower sequential dividend declaration, and lower stock buybacks could weigh on Devon's shares. Production estimates fall short of RBC's forecast of 670 MMboe/day.
  • Mizuho writes that DVN repurchased ~$700 million in 2022. It only bought around $57 million in 4Q22. 
  • With another $700 million remaining, the analyst would look for thoughts on how the company would allocate FCF above the fixed-plus-variable dividend between share repurchases and net debt reduction.
  • Raymond James writes that earnings metrics came up shy of its estimates, with EBITDA and EPS falling ~2% and ~5%. 4Q22 capex was in-line at $874 million. However, FY23 guidance has capex ~6% above RJ/Street and FY23 production ~1% below RJ/Street due to weaker 1Q23.
  • Price Action: DVN shares are down 13.20% at $55.51 on the last check Wednesday.
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