Devon Energy beats Q2 estimates as Coterra merger lifts output 62%

Devon Energy reported Q2 adjusted earnings of $1.57 a share, beating the $1.30 consensus by 21 percent as the Coterra merger lifted output.

The company generated $1.7 billion of adjusted free cash flow and returned $1.06 billion to shareholders through dividends, buybacks and debt retirement, Devon said in its Aug. 4 earnings release.

Revenue surged 73 percent year over year to $7.42 billion, topping the $6.29 billion consensus by 17.8 percent. Total production averaged 1,359 thousand barrels of oil equivalent per day, up 61.6 percent, with oil output rising 30 percent to 503,000 barrels a day. Realized oil prices, including cash settlements, climbed 39.9 percent to $88.09 a barrel.

Devon completed its merger with Coterra Energy on May 7, adding the Delaware Basin acreage that drove the volume jump. The company raised its quarterly fixed dividend 33 percent to 32 cents a share and repurchased 4.3 million shares for $197 million during the quarter.

Oil, gas and natural gas liquids sales totaled $5.11 billion, up from $2.71 billion a year earlier, while marketing and midstream revenue rose to $1.90 billion from $1.34 billion. Capital spending came in at $1.27 billion, with the Permian accounting for $731 million. Devon also acquired 16,300 net Delaware Basin acres for $2.6 billion, adding roughly 400 top-tier drilling locations.

For the third quarter, Devon guided total production of 1,660 to 1,690 thousand barrels of oil equivalent per day and oil output of 550,000 to 560,000 barrels a day, with capital spending of $1.4 billion to $1.5 billion. The company maintained its full-year production guidance of 1,364 to 1,398 thousand barrels of oil equivalent per day and a capital budget of $4.8 billion to $5 billion.

Devon shares have gained about 21.7 percent since the start of the year, outpacing the S&P 500's 11 percent advance. The stock traded flat at $44.13 after the results.

The earnings beat and dividend increase signal management expects the Coterra integration to keep driving volume growth. Investors will watch the third-quarter earnings call for progress toward the company's target of at least $1 billion in annual pre-tax cost savings by the end of 2027.

This article is for informational purposes only and does not constitute investment advice.