Devon Energy Reaps Wins from Eagle Ford Bet in First-Quarter 2015, Cuts Capex to Just Less than $5 Billion

---

Researched by Industrial Info Resources (Sugar Land, Texas)--It's very clear, we've heard this song before: Devon Energy (NYSE:DVN) (Oklahoma City, Oklahoma), a leading oil and gas producer, reported record oil production in first-quarter 2015, which was more than offset by $5.46 billion in write-downs that stemmed mostly from collapsing commodity prices. Even a 72% jump in U.S. operations, driven by rapid growth in Eagle Ford Shale assets that were acquired just a year ago, could not make up for the plunge in per-barrel crude prices. Net losses for the quarter were reported to be $3.6 billion, compared with net income of $324 million in first-quarter 2014.

Industrial Info is tracking $5.64 billion in projects related to Devon, including the planned, $350 million addition of a fourth train to a natural gas-processing plant in Plaquemine, Louisiana. The project, which is in its earliest phases, would add a 100,000-barrel-per-day (BBL/d) natural gas liquids (NGL) fractionator, bringing total fractionation capacity to 400,000 BBL/d of propane, ethane and butane. The plant is owned by EnLink Midstream Partners (NASDAQ:ENLK), a midstream provider that was created when Devon combined virtually all of its U.S. midstream assets with the former Crosstex Energy.

Total operating revenues stood at $3.27 billion, a 12.35% decrease from the same period last year. Total production from Devon's retained asset base averaged 685,000 oil-equivalent barrels per day, a 22% increase. Oil sales became increasingly important to Devon during the quarter, accounting for 64% of total upstream revenues after substantial growth in U.S. and Canadian oil production. Production from the Eagle Ford Shale assets reached 122,000 barrels of oil equivalent per day, a 140% growth from March 2014, when the assets were acquired by Devon; significant growth also was seen in the Delaware Basin.

Devon also benefited from the sale of common units in EnLink; along with its recent sale of the Victoria Express Pipeline in the Eagle Ford to EnLink, Devon netted a total of $870 million, about $569 million of which was recognized in the first quarter.

Consolidated capital expenditures were reported to be $1.72 billion for the quarter, compared with $1.58 billion in first-quarter 2014.

"We're seeing significant operational improvements across the portfolio, with improving tight curves and increasing inventory, and we're achieving meaningful capital and operating cost efficiencies," said John Richels, the president and chief executive officer of Devon, in a conference call. "The strong operational momentum translated into top-notch first quarter performance. We exceeded our production guidance for the third consecutive quarter. We did a great job of accelerating cost savings across our portfolio, with field level operating costs coming in well below our guidance."

Capital expenditures are expected to total between $4.51 billion and $4.91 billion in full-year 2015, including between $1.1 billion and $1.25 billion in the second quarter. The full-year estimate is $250 million lower than the previous guidance, due to the company's ongoing cost-cutting efforts. Among the other savings Devon expects to see in 2015 is about $170 million in cuts from lease-operating expenses.

Devon now expects total oil production to increase 25% to 35% from 2014, compared with a previous estimate of 20% to 25%. Top-line growth is expected to be between 5% and 10%. Devon expects to see $300 million in benefits from its EnLink-related transactions in the second quarter, including $85 million from the sale of EnLink common units, and $215 million from the sale of the Victoria Express Pipeline to EnLink, which closed on March 23.

"There's a number of things that we're working on with our midstream provider and with our partner [in the Eagle Ford Shale] in order to increase the capacity," said Darryl G. Smette, the executive vice president of Devon's Marketing, Midstream & Supply Chain. "A lot of that has to do with operating efficiencies. That includes getting more uptime on the stabilizer that's out there. Currently, that stabilizer has a nameplate capacity of around 170,000 barrels a day. And, historically, that has been running about 140,000 or 145,000. So we're working with our midstream provider to see if we can't increase that operational time."

He added: "We're looking at additional compression in certain areas. We're also looking at, on the truck side of the equation, putting in delivery stations that are closer to the location so we can increase our truck activities so they don't have to drive so far."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.