Devon Energy shares slump on higher capex, disappointing Q4 output outlook
Reuters
Published Nov 02, 2022 11:49AM ET
Updated Nov 02, 2022 04:18PM ET
By Liz Hampton
(Reuters) -Shares of U.S. shale oil producer Devon Energy (NYSE:DVN) slumped almost 13% on Wednesday on an outlook for higher than expected capital spending and lower than forecast fourth-quarter output.
Investors have been pushing U.S. shale companies to hold spending flat and increase oil and gas output at single-digit percentage levels to generate higher returns. However, companies have warned that higher costs for labor, materials and equipment are pushing up spending.
Devon forecast fourth-quarter production of between 640,000 and 660,000 barrels of oil equivalent per day (boepd), 2% under the midpoint of investment firm Cowen's estimate. It also projected new project spending of between $845 million and $915 million, 16% above its prior estimate, analysts for the firm wrote in a note.
Shares of Devon closed at $67.43, down 12.77%. U.S. crude futures settled at $90 a barrel, up 1.8%.
"Q3 slightly better than expectations, but disappointing Q4 will be the focal point and likely drive early underperformance," wrote Tudor, Pickering, Holt & Co analysts in a note on Wednesday ahead of Devon's investor call.
Devon executives told investors the company anticipates higher production in 2023 over 2022, but next year's volumes will be at the bottom half of its targeted 0% to 5% growth rate compared to 2022 exit rates.
Devon said about two-thirds of its increased capital spending was the result of acquisitions, while the remainder was due to a combination of higher service costs and more operating activity than previously planned.
The company during the quarter completed its acquisition of leasehold and related assets of RimRock Oil and Gas in the Williston Basin in North Dakota, and the acquisition of Validus Energy in the Eagle Ford.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.