Devon Energy's Output Records Fuel Intense Cash Generation and Returns for Shareholders, Predicted to Persist in 2025
Devon Energy's Record-Breaking Year and 2025 Outlook
Good vibes are in the air at Devon Energy (DVN 2.61%), wrapping up an impressive year in the oil game. Boasting record-breaking production volumes in the fourth quarter and across the full year, the company has been flushing out serious free cash flow. The cherry on top? A substantial chunk of this cash has been returned to happy shareholders in the form of dividends and stock repurchases.
Looking forward to 2025, Devon Energy expects more growth, more cash, and more returns for its investors.
A Magnificent 2022
Devon Energy crushed it with a jaw-dropping 398,000 barrels of oil daily in the fourth quarter, outpacing expectations by a whopping 3%. Add in natural gas and natural gas liquids, and the company's total output averaged a staggering 848,000 barrels of oil equivalent (BOE) per day, marking a 16% increase from the previous quarter. The oil giant benefited from its late September acquisition of Grayson Mill Energy, which contributed 117,000 BOE/d and 63,000 barrels of oil per day to its quarterly total. The Eagle Ford in South Texas's legacy assets also saw a 23% output surge to 92,000 BOE/d.
These strong production numbers yielded a mighty $1.7 billion in cash from operations and $738 million in free cash flow after operational expenses. Devon Energy generously returned $444 million of this cash to shareholders, buying back 7.7 million shares at a cost of $301 million.
For the entire year, Devon Energy's record production totaled 737,000 BOE/d, leading to a whopping $6.6 billion in operating cash flow and $3 billion in free cash flow. The company returned $2 billion of this cash to investors and used the remaining funds to maintain a solid financial position, retiring $474 million in debt last year and ending the year with a $846 million cash stash and a 1.0 net leverage ratio.
Cruising into 2025
With tailwinds in its sails, Devon Energy is set to continue its impressive growth in 2025. The company should continue to benefit from its highly profitable Grayson Mill Energy deal and intensify its efforts to organically develop its assets. Devon Energy forecasts its capital spending to range between $3.8–$4 billion, with 50% earmarked for its renowned Delaware Basin asset spread across western Texas and southeast New Mexico. Although this investment level is higher than last year's ($3.6 billion), it's somewhat lower than initially expected due to continued efficiency improvements.
Devon Energy's strategic investments should enable it to produce an average of 805,000 to 825,000 BOE/d in 2025, representing a more than 10% increase from 2022's average. This is also a 2% upgrade from the company's initial outlook while lowering its capital spending estimation, highlighting the company's admirable efficiency gains.
With oil pricing roughly hovering around $70/barrel, Devon Energy anticipates generating more than $3 billion in free cash flow in 2025. It intends to return up to 70% of this wealth to its investors, which could translate into substantial gains through dividend distributions and share buybacks. Devon Energy has already revealed plans to boost its quarterly fixed dividend by 9% in 2025. Furthermore, it aims to acquire between $200–$300 million of shares each quarter. The remaining excess free cash will be utilized to enhance its balance sheet, primarily by building cash reserves and retiring debt as it matures.
Oiling the Machine
Devon Energy ended 2022 with breath-taking production figures and released a torrent of free cash flow. It's on track to set another record in 2025, en route to producing ample free cash flow and returning plenty to its shareholders. This perfect blend of growth and returns makes Devon Energy a compelling contender for top oil stocks to consider investing in.
- Devon Energy's impressive fourth-quarter performance resulted in a record-breaking 398,000 barrels of oil daily, with a significant portion of the generated cash returning to shareholders through dividends and stock repurchases.
- In 2025, Devon Energy projects a substantial increase in production, with plans to return up to 70% of the anticipated $3 billion in free cash flow to its investors, potentially leading to substantial dividend distributions and share buybacks.
- Following their strong financial performance in 2022, Devon Energy announced their intentions to acquire Grayson Mill Energy, a move that boosted their quarterly total by 117,000 BOE/d and 63,000 barrels of oil per day.
- The company's highly profitable acquisition and strategic investments in their renowned Delaware Basin asset are expected to enable Devon Energy to produce an average of 805,000 to 825,000 BOE/d in 2025, which could dramatically increase their return on investing in oil stocks.
