Devon Energy to boost free cash flow by $1 billion by 2026
Devon Energy announced on Tuesday that it intends to increase its annual free cashflow by $1 billion by 2026. This sent its shares up by 3.5% in the premarket.
This is what the U.S. oil-and-gas producer hopes to achieve by reducing costs for drilling and completion and improving operating margins.
In a recent statement, CEO Clay Gaspar stated that "given the changing competitive landscape and the challenges of the market, now is the time to improve our profitability."
Devon is expecting to save $300,000,000 through capital efficiency. Another $250,000,000 will be saved by reducing production and operational costs. A further $300,000,000 will be saved through enhanced commercial contracts.
The plan itself is not surprising, but the size of the investment may be a little larger than what the Street was expecting. This looks like more than window dressing, said Phillips Johnston of Capital One Securities.
The company stated that it expects to achieve nearly 30% of its estimated improvements by the end this year, and the remainder by the end 2026.
Arun Jayaram, J.P. Morgan analyst said: "We anticipate a positive response to the significant self-help initiatives laid out by the new CEO Clay Gaspar... While we felt elevated expectations before the print (1Q25), the plan...will likely be well received by the buying side."
Devon is scheduled to release its first-quarter results after the close of markets on May 6. (Reporting and editing by Sriraj Kalluvila in Bengaluru. Pooja menon is based in Bengaluru.
(source: Reuters)
