Devon Energy, Diamondback Earnings Soar; Shale Oil Stocks Hike Payouts, Not Production

Devon Energy and Diamondback Energy (FANG) posted better-than-expected first-quarter earnings after the close Monday. Oil prices held above $100 a barrel, while natural gas prices are near their highest levels in the last 12 months.

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Devon stock and Diamondback stock rose slightly in late trading after both edged higher in Monday’s regular session. Other oil stocks were mixed Monday.

Shanghai continues to grapple with Covid-related closures, China’s demand for crude oil and raw materials is weakening. But many Western countries have turned away from Russian oil, pushing up demand from other producers. The European Union is mulling an outright ban on Russian oil by year-end. Meanwhile, oil-producing bloc OPEC+, which includes Russia, meets on Thursday to discuss output. 

It’s become increasingly clear, however, that OPEC+ won’t be a big help in replacing Russian oil. While Saudi Arabia increased output in April, it was offset by declines from Libya and Nigeria. OPEC pumped out 28.58 million barrels per day last month, according to Reuters report, up 40,000 bpd from the previous month but short of the 254,000 bpd increase called for under a supply deal.

As a result of reduced supply, oil and gas firms are reporting record profits. Shale energy companies, including Devon Energy and Diamondback, have focused on profits and shareholder returns vs. expanding activity.

Crude oil prices fell sharply Monday morning, but erased losses. U.S. crude oil futures closed up 0.5% to $105.17 a barrel.

Devon Earnings

Estimates: FactSet analysts expected Devon Energy earnings to more than triple in the first quarter vs. a year ago, to $1.75 a share. Sales were seen more than doubling to $4.046 billion.

Results: Devon earnings per share surged to $1.88. Revenue came in at $3.812 billion vs. $2.050 billion in the year-ago quarter.

Delaware Basin production growth and margin expansion drove first-quarter financial performance.

Devon Energy made it clear it’ll continue to focus on shareholder returns and not boost production.

Devon hiked its quarterly payout by 27% to $1.27 per share. The board expanded the DVN stock buyback program by 25% to $2 billion.

Outlook: “Devon remains committed to a disciplined maintenance capital program and is on track to meet the strategic objectives that underpin its operating plan in 2022,” Devon managements said in a statement. “The company has not made any modifications to its previously announced plan to sustain production in the range of 570,000 to 600,000 (barrels of oil equivalent) per day, with an upstream capital investment of $1.9 billion to $2.2 billion.”

Oil Stocks: Devon Stock

DVN stock popped 3% in extended action. Shares closed up 0.3% to 58.35 on the stock market today. Devon stock is signaling a move back above its rising 50-day line, according to MarketSmith, following a prior, strong uptrend. This is at least the third pullback to the 50-day/10-week line since a year-end breakout, so buying a rebound here would be riskier.

Its relative strength line is trending upward toward highs not seen since 2019. Devon’s RS Rating is 98 out of best-possible 99, while its EPS Rating is 73.

The company has posted four straight quarters of triple-digit earnings growth and three quarters in a row of earnings gains.

Oklahoma-based Devon Energy engages in the exploration, development and production of oil and natural gas properties. It develops and operates the Barnett Shale STACK formation in Oklahoma, Delaware Basin, Eagle Ford Group and the Rocky Mountains.

Diamondback Earnings

Estimates: Diamondback earnings were expected to surge 106% vs. the year-ago period to $4.73 a share, while revenue was seen jumping 65% to $1.951 billion.

Results: Diamondback earnings jumped 126% to $5.20 a share. Revenue was $2.408 billion vs. $1.184 billion in the year-ago quarter, both above estimates.

Diamondback also increased its annual base dividend by 17% to $2.80 per share.

Diamondback also closed the acquisition of approximately 6,200 net acres in Ward County, Texas, for a gross purchase price of $230 million.

Outlook: “Diamondback is committed to maintaining our current production levels, providing a significant supply of energy to our country and the world,” CEO Travis Stice, said in a statement. “While we believe that efficiently growing our production base is achievable over the long-term, we do not feel that today is the appropriate time to begin spending dollars that would not equate to additional barrels until multiple quarters from today given the uncertainty and volatility currently in the market.”

Oil Stocks: Diamondback Stock

FANG stock edged up 0.7% in overnight trade. Shares closed up 1% to 127.50. FANG stock raced up 21% from its Jan. 4 breakout, before taking a breather in late March. It’s now trading below its 50-day line. Diamondback stock could soon have a new base with a 148.09 buy point.

Its relative strength line is around its best levels since late 2019. Diamondback’s RS Rating is 95, while its EPS Rating is 95.

Midland, Texas-based Diamondback Energy operates primarily on the Permian Basin in West Texas.

Later this week, several other oil and gas producers will report earnings. ConocoPhillips (COP) reports on Thursday, while BP (BP) will report on Tuesday. Shell (SHEL), Oasis Petroleum (OAS), Callon Petroleum (CPE) and Canadian Natural Resources (CNQ) will report Thursday. And Laredo Petroleum (LPI), Oneok (OKE) and Cheniere Energy (LNG) report Wednesday.

Last week, Chevron (CVX) and Exxon Mobil (XOM) reported mixed earnings.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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