Devon Crushes 1Q08 Results – Pre Call Note

We're long here. Long and happy.

The 1Q Numbers:

  • EPS  of $2.74 vs $2.33 Street Consensus,
  • CFPS of $5.79 vs $4.55 expected,
  • Production of 640 MBOEpd  vs 631.5 MBOEpd in 4Q07 (from non-divested properties)
  • LOE inched up 7% YoY

Guidance:  None given but look for them to certainly re-affirm 2008 guidance on the conference call; here is the prior guidance:

  • 2008 was - 240 to 247 MMBOE vs retained production comp of 223 from 2007
  • 2009 was 259 to 274

Operations Update: Not a lot of details in the pr but here are the highlights.

Barnett Shale Update:

  • Still the biggest producer and lease holder in the play
  • Production average 995 MMcfedp in 1Q08, up from a YE07 exit rate of 950 MMcfepd (0.95 Bcfepd),
  • now over the 1 Bcfgpd mark
  • in the Gooseneck area, they had 3 horizontal wells IP at 19 MMcfepd. Wow. There are going to be lots of questions on the call about this. They had 100% WI in two of these and 93% in the third.

Lower Tertiary Trend, Deepwater Gulf of Mexico: 

Progress Being Made At Jack and St Malo Discoveries. Chevron subsea general manager Randall Kubota, yesterday confirmed at the Offshore Technology Conference that a full front-end engineering and design study will be launched this summer for the Jack and St Malo ultra-deep discoveries in the Gulf of Mexico. Devon has 25% of Jack and 22.5% of St Malo.

No word on the Chuck Prospect - first DVN operated Lower Tertiary trend test, 39.5% working interest, and has been drilling for the better part of a year now.

Canada Update: oil sands and another play mentioned but scant details.

Brazil - Polvo Update - did not get an update here either. Probably some news on the conference call.

Conference Call: 11 EST

Valuation: Devon is only trading at 6x 2009 CFPS estimate of $20.64 and I would expect it to add multiple as the firm continues to lengthen reserve life. 

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