• Natural Gas News

    Devon Reports Q2 Loss, Accelerates Barnett Sale


Sale will fund special dividend

by: Dale Lunan

Posted in:

Natural Gas & LNG News, Americas, Daily Digest, Premium, Editorial, Corporate, Financials, News By Country, United States

Devon Reports Q2 Loss, Accelerates Barnett Sale

US senior producer Devon Energy said August 4 it had a net loss of $670mn in Q2 2020, down from Q2 2019 earnings of $495mn but an improvement over the $1.8bn loss it reported in the first quarter this year.

The quarterly performance, the company said, was negatively impacted by a $593mn unrealised change in the fair value of its derivative position due to higher futures prices. Adjusting for that and other unusual items, Devon had a core loss of $60mn.

In a separate announcement, Devon said it was accelerating the sale of its Barnett shale assets in Texas, moving the anticipated close of the transaction up to October 1 from December 31. After accounting for purchase price adjustments, including an upfront deposit of $170mn and allocated revenues and expenses from the effective date, Devon expects to receive a net cash payment on closing of more than $300mn.

The Barnett assets, presented as discontinued operations in Devon’s Q2 report, produced 401mn ft3/day of natural gas and 28,000 b/d of natural gas liquids in the second quarter, compared to 420mn ft3/day of gas and 31,000 b/d of NGL and crude oil in the comparable 2019 period.

Devon’s other natural gas assets produced 614mn ft3/day in Q2 2020, down from 634mn ft3/day in Q1 2020 but higher than Q2 2019 production of 578mn ft3/day.

The Barnett sale agreement, with Thailand’s Banpu Kalnin Ventures, also provides Devon the opportunity to receive contingent cash payments of up to $260mn based on future commodity prices, with participation triggered when either the Henry Hub natural gas price reaches $2.75/mn Btu or the West Texas Intermediate crude oil price reaches $50/b. The contingent period has a four-year term, beginning January 1, 2021.

Devon will use part of the proceeds from the accelerated closing to fund a special dividend of $0.26/share, resulting in an aggregate payment to shareholders of $100mn.