Oklahoma City energy companies continue to benefit from the country’s ongoing shale oil and natural gas boom.
Devon Energy Corp., Chesapeake Energy Corp. and SandRidge Energy Inc. reported second-quarter earnings Wednesday. At all three firms, oil and natural gas production was up, but while all three continued to make money, they each earned less in the second quarter than they did in the year-ago period.
Devon Energy Corp.
Devon Energy Corp. boosted its oil production more than one-third in the second quarter amid a strategic transformation, company officials said Wednesday.
Devon reported net earnings of $675 million, or $1.65 a share, for the quarter. That is down slightly from the same period of last year, when the company earned $683 million, or $1.69 a share.
Devon’s adjusted earnings of $574 million, or $1.40 a share, were in line with analysts’ estimates and up 16 percent over last year.
“The second quarter was another outstanding one for Devon, both operationally and financially, as we continued to successfully execute on our strategic plan,” Devon CEO John Richels said in a conference call with analysts.
He said Devon reconfigured its portfolio by acquiring acreage in south Texas’ oil-rich Eagle Ford Shale, moving its pipeline assets to Enlink Midstream and selling its noncore assets.
“Our drilling program has delivered impressive oil production growth through our focus on our reconfigured portfolio,” Richels said.
He said Devon was able to increase oil production from its retained assets by 34 percent, reaching an average of more than 200,000 barrels a day. The growth was driven by a 79 percent increase from the company’s light oil assets in the U.S., notably its “world-class operations” in Texas.
Richels said Devon’s oil-rich holdings in the Eagle Ford and Permian Basin should push the company’s total liquids production to near 60 percent by the end of the year. That figure had been just more than 30 percent a few years ago.
“This portfolio repositioning provides Devon all the necessary attributes to deliver superior per-share growth,” Richels said. “Our go-forward assets are generating excellent full-cycle returns, we have a strong investment-grade balance sheet, and we have a deep inventory of highly economic, low-risk development projects in some of the most attractive basins in North America.”
Dave Hager, Devon’s chief operating officer, said the company is “laser focused” on improving its operational performance. Teams are looking to reduce drilling times, optimize completion designs and make production operations more efficient, he said.
“Continuous improvement in each of these areas, and others, will provide incremental value in each of our operating areas,” Hager said.
He said Devon set a production record in western Oklahoma’s Anadarko Basin in the second quarter with redesigned completions and an ongoing acid treatment program.
Chesapeake Energy Corp.
Chesapeake Energy Corp. on Wednesday reported a 68 percent drop in profits, led by lower commodity prices and the cost of buying back debt.
The Oklahoma City oil and natural gas company posted a net income of $191 million, or 22 cents a share, down from $457 million, or 66 cents a share, in the year-ago quarter. Adjusting for one-time expenses, the company earned $235 million, or 36 cents a share, down from $265 million, or 51 cents a share, in the second quarter of 2013.
Adjusted earnings before interest, taxes, depreciation and amortization was $1.277 billion, down from $1.424 billion one year ago.
While prices slipped, production continued to grow. Chesapeake produced 63.2 million barrels of oil equivalent in the quarter, up 2.6 percent from the year-ago period. Adjusting for asset sales, Chesapeake’s production increased 13 percent on the year. Oil represents 16 percent of the company’s production, down from 17 percent one year ago.
Chesapeake raised its forecast of production by the end of the year by 10,000 barrels of oil equivalent per day, or about 1.5 percent, to more than 730,000 barrels of oil equivalent.
“Chesapeake had another strong quarter with production growth and operating performance,” CEO Doug Lawler said on a conference call with analysts Wednesday. “We continue to make foundational progress on our strategies of financial discipline and profitable and efficient growth from our high-quality assets. I’m very pleased with our continued improvements in operating efficiencies, measured by cycle time improvements, capital spending reductions and cash cost leadership.”
Chesapeake executives said the company’s sales prices were held down by an oversupply of natural gas in the Marcellus Shale region of the Northeast.
The executives also reiterated the company’s ongoing effort to reduce debt. Chesapeake recently bought back $1.26 billion in debt from its Chesapeake Utica LLC subsidiary.
“Chesapeake is standing strong on four pillars today,” Lawler said. “We’re growing production at a double-digit annual rate, we’re demonstrating excellent capital efficiency and cost leadership, we’re reducing our financial complexity and we’re laser-focused on creating shareholder value through a variety of strategic initiatives.”
SandRidge Energy Inc.
Despite power and weather disruptions in Texas, SandRidge Energy Inc. increased its second-quarter production to nearly 70,000 barrels of oil equivalent a day.
That is up 19 percent over last year, SandRidge said Wednesday as it reported net earnings of $34.2 million, or 6 cents a share.
SandRidge earned $44.6 million, or 8 cents a share, in the second quarter of last year, but still beat analysts’ estimates despite that dip.
CEO James Bennett said SandRidge’s decision to focus on the Mid-Continent region is paying dividends with improving drilling results and lower costs. He said the company’s initial production rates in the Mississippian formation are higher than they’ve been in two years, while its results from the Chester formation are exceeding expectations. SandRidge also plans to expand its innovative multi-lateral drilling program.
“With the continued strength of our drilling program, results of our Chester and Woodford zones, and a broader application of our multilateral program, we are positioned for a very strong back half of the year,” Bennett said.
SandRidge was plagued by problems late in the quarter, as power and weather disruptions curtailed 250 million barrels of production.
“While we had production challenges, the second quarter featured record-setting capital efficiency improvement along with the continued expansion of our multi-zone oil developments,” said David Lawler, SandRidge’s chief operating officer.
He said SandRidge is adding a new substation and upgrading transformers to address power-related issues. The company also is working to ensure that wells with electric submersible pumps will restart automatically once power is restored.