Oil and gas company Devon Energy has reported that it missed the projected fourth-quarter profit due to production issues caused by severe winter storms in the U.S. during that period and higher expenses on staff.
In January, Devon estimated its production in the fourth quarter of 2022 to be around two percent lower because its operations in North Dakota were hampered by the winter storm Elliott, which affected two-thirds of the country in December, freezing oil and gas wells in mining sites.
The company also said its expenses had increased by one percent for the entire 2022 due to higher personnel costs in Q4.
Devon estimates its production for this year to range from 643,000 to 663,000 barrels of oil equivalent per day (BOE/D). It was an increase compared to the average output of 636,000 BOE/D in the last quarter.
The Oklahoma City-based company said it expects a total capital investment of $3.6 billion to $3.8 billion this year, with higher spending in the first six months because of temporary fourth frac personnel expenses in the Delaware Basin.
Devon notched adjusted earnings of $1.66 per share for the last quarter, which is lower than the earlier estimate of $1.75 per share. Despite that, the company said its realized price — excluding hedges — increased from $53.12 to $53.66 in the same period. The company also raised its fixed quarterly dividend by 11 percent to $0.20 per share.
Devon shares fell by five percent to $60.65 in after-hours trading following the earnings report.
The energy company will hold a conference call regarding the earnings report on Wednesday to answer shareholders' questions.
Short-term energy outlook in U.S.
The U.S. Energy Information Administration (EIA) recently published bearish short-term outlooks on the energy market. The U.S. is expected to post a 0.8 percent growth in 2023, lower than the two percent growth last year. The EIA predicted that the U.S. gross domestic product (GDP) would contract in the first half of 2023 but return to expansion in the latter half. The general assumption underlies its short-term forecasts for U.S. energy.
American oil producers had pledged to maintain "fiscal discipline" post-pandemic — focusing on paying debts and maintaining investors rather than increasing production volume. For most of 2022, oil production was capped below the pre-pandemic peak of 13.1 million barrels per day (B/D).
The agency predicts that crude oil production will increase by 590,000 B/D to 12.49 million B/D in 2023. Next year, the production will increase by 160,000 barrels to 12.65 million B/D.
Despite the increase, domestic demand for petroleum and other liquid fuels will remain at 20.3 million B/D this year. Meanwhile, China will likely increase its demand by 700,000 B/D in 2023 and another 400,000 B/D the following year due to the relaxation of its COVID-19 policy.
The EIA also projects a production decline of Russian oil and other liquids by around 1 million to 9.9 million B/D this year. However, the figure was 400,000 B/D higher than the previous forecast as Russia exports a higher volume of oil than anticipated.
Prices for natural gas will go down, while the production reaches a record high of 100.27 billion cubic feet per day (Bcf/D) this year — higher than last year's production of 98.09 Bcf/D. Natural gas production will see a further increase next year to 101.68 Bcf/D.
While production surges, the agency predicted that domestic demand for natural gas would fall to 87.04 Bcf/D this year. The lower demand will likely lead to fewer drilling activities, which according to the EIA, can negatively affect propane supply as 86 percent of the supply comes from natural gas processing.