"Despite higher benchmark strip prices, continued production growth, cost savings and efficiency improvements, we expect 2016 earnings to be significantly below the 2015 level, which benefits from hedging gains," Oppenheimer analysts said.
The firm estimates that Devon Energy will face cash flow deficits of $0.9 billion this year and $1.9 billion next year, Oppenheimer noted.
Devon Energy is an independent energy company engaged in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the U.S. and Canada.
Shares of Devon Energy are up 0.08% to $62.51 in morning trading Wednesday.
Separately, TheStreet Ratings team rates DEVON ENERGY CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DEVON ENERGY CORP (DVN) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $1,648.00 million or 16.87% when compared to the same quarter last year. In addition, DEVON ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of -53.28%.
- The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that DVN's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
- Despite the weak revenue results, DVN has outperformed against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 12.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1210.8% when compared to the same quarter one year ago, falling from $324.00 million to -$3,599.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DEVON ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DVN Ratings Report