Devon cuts spending forecast again on improved well performance

FILE PHOTO: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma, September 15, 2015. REUTERS/Nick Oxford/File Photo

(Reuters) - Devon Energy Corp DVN.N lowered its spending forecast slightly on Thursday, while raising production outlook for the year as it benefited from improved efficiency at oil and gas wells and a recovery in oil prices as coronavirus-related lockdowns eased.

A more than 30% plunge in crude prices this year forced cash-strapped shale operators to try to increase output from existing wells while cutting costs, laying off employees and, increasingly, consolidating to survive the downturn.

Last month, Devon agreed to buy shale rival WPX Energy Inc WPX.N in an all-stock deal, as oil producers increasingly turn to consolidation to find ways to grow in a lower oil price environment while keeping their costs in check.

Fuel demand improved slightly over the third quarter as economies began to emerge from lockdowns, and Devon said full year oil production could be as much as 154,000 barrels per day (bpd), up from a previous forecast of between 148,000 and 152,000 bpd.

In light of improved natural gas prices, the company said it was also considering resumption of drilling in the Anadarko basin next year.

The company now sees exploration and production capital expenditure ranging between $950 million and $990 million, $10 million lower at the top end of an earlier forecast, its third reduction to the budget since March.

Devon, which has a foothold in the Delaware portion of the Permian basin of Texas and New Mexico, reported net production from retained assets of 326,000 barrels of oil equivalent per day in the third quarter, up marginally from last year.

On an adjusted basis, it lost 7 cents in the quarter, below analysts’ average estimate of 10 cents per share according to Refinitv IBES data.

Reporting by Rithika Krishna; Editing by Maju Samuel, Shounak Dasgupta and Vinay Dwivedi