(Reuters) - Oil and gas producer Devon Energy Corp beat quarterly production estimates on Tuesday on the strength of its U.S. shale assets and forecast a strong year ahead, sending its shares up 6 percent after the bell.
The Oklahoma-based company also said its board had authorized sale of its assets in Canada and in the gas-rich Barnett shale patch in the United States, to turn Devon into a pure-play oil producer.
“The New Devon will be able to grow oil volumes at a mid-teens rate while generating free cash flow at pricing above $46 per barrel,” Chief Executive Dave Hager said.
On Tuesday, U.S. light crude futures were trading at $56.09 a barrel.
Stifel Nicolaus and Co analyst Derrick Whitfield said investors have long asked for Devon to shed its non-shale assets to drive growth. “Its top-line metrics will materially improve as a result of the divestiture,” he said.
The company expects to complete the sale by the end of 2019.
In 2019, the company expects a growth of 13 to 18 percent in its oil business, while spending 10 percent less on exploration and production than it did in 2018, the company said here.
Devon is among several oil producers to invest in the SCOOP and STACK regions, a fast-growing shale oil play in the Anadarko basin that has attracted investment from crude producers expanding beyond the Permian.
In the STACK region, the company produced 126,000 boe/d during the quarter, up from 114,000 boe/d in the year-ago quarter. Its production in the Delaware basin rose 49 percent to 84,000 barrels of oil equivalent per day (boe/d) from a year earlier.
The Delaware basin of the oil-rich Permian shale field is among the largest in the region.
For the quarter ended Dec. 31, the company reported production of 532,000 barrels of oil equivalent per day (boe/d), while analysts had expected 527,060 boe/d, according to IBES data from Refinitiv.
Higher production resulted in a bigger profit. Net income for the company rose to $1.15 billion or $2.48 per share, from $304 million or 35 cents per share, a year earlier.
Adjusting for certain items, the company earned $46 million or 10 cents per share in the quarter.
The company’s shares were up 6.3 percent at $30.10 in after-market trading.
Reporting by Debroop Roy in Bengaluru; Editing by Shinjini Ganguli