Devon Energy targets $1 billion free cash flow boost by 2026
April 22 (Reuters) - Devon Energy (DVN.N), opens new tab said on Tuesday it plans to boost its annual free cash flow by $1 billion by the end of 2026, sending its shares up 3.5% in premarket trading.
The U.S. oil and gas producer aims to achieve this by reducing drilling and completion costs and improving operating margins.
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"Given the challenging market and shifting competitive landscape, this is the right moment to focus internally and improve our profitability," CEO Clay Gaspar said in a statement.
Devon expects to save $300 million through capital efficiency, another $250 million by cutting production and operating costs and an additional $300 million through enhancing commercial contracts.
"The plan itself doesn't come as a surprise, but we think the size is probably a bit larger than the Street has been expecting. Meaningful (free cash flow) uplift potential, so this looks to be more than just window dressing," said Phillips Johnston, analyst at Capital One Securities.
Nearly 30% of the estimated improvements are expected to be achieved by the end of this year and the remaining by the end of 2026, the company said.
"We expect a positive reaction to the significant 'self-help' initiatives outlined by new CEO Clay Gaspar... while we sensed elevated expectations ahead of the print (1Q25), we think the plan...will be favorably received by the buyside" said J.P. Morgan analyst Arun Jayaram.
Devon scheduled to report first-quarter results on May 6 after markets close.
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