Devon Joins Oil Producers That Have Cut Jobs and Spendingby
Producer slashes dividend by 75%, reduces workforce by 20%
Cimarex also cuts budget; says will spend 29% less than 2015
Devon Energy Corp. tumbled after it became the latest oil and natural gas producer to cut everything from its dividend to jobs to spending as it tries to weather the worst price slump in a generation.
The stock fell as much as 14 percent on Wednesday and was down 10 percent to $19.06, the lowest since 2002, at 10:24 a.m. in New York. Shares are down about 40 percent for the year.
The shale driller is reducing its workforce by 20 percent in the first quarter, while slashing its quarterly dividend to 6 cents a share from 24 cents, according to a statement Tuesday. It expects 2016 capital spending between $900 million and $1.1 billion, down 75 percent from a year earlier. Cimarex Energy Co. also said it’s cutting investment.
“Devon’s top priority in 2016 is to protect the balance sheet,” Chief Executive Officer David Hager said in the statement. “We are tailoring activity to current market conditions and are prepared to adjust capital plans throughout the year to ensure we balance capital investment with cash inflows."
Devon and peers from ConocoPhillips to Anadarko Petroleum Corp. have turned to asset sales and spending cuts to weather the steep drop in crude prices. The company previously said it seeks to raise $2 billion to $3 billion from divestitures.
Devon plans to dismiss about 1,000 employees in February, according to a company filing. An additional 600 employees will be affected by asset sales. The company expects to incur about $225 million to $275 million in restructuring costs.
Devon needs to provide more clarity on funding, higher oil prices and differentiated asset performance, Goldman Sachs Group Inc. analyst Brian Singer said in a research note. The company’s cost cuts are viewed favorably, he said.
The Oklahoma City-based producer reported fourth-quarter earnings exclusive of one-time items of 77 cents a share, compared with the 71-cent average of 31 estimates compiled by Bloomberg. Devon posted a net loss of $4.53 billion, or $11.12 a share, compared with a loss of $408 million a year earlier.
Cimarex, the Denver-based oil and gas producer, said its capital investment will fall to a range of $600 million to $650 million, a 29 percent cut from last year at the midpoint, and 67 percent from 2014. The shares are down about 10 percent this year.