Devon Energy Corporation (NYSE: DVN) has expenditures 30% to counter the challenges posed by the sudden decline in commodity prices. The revised expenditure amount is $1.3 billion and it will be allowed the company to preserve liquidity. The planned reduction of nearly $500 million in capital expenditure will be developed across the company’s diversified portfolio. These major cuts are directed toward STACK and Powder River Basin assets. The DVN stock or DVN stock news at https://www.webull.com/quote/nyse-dvn company has hedged around 40% of expected oil production and exposure of the remaining 60% oil production to volatile prices has forced management to cut down capital expenditure plans.
Improvement of Liquidity & Cost Structure
- Devon Energy started 2020 with a liquidity of $1.8 billion. It has agreed to sell Barnett Shale gas assets for $770 million, which will further increase its liquidity. The agreement is expected to close this year.
- Even before the drastic drop in commodity prices, Devon Energy had been taking steps to improve the cost structure. The company was able to reduce G&A expenses by $240 million in 2019 and it has the intention to carry on cost-management initiatives in 2020.
Why Global Oil Prices are Declining?
- The ongoing decline in commodity prices was due to a reduction in global demand as the novel coronavirus has impacted global economic growth. Governments are across the globe that is supplying directives related to travel, temporary closure of schools, factories, offices, and asking people to avoid mass gatherings. These are adversely impacting demand for crude.
- Saudi Arabia is the world’s top oil exporter and it has plans to increase crude oil production above 10 million barrels per day in April, after the collapse of its OPEC supply cut agreement with Russia.
- The decision of Russia and Saudi Arabia is the major producers of crude apart from the United States to produce more crude volumes.
- They are having already seen companies belonging to the oil and gas sector like Occidental Petroleum Corporation OXY, Noble Energy NBL and Murphy Oil MUR cutting down on the capital. These expenditures are preserved liquidity and slowing down expansion is planning amid the falling oil prices.
- The bumpy ride of global oil prices is expected to continue in the near term until the demand for commodities normalizes and oil-producing. These majors are agreeing about reducing production volumes that will be stabilized oil prices. If you want to know more stock news like Nasdaq ttwo, you can check at https://www.webull.com/quote/nasdaq-ttwo .