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Devon Energy To Pursue Separation Of Canadian And Barnett Shale Assets

Devon Energy Corp. (DVN) announced its board has authorized the company to pursue the separation of its Canadian and Barnett Shale assets to complete its transformation to a high-return U.S. oil growth business. Devon will evaluate multiple methods of separating the assets, including a potential sale or spin-off. The company expects to complete the separation by the end of 2019.

Devon also announced its board authorized a $1 billion increase to the previously announced $4 billion share-repurchase program, bringing the total repurchase program to $5 billion. The authorization for the repurchase program expires on Dec. 31, 2019. As of Feb. 18, 2019, Devon had completed $3.4 billion of repurchases under the program.

Additionally, the company's board approved a 13 percent increase in its quarterly common stock dividend beginning in the second quarter of 2019. The new quarterly dividend rate will be $0.09 per share.

The company said it is committed to aligning the cost structure by taking steps to deliver at least $780 million in sustainable annual cost savings by 2021. Approximately 70 percent of the estimated cost reductions are expected to be accomplished by year-end 2019, with the remaining savings realized in 2020 and 2021.

Jeff Ritenour, CFO, said: "The combination of selling higher-cost assets and bringing online new lower cost production, along with our commitment to at least $780 million in annual cost-reductions, is expected to drive down per-unit cash costs more than 20 percent by 2021."

Devon Energy reported net earnings attributable to company of $1.1 billion, or $2.48 per diluted share, in the fourth quarter. Adjusting for items, core earnings totaled $46 million, or $0.10 per diluted share, for the quarter.

In the fourth quarter, the company's upstream revenue, excluding commodity derivatives, totaled $1.1 billion, an 18 percent decline compared to the year-ago quarter. The company said its revenue in the fourth quarter was impacted by historically wide differentials in Canada, which negatively impacted the realized price on heavy oil production. Devon's reported net production averaged 532,000 Boe per day during the fourth quarter of 2018, exceeding midpoint guidance by 3,000 Boe per day.

The company exited the fourth quarter with $2.4 billion of cash on hand and an undrawn credit facility of $3 billion. At year end, Devon had an outstanding balance of $5.9 billion with no significant debt maturities until mid-2021.

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