By Geoffrey Smith
Investing.com -- Devon Energy (NYSE:DVN) stock rose 1.8% in premarket trading on Wednesday after the company resisted the temptation to cash in on the current boom in oil prices by pumping more.
Instead, the company kept its production guidance for the year unchanged, with a slight dip in the first quarter expected due to severe weather.
The shale oil and gas producer reported late on Tuesday that its operating cash flow tripled and free cash flow hit an all-time high of $2.9 billion last year, as crude prices rebounded from the initial shock of the pandemic. Revenue and adjusted earnings per share of $1.39 were both more than 10% ahead of expectations.
However, it chose to use the windfall to reward long-suffering shareholders, who had seen the stock lose over 90% from its 2014 high by the middle of 2020. The board increased the company's share buyback program by $600 million to $1.6 billion, and also raised the fixed component of its dividend by 45% to 5 cents a share - a sign that it sees an improvement in its medium-term cash generation potential. The overwhelming majority of the dividend is tied to free cash flow, and the improvement on that score took the total dividend to $1.00 a share.
Devon said it had made no changes to its capital spending plans for the year, which will stay in a range of $1.9 billion to $2.2 billion. As such, it expects output to be between 570,000 and 600,000 barrels of oil equivalent a day. That's below the 611,000 barrels a day it had produced in the fourth quarter.
Devon's results may provoke dismay in Washington, D.C., where the administration of President Joe Biden is facing increasing political pressure because of the rise in gasoline prices over the last year.