Selection, Value Addition to the Society and Stakeholders
The selected company is Devon Energy Corporation based in Oklahoma City, Oklahoma. Devon Energy Corporation is an independent company in the United States that deals with the production of petroleum, natural gas and natural gas liquids through exploration that focuses its activities on onshore within North America. The reason for selecting this company is that it operates in an industry of interest which is oil and gas. The interest in this company and industry arises from the fact that it plays a considerable role in driving American as well as the world's economy. The oil and gas industry, directly and indirectly, influences the American domestic economy. In this regard, incredible importance is attached to the role played by the oil and gas in other sectors within the American and world economies such as manufacturing and production among others. Devon Energy Corporation is a company of interest owing to considerable contribution towards the realization of a stable and thriving economy. In particular, the Devon Energy Corporation is among the largest producers of energy within the Barnett Shale with about 600,000 acres of oil and gas reserve under its control and management ( Devon Energy, 2018).
This company recorded more than 2.1 billion barrels of oil in its reserve by the end of the year 2017. As a way of adding value to the society, Devon Energy Corporation takes a keen interest in the progress of political affairs in the United States. In that respect, Devon happens to be one of the major contributors to political organizations and their various campaigns. Considering its affiliation with the Republican Party in the United States, Devon has been able to demonstrate its commitment through its contributions of financial assistance to Congressional Leadership Fund as well as Senate Leadership Fund during the 2016 political campaigns. The stakeholders of Devon include BlackRock Fund Advisors, SSgA Funds Management Inc., The Vanguard Group Inc., Invesco Advisers Inc., AQR Capital Management LLC, Artisan Partners LP, Fidelity Management & Research Co., Geode Capital Management LLC, PointState Capital LP, AQR Capital Management LLC, and Northern Trust Investments, Inc. (Laing, Lucey & Leutkemeyer, 2017).
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Where the company sells its Products
The sale of products from Devon Energy Corporation majorly takes place in the United States domestic market. However, the company also exports part of the oil and gas products that it produces. Devon, through one its partners, places its focus and more emphasis on processing, gathering, storage, fractionating, transmission, and marketing of oil and gas products. Moreover, this particular partner ensures that Devon secures a linkage between producers of oil and natural gas on one side and different areas of the market on the other hand. Parts of Devon such as EnLink are also involved in the purchase of its products before supplying them to different other sources. The product from Devon such as natural gas is usually sold to pipelines, industrial consumers, utilities, and other marketers (Devon Energy, 2018).
Company’s Financial Position
The expenditure directed by the company towards development further exploration in the third quarter financial year 2017 amounted to $548 million. This value of expenditure was way below the required amount for the third year in a row. Over the last couple of years, the yearly capital investment made by Devon has gone to about 12% lower than the middle point of the expected value and 65% of the initial capital budget that was allocated in February the year 2017. Over the last few years, Devon has managed to exhibit strong capital efficiency whose sustainability and maintenance has been largely dependent on the level of productivity established at Delaware Basin and Stack as well as decoupling of various services that have always been subjected to historical disbandment. Enhancements of efficiencies characterized the financial status of Devon in the year 2017 to the extent that the inflationary pressures of the industry were significantly offset (Devon Energy, 2018).
Owing to the positive trends of operation experienced by Devon in relation to its financial trends over the last couple of years, The expectation of Devon concerning capital spending has gone up to the a level where it ranges between $2.0 billion and $2.1 billion by the end of the year 2017. In examining and analyzing its production margin, it is important to note that Devon’s higher-margin production has to the extent that it is almost doubling the cash flow. The operating cash flow for this company amounted to $776 million during the third quarter of the year 2017. Considering a yearly evaluation, Devon’s operating cash flow has increased to about $2.4 billion which corresponds to 96% rise in comparison to the amounts that were recorded in the year 2016. The high level of cash flow experienced by Devon during the financial ending December 31, 2017 is majorly attributable to a number of enhancements that the company conducted on the prices of its commodities as well as a structure of lower cost for its various others operations ( Laing, Lucey & Leutkemeyer, 2017).
The reported net earnings for this company amounted to $228 million by the end of third quarter of the year 2017. Furthermore, this company’s core earnings amounted to about $242 million following an adjustment of some of the items that were initially excluded from the published estimates by security analysts. During the third quarter of the year 2017, Devon’s operations that were being conducted upstream were able to provide the entire amounts required to fully fund its capital expense and requirements. Additionally, these upstream operations were sufficient to assist in the generation of the company’s free cash flow which played a crucial role in raising cash balances to $2.8 billion through an addition of $400 million by the end of September in the year 2017. This trend represented a third consecutive quarter that the company managed to raise its cash balance and it amounted to a yearly overall cash of close to $800 million (Devon Energy, 2018).
Economy and other factors that the company must deal with
Oil and gas Inventories
Considering that oil and gas are products that are regarded as strategically and economically significant for some sectors in the economy, it would be important for Devon to adequately prepare itself to deal with a situation occasioned by an increase in the capacity crude oil required for present and future use. The measurement and evaluation of the oil reserves within the United States play a critical role by acting as one of the economic indicators often monitored and examined by investors who are interested in investing in the oil and gas industry. Moreover, changes taking place about the stock levels of oil reservoirs largely reflect some of the trends that describe the production and consumption of the products from the oil and gas industry (Cakir, Plante & Yucel, 2017).
Economic Performance and Global Demand
Economic growth and development in countries with high populations such as China and India could bring about an increase in the global demand for products like oil and gas. On the other hand, the presence of economic turbulence in various countries around the world would have the tendency of lowering the demand for oil and gas products. Such a situation can clearly be demonstrated through the crisis that affected the housing industry in the year 2008 following a drop of process of oil and gas products by about 40% in a period of less than seven months. General indicators of the overall economic performance is sufficient to inform and guide investors concerning the kind of shifts that would be expected to take place in the demand for products produced by companies such Devon. Gross domestic product measures the overall levels of production and spending in any economy and it increase causes a corresponding increase in the demand for oil and gas products ( Gray & Swanson, 2017).
Taxes, Interest Rates, and R egulations
Interest rates are crucial economic indicators for oil and gas industry and the role it plays in influencing the economic performance of other sectors. Adjustments in interest rates and taxes can considerably determine the costs associated with spending and borrowing habits as well as inventory storage. Furthermore, changes in capital structure and costs could be significantly influenced by changes in interest rates, policies, and regulations. Tax adjustments could considerably influence the performance of as well as the profitability of companies such as Devon that are major plays in the oil and gas industry. Increase in the taxation of products produced by Devon could go to the extent of restricting the level of production thereby raising the prices for such products (Cakir, Plante & Yucel, 2017).
Interest in Working for the Company
Considering that reason for selecting this company is that it operates in an industry of interest which is oil and gas, I would like to work in Devon Energy Corporation as a production manager. This is because I have been impressed by the financial as well as the general performance of this company. Moreover, I would like to work in this company as a production manager to acquire a deeper and broader understanding of the various factors that influence production of its main products which are oil and gas and how they are affected by the performance of the global economy.
References
Cakir M. N., Plante, M., & Yucel, M. (2017). The U.S. shale oil boom, the oil export ban, and the economy: A general equilibrium analysis. Federal Reserve Bank
Of Dallas, Working Papers , 2017 (1708). http://dx.doi.org/10.24149/wp1708
Devon Energy (2018). Devon Energy Corp. DVN (U.S.: NYSE). The Wall Street Journal . Retrieved 23 April 2018, from https://quotes.wsj.com/DVN
Gray, C., & Swanson, Z. (2017). The market impact of proved reserves disclosures by The US publicly held oil and gas explora tion and development companies. International Journal Of Accounting, Auditing And Performance Evaluation , 13 (4), 361. http://dx.doi.org/10.1504/ijaape.2017.087240
Laing, E., Lucey, B., & Leutkemeyer, T. (2017). Commodity Exposure, Financial and Operational Hedging of US Oil and Gas Companies. SSRN Electronic
Journal . http://dx.doi.org/10.2139/ssrn.2918966
