UBS analyst William Featherston reiterated an Neutral rating on Devon Energy (NYSE: DVN) while lowering his price target to $53.00 (from $70.00) following Q2 results which beat the street on lower cost. The firm sees a material reduction in 2016 Capex versus the consensus.

Featherston commented, "Clean 2Q EPS/CFPS of $0.78/$2.95 were comfortably above consensus & UBSe of $0.43/$2.72 & 0.38/$2.39, respectively; variance vs UBS was driven by lower per-unit costs, higher G&P income, & higher NGL realizations. Core 2Q volumes rose 9% YoY to 674 MBoed, in line with guidance of 660-688 MBoed & consensus of ~675 MBoed. Price realizations fell 20% YoY to $5.61/Mcfe but were 3% above UBSe. Unit costs fell 4% YoY to $4.96/Mcfe & were 5% below our forecast. We raised our '15-16E CFPS from $9.96/$8.21 to $10.75/$8.45 on the 2Q beat and lower cost guidance."

DVN reiterated its '15 production guidance of 650-684 MBoed. Meanwhile, DVN trimmed its 2015 capex budget by $100MM to $4.4-$4.8bn. "While DVN continues to target rough capex/cash balance in '16, it can cut Canadian & exploration spending by ~$1bn next year which should enable it to hold liquids volumes flat with 4Q15 while natgas prod'n should continue to decline. We forecast a $3.5bn budget with 2% YoY prod'n decline but 4% YoY oil growth in '16. However, consensus capex is $4.8bn with no volume growth, implying consensus underestimates DVN's capital efficiency improvements."

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Shares of Devon Energy closed at $48.74 yesterday.