Devon Energy Corporation
) reported first quarter 2012 pro forma earnings per share of $1.05
compared with $1.34 in the year-ago quarter. The decline in
earnings was due to higher Canadian oil price differentials, and
increase in oilfield service and supply expenses. The reported
earnings missed the Zacks Consensus Estimate of $1.44.
On a GAAP basis, the company reported earnings per share of 97
cents, flat year over year. The variance between pro forma and GAAP
earnings in the reported quarter resulted from a 5-cent loss from
adjustments on asset sales related to discontinued operations, 2
cents loss from oil and gas derivatives, and 1 cent loss from
interest rate and financial instruments.
Devon's quarterly revenue was $2.50 billion versus $2.18 billion
in first quarter 2011. The quarterly performance was driven by
Natural Gas Liquids
("NGL") sales, and higher oil, gas and NGL derivatives, partially
offset by a decline in marketing and midstream revenues. The
reported revenue missed the Zacks Consensus Estimate of $2.54
In the first quarter 2012, North American onshore production
increased 10% year over year to 694,000 oil-equivalent barrels
("Boe") per day. The growth was attributable to higher oil
production, which increased by 26% year over year to 256,000 Boe
Lease operating expenses of the company in first quarter 2012
increased to $514 million from $424 million in the year-ago
quarter. The increase in expenses was due to higher industry costs
related to increase in operations in the oil-focused basins.
Interest expenses were $87 million as of March 31, 2012, up from
$81 million in the year-ago period due to an increase in debt
In the reported quarter, Devon's overall realized price was
$32.83 per Boe, compared with $34.38 per Boe in the year-ago
period. This decline in price was due to depressed gas and NGL
realized prices, but partially offset by strong realized oil
The gas price realization was down by 24.7% year over year to
$3.02 per thousand cubic feet ("Mcf") from $4.01 per Mcf in the
year-ago quarter. Realized prices for NGL were also down 5.2% to
$35.49 per barrel from $37.45 per barrel in the year-ago
Realized oil prices in the quarter improved significantly to
$76.14 per barrel, representing an 8.0% jump from the year-ago
Cash and cash equivalents of the company as of March 31, 2012
were $5.83 billion versus $5.56 billion as of December 31,
Capital expenditure in first quarter 2012 was $2.09 billion, up
from $1.83 billion reported in the year-ago period.
Long-term debt was $6.72 billion as of March 31, 2012 compared
with $5.97 billion as of December 31, 2011.
Devon Energy's peer
Chesapeake Energy Corporation
also announced its first quarter 2012 earnings: 18 cents per share
compared with 75 cents in the year-ago quarter. The quarterly
earnings missed the Zacks Consensus Estimate of 29 cents.
Chesapeake Energy's first quarter 2012 revenue was $2.42 billion
versus $1.61 billion in the prior-year quarter. The reported
revenue failed to surpass the Zacks Consensus Estimate of $2.75
Devon Energy's results in the first quarter failed to meet our
expectations due to weak gas and NGL prices.
However, Devon Energy's continuous acreage acquisitions program,
allied oil and gas drilling and development activities, and higher
midstream capital activities related to addition of natural gas
processing plants and pipeline extension will fuel near-term
growth. The company's diversified portfolio, with significant oil
and natural gas liquids-rich projects, is also likely to generate
better risk-adjusted profit.
But, at the same time, we are concerned about a rise in
oil-field operations and servicing expenses.
Devon Energy currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
Based in Oklahoma City, Oklahoma, Devon Energy Corporation, is
an independent energy company engaged primarily in exploration,
development and production of oil and natural gas.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis Report
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