UPDATE: Devon 3Q Profits Fall 81%, Production Up
(Adds results on Gulf of Mexico prospect, analysts' comments, a new share
price and background)
By Isabel Ordonez
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Devon Energy Corp. (DVN) on Wednesday posted a better-
than-expected 81% fall in third-quarter earnings due to sharply lower natural
gas prices that offset a 6% increase in production and cost cuts.
The independent oil and gas producer reported a profit of $499 million, or $
1.12 a share, down from $2.6 billion, or $5.88 a share, a year earlier.
Excluding items such as hedging impacts, earnings fell to $1.10 a share from $
3.09 a share. Analysts forecasted earnings of 90 cents a share on revenue of $
2.04 billion. Revenue decreased 65% to $2.1 billion.
The Oklahoma City-based company said its quarterly production averaged 673,000
barrels of oil equivalent per day, a 6% increase compared with the third quarter
of 2008 and 1% above the company's previous guidance due to the absence of
hurricanes and related shut-ins of production. However, output was 6% lower
sequentially.
Analysts at UBS showed concern about Devon's production outlook for the fourth
quarter and next year as the absence of protective commodity-prices hedges
forced the company to reduce activity more than its peers. "We currently
forecast 2009 production to increase by 4% and decline 1.5% in 2010," said UBS's
analyst William Featherston in a note to clients.
Devon's shares recently were up 2% at $67.78 in a widely broader market.
Many natural-gas producers have scaled back drilling programs due to slumping
prices, though efficiency gains in shale-oil drilling have helped to keep
supplies abundant, drive costs down and make longer-term, fixed-price contracts
with power generators and other big customers more feasible. Devon and some
other big U.S. gas producers have begun discussing turning to such contracts in
recent months.
Devon also announced that the appraisal well on the Kaskida prospect in the
ultra deepwaters of the Gulf of Mexico encountered "an encouraging oil column."
Some analysts saw this as a good news for Devon, which is selling its 30%
stake on the field and had said the bidding process will remain open until the
results of the well are completed. The full results are expected to come before
the end of the year, but Wednesday's announcement signals Kaskida is a major
finding, says Fadel Gheit, analyst at Oppenheimer & Co. Inc.
Devon said in May the company would sell stakes in its four oil discoveries in
deepwater Gulf of Mexico--Kaskida, St. Malo, Jack and Cascade. It has stakes in
each field, all of which are thought to be major discoveries and are said to be
in the radar of major international and national oil companies. Analysts at UBS
said Wednesday they estimated Devon's interest in the four discoveries are worth
$2 billion.
-By Isabel Ordonez; at Dow Jones Newswires; 713.547.9207; isabel.ordonez@
dowjones.com
(Tess Stynes in New York contributed to this article)
(END) Dow Jones Newswires
11-04-091134ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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