2nd UPDATE: Devon 3Q Profits Fall 81%, Production Up
(Adds company executives' comments on capital budgets, new production outlook
and Gulf of Mexico asset sales, and updated stock price.)
By Isabel Ordonez
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Devon Energy Corp. (DVN) on Wednesday increased its 2009
production outlook while maintaining its capital spending, saying it expects to
receive the final bids for its stakes in four ultra-deepwater oil discoveries of
the Gulf of Mexico by year's end.
Devon, which posted Wednesday an 81% fall in third-quarter earnings due to
sharply lower natural gas prices, also said it expects to increase its spending
next year if commodity prices don't fall substantially. It also plans to spend
the proceeds of its Gulf of Mexico assets sales on its onshore properties in
North America, the company said.
"We certainly do intend, as long as oil and gas prices continue the way that
we think they will, to ramp up our spending in 2010," Devon Chief Executive
Larry Nichols said during a conference call with analysts.
The Oklahoma City-based company said it expects to increase 4% its 2009
production compared with last year, or 1% above its previous outlook to about
248 million barrels of oil equivalent. The company expects to maintain its 2009
capital expenditure at about $4.1 billion.
The company's shares recently were up 1.8% at $67.61.
Devon says it expects to receive the final bids for its stakes in its Kaskida,
St. Malo, Jack and Cascade prospects - four oil discoveries in the deepwater
Gulf of Mexico - at the end of December. Devon said bids are expected to come
after the company announces the results of the appraisal well being drilled at
the Kaskida prospect, which is expected to be completed this month. Executives
of the company said the sale has attracted very strong interest from companies.
"We are confident we will complete those operations on Kaskida this month,"
said Vincent White, vice president of Investor Relations. "That schedule would
put us with business due by the end of December."
Devon has said recently it expects to finish the selling process next year,
and that the bidding process will remain open until the results of its Kaskida
discovery well are completed.
Devon said in May the company would sell stakes in the four fields, 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 is worth $2 billion.
Kaskida, in which Devon has a 30% interest and is operated by BP PLC (BP), has
the potential to be the largest of the four discoveries, the company said. Devon
said earlier Wednesday the appraisal well on the Kaskida prospect encountered "
an encouraging oil column." Devon's executives declined to offer more details on
the well results, saying they were not authorized by BP.
Devon also expects to increase its drilling activity in the Haynesville Shale
in the fourth quarter and in 2010. The area is a rapidly developing natural gas
field in Texas and Louisiana where Devon has a large position. The company
announced Monday one of its East Texas wells being drilled in southern
Haynesville initially produced about 31 million cubic feet of natural gas a day,
making it among the most prolific onshore natural gas wells in the U.S.
Devon 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 expected
earnings of 90 cents a share on revenue of $2.04 billion. Revenue decreased 65%
to $2.1 billion.
-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; isabel.ordonez@
dowjones.com
(END) Dow Jones Newswires
11-04-091417ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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