Devon Energy posts record earnings, output

Journal Record, The (Oklahoma City), Aug 7, 2003 by Journal Record staff

Devon Energy on Wednesday reported record oil and gas production and earnings for the second quarter.

Net earnings for the quarter totaled $356 million, or $1.67 per share, compared with a net loss of $104 million, or 68 cents per share, for the second quarter of 2002.

Revenues totaled $1.8 billion, up from $1.15 billion a year earlier.

Net income for the first six months of 2003 totaled $792 million, or $4.27 per common share, compared with a net loss of $42 million, or 31 cents per share, for the same period of 2002. Revenues totaled $3.5 billion, up from $2.05 billion a year earlier.

Combined production of oil, gas and natural gas liquids reached 56 million barrels of oil equivalent in the second quarter of 2003, a quarterly production record and a 13 percent increase from 50 million barrels of oil equivalent a year earlier.

Devon's merger with Ocean Energy, completed April 25, drove the production increase, more than offsetting the impact of property divestitures. Devon, the nation's largest independent oil and gas producer, divested $1.4 billion of non-core oil and gas producing properties in 2002.

Sales of oil, gas and natural gas liquids increased 67 percent from the second quarter of 2002 to a record $1.5 billion due to higher production volumes and higher product prices.

Devon's second quarter average realized natural gas price increased 64 percent to $4.67 per thousand cubic feet. The average price realized for second quarter oil production increased 13 percent to $25.42 per barrel and the average price realized for natural gas liquids increased 31 percent to $17.88 per barrel.

Marketing and midstream revenue also increased in the second quarter, primarily due to higher natural gas and natural gas liquids prices. Marketing and midstream revenue climbed 26 percent to $335 million from a year earlier.

Total operating costs and expenses, excluding a 2002 non-cash reduction of carrying value of oil and gas properties, increased 37 percent to $1.1 billion in the second quarter. The increases reflect Devon's larger size and scope of operations following the merger with Ocean Energy. Marketing and midstream costs also increased due primarily to higher natural gas prices.

The overall increase in second quarter 2003 general and administrative expenses included $20 million attributable to two items.

The first was $12 million due to a change in the value of investments in certain compensation plans, partially offset by a related $7 million increase in other income. The second item was the one-time, $8 million cost of closing Devon's office in The Woodlands, Texas. The company is consolidating its Houston-area operations into a single downtown location.

Partially offsetting these expense increases was a decrease in interest expense. Interest expense decreased 12 percent to $130 million.

Income tax expense was $233 million in the second quarter of 2003. This was a result of significantly higher pre-tax earnings in the period.

Cash flow before balance sheet changes climbed 101 percent to $890 million in the second quarter. The increase allowed Devon to fully fund its second quarter capital expenditure requirements, repay $300 million of debt and increased cash on hand by $90 million.