OK-based Devon Energy profits increase 44 percent, break record

Journal Record, The (Oklahoma City),  Nov 3, 2005  by Jerry Shottenkirk

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Devon Energy reported a 44 percent increase in third quarter profit, breaking a company record, officials said Wednesday.

Net income increased to $744 million, or a record $1.63 per share, from $517 million, or $1.06 per share, during the corresponding quarter of 2004. The per-share amounts reflect a two- for-one stock split completed in November 2004.

Devon had a 24 percent net increase in sales to $2.3 billion, up from $1.9 billion.

Items such as a $134 million pre-tax charge for a change in fair value of Devon's financial derivatives brought the income total down $105 million.

We had record earnings in the third quarter despite the disruptions caused by the Gulf hurricanes, said Larry Nichols, Devon chairman and chief executive officer. Devon's strong financial results are allowing us to expand our search for new oil and gas reserves in the United States, Canada and abroad. Through the first nine months of 2005 we invested a record $2.6 billion, enabling us to drill 1,837 wells. This was 20 percent more wells than we drilled in the first nine months of 2004.

The average natural gas price rose 38 percent to $7.13 per thousand cubic feet and the average realized oil price increased 49 percent to $43.45 per day. Overall production dropped from 679,000 barrels of oil per day to 598,000 barrels during the quarter, mainly due to the hurricanes.

Devon reported net earnings of $2 billion or $4.22 per common share during the first nine months of 2005. Net earnings during the same period last year were $1.5 billion, or $3.13 per share.

The marketing and midstream operating margin increased 24 percent to $111 million, up from $89 during the third quarter of 2004.

Devon drilled 644 productive wells during the quarter and had a success rate of 98 percent. Other highlights during the quarter included Devon operating its 2,000th well in the Barnett Shale field of Texas, continued drilling in Arkoma shale in eastern Oklahoma, where 70,000 net acres are under lease, and success in the Gulf of Mexico's lower Tertiary formation. In West Africa, Devon drilled two successful exploration wells in offshore Equatorial Guinea.

During the quarter Devon retired $668 million of long-term debt with cash on hand, and the company's net debt to adjusted capitalization was at 23 percent at the end of the quarter.

Devon repurchased 10.4 million shares of its common stock for $567 million during the quarter and completed a 50 million-share repurchase program announced in September 2004. Devon is currently conducting a second 50 million share repurchase program. After debt retirements, stock repurchases and other uses of cash in the quarter, cash and short-term investments on hand were $1.9 billion at the end of the quarter.

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