Devon Energy Corp.'s quarterly profit rose sharply on rising energy prices, share repurchases and operational improvements, but its oil and natural gas production, compared with a year ago, was down because of hurricane impacts and asset sales. Meanwhile, Southwestern Energy Co., which concentrates its activities in some of the same U.S. onshore regions as Devon, increased its gas-rich volumes 14% and boosted earnings 79% in 1Q2006.
Oklahoma City-based Devon, which Tuesday announced it would buy privately held Chief Holdings LLC (see related story), reported net income rose to $700 million ($1.56/share) from $563 million ($1.14) in 1Q2005. Excluding special items, Devon posted a profit of $1.76/share, slightly below Wall Street's expectations of $1.79. Devon's 1Q2006 average realized natural gas price increased 30% to $7.13/Mcf from $5.50 in 1Q2005.
Total production averaged 568,000 boe/d in the quarter, about 14% below the 660,000 boe/d reported a year earlier. Devon attributed the production drop to property divestitures and hurricane impacts, but its gas output across North America was down. Devon said if not for the hurricanes, overall oil and gas production would have risen 2%.
Total quarterly gas production in the U.S. onshore fell to 113.5 Bcf from 115.8 Bcf, and in the U.S. offshore, gas output dropped sharply to 16.5 Bcf from 29.1 Bcf from a year earlier. Total U.S. gas production for the quarter fell to 130 Bcf from 144.9 Bcf, and in Canada, total gas output fell to 59.1 Bcf from 66.2 Bcf. Average U.S. daily gas output was 1.44 Bcf/d, down from 1.61 Bcf/d in 1Q2005. In Canada, average gas production dropped to 656 MMcf/d from 735 MMcf/d.
Houston-based Southwestern reported net income climbed to $58.4 million (34 cents/share) from $32.6 million (22 cents) adjusted for stock splits in 1Q2005. Southwestern, with extensive holdings across the Midcontinent, increased its gas production to 14.8 MMcf from 13 MMcf a year earlier. Average gas prices climbed to $7.86/Mcf from $5.71 a year ago.
"We've had a very good start to 2006," said Southwestern CEO Harold M. Korell. "We set new quarterly records for net income and cash flow, primarily due to higher production from our development drilling programs in East Texas and the Arkoma Basin and higher commodity prices. In addition, our activity in the Fayetteville Shale play is accelerating as more rigs are being delivered in the area. Through the rest of 2006, we plan to test several new pilot areas as we continue to define the productivity of our acreage position."
Gas and oil production totaled 15.9 Bcfe, up from 14.0 Bcfe in 1Q2005. The increase, said Southwestern, came primarily from higher output from its Overton Field in East Texas and increased production in the Arkoma Basin's Fayetteville Shale play. Total production was 15.9 Bcfe, up from 13.99 Bcfe in 1Q2005. The company also marketed 1.377 Bcf of gas, down from 1.44 Bcf a year earlier.
Separately, Southwestern said last week it will sell its 25% stake in Noark Pipeline System LP to Atlas Pipeline Partners LP for $69 million. Southwestern will assume $39 million of partnership debt related to its ownership interest in Noark. Atlas said it will own 100% of Noark's assets after the transaction is complete, which is expected in 2Q2006.
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