Devon, EnCana Set Record Earnings Pace, Mixed Production Results
Soaring oil and gas sales pushed two of North America's largest independents, Devon Energy Corp. and EnCana Corp., to record first quarter earnings. Devon's net earnings were $436 million ($2.76 a share), compared with $62 million (41 cents) a year ago. Meanwhile, Calgary-based EnCana earned C$1.246 billion (C$2.57), versus C$163 million (34 cents) for the same period of 2002.
Devon, based in Oklahoma City, said net cash nearly doubled for the period to $827 million compared with $368 million a year ago. Before balance sheet changes, cash flow climbed 111% to a record $868 million, compared with $411 million in 1Q2002.
Devon's combined production of oil, gas and natural gas liquids was 44.3 MMboe in the first quarter, 9% less than last year's 48.6 MMboe. The independent attributed the production decline to divestitures, which were in part offset by the acquisition of Mitchell Energy & Development Corp. Devon divested approximately $1.4 billion in producing properties in 2002. However, Devon acquired Mitchell in late January 2002, and 1Q2002 production included volumes attributable to the Mitchell properties only after the acquisition was completed.
With the significantly higher commodity prices realized, Devon's sales of oil, gas and natural gas liquids increased 66% over a year ago to $1.2 billion. Also, the average price realized for natural gas production increased 101% to $4.84/Mcf from $2.41 for the same period of 2002. The average price for oil was up 51%, while the realized for natural gas liquids was $21.15/bbl in the first quarter, up 73% from last year's $12.22.
For Canadian super independent EnCana, the first quarter proved a bonanza compared with last year. Along with its high earnings, the company generated C$1.852 billion of cash flow, or $3.80 per diluted share. Excluding special items, EnCana earned C$790 million, (C$1.63) from continuing operations. Revenues, net of royalties and production taxes, in the first quarter were C$4.158 billion, while core capital investment was C$1.587 billion.
First quarter daily conventional oil and gas sales increased 10%, averaging 736 Mboe, compared to the pro forma conventional sales of 669 Mboe in 1Q2002. Daily natural gas sales increased 11% to average 3 Bcf, which included an average of 141 MMcf/d from EnCana's gas storage. First quarter natural gas production also was up, increasing 12% over the same period in 2002. Conventional oil and natural gas liquids sales increased 8% to average 233,169 bbl/d, compared to pro forma sales of 215,298 bbl/d in the first quarter of 2002. EnCana drilled 1,329 net wells in the first quarter.
"EnCana is right on track, achieving record financial and operating performance as it embarks on its second year of operations," said CEO Gwyn Morgan. "With the outlook for a continuation of very strong gas pricing fundamentals, EnCana is extremely well positioned to capitalize on a production mix that is leveraged two-thirds to North American natural gas." Morgan added that EnCana's current gas field productive capacity is already in the range of its 2003 sales target of 3 Bcf/d to 3.1 Bcf/d.
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