While sharply lower oil and gas prices took an 80% chunk out of Devon Energy’s earnings in the first quarter, the company’s oil and gas production soared, following the additions of Anderson Exploration and Mitchell Energy.

First quarter earnings fell to $75 million, or 49 cents/share, excluding special items, compared to $368 million or $2.72 per diluted common share in the first quarter of 2001, but total gas production rose 74% to 195 Bcf, or 2.2 Bcf/d. Canadian gas production jumped 380% to 73 Bcf and U.S. gas production rose 27% to 120 Bcf mainly because of the acquisitions.

Total first quarter production of oil, gas and natural gas liquids climbed 66% to a record 51 million barrels in 2002. “We are very pleased with Devon’s first quarter performance,” said CEO J. Larry Nichols. “The properties acquired from both Anderson and Mitchell delivered solid growth during the first quarter driving oil and gas production to record highs.”

Devon completed the acquisition of Anderson on Oct. 15, 2001, and the acquisition of Mitchell Energy on Jan. 24, 2002. In addition, the company drilled 718 wells during the first quarter of which 92% were successful.

Nevertheless, sales of oil, gas and natural gas liquids were down 23% to $778 million. Devon’s dramatic increase in first quarter 2002 production was more than offset by the effect of lower oil and gas prices. The average price Devon received for its first quarter 2002 oil production declined 23% to $18.69/bbl, and the average price received for natural gas decreased 63% to $2.41/Mcf. Devon’s average price received for natural gas liquids was $12.24/bbl versus $24.55 in 2001, a 50% decrease.

For the first quarter, including the effects of the special items such as amortization of goodwill and the effects of foreign exchange, Devon recorded net earnings of $62 million, or 41 cents per common share (40 cents per diluted common share), compared to first quarter 2001 net earnings, including the effects of the special items, of $400 million, or $3.08 per common share ($2.96 per diluted common share).

Marketing and midstream revenues, which came from the assets acquired in the Mitchell Energy transaction, were $160 million compared to $20 million in 2001. Marketing and midstream costs and expenses were $125 million in the first quarter of 2002 compared to $16 million in 2001.

Devon’s acquisitions of Anderson and Mitchell dramatically broadened and enhanced the company’s asset base. To further focus and upgrade its property portfolio, Devon previously announced plans to divest in excess of $1 billion of non-core properties. As of this date, the company has entered into agreements to sell non-core oil and gas properties in the U.S., Canada and Indonesia for about $1.2 billion. The company is applying the sales proceeds to repay outstanding debt. Through March 31, Devon received $227 million of the sale proceeds.

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