Sharply lower gas and oil prices in the fourth quarter of 2001 forced Devon Energy to write down the value of its reserves by $556 million (after taxes) and take a $518 million net loss compared to $307 million in net earnings in 4Q2000. Quarterly earnings per share before special charges were 23 cents, or nearly double the average of Wall Street estimates. Despite the poor results, Devon reported record high oil and gas production, revenues and year-end reserves, mainly because of its mergers with Canada’s Anderson Exploration and Houston-based Santa Fe Snyder.

Earnings for the year including special charges were $103 million, down from $730 million a year earlier. Earnings per share for the year before special charges were $5.03, also beating average Wall Street estimates of $4.87.

Sales of oil, gas and natural gas liquids reached a record high $3 billion in 2001, up 10% from 2000. Total production of oil, gas and natural gas liquids rose 12% to a record 135 MMboe. There was an 81% increase in Canadian production attributable to the Anderson acquisition. The average price the company received for its oil production decreased 15% to $21.57/bbl and the average price for gas increased 9% to $3.80/Mcf. Gas liquids prices fell 19% to $16.98/bbl.

Although the company reported minimal expenses related to its mergers with Anderson Exploration ($1 million pre-tax) and Santa Fe Snyder ($60 million), operating and other expenses rose across the board, including a 20% increase in operating expenses, a 55% in transportation expenses, a 26% increase in rates related to depreciation, depletion and amortization of property and equipment, a 19% increase in general and administrative expenses and a $3 million charge related to exposure to Enron.

Estimated proved oil and gas reserves at the end of the year were 1,620 MMboe, or 523 MMboe greater than at Dec. 31, 2000. Total reserve additions were 658 MMboe, reduced by production of 135 MMboe. This resulted in production replacement of 487%. Year-end reserves included 586 MMbbl of oil, 5.5 Tcf of natural gas and 121 MMbbl of gas liquids.

The company’s 2002 capital budget for drilling and facilities expenditures is approximately $1.3 billion. In addition, Devon has budgeted approximately $150 million for midstream facilities.

In order to limit the impact of declining oil and gas prices on cash flow, Devon has hedged 35-40% of its gas production at $3/Mcf, and 50-55% of its oil production at $22.35/bbl.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.