Thursday, February 10, 2011

Devon Energy Corp. (NYSE: DVN): Q4 Earnings Preview 2010

Devon Energy Corp. (NYSE: DVN), the third-largest U.S. independent oil and natural-gas producer by market value, is scheduled to release fourth-quarter earnings before the opening bell on Wednesday, February 16, 2011. Analysts, on average, expect the company to report earnings of $1.39 per share on revenue of $2.40 billion. In the year ago quarter, the company reported earnings of $1.33 per share on revenue of $2.44 billion.

Devon Energy Corporation, together with its subsidiaries, engages in the exploration, development, and production of natural gas and oil; transportation of oil, gas, and natural gas liquids (NGLs); and processing of natural gas.

In the preceding third-quarter, the Oklahoma City, Oklahoma-based company's net earnings surged to $2.09 billion or $4.79 per share from $499 million or $1.12 per share in the year ago quarter.Excluding such special items, the company earned $628 million or $1.44 per share in the quarter. Revenues for the quarter were $2.35 billion, up from $1.85 billion in the prior-year quarter. Analysts, on average, expected the company to report earnings of $1.29 per share on revenue of $2.35 billion.

Devon Energy continued construction of the second phase of Jackfish development in Canada during the third quarter of 2010. The company estimates that phase two is 90% complete and should start production by the end of 2011

At its last earnings call in November, Devon said that it expects to grow production 10% from the fourth quarter of 2009 to 625-635 MBoe/d in fourth quarter of 2010. For 2011, Devon expects overall production growth of 68% led by a roughly 20% growth in oil and NGL volumes. The company also said that spending on exploration and production will fall in 2011. Spending will be $4.5 billion to $4.9 billion, down from as much as $5.8 billion this year. About 90 percent of next year’s spending will be for oil and gas liquids, driving up liquids output by 20 percent and total production by as much as 8 percent. Devon may sell all or part of 17,000 acres in the Haynesville Shale region of east Texas that won’t be as profitable as other holdings. It has locked in drilling rights on 110,000 acres in the gas-rich region that will generate sufficient profit at prices of $5.50 to $6 per million British thermal units.

The company has benefited from higher energy prices and a rising output in the North America fields. Devon shifted its strategy last year to focus on its North American land assets and shed offshore fields and properties outside the continent. 

In December, the oil and gas company was forced to cut its production by roughly 10,000 barrels per day due to outages at Enbridge Inc.’s (NYSE: ENB) pipeline network. As a result, the company said that it expects Canadian oil volumes in the fourth quarter to reduce by 300,000 barrels, representing about 0.5% reduction in the company’s estimated total production for the fourth quarter.

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