Devon Results Hit by Big Drop in Asset Values (DVN)

Devon Energy Corp. (NYSE:DVN) reported a net loss for its fourth quarter of $6.8 billion (EPS of -$15.42), and a net loss for the year of $2.1 billion (EPS of -$4.85). Anyone who is surprised by these numbers hasn’t been paying attention.

Devon recalculated the value of its oil and gas reserves, as it is
required to do by SEC rules, and took a non-cash $7.1 billion
write-down in the carrying value of its oil and gas properties. Without
that write-down, the company would have reported EPS of $9.91 for the year, below
analysts’ estimates of $10.03. Revenue estimates were $15.09 billion
for the year, and Devon posted $15.21 billion.

The worst news from the results is Devon’s cash position, which has
melted from $1.36 billion at the end of 2007 to $379 million at the end
of 2008. The company did lower its short-term and long-term debt over
the course of the year, so that helps some.

Devon also reported a slight decrease in total proved reserves from
2.496 billion barrels of oil equivalent at the end of 2007 to 2.428
billion barrels at the end of 2008.

Its reserves of crude oil dropped from 677 million barrels to 429
million barrels. The drop in prices accounted for 355 million barrels
of the decline. Crude production of 53 million barrels was offset by
150 million barrels of newly discovered and acquired properties. The
story in the company’s natural gas reserves is the same. If there’s any
good news in Devon’s numbers, this is where it is.

Devon’s share price is off nearly 4% at $59.65 so far this morning, off about 53% from 52-week highs.

Paul Ausick
February 4, 2009