Independent oil and gas company Devon Energy Corp. (DVN) reported Wednesday a profit for the third quarter that plunged from last year, hurt by significantly lower product prices as well as a 64% drop in quarterly revenues, despite strong production growth and lower overall costs. The company noted that costs across all expense categories decline from the year-ago quarter.
With the economic crisis curtailing demand for oil, companies operating in the oil sector have had a tough time. Lower commodity prices and a decline in margins have hurt the bottom line of many of them. Oil prices have almost halved from an all-time high of $147 per barrel in July 2008, although they have improved from a yearly low of less than $34 a barrel in February this year.
Third Quarter Results
The Oklahoma City, Oklahoma-based company reported net income of $499 million or $1.12 per share for the third quarter, sharply lower than $2.62 billion or $5.88 per share in the prior-year quarter.
The year-ago quarter had earnings from discontinued operations of $109 million or $0.25 per share. Income from continuing operations for the quarter plunged to $499 million, or $1.12 per share from $2.51 billion, or $5.64 per share in the year-ago quarter.
Excluding items, Devon reported earnings for the latest quarter of $491 million, or $1.10 per share. On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $0.90 per share. Analysts' estimates typically exclude special items.
Total revenues for the quarter plunged to $2.10 billion from $5.98 billion in the same quarter last year, but topped nine Wall Street analysts' consensus estimate of $1.84 billion.
Oil sales for the quarter fell to $845 million from $1.30 billion in the same quarter last year. Gas sales were $691 million, sharply down from $2.11 billion a year ago. Sales of natural gas liquids declined to $195 million from $362 million in the prior-year quarter.
Revenues from oil, gas and natural gas liquids sales dropped 54% to $1.7 billion from the year-ago quarter, as significantly lower product prices more than offset the growth in natural gas and liquids production.
Among Devon's peers, ConocoPhillips (COP) reported last week a sharp year-over-year decline in profit for the third quarter of fiscal 2009, hurt by lower crude oil and natural gas prices as well as lower refining margins. Net income declined to $1.50 billion or $1.00 per share from $5.19 billion or $3.39 per share last year. Quarterly revenues and other income dropped to $41.31 billion from $71.37 billion in the prior-year quarter.
Other Metrics
The company noted that costs across all expense categories decline from the year-ago quarter. Strong production growth and lower overall costs were more than offset by significantly lower product prices.
Total expenses and other income for the quarter dropped to $1.51 billion from $2.24 billion in the year-ago quarter. The company's lease operating expenses or LOE declined 15% to $505 million from $591 million in the prior-year quarter, and unit LOE also decreased 19% to $8.16 per Boe, reflecting both lower absolute costs and increased production volumes.
Depreciation, depletion and amortization or DD&A of oil and gas properties dropped 39% to $480 million from $781 million last year, and unit DD&A fell 42% to $7.75 per Boe from a year ago.
General and administrative expenses or G&A decreased 7% to $137 million from $146 million a year ago. Interest expense increased 30% to $90 million from the year-ago quarter, reflecting larger debt balance.
In a statement, President John Richels said, "Year to date, Devon increased oil and gas production eight percent compared with 2008. The performance of the company's oil and gas properties has continued to exceed our expectations throughout 2009."
Devon's combined oil, natural gas and natural gas liquids production for the third quarter rose 6% to 61.9 million barrels of oil equivalent, or Boe, from 58.6 million Boe in the year-ago quarter, with each of Devon's operating segments contributing to the production growth.
Total natural gas production for the quarter edged up to 242.8 billion cubic feet or Bcf, from the year-ago quarter's 238.9 Bcf, and total oil production also increased to 13.8 million barrels from 12.1 million barrels in the prior-year quarter. Production of natural gas liquids for the quarter rose to 7.6 million barrels from last year's 6.6 million barrels.
Combined oil, gas and natural gas liquids production averaged 672.6 thousand Boe per day, being the highest third-quarter production in Devon's history, up 6% from 636.6 thousand Boe per day in the prior-year quarter.
The company's realized price, including cash settlements, for the quarter was $30.02 per Boe, sharply down from $60.19 per Boe in the year-ago quarter. Realized price for natural gas during the quarter plunged to $3.37 per thousand cubic feet from $7.81 per thousand cubic feet in the prior-year quarter. Devon's realized price for oil dropped to $61.12 per barrel from %106.94 per barrel, while realized price for natural gas liquids price also fell to $25.67 per barrel from a year ago's $54.72 per barrel.
The company ended the third quarter with cash and cash equivalents of $912 million, compared to $1.20 billion at end of the prior-year quarter.
Nine-Month Highlights
For the nine-month-period, Devon reported a net loss of $3.15 billion or $7.09 per share, compared to net income of $4.66 billion or $10.40 per share in the prior-year period. Loss from continuing operations for the period was $3.16 billion or $7.12 per share, compared to income of $3.75 billion or $8.37 per share in the year-ago period.
Total revenues for the year-to-date period halved to $6.22 billion from $12.50 billion in the same period last year.
Stock Quote
In Wednesday's regular trading session, DVN is currently trading at $66.06, down $0.39 or 0.59% on a volume of 1.07 million shares. In the past 52-week period, the stock has been trading in a broad range of $38.55 to $83.77.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.