Devon Energy reports $357 million net loss
BY Staff and Wire Reports
Thursday, February 21, 2013
2/21/13 at 3:18 AM
OKLAHOMA CITY - Devon Energy Corp. reported Wednesday a fourth-quarter net loss of $357 million, as the state's second biggest production company was hit hard by lower natural gas prices.
Also Wednesday, Devon executives said the company has hired bankers and lawyers to explore an initial public offering of a midstream master-limited partnership.
Oklahoma City-based Devon reported that it took a non-cash impairment charge of $896 million in the quarter. The accounting impairment reduced the carrying value of the company's oil and gas assets.
"In spite of a challenging commodity price environment that impacted our financial results, Devon delivered solid operating results in 2012," CEO John Richels said in a statement. "During the year, we continued to make significant progress toward the conversion of our asset portfolio to a higher oil weighting. This is evident through the strong oil production growth we delivered during the year and the impressive growth in oil reserves."
Shares of Devon fell $4, or 6.6 percent, to finish the day at $56.57.
Devon's net losses totaled $206 million for the year, compared with a $4.7 billion profit in 2011. Last year's revenues topped $9.5 billion, down from $11.5 billion a year earlier.
Devon said production of oil, natural gas and natural gas liquids increased to 250 million barrels of oil equivalent in 2012 - the highest ever from its North American properties and a 10 million boe increase over 2011.
On a conference call with analysts, Richels said markets have changed since 2007, when Devon considered forming a publicly traded partnership for its pipeline and logistics assets.
Initial proceeds for the midsteam partnership IPO would be $300 million to $500 million, Chief Financial Officer Jeff Agosta said on the call.
Devon would follow cross-town rival Chesapeake Energy Corp., Anadarko Petroleum Corp. and other producers in selling pipelines and processing plants for cash while retaining operational control. Separating the business may unlock value for shareholders, Richels said.
"Today, capital markets are much deeper, the yields have all changed," Richels said. "We're out there building new facilities all the time."
Investors have snapped up master limited partnership units, which don't pay corporate income tax, so they have more cash available to pay holders of units, which are like shares. Yield at Access Midstream Partners LP, which Chesapeake sold last year, is about 4.8 percent, compared with a 1.4 percent dividend yield on Devon stock and 1.7 percent at Chesapeake itself, according to data compiled by Bloomberg.
Devon's midstream operations include more than 6,500 miles of pipelines and eight U.S. natural gas processing plants with capacity of 1.2 billion cubic feet per day. It also holds stakes in 56 Canadian plants representing 1.2 billion cubic feet per day of processing capacity.
Devon's portfolio includes production from the Permian Basin of west Texas, and the Mississippian Lime, Granite Wash and Cana-Woodford Shale plays of Oklahoma.
Original Print Headline: Devon reports $357M net loss
A Devon Energy natural gas well operates in the Permian Basin near Carlsbad, N.M. Lower natural gas prices hurt the company's earnings in the fourth quarter. Bloomberg file