10-QPeriod: Q2 FY2001

DEVON ENERGY CORP/DE Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 14, 2001For Securities:DVN

Summary

Devon Energy Corporation (DVN) reported its second quarter and first half results for 2001. The company saw a significant increase in total revenues, driven primarily by a surge in natural gas prices and production. For the six months ended June 30, 2001, net earnings more than doubled compared to the same period in 2000, reaching $536.7 million, with earnings per share also showing substantial growth. Financially, Devon's balance sheet strengthened with a notable increase in cash and cash equivalents and a reduction in debt. The company also announced a significant pending acquisition of Mitchell Energy & Development Corporation, which, if completed, would add substantial proved reserves and midstream assets. Devon also continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Key Highlights

  • 1Net earnings for the first six months of 2001 were $536.7 million, a substantial increase from $258.5 million in the prior year's comparable period.
  • 2Diluted earnings per share for the first six months of 2001 were $3.96, up from $1.97 in the same period of 2000.
  • 3Total revenues for the six months ended June 30, 2001, increased by 45% to $1.75 billion, driven by higher natural gas prices and production.
  • 4The company announced its intent to acquire Mitchell Energy & Development Corporation for cash and stock, significantly expanding its asset base and reserve portfolio.
  • 5Cash and cash equivalents more than doubled from $228.1 million at the end of 2000 to $477.8 million as of June 30, 2001.
  • 6Devon continued its share repurchase program, authorizing up to $1 billion in repurchases and having bought back $190.4 million in shares as of July 31, 2001.

Frequently Asked Questions

The significant increase in earnings for the first six months of 2001 was primarily driven by substantially higher average natural gas prices, which rose by 96% compared to the same period in 2000, coupled with an increase in gas production and higher natural gas liquids (NGL) sales.

Devon announced an agreement to acquire Mitchell Energy & Development Corporation for cash and stock. This acquisition would add approximately 2.5 trillion cubic feet of gas equivalent in proved reserves located in the U.S., along with natural gas processing plants, pipelines, and other midstream assets valued between $800 million and $1 billion. The transaction is subject to shareholder and regulatory approvals.

Effective January 1, 2001, Devon adopted SFAS No. 133, which requires all derivative instruments to be recorded on the balance sheet at their fair value. This led to a cumulative-effect adjustment and a revaluation of certain derivative instruments, impacting reported earnings and equity. The company utilizes these derivatives for hedging commodity price and foreign exchange rate risks.

Devon's financial position improved considerably. Cash and cash equivalents increased significantly to $477.8 million from $228.1 million at year-end 2000. Long-term debt also saw significant activity, with net proceeds from borrowings and principal repayments resulting in a higher overall debt balance but managed within available credit facilities. The company also utilized operating cash flow to fund capital expenditures and increase its cash reserves.