10-QPeriod: Q3 FY2001

DEVON ENERGY CORP/DE Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:DVN

Summary

Devon Energy Corporation's 10-Q filing for the period ending September 30, 2001, reveals a mixed financial performance. While the nine-month period showed strong growth in net earnings, driven by higher natural gas prices and increased production, the third quarter experienced a decline due to lower oil and natural gas prices, partially offset by increased production. The company's balance sheet reflects a significant increase in property and equipment, likely due to ongoing investments and acquisitions. A major development during this period was the announcement and subsequent completion of significant acquisitions, including Anderson Exploration Ltd. for approximately $3.5 billion and the pending acquisition of Mitchell Energy & Development Corp. for approximately $3.2 billion. These strategic moves are poised to substantially expand the company's asset base and reserve potential. Financially, the company has actively managed its capital structure, issuing $3.0 billion in debt securities and securing a $3.0 billion senior unsecured term loan credit facility to fund these acquisitions. Despite increased debt, the company reported robust operating cash flow, indicating strong underlying business performance. The adoption of SFAS No. 133 has led to the recording of derivative instruments at fair value, impacting earnings and other comprehensive income. Investors should note the company's proactive approach to hedging commodity prices and interest rates to mitigate market volatility.

Key Highlights

  • 1Net earnings for the first nine months of 2001 increased to $621.4 million from $423.4 million in the prior year, driven by higher natural gas prices and production.
  • 2Third-quarter 2001 net earnings decreased to $84.7 million from $164.9 million in the same period of 2000, primarily due to lower commodity prices.
  • 3Devon completed the acquisition of Anderson Exploration Ltd. for approximately $3.5 billion.
  • 4Devon announced its intention to acquire Mitchell Energy & Development Corp. for approximately $3.2 billion, subject to shareholder and regulatory approvals.
  • 5The company secured $3.0 billion in debt securities and a $3.0 billion term loan credit facility to fund its acquisitions.
  • 6Operating cash flow for the first nine months of 2001 increased to $1.5 billion from $1.1 billion in the prior year.
  • 7The company adopted SFAS No. 133, requiring derivative instruments to be recorded at fair value, impacting reported earnings and equity.

Frequently Asked Questions

Net earnings decreased in Q3 2001 compared to Q3 2000 primarily due to a decline in oil and natural gas prices. This was partially offset by an increase in production volumes.

Devon completed the acquisition of Anderson Exploration Ltd. for approximately $3.5 billion and announced a pending acquisition of Mitchell Energy & Development Corp. for approximately $3.2 billion. These acquisitions are expected to significantly expand the company's operations and asset base.

Devon financed its acquisitions through a combination of issuing $3.0 billion in debt securities and securing a $3.0 billion senior unsecured term loan credit facility. These actions were taken to fund the significant cash components of the transactions.

The adoption of SFAS No. 133 required Devon to record all derivative instruments on the balance sheet at their fair value. This has led to adjustments in both net earnings and accumulated other comprehensive income, including gains and losses related to derivative instruments that do not qualify for hedge accounting.