Devon Energy Corp., the second-worst performer in the past year among a group of U.S. oil and natural gas producers, posted a third-quarter profit as output gained.
Net income of $429 million, or $1.05 a share, compared with a loss of $719 million, or $1.80, a year earlier, the Oklahoma City-based company said today in a statement. Per-share earnings, excluding one-time items, exceeded the $1.19 average of 29 analysts’ estimates compiled by Bloomberg. Revenue increased 46 percent to $2.7 billion.
Devon has narrowed its focus to onshore North America after selling assets in the Gulf of Mexico and Brazil in recent years. Production averaged 691,000 barrels of oil equivalent a day in the third quarter, up from 678,000 in the year-earlier period. Oil output increased 29 percent from its Permian Basin holdings and 34 percent from those in the Rocky Mountains.
“They are showing double digit production growth in most areas,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, said in a phone interview today. “They are achieving their growth initiatives in these areas more quickly than anticipated.”
Last month, Devon agreed to move most of its U.S. pipeline and processing business into a master limited partnership to increase cash flow. Devon said it would contribute $4.8 billion in midstream assets to the planned partnership with Crosstex Energy Inc. The to-be-named entity will consist of an MLP and a general partner controlling it.
The master-limited partnership structure is attractive for assets like pipelines with steady returns because an MLP doesn’t pay corporate income tax and has more cash available to return to investors.
For the third quarter of 2012, Devon recorded a $1.1 billion non-cash asset impairment resulting from a decline in gas prices in the previous 12 months.
Devon is the second-worst performer in the past year in the Standard & Poor’s 500 Oil & Gas Exploration & Production Index, beating only Southwestern Energy Co.
Devon Energy fell 3.7 percent to $61.40 at the close in New York. The stock has 18 buy, 14 hold and one sell recommendation from analysts.