Devon Energy to Expense Certain International Investments
Devon Energy will record a non-cash charge of approximately $215 million ($165 million after tax) in its 2005 earnings. The charge relates to impairment of certain of the company's international assets in Angola and Brazil. Devon is in the process of finalizing its year-end results for 2005. Therefore, the final reported charge could differ from the estimates.
With the completion of 2005 exploration and development activities, Devon determined that it will impair its cumulative investment in Angola by $170 million pre-tax ($120 million after tax) and in Brazil by $45 million pre-tax ($45 million after tax). The impairment in Brazil relates to the purchase price allocated to certain Brazilian oil and gas assets through mergers and acquisitions and the cost of exploration activities unrelated to the company's recent success with its Polvo project on block BM-C-8. There is no tax benefit related to the Brazilian impairment.
"While we are naturally disappointed with the recent drilling results in Angola, these prospects represent only a small part of Devon's international high-impact exploration inventory," said Stephen J. Hadden, senior vice president, exploration and production. "We drilled two discoveries offshore Equatorial Guinea in 2005 and will test several highly prospective blocks offshore West Africa this year. In Brazil, we are very encouraged by our recent results. We expect to begin booking reserves at Polvo in 2006 and are highly optimistic about the potential of the exploration blocks we recently acquired in bid round seven."
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