Devon Energy Corporation reported net earnings for the quarter ended March 31, 2008, of $749 million, or $1.68 per common share ($1.66 per diluted common share). This is a 15 percent increase compared with Devon's first-quarter 2007 net earnings of $651 million, or $1.46 per common share ($1.44 per diluted common share).
First-quarter 2008 reported net earnings of $749 million were impacted by certain items securities analysts typically exclude from their published estimates. Excluding these items, Devon earned $1.2 billion or $2.74 per diluted share. By far the most significant of these items was a non-cash, unrealized loss on oil and natural gas derivative instruments of $780 million pre-tax ($500 million after tax).
Rising Expenses Reflect Higher Production and Activity Levels
Lease operating expenses (LOE) in the first quarter of 2008 increased to $506 million. On a unit of production basis, first-quarter 2008 LOE was $8.69 per Boe, or seven percent higher than the first quarter of 2007. The increase in unit LOE in the 2008 quarter reflects higher Canadian exchange rates, higher transportation costs and generally higher expenditures for oilfield services and supplies.
Depreciation, depletion and amortization (DD&A) of oil and gas properties increased to $737 million in the first quarter of 2008. Unit DD&A increased 14 percent to $12.64 per Boe.
As expected, first-quarter general and administrative expenses (G&A) increased to $148 million. Higher employee-related costs were the largest contributor to the quarterly increase in G&A. Devon has increased the size of its workforce to support expanding levels of large-scale exploration and development projects.
Interest expense for the first quarter of 2008 decreased to $102 million. This is seven percent less than first-quarter 2007 interest expense of $110 million.
Cash Flow at Record Level; Balance Sheet Strengthened
First-quarter cash flow before balance sheet changes reached a record $2.6 billion in 2008. This was a 74 percent increase compared with the first quarter of 2007. The company funded $2.0 billion of capital expenditures in the first quarter of 2008 and paid common and preferred dividends totaling $73 million. This resulted in free cash flow of nearly $600 million in the quarter. Cash on hand at March 31, 2008, increased to approximately $1.9 billion.
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