UPDATE 3-Devon profit tops Street view as oil output rises

Wed Aug 7, 2013 1:53pm EDT
 
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* Second-quarter adjusted EPS $1.21 versus Street view 95
cents
    * Gas volumes drive production beat -analysts

 (Adds information on Woodford oil shale from conference call,
byline)
    By Anna Driver
    Aug 7 (Reuters) - U.S. oil and gas producer Devon Energy
Corp's quarterly profit jumped a higher-than-expected 43
percent as production from properties in the Permian basin of
Texas boosted oil output by 14 percent, and gas volumes grew.
    Devon and other U.S. exploration companies, including EOG
Resources Inc, are investing heavily in domestic shale
formations like the Eagle Ford and Permian basin as a means of
increasing production.
    Shares of Devon were up less than one percent at $56.13 on
Wednesday.
    Devon's oil and gas output in the quarter rose to 698,000
barrels of oil equivalent per day (boed), from 679,000 in the
same quarter a year earlier. Oil production averaged 169,000
boed.
    "Production above the high-end of guidance and an impressive
(earnings per share) beat are certainly positives," analysts at
Houston-based energy investment Simmons & Co said in a note to
clients. 
    Still, gas volumes, the biggest driver of the production
beat, tend to be less profitable than oil, analysts noted.
    Devon's stock has underperformed peers this year, partly due
to its high exposure to low natural gas prices and natural gas
liquids. 
    To keep its crude output growing, Devon told analysts on a
conference call that it will continue to drill more Permian
wells. It also said it has met with success exploring for oil in
north-central Oklahoma in the Woodford shale.
    Initial production in the Woodford, which is located beneath
the company's Mississippi Lime acreage, is so far about 80
percent oil, Dave Hager, Devon's chief operating officer told
analysts on the call.
    The Woodford and Mississippian combined have the potential
to "provide the next leg of large-scale highly economic growth
for Devon," said Hager.
    
    PROFIT RISES
    Net profit rose to $683 million, or $1.68 per share, in the
second quarter, from $477 million, or $1.18 per share, a year
earlier. 
    Excluding one-time items, Devon had earnings of $1.21 per
share. Wall Street analysts on average had expected a profit of
95 cents per share, according to Thomson Reuters I/B/E/S.
    The Oklahoma City-based company's revenue rose about 21
percent to $3.09 billion.
    One of Devon's peers, EOG, reported better-than-expected
second-quarter earnings after the close of trading on Tuesday.
 
    The Houston company's wells in the Eagle Ford basin produced
more crude oil than anticipated as EOG improved its hydraulic
fracturing technique, executives told analysts on a conference
call.
    Shares of EOG were up 1.75 percent at $155.90 on Wednesday.
    Andrew Coleman, oil company analyst at Raymond James, wrote
on Wednesday that EOG's operations "continue to impress."

 (Reporting by Garima Goel in Bangalore and Anna Driver in
Houston; Editing by Terry Wade, Matthew Lewis and Carol
Bishopric)