August 5, 2009 / 5:57 PM / 9 years ago

WRAPUP 2-Devon, XTO profits lower, but top Street

* Devon Q2 output a record, raises 2009 target

* XTO Q2 production up 32 percent

* Devon shares up 3 pct, XTO down slightly

* XTO says drilling costs down 30 pct (Adds quotes, details, updates share prices)

By Anna Driver

HOUSTON, Aug 5 (Reuters) - Devon Energy Corp (DVN.N) and XTO Energy Inc XTO.N said Wednesday that quarterly profits fell alongside a drop in crude oil prices, but lower costs helped the U.S. oil and natural gas companies boost output, and results topped expectations.

Devon’s shares climbed more than 4 percent, while XTO Energy fell less than 1 percent.

Demand for oil and natural gas has been hurt by the global economic slowdown, which has caused stockpiles to grow. As a result, crude prices fell more than 50 percent in the second quarter from a year earlier, and natural gas prices were down about 65 percent.

But those lower commodity prices have also brought down the cost of drilling wells, allowing producers to get more for their money. XTO told investors on a conference call that its drilling costs are down 30 percent.

“Everybody’s dollars are going farther,” Ray Deacon, an energy analyst at Pritchard Capital Partners, said. “Both XTO and Devon are getting to drill more wells from the dollars they are spending.”

Devon’s combined oil, gas and natural gas liquids production rose 12 percent to a record 65.4 million oil-equivalent barrels (BOE). Devon also said it is raising its full-year production outlook by 7 million BOE.

The Oklahoma City, Oklahoma, company said gains in its output were fueled by natural gas from the company’s operations in the Barnett Shale in North Texas and oil from its Jackfish oil sands project in Canada.

Devon’s net profit in the second quarter was $314 million, or 70 cents per share, compared with $1.3 billion, or $2.88 per share, a year earlier.

Excluding one-time items, it earned 85 cents per share, topping analysts’ average forecast of 59 cents, according to Reuters Estimates.

“Cost trends were favorable, with most categories coming down in the second quarter,” Larry Nichols, Devon’s chief executive officer told investors on the company’s earnings conference call.

XTO, based in Fort Worth, Texas, reported a 32 percent rise in oil and gas output and raised its 2009 production growth target to a range of 16 to 20 percent from its prior estimate of 14 to 16 percent.

The company’s second-quarter net profit fell 14 percent, but topped Wall Street estimates on an adjusted basis.

Excluding items, XTO had earnings of $509 million, or 87 cents per share, above the Wall Street consensus estimate of 81 cents per share, according to Reuters Estimates.

Devon rose 4 percent, or $2.53 to $63.76, and XTO shares fell 35 cents to $42.25, both on the New York Stock Exchange. (Reporting by Anna Driver in Houston, editing by Maureen Bavdek and Gerald E. McCormick)

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