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Devon Energy


said Wednesday that its first-quarter income increased by 14%, driven by higher fuel prices. The results missed analysts estimates.

The Oklahoma City-based independent oil and gas producer reported earnings for the first quarter of $563 million, or $1.17 a share, up from $494 million, or $1.03 a share, in the same period a year ago.

Excluding a $33 million after-tax loss from a change in fair value of derivative instruments, a $25 million after-tax loss on oil hedges and a $98 million after-tax gain on sale of marketing and midstream assets, earnings were $1.12 a share.

Wall Street analysts were expecting earnings of $1.24 per share, according to Thomson Financial.

Devon said first-quarter sales of oil, gas and natural gas liquids rose 6% to $1.9 billion, helped by higher energy prices.

But Ray Deacon, an analyst at Harris Nesbitt, cited higher operating costs, including high rig and transportation costs, as well as lower realized prices from its natural gas segment, as the main drags on Devon's earnings growth.

Deacon said that there was "uncertainty" regarding the company's drilling success in the Gulf of Mexico, which counts for about 25% of its earnings growth projection. "We decided to trim our earnings estimated for Devon for the second quarter, as well as tweak down our full-year estimates," Deacon said.

He was advising clients to buy peer companies "with more visible growth," such as

Murphy Oil






XTO Energy

( XTO).

Shares of Devon Energy were recently down 27 cents, or 0.60%, to $44.70.