recorded a loss of $6.8 billion in the fourth quarter, primarily due to writedowns.
The company lost $15.42 a share in the quarter, compared with earnings of $1.3 billion, or $2.92 per share, a year earlier.
The results included a $7.1 billion noncash after-tax charge related to the decline in value of oil and natural gas assets, fueled by lower crude oil prices. Excluding the charge, the company earned $297 million, or 67 cents per share.
The quarterly loss was attributable to a regulatory rule that requires oil and companies to account for adjustments in the market value of their unsold inventories. Because the market price for crude oil and natural gas fell severely during the quarter, the value of Devon's oil and gas assets went down.
According to Devon's release, "Under the full-cost method of accounting, a company's net book value of its oil and gas properties, less related deferred income taxes, may not exceed a calculated 'ceiling.' The test is performed separately for each country in which the company operates. The ceiling is the estimated after-tax stream of future net revenues from proved oil and gas properties, discounted at 10 percent per year, using year-end costs and prices held flat plus the cost of unevaluated properties. Any excess is written off as a non-cash expense." Hence, the $7.1 billion writedown.
Analysts polled by Thomson Reuters estimated a profit of $1.05, on average, not factoring in the charge.
Revenue fell 15% to $2.71 billion, from $3.20 billion in the prior-year period. Analysts were looking for $2.78 billion.
"Despite the effects of the sharp fourth-quarter declines in oil and natural gas prices, 2008 was a very successful year for the company," said J. Larry Nichols, chairman and chief executive officer. "Cash flow reached an all-time record of nearly $10 billion. We increased oil and gas production by 6% and drilled 2,441 wells, with a 98% success rate. In addition, we added 584 million barrels of proved reserves before price revisions at a very attractive cost per barrel."
For all of 2008, Devon lost $2.15 billion, or $4.85 a share, compared with earnings of $3.61 billion, or $8 per share in 2007. Minus items, Devon earned $4.4 billion, or $9.91 per share in 2008, as revenue rose 33% to $15.21 billion.
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