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BEIJING/HONG KONG - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.
Devon, Sumitomo in $1.4 billion deal; Devon profit down
(Reuters) - Devon Energy Corp (DVN.N) reported earnings that fell short of estimates and announced that Japan's Sumitomo Corp (8053.T) will take a 30 percent stake in shale acreage Devon controls in the Permian Basin in a $1.4 billion deal.
Investors focused on the earnings miss, pushing shares of Devon down 3.8 percent.
The company, a heavy producer of natural gas liquids (NGLs) like propane and ethane, said the prices for those feedstocks fell below expectations in the quarter, and more weakness is expected this year.
"Our outlook for NGL realizations has deteriorated somewhat since our last quarterly call," Devon CEO John Richels told investors on a conference call, citing high inventories and new supplies as the reasons for the dimmer outlook.
The Oklahoma City company reported a steep decline in second-quarter earnings that fell short of analyst estimates, as lower oil and natural gas prices weighed. Year-ago results were boosted by a $2.5 billion gain from the sale of the company's Brazilian assets.
Maintenance work pushed Devon's oil and gas output below expectations and contributed to the big earnings miss, analysts said.
The company posted a profit of $477 million, or $1.18 per share, compared with $2.7 billion, or $6.50 per share, in the same quarter a year ago.
Excluding items, Devon posted a profit of 55 cents a share. Analysts on average had expected a profit of 81 cents per share, according to Thomson Reuters I/B/E/S.
Devon said its oil and gas output was 679,000 barrels of oil equivalent per day, up 3 percent from a year ago.
Bernstein Research characterized the quarter as disappointing and said it had expected Devon to produce 692,000 boe per day.
Devon's deal with Sumitomo signals continued strong demand for shale drilling know-how from foreign partners. In April, Devon closed a $2.5 billion shale joint venture with China's Sinopec.
Sumitomo will invest $340 million in cash upon closing and an additional $1.025 billion which will be invested in Devon's drilling costs in the Cline and Midland-Wolfcamp shales, the companies said.
Analysts put the value of the deal at about $7,000 per acre.
Capital from Devon's Japanese partner will help accelerate its search for light oil and allow it to redirect funds to exploration elsewhere, the company told investors.
For the full-year 2012, the companies expect to drill about 40 wells, with the well drilling and development funds expected to be used up by the middle of 2014.
Closing of the deal is expected in the third quarter of 2012.
Shares of Devon fell $2.25 to $56.87 in midday New York Stock Exchange trading.
(Reporting By Anna Driver; Editing by Gerald E. McCormick, Maureen Bavdek, Sofina Mirza-Reid; and Phil Berlowitz)
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