Interview: Devon Energy
>> microsoft and p.c. makers including dell, sony and hewlett-packard will be selling entertainment computers that double as televisions and record shows, organize digital photos and music. computers with the new windows x.p. media center edition 2005 will range from $600 to more than $3,000. microsoft introduced music, cell phone and home devices that use the software to use audio and connect to p.c.’s. u.s. sales of home p.c.’s outgrew business p.c.’s the past two years and market researcher i.d.c. says the trend will continue this year and next. dreamworks animation plans to raise as much as $725 million in an initial public offering. the i.p.o. values the company up to $2.64 billion and the creator of the shrek films will use proceeds to fund movie production and repay debt, selling 29 million shares at between $23 to $25 a share, trading at the new york stock exchange under d.w.a. dreamworks animation is going public in a year of box office success with “shark tale” holding the number one spot at the box office for two weeks. devon energy is the nation’s largest independent oil company by market cap. chief executive larry nichols expects energy prices to stay high because of turmoil in oil-producing nations. suzy assaad spoke with him about his outlook for oil beginning with why his company moved from the american stock exchange to the new york stock exchange.
>> we started as a little public company, 250th out of 400 companies, $75 million market cap and with a $12 billion enterprise value today, it seemed an appropriate move.
>> many people are talking about the supply from the gulf. can you update the status?
>> the what from the gulf?
>> the supply from the gulf of mexico.
>> most of our production is back on stream. hurricane ivan did have an impact and affected some production particularly with onshore facilities hit. we’re only not producing about 10,000 to 12,000 barrels a day to come on stream some time in the next several months. it’s not having a major impact on devon.
>> there is talk out there, analysts saying we may never see the overall supply from the gulf of mexico coming back before ivan because a lot of the oil wells are older and it may not be worth the investment for companies to spend that money to bring an oil well with only two or three more years left, but it’s wiser to use the money for newer oil wells.
>> they’re almost by definition fields near the end of their economic life so they will not have much impact on supply.
>> we have to ask you about prices. a lot of discussion about where they are and where they’re going. what kind of forecasting are you doing inside the company in order to give direction as to how to proceed and what levels do you take into effect for oil prices?
>> we’re not basing our capital spendings on oil prices. with all the turmoil in the world and where oil is produced, all of west africa, all of the middle east, racial strife in nigeria, strikes in norway, chavez in venezuela―the world depends upon a lot of shaky places for its oil. it’s one of the reasons we’ve positioned devon to have 85% of our reserves in north america where they’re in a politically secure place.
>> you have mentioned that you are not taking into forecasts these current prices. does that mean that in 2005 we can see oil and gas revenues for devon lower than what they are this year?
>> i have no idea what oil prices will be next year. it depends so much upon the situation in the middle east and i don’t know anyone who can forecast that.
>> what are you expecting for your revenues for 2005?
>> i think for 2005 and 2006 and beyond, we really have almost the reverse. of what the past. past models for oil prices have been fairly flat, low prices with occasional spikes when there’s turmoil in the world as there was 10 years ago with iraq invading kuwait. now we’ll have high prices continuously because of all the chaotic places that oil comes from in the world with only an occasional spike down whenever all of those places are at peace and functioning properly.
>> that was the c.e.o. of devon energy, larry nichols speaking with suzy assaad. checking shares of devon today, they fell 47 cents or .63%. we have this breaking news, a.g. edwards contacted by the justice department regarding mutual fund transactions and we’ll bring you more on the a.g. edwards justice department store when that’s available. moving on, exxon mobil said it may develop oil fields in iraq and libya under certain conditions. an official said it would consider products projects in iraq if the iraqi government decides it wants such projects. the company invited u.s. companies this year to look for oil after sanctions were lifted.
