Watch for Falling Natural Gas Stock Prices: DVN Takes Huge Asset Writedown
Devon Energy (DVN) just released 4th Quarter earnings and they took a huge $7.1 Billion asset writedown for their oil and natural gas properties. This seems to have surprised the market as Devon is down sharply despite having positive earnings if you exclude the writedown.
I have not seen the official financial statement release yet, but from my own calculations, this should drop Devon's book value from around $57 to the $39 range. That's quite a huge drop!
Long-term, I am bullish on natural gas, but I would hold back from buying natural gas company stocks for at least a few weeks. There's a bit of irrational optimism because of the Obama Administration and other natural gas players such as Chesapeake (CHK) and PetroHawk (HK) seem likely to take similiar writedowns when they release their earnings. Despite this, the stocks are still up for the day.