Exhibit 99.1
News Release
Devon Energy Corporation
20 North Broadway
Oklahoma City, OK 73102-8260
| | | | |
| | | | | |
| Investor Contact | | Zack Hager | | 405 552 4526 |
| Media Contact | | Chip Minty | | 405 228 8647 |
DEVON ENERGY REPORTS SECOND-QUARTER 2009 RESULTS; $314 MILLION NET EARNINGS DRIVEN BY RECORD PRODUCTION
OKLAHOMA CITY – August 5, 2009– Devon Energy Corporation (NYSE:DVN) today reported net earnings of $314 million for the quarter ended June 30, 2009, or 71 cents per common share (70 cents per diluted common share). For the quarter ended June 30, 2008, Devon reported net earnings of $1.3 billion, or $2.91 per common share ($2.88 per diluted common share). Production of oil, natural gas and natural gas liquids increased 12 percent to a record 65.4 million oil-equivalent barrels (Boe) in the second quarter of 2009. Lower realized prices for all three products led to the decrease in quarterly net earnings.
For the six months ended June 30, 2009, Devon reported a net loss of $3.6 billion, or $8.21 per common share ($8.21 per diluted common share). A $4.2 billion non-cash, after-tax reduction in the carrying value of oil and gas properties in the first quarter of 2009 drove the first-half loss. For the six months ended June 30, 2008, the company reported net earnings of $2.1 billion, or $4.60 per common share ($4.55 per diluted common share).
Earnings 85 Cents per Share Excluding Items Not Estimated by Analysts
Devon’s second-quarter 2009 financial results were impacted by certain items securities analysts typically exclude from their published estimates. Excluding the adjusting items, Devon earned $379 million or 85 cents per diluted common share in the second quarter of 2009. The adjusting items are discussed in more detail later in this news release.
Production Growth in All Geographic Areas
Combined oil, gas and natural gas liquids production averaged 719 thousand Boe per day in the second quarter of 2009. This is the highest average daily production of any quarter in Devon’s history and compares with 643 thousand Boe per day in the second quarter of 2008. Average daily production in the second quarter increased five percent sequentially, compared with 685 thousand Boe per day produced in the first quarter of 2009.
The 12 percent increase in year-over-year second-quarter production was driven by growth in all major operating segments. U.S. onshore natural gas production led by the Barnett Shale field in Texas demonstrated significant growth. Continuing ramp up of daily volumes from the Jackfish oil sands project led oil production growth in Canada. Canadian natural gas production increased principally due to lower government royalties. Canadian royalties are calculated on a sliding scale. At lower product prices, Devon’s share of Canadian gas production increases.
Despite the strong production growth, revenues from oil, gas and natural gas liquids sales decreased 58 percent to $1.7 billion in the second quarter of 2009. Dramatically lower prices for all three products more than offset the increases in production.
Devon’s average realized price for natural gas decreased 70 percent in the second quarter of 2009 compared to the second quarter of 2008, to $2.91 per thousand cubic feet. The company’s average realized oil price decreased 53 percent to $52.44 per barrel in the second quarter of 2009. Devon’s average second-quarter realized natural gas liquids price decreased 59 percent to $22.24 per barrel in 2009.
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Climbing Jackfish Production Leads Operations Highlights
Devon drilled 198 wells (197 successful) in the second quarter of 2009 compared to 494 wells (483 successful) drilled in the second quarter of 2008. The company has reduced drilling activity and related capital expenditures in response to declines in natural gas and oil prices. In spite of the lower activity levels, Devon achieved several notable operational accomplishments in the second quarter:
| • | | Devon continued to ramp up production from its 100 percent-owned Jackfish oil sands project in Alberta in the second quarter of 2009. Oil production at Jackfish averaged 28,000 barrels per day in June. Production hit a peak rate of 33,000 barrels per day during June, nearing its design capacity of 35,000 barrels per day. |
| • | | Construction of Jackfish 2, a nearly identical second phase of the project, is now about 40 percent complete. Devon commenced drilling the first producing wells for Jackfish 2 in July 2009. |
| • | | Devon maintained a four-rig drilling program in the Cana-Woodford Shale play in western Oklahoma in the second quarter of 2009 and added 13 new wells to production. The company increased its average net production from the Cana-Woodford to 34 million cubic feet of gas equivalent per day in the second quarter. This is a 10-fold increase compared with the second quarter of 2008. Devon is adding two additional drilling rigs in the third quarter. |
| • | | At Groesbeck in east Texas, Devon drilled another high-volume well in the Nan-Su-Gail field in the second quarter. The Hill-Crenshaw 3H (100 percent working interest) had a 24-hour initial production test of 18 million cubic feet of gas per day. |
| • | | Also in east Texas, Devon continued evaluating its Haynesville Shale acreage in the greater Carthage area. The company has substantially de-risked 74,000 of its 110,000 net acres within the Carthage area and has identified roughly 800 Haynesville drilling locations on this acreage. The company believes this 74,000 net acres has resource potential of more than three trillion cubic feet of natural gas equivalent. Devon is now drilling a well in San Augustine County as the company also evaluates its acreage in the southern region of the Haynesville Shale. |
Marketing and Midstream Profit Reflects Lower Prices
Marketing and midstream operating profit was $125 million in the second quarter of 2009. This was a 39 percent decrease compared with the second quarter of 2008. The decrease was largely attributable to lower natural gas and natural gas liquids prices.
Positive Cost Comparisons Continue
Continuing a trend evidenced in the first quarter of 2009, expenses in several important categories decreased in the second quarter. Compared with the second quarter of 2008, quarterly unit lease operating expenses (LOE) decreased by 15 percent to $7.80 per Boe in 2009. The decrease in unit LOE reflects declines in oil field service, supply, power and fuel costs and lower Canadian exchange rates.
Depreciation, depletion and amortization (DD&A) of oil and gas properties decreased 35 percent to $494 million in the second quarter of 2009. Unit DD&A decreased 42 percent to $7.56 per Boe compared with the second quarter of 2008.
General and administrative expenses (G&A) increased two percent to $182 million compared with the second quarter of 2008. The increase resulted from employee severance costs following the consolidation of Devon’s Gulf and International operations. The consolidation is expected to achieve operating efficiencies and reduce G&A costs in future periods.
Retaining Liquidity and Financial Strength
Second-quarter 2009 cash flow before balance sheet changes totaled $1.1 billion, fully funding capital expenditures and dividend payments for the quarter. The company ended the quarter with cash on hand and unused credit facilities of $2.6 billion and a net debt to adjusted capitalization ratio of 33 percent. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.
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Items Excluded from Published Earnings Estimates
Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company’s financial results. These items and their effects upon reported earnings for the second quarter of 2009 were as follows:
Items affecting continuing operations-
| • | | A change in the fair value of oil and natural gas derivative instruments decreased second-quarter earnings by $101 million pre-tax ($65 million after tax). |
| • | | A change in the fair value of other financial instruments increased second-quarter earnings by $5 million pre-tax ($4 million after tax). |
| • | | Employee severance costs associated with consolidation of the Gulf and International operations decreased second-quarter net earnings by $33 million pre-tax ($21 million after tax). |
Items affecting discontinued operations-
| • | | A post-closing adjustment from the divestiture of West African assets in 2008 resulted in a second-quarter gain of $17 million pre-tax ($17 million after tax). |
The following tables summarize the effects of these items on second-quarter earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Quarter Ended June 30, 2009
Continuing Operations
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pre-tax | | | | | | | | | | | | | | | After tax | | | Cash Flow Before | |
| | | Earnings | | | Income Tax Effect | | | Earnings | | | Balance Sheet | |
| | | Effect | | | Current | | | Deferred | | | Total | | | Effect | | | Changes Effect | |
| |
| Change in fair value of oil and gas derivative instruments | | $ | (101 | ) | | | — | | | | (36 | ) | | | (36 | ) | | | (65 | ) | | | — | |
| Change in fair value of other financial instruments | | | 5 | | | | — | | | | 1 | | | | 1 | | | | 4 | | | | — | |
| Employee severance costs from consolidation of operations | | | (33 | ) | | | (12 | ) | | | — | | | | (12 | ) | | | (21 | ) | | | (11 | ) |
| |
| Totals | | $ | (129 | ) | | | (12 | ) | | | (35 | ) | | | (47 | ) | | | (82 | ) | | | (11 | ) |
| |
Discontinued Operations
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pre-tax | | | | | | | | | | | | | | | After tax | | | Cash Flow Before | |
| | | Earnings | | | Income Tax Effect | | | Earnings | | | Balance Sheet | |
| | | Effect | | | Current | | | Deferred | | | Total | | | Effect | | | Changes Effect | |
| |
| Post-closing adjustment on sale of West African assets | | $ | 17 | | | | — | | | | — | | | | — | | | | 17 | | | | — | |
| |
In aggregate, these items decreased second-quarter 2009 net earnings by $65 million, or 14 cents per common share (15 cents per diluted share). These items and their associated tax effects decreased second-quarter 2009 cash flow before balance sheet changes by $11 million.
Conference Call to be Webcast Today
Devon will discuss its second-quarter 2009 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon’s internet home page atwww.devonenergy.com.
This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materiallyfrom those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise.
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Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. This release may contain certain terms, such as resource potential, reserve potential, probable reserves, possible reserves and exploration target size. The SEC guidelines strictly prohibit us from including these terms in filings with the SEC. U.S. investors are urged to consider closely the disclosure in ourForm 10-K, File No. 001-32318, available from us at Devon Energy Corporation, Attn. Investor Relations, 20 North Broadway, Oklahoma City, OK 73102. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is the largest U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For more information about Devon, please visit our website atwww.devonenergy.com.
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DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties)
Excludes discontinued operations
| | | | | | | | | | | | | | | | | |
| | Quarter Ended | | | Six Months Ended | |
| | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| |
Total Period Production | | | | | | | | | | | | | | | | |
| |
| Natural Gas (Bcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 183.2 | | | | 162.3 | | | | 364.2 | | | | 314.8 | |
| U.S. Offshore | | | 10.5 | | | | 14.2 | | | | 21.3 | | | | 32.5 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 193.7 | | | | 176.5 | | | | 385.5 | | | | 347.3 | |
| Canada | | | 60.1 | | | | 53.0 | | | | 112.8 | | | | 104.7 | |
| International | | | 0.3 | | | | 0.4 | | | | 0.6 | | | | 1.0 | |
| |
| Total Natural Gas | | | 254.1 | | | | 229.9 | | | | 498.9 | | | | 453.0 | |
| |
| Oil (MMBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 2.9 | | | | 2.8 | | | | 5.9 | | | | 5.7 | |
| U.S. Offshore | | | 1.2 | | | | 1.8 | | | | 2.3 | | | | 3.6 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 4.1 | | | | 4.6 | | | | 8.2 | | | | 9.3 | |
| Canada | | | 6.6 | | | | 5.3 | | | | 12.9 | | | | 9.9 | |
| International | | | 4.7 | | | | 3.3 | | | | 7.9 | | | | 8.1 | |
| |
| Total Oil | | | 15.4 | | | | 13.2 | | | | 29.0 | | | | 27.3 | |
| |
| Natural Gas Liquids (MMBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 6.4 | | | | 5.8 | | | | 12.6 | | | | 11.6 | |
| U.S. Offshore | | | 0.2 | | | | 0.2 | | | | 0.4 | | | | 0.4 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 6.6 | | | | 6.0 | | | | 13.0 | | | | 12.0 | |
| Canada | | | 1.0 | | | | 1.0 | | | | 2.0 | | | | 1.9 | |
| International | | | — | | | | — | | | | — | | | | — | |
| |
| Total Natural Gas Liquids | | | 7.6 | | | | 7.0 | | | | 15.0 | | | | 13.9 | |
| |
| Oil Equivalent (MMBoe) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 39.9 | | | | 35.7 | | | | 79.2 | | | | 69.7 | |
| U.S. Offshore | | | 3.1 | | | | 4.4 | | | | 6.2 | | | | 9.4 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 43.0 | | | | 40.1 | | | | 85.4 | | | | 79.1 | |
| Canada | | | 17.6 | | | | 15.1 | | | | 33.7 | | | | 29.4 | |
| International | | | 4.8 | | | | 3.3 | | | | 8.0 | | | | 8.3 | |
| |
| Total Oil Equivalent | | | 65.4 | | | | 58.5 | | | | 127.1 | | | | 116.8 | |
| |
Average Daily Production | | | | | | | | | | | | | | | | |
| |
| Natural Gas (MMcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 2,013.1 | | | | 1,783.0 | | | | 2,012.4 | | | | 1,729.7 | |
| U.S. Offshore | | | 115.5 | | | | 156.1 | | | | 117.4 | | | | 178.7 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 2,128.6 | | | | 1,939.1 | | | | 2,129.8 | | | | 1,908.4 | |
| Canada | | | 660.2 | | | | 582.6 | | | | 623.0 | | | | 575.0 | |
| International | | | 3.2 | | | | 4.8 | | | | 3.3 | | | | 5.4 | |
| |
| Total Natural Gas | | | 2,792.0 | | | | 2,526.5 | | | | 2,756.1 | | | | 2,488.8 | |
| |
| Oil (MBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 32.0 | | | | 30.9 | | | | 32.5 | | | | 31.0 | |
| U.S. Offshore | | | 13.0 | | | | 19.9 | | | | 12.5 | | | | 19.9 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 45.0 | | | | 50.8 | | | | 45.0 | | | | 50.9 | |
| Canada | | | 72.1 | | | | 58.0 | | | | 71.3 | | | | 54.7 | |
| International | | | 52.3 | | | | 35.8 | | | | 43.4 | | | | 44.6 | |
| |
| Total Oil | | | 169.4 | | | | 144.6 | | | | 159.7 | | | | 150.2 | |
| |
| Natural Gas Liquids (MBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 70.8 | | | | 64.1 | | | | 69.7 | | | | 63.7 | |
| U.S. Offshore | | | 2.0 | | | | 2.1 | | | | 2.2 | | | | 2.0 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 72.8 | | | | 66.2 | | | | 71.9 | | | | 65.7 | |
| Canada | | | 11.1 | | | | 10.7 | | | | 10.8 | | | | 10.8 | |
| International | | | — | | | | — | | | | — | | | | — | |
| |
| Total Natural Gas Liquids | | | 83.9 | | | | 76.9 | | | | 82.7 | | | | 76.5 | |
| |
| Oil Equivalent (MBoe) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 438.2 | | | | 392.2 | | | | 437.6 | | | | 382.9 | |
| U.S. Offshore | | | 34.2 | | | | 48.0 | | | | 34.3 | | | | 51.7 | |
| | | | | | | | | | | | | |
| Total U.S. | | | 472.4 | | | | 440.2 | | | | 471.9 | | | | 434.6 | |
| Canada | | | 193.3 | | | | 165.8 | | | | 185.9 | | | | 161.3 | |
| International | | | 52.8 | | | | 36.6 | | | | 43.9 | | | | 45.6 | |
| |
| Total Oil Equivalent | | | 718.5 | | | | 642.6 | | | | 701.7 | | | | 641.5 | |
| |
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DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
BENCHMARK PRICES
(average prices)
| | | | | | | | | | | | | | | | | |
| | Quarter Ended | | | Six Months Ended | |
| | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| |
| Natural Gas ($/Mcf) – Henry Hub | | $ | 3.51 | | | $ | 10.94 | | | $ | 4.21 | | | $ | 9.49 | |
| Oil ($/Bbl) – West Texas Intermediate (Cushing) | | $ | 59.83 | | | $ | 124.28 | | | $ | 51.51 | | | $ | 110.98 | |
| |
REALIZED PRICES
(excludes the effects of unrealized gains and losses from hedging)
Quarter Ended June 30, 2009
| | | | | | | | | | | | | | | | | |
| | Oil | | | Gas | | | NGLs | | | Total | |
| | | (Per Bbl) | | | (Per Mcf) | | | (Per Bbl) | | | (Per Boe) | |
| |
| U.S. Onshore | | $ | 54.66 | | | $ | 2.75 | | | $ | 20.81 | | | $ | 19.98 | |
| U.S. Offshore | | $ | 56.44 | | | $ | 3.76 | | | $ | 23.69 | | | $ | 35.49 | |
| Total U.S. | | $ | 55.18 | | | $ | 2.81 | | | $ | 20.89 | | | $ | 21.10 | |
| Canada | | $ | 48.14 | | | $ | 3.25 | | | $ | 30.99 | | | $ | 30.85 | |
| International | | $ | 56.03 | | | $ | 4.24 | | | $ | — | | | $ | 55.71 | |
| |
| Realized price without hedges | | $ | 52.44 | | | $ | 2.91 | | | $ | 22.24 | | | $ | 26.27 | |
| Cash settlements | | $ | — | | | $ | 0.45 | | | $ | — | | | $ | 1.75 | |
| |
| Realized price, including cash settlements | | $ | 52.44 | | | $ | 3.36 | | | $ | 22.24 | | | $ | 28.02 | |
| |
Quarter Ended June 30, 2008
| | | | | | | | | | | | | | | | | |
| | Oil | | | Gas | | | NGLs | | | Total | |
| | | (Per Bbl) | | | (Per Mcf) | | | (Per Bbl) | | | (Per Boe) | |
| |
| U.S. Onshore | | $ | 120.69 | | | $ | 9.40 | | | $ | 50.56 | | | $ | 60.51 | |
| U.S. Offshore | | $ | 125.24 | | | $ | 11.43 | | | $ | 53.63 | | | $ | 91.38 | |
| Total U.S. | | $ | 122.47 | | | $ | 9.56 | | | $ | 50.66 | | | $ | 63.88 | |
| Canada | | $ | 94.35 | | | $ | 9.76 | | | $ | 75.10 | | | $ | 72.14 | |
| International | | $ | 119.87 | | | $ | 11.00 | | | $ | — | | | $ | 118.70 | |
| |
| Realized price without hedges | | $ | 110.56 | | | $ | 9.61 | | | $ | 54.08 | | | $ | 69.14 | |
| Cash settlements | | $ | (0.01 | ) | | $ | (1.32 | ) | | $ | — | | | $ | (5.18 | ) |
| |
| Realized price, including cash settlements | | $ | 110.55 | | | $ | 8.29 | | | $ | 54.08 | | | $ | 63.96 | |
| |
Six Months Ended June 30, 2009
| | | | | | | | | | | | | | | | | |
| | Oil | | | Gas | | | NGLs | | | Total | |
| | | (Per Bbl) | | | (Per Mcf) | | | (Per Bbl) | | | (Per Boe) | |
| |
| U.S. Onshore | | $ | 44.67 | | | $ | 3.09 | | | $ | 19.16 | | | $ | 20.57 | |
| U.S. Offshore | | $ | 49.69 | | | $ | 4.46 | | | $ | 21.96 | | | $ | 34.85 | |
| Total U.S. | | $ | 46.07 | | | $ | 3.16 | | | $ | 19.24 | | | $ | 21.61 | |
| Canada | | $ | 38.19 | | | $ | 3.82 | | | $ | 28.52 | | | $ | 29.11 | |
| International | | $ | 50.10 | | | $ | 3.85 | | | $ | — | | | $ | 49.76 | |
| |
| Realized price without hedges | | $ | 43.65 | | | $ | 3.31 | | | $ | 20.45 | | | $ | 25.36 | |
| Cash settlements | | $ | — | | | $ | 0.47 | | | $ | — | | | $ | 1.83 | |
| |
| Realized price, including cash settlements | | $ | 43.65 | | | $ | 3.78 | | | $ | 20.45 | | | $ | 27.19 | |
| |
Six Months Ended June 30, 2008
| | | | | | | | | | | | | | | | | |
| | Oil | | | Gas | | | NGLs | | | Total | |
| | | (Per Bbl) | | | (Per Mcf) | | | (Per Bbl) | | | (Per Boe) | |
| |
| U.S. Onshore | | $ | 107.15 | | | $ | 8.26 | | | $ | 47.65 | | | $ | 53.91 | |
| U.S. Offshore | | $ | 112.07 | | | $ | 9.94 | | | $ | 51.77 | | | $ | 79.52 | |
| Total U.S. | | $ | 109.08 | | | $ | 8.42 | | | $ | 47.78 | | | $ | 56.95 | |
| Canada | | $ | 84.16 | | | $ | 8.66 | | | $ | 68.86 | | | $ | 64.01 | |
| International | | $ | 105.63 | | | $ | 9.56 | | | $ | — | | | $ | 104.68 | |
| |
| Realized price without hedges | | $ | 98.98 | | | $ | 8.48 | | | $ | 50.76 | | | $ | 62.12 | |
| Cash settlements | | $ | — | | | $ | (0.69 | ) | | $ | — | | | $ | (2.67 | ) |
| |
| Realized price, including cash settlements | | $ | 98.98 | | | $ | 7.79 | | | $ | 50.76 | | | $ | 59.45 | |
| |
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DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| | 2009 | | 2008 | | 2009 | | 2008 |
| |
Revenues | | | | | | | | | | | | | | | | |
| |
| Oil sales | | $ | 808 | | | $ | 1,455 | | | $ | 1,262 | | | $ | 2,705 | |
| Gas sales | | | 740 | | | | 2,210 | | | | 1,653 | | | | 3,840 | |
| NGL sales | | | 170 | | | | 379 | | | | 306 | | | | 707 | |
| Net gain (loss) on oil and gas derivative financial instruments | | | 13 | | | | (1,215 | ) | | | 167 | | | | (2,003 | ) |
| Marketing and midstream revenues | | | 359 | | | | 719 | | | | 730 | | | | 1,274 | |
| |
| Total revenues | | | 2,090 | | | | 3,548 | | | | 4,118 | | | | 6,523 | |
| |
Expenses and other income, net | | | | | | | | | | | | | | | | |
| |
| Lease operating expenses | | | 510 | | | | 537 | | | | 1,034 | | | | 1,043 | |
| Production taxes | | | 47 | | | | 176 | | | | 89 | | | | 310 | |
| Marketing and midstream operating costs and expenses | | | 234 | | | | 515 | | | | 463 | | | | 897 | |
| Depreciation, depletion and amortization of oil and gas properties | | | 494 | | | | 762 | | | | 1,093 | | | | 1,499 | |
| Depreciation and amortization of non-oil and gas properties | | | 74 | | | | 62 | | | | 144 | | | | 119 | |
| Accretion of asset retirement obligation | | | 24 | | | | 22 | | | | 48 | | | | 44 | |
| General and administrative expenses | | | 182 | | | | 180 | | | | 348 | | | | 328 | |
| Interest expense | | | 90 | | | | 90 | | | | 173 | | | | 192 | |
| Change in fair value of other financial instruments | | | (10 | ) | | | (40 | ) | | | (15 | ) | | | (24 | ) |
| Reduction of carrying value of oil and gas properties | | | — | | | | — | | | | 6,516 | | | | — | |
| Other expense (income), net | | | 20 | | | | (17 | ) | | | 27 | | | | (38 | ) |
| |
| Total expenses and other income, net | | | 1,665 | | | | 2,287 | | | | 9,920 | | | | 4,370 | |
| |
| Earnings (loss) from continuing operations before income taxes | | | 425 | | | | 1,261 | | | | (5,802 | ) | | | 2,153 | |
| |
Income tax expense (benefit) | | | | | | | | | | | | | | | | |
| |
| Current | | | 51 | | | | 414 | | | | 53 | | | | 517 | |
| Deferred | | | 77 | | | | 253 | | | | (2,194 | ) | | | 391 | |
| |
| Total income tax expense (benefit) | | | 128 | | | | 667 | | | | (2,141 | ) | | | 908 | |
| |
Earnings (loss) from continuing operations | | | 297 | | | | 594 | | | | (3,661 | ) | | | 1,245 | |
| |
Discontinued operations | | | | | | | | | | | | | | | | |
| |
| Earnings from discontinued operations before income taxes | | | 17 | | | | 851 | | | | 16 | | | | 1,040 | |
| Income tax expense | | | — | | | | 144 | | | | — | | | | 235 | |
| |
Earnings from discontinuing operations | | | 17 | | | | 707 | | | | 16 | | | | 805 | |
| |
Net earnings (loss) | | | 314 | | | | 1,301 | | | | (3,645 | ) | | | 2,050 | |
| Preferred stock dividends | | | — | | | | 3 | | | | — | | | | 5 | |
| |
Net earnings (loss) applicable to common stockholders | | $ | 314 | | | $ | 1,298 | | | $ | (3,645 | ) | | $ | 2,045 | |
| |
| | | | | | | | | | | | | | | | | |
Basic net earnings (loss) per share | | | | | | | | | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 0.67 | | | $ | 1.33 | | | $ | (8.25 | ) | | $ | 2.80 | |
| Earnings from discontinued operations | | $ | 0.04 | | | $ | 1.58 | | | $ | 0.04 | | | $ | 1.80 | |
| |
| Net earnings (loss) | | $ | 0.71 | | | $ | 2.91 | | | $ | (8.21 | ) | | $ | 4.60 | |
| |
| | | | | | | | | | | | | | | | | |
Diluted net earnings (loss) per share | | | | | | | | | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 0.66 | | | $ | 1.31 | | | $ | (8.25 | ) | | $ | 2.76 | |
| Earnings from discontinued operations | | $ | 0.04 | | | $ | 1.57 | | | $ | 0.04 | | | $ | 1.79 | |
| |
| Net earnings (loss) | | $ | 0.70 | | | $ | 2.88 | | | $ | (8.21 | ) | | $ | 4.55 | |
| |
Page 7 of 12
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions)
| | | | | | | | | |
| | | June 30, | | December 31, |
| | 2009 | | 2008 |
| |
| | | | | | | (Audited) |
| |
Assets | | | | | | | | |
| |
| Current assets | | | | | | | | |
| |
| Cash and cash equivalents | | $ | 648 | | | $ | 379 | |
| Accounts receivable | | | 1,318 | | | | 1,412 | |
| Income taxes receivable | | | 27 | | | | 334 | |
| Derivative financial instruments, at fair value | | | 226 | | | | 282 | |
| Other current assets | | | 358 | | | | 277 | |
| |
| Total current assets | | | 2,577 | | | | 2,684 | |
| |
| Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($4,298 and $4,551 excluded from amortization in 2009 and 2008, respectively) | | | 59,086 | | | | 55,664 | |
| Less accumulated depreciation, depletion and amortization | | | 40,999 | | | | 32,683 | |
| |
| Property and equipment, net | | | 18,087 | | | | 22,981 | |
| |
| Goodwill | | | 5,710 | | | | 5,579 | |
| Other long-term assets, including $180 million and $199 million at fair value in 2009 and 2008, respectively | | | 683 | | | | 664 | |
| |
Total Assets | | $ | 27,057 | | | $ | 31,908 | |
| |
Liabilities and Stockholders’ Equity | | | | | | | | |
| |
| Current liabilities | | | | | | | | |
| |
| Accounts payable — trade | | $ | 1,074 | | | $ | 1,825 | |
| Revenues and royalties due to others | | | 377 | | | | 496 | |
| Short-term debt | | | 1,508 | | | | 180 | |
| Current portion of asset retirement obligation, at fair value | | | 175 | | | | 138 | |
| Accrued expenses and other current liabilities | | | 358 | | | | 496 | |
| |
| Total current liabilities | | | 3,492 | | | | 3,135 | |
| |
| Long-term debt | | | 5,849 | | | | 5,661 | |
| Asset retirement obligation, at fair value | | | 1,411 | | | | 1,347 | |
| Other long-term liabilities | | | 1,036 | | | | 1,026 | |
| Deferred income taxes | | | 1,587 | | | | 3,679 | |
| |
| Stockholders’ equity | | | | | | | | |
| |
| Common stock | | | 44 | | | | 44 | |
| Additional paid-in capital | | | 6,363 | | | | 6,257 | |
| Retained earnings | | | 6,589 | | | | 10,376 | |
| Accumulated other comprehensive income | | | 686 | | | | 383 | |
| |
Total Stockholders’ Equity | | | 13,682 | | | | 17,060 | |
| |
Total Liabilities and Stockholders’ Equity | | $ | 27,057 | | | $ | 31,908 | |
| |
Common Shares Outstanding | | | 444 | | | | 444 | |
| |
Page 8 of 12
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | |
| | | Six Months Ended June 30, |
| | | 2009 | | 2008 |
| |
Cash Flows From Operating Activities | | | | | | | | |
| |
| Net (loss) earnings | | $ | (3,645 | ) | | $ | 2,050 | |
| Earnings from discontinued operations, net of tax | | | (16 | ) | | | (805 | ) |
| Adjustments to reconcile (loss) earnings from continuing operations to net | | | | | | | | |
| cash provided by operating activities: | | | | | | | | |
| Depreciation, depletion and amortization | | | 1,237 | | | | 1,618 | |
| Deferred income tax (benefit) expense | | | (2,194 | ) | | | 391 | |
| Reduction of carrying value of oil and gas properties | | | 6,516 | | | | — | |
| Net unrealized loss on oil and gas derivative financial instruments | | | 65 | | | | 1,692 | |
| Other noncash charges | | | 134 | | | | 122 | |
| Net increase in working capital | | | (89 | ) | | | (132 | ) |
| Decrease (increase) in long-term other assets | | | 43 | | | | (37 | ) |
| Increase in long-term other liabilities | | | 19 | | | | 181 | |
| |
| Cash provided by operating activities — continuing operations | | | 2,070 | | | | 5,080 | |
| Cash provided by operating activities — discontinued operations | | | 7 | | | | 106 | |
| |
Net cash provided by operating activities | | $ | 2,077 | | | $ | 5,186 | |
| |
| | | | | | | | | |
Cash Flows From Investing Activities | | | | | | | | |
| |
| Proceeds from sales of property and equipment | | | 2 | | | | 108 | |
| Capital expenditures | | | (3,201 | ) | | | (3,870 | ) |
| Purchases of short-term investments | | | — | | | | (50 | ) |
| Sales of long-term and short-term investments | | | 4 | | | | 295 | |
| |
| Cash used in investing activities — continuing operations | | | (3,195 | ) | | | (3,517 | ) |
| Cash provided by investing activities — discontinued operations | | | 2 | | | | 1,712 | |
| |
Net cash used in investing activities | | $ | (3,193 | ) | | $ | (1,805 | ) |
| |
| | | | | | | | | |
Cash Flows From Financing Activities | | | | | | | | |
| |
| Proceeds from borrowing of long-term debt, net of issuance costs | | | 1,187 | | | | — | |
| Credit facility repayments | | | — | | | | (3,070 | ) |
| Credit facility borrowings | | | — | | | | 1,620 | |
| Net commercial paper borrowings (repayments) | | | 325 | | | | (1,004 | ) |
| Debt repayments | | | (1 | ) | | | (47 | ) |
| Redemption of preferred stock | | | — | | | | (150 | ) |
| Proceeds from stock option exercises | | | 9 | | | | 104 | |
| Repurchases of common stock | | | — | | | | (252 | ) |
| Dividends paid on common and preferred stock | | | (142 | ) | | | (146 | ) |
| Excess tax benefits related to share-based compensation | | | 5 | | | | 55 | |
| |
Net cash provided by (used in) financing activities | | $ | 1,383 | | | $ | (2,890 | ) |
| |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 5 | | | | (19 | ) |
| |
| Net increase in cash and cash equivalents | | | 272 | | | | 472 | |
| Cash and cash equivalents at beginning of period (including assets held for sale) | | | 384 | | | | 1,373 | |
| |
| Cash and cash equivalents at end of period (including assets held for sale) | | $ | 656 | | | $ | 1,845 | |
| |
Page 9 of 12
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
DRILLING ACTIVITY
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
| |
Exploration Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 2 | | | | 8 | | | | 9 | | | | 17 | |
| Canada | | | 7 | | | | 7 | | | | 29 | | | | 58 | |
| International | | | — | | | | 1 | | | | 1 | | | | 7 | |
| |
| Total | | | 9 | | | | 16 | | | | 39 | | | | 82 | |
| |
Exploration Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 50 | % | | | 88 | % | | | 78 | % | | | 71 | % |
| Canada | | | 100 | % | | | 86 | % | | | 100 | % | | | 95 | % |
| International | | | — | | | | 0 | % | | | 0 | % | | | 0 | % |
| |
| Total | | | 89 | % | | | 81 | % | | | 92 | % | | | 82 | % |
| |
Development Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 160 | | | | 405 | | | | 454 | | | | 777 | |
| Canada | | | 22 | | | | 61 | | | | 143 | | | | 259 | |
| International | | | 7 | | | | 12 | | | | 13 | | | | 22 | |
| |
| Total | | | 189 | | | | 478 | | | | 610 | | | | 1,058 | |
| |
Development Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 100 | % | | | 98 | % | | | 99 | % | | | 98 | % |
| Canada | | | 100 | % | | | 100 | % | | | 99 | % | | | 100 | % |
| International | | | 100 | % | | | 92 | % | | | 100 | % | | | 91 | % |
| |
| Total | | | 100 | % | | | 98 | % | | | 99 | % | | | 98 | % |
| |
Total Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 162 | | | | 413 | | | | 463 | | | | 794 | |
| Canada | | | 29 | | | | 68 | | | | 172 | | | | 317 | |
| International | | | 7 | | | | 13 | | | | 14 | | | | 29 | |
| |
| Total | | | 198 | | | | 494 | | | | 649 | | | | 1,140 | |
| |
Total Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. 99% | | | 98 | % | | | 99 | % | | | 98 | % | | | | |
| Canada | | | 100 | % | | | 99 | % | | | 99 | % | | | 99 | % |
| International | | | 100 | % | | | 85 | % | | | 93 | % | | | 69 | % |
| |
| Total | | | 99 | % | | | 98 | % | | | 99 | % | | | 97 | % |
| |
| | | | | | | | | |
| | | June 30, |
| | | 2009 | | 2008 |
| |
Number of Company Operated Rigs Running | | | | | | | | |
| |
| U.S. | | | 23 | | | | 79 | |
| Canada | | | 1 | | | | 12 | |
| International | | | — | | | | 1 | |
| |
| Total | | | 24 | | | | 92 | |
| |
Page 10 of 12
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CAPITAL EXPENDITURES (in millions)
Quarter Ended June 30, 2009
| | | | | | | | | | | | | | | | | | | | | |
| | | U.S. Onshore | | U.S. Offshore | | Canada | | International | | Total |
| |
Capital Expenditures | | | | | | | | | | | | | | | | | | | | |
| |
| Exploration | | $ | 25 | | | | 31 | | | | 19 | | | | 53 | | | $ | 128 | |
| Development | | | 409 | | | | 119 | | | | 149 | | | | 43 | | | | 720 | |
| |
| Exploration and development capital | | $ | 434 | | | | 150 | | | | 168 | | | | 96 | | | $ | 848 | |
| Capitalized G&A | | | | | | | | | | | | | | | | | | | 104 | |
| Capitalized interest | | | | | | | | | | | | | | | | | | | 21 | |
| Discontinued operations | | | | | | | | | | | | | | | | | | | — | |
| Midstream capital | | | | | | | | | | | | | | | | | | | 62 | |
| Other capital | | | | | | | | | | | | | | | | | | | 24 | |
| |
Total Capital Expenditures | | | | | | | | | | | | | | | | | | $ | 1,059 | |
| |
CAPITAL EXPENDITURES (in millions)
Six Months Ended June 30, 2009
| | | | | | | | | | | | | | | | | | | | | |
| | | U.S. Onshore | | U.S. Offshore | | Canada | | International | | Total |
| |
Capital Expenditures | | | | | | | | | | | | | | | | | | | | |
| |
| Exploration | | $ | 50 | | | | 114 | | | | 69 | | | | 109 | | | $ | 342 | |
| Development | | | 1,130 | | | | 238 | | | | 379 | | | | 60 | | | | 1,807 | |
| |
| Exploration and development capital | | $ | 1,180 | | | | 352 | | | | 448 | | | | 169 | | | $ | 2,149 | |
| Capitalized G&A | | | | | | | | | | | | | | | | | | | 208 | |
| Capitalized interest | | | | | | | | | | | | | | | | | | | 46 | |
| Discontinued operations | | | | | | | | | | | | | | | | | | | 4 | |
| Midstream capital | | | | | | | | | | | | | | | | | | | 150 | |
| Other capital | | | | | | | | | | | | | | | | | | | 44 | |
| |
Total Capital Expenditures | | | | | | | | | | | | | | | | | | $ | 2,601 | |
| |
Page 11 of 12
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
NON-GAAP FINANCIAL MEASURES
The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles.) The company must reconcile the Non-GAAP financial measure to related GAAP information. Cash flow before balance sheet changes is a Non-GAAP financial measure. Devon believes cash flow before balance sheet changes is relevant because it is a measure of cash available to fund the company’s capital expenditures, dividends and to service its debt. Cash flow before balance sheet changes is also used by certain securities analysts as a measure of Devon’s financial results.
RECONCILIATION TO GAAP INFORMATION
(in millions)
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
| |
Net Cash Provided By Operating Activities (GAAP) | | $ | 1,030 | | | $ | 2,931 | | | $ | 2,077 | | | $ | 5,186 | |
| |
| Changes in assets and liabilities — continuing operations | | | 81 | | | | (365 | ) | | | 27 | | | | 2 | |
| Changes in assets and liabilities — discontinued operations | | | (2 | ) | | | 124 | | | | (7 | ) | | | 61 | |
| |
| Cash flow before balance sheet changes (Non-GAAP) | | $ | 1,109 | | | $ | 2,690 | | | $ | 2,097 | | | $ | 5,249 | |
| |
Devon believes that using net debt for the calculation of “net debt to adjusted capitalization” provides a better measure than using debt. Devon defines net debt as debt less cash and cash equivalents. Devon believes that because cash can be used to repay indebtedness, netting cash and cash equivalents against debt provides a clearer picture of the future demands on cash to repay debt.
RECONCILIATION TO GAAP INFORMATION
(in millions)
| | | | | | | | | |
| | | June 30, |
| | | 2009 | | 2008 |
| |
| Total debt (GAAP) | | $ | 7,357 | | | $ | 5,450 | |
| Adjustments: | | | | | | | | |
| Cash and cash equivalents | | | 648 | | | | 1,838 | |
| |
| Net Debt (Non-GAAP) | | $ | 6,709 | | | $ | 3,612 | |
| |
| | | | | | | | | |
| Total debt | | $ | 7,357 | | | $ | 5,450 | |
| Stockholders’ equity | | | 13,682 | | | | 23,433 | |
| |
| Total Capitalization (GAAP) | | $ | 21,039 | | | $ | 28,883 | |
| |
| | | | | | | | | |
| Net debt | | $ | 6,709 | | | $ | 3,612 | |
| Stockholders’ equity | | | 13,682 | | | | 23,433 | |
| |
| Adjusted Capitalization (Non-GAAP) | | $ | 20,391 | | | $ | 27,045 | |
| |
Page 12 of 12
