Exhibit 99.1
| | | | | |
| | 20 North Broadway
Oklahoma City, Oklahoma 73102-8260 | | Telephone: (405) 235-3611
Fax: (405) 552-4667 |
| | | | | |
NEWS RELEASE
| | |
| Investor contact: | | Zack Hager
(405) 552-4526 |
| | |
| Media contact: | | Brian Engel
(405) 228-7750 |
DEVON ENERGY NET EARNINGS UP 44 PERCENT TO $744 MILLION
IN THIRD QUARTER 2005
OKLAHOMA CITY — November 2, 2005— Devon Energy Corporation (NYSE:DVN) today reported net earnings for the quarter ended September 30, 2005, of $744 million, or a record $1.66 per common share ($1.63 per diluted common share). This is 44 percent above Devon’s third quarter 2004 net earnings of $517 million, or $1.06 per common share ($1.03 per diluted common share). Per-share amounts reflect a two-for-one stock split completed in November 2004.
The $744 million of net earnings Devon reported in the third quarter of 2005 is after a net reduction for items that securities analysts typically exclude from their published estimates. Collectively, these items reduced Devon’s reported net earnings in the third quarter of 2005 by $108 million, or 24 cents per diluted share. The most significant of these items, changes in the fair value of derivative financial instruments, reduced third quarter 2005 net earnings by $134 million pre-tax ($86 million after tax). Third quarter 2005 net earnings were also reduced by $51 million pre-tax ($34 million after tax) for additional interest costs associated with the early redemption of debt. These items and other excluded items are described more fully in the following pages of this release.
For the nine months ended September 30, 2005, Devon reported net earnings of $2.0 billion or $4.22 per common share ($4.15 per diluted common share). Net earnings for the nine months ended September 30, 2004, were $1.5 billion, or $3.13 per share ($3.04 per diluted common share).
“We had record earnings in the third quarter despite the disruptions caused by the Gulf hurricanes,” said J. Larry Nichols, chairman and chief executive officer. “Devon’s strong financial results are allowing us to expand our search for new oil and gas reserves in the United States, Canada and abroad. Through the first nine months of 2005 we have invested a record $2.6 billion, enabling us to drill 1,837 wells. This was 20 percent more wells than we drilled in the first nine months of 2004.”
Operating Highlights Include 2,000th Barnett Shale Well
Devon drilled 644 productive wells in the third quarter of 2005 with an overall success rate of 98 percent. Operating highlights included:
| • | | In the third quarter, Devon began producing its 2,000thoperated well in the Barnett Shale field in north Texas. Devon is the largest producer in the Barnett Shale, which is the largest natural gas field in Texas. |
| • | | In south Texas, Devon completed its third successful well in Matagorda County. The well, in which Devon has a 100 percent working interest, is producing 22 million cubic feet of gas per day. An offset well is now drilling. |
| • | | The company continued its drilling programs in two promising natural gas exploration areas onshore in the United States. Devon holds 200,000 net acres in the north Louisiana Bossier play and 70,000 net acres in the Arkoma shale play in eastern Oklahoma. |
| • | | Devon continued successful delineation drilling on its Cascade and Jack lower Tertiary discoveries in the deepwater Gulf of Mexico. Production tests of both wells are planned in 2006. |
| • | | In Canada, Devon drilled 125 wells in the Lloydminster area of Alberta, including 47 wells at Iron River. The company commenced oil production from its first new Iron River well in July. Devon acquired the Iron River acreage in the second quarter of 2005. |
| • | | Offshore West Africa, Devon drilled two successful wells in its high impact exploration program. |
Oil, Gas and NGL Sales Increase 24 Percent to $2.3 Billion
Sales of oil, gas and natural gas liquids climbed to $2.3 billion in the third quarter of 2005. This was a 24 percent increase over third quarter 2004 sales of $1.9 billion. Higher realized oil, gas and natural gas liquids prices more than offset the production impact of property divestitures completed in 2005.
Combined oil, gas and natural gas liquids production in the third quarter of 2005 was 598 thousand barrels of oil equivalent (Boe) per day. This compares to third quarter 2004 production of 679 thousand Boe per day. The decrease in 2005 is primarily attributable to property divestitures and, to a lesser extent, the recent hurricanes.
Devon’s third quarter 2005 average realized natural gas price increased 38 percent to $7.13 per thousand cubic feet, compared with $5.17 per thousand cubic feet in the third quarter of 2004. The company’s third quarter 2005 average realized oil price increased 49 percent to $43.45 per barrel compared with $29.19 per barrel in the third quarter of 2004. Devon’s average realized price for natural gas liquids for the third quarter of 2005 was $32.23 per barrel, a 32 percent increase over the $24.36 per barrel realized in the comparable quarter of 2004.
Marketing and midstream operating margin increased 24 percent to $111 million compared with $89 million in the third quarter of 2004. Marketing and midstream revenues decreased one percent to $405 million while related expenses decreased eight percent to $294 million in the third quarter of 2005.
Higher Activity Levels Reflected in Higher Unit Costs
Lease operating expenses decreased one percent to $319 million in the third quarter of 2005 compared with the same quarter in 2004. On a unit of production basis, lease operating expenses increased 12 percent to $5.80 per Boe compared with the third quarter of 2004. The increase in per-unit expenses reflects higher transportation costs, higher ad valorem taxes and the foreign exchange
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effect of the weaker U.S. dollar on Devon’s Canadian operations. Power, fuel and repairs and maintenance costs also increased.
Production taxes increased 67 percent to $81 million in the third quarter of 2005, compared with the third quarter of 2004. Higher oil and gas sales contributed to the increase in production taxes. In addition, third quarter 2004 production taxes were reduced by an $18 million adjustment related principally to previous accounting periods.
Depreciation, depletion and amortization (DD&A) of oil and gas properties decreased seven percent to $493 million from $532 million in the third quarter of 2004. This decrease follows the decrease in production resulting from oil and gas property divestitures in the first half of 2005. The DD&A rate was $8.96 per Boe in the third quarter of 2005.
General and administrative expenses increased to $70 million, a 20 percent increase over third quarter 2004. Higher costs relate to increased activity, a larger personnel base and increases in compensation and benefits.
Third quarter 2005 interest expense increased 50 percent to $164 million compared with the third quarter of 2004. The increase was attributable to a $51 million charge in the 2005 quarter resulting from early redemption of long-term debt.
Income tax expense was $395 million, or 35 percent of pre-tax earnings in the third quarter of 2005. Of total income tax expense, $203 million was current and $192 million was deferred. As a result of finalizing Devon’s 2004 tax return in the third quarter of 2005, the company accelerated the utilization of certain deferred tax benefits. This resulted in a $76 million reclassification of deferred tax benefits to reduce current tax expense in the third quarter of 2005.
$1.2 Billion of Cash Applied to Debt Reduction and Share Repurchases
Devon retired $668 million of long-term debt with cash on hand in the third quarter of 2005. This included the early retirement of its 6.75 percent notes due in 2011 with a face value of $400 million. The company also repurchased 10.4 million shares of its common stock during the quarter for $567 million completing the 50 million share repurchase program announced in September 2004. A second 50 million share repurchase program is now under way.
Cash flow before balance sheet changes was $1.6 billion in the third quarter of 2005. This was a 26 percent increase over the same quarter in 2004. Following the debt retirements, stock repurchases and other uses of cash in the quarter, cash and short term investments were $1.9 billion as of September 30, 2005. At September 30, 2005, Devon’s net debt to adjusted capitalization was 23 percent. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, all of which are non-GAAP measures, are provided in this release.
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 for the company’s financial results. These items and their effects upon third quarter 2005 reported earnings were as follows:
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| • | | Effects of changes in foreign currency exchange rates increased earnings $15 million pre-tax ($12 million after tax). |
| • | | A change in fair value of derivative financial instruments decreased earnings by $134 million pre-tax ($86 million after tax). Of the pre-tax amount, $90 million was related to long-term debt and the remainder was related to oil and gas hedges that no longer qualify for hedge accounting. |
| • | | Additional interest expense attributable to early redemption of the $400 million 6.75 percent senior notes due 2011 decreased earnings by $51 million pre-tax ($34 million after tax). |
The following table summarizes the effects of these items on earnings and income taxes. Included in the table are the tax effects of an income tax accrual adjustment and oil and gas property divestitures that did not affect net earnings.
Summary of Items Typically Excluded by Securities Analysts
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Pretax | | | | | | | | | | | | | | | After-tax | | | Cash Flow Before | |
| | | Earnings | | | Income Tax Effect | | | Earnings | | | Balance Sheet | |
| | | Effect | | | Current | | | Deferred | | | Total | | | Effect | | | Changes Effect | |
| |
| Change in fair value of financial instruments | | $ | (134 | ) | | | (4 | ) | | | (44 | ) | | | (48 | ) | | | (86 | ) | | | (8 | ) |
| Foreign exchange effect | | | 15 | | | | — | | | | 3 | | | | 3 | | | | 12 | | | | — | |
| Additional interest costs on debt retirement | | | (51 | ) | | | (17 | ) | | | — | | | | (17 | ) | | | (34 | ) | | | (34 | ) |
| Income tax accrual adjustment | | | — | | | | (76 | ) | | | 76 | | | | — | | | | — | | | | 76 | |
| Effects of oil and gas property divestitures | | | — | | | | 42 | | | | (42 | ) | | | — | | | | — | | | | (42 | ) |
| |
| Totals | | $ | (170 | ) | | | (55 | ) | | | (7 | ) | | | (62 | ) | | | (108 | ) | | | (8 | ) |
| |
In aggregate, these items decreased third quarter 2005 net earnings by $108 million, or 25 cents per common share (24 cents per diluted share). These items and their associated tax effects decreased cash flow before balance sheet changes by $8 million.
Conference Call to be Webcast Today
Devon will discuss its third quarter 2005 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 at www.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, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.
Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration, production and property acquisitions. 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 at www.devonenergy.com.
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DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION DATA
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Nine Months Ended |
| (net of royalties) | | September 30, | | September 30, |
| | | 2005 | | 2004 | | 2005 | | 2004 |
| |
Total Period Production | | | | | | | | | | | | | | | | |
| |
| Natural Gas (Bcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 113.9 | | | | 120.8 | | | | 343.5 | | | | 359.7 | |
| U.S. Offshore | | | 22.7 | | | | 29.2 | | | | 77.5 | | | | 92.4 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 136.6 | | | | 150.0 | | | | 421.0 | | | | 452.1 | |
| Canada | | | 66.7 | | | | 70.1 | | | | 199.8 | | | | 208.4 | |
| International | | | 2.5 | | | | 2.0 | | | | 7.6 | | | | 7.1 | |
| |
| Total Natural Gas | | | 205.8 | | | | 222.1 | | | | 628.4 | | | | 667.6 | |
| |
| Oil (MMBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 2.9 | | | | 3.4 | | | | 9.2 | | | | 10.6 | |
| U.S. Offshore | | | 2.7 | | | | 4.1 | | | | 11.1 | | | | 13.8 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 5.6 | | | | 7.5 | | | | 20.3 | | | | 24.4 | |
| Canada | | | 3.1 | | | | 3.5 | | | | 9.9 | | | | 10.3 | |
| International | | | 6.1 | | | | 8.1 | | | | 19.9 | | | | 24.6 | |
| |
| Total Oil | | | 14.8 | | | | 19.1 | | | | 50.1 | | | | 59.3 | |
| |
| Natural Gas Liquids (MMBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 4.2 | | | | 4.5 | | | | 13.0 | | | | 13.4 | |
| U.S. Offshore | | | 0.3 | | | | 0.4 | | | | 0.8 | | | | 0.9 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 4.5 | | | | 4.9 | | | | 13.8 | | | | 14.3 | |
| Canada | | | 1.3 | | | | 1.3 | | | | 3.9 | | | | 3.6 | |
| International | | | 0.1 | | | | 0.1 | | | | 0.2 | | | | 0.2 | |
| |
| Total Natural Gas Liquids | | | 5.9 | | | | 6.3 | | | | 17.9 | | | | 18.1 | |
| |
| Oil Equivalent (MMBoe) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 26.1 | | | | 28.0 | | | | 79.5 | | | | 83.9 | |
| U.S. Offshore | | | 6.8 | | | | 9.4 | | | | 24.8 | | | | 30.1 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 32.9 | | | | 37.4 | | | | 104.3 | | | | 114.0 | |
| Canada | | | 15.6 | | | | 16.5 | | | | 47.0 | | | | 48.7 | |
| International | | | 6.5 | | | | 8.5 | | | | 21.4 | | | | 26.0 | |
| |
| Total Oil Equivalent | | | 55.0 | | | | 62.4 | | | | 172.7 | | | | 188.7 | |
| |
Average Daily Production | | | | | | | | | | | | | | | | |
| |
| Natural Gas (MMcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 1,238.6 | | | | 1,312.8 | | | | 1,258.3 | | | | 1,312.9 | |
| U.S. Offshore | | | 246.5 | | | | 317.3 | | | | 284.0 | | | | 337.1 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 1,485.1 | | | | 1,630.1 | | | | 1,542.3 | | | | 1,650.0 | |
| Canada | | | 725.3 | | | | 762.2 | | | | 731.7 | | | | 760.5 | |
| International | | | 26.8 | | | | 21.8 | | | | 27.9 | | | | 26.1 | |
| |
| Total Natural Gas | | | 2,237.2 | | | | 2,414.1 | | | | 2,301.9 | | | | 2,436.6 | |
| |
| Oil (MBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 31.1 | | | | 36.6 | | | | 33.7 | | | | 38.6 | |
| U.S. Offshore | | | 29.7 | | | | 45.2 | | | | 40.6 | | | | 50.3 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 60.8 | | | | 81.8 | | | | 74.3 | | | | 88.9 | |
| Canada | | | 34.2 | | | | 38.1 | | | | 36.1 | | | | 37.8 | |
| International | | | 65.8 | | | | 88.4 | | | | 73.0 | | | | 89.7 | |
| |
| Total Oil | | | 160.8 | | | | 208.3 | | | | 183.4 | | | | 216.4 | |
| |
| Natural Gas Liquids (MBbls) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 45.7 | | | | 49.7 | | | | 47.7 | | | | 49.0 | |
| U.S. Offshore | | | 3.2 | | | | 3.9 | | | | 2.8 | | | | 3.3 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 48.9 | | | | 53.6 | | | | 50.5 | | | | 52.3 | |
| Canada | | | 14.2 | | | | 13.7 | | | | 14.2 | | | | 13.1 | |
| International | | | 0.9 | | | | 0.8 | | | | 0.9 | | | | 0.8 | |
| |
| Total Natural Gas Liquids | | | 64.0 | | | | 68.1 | | | | 65.6 | | | | 66.2 | |
| |
| Oil Equivalent (MBoe) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 283.2 | | | | 305.1 | | | | 291.2 | | | | 306.4 | |
| U.S. Offshore | | | 74.0 | | | | 102.0 | | | | 90.7 | | | | 109.7 | |
| | | | | | | | | | | | | | | | | |
| Total U.S. | | | 357.2 | | | | 407.1 | | | | 381.9 | | | | 416.1 | |
| Canada | | | 169.3 | | | | 178.8 | | | | 172.2 | | | | 177.6 | |
| International | | | 71.2 | | | | 92.9 | | | | 78.6 | | | | 94.9 | |
| |
| Total Oil Equivalent | | | 597.7 | | | | 678.8 | | | | 632.7 | | | | 688.6 | |
| |
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DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION DATA - RETAINED PROPERTIES
| | | | | | | | | | | | | | | | | | | | | |
| All periods exclude properties divested in 2005 | | | | | | | | | | | | | | YOY | | | Sequential | |
| | | Q3 2005 | | | Q3 2004 | | | Q2 2005 | | | % Change | | | % Change | |
Total Period Production | | | | | | | | | | | | | | | | | | | | |
| Natural Gas (Bcf) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 113.9 | | | | 113.0 | | | | 113.2 | | | | 1 | % | | | 1 | % |
| U.S. Offshore | | | 22.0 | | | | 16.8 | | | | 23.5 | | | | 31 | % | | | -6 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 135.9 | | | | 129.8 | | | | 136.7 | | | | 5 | % | | | -1 | % |
| Canada | | | 66.6 | | | | 60.1 | | | | 61.3 | | | | 11 | % | | | 9 | % |
| International | | | 2.5 | | | | 2.0 | | | | 2.4 | | | | 25 | % | | | 4 | % |
| | | | | | | |
| Total Natural Gas | | | 205.0 | | | | 191.9 | | | | 200.4 | | | | 7 | % | | | 2 | % |
| | | | | | | |
| Oil (MMBbls) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 2.9 | | | | 2.8 | | | | 2.9 | | | | 4 | % | | | 0 | % |
| U.S. Offshore | | | 2.6 | | | | 2.9 | | | | 3.0 | | | | -10 | % | | | -13 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 5.5 | | | | 5.7 | | | | 5.9 | | | | -4 | % | | | -7 | % |
| Canada | | | 3.1 | | | | 2.9 | | | | 3.2 | | | | 7 | % | | | -3 | % |
| International | | | 6.1 | | | | 8.1 | | | | 7.1 | | | | -25 | % | | | -14 | % |
| | | | | | | |
| Total Oil | | | 14.7 | | | | 16.7 | | | | 16.2 | | | | -12 | % | | | -9 | % |
| | | | | | | |
| Natural Gas Liquids (MMBbls) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 4.2 | | | | 4.3 | | | | 4.4 | | | | -2 | % | | | -5 | % |
| U.S. Offshore | | | 0.3 | | | | 0.1 | | | | 0.2 | | | | 200 | % | | | 50 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 4.5 | | | | 4.4 | | | | 4.6 | | | | 2 | % | | | -2 | % |
| Canada | | | 1.3 | | | | 1.2 | | | | 1.2 | | | | 8 | % | | | 8 | % |
| International | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0 | % | | | 0 | % |
| | | | | | | |
| Total Natural Gas Liquids | | | 5.9 | | | | 5.7 | | | | 5.9 | | | | 4 | % | | | 0 | % |
| | | | | | | |
| Oil Equivalent (MMBoe) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 26.1 | | | | 25.9 | | | | 26.2 | | | | 1 | % | | | 0 | % |
| U.S. Offshore | | | 6.5 | | | | 5.9 | | | | 7.1 | | | | 10 | % | | | -8 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 32.6 | | | | 31.8 | | | | 33.3 | | | | 3 | % | | | -2 | % |
| Canada | | | 15.6 | | | | 14.1 | | | | 14.6 | | | | 11 | % | | | 7 | % |
| International | | | 6.5 | | | | 8.5 | | | | 7.6 | | | | -24 | % | | | -14 | % |
| |
| Total Oil Equivalent | | | 54.7 | | | | 54.4 | | | | 55.5 | | | | 1 | % | | | -1 | % |
| |
Average Daily Production | | | | | | | | | | | | | | | | | | | | |
| Natural Gas (MMcf) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 1,238.1 | | | | 1,227.8 | | | | 1,243.4 | | | | 1 | % | | | 0 | % |
| U.S. Offshore | | | 239.8 | | | | 182.3 | | | | 258.8 | | | | 32 | % | | | -7 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 1,477.9 | | | | 1,410.1 | | | | 1,502.2 | | | | 5 | % | | | -2 | % |
| Canada | | | 723.5 | | | | 653.6 | | | | 672.9 | | | | 11 | % | | | 8 | % |
| International | | | 26.8 | | | | 21.8 | | | | 26.9 | | | | 23 | % | | | 0 | % |
| | | | | | | |
| Total Natural Gas | | | 2,228.2 | | | | 2,085.5 | | | | 2,202.0 | | | | 7 | % | | | 1 | % |
| | | | | | | |
| Oil (MBbls) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 31.1 | | | | 30.8 | | | | 32.8 | | | | 1 | % | | | -5 | % |
| U.S. Offshore | | | 28.3 | | | | 30.5 | | | | 32.6 | | | | -7 | % | | | -13 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 59.4 | | | | 61.3 | | | | 65.4 | | | | -3 | % | | | -9 | % |
| Canada | | | 34.2 | | | | 31.8 | | | | 35.0 | | | | 8 | % | | | -2 | % |
| International | | | 65.8 | | | | 88.4 | | | | 77.8 | | | | -26 | % | | | -15 | % |
| | | | | | | |
| Total Oil | | | 159.4 | | | | 181.5 | | | | 178.2 | | | | -12 | % | | | -11 | % |
| | | | | | | |
| Natural Gas Liquids (MBbls) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 45.7 | | | | 46.5 | | | | 48.1 | | | | -2 | % | | | -5 | % |
| U.S. Offshore | | | 3.0 | | | | 1.9 | | | | 2.1 | | | | 58 | % | | | 43 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 48.7 | | | | 48.4 | | | | 50.2 | | | | 1 | % | | | -3 | % |
| Canada | | | 14.2 | | | | 13.0 | | | | 13.8 | | | | 9 | % | | | 3 | % |
| International | | | 0.9 | | | | 0.8 | | | | 0.9 | | | | 13 | % | | | 0 | % |
| | | | | | | |
| Total Natural Gas Liquids | | | 63.8 | | | | 62.2 | | | | 64.9 | | | | 3 | % | | | -2 | % |
| | | | | | | |
| Oil Equivalent (MBoe) | | | | | | | | | | | | | | | | | | | | |
| U.S. Onshore | | | 283.2 | | | | 282.0 | | | | 288.2 | | | | 0 | % | | | -2 | % |
| U.S. Offshore | | | 71.1 | | | | 62.6 | | | | 77.8 | | | | 14 | % | | | -9 | % |
| | | | | | | | | | | | | | | | |
| Total U.S. | | | 354.3 | | | | 344.6 | | | | 366.0 | | | | 3 | % | | | -3 | % |
| Canada | | | 169.0 | | | | 153.7 | | | | 160.9 | | | | 10 | % | | | 5 | % |
| International | | | 71.2 | | | | 92.9 | | | | 83.2 | | | | -23 | % | | | -14 | % |
| |
| Total Oil Equivalent | | | 594.5 | | | | 591.2 | | | | 610.1 | | | | 1 | % | | | -3 | % |
| |
6
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
REALIZED PRICE DATA
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Nine Months Ended |
| (average realized prices) | | September 30, | | September 30, |
| | | 2005 | | 2004 | | 2005 | | 2004 |
| |
Realized Prices | | | | | | | | | | | | | | | | |
| |
| Natural Gas ($/Mcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | 6.98 | | | $ | 5.04 | | | $ | 6.03 | | | $ | 5.04 | |
| U.S. Offshore | | $ | 8.59 | | | $ | 6.06 | | | $ | 7.33 | | | $ | 6.10 | |
| Total U.S. | | $ | 7.25 | | | $ | 5.24 | | | $ | 6.27 | | | $ | 5.26 | |
| Canada | | $ | 6.97 | | | $ | 5.02 | | | $ | 6.21 | | | $ | 5.04 | |
| International | | $ | 4.65 | | | $ | 4.73 | | | $ | 4.18 | | | $ | 3.37 | |
| |
| Total Natural Gas | | $ | 7.13 | | | $ | 5.17 | | | $ | 6.23 | | | $ | 5.17 | |
| |
| Oil ($/Bbl) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | 58.82 | | | $ | 31.53 | | | $ | 49.86 | | | $ | 30.44 | |
| U.S. Offshore | | $ | 33.54 | | | $ | 31.07 | | | $ | 33.35 | | | $ | 30.46 | |
| Total U.S. | | $ | 46.48 | | | $ | 31.27 | | | $ | 40.85 | | | $ | 30.45 | |
| Canada | | $ | 33.89 | | | $ | 23.71 | | | $ | 27.15 | | | $ | 22.75 | |
| International | | $ | 45.62 | | | $ | 29.63 | | | $ | 40.72 | | | $ | 28.56 | |
| |
| Total Oil | | $ | 43.45 | | | $ | 29.19 | | | $ | 38.10 | | | $ | 28.32 | |
| |
| Natural Gas Liquids ($/Bbl) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | 29.70 | | | $ | 22.58 | | | $ | 24.95 | | | $ | 19.92 | |
| U.S. Offshore | | $ | 33.10 | | | $ | 29.01 | | | $ | 29.88 | | | $ | 25.73 | |
| Total U.S. | | $ | 29.93 | | | $ | 23.04 | | | $ | 25.23 | | | $ | 20.28 | |
| Canada | | $ | 40.86 | | | $ | 29.71 | | | $ | 35.76 | | | $ | 27.52 | |
| International | | $ | 21.07 | | | $ | 21.11 | | | $ | 23.36 | | | $ | 21.12 | |
| |
| Total Natural Gas Liquids | | $ | 32.23 | | | $ | 24.36 | | | $ | 27.48 | | | $ | 21.72 | |
| |
| Oil Equivalent ($/Boe) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | 41.78 | | | $ | 29.14 | | | $ | 35.94 | | | $ | 28.61 | |
| U.S. Offshore | | $ | 43.50 | | | $ | 33.74 | | | $ | 38.80 | | | $ | 33.47 | |
| Total U.S. | | $ | 42.14 | | | $ | 30.29 | | | $ | 36.61 | | | $ | 29.89 | |
| Canada | | $ | 40.12 | | | $ | 28.74 | | | $ | 35.02 | | | $ | 28.43 | |
| International | | $ | 44.20 | | | $ | 29.50 | | | $ | 39.60 | | | $ | 28.11 | |
| |
| Total Oil Equivalent | | $ | 41.81 | | | $ | 29.78 | | | $ | 36.55 | | | $ | 29.27 | |
| |
BENCHMARK PRICES
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Nine Months Ended |
| (average prices) | | September 30, | | September 30, |
| | | 2005 | | 2004 | | 2005 | | 2004 |
| |
Benchmark Prices | | | | | | | | | | | | | | | | |
| |
| Natural Gas ($/Mcf) – Henry Hub | | $ | 8.53 | | | $ | 5.75 | | | $ | 7.18 | | | $ | 5.81 | |
| Oil ($/Bbl) – West Texas Intermediate (Cushing) | | $ | 63.16 | | | $ | 43.80 | | | $ | 55.43 | | | $ | 39.06 | |
| |
PRICE DIFFERENTIALS, EXCLUDING EFFECTS OF HEDGES
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | Nine Months Ended | |
| (average floating price differentials from benchmark prices) | | September 30, | | | September 30, | |
| | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
| |
Price Differentials | | | | | | | | | | | | | | | | |
| |
| Natural Gas ($/Mcf) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | (1.52 | ) | | $ | (0.69 | ) | | $ | (1.13 | ) | | $ | (0.76 | ) |
| U.S. Offshore | | $ | 0.25 | | | $ | 0.31 | | | $ | 0.22 | | | $ | 0.29 | |
| Total U.S. | | $ | (1.23 | ) | | $ | (0.50 | ) | | $ | (0.88 | ) | | $ | (0.54 | ) |
| Canada | | $ | (1.34 | ) | | $ | (0.57 | ) | | $ | (0.80 | ) | | $ | (0.62 | ) |
| International | | $ | (2.01 | ) | | $ | (1.03 | ) | | $ | (1.63 | ) | | $ | (2.44 | ) |
| |
| Total Natural Gas | | $ | (1.27 | ) | | $ | (0.52 | ) | | $ | (0.86 | ) | | $ | (0.58 | ) |
| |
| Oil ($/Bbl) | | | | | | | | | | | | | | | | |
| U.S. Onshore | | $ | (4.34 | ) | | $ | (2.82 | ) | | $ | (4.93 | ) | | $ | (2.40 | ) |
| U.S. Offshore | | $ | (2.31 | ) | | $ | (2.06 | ) | | $ | (5.14 | ) | | $ | (1.90 | ) |
| Total U.S. | | $ | (3.35 | ) | | $ | (2.40 | ) | | $ | (5.05 | ) | | $ | (2.11 | ) |
| Canada | | $ | (12.88 | ) | | $ | (7.86 | ) | | $ | (14.10 | ) | | $ | (7.72 | ) |
| International | | $ | (6.45 | ) | | $ | (5.55 | ) | | $ | (6.99 | ) | | $ | (5.32 | ) |
| |
| Total Oil | | $ | (6.65 | ) | | $ | (4.74 | ) | | $ | (7.60 | ) | | $ | (4.42 | ) |
| |
7
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | Nine Months Ended |
| (in millions, except per share data) | | September 30, | | | September 30, |
| | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
| |
Revenues | | | | | | | | | | | | | | | | |
| |
| Oil sales | | $ | 643 | | | $ | 559 | | | $ | 1,908 | | | $ | 1,679 | |
| Gas sales | | | 1,466 | | | | 1,147 | | | | 3,913 | | | | 3,450 | |
| Natural gas liquids sales | | | 190 | | | | 153 | | | | 492 | | | | 393 | |
| Marketing & midstream revenues | | | 405 | | | | 408 | | | | 1,210 | | | | 1,202 | |
| |
| Total revenues | | | 2,704 | | | | 2,267 | | | | 7,523 | | | | 6,724 | |
| |
Expenses and Other Income, net | | | | | | | | | | | | | | | | |
| |
| Lease operating expenses | | | 319 | | | | 323 | | | | 1,005 | | | | 939 | |
| Production taxes | | | 81 | | | | 48 | | | | 234 | | | | 182 | |
| Marketing & midstream operating costs and expenses | | | 294 | | | | 319 | | | | 921 | | | | 949 | |
| Depreciation, depletion and amortization of oil and gas properties | | | 493 | | | | 532 | | | | 1,528 | | | | 1,587 | |
| Depreciation and amortization of non-oil and gas properties | | | 40 | | | | 40 | | | | 119 | | | | 109 | |
| Accretion of asset retirement obligation | | | 12 | | | | 11 | | | | 35 | | | | 32 | |
| General & administrative expenses | | | 70 | | | | 59 | | | | 206 | | | | 206 | |
| Interest expense | | | 164 | | | | 109 | | | | 428 | | | | 361 | |
| Effects of changes in foreign currency exchange rates | | | (15 | ) | | | (21 | ) | | | (4 | ) | | | (6 | ) |
| Change in fair value of derivative financial instruments | | | 134 | | | | 47 | | | | 168 | | | | 54 | |
| Other income, net | | | (27 | ) | | | (17 | ) | | | (179 | ) | | | (54 | ) |
| |
| Total expenses and other income, net | | | 1,565 | | | | 1,450 | | | | 4,461 | | | | 4,359 | |
| |
| Earnings before income tax expense | | | 1,139 | | | | 817 | | | | 3,062 | | | | 2,365 | |
| |
Income Tax Expense | | | | | | | | | | | | | | | | |
| |
| Current | | | 203 | | | | 168 | | | | 832 | | | | 568 | |
| Deferred | | | 192 | | | | 132 | | | | 270 | | | | 284 | |
| |
| Total income tax expense | | | 395 | | | | 300 | | | | 1,102 | | | | 852 | |
| |
Net earnings | | | 744 | | | | 517 | | | | 1,960 | | | | 1,513 | |
| Preferred stock dividends | | | 2 | | | | 2 | | | | 7 | | | | 7 | |
| |
Net earnings applicable to common stockholders | | | 742 | | | | 515 | | | | 1,953 | | | | 1,506 | |
| |
Net earnings per weighted average common shares outstanding | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.66 | | | $ | 1.06 | | | $ | 4.22 | | | $ | 3.13 | |
| Diluted | | $ | 1.63 | | | $ | 1.03 | | | $ | 4.15 | | | $ | 3.04 | |
| Basic weighted average shares outstanding | | | 446 | | | | 485 | | | | 463 | | | | 482 | |
| Diluted weighted average shares outstanding | | | 454 | | | | 500 | | | | 471 | | | | 498 | |
8
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| (in millions) | | September 30, | | December 31, |
| | | 2005 | | 2004 |
| | | | | | | (Audited) |
| |
Assets | | | | | | | | |
| |
| Current assets | | | | | | | | |
| |
| Cash and cash equivalents | | $ | 1,095 | | | $ | 1,152 | |
| Short-term investments | | | 791 | | | | 967 | |
| Accounts receivable | | | 1,516 | | | | 1,320 | |
| Fair value of derivative financial instruments | | | — | | | | 1 | |
| Deferred income taxes | | | 180 | | | | 289 | |
| Other current assets | | | 177 | | | | 143 | |
| |
| Total current assets | | | 3,759 | | | | 3,872 | |
| |
| Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,207 and $3,187 excluded from amortization in 2005 and 2004, respectively | | | 33,313 | | | | 32,114 | |
| Less accumulated depreciation, depletion and amortization | | | 14,591 | | | | 12,768 | |
| |
| Net property and equipment | | | 18,722 | | | | 19,346 | |
| |
| Investment in Chevron Corporation common stock, at fair value | | | 918 | | | | 745 | |
| Fair value of derivative financial instruments | | | — | | | | 8 | |
| Goodwill | | | 5,729 | | | | 5,637 | |
| Other assets | | | 395 | | | | 417 | |
| |
Total Assets | | $ | 29,523 | | | $ | 30,025 | |
| |
Liabilities and Stockholders’ Equity | | | | | | | | |
| |
| Current liabilities | | | | | | | | |
| |
| Accounts payable: | | | | | | | | |
| Trade | | $ | 970 | | | $ | 715 | |
| Revenues and royalties due to others | | | 519 | | | | 487 | |
| Income taxes payable | | | 108 | | | | 223 | |
| Current portion of long-term debt | | | 900 | | | | 933 | |
| Accrued interest payable | | | 94 | | | | 139 | |
| Fair value of derivative financial instruments | | | 271 | | | | 399 | |
| Current portion of asset retirement obligation | | | 56 | | | | 46 | |
| Accrued expenses and other current liabilities | | | 160 | | | | 158 | |
| |
| Total current liabilities | | | 3,078 | | | | 3,100 | |
| |
| Debentures exchangeable into shares of Chevron Corporation common stock | | | 705 | | | | 692 | |
| Other long-term debt | | | 5,252 | | | | 6,339 | |
| Fair value of derivative financial instruments | | | 191 | | | | 72 | |
| Asset retirement obligation, long-term | | | 617 | | | | 693 | |
| Other liabilities | | | 363 | | | | 366 | |
| Deferred income taxes | | | 5,373 | | | | 5,089 | |
| |
| Stockholders’ equity | | | | | | | | |
| |
| Preferred stock | | | 1 | | | | 1 | |
| Common stock | | | 45 | | | | 48 | |
| Additional paid-in capital | | | 7,645 | | | | 9,087 | |
| Retained earnings | | | 5,543 | | | | 3,693 | |
| Accumulated other comprehensive income | | | 1,343 | | | | 930 | |
| Deferred compensation and other | | | (66 | ) | | | (85 | ) |
| Treasury stock | | | (567 | ) | | | — | |
| |
Stockholders’ Equity | | | 13,944 | | | | 13,674 | |
| |
Total Liabilities & Stockholders’ Equity | | $ | 29,523 | | | $ | 30,025 | |
| |
Common Shares Outstanding | | | 444 | | | | 484 | |
| |
9
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | |
| (in millions) | | Nine Months Ended September 30, |
| | | 2005 | | 2004 |
| |
Cash Flows From Operating Activities | | | | | | | | |
| |
| Net earnings | | $ | 1,960 | | | $ | 1,513 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities | | | | | | | | |
| Depreciation, depletion and amortization | | | 1,647 | | | | 1,696 | |
| Accretion of asset retirement obligation | | | 35 | | | | 32 | |
| Amortization of premiums on long-term debt, net | | | (2 | ) | | | (4 | ) |
| Effects of changes in foreign currency exchange rates | | | (4 | ) | | | (6 | ) |
| Non-cash change in fair value of derivative financial instruments | | | 156 | | | | 54 | |
| Deferred income tax expense | | | 270 | | | | 284 | |
| Net gain on sales of non-oil and gas properties | | | (145 | ) | | | (4 | ) |
| Other | | | 39 | | | | 45 | |
| |
| | | | 3,956 | | | | 3,610 | |
| | | | | | | | | |
| Changes in assets and liabilities: | | | | | | | | |
| (Increase) decrease in: | | | | | | | | |
| Accounts receivable | | | (164 | ) | | | (142 | ) |
| Other current assets | | | (33 | ) | | | (22 | ) |
| Long-term other assets | | | 28 | | | | — | |
| Increase (decrease) in: | | | | | | | | |
| Accounts payable | | | 133 | | | | 176 | |
| Income taxes payable | | | (116 | ) | | | 212 | |
| Accrued interest and expenses | | | (53 | ) | | | (129 | ) |
| Long-term debt, including current maturities | | | (67 | ) | | | 12 | |
| Long-term other liabilities | | | (32 | ) | | | (25 | ) |
| |
Net cash provided by operating activities | | | 3,652 | | | | 3,692 | |
| |
| | | | | | | | | |
| |
Cash Flows From Investing Activities | | | | | | | | |
| |
| Proceeds from sales of property and equipment | | | 2,150 | | | | 20 | |
| Capital expenditures | | | (2,923 | ) | | | (2,402 | ) |
| Purchases of short-term investments | | | (3,501 | ) | | | (2,442 | ) |
| Sales of short-term investments | | | 3,677 | | | | 2,192 | |
| |
Net cash used in investing activities | | | (597 | ) | | | (2,632 | ) |
| |
| | | | | | | | | |
| |
Cash Flows From Financing Activities | | | | | | | | |
| |
| Principal payments on long-term debt | | | (1,023 | ) | | | (972 | ) |
| Issuance of common stock, net of issuance costs | | | 117 | | | | 220 | |
| Repurchase of common stock | | | (2,129 | ) | | | — | |
| Dividends paid on common stock | | | (103 | ) | | | (73 | ) |
| Dividends paid on preferred stock | | | (7 | ) | | | (7 | ) |
| |
Net cash used in financing activities | | | (3,145 | ) | | | (832 | ) |
| |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 33 | | | | 10 | |
| Net (decrease) increase in cash and cash equivalents | | | (57 | ) | | | 238 | |
| Cash and cash equivalents at beginning of period | | | 1,152 | | | | 932 | |
| |
| Cash and cash equivalents at end of period | | $ | 1,095 | | | $ | 1,170 | |
| |
10
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
DRILLING ACTIVITY
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2005 | | 2004 | | 2005 | | 2004 |
| |
Exploration Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 14 | | | | 8 | | | | 35 | | | | 18 | |
| Canada | | | 33 | | | | 23 | | | | 185 | | | | 154 | |
| International | | | 1 | | | | 1 | | | | 8 | | | | 3 | |
| |
| Total | | | 48 | | | | 32 | | | | 228 | | | | 175 | |
| |
Exploration Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 64 | % | | | 38 | % | | | 71 | % | | | 39 | % |
| Canada | | | 79 | % | | | 91 | % | | | 91 | % | | | 92 | % |
| International | | | — | | | | — | | | | 38 | % | | | 33 | % |
| |
| Total | | | 73 | % | | | 75 | % | | | 86 | % | | | 85 | % |
| |
Development Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 321 | | | | 312 | | | | 918 | | | | 820 | |
| Canada | | | 277 | | | | 138 | | | | 659 | | | | 472 | |
| International | | | 13 | | | | 21 | | | | 32 | | | | 57 | |
| |
| Total | | | 611 | | | | 471 | | | | 1,609 | | | | 1,349 | |
| |
Development Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 100 | % | | | 98 | % | | | 99 | % | | | 98 | % |
| Canada | | | 100 | % | | | 98 | % | | | 99 | % | | | 95 | % |
| International | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| |
| Total | | | 100 | % | | | 98 | % | | | 99 | % | | | 97 | % |
| |
Total Wells Drilled | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 335 | | | | 320 | | | | 953 | | | | 838 | |
| Canada | | | 310 | | | | 161 | | | | 844 | | | | 626 | |
| International | | | 14 | | | | 22 | | | | 40 | | | | 60 | |
| |
| Total | | | 659 | | | | 503 | | | | 1,837 | | | | 1,524 | |
| |
Total Wells Success Rate | | | | | | | | | | | | | | | | |
| |
| U.S. | | | 98 | % | | | 97 | % | | | 98 | % | | | 97 | % |
| Canada | | | 97 | % | | | 97 | % | | | 97 | % | | | 94 | % |
| International | | | 93 | % | | | 95 | % | | | 88 | % | | | 97 | % |
| |
| Total | | | 98 | % | | | 97 | % | | | 97 | % | | | 96 | % |
| |
COMPANY OPERATED RIGS
| | | | | | | | | |
| | | September 30, |
| | | 2005 | | 2004 |
| |
Number of Company Operated Rigs Running | | | | | | | | |
| |
| U.S. | | | 52 | | | | 49 | |
| Canada | | | 19 | | | | 16 | |
| International | | | 2 | | | | 4 | |
| |
| Total | | | 73 | | | | 69 | |
| |
CAPITAL EXPENDITURES DATA
| | | | | | | | | |
| | | Quarter Ended | | | Nine Months Ended | |
| (in millions) | | September 30, 2005 | | | September 30, 2005 | |
| |
Capital Expenditures | | | | | | | | |
| |
| U.S. Onshore | | $ | 393 | | | $ | 1,089 | |
| U.S. Offshore | | | 76 | | | | 295 | |
| | | | | | | |
| Total U.S. | | | 469 | | | | 1,384 | |
| Canada | | | 389 | | | | 1,326 | |
| International | | | 55 | | | | 106 | |
| Marketing & midstream | | | 38 | | | | 72 | |
| Capitalized general & administrative costs | | | 44 | | | | 135 | |
| Capitalized interest costs | | | 16 | | | | 51 | |
| Other | | | 10 | | | | 32 | |
| |
| Total | | $ | 1,021 | | | $ | 3,106 | |
| |
11
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
| | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | Nine Months Ended |
| (in millions) | | September 30, | | September 30, |
| | | 2005 | | 2004 | | 2005 | | 2004 |
| |
Net Cash Provided By Operating Activities (GAAP) | | $ | 1,267 | | | $ | 1,332 | | | $ | 3,652 | | | $ | 3,692 | |
| |
| Changes in assets and liabilities, net of effects of acquisitions of businesses | | | 336 | | | | (65 | ) | | | 304 | | | | (82 | ) |
| |
| Cash flow before balance sheet changes (Non-GAAP) | | $ | 1,603 | | | $ | 1,267 | | | $ | 3,956 | | | $ | 3,610 | |
| |
Devon believes that using net debt, defined as debt less cash and the market value of Chevron common stock, for the calculation of “net debt to adjusted capitalization” provides a better measure than using debt. Devon believes that because cash can be used to repay indebtedness, netting cash against debt provides a clearer picture of the future demands on cash to repay debt. Included in Devon’s indebtedness are $705 million of debentures exchangeable into 14.2 million shares of Chevron common stock owned outright by Devon. As of September 30, 2005, the market value of the shares ($918 million) exceeded the related debt obligation of $705 million. Since the value of Chevron common stock held by Devon is higher than the debt obligation, Devon believes deducting the market value of the stock provides a clearer picture of future demands on cash to repay debt. This methodology is also utilized by various lenders, rating agencies and securities analysts as a measure of Devon’s indebtedness.
RECONCILIATION TO GAAP INFORMATION
| | | | | | | | | |
| | | |
| (in millions) | | September 30, |
| | | 2005 | | 2004 |
| |
| Total debt (GAAP) | | $ | 6,857 | | | | 7,955 | |
| Adjustments: | | | | | | | | |
| Cash and short-term investments | | | (1,886 | ) | | | (1,761 | ) |
| Market value of Chevron Corporation common stock | | | (918 | ) | | | (761 | ) |
| |
| Net Debt (Non-GAAP) | | $ | 4,053 | | | | 5,433 | |
| |
| | | | | | | | | |
| |
Total Capitalization | | | | | | | | |
| |
| Total debt | | $ | 6,857 | | | | 7,955 | |
| Stockholders’ equity | | | 13,944 | | | | 12,655 | |
| |
| Total Capitalization (GAAP) | | $ | 20,801 | | | | 20,610 | |
| |
| | | | | | | | | |
| |
Adjusted Capitalization | | | | | | | | |
| |
| Net debt | | $ | 4,053 | | | | 5,433 | |
| Stockholders’ equity | | | 13,944 | | | | 12,655 | |
| |
| Adjusted Capitalization (Non-GAAP) | | $ | 17,997 | | | | 18,088 | |
| |
12
