EXHIBIT 99.1
| | | | | |
| | | 20 North Broadway | | Telephone: (405) 235-3611
|
| | | Oklahoma City, Oklahoma 73102-8260 | | Fax: (405) 552-4667 |
| Investor contact: | | Zack Hager |
| | | (405) 552-4526 |
| |
| Media contact: | | Brian Engel |
| | | (405) 228-7750 |
DEVON ENERGY EARNS $651 MILLION IN FIRST QUARTER 2007; INCREASES OIL AND GAS PRODUCTION 12 PERCENT
OKLAHOMA CITY — May 2, 2007— Devon Energy Corporation (NYSE:DVN) today reported net earnings of $651 million, or $1.46 per common share, ($1.44 per diluted common share), for the quarter ended March 31, 2007. In the first quarter of 2006, Devon earned $700 million, or $1.58 per common share ($1.56 per diluted common share).
The company’s reported net earnings increased 12 percent compared with the fourth quarter of 2006. Fourth-quarter 2006 net earnings were $582 million, or $1.31 per common share ($1.29 per diluted common share).
Securities analysts typically exclude certain items from their published estimates. In aggregate, these items were offsetting and had no effect upon Devon’s first-quarter 2007 net earnings. The adjusting items are discussed in detail later in this news release.
12 Percent Production Growth Underpinned by Operational Milestones
Oil and gas production from continuing operations increased 12 percent in the first quarter of 2007 to 52.9 million oil-equivalent barrels (Boe). This was Devon’s fourth consecutive quarter of production increases from retained properties. The steady growth in production reflects the strength of the company’s underlying property base. Further production growth in the remaining quarters of 2007 and in 2008 will be fueled by growth in all the company’s geographic regions.
Devon drilled 585 successful wells in the first quarter of 2007. This represents an overall success rate of 98 percent. Following are highlights of operations conducted in the first quarter of 2007.
| • | | Devon’s net production in the Barnett Shale field in north Texas averaged a record 730 million cubic feet of gas equivalent per day in the first quarter of 2007. This was a 28 percent increase compared with first-quarter 2006 average production and a six percent increase compared with the fourth quarter of 2006. |
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| • | | The company drilled its 700th operated horizontal well in the Barnett Shale in the first quarter of 2007. Devon plans to drill more than 385 wells in the Barnett in 2007, and more than 90 percent of the planned wells will be horizontals. |
| • | | In the Gulf of Mexico, subsea preparations continued at the Merganser field. Devon expects to produce about 50 million cubic feet of gas per day from Merganser when the deepwater Independence Hub becomes operational in the third quarter of this year. |
| • | | Offshore Brazil, the Polvo platform was readied for drilling and commissioning. Devon expects to commence oil production at Polvo in the next few months. |
| • | | In Azerbaijan, Devon achieved its first full quarter of increased production following payout of its carried interest in the ACG field. Devon’s net production from ACG averaged more than 35,000 barrels of oil per day in the quarter. |
Increased Production Boosts Revenues
Combined oil, gas and natural gas liquids production from continuing operations averaged 588 thousand Boe per day in the quarter ended March 31, 2007. This was a 12 percent increase in production from continuing operations over the first quarter of 2006. The production growth was largely driven by the United States onshore and Azerbaijan.
Combined daily production from continuing operations climbed two percent in the first quarter 2007 over the fourth quarter of 2006. Devon expects to produce 219 to 221 million Boe from continuing operations in the full year of 2007, representing a 10 percent increase over 2006.
Sales of oil, natural gas and natural gas liquids increased three percent to $2.1 billion in the first quarter of 2007 compared with the same quarter in 2006. The 12 percent increase in daily oil and gas production more than offset lower realized natural gas and natural gas liquids prices.
Devon’s first-quarter 2007 average realized price for natural gas decreased 15 percent to $6.07 per thousand cubic feet compared with $7.16 per thousand cubic feet in the first quarter of 2006. The company’s average realized oil price increased one percent to $52.11 per barrel in the first quarter of 2007 compared with $51.70 per barrel in the year-ago period. The realized natural gas liquids price decreased three percent to $29.33 per barrel from $30.18 per barrel in the first quarter of 2006.
Marketing and midstream operating profit was $109 million in the quarter ended March 31, 2007, compared with $120 million in the comparable period in 2006. The quarterly decrease was primarily due to lower natural gas prices and lower third-party throughput volumes.
Rising Expenses Reflect Rising Production
Lease operating expenses (LOE) in the first quarter of 2007 increased to $430 million. On a unit of production basis, first-quarter 2007 LOE was $8.13 per Boe, or 16 percent higher than in the first quarter of 2006. The increase in unit LOE in the 2007 quarter reflects higher oil transportation costs, casualty insurance premiums, increased workover activity and generally higher industry prices for oilfield services and supplies. The increase in oil transportation costs is largely related to higher production volumes in Azerbaijan.
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Depreciation, depletion and amortization (DD&A) of oil and gas properties increased 32 percent to $587 million in the first quarter of 2007. Unit DD&A increased 18 percent to $11.09 per Boe.
First-quarter general and administrative expenses (G&A) increased 33 percent to $119 million in 2007 compared with 2006. Higher employee-related costs were the largest contributor to the quarterly increase in G&A. Devon has increased the size of its technical workforce in response to expanding levels of exploration and development activity and opportunities.
Interest expense for the first quarter of 2007 increased nine percent to $110 million. The increase reflects higher commercial paper balances offset in part by an increase in capitalized interest and lower long-term debt balances.
African Divestitures Progressing; Reported as Discontinued Operations
In the fourth quarter of 2006, Devon announced its intention to divest its assets and terminate operations in Egypt. In April 2007, Devon entered into an agreement to sell its Egyptian assets for $375 million. The sale is expected to close in the third quarter of 2007.
In the first quarter of 2007, the company announced its intentions to divest its remaining assets in Africa and terminate African operations. Data rooms are now open in Houston and London for divestiture of the West African assets, and bids are expected in the third quarter.
In accordance with accounting standards, Devon has reclassified the assets, liabilities and results of its operations in Egypt and West Africa as discontinued operations for all accounting periods presented in this release. Although revenues and expenses for prior periods were reclassified, there was no impact upon previously reported net earnings. Included with the financial information that follows is a table of revenues, expenses and production categories and the amounts reclassified as discontinued operations for each period presented.
Balance Sheet Remains Strong
Cash flow before balance sheet changes totaled $1.5 billion in the first quarter of 2007. The company used cash flow and cash on hand to fund $1.3 billion of exploration and development expenditures and $300 million of other capital expenditures during the quarter.
Devon also repaid $348 million of commercial paper during the first quarter of 2007 utilizing cash and short term investments. The company’s net debt to adjusted capitalization was approximately 23 percent at March 31, 2007. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, 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 of the company’s financial results. These items and their effects upon reported earnings for the first quarter of 2007 were as follows:
| • | | A change in fair value of financial instruments decreased first-quarter earnings by $1 million pre-tax (no effect after tax). |
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| • | | An unrealized loss on natural gas derivative instruments decreased first-quarter 2007 earnings by $32 million pre-tax ($21 million after tax). |
| • | | The decisions to exit Egypt and West Africa generated financial benefits that increased first-quarter 2007 earnings by $40 million pre-tax ($21 million after tax). |
The following table summarizes the effects of these items on first-quarter 2007 earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts — First Quarter 2007
(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 | | $ | (1 | ) | | | — | | | | (1 | ) | | | (1 | ) | | | — | | | | — | |
| Unrealized loss on natural gas derivatives | | | (32 | ) | | | — | | | | (11 | ) | | | (11 | ) | | | (21 | ) | | | — | |
| Financial benefits generated by decision to exit Africa | | | 40 | | | | — | | | | 19 | | | | 19 | | | | 21 | | | | — | |
| |
| Totals | | $ | 7 | | | | — | | | | 7 | | | | 7 | | | | — | | | | — | |
| |
In aggregate, these items had no effect on first-quarter 2007 net earnings.
Conference Call to be Webcast Today
Devon will discuss its first-quarter 2007 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, 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 and production. Devon is one of the world’s leading independent oil and gas producers 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
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| PRODUCTION DATA(net of royalties) | | Quarter Ended |
| All periods exclude discontinued operations from Egypt and West Africa | | March 31, |
| | | 2007 | | 2006 |
| |
Total Period Production | | | | | | | | |
| |
| Natural Gas (Bcf) | | | | | | | | |
| U.S. Onshore | | | 127.6 | | | | 113.5 | |
| U.S. Offshore | | | 18.6 | | | | 16.5 | |
| | | | | | | | | |
| Total U.S. | | | 146.2 | | | | 130.0 | |
| Canada | | | 55.4 | | | | 59.1 | |
| International | | | 0.3 | | | | 0.6 | |
| |
| Total Natural Gas | | | 201.9 | | | | 189.7 | |
| |
| Oil (MMBbls) | | | | | | | | |
| U.S. Onshore | | | 2.8 | | | | 2.8 | |
| U.S. Offshore | | | 1.7 | | | | 2.2 | |
| | | | | | | | | |
| Total U.S. | | | 4.5 | | | | 5.0 | |
| Canada | | | 3.5 | | | | 3.2 | |
| International | | | 5.3 | | | | 1.6 | |
| |
| Total Oil | | | 13.3 | | | | 9.8 | |
| |
| Natural Gas Liquids (MMBbls) | | | | | | | | |
| U.S. Onshore | | | 4.8 | | | | 4.5 | |
| U.S. Offshore | | | 0.1 | | | | 0.1 | |
| | | | | | | | | |
| Total U.S. | | | 4.9 | | | | 4.6 | |
| Canada | | | 1.1 | | | | 1.2 | |
| International | | | — | | | | — | |
| |
| Total Natural Gas Liquids | | | 6.0 | | | | 5.8 | |
| |
| Oil Equivalent (MMBoe) | | | | | | | | |
| U.S. Onshore | | | 28.9 | | | | 26.2 | |
| U.S. Offshore | | | 4.9 | | | | 5.1 | |
| | | | | | | | | |
| Total U.S. | | | 33.8 | | | | 31.3 | |
| Canada | | | 13.8 | | | | 14.3 | |
| International | | | 5.3 | | | | 1.7 | |
| |
| Total Oil Equivalent | | | 52.9 | | | | 47.3 | |
| |
Average Daily Production | | | | | | | | |
| |
| Natural Gas (MMcf) | | | | | | | | |
| U.S. Onshore | | | 1,418.5 | | | | 1,261.2 | |
| U.S. Offshore | | | 206.4 | | | | 182.9 | |
| | | | | | | | | |
| Total U.S. | | | 1,624.9 | | | | 1,444.1 | |
| Canada | | | 615.0 | | | | 656.3 | |
| International | | | 3.0 | | | | 7.0 | |
| |
| Total Natural Gas | | | 2,242.9 | | | | 2,107.4 | |
| |
| Oil (MBbls) | | | | | | | | |
| U.S. Onshore | | | 30.7 | | | | 31.2 | |
| U.S. Offshore | | | 19.1 | | | | 24.3 | |
| | | | | | | | | |
| Total U.S. | | | 49.8 | | | | 55.5 | |
| Canada | | | 39.0 | | | | 35.7 | |
| International | | | 58.6 | | | | 17.9 | |
| |
| Total Oil | | | 147.4 | | | | 109.1 | |
| |
| Natural Gas Liquids (MBbls) | | | | | | | | |
| U.S. Onshore | | | 53.2 | | | | 49.8 | |
| U.S. Offshore | | | 1.4 | | | | 1.4 | |
| | | | | | | | | |
| Total U.S. | | | 54.6 | | | | 51.2 | |
| Canada | | | 12.3 | | | | 13.6 | |
| International | | | — | | | | — | |
| |
| Total Natural Gas Liquids | | | 66.9 | | | | 64.8 | |
| |
| Oil Equivalent (MBoe) | | | | | | | | |
| U.S. Onshore | | | 320.3 | | | | 291.2 | |
| U.S. Offshore | | | 54.9 | | | | 56.3 | |
| | | | | | | | | |
| Total U.S. | | | 375.2 | | | | 347.5 | |
| Canada | | | 153.8 | | | | 158.6 | |
| International | | | 59.2 | | | | 19.1 | |
| |
| Total Oil Equivalent | | | 588.2 | | | | 525.2 | |
| |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| REALIZED PRICE DATA | | Quarter Ended |
| (average realized prices) | | March 31, |
| | | 2007 | | 2006 |
| |
Realized Prices | | | | | | | | |
| |
| Natural Gas ($/Mcf) | | | | | | | | |
| U.S. Onshore | | $ | 5.76 | | | $ | 6.89 | |
| U.S. Offshore | | $ | 7.19 | | | $ | 8.26 | |
| Total U.S. | | $ | 5.94 | | | $ | 7.07 | |
| Canada | | $ | 6.43 | | | $ | 7.37 | |
| International | | $ | 3.21 | | | $ | 6.07 | |
| |
| Total Natural Gas | | $ | 6.07 | | | $ | 7.16 | |
| |
| Oil ($/Bbl) | | | | | | | | |
| U.S. Onshore | | $ | 51.04 | | | $ | 57.58 | |
| U.S. Offshore | | $ | 54.13 | | | $ | 60.13 | |
| Total U.S. | | $ | 52.22 | | | $ | 58.70 | |
| Canada | | $ | 43.51 | | | $ | 38.14 | |
| International | | $ | 57.72 | | | $ | 56.95 | |
| |
| Total Oil | | $ | 52.11 | | | $ | 51.70 | |
| |
| Natural Gas Liquids ($/Bbl) | | | | | | | | |
| U.S. Onshore | | $ | 27.54 | | | $ | 26.61 | |
| U.S. Offshore | | $ | 29.51 | | | $ | 36.65 | |
| Total U.S. | | $ | 27.59 | | | $ | 26.89 | |
| Canada | | $ | 37.03 | | | $ | 42.56 | |
| International | | $ | — | | | $ | — | |
| |
| Total Natural Gas Liquids | | $ | 29.33 | | | $ | 30.18 | |
| |
| Oil Equivalent ($/Boe) | | | | | | | | |
| U.S. Onshore | | $ | 34.98 | | | $ | 40.58 | |
| U.S. Offshore | | $ | 46.60 | | | $ | 53.81 | |
| Total U.S. | | $ | 36.68 | | | $ | 42.72 | |
| Canada | | $ | 39.71 | | | $ | 42.73 | |
| International | | $ | 57.40 | | | $ | 55.69 | |
| |
| Total Oil Equivalent | | $ | 39.56 | | | $ | 43.20 | |
| |
| | | | | | | | | |
| BENCHMARK PRICES | | Quarter Ended |
| (average prices) | | March 31, |
| | | 2007 | | 2006 |
| |
Benchmark Prices | | | | | | | | |
| |
| Natural Gas ($/Mcf) — Henry Hub | | $ | 6.77 | | | $ | 9.01 | |
| Oil ($/Bbl) — West Texas Intermediate (Cushing) | | $ | 58.33 | | | $ | 63.41 | |
| |
| | | | | | | | | |
| PRICE DIFFERENTIALS, EXCLUDING EFFECTS OF HEDGES | | Quarter Ended |
| (average floating price differentials from benchmark prices) | | March 31, |
| | | 2007 | | 2006 |
| |
Price Differentials | | | | | | | | |
| |
| Natural Gas ($/Mcf) | | | | | | | | |
| U.S. Onshore | | $ | (0.85 | ) | | $ | (2.12 | ) |
| U.S. Offshore | | $ | 0.42 | | | $ | (0.75 | ) |
| Total U.S. | | $ | (0.69 | ) | | $ | (1.94 | ) |
| Canada | | $ | (0.12 | ) | | $ | (1.38 | ) |
| International | | $ | (3.56 | ) | | $ | (2.94 | ) |
| |
| Total Natural Gas | | $ | (0.54 | ) | | $ | (1.78 | ) |
| |
| Oil ($/Bbl) | | | | | | | | |
| U.S. Onshore | | $ | (7.29 | ) | | $ | (5.83 | ) |
| U.S. Offshore | | $ | (4.20 | ) | | $ | (3.28 | ) |
| Total U.S. | | $ | (6.11 | ) | | $ | (4.71 | ) |
| Canada | | $ | (14.82 | ) | | $ | (25.27 | ) |
| International | | $ | (0.61 | ) | | $ | (6.46 | ) |
| |
| Total Oil | | $ | (6.22 | ) | | $ | (11.71 | ) |
| |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | Quarter Ended |
| (in millions, except per share data) | | March 31, |
| | | 2007 | | 2006 |
| |
Revenues | | | | | | | | |
| |
| Oil sales | | $ | 691 | | | | 508 | |
| Gas sales | | | 1,226 | | | | 1,358 | |
| Natural gas liquids sales | | | 177 | | | | 176 | |
| Marketing & midstream revenues | | | 379 | | | | 458 | |
| |
| Total revenues | | | 2,473 | | | | 2,500 | |
| |
| |
Expenses and other income, net | | | | | | | | |
| |
| Lease operating expenses | | | 430 | | | | 331 | |
| Production taxes | | | 80 | | | | 83 | |
| Marketing & midstream operating costs and expenses | | | 270 | | | | 338 | |
| Depreciation, depletion and amortization of oil and gas properties | | | 587 | | | | 443 | |
| Depreciation and amortization of non-oil and gas properties | | | 46 | | | | 41 | |
| Accretion of asset retirement obligation | | | 18 | | | | 10 | |
| General & administrative expenses | | | 119 | | | | 90 | |
| Interest expense | | | 110 | | | | 101 | |
| Change in fair value of financial instruments | | | 1 | | | | 12 | |
| Other income, net | | | (26 | ) | | | (29 | ) |
| |
| Total expenses and other income, net | | | 1,635 | | | | 1,420 | |
| |
Earnings from continuing operations before income tax expense | | | 838 | | | | 1,080 | |
| |
| |
Income tax expense | | | | | | | | |
| |
| Current | | | 189 | | | | 224 | |
| Deferred | | | 75 | | | | 140 | |
| |
| Total income tax expense | | | 264 | | | | 364 | |
| |
Earnings from continuing operations | | | 574 | | | | 716 | |
| |
| |
Discontinued operations | | | | | | | | |
| |
| Earnings from discontinued operations before income tax expense | | | 137 | | | | 47 | |
| Income tax expense | | | 60 | | | | 63 | |
| |
Earnings (loss) from discontinuing operations | | | 77 | | | | (16 | ) |
| |
| |
Net earnings | | | 651 | | | | 700 | |
| Preferred stock dividends | | | 2 | | | | 2 | |
| |
Net earnings applicable to common stockholders | | $ | 649 | | | $ | 698 | |
| |
| |
Net earnings per weighted average common share outstanding | | | | | | | | |
| Basic | | $ | 1.46 | | | | 1.58 | |
| Diluted | | $ | 1.44 | | | | 1.56 | |
| Basic weighted average shares outstanding | | | 444 | | | | 442 | |
| Diluted weighted average shares outstanding | | | 450 | | | | 449 | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | | | |
(in millions)
| | March 31,
2007 | | December 31,
2006 |
| |
| | | | | (Audited) |
| |
Assets | | | | | | | | |
| |
| Current assets | | | | | | | | |
| |
| Cash and cash equivalents | | $ | 615 | | | $ | 692 | |
| Short-term investments | | | 275 | | | | 574 | |
| Accounts receivable | | | 1,361 | | | | 1,324 | |
| Deferred income taxes | | | 66 | | | | 102 | |
| Current assets held for sale | | | 252 | | | | 232 | |
| Other current assets | | | 167 | | | | 288 | |
| |
| Total current assets | | | 2,736 | | | | 3,212 | |
| |
| Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,276 and $3,293 excluded from amortization in 2007 and 2006, respectively) | | | 41,536 | | | | 39,585 | |
| Less accumulated depreciation, depletion and amortization | | | 17,128 | | | | 16,429 | |
| |
| Net property and equipment | | | 24,408 | | | | 23,156 | |
| |
| Investment in Chevron Corporation common stock, at fair value | | | 1,049 | | | | 1,043 | |
| Goodwill | | | 5,741 | | | | 5,706 | |
| Assets held for sale | | | 1,680 | | | | 1,619 | |
| Other assets | | | 364 | | | | 327 | |
| |
Total Assets | | $ | 35,978 | | | $ | 35,063 | |
| |
Liabilities and Stockholders’ Equity | | | | | | | | |
| |
| Current liabilities | | | | | | | | |
| |
| Accounts payable — trade | | $ | 1,236 | | | $ | 1,154 | |
| Revenues and royalties due to others | | | 476 | | | | 522 | |
| Income taxes payable | | | 192 | | | | 82 | |
| Short-term debt | | | 1,857 | | | | 2,205 | |
| Accrued interest payable | | | 81 | | | | 114 | |
| Current portion of asset retirement obligation | | | 55 | | | | 53 | |
| Current liabilities associated with assets held for sale | | | 222 | | | | 173 | |
| Accrued expenses and other current liabilities | | | 321 | | | | 342 | |
| |
| Total current liabilities | | | 4,440 | | | | 4,645 | |
| |
| Debentures exchangeable into shares of Chevron Corporation common stock | | | 732 | | | | 727 | |
| Other long-term debt | | | 4,839 | | | | 4,841 | |
| Fair value of financial instruments | | | 309 | | | | 302 | |
| Asset retirement obligation | | | 1,152 | | | | 804 | |
| Liabilities associated with assets held for sale | | | 450 | | | | 429 | |
| Other liabilities | | | 630 | | | | 583 | |
| Deferred income taxes | | | 5,270 | | | | 5,290 | |
| |
| Stockholders’ equity | | | | | | | | |
| |
| Preferred stock | | | 1 | | | | 1 | |
| Common stock | | | 44 | | | | 44 | |
| Additional paid-in capital | | | 6,897 | | | | 6,840 | |
| Retained earnings | | | 10,055 | | | | 9,114 | |
| Accumulated other comprehensive income | | | 1,159 | | | | 1,444 | |
| Treasury stock | | | — | | | | (1 | ) |
| |
Stockholders’ Equity | | | 18,156 | | | | 17,442 | |
| |
Total Liabilities & Stockholders’ Equity | | $ | 35,978 | | | $ | 35,063 | |
| |
Common Shares Outstanding | | | 445 | | | | 444 | |
| |
Page 8 of 12
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | | |
| (in millions) | | Quarter Ended March 31, |
| | | 2007 | | 2006 |
| |
Cash Flows From Operating Activities | | | | | | | | |
| |
| Net earnings | | $ | 651 | | | $ | 700 | |
| (Earnings) loss from discontinued operations, net of tax | | | (77 | ) | | | 16 | |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities: | | | | | | | | |
| Depreciation, depletion and amortization | | | 633 | | | | 484 | |
| Deferred income tax expense | | | 75 | | | | 140 | |
| Net gain on sales of non-oil and gas property and equipment | | | — | | | | (5 | ) |
| Other non-cash charges | | | 75 | | | | 39 | |
| Changes in assets and liabilities: | | | | | | | | |
| (Increase) decrease in: | | | | | | | | |
| Accounts receivable | | | (29 | ) | | | 241 | |
| Other current assets | | | (10 | ) | | | (10 | ) |
| Long-term other assets | | | (25 | ) | | | 4 | |
| Increase (decrease) in: | | | | | | | | |
| Accounts payable | | | 20 | | | | (162 | ) |
| Income taxes payable | | | 207 | | | | 80 | |
| Other current liabilities | | | (118 | ) | | | (160 | ) |
| Long-term other liabilities | | | (2 | ) | | | (6 | ) |
| |
| Cash provided by operating activities — continuing operations | | | 1,400 | | | | 1,361 | |
| Cash provided by operating activities — discontinued operations | | | 117 | | | | 161 | |
| |
Net cash provided by operating activities | | | 1,517 | | | | 1,522 | |
| |
| | | | | | | | | |
Cash Flows From Investing Activities | | | | | | | | |
| |
| Proceeds from sales of property and equipment | | | 25 | | | | 19 | |
| Capital expenditures | | | (1,484 | ) | | | (1,249 | ) |
| Purchases of short-term investments | | | (424 | ) | | | (495 | ) |
| Sales of short-term investments | | | 723 | | | | 441 | |
| |
| Cash used in investing activities — continuing operations | | | (1,160 | ) | | | (1,284 | ) |
| Cash used in investing activities — discontinued operations | | | (53 | ) | | | (68 | ) |
| |
Net cash used in investing activities | | | (1,213 | ) | | | (1,352 | ) |
| |
| | | | | | | | | |
Cash Flows From Financing Activities | | | | | | | | |
| |
| Net commercial paper repayments, net of issuance costs | | | (348 | ) | | | — | |
| Debt repayments, including current maturities | | | — | | | | (3 | ) |
| Proceeds from stock options | | | 23 | | | | 20 | |
| Repurchases of common stock | | | — | | | | (253 | ) |
| Excess tax benefits related to share-based compensation | | | 5 | | | | 4 | |
| Dividends paid on common stock | | | (62 | ) | | | (49 | ) |
| Dividends paid on preferred stock | | | (2 | ) | | | (2 | ) |
| |
Net cash used in financing activities | | | (384 | ) | | | (283 | ) |
| |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 2 | | | | 1 | |
| Net decrease in cash and cash equivalents | | | (78 | ) | | | (112 | ) |
| Cash and cash equivalents at beginning of period (including assets held for sale) | | | 756 | | | | 1,606 | |
| |
| Cash and cash equivalents at end of period (including assets held for sale) | | $ | 678 | | | $ | 1,494 | |
| |
| | | | | | | | | |
Supplementary cash flow data: | | | | | | | | |
| Interest paid | | $ | 162 | | | $ | 159 | |
| Income taxes (received) paid | | $ | (24 | ) | | $ | 160 | |
Page 9 of 12
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| DRILLING ACTIVITY | | Quarter Ended |
| | | March 31, |
| | | 2007 | | 2006 |
| |
Exploration Wells Drilled | | | | | | | | |
| |
| U.S. | | | 22 | | | | 21 | |
| Canada | | | 55 | | | | 66 | |
| International | | | 1 | | | | — | |
| |
| Total | | | 78 | | | | 87 | |
| |
| |
Exploration Wells Success Rate | | | | | | | | |
| |
| U.S. | | | 77 | % | | | 90 | % |
| Canada | | | 100 | % | | | 98 | % |
| International | | | 0 | % | | | — | |
| |
| Total | | | 92 | % | | | 97 | % |
| |
| |
Development Wells Drilled | | | | | | | | |
| |
| U.S. | | | 264 | | | | 283 | |
| Canada | | | 252 | | | | 273 | |
| International | | | 3 | | | | 7 | |
| |
| Total | | | 519 | | | | 563 | |
| |
| |
Development Wells Success Rate | | | | | | | | |
| |
| U.S. | | | 98 | % | | | 99 | % |
| Canada | | | 100 | % | | | 100 | % |
| International | | | 100 | % | | | 100 | % |
| |
| Total | | | 99 | % | | | 99 | % |
| |
| |
Total Wells Drilled | | | | | | | | |
| |
| U.S. | | | 286 | | | | 304 | |
| Canada | | | 307 | | | | 339 | |
| International | | | 4 | | | | 7 | |
| |
| Total | | | 597 | | | | 650 | |
| |
| |
Total Wells Success Rate | | | | | | | | |
| |
| U.S. | | | 97 | % | | | 98 | % |
| Canada | | | 100 | % | | | 99 | % |
| International | | | 75 | % | | | 100 | % |
| |
| Total | | | 98 | % | | | 99 | % |
| |
| |
| | | | | | | | | |
| COMPANY OPERATED RIGS | | March 31, |
| | | 2007 | | 2006 |
| |
Number of Company Operated Rigs Running | | | | | | | | |
| |
| U.S. | | | 65 | | | | 55 | |
| Canada | | | 5 | | | | 13 | |
| International | | | — | | | | — | |
| |
| Total | | | 70 | | | | 68 | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| CAPITAL EXPENDITURES DATA(in millions) | | | | | | | | | | |
| Quarter Ended March 31, 2007 | | U.S. Onshore | | U.S. Offshore | | Canada | | International | | Devon Total |
| |
Capital Expenditures | | | | | | | | | | | | | | | | | | | | |
| |
| Exploration | | $ | 42 | | | | 70 | | | | 39 | | | | 34 | | | $ | 185 | |
| Development | | | 638 | | | | 60 | | | | 375 | | | | 59 | | | | 1,132 | |
| |
| Exploration and development capital | | $ | 680 | | | | 130 | | | | 414 | | | | 93 | | | $ | 1,317 | |
| |
| Capitalized G&A | | | | | | | | | | | | | | | | | | | 64 | |
| Capitalized interest | | | | | | | | | | | | | | | | | | | 20 | |
| Discontinued operations | | | | | | | | | | | | | | | | | | | 55 | |
| Property acquisitions | | | | | | | | | | | | | | | | | | | 3 | |
| Midstream capital | | | | | | | | | | | | | | | | | | | 99 | |
| Other capital | | | | | | | | | | | | | | | | | | | 20 | |
| |
Total capital expenditures | | | | | | | | | | | | | | | | | | $ | 1,578 | |
| |
Page 10 of 12
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
| | | | | | | | | |
| DETAIL OF RECLASSIFICATION FOR DISCONTINUED | | Quarter Ended |
| OPERATIONS IN EGYPT AND WEST AFRICA | | March 31, |
| | | 2007 | | 2006 |
| |
Production from Discontinued Operations | | | | | | | | |
| |
| Oil (MMBbls) | | | 3.1 | | | | 3.6 | |
| Natural Gas (Bcf) | | | 1.4 | | | | 1.6 | |
| |
| Total Oil Equivalent (MMBoe) | | | 3.3 | | | | 3.8 | |
| |
| | | | | | | | | |
| STATEMENTS OF DISCONTINUED OPERATIONS DATA | | Quarter Ended |
| (in millions) | | March 31, |
| | | 2007 | | 2006 |
| |
Revenues | | | | | | | | |
| |
| Oil sales | | $ | 170 | | | $ | 207 | |
| Gas sales | | | 4 | | | | 6 | |
| Marketing & midstream revenues | | | 1 | | | | 5 | |
| |
| Total revenues | | | 175 | | | | 218 | |
| |
Expenses and other income, net | | | | | | | | |
| |
| Lease operating expenses | | | 20 | | | | 19 | |
| Marketing & midstream operating costs and expenses | | | 1 | | | | 1 | |
| Depreciation, depletion and amortization of oil and gas properties | | | 16 | | | | 64 | |
| Depreciation and amortization of non-oil and gas properties | | | — | | | | 1 | |
| Accretion of asset retirement obligation | | | 1 | | | | 1 | |
| Reduction of carrying value of oil and gas properties | | | — | | | | 85 | |
| |
| Total expenses and other income, net | | | 38 | | | | 171 | |
| |
Earnings before income tax expense | | | 137 | | | | 47 | |
| |
Income tax (benefit) expense | | | | | | | | |
| |
| Current | | | 44 | | | | 79 | |
| Deferred | | | 16 | | | | (16 | ) |
| |
| Total income tax expense | | | 60 | | | | 63 | |
| |
Earnings from discontinued operations | | $ | 77 | | | $ | (16 | ) |
| |
Page 11 of 12
DEVON ENERGY CORPORATION
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 |
| (in millions) | | March 31, |
| | | 2007 | | 2006 |
| |
Net Cash Provided By Operating Activities (GAAP) | | $ | 1,517 | | | $ | 1,522 | |
| Changes in assets and liabilities — continuing operations | | | (43 | ) | | | 13 | |
| Changes in assets and liabilities — discontinued operations | | | (6 | ) | | | (43 | ) |
| |
| Cash flow before balance sheet changes (Non-GAAP) | | $ | 1,468 | | | $ | 1,492 | |
| |
Devon believes that using net debt, defined as debt less cash, short-term investments 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 and short-term investments can be used to repay indebtedness, netting cash and short-term investments against debt provides a clearer picture of the future demands on cash to repay debt. Included in Devon’s indebtedness are $732 million of debentures exchangeable into 14.2 million shares of Chevron common stock owned outright by Devon. As of March 31, 2007, the market value of the shares ($1.0 billion) exceeded the related 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) | | March 31, |
| | | 2007 | | 2006 |
| |
| Total debt (GAAP) | | $ | 7,428 | | | $ | 6,619 | |
| Adjustments: | | | | | | | | |
| Cash and short-term investments | | | (890 | ) | | | (2,128 | ) |
| Market value of Chevron Corporation common stock | | | (1,049 | ) | | | (822 | ) |
| |
| Net Debt (Non-GAAP) | | $ | 5,489 | | | $ | 3,669 | |
| |
Total Capitalization | | | | | | | | |
| |
| Total debt | | $ | 7,428 | | | $ | 6,619 | |
| Stockholders’ equity | | | 18,156 | | | | 15,302 | |
| |
| Total Capitalization (GAAP) | | $ | 25,584 | | | $ | 21,921 | |
| |
Adjusted Capitalization | | | | | | | | |
| |
| Net debt | | $ | 5,489 | | | $ | 3,669 | |
| Stockholders’ equity | | | 18,156 | | | | 15,302 | |
| |
| Adjusted Capitalization (Non-GAAP) | | $ | 23,645 | | | $ | 18,971 | |
| |
Page 12 of 12
