EXHIBIT 99.1
| | |
| | Devon Energy Corporation |
| | 20 North Broadway |
| | Oklahoma City, OK 73102-8260 |
News Release
| | | | |
Investor Contact | | Zack Hager | | 405 552 4526 |
Media Contact | | Chip Minty | | 405 228 8647 |
DEVON ENERGY INCREASED FIRST-QUARTER 2008 NET EARNINGS 15 PERCENT; GROWTH IN OIL AND GAS PRODUCTION FUELS RECORD CASH FLOW OF $2.6 BILLION
OKLAHOMA CITY – May 7, 2008– Devon Energy Corporation (NYSE:DVN) today reported net earnings for the quarter ended March 31, 2008, of $749 million, or $1.68 per common share ($1.66 per diluted common share). This is a 15 percent increase compared with Devon’s first-quarter 2007 net earnings of $651 million, or $1.46 per common share ($1.44 per diluted common share).
Earnings $2.74 per Share Excluding Items Not Estimated by Analysts
First-quarter 2008 reported net earnings of $749 million were impacted by certain items securities analysts typically exclude from their published estimates. Excluding these items, Devon earned $1.2 billion or $2.74 per diluted share. By far the most significant of these items was a non-cash, unrealized loss on oil and natural gas derivative instruments of $780 million pre-tax ($500 million after tax).
Increased Production Drives 52 Percent Sales Growth
Combined oil, gas and natural gas liquids production from continuing operations averaged 640 thousand oil-equivalent barrels (Boe) per day in the first quarter of 2008. This was a nine percent increase in production from continuing operations compared with the first quarter of 2007. The production growth was concentrated in onshore fields within the United States and Canada. Devon has increased oil and natural gas production from retained properties for eight consecutive quarters.
Sales of oil, gas and natural gas liquids increased 52 percent to $3.2 billion in the first quarter of 2008. The combined effects of increased oil and gas production and higher oil, gas and natural gas liquids prices led to the increase in sales.
Barnett Shale Production Growth Leads Operating Highlights
Devon drilled 646 wells in the first quarter of 2008, with an overall success rate of 97 percent. Following are highlights of operations conducted in the first quarter of 2008:
• | | Devon’s net production from the Barnett Shale field in north Texas averaged a record 995 million cubic feet of gas equivalent per day in the first quarter of 2008. This was 36 percent greater than its production in the first quarter of 2007. During April, the company’s net Barnett Shale production surpassed one billion cubic feet of gas equivalent per day. This milestone event occurred approximately 21 months ahead of Devon’s original target date. |
• | | In east Texas in the Groesbeck area, the company initiated production on three significant horizontal natural gas wells in the first quarter. Initial daily production from the three horizontal wells averaged more than 19 million cubic feet of gas equivalent per well. Devon has 100 percent working interests in two of the wells and 93 percent in the third. |
• | | In the Gulf of Mexico, Devon continued appraisal and development operations on its four significant discoveries in the deepwater Lower Tertiary trend: Cascade, St. Malo, Jack and Kaskida. The company conducted drilling operations on the St. Malo No. 3 and No. 4 wells in the quarter. It also commenced drilling the Jack No. 3 appraisal well. At Cascade, the company is moving forward with development plans and will begin drilling the first of two producing wells later in 2008. |
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• | | In April, Devon increased its interest in the Kaskida unit by exercising a preferential right. Devon now has a 26.67 percent working interest in the 51,800-acre Kaskida unit. Kaskida, discovered in 2006, is believed to be the largest of the company’s four Lower Tertiary discoveries. |
• | | In Canada, Devon established significant production from its Jackfish oil sands project in Alberta during the first quarter of 2008. First-quarter exit-rate production reached 10,000 barrels per day. Production from the 100 percent-owned Jackfish project is expected to ramp up throughout 2008. A peak rate of 35,000 barrels of oil per day is expected in early 2009. |
• | | Also in Canada, Devon continued an active drilling program in the company’s Lloydminster oil play, drilling 121 new wells in the first quarter. The company’s production in Lloydminster has increased by 30 percent over the past 12 months to nearly 42,000 Boe per day. |
African Divestitures Total $3 Billion
In 2006 and 2007, Devon announced it would divest its assets in Africa and terminate its African operations. In April 2008, Devon announced an agreement to sell its operations in Equatorial Guinea for $2.2 billion. To date, the company has announced sales agreements for its assets in six African countries with aggregate divestiture proceeds of more than $3 billion, before taxes. Devon expects to complete all of the announced transactions around mid-2008.
In accordance with accounting standards, Devon has classified the assets, liabilities and results of its operations in Africa as discontinued operations for all accounting periods presented in this release. Included with this release is a table of revenues, expenses and production categories and amounts reclassified as discontinued operations for each period presented.
Marketing and Midstream Profit Climbs 59 Percent
Marketing and midstream operating profit was $173 million in the quarter ended March 31, 2008, compared with $109 million in the same period in 2007. The 59 percent increase was largely attributable to higher natural gas and natural gas liquids prices.
Rising Expenses Reflect Higher Production and Activity Levels
Lease operating expenses (LOE) in the first quarter of 2008 increased to $506 million. On a unit of production basis, first-quarter 2008 LOE was $8.69 per Boe, or seven percent higher than the first quarter of 2007. The increase in unit LOE in the 2008 quarter reflects higher Canadian exchange rates, higher transportation costs and generally higher expenditures for oilfield services and supplies.
Depreciation, depletion and amortization (DD&A) of oil and gas properties increased to $737 million in the first quarter of 2008. Unit DD&A increased 14 percent to $12.64 per Boe.
As expected, first-quarter general and administrative expenses (G&A) increased to $148 million. Higher employee-related costs were the largest contributor to the quarterly increase in G&A. Devon has increased the size of its workforce to support expanding levels of large-scale exploration and development projects.
Interest expense for the first quarter of 2008 decreased to $102 million. This is seven percent less than first-quarter 2007 interest expense of $110 million.
Cash Flow at Record Level; Balance Sheet Strengthened
First-quarter cash flow before balance sheet changes reached a record $2.6 billion in 2008. This was a 74 percent increase compared with the first quarter of 2007. The company funded $2.0 billion of capital expenditures in the first quarter of 2008 and paid common and preferred dividends totaling $73 million. This resulted in free cash flow of nearly $600 million in the quarter. Cash on hand at March 31, 2008, increased to approximately $1.9 billion. A reconciliation of cash flow before balance sheet changes and free cash flow is provided later in this release.
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Accounting for Derivative Instruments
Devon accounts for derivative instruments using mark-to-market accounting. As a result, Devon recognizes in earnings for each reporting period the unrealized changes in the fair values of its derivative instruments. A first-quarter unrealized loss on derivative instruments was the result of rising natural gas prices during the quarter. The company could record unrealized gains or losses on oil and natural gas derivative instruments in subsequent quarters dependent upon the direction of commodity prices.
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 2008 were as follows:
• | | A change in fair value of non-oil and gas derivative financial instruments decreased first-quarter earnings by $16 million pre-tax ($10 million after tax). |
• | | An unrealized loss on oil and natural gas derivative financial instruments decreased first-quarter earnings by $780 million pre-tax ($500 million after tax). |
• | | A reduction in Canadian statutory income tax rates increased first-quarter after-tax earnings by $7 million. |
• | | The decisions to exit Africa generated financial benefits that increased first-quarter earnings by $34 million pre-tax ($17 million after tax). |
The following tables summarize the effects of these items on first-quarter earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts — First Quarter 2008
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 non-oil and gas derivative instruments | | $ | (16 | ) | | | — | | | | (6 | ) | | | (6 | ) | | | (10 | ) | | | — | |
Unrealized loss on oil and gas derivative financial instruments | | | (780 | ) | | | — | | | | (280 | ) | | | (280 | ) | | | (500 | ) | | | — | |
Change in Canadian income tax | | | — | | | | — | | | | (7 | ) | | | (7 | ) | | | 7 | | | | | |
Financial benefits of decision to exit Africa | | | 34 | | | | — | | | | 17 | | | | 17 | | | | 17 | | | | — | |
|
Totals | | $ | (762 | ) | | | — | | | | (276 | ) | | | (276 | ) | | | (486 | ) | | | — | |
|
In aggregate, these items decreased first-quarter 2008 net earnings by $486 million, or $1.09 per common share ($1.08 per diluted share).
Conference Call to be Webcast Today
Devon will discuss its first-quarter 2008 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.
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 beeconomically 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 our Form 10-K, File No. 001-32318, available from us at Devon Energy Corporation,
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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
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties)
Excludes discontinued operations
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Total Period Production | | | | | | | | |
|
Natural Gas (Bcf) | | | | | | | | |
U.S. Onshore | | | 152.6 | | | | 127.6 | |
U.S. Offshore | | | 18.3 | | | | 18.6 | |
| | | | | | | | |
Total U.S. | | | 170.9 | | | | 146.2 | |
Canada | | | 51.6 | | | | 55.4 | |
International | | | 0.5 | | | | 0.3 | |
|
Total Natural Gas | | | 223.0 | | | | 201.9 | |
|
Oil (MMBbls) | | | | | | | | |
U.S. Onshore | | | 2.8 | | | | 2.8 | |
U.S. Offshore | | | 1.8 | | | | 1.7 | |
| | | | | | | | |
Total U.S. | | | 4.6 | | | | 4.5 | |
Canada | | | 4.7 | | | | 3.5 | |
International | | | 4.9 | | | | 5.3 | |
|
Total Oil | | | 14.2 | | | | 13.3 | |
|
Natural Gas Liquids (MMBbls) | | | | | | | | |
U.S. Onshore | | | 5.8 | | | | 4.8 | |
U.S. Offshore | | | 0.2 | | | | 0.1 | |
| | | | | | | | |
Total U.S. | | | 6.0 | | | | 4.9 | |
Canada | | | 1.0 | | | | 1.1 | |
International | | | — | | | | — | |
|
Total Natural Gas Liquids | | | 7.0 | | | | 6.0 | |
|
Oil Equivalent (MMBoe) | | | | | | | | |
U.S. Onshore | | | 34.0 | | | | 28.9 | |
U.S. Offshore | | | 5.0 | | | | 4.9 | |
| | | | | | | | |
Total U.S. | | | 39.0 | | | | 33.8 | |
Canada | | | 14.3 | | | | 13.8 | |
International | | | 5.0 | | | | 5.3 | |
|
Total Oil Equivalent | | | 58.3 | | | | 52.9 | |
|
Average Daily Production | | | | | | | | |
|
Natural Gas (MMcf) | | | | | | | | |
U.S. Onshore | | | 1,676.4 | | | | 1,418.5 | |
U.S. Offshore | | | 201.2 | | | | 206.4 | |
| | | | | | | | |
Total U.S. | | | 1,877.6 | | | | 1,624.9 | |
Canada | | | 567.4 | | | | 615.0 | |
International | | | 6.0 | | | | 3.0 | |
|
Total Natural Gas | | | 2,451.0 | | | | 2,242.9 | |
|
Oil (MBbls) | | | | | | | | |
U.S. Onshore | | | 30.9 | | | | 30.7 | |
U.S. Offshore | | | 19.9 | | | | 19.1 | |
| | | | | | | | |
Total U.S. | | | 50.8 | | | | 49.8 | |
Canada | | | 51.4 | | | | 39.0 | |
International | | | 53.4 | | | | 58.6 | |
|
Total Oil | | | 155.6 | | | | 147.4 | |
|
Natural Gas Liquids (MBbls) | | | | | | | | |
U.S. Onshore | | | 63.4 | | | | 53.2 | |
U.S. Offshore | | | 1.9 | | | | 1.4 | |
| | | | | | | | |
Total U.S. | | | 65.3 | | | | 54.6 | |
Canada | | | 10.9 | | | | 12.3 | |
International | | | — | | | | — | |
|
Total Natural Gas Liquids | | | 76.2 | | | | 66.9 | |
|
Oil Equivalent (MBoe) | | | | | | | | |
U.S. Onshore | | | 373.7 | | | | 320.3 | |
U.S. Offshore | | | 55.3 | | | | 54.9 | |
| | | | | | | | |
Total U.S. | | | 429.0 | | | | 375.2 | |
Canada | | | 156.9 | | | | 153.8 | |
International | | | 54.4 | | | | 59.2 | |
|
Total Oil Equivalent | | | 640.3 | | | | 588.2 | |
|
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
BENCHMARK PRICES
(average prices)
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Natural Gas ($/Mcf) – Henry Hub | | $ | 8.03 | | | $ | 6.77 | |
Oil ($/Bbl) – West Texas Intermediate (Cushing) | | $ | 97.67 | | | $ | 58.33 | |
|
REALIZED PRICES
(Excludes the effects of unrealized gains (losses) from hedging)
Quarter Ended March 31, 2008
| | | | | | | | | | | | | | | | |
| | Oil | | Gas | | NGLs | | Total |
| | (Per Bbl) | | (Per Mcf) | | (Per Bbl) | | (Per Boe) |
|
U.S. Onshore | | $ | 93.61 | | | $ | 7.05 | | | $ | 44.72 | | | $ | 46.97 | |
U.S. Offshore | | $ | 98.95 | | | $ | 8.78 | | | $ | 49.65 | | | $ | 69.23 | |
Total U.S. | | $ | 95.70 | | | $ | 7.24 | | | $ | 44.86 | | | $ | 49.84 | |
Canada | | $ | 72.68 | | | $ | 7.53 | | | $ | 62.67 | | | $ | 55.42 | |
International | | $ | 96.08 | | | $ | 8.41 | | | $ | — | | | $ | 95.24 | |
|
Realized price without hedges | | $ | 88.23 | | | $ | 7.31 | | | $ | 47.40 | | | $ | 55.07 | |
Cash settlements | | $ | — | | | $ | (0.04 | ) | | $ | — | | | $ | (0.14 | ) |
|
Realized price, including cash settlements | | $ | 88.23 | | | $ | 7.27 | | | $ | 47.40 | | | $ | 54.93 | |
|
Quarter Ended March 31, 2007
| | | | | | | | | | | | | | | | |
| | Oil | | Gas | | NGLs | | Total |
| | (Per Bbl) | | (Per Mcf) | | (Per Bbl) | | (Per Boe) |
|
U.S. Onshore | | $ | 51.04 | | | $ | 5.92 | | | $ | 27.54 | | | $ | 35.69 | |
U.S. Offshore | | $ | 54.13 | | | $ | 7.19 | | | $ | 29.51 | | | $ | 46.60 | |
Total U.S. | | $ | 52.22 | | | $ | 6.08 | | | $ | 27.59 | | | $ | 37.29 | |
Canada | | $ | 43.51 | | | $ | 6.43 | | | $ | 37.03 | | | $ | 39.71 | |
International | | $ | 57.72 | | | $ | 3.21 | | | $ | — | | | $ | 57.40 | |
|
Realized price without hedges | | $ | 52.11 | | | $ | 6.17 | | | $ | 29.33 | | | $ | 39.94 | |
Cash settlements | | $ | — | | | $ | 0.06 | | | $ | — | | | $ | 0.22 | |
|
Realized price, including cash settlements | | $ | 52.11 | | | $ | 6.23 | | | $ | 29.33 | | | $ | 40.16 | |
|
CAPITAL EXPENDITURES (in millions)
Quarter Ended March 31, 2008
| | | | | | | | | | | | | | | | | | | | |
| | U.S. Onshore | | U.S. Offshore | | Canada | | International | | Total |
|
Capital Expenditures | | | | | | | | | | | | | | | | | | | | |
|
Exploration | | $ | 53 | | | | 145 | | | | 131 | | | | 71 | | | $ | 400 | |
Development | | | 865 | | | | 88 | | | | 332 | | | | 59 | | | | 1,344 | |
|
Exploration and development capital | | $ | 918 | | | | 233 | | | | 463 | | | | 130 | | | $ | 1,744 | |
Capitalized G&A | | | | | | | | | | | | | | | | | | | 99 | |
Capitalized interest | | | | | | | | | | | | | | | | | | | 20 | |
Discontinued operations | | | | | | | | | | | | | | | | | | | 14 | |
Midstream capital | | | | | | | | | | | | | | | | | | | 99 | |
Other capital | | | | | | | | | | | | | | | | | | | 16 | |
|
Total Capital Expenditures | | | | | | | | | | | | | | | | | | $ | 1,992 | |
|
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except peer share amounts)
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Revenus | | | | | | | | |
|
Oil sales | | $ | 1,250 | | | $ | 691 | |
Gas sales | | | 1,630 | | | | 1,246 | |
NGL sales | | | 328 | | | | 177 | |
Net loss on oil and gas derivative financial instruments | | | (788 | ) | | | (20 | ) |
Marketing and midstream revenues | | | 555 | | | | 379 | |
|
Total revenues | | | 2,975 | | | | 2,473 | |
|
Expenses and other income, net | | | | | | | | |
|
Lease operating expenses | | | 506 | | | | 430 | |
Production taxes | | | 134 | | | | 80 | |
Marketing and midstream operating costs and expenses | | | 382 | | | | 270 | |
Depreciation, depletion and amortization of oil and gas properties | | | 737 | | | | 587 | |
Depreciation and amortization of non-oil and gas properties | | | 57 | | | | 46 | |
Accretion of asset retirement obligation | | | 22 | | | | 18 | |
General and administrative expenses | | | 148 | | | | 119 | |
Interest expense | | | 102 | | | | 110 | |
Change in fair value of non-oil and gas derivative financial instruments | | | 16 | | | | 1 | |
Other income, net | | | (21 | ) | | | (26 | ) |
|
Total expenses and other income, net | | | 2,083 | | | | 1,635 | |
|
Earnings from continuing operations before income tax expense | | | 892 | | | | 838 | |
|
Income tax expense | | | | | | | | |
|
Current | | | 103 | | | | 189 | |
Deferred | | | 138 | | | | 75 | |
|
Total income tax expense | | | 241 | | | | 264 | |
|
Earnings from continuing operations | | | 651 | | | | 574 | |
|
Discontinued operations | | | | | | | | |
|
Earnings from discontinued operations before income tax expense | | | 189 | | | | 137 | |
Income tax expense | | | 91 | | | | 60 | |
|
Earnings from discontined operations | | | 98 | | | | 77 | |
|
Net earnings | | | 749 | | | | 651 | |
Preferred stock dividends | | | 2 | | | | 2 | |
|
Net earnings applicable to common stockholders | | $ | 747 | | | $ | 649 | |
|
| | | | | | | | |
Basic net earnings per share | | | | | | | | |
Earnings from continuing operations | | $ | 1.46 | | | $ | 1.29 | |
Earnings from discontinued operations | | | 0.22 | | | | 0.17 | |
|
Net earnings | | $ | 1.68 | | | $ | 1.46 | |
|
| | | | | | | | |
Diluted net earnings per share | | | | | | | | |
Earnings from continuing operations | | $ | 1.44 | | | $ | 1.27 | |
Earnings from discontinued operations | | | 0.22 | | | | 0.17 | |
|
Net earnings | | $ | 1.66 | | | $ | 1.44 | |
|
| | | | | | | | |
Weighted average common shares outstanding | | | | | | | | |
Basic | | | 445 | | | | 444 | |
Diluted | | | 449 | | | | 450 | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions)
| | | | | | | | |
| | March 31, | | | December 31, | |
| | 2008 | | | 2007 | |
|
| | | | | | (Audited) | |
|
Assets | | | | | | | | |
|
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 1,875 | | | $ | 1,364 | |
Short-term investments, at fair value | | | 23 | | | | 372 | |
Accounts receivable | | | 2,090 | | | | 1,779 | |
Deferred income taxes | | | 325 | | | | 44 | |
Current assets held for sale | | | 112 | | | | 120 | |
Other current assets | | | 232 | | | | 235 | |
|
Total current assets | | | 4,657 | | | | 3,914 | |
|
Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,492 and $3,417 excluded from amortization in 2008 and 2007, respectively) | | | 49,816 | | | | 48,473 | |
Less accumulated depreciation, depletion and amortization | | | 20,883 | | | | 20,394 | |
|
Net property and equipment | | | 28,933 | | | | 28,079 | |
|
Investment in Chevron Corporation common stock, at fair value | | | 1,211 | | | | 1,324 | |
Goodwill | | | 6,054 | | | | 6,172 | |
Long-term assets held for sale | | | 1,531 | | | | 1,512 | |
Other long-term assets | | | 599 | | | | 455 | |
|
Total Assets | | $ | 42,985 | | | $ | 41,456 | |
|
Liabilities and Stockholders’ Equity | | | | | | | | |
|
Current liabilities | | | | | | | | |
|
Accounts payable — trade | | $ | 1,440 | | | $ | 1,360 | |
Revenues and royalties due to others | | | 695 | | | | 578 | |
Short-term debt | | | 1,446 | | | | 1,004 | |
Derivative financial instruments, at fair value | | | 775 | | | | — | |
Current portion of asset retirement obligation, at fair value | | | 68 | | | | 82 | |
Current liabilities associated with assets held for sale | | | 173 | | | | 145 | |
Accrued expenses and other current liabilities | | | 398 | | | | 488 | |
|
Total current liabilities | | | 4,995 | | | | 3,657 | |
|
Debentures exchangeable into shares of Chevron Corporation common stock | | | 620 | | | | 641 | |
Other long-term debt | | | 5,751 | | | | 6,283 | |
Derivative financial instruments, at fair value | | | 376 | | | | 488 | |
Asset retirement obligation, at fair value | | | 1,377 | | | | 1,236 | |
Long-term liabilities associated with assets held for sale | | | 428 | | | | 404 | |
Other long-term liabilities | | | 701 | | | | 699 | |
Deferred income taxes | | | 6,339 | | | | 6,042 | |
|
Stockholders’ equity | | | | | | | | |
|
Preferred stock | | | 1 | | | | 1 | |
Common stock | | | 45 | | | | 44 | |
Additional paid-in capital | | | 6,820 | | | | 6,743 | |
Retained earnings | | | 13,489 | | | | 12,813 | |
Accumulated other comprehensive income | | | 2,043 | | | | 2,405 | |
|
Total Stockholders’ Equity | | | 22,398 | | | | 22,006 | |
|
Total Liabilities and Stockholders’ Equity | | $ | 42,985 | | | $ | 41,456 | |
|
Common Shares Outstanding | | | 446 | | | | 444 | |
|
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | |
| | Quarter Ended March 31, |
| | 2008 | | 2007 |
|
Cash Flows From Operating Activities | | | | | | | | |
|
Net earnings | | $ | 749 | | | $ | 651 | |
Earnings from discontinued operations, net of tax | | | (98 | ) | | | (77 | ) |
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities: | | | | | | | | |
Depreciation, depletion and amortization | | | 794 | | | | 633 | |
Deferred income tax expense | | | 138 | | | | 75 | |
Net unrealized loss on oil and gas derivative financial instruments | | | 780 | | | | 32 | |
Other noncash charges | | | 74 | | | | 43 | |
Changes in assets and liabilities: | | | | | | | | |
Increase in: | | | | | | | | |
Accounts receivable | | | (328 | ) | | | (29 | ) |
Other current assets | | | (39 | ) | | | (10 | ) |
Long-term other assets | | | (11 | ) | | | (25 | ) |
Increase (decrease) in: | | | | | | | | |
Accounts payable | | | 38 | | | | 66 | |
Revenues and royalties due to others | | | 119 | | | | (46 | ) |
Other current liabilities | | | (167 | ) | | | 89 | |
Long-term other liabilities | | | 21 | | | | (2 | ) |
|
Cash provided by operating activities — continuing operations | | | 2,070 | | | | 1,400 | |
Cash provided by operating activities — discontinued operations | | | 185 | | | | 117 | |
|
Net cash provided by operating activities | | | 2,255 | | | | 1,517 | |
|
| | | | | | | | |
Cash Flows From Investing Activities | | | | | | | | |
|
Proceeds from sales of property and equipment | | | 105 | | | | 25 | |
Capital expenditures | | | (1,862 | ) | | | (1,484 | ) |
Purchases of short-term investments | | | (50 | ) | | | (424 | ) |
Sales of short-term investments | | | 270 | | | | 723 | |
|
Cash used in investing activities — continuing operations | | | (1,537 | ) | | | (1,160 | ) |
Cash used in investing activities — discontinued operations | | | (24 | ) | | | (53 | ) |
|
Net cash used in investing activities | | | (1,561 | ) | | | (1,213 | ) |
|
| | | | | | | | |
Cash Flows From Financing Activities | | | | | | | | |
|
Credit facility repayments | | | (1,450 | ) | | | — | |
Credit facility borrowings | | | 920 | | | | — | |
Net commercial paper borrowings (repayments) | | | 442 | | | | (348 | ) |
Principal payments on debt | | | (41 | ) | | | — | |
Proceeds from stock options exercises | | | 74 | | | | 23 | |
Repurchases of common stock | | | (64 | ) | | | — | |
Dividends paid on common and preferred stock | | | (73 | ) | | | (64 | ) |
Excess tax benefits related to share-based compensation | | | 27 | | | | 5 | |
|
Net cash used in financing activities | | | (165 | ) | | | (384 | ) |
|
| | | | | | | | |
Effect of exchange rate changes on cash | | | (19 | ) | | | 2 | |
|
Net increase (decrease) in cash and cash equivalents | | | 510 | | | | (78 | ) |
Cash and cash equivalents at beginning of period (including assets held for sale) | | | 1,373 | | | | 756 | |
|
Cash and cash equivalents at end of period (including assets held for sale) | | $ | 1,883 | | | $ | 678 | |
|
| | | | | | | | |
Supplementary cash flow data: | | | | | | | | |
Interest paid (net of capitalized interest) | | $ | 136 | | | $ | 138 | |
Income taxes paid (received) — continuing and discontinued operations | | $ | 83 | | | $ | (24 | ) |
Page 9 of 12
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
DRILLING ACTIVITY
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Exploration Wells Drilled | | | | | | | | |
|
U.S. | | | 9 | | | | 22 | |
Canada | | | 51 | | | | 55 | |
International | | | 6 | | | | 1 | |
|
Total | | | 66 | | | | 78 | |
|
Exploration Wells Success Rate | | | | | | | | |
|
U.S. | | | 56 | % | | | 77 | % |
Canada | | | 96 | % | | | 100 | % |
International | | | 0 | % | | | 0 | % |
|
Total | | | 82 | % | | | 92 | % |
|
Development Wells Drilled | | | | | | | | |
|
U.S. | | | 372 | | | | 264 | |
Canada | | | 198 | | | | 252 | |
International | | | 10 | | | | 3 | |
|
Total | | | 580 | | | | 519 | |
|
Development Wells Success Rate | | | | | | | | |
|
U.S. | | | 98 | % | | | 98 | % |
Canada | | | 100 | % | | | 100 | % |
International | | | 90 | % | | | 100 | % |
|
Total | | | 99 | % | | | 99 | % |
|
Total Wells Drilled | | | | | | | | |
|
U.S. | | | 381 | | | | 286 | |
Canada | | | 249 | | | | 307 | |
International | | | 16 | | | | 4 | |
|
Total | | | 646 | | | | 597 | |
|
Total Wells Success Rate | | | | | | | | |
|
U.S. | | | 97 | % | | | 97 | % |
Canada | | | 99 | % | | | 100 | % |
International | | | 56 | % | | | 75 | % |
|
Total | | | 97 | % | | | 98 | % |
|
COMPANY OPERATED RIGS
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Number of Company Operated Rigs Running | | | | | | | | |
|
U.S. | | | 72 | | | | 65 | |
Canada | | | 2 | | | | 5 | |
International | | | 2 | | | | — | |
|
Total | | | 76 | | | | 70 | |
|
Page 10 of 12
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION FROM DISCONTINUED OPERATIONS
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Total Period Production | | | | | | | | |
|
Oil (MMBbls) | | | 2.1 | | | | 3.1 | |
Natural Gas (Bcf) | | | 1.1 | | | | 1.4 | |
|
Total Oil Equivalent (MMBoe) | | | 2.3 | | | | 3.3 | |
|
STATEMENTS OF DISCONTINUED OPERATIONS
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
(in millions) | | 2008 | | 2007 |
|
Revenues | | | | | | | | |
|
Oil sales | | $ | 196 | | | $ | 170 | |
Gas sales | | | 4 | | | | 4 | |
Marketing and midstream revenues | | | 5 | | | | 1 | |
|
Total revenues | | | 205 | | | | 175 | |
|
Expenses and other income, net | | | | | | | | |
|
Lease operating expenses | | | 14 | | | | 20 | |
Marketing and midstream operating costs and expenses | | | 1 | | | | 1 | |
Depreciation, depletion and amortization of oil and gas properties | | | — | | | | 16 | |
Accretion of asset retirement obligation | | | 1 | | | | 1 | |
|
Total expenses and other income, net | | | 16 | | | | 38 | |
|
Earnings before income tax expense | | | 189 | | | | 137 | |
|
Income tax expense | | | | | | | | |
|
Current | | | 67 | | | | 44 | |
Deferred | | | 24 | | | | 16 | |
|
Total income tax expense | | | 91 | | | | 60 | |
|
Earnings from discontinued operations | | $ | 98 | | | $ | 77 | |
|
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 and free cash flow are Non-GAAP financial measures. 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. Devon believes free cash flow is relevant because it is a measure of cash available to service debt. Cash flow before balance sheet changes and free cash flow are also used by certain securities analysts as a measure of Devon’s financial results.
RECONCILIATION TO GAAP INFORMATION
(in millions)
| | | | | | | | |
| | Quarter Ended |
| | March 31, |
| | 2008 | | 2007 |
|
Net Cash Provided By Operating Activities (GAAP) | | $ | 2,255 | | | $ | 1,517 | |
|
Changes in assets and liabilities — continuing operations | | | 367 | | | | (43 | ) |
Changes in assets and liabilities — discontinued operations | | | (63 | ) | | | (6 | ) |
|
Cash flow before balance sheet changes (Non-GAAP) | | $ | 2,559 | | | $ | 1,468 | |
|
Less: | | | | | | | | |
Capital expenditures | | | 1,992 | | | | 1,578 | |
|
Free cash flow (Non-GAAP) | | $ | 567 | | | $ | (110 | ) |
|
Page 12 of 12