Exhibit 99.1
| | | | | | |
 | | | | | | Devon Energy Corporation |
| | | | 333 West Sheridan Avenue |
| | | | Oklahoma City, OK 73102-5015 |
NEWS RELEASE
Devon Energy Reports Fourth-Quarter and Full-Year 2016 Results; Provides Updated Capital and Production Outlook
OKLAHOMA CITY – Feb. 14, 2017– Devon Energy Corp. (NYSE: DVN) today reported operational and financial results for the fourth quarter and full-year 2016. Also included within the release is the company’s guidance outlook for the first quarter and full-year 2017.
Highlights
| | • | | Exceeded fourth-quarter production expectations |
| | • | | Achieved record-setting well productivity in 2016 |
| | • | | Reduced operating expenses in U.S. by 42 percent from peak rates |
| | • | | Attained $1.3 billion in annual cost savings |
| | • | | Delivered proved reserves growth at attractive finding costs |
| | • | | Improved growth outlook driven by accelerated capital investment |
“For Devon, 2016 was a transformational year,” said Dave Hager, president and CEO. “We successfully reshaped our asset portfolio to focus on our top two franchise assets, the STACK and Delaware Basin, providing us a sustainable, multi-decade growth platform. With these world-class assets, we delivered outstanding operational performance throughout the year. Our drilling programs generated the best well productivity in Devon’s 45-year history and we maximized the value of every barrel produced with cost-reduction efforts that reached $1.3 billion of annual savings.”
“We also took important steps during the year to strengthen our investment-grade financial position with the timely completion of our $3.2 billion asset divestiture program,” Hager said. “These accretive transactions provided us with the financial capacity to further accelerate investment across our best-in-class U.S. resource plays in 2017 and beyond. This increased drilling activity will continue to rapidly shift our production mix to higher-margin products, positioning us to deliver peer-leading cash flow expansion at today’s market prices.”
Fourth-Quarter Production Exceeds Midpoint Guidance
Devon’s reported oil production averaged 244,000 barrels per day in the fourth quarter of 2016. With the shift to higher-margin production, oil accounted for the largest component of the company’s product mix at 45 percent of total volumes.
Total companywide production in the fourth quarter reached 537,000 oil-equivalent barrels (Boe) per day, exceeding the midpoint of guidance by 2,000 Boe per day. In an effort to maximize profitability, Devon chose to reject approximately 12,000 barrels per day of ethane in the fourth quarter.
Record-Setting Well Productivity in U.S. Resource Plays
The majority of the company’s production was attributable to its U.S. resource plays, which averaged 396,000 Boe per day during the fourth quarter. Production within the U.S. during 2016 benefited from drilling activity that achieved the best new well productivity in Devon’s 45-year history. Led by results from the STACK, Delaware Basin and Eagle Ford assets, the company’s initial 90-day production rates in the U.S. increased for the fourth consecutive year, advancing more than 300 percent from 2012.
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The substantial improvement in well productivity was driven by activity focused in top resource plays, improved subsurface reservoir characterization, leading-edge completion designs and improvements in lateral placement.
In Canada, Devon’s heavy-oil operations also delivered impressive results with net oil production averaging 139,000 barrels per day in the fourth quarter. Driven by the industry-leading performance of the Jackfish complex, Canadian oil production increased 14 percent compared to the fourth quarter of 2015.
Reserve Report Highlights Operational Excellence
Devon’s estimated proved reserves were 2.1 billion Boe on Dec. 31, 2016, a 3 percent increase compared to the company’s retained asset portfolio in 2015. Proved developed reserves accounted for 80 percent of the total. At year-end, higher-margin, liquids reserves totaled 1.1 billion Boe, or approximately 55 percent of total reserves.
The most significant reserve growth came from the company’s U.S. operations where proved reserves increased 7 percent to 1.6 billion Boe. Devon’s capital programs within the U.S. added 275 million Boe of reserves (extensions, discoveries and performance revisions) during 2016. This represents a replacement rate of approximately 175 percent (on a retained asset basis). Excluding property acquisition costs, these reserves were added at a finding cost of only $5 per Boe added during the year. These attractive reserve results in the U.S. were driven by new-well activity that achieved record-setting productivity, a materially improved operating cost structure and successful base production initiatives.
In Canada, the company’s heavy oil reserves amounted to 504 million Boe at year end. Beyond proved reserves, tremendous upside exists with Devon’s top-tier Canadian assets, with more than 1.4 billion Boe of risked resource.
Lease Operating Costs Improve by 42 Percent in U.S. Resource Plays
Devon continued to make progress lowering operating costs in the fourth quarter. Lease operating expenses (LOE) totaled $367 million for the quarter and were 4 percent below the midpoint of guidance. The $1.1 billion sale of Access Pipeline in Canada added $28 million of incremental LOE during the quarter. The strong fourth-quarter result was driven by the company’s U.S. asset portfolio, where LOE costs improved by 42 percent from peak rates in early 2015. The decrease in LOE was primarily driven by improved power and water-handling infrastructure, reduced labor expense and lower supply chain costs.
The company also maintained its significantly improved general and administrative (G&A) cost structure in the fourth quarter. Including capitalized costs, G&A expenses totaled $224 million, a nearly 40 percent improvement compared to peak costs in late 2014. The significantly lower overhead costs were driven by lower personnel expenses.
Cost Savings Reach $1.3 Billion in 2016
In aggregate, Devon’s cost-savings initiatives achieved $1.3 billion of operating and G&A expense reductions in 2016 compared to peak levels in 2014.
The company expects these cost savings to be sustainable in 2017 due to structural improvements and efficiency gains within its field operations and corporate support groups.
EnLink Positioned to Deliver Double-Digit Growth in 2017
Devon’s midstream business generated $212 million of operating profit in the fourth quarter, driven entirely by the company’s strategic investment in EnLink Midstream. For the full-year 2016, EnLink-related operating profit expanded to $879 million, a 6 percent improvement compared to 2015.
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In 2017, with strong growth expected from EnLink, Devon projects its midstream operating profits will advance to a range of $900 million to $950 million. Based on the midpoint of guidance, this estimate represents approximately a 10 percent increase compared to 2016. EnLink’s growth is derived from an asset base that is positioned in some of the most attractive markets in North America, including the STACK, Midland Basin, Delaware Basin and an NGL business that services end-user demand along the Gulf Coast.
Devon has a 64 percent ownership in EnLink’s general partner (NYSE: ENLC) and a 24 percent interest in the limited partner (NYSE: ENLK). In aggregate, the company’s ownership in EnLink has a market value of approximately $4 billion and is expected to generate cash distributions of around $270 million annually.
Fourth-Quarter 2016 Operations Report
For additional details on Devon’s E&P operations, please refer to the company’s fourth-quarter 2016 operations report atwww.devonenergy.com. Highlights from the report include:
| | • | | Meramec drilling inventory increases by 40 percent |
| | • | | Leonard Shale and Delaware Sands resource potential expands |
| | • | | Staggered spacing tests successful in Eagle Ford |
| | • | | Jackfish complex delivers record production |
| | • | | Barnett cash flow generation accelerates |
Divestitures and Hedging Position Enhance Strong Financial Position
On Oct. 6, 2016, the company closed on the sale of its 50 percent interest in the Access Pipeline for USD $1.1 billion. This accretive transaction officially completed Devon’s $3.2 billion non-core asset divestiture program.
The majority of divestiture proceeds were utilized to retire $2.5 billion of debt through tender offerings and repayments in the second half of 2016. As a result of the debt-reduction efforts, the company expects its recurring, go-forward financing costs to decline by around $120 million annually, with no significant debt maturities until mid-2021. Devon exited the fourth quarter with investment-grade credit ratings and significant liquidity, which consisted of $2 billion of cash on hand and an undrawn credit facility of $3 billion.
In addition to an investment-grade balance sheet, Devon’s financial position is bolstered by a significantly increased commodity hedging position in 2017. The company currently has approximately 50 percent of its estimated oil and gas production hedged in the upcoming year and will continue to build out its hedging position in the future.
Earnings Beat Wall Street Consensus by 20 Percent
Devon’s reported net earnings totaled $331 million or $0.63 per diluted share in the fourth quarter. Adjusting for items securities analysts typically exclude from their published estimates, the company’s core earnings were $131 million or $0.25 per diluted share in the fourth quarter. This strong earnings result exceeded analyst consensus estimates by 20 percent.
The company’s significantly improved profitability in the fourth quarter was attributable to higher commodity prices and an improved cost structure. These factors also strengthened Devon’s operating cash flow to $536 million in the fourth quarter. Combined with proceeds received from asset sales, the company’s total cash inflows for the quarter reached $1.8 billion.
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Devon Positioned to Deliver Peer-Leading Cash Flow Expansion
Detailed forward-looking guidance for the first quarter and full-year 2017 is provided later in the release. In 2017, Devon expects to further accelerate activity in its U.S. resource plays to as many as 20 operated rigs by year end. With this level of planned activity, the company expects to invest between $2.0 billion and $2.3 billion of E&P capital in 2017, with nearly 90 percent of the capital devoted to U.S. resource plays.
Devon’s upstream capital plans are expected to drive 13 to 17 percent oil production growth in the U.S. during 2017 compared to the fourth quarter of 2016, which marks the low point of Devon’s production profile. This resumption of growth in high-margin production will begin in the first quarter of 2017. The operational momentum created by accelerated drilling activity in the STACK and Delaware Basin in the upcoming year is expected to advance light-oil production in the U.S. by approximately 20 percent in 2018 compared to 2017. This rapid growth in high-margin production, combined with a significantly improved cost structure, positions Devon to deliver peer-leading cash flow expansion at today’s market prices.
Non-GAAP Reconciliations
Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP (generally accepted accounting principles) financial measures to the related GAAP information. Finding cost, core earnings and core earnings per share referenced within the commentary of this release are non-GAAP financial measures. Reconciliations of these and other non-GAAP measures are provided within the tables of this release.
Conference Call Webcast and Supplemental Earnings Materials
Please note that as soon as practicable today, Devon will post an operations report to its website atwww.devonenergy.com. The company’s fourth-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Feb. 15, 2017, and will serve primarily as a forum for analyst and investor questions and answers.
Forward-Looking Statements
This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. 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 our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties identified in our Form 10-K and our other filings with the SEC. 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 forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
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The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential, potential locations, risked and unrisked locations, estimated ultimate recovery (or EUR), exploration target size and other similar terms. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available atwww.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website atwww.sec.gov.
About Devon Energy
Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The company is the second-largest oil producer among North American onshore independents. For more information, please visitwww.devonenergy.com.
| | |
| Investor Contacts | | Media Contact |
| Scott Coody, 405-552-4735 | | John Porretto, 405-228-7506 |
| Chris Carr, 405-228-2496 | | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION NET OF ROYALTIES
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Oil and bitumen (MBbls/d) | | | | | | | | | | | | | | | | |
U. S. - Core | | | 105 | | | | 139 | | | | 119 | | | | 142 | |
Heavy Oil | | | 139 | | | | 121 | | | | 131 | | | | 111 | |
| | | | | | | | | | | | | | | | |
Retained assets | | | 244 | | | | 260 | | | | 250 | | | | 253 | |
Divested assets | | | — | | | | 18 | | | | 10 | | | | 22 | |
| | | | | | | | | | | | | | | | |
Total | | | 244 | | | | 278 | | | | 260 | | | | 275 | |
| | | | | | | | | | | | | | | | |
Natural gas liquids (MBbls/d) | | | | | | | | | | | | | | | | |
U. S. - Core | | | 90 | | | | 115 | | | | 103 | | | | 110 | |
Divested assets | | | — | | | | 24 | | | | 13 | | | | 26 | |
| | | | | | | | | | | | | | | | |
Total | | | 90 | | | | 139 | | | | 116 | | | | 136 | |
| | | | | | | | | | | | | | | | |
Gas (MMcf/d) | | | | | | | | | | | | | | | | |
U. S. - Core | | | 1,203 | | | | 1,327 | | | | 1,270 | | | | 1,333 | |
Heavy Oil | | | 18 | | | | 24 | | | | 20 | | | | 22 | |
| | | | | | | | | | | | | | | | |
Retained assets | | | 1,221 | | | | 1,351 | | | | 1,290 | | | | 1,355 | |
Divested assets | | | — | | | | 232 | | | | 123 | | | | 255 | |
| | | | | | | | | | | | | | | | |
Total | | | 1,221 | | | | 1,583 | | | | 1,413 | | | | 1,610 | |
| | | | | | | | | | | | | | | | |
Oil equivalent (MBoe/d) | | | | | | | | | | | | | | | | |
U. S. - Core | | | 396 | | | | 475 | | | | 434 | | | | 474 | |
Heavy Oil | | | 141 | | | | 126 | | | | 134 | | | | 115 | |
| | | | | | | | | | | | | | | | |
Retained assets | | | 537 | | | | 601 | | | | 568 | | | | 589 | |
Divested assets | | | — | | | | 80 | | | | 43 | | | | 91 | |
| | | | | | | | | | | | | | | | |
Total | | | 537 | | | | 681 | | | | 611 | | | | 680 | |
| | | | | | | | | | | | | | | | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
KEY OPERATING STATISTICS BY REGION
| | | | | | | | | | | | |
| | | Quarter Ended December 31, 2016 | |
| | | Avg. Production
(MBoe/d) | | | Gross Wells
Drilled | | | Operated Rigs at
December 31,
2016 | |
STACK | | | 88 | | | | 55 | | | | 6 | |
Delaware Basin | | | 54 | | | | 15 | | | | 3 | |
Eagle Ford | | | 60 | | | | 29 | | | | — | |
Heavy Oil | | | 141 | | | | 12 | | | | 3 | |
Barnett Shale | | | 163 | | | | — | | | | — | |
Rockies Oil | | | 15 | | | | 11 | | | | 1 | |
Other assets | | | 16 | | | | 11 | | | | — | |
| | | | | | | | | | | | |
Total | | | 537 | | | | 133 | | | | 13 | |
| | | | | | | | | | | | |
| | | | | | | | |
| | | Year Ended December 31, 2016 | |
| | | Avg. Production
(MBoe/d) | | | Gross Wells
Drilled | |
STACK | | | 93 | | | | 133 | |
Delaware Basin | | | 60 | | | | 58 | |
Eagle Ford | | | 76 | | | | 63 | |
Heavy Oil | | | 134 | | | | 25 | |
Barnett Shale | | | 169 | | | | — | |
Rockies Oil | | | 19 | | | | 19 | |
Other assets | | | 17 | | | | 28 | |
| | | | | | | | |
Retained assets | | | 568 | | | | 326 | |
Divested assets | | | 43 | | | | 14 | |
| | | | | | | | |
Total | | | 611 | | | | 340 | |
| | | | | | | | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION TREND
| | | | | | | | | | | | | | | | | | | | |
| | | 2015 | | | 2016 | |
| | | Quarter 4 | | | Quarter 1 | | | Quarter 2 | | | Quarter 3 | | | Quarter 4 | |
Oil and bitumen (MBbls/d) | | | | | | | | | | | | | | | | | | | | |
STACK | | | 9 | | | | 15 | | | | 19 | | | | 21 | | | | 19 | |
Delaware Basin | | | 42 | | | | 38 | | | | 36 | | | | 31 | | | | 29 | |
Eagle Ford | | | 60 | | | | 59 | | | | 41 | | | | 33 | | | | 34 | |
Heavy Oil | | | 121 | | | | 126 | | | | 121 | | | | 137 | | | | 139 | |
Barnett Shale | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
Rockies Oil | | | 15 | | | | 17 | | | | 15 | | | | 11 | | | | 11 | |
Other assets | | | 12 | | | | 12 | | | | 11 | | | | 11 | | | | 11 | |
| | | | | | | | | | | | | | | | | | | | |
Retained assets | | | 260 | | | | 268 | | | | 244 | | | | 245 | | | | 244 | |
Divested assets | | | 18 | | | | 17 | | | | 15 | | | | 6 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 278 | | | | 285 | | | | 259 | | | | 251 | | | | 244 | |
| | | | | | | | | | | | | | | | | | | | |
Natural gas liquids (MBbls/d) | | | | | | | | | | | | | | | | | | | | |
STACK | | | 24 | | | | 30 | | | | 30 | | | | 23 | | | | 21 | |
Delaware Basin | | | 11 | | | | 12 | | | | 13 | | | | 12 | | | | 10 | |
Eagle Ford | | | 27 | | | | 24 | | | | 17 | | | | 13 | | | | 11 | |
Barnett Shale | | | 49 | | | | 46 | | | | 46 | | | | 44 | | | | 43 | |
Rockies Oil | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
Other assets | | | 3 | | | | 2 | | | | 3 | | | | 3 | | | | 4 | |
| | | | | | | | | | | | | | | | | | | | |
Retained assets | | | 115 | | | | 115 | | | | 110 | | | | 96 | | | | 90 | |
Divested assets | | | 24 | | | | 22 | | | | 21 | | | | 8 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 139 | | | | 137 | | | | 131 | | | | 104 | | | | 90 | |
| | | | | | | | | | | | | | | | | | | | |
Gas (MMcf/d) | | | | | | | | | | | | | | | | | | | | |
STACK | | | 253 | | | | 306 | | | | 289 | | | | 292 | | | | 284 | |
Delaware Basin | | | 82 | | | | 84 | | | | 99 | | | | 92 | | | | 89 | |
Eagle Ford | | | 152 | | | | 144 | | | | 103 | | | | 85 | | | | 90 | |
Heavy Oil | | | 24 | | | | 15 | | | | 28 | | | | 18 | | | | 18 | |
Barnett Shale | | | 786 | | | | 768 | | | | 757 | | | | 730 | | | | 710 | |
Rockies Oil | | | 38 | | | | 32 | | | | 31 | | | | 19 | | | | 17 | |
Other assets | | | 16 | | | | 17 | | | | 14 | | | | 13 | | | | 13 | |
| | | | | | | | | | | | | | | | | | | | |
Retained assets | | | 1,351 | | | | 1,366 | | | | 1,321 | | | | 1,249 | | | | 1,221 | |
Divested assets | | | 232 | | | | 215 | | | | 206 | | | | 75 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 1,583 | | | | 1,581 | | | | 1,527 | | | | 1,324 | | | | 1,221 | |
| | | | | | | | | | | | | | | | | | | | |
Oil equivalent (MBoe/d) | | | | | | | | | | | | | | | | | | | | |
STACK | | | 75 | | | | 96 | | | | 97 | | | | 92 | | | | 88 | |
Delaware Basin | | | 66 | | | | 63 | | | | 65 | | | | 59 | | | | 54 | |
Eagle Ford | | | 113 | | | | 107 | | | | 76 | | | | 61 | | | | 60 | |
Heavy Oil | | | 126 | | | | 129 | | | | 126 | | | | 140 | | | | 141 | |
Barnett Shale | | | 181 | | | | 175 | | | | 173 | | | | 166 | | | | 163 | |
Rockies Oil | | | 23 | | | | 23 | | | | 21 | | | | 16 | | | | 15 | |
Other assets | | | 17 | | | | 18 | | | | 16 | | | | 16 | | | | 16 | |
| | | | | | | | | | | | | | | | | | | | |
Retained assets | | | 601 | | | | 611 | | | | 574 | | | | 550 | | | | 537 | |
Divested assets | | | 80 | | | | 74 | | | | 70 | | | | 27 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 681 | | | | 685 | | | | 644 | | | | 577 | | | | 537 | |
| | | | | | | | | | | | | | | | | | | | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
BENCHMARK PRICES
(average prices)
| | | | | | | | | | | | | | | | |
| | | Quarter 4 | | | December YTD | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Oil ($/Bbl) - West Texas Intermediate (Cushing) | | $ | 49.21 | | | $ | 42.15 | | | $ | 43.36 | | | $ | 48.87 | |
Natural Gas ($/Mcf) - Henry Hub | | $ | 2.98 | | | $ | 2.27 | | | $ | 2.46 | | | $ | 2.67 | |
| |
| REALIZED PRICES | | | |
| |
| | | Quarter Ended December 31, 2016 | |
| | | Oil /Bitumen
(Per Bbl) | | | NGL
(Per Bbl) | | | Gas
(Per Mcf) | | | Total
(Per Boe) | |
United States | | $ | 46.74 | | | $ | 13.81 | | | $ | 2.37 | | | $ | 22.78 | |
Canada | | $ | 25.90 | | | | N/M | | | | N/M | | | $ | 25.39 | |
| | | | | | | | | | | | | | | | |
Realized price without hedges | | $ | 34.90 | | | $ | 13.81 | | | $ | 2.34 | | | $ | 23.47 | |
Cash settlements | | $ | — | | | $ | (0.31 | ) | | $ | (0.11 | ) | | $ | (0.30 | ) |
| | | | | | | | | | | | | | | | |
Realized price, including cash settlements | | $ | 34.90 | | | $ | 13.50 | | | $ | 2.23 | | | $ | 23.17 | |
| | | | | | | | | | | | | | | | |
| |
| | | Quarter Ended December 31, 2015 | |
| | | Oil /Bitumen
(Per Bbl) | | | NGL
(Per Bbl) | | | Gas (Per
Mcf) | | | Total
(Per Boe) | |
United States | | $ | 38.04 | | | $ | 8.81 | | | $ | 1.76 | | | $ | 17.90 | |
Canada | | $ | 18.03 | | | | N/M | | | | N/M | | | $ | 17.62 | |
| | | | | | | | | | | | | | | | |
Realized price without hedges | | $ | 29.31 | | | $ | 8.81 | | | $ | 1.75 | | | $ | 17.85 | |
Cash settlements | | $ | 24.36 | | | $ | — | | | $ | 0.70 | | | $ | 11.59 | |
| | | | | | | | | | | | | | | | |
Realized price, including cash settlements | | $ | 53.67 | | | $ | 8.81 | | | $ | 2.45 | | | $ | 29.44 | |
| | | | | | | | | | | | | | | | |
| |
| | | Year Ended December 31, 2016 | |
| | | Oil /Bitumen
(Per Bbl) | | | NGL
(Per Bbl) | | | Gas
(Per Mcf) | | | Total
(Per Boe) | |
United States | | $ | 38.92 | | | $ | 9.81 | | | $ | 1.84 | | | $ | 18.34 | |
Canada | | $ | 20.53 | | | | N/M | | | | N/M | | | $ | 20.07 | |
| | | | | | | | | | | | | | | | |
Realized price without hedges | | $ | 29.65 | | | $ | 9.81 | | | $ | 1.84 | | | $ | 18.72 | |
Cash settlements | | $ | (0.43 | ) | | $ | (0.11 | ) | | $ | 0.07 | | | $ | (0.05 | ) |
| | | | | | | | | | | | | | | | |
Realized price, including cash settlements | | $ | 29.22 | | | $ | 9.70 | | | $ | 1.91 | | | $ | 18.67 | |
| | | | | | | | | | | | | | | | |
| |
| | | Year Ended December 31, 2015 | |
| | | Oil /Bitumen
(Per Bbl) | | | NGL
(Per Bbl) | | | Gas
(Per Mcf) | | | Total
(Per Boe) | |
United States | | $ | 44.01 | | | $ | 9.32 | | | $ | 2.17 | | | $ | 21.12 | |
Canada | | $ | 25.14 | | | | N/M | | | | N/M | | | $ | 24.46 | |
| | | | | | | | | | | | | | | | |
Realized price without hedges | | $ | 36.39 | | | $ | 9.32 | | | $ | 2.14 | | | $ | 21.68 | |
Cash settlements | | $ | 20.72 | | | $ | — | | | $ | 0.57 | | | $ | 9.74 | |
| | | | | | | | | | | | | | | | |
Realized price, including cash settlements | | $ | 57.11 | | | $ | 9.32 | | | $ | 2.71 | | | $ | 31.42 | |
| | | | | | | | | | | | | | | | |
Page 9 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
December 31, | | | Year Ended
December 31, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Oil, gas and NGL sales | | $ | 1,159 | | | $ | 1,118 | | | $ | 4,182 | | | $ | 5,382 | |
Oil, gas and NGL derivatives | | | (171 | ) | | | 77 | | | | (201 | ) | | | 503 | |
Marketing and midstream revenues | | | 1,820 | | | | 1,691 | | | | 6,323 | | | | 7,260 | |
Asset dispositions and other | | | 542 | | | | — | | | | 1,893 | | | | — | |
| | | | | | | | | | | | | | | | |
Total revenues and other | | | 3,350 | | | | 2,886 | | | | 12,197 | | | | 13,145 | |
| | | | | | | | | | | | | | | | |
Lease operating expenses | | | 367 | | | | 479 | | | | 1,582 | | | | 2,104 | |
Marketing and midstream operating expenses | | | 1,608 | | | | 1,481 | | | | 5,492 | | | | 6,420 | |
General and administrative expenses | | | 163 | | | | 194 | | | | 645 | | | | 855 | |
Production and property taxes | | | 55 | | | | 73 | | | | 275 | | | | 388 | |
Depreciation, depletion and amortization | | | 372 | | | | 641 | | | | 1,792 | | | | 3,129 | |
Asset impairments | | | 124 | | | | 5,341 | | | | 4,975 | | | | 20,820 | |
Restructuring and transaction costs | | | 1 | | | | 78 | | | | 267 | | | | 78 | |
Other operating items | | | 23 | | | | 24 | | | | 64 | | | | 78 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 2,713 | | | | 8,311 | | | | 15,092 | | | | 33,872 | |
| | | | | | | | | | | | | | | | |
Operating income (loss) | | | 637 | | | | (5,425 | ) | | | (2,895 | ) | | | (20,727 | ) |
Net financing costs | | | 334 | | | | 139 | | | | 904 | | | | 517 | |
Other nonoperating items | | | (72 | ) | | | (22 | ) | | | 78 | | | | 24 | |
| | | | | | | | | | | | | | | | |
Earnings (loss) before income taxes | | | 375 | | | | (5,542 | ) | | | (3,877 | ) | | | (21,268 | ) |
Income tax expense (benefit) | | | 55 | | | | (630 | ) | | | (173 | ) | | | (6,065 | ) |
| | | | | | | | | | | | | | | | |
Net earnings (loss) | | | 320 | | | | (4,912 | ) | | | (3,704 | ) | | | (15,203 | ) |
Net earnings (loss) attributable to noncontrolling interests | | | (11 | ) | | | (380 | ) | | | (402 | ) | | | (749 | ) |
| | | | | | | | | | | | | | | | |
Net earnings (loss) attributable to Devon | | $ | 331 | | | $ | (4,532 | ) | | $ | (3,302 | ) | | $ | (14,454 | ) |
| | | | | | | | | | | | | | | | |
Net earnings (loss) per share attributable to Devon: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.63 | | | $ | (11.12 | ) | | $ | (6.52 | ) | | $ | (35.55 | ) |
Diluted | | $ | 0.63 | | | $ | (11.12 | ) | | $ | (6.52 | ) | | $ | (35.55 | ) |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 524 | | | | 413 | | | | 513 | | | | 412 | |
Diluted | | | 527 | | | | 413 | | | | 513 | | | | 412 | |
Page 10 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
December 31, | | | Year Ended
December 31, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | 320 | | | $ | (4,912 | ) | | $ | (3,704 | ) | | $ | (15,203 | ) |
Adjustments to reconcile net earnings (loss) to net cash from operating activities: | | | | | | | | | | | | | | | | |
Depreciation, depletion and amortization | | | 372 | | | | 641 | | | | 1,792 | | | | 3,129 | |
Asset impairments | | | 124 | | | | 5,341 | | | | 4,975 | | | | 20,820 | |
Gains and losses on asset sales | | | (536 | ) | | | — | | | | (1,887 | ) | | | — | |
Deferred income tax expense (benefit) | | | 27 | | | | (480 | ) | | | (273 | ) | | | (5,828 | ) |
Derivatives and other financial instruments | | | 27 | | | | (132 | ) | | | 386 | | | | (738 | ) |
Cash settlements on derivatives and financial instruments | | | (9 | ) | | | 775 | | | | (142 | ) | | | 2,688 | |
Asset retirement obligation accretion | | | 17 | | | | 19 | | | | 75 | | | | 75 | |
Amortization of stock-based compensation | | | 31 | | | | 44 | | | | 194 | | | | 181 | |
Other | | | 334 | | | | 37 | | | | 303 | | | | 281 | |
Net change in working capital | | | (189 | ) | | | (404 | ) | | | (8 | ) | | | (311 | ) |
Change in long-term other assets | | | 26 | | | | 74 | | | | 36 | | | | 285 | |
Change in long-term other liabilities | | | (8 | ) | | | 68 | | | | (1 | ) | | | (6 | ) |
| | | | | | | | | | | | | | | | |
Net cash from operating activities | | | 536 | | | | 1,071 | | | | 1,746 | | | | 5,373 | |
| | | | | | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | |
Capital expenditures | | | (671 | ) | | | (1,079 | ) | | | (2,330 | ) | | | (5,308 | ) |
Acquisitions of property, equipment and businesses | | | — | | | | (577 | ) | | | (1,641 | ) | | | (1,107 | ) |
Divestitures of property and equipment | | | 1,229 | | | | 72 | | | | 3,118 | | | | 107 | |
Other | | | (26 | ) | | | (8 | ) | | | (19 | ) | | | (16 | ) |
| | | | | | | | | | | | | | | | |
Net cash from investing activities | | | 532 | | | | (1,592 | ) | | | (872 | ) | | | (6,324 | ) |
| | | | | | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | | | | | |
Borrowings of long-term debt, net of issuance costs | | | 483 | | | | 1,444 | | | | 2,145 | | | | 4,772 | |
Repayments of long-term debt | | | (1,687 | ) | | | (861 | ) | | | (4,409 | ) | | | (2,634 | ) |
Net short-term debt repayments | | | — | | | | 625 | | | | (626 | ) | | | (307 | ) |
Early retirement of debt | | | (183 | ) | | | — | | | | (265 | ) | | | — | |
Issuance of common stock | | | — | | | | — | | | | 1,469 | | | | — | |
Sale of subsidiary units | | | — | | | | — | | | | — | | | | 654 | |
Issuance of subsidiary units | | | 57 | | | | 12 | | | | 892 | | | | 25 | |
Dividends paid on common stock | | | (31 | ) | | | (100 | ) | | | (221 | ) | | | (396 | ) |
Contributions from noncontrolling interests | | | 17 | | | | 4 | | | | 168 | | | | 16 | |
Distributions to noncontrolling interests | | | (80 | ) | | | (68 | ) | | | (304 | ) | | | (254 | ) |
Other | | | (4 | ) | | | — | | | | (13 | ) | | | (18 | ) |
| | | | | | | | | | | | | | | | |
Net cash from financing activities | | | (1,428 | ) | | | 1,056 | | | | (1,164 | ) | | | 1,858 | |
| | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash | | | (66 | ) | | | (12 | ) | | | (61 | ) | | | (77 | ) |
| | | | | | | | | | | | | | | | |
Net change in cash and cash equivalents | | | (426 | ) | | | 523 | | | | (351 | ) | | | 830 | |
Cash and cash equivalents at beginning of period | | | 2,385 | | | | 1,787 | | | | 2,310 | | | | 1,480 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,959 | | | $ | 2,310 | | | $ | 1,959 | | | $ | 2,310 | |
| | | | | | | | | | | | | | | | |
Page 11 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions)
| | | | | | | | |
| | | December 31,
2016 | | | December 31,
2015 | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,959 | | | $ | 2,310 | |
Accounts receivable | | | 1,356 | | | | 1,105 | |
Assets held for sale | | | 193 | | | | — | |
Other current assets | | | 264 | | | | 606 | |
| | | | | | | | |
Total current assets | | | 3,772 | | | | 4,021 | |
| | | | | | | | |
Property and equipment, at cost: | | | | | | | | |
Oil and gas, based on full cost accounting: | | | | | | | | |
Subject to amortization | | | 75,648 | | | | 78,190 | |
Not subject to amortization | | | 3,437 | | | | 2,584 | |
| | | | | | | | |
Total oil and gas | | | 79,085 | | | | 80,774 | |
Midstream and other | | | 10,455 | | | | 10,380 | |
| | | | | | | | |
Total property and equipment, at cost | | | 89,540 | | | | 91,154 | |
Less accumulated depreciation, depletion and amortization | | | (73,350 | ) | | | (72,086 | ) |
| | | | | | | | |
Property and equipment, net | | | 16,190 | | | | 19,068 | |
| | | | | | | | |
Goodwill | | | 3,964 | | | | 5,032 | |
Other long-term assets | | | 1,987 | | | | 1,330 | |
| | | | | | | | |
Total assets | | $ | 25,913 | | | $ | 29,451 | |
| | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 642 | | | $ | 906 | |
Revenues and royalties payable | | | 908 | | | | 763 | |
Short-term debt | | | — | | | | 976 | |
Other current liabilities | | | 1,066 | | | | 650 | |
| | | | | | | | |
Total current liabilities | | | 2,616 | | | | 3,295 | |
| | | | | | | | |
Long-term debt | | | 10,154 | | | | 12,056 | |
Asset retirement obligations | | | 1,226 | | | | 1,370 | |
Other long-term liabilities | | | 894 | | | | 853 | |
Deferred income taxes | | | 648 | | | | 888 | |
Stockholders’ equity: | | | | | | | | |
Common stock | | | 52 | | | | 42 | |
Additional paid-in capital | | | 7,237 | | | | 4,996 | |
Retained earnings (accumulated deficit) | | | (1,646 | ) | | | 1,781 | |
Accumulated other comprehensive earnings | | | 284 | | | | 230 | |
| | | | | | | | |
Total stockholders’ equity attributable to Devon | | | 5,927 | | | | 7,049 | |
Noncontrolling interests | | | 4,448 | | | | 3,940 | |
| | | | | | | | |
Total stockholders’ equity | | | 10,375 | | | | 10,989 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 25,913 | | | $ | 29,451 | |
| | | | | | | | |
Common shares outstanding | | | 523 | | | | 418 | |
Page 12 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended December 31, 2016 | |
| | | Devon U.S.
& Canada | | | EnLink | | | Eliminations | | | Total | |
Oil, gas and NGL sales | | $ | 1,159 | | | $ | — | | | $ | — | | | $ | 1,159 | |
Oil, gas and NGL derivatives | | | (171 | ) | | | — | | | | — | | | | (171 | ) |
Marketing and midstream revenues | | | 758 | | | | 1,225 | | | | (163 | ) | | | 1,820 | |
Asset dispositions and other | | | 558 | | | | (16 | ) | | | — | | | | 542 | |
| | | | | | | | | | | | | | | | |
Total revenues and other | | | 2,304 | | | | 1,209 | | | | (163 | ) | | | 3,350 | |
| | | | | | | | | | | | | | | | |
Lease operating expenses | | | 367 | | | | — | | | | — | | | | 367 | |
Marketing and midstream operating expenses | | | 769 | | | | 1,002 | | | | (163 | ) | | | 1,608 | |
General and administrative expenses | | | 133 | | | | 30 | | | | — | | | | 163 | |
Production and property taxes | | | 48 | | | | 7 | | | | — | | | | 55 | |
Depreciation, depletion and amortization | | | 241 | | | | 131 | | | | — | | | | 372 | |
Asset impairments | | | 124 | | | | — | | | | — | | | | 124 | |
Restructuring and transaction costs | | | 1 | | | | — | | | | — | | | | 1 | |
Other operating items | | | 23 | | | | — | | | | — | | | | 23 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 1,706 | | | | 1,170 | | | | (163 | ) | | | 2,713 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 598 | | | | 39 | | | | — | | | | 637 | |
Net financing costs | | | 284 | | | | 50 | | | | — | | | | 334 | |
Other nonoperating items | | | (92 | ) | | | 20 | | | | — | | | | (72 | ) |
| | | | | | | | | | | | | | | | |
Earnings (loss) before income taxes | | | 406 | | | | (31 | ) | | | — | | | | 375 | |
Income tax expense (benefit) | | | 56 | | | | (1 | ) | | | — | | | | 55 | |
| | | | | | | | | | | | | | | | |
Net earnings (loss) | | | 350 | | | | (30 | ) | | | — | | | | 320 | |
Net loss attributable to noncontrolling interests | | | — | | | | (11 | ) | | | — | | | | (11 | ) |
| | | | | | | | | | | | | | | | |
Net earnings (loss) attributable to Devon | | $ | 350 | | | $ | (19 | ) | | $ | — | | | $ | 331 | |
| | | | | | | | | | | | | | | | |
OTHER KEY STATISTICS
(in millions)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended December 31, 2016 | |
| | | Devon U.S.
& Canada | | | EnLink | | | Eliminations | | | Total | |
Cash flow statement related items: | | | | | | | | | | | | | | | | |
Operating cash flow | | $ | 383 | | | $ | 153 | | | $ | — | | | $ | 536 | |
Capital expenditures | | $ | (432 | ) | | $ | (239 | ) | | $ | — | | | $ | (671 | ) |
Divestitures of property and equipment | | $ | 1,141 | | | $ | 88 | | | $ | — | | | $ | 1,229 | |
Repayments of long-term debt | | $ | (1,254 | ) | | $ | (433 | ) | | $ | — | | | $ | (1,687 | ) |
EnLink distributions received (paid) | | $ | 66 | | | $ | (146 | ) | | $ | — | | | $ | (80 | ) |
Issuance of subsidiary units | | $ | — | | | $ | 57 | | | $ | — | | | $ | 57 | |
Balance sheet statement items: | | | | | | | | | | | | | | | | |
Net debt (1) | | $ | 4,911 | | | $ | 3,284 | | | $ | — | | | $ | 8,195 | |
| (1) | Net debt is a non-GAAP measure. For a reconciliation of the comparable GAAP measure, see “Non-GAAP Financial Measures” later in this release. |
Page 13 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CAPITAL EXPENDITURES
(in millions)
| | | | | | | | |
| | | Quarter Ended December 31, 2016 | | | Year Ended December 31, 2016 | |
Exploration and development capital(1) | | $ | 363 | | | $ | 1,166 | |
Capitalized G&A and interest | | | 78 | | | | 308 | |
Acquisitions | | | 36 | | | | 1,595 | |
Other | | | 20 | | | | 40 | |
| | | | | | | | |
Devon capital expenditures(2) | | $ | 497 | | | $ | 3,109 | |
| | | | | | | | |
| (1) | Exploration and development capital in this table is presented before capitalized G&A and interest. The full-year amount excludes a $95 million positive revision to future asset retirement obligations, which is included in costs incurred. The fourth quarter and full-year amounts include $8 million and $32 million for abandonment expenditures paid during each respective period, which are not included in costs incurred. |
| (2) | Excludes $266 and $1,082 million attributable to EnLink for the fourth quarter and year end of 2016, respectively. |
Page 14 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
COSTS INCURRED
(in millions)
| | | | | | | | |
| | | Total
Year Ended December 31, | |
| | | 2016 | | | 2015 | |
Property acquisition costs: | | | | | | | | |
Proved properties | | $ | 237 | | | $ | 195 | |
Unproved properties | | | 1,358 | | | | 717 | |
Exploration costs | | | 394 | | | | 587 | |
Development costs | | | 1,143 | | | | 3,671 | |
| | | | | | | | |
Costs Incurred | | $ | 3,132 | | | $ | 5,170 | |
| | | | | | | | |
| |
| | | United States
Year Ended December 31, | |
| | | 2016 | | | 2015 | |
Property acquisition costs: | | | | | | | | |
Proved properties | | $ | 237 | | | $ | 193 | |
Unproved properties | | | 1,356 | | | | 634 | |
Exploration costs | | | 345 | | | | 478 | |
Development costs | | | 1,034 | | | | 3,269 | |
| | | | | | | | |
Costs Incurred | | $ | 2,972 | | | $ | 4,574 | |
| | | | | | | | |
| |
| | | Canada
Year Ended December 31, | |
| | | 2016 | | | 2015 | |
Property acquisition costs: | | | | | | | | |
Proved properties | | $ | — | | | $ | 2 | |
Unproved properties | | | 2 | | | | 83 | |
Exploration costs | | | 49 | | | | 109 | |
Development costs | | | 109 | | | | 402 | |
| | | | | | | | |
Costs Incurred | | $ | 160 | | | $ | 596 | |
| | | | | | | | |
Page 15 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
RESERVES RECONCILIATION
| | | | | | | | | | | | | | | | |
| | | Total | |
| | | Oil / Bitumen
(MMBbls) | | | Gas
(Bcf) | | | NGL
(MMBbls) | | | Total
(MMBoe) | |
As of December 31, 2015: | | | | | | | | | | | | | | | | |
Proved developed | | | 444 | | | | 5,707 | | | | 411 | | | | 1,806 | |
Proved undeveloped | | | 340 | | | | 114 | | | | 17 | | | | 376 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 784 | | | | 5,821 | | | | 428 | | | | 2,182 | |
| | | | | | | | | | | | | | | | |
Revisions due to prices | | | 3 | | | | (103 | ) | | | (13 | ) | | | (27 | ) |
Revisions other than price | | | (18 | ) | | | 638 | | | | 48 | | | | 137 | |
Extensions and discoveries | | | 38 | | | | 280 | | | | 42 | | | | 126 | |
Purchase of reserves | | | 8 | | | | 33 | | | | 7 | | | | 20 | |
Production | | | (95 | ) | | | (517 | ) | | | (42 | ) | | | (223 | ) |
Sale of reserves | | | (25 | ) | | | (521 | ) | | | (45 | ) | | | (157 | ) |
| | | | | | | | | | | | | | | | |
As of December 31, 2016: | | | | | | | | | | | | | | | | |
Proved developed | | | 367 | | | | 5,377 | | | | 387 | | | | 1,649 | |
Proved undeveloped | | | 328 | | | | 254 | | | | 38 | | | | 409 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 695 | | | | 5,631 | | | | 425 | | | | 2,058 | |
| | | | | | | | | | | | | | | | |
| |
| | | United States | |
| | | Oil / Bitumen
(MMBbls) | | | Gas
(Bcf) | | | NGL
(MMBbls) | | | Total
(MMBoe) | |
As of December 31, 2015: | | | | | | | | | | | | | | | | |
Proved developed | | | 203 | | | | 5,694 | | | | 411 | | | | 1,563 | |
Proved undeveloped | | | 39 | | | | 114 | | | | 17 | | | | 75 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 242 | | | | 5,808 | | | | 428 | | | | 1,638 | |
| | | | | | | | | | | | | | | | |
Revisions due to prices | | | (18 | ) | | | (103 | ) | | | (13 | ) | | | (48 | ) |
Revisions other than price | | | (2 | ) | | | 628 | | | | 48 | | | | 151 | |
Extensions and discoveries | | | 36 | | | | 280 | | | | 42 | | | | 124 | |
Purchase of reserves | | | 8 | | | | 33 | | | | 7 | | | | 20 | |
Production | | | (47 | ) | | | (510 | ) | | | (42 | ) | | | (174 | ) |
Sale of reserves | | | (25 | ) | | | (521 | ) | | | (45 | ) | | | (157 | ) |
| | | | | | | | | | | | | | | | |
As of December 31, 2016: | | | | | | | | | | | | | | | | |
Proved developed | | | 160 | | | | 5,361 | | | | 387 | | | | 1,439 | |
Proved undeveloped | | | 34 | | | | 254 | | | | 38 | | | | 115 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 194 | | | | 5,615 | | | | 425 | | | | 1,554 | |
| | | | | | | | | | | | | | | | |
| |
| | | Canada | |
| | | Oil / Bitumen
(MMBbls) | | | Gas
(Bcf) | | | NGL
(MMBbls) | | | Total
(MMBoe) | |
As of December 31, 2015: | | | | | | | | | | | | | | | | |
Proved developed | | | 241 | | | | 13 | | | | — | | | | 243 | |
Proved undeveloped | | | 301 | | | | — | | | | — | | | | 301 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 542 | | | | 13 | | | | — | | | | 544 | |
| | | | | | | | | | | | | | | | |
Revisions due to prices | | | 21 | | | | — | | | | — | | | | 21 | |
Revisions other than price | | | (16 | ) | | | 10 | | | | — | | | | (14 | ) |
Extensions and discoveries | | | 2 | | | | — | | | | — | | | | 2 | |
Production | | | (48 | ) | | | (7 | ) | | | — | | | | (49 | ) |
| | | | | | | | | | | | | | | | |
As of December 31, 2016: | | | | | | | | | | | | | | | | |
Proved developed | | | 207 | | | | 16 | | | | — | | | | 210 | |
Proved undeveloped | | | 294 | | | | — | | | | — | | | | 294 | |
| | | | | | | | | | | | | | | | |
Total Proved | | | 501 | | | | 16 | | | | — | | | | 504 | |
| | | | | | | | | | | | | | | | |
Page 16 of 21
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
NON-GAAP FINANCIAL MEASURES
This press release includes non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.
CORE EARNINGS
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. Accordingly, the company also uses the measures of core earnings and core earnings per share attributable to Devon. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on fourth-quarter 2016 earnings.
| | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | | Quarter Ended December 31, 2016 | |
| | | Before-tax | | | After-tax | | | After
Noncontrolling
Interests | | | Per
Share | |
Earnings attributable to Devon (GAAP) | | $ | 375 | | | $ | 320 | | | $ | 331 | | | $ | 0.63 | |
Adjustments: | | | | | | | | | | | | | | | | |
Gains and losses on asset sales | | | (539 | ) | | | (455 | ) | | | (462 | ) | | | (0.87 | ) |
Asset impairments | | | 145 | | | | 107 | | | | 100 | | | | 0.19 | |
Deferred tax asset valuation allowance | | | — | | | | (16 | ) | | | (16 | ) | | | (0.03 | ) |
Restructuring and transaction costs | | | 1 | | | | 1 | | | | 1 | | | | — | |
Fair value changes in financial instruments and foreign currency | | | 69 | | | | 62 | | | | 59 | | | | 0.11 | |
Early retirement of debt | | | 185 | | | | 118 | | | | 118 | | | | 0.22 | |
| | | | | | | | | | | | | | | | |
Core earnings attributable to Devon (Non-GAAP) | | $ | 236 | | | $ | 137 | | | $ | 131 | | | $ | 0.25 | |
| | | | | | | | | | | | | | | | |
NET DEBT
Devon defines net debt as debt less cash and cash equivalents and net debt attributable to the consolidation of EnLink Midstream as presented in the following table. Devon believes that netting these sources of cash against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.
| | | | | | | | | | | | |
| (in millions) | | December 31, 2016 | |
| | | Devon U.S. & Canada | | | EnLink | | | Devon Consolidated | |
Total debt (GAAP) | | $ | 6,859 | | | $ | 3,295 | | | $ | 10,154 | |
Less cash and cash equivalents | | | (1,948 | ) | | | (11 | ) | | | (1,959 | ) |
| | | | | | | | | | | | |
Net debt (Non-GAAP) | | $ | 4,911 | | | $ | 3,284 | | | $ | 8,195 | |
| | | | | | | | | | | | |
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DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
FINDING COST
Finding cost is defined as costs incurred less acquisitions costs. Devon believes finding cost is relevant because it provides additional insight into costs associated with current year exploration and development activities. Certain securities analysts also use this methodology to measure Devon’s performance. It should be noted that the actual costs of reserves added through Devon’s drilling program will differ, sometimes significantly, from the direct comparison of capital spent and reserves added in any given period due to the timing of capital expenditures and reserves bookings.
| | | | |
| (in millions) | | Year Ended December 31, 2016 | |
| | | United States | |
Costs Incurred (GAAP) | | $ | 2,972 | |
Less: | | | | |
Acquisition costs | | | 1,593 | |
| | | | |
Finding cost (Non-GAAP) | | $ | 1,379 | |
| | | | |
Revisions other than price | | | 151 | |
Extensions and discoveries | | | 124 | |
| | | | |
Total | | | 275 | |
| | | | |
Finding cost per BOE (Non-GAAP) | | $ | 5.01 | |
UPSTREAM CASH FLOW
Devon defines upstream cash flow as cash flow from operations less EnLink cash flow from operations, less cash flow from divested assets and debt repayments, plus distributions received from EnLink. Devon believes upstream cash flow is relevant because it provides a clearer picture of cash flow generation ability from Devon’s retained upstream assets and its investment in EnLink.
| | | | |
| (in millions) | | Year Ended December 31, 2016 | |
Consolidated cash flow from operations (GAAP) | | $ | 1,746 | |
Less: EnLink cash flow from operations | | | 666 | |
| | | | |
Devon cash flow from operations | | | 1,080 | |
Less: cash flow from divested assets | | | 150 | |
Less: cash associated with debt repayments | | | 265 | |
Add: EnLink distributions received | | | 265 | |
| | | | |
Upstream cash flow (Non-GAAP) | | $ | 930 | |
| | | | |
Page 18 of 21
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
PRODUCTION GUIDANCE
| | | | | | | | | | | | | | | | |
| | | Quarter 1 | | | Full Year | |
| | | Low | | | High | | | Low | | | High | |
Oil and bitumen (MBbls/d) | | | | | | | | | | | | | | | | |
U.S. | | | 114 | | | | 118 | | | | 119 | | | | 123 | |
Heavy Oil | | | 133 | | | | 138 | | | | 130 | | | | 135 | |
| | | | | | | | | | | | | | | | |
Total | | | 247 | | | | 256 | | | | 249 | | | | 258 | |
| | | | | | | | | | | | | | | | |
Natural gas liquids (MBbls/d) | | | | | | | | | | | | | | | | |
Total | | | 88 | | | | 93 | | | | 95 | | | | 100 | |
Gas (MMcf/d) | | | | | | | | | | | | | | | | |
U.S. | | | 1,190 | | | | 1,220 | | | | 1,160 | | | | 1,200 | |
Heavy Oil | | | 14 | | | | 18 | | | | 14 | | | | 16 | |
| | | | | | | | | | | | | | | | |
Total | | | 1,204 | | | | 1,238 | | | | 1,174 | | | | 1,216 | |
| | | | | | | | | | | | | | | | |
Oil equivalent (MBoe/d) | | | | | | | | | | | | | | | | |
U.S. | | | 400 | | | | 414 | | | | 407 | | | | 423 | |
Heavy Oil | | | 135 | | | | 141 | | | | 132 | | | | 138 | |
| | | | | | | | | | | | | | | | |
Total | | | 535 | | | | 555 | | | | 539 | | | | 561 | |
| | | | | | | | | | | | | | | | |
PRICE REALIZATIONS GUIDANCE
| | | | | | | | | | | | | | | | |
| | | Quarter 1 | | | Full Year | |
| | | Low | | | High | | | Low | | | High | |
Oil and bitumen - % of WTI | | | | | | | | | | | | | | | | |
U.S. | | | 88 | % | | | 98 | % | | | 88 | % | | | 98 | % |
Canada | | | 45 | % | | | 55 | % | | | 48 | % | | | 58 | % |
NGL - realized price | | $ | 12 | | | $ | 15 | | | $ | 12 | | | $ | 15 | |
Natural gas - % of Henry Hub | | | 78 | % | | | 88 | % | | | 78 | % | | | 88 | % |
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DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
OTHER GUIDANCE ITEMS
| | | | | | | | | | | | | | | | |
| | | Quarter 1 | | | Full Year | |
| ($ millions, except %) | | Low | | | High | | | Low | | | High | |
Marketing & midstream operating profit | | $ | 200 | | | $ | 220 | | | $ | 900 | | | $ | 950 | |
Lease operating expenses | | $ | 350 | | | $ | 400 | | | $ | 1,500 | | | $ | 1,600 | |
General & administrative expenses - Devon | | $ | 130 | | | $ | 150 | | | $ | 500 | | | $ | 550 | |
General & administrative expenses - EnLink | | $ | 35 | | | $ | 45 | | | $ | 130 | | | $ | 140 | |
Production and property taxes | | $ | 75 | | | $ | 85 | | | $ | 275 | | | $ | 325 | |
Depreciation, depletion and amortization | | $ | 375 | | | $ | 425 | | | $ | 1,650 | | | $ | 1,750 | |
Other operating items | | $ | 15 | | | $ | 25 | | | $ | 70 | | | $ | 80 | |
Net financing costs | | $ | 125 | | | $ | 135 | | | $ | 485 | | | $ | 535 | |
Current income tax rate | | | 5.0 | % | | | 15.0 | % | | | 5.0 | % | | | 15.0 | % |
Deferred income tax rate | | | 20.0 | % | | | 30.0 | % | | | 20.0 | % | | | 30.0 | % |
| | | | | | | | | | | | | | | | |
Total income tax rate | | | 25.0 | % | | | 45.0 | % | | | 25.0 | % | | | 45.0 | % |
| | | | | | | | | | | | | | | | |
Net earnings attributable to noncontrolling interests | | $ | — | | | $ | 5 | | | $ | 50 | | | $ | 100 | |
CAPITAL EXPENDITURES GUIDANCE
| | | | | | | | | | | | | | | | |
| | | Quarter 1 | | | Full Year | |
| (in millions) | | Low | | | High | | | Low | | | High | |
Exploration and development | | $ | 450 | | | $ | 500 | | | $ | 2,000 | | | $ | 2,300 | |
Capitalized G&A | | | 55 | | | | 65 | | | | 200 | | | | 250 | |
Capitalized interest | | | 15 | | | | 20 | | | | 60 | | | | 90 | |
Other | | | 5 | | | | 10 | | | | 25 | | | | 50 | |
| | | | | | | | | | | | | | | | |
Devon capital expenditures(1) | | $ | 525 | | | $ | 595 | | | $ | 2,285 | | | $ | 2,690 | |
| | | | | | | | | | | | | | | | |
| (1) | Excludes capital expenditures related to EnLink. |
Page 20 of 21
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
COMMODITY HEDGES
| | | | | | | | | | | | | | | | | | | | |
| | | Oil Commodity Hedges | |
| | | Price Swaps | | | Price Collars | |
Period | | Volume (Bbls/d) | | | Weighted
Average Price
($/Bbl) | | | Volume
(Bbls/d) | | | Weighted
Average Floor
Price ($/Bbl) | | | Weighted
Average Ceiling
Price ($/Bbl) | |
Q1-Q4 2017 | | | 73,760 | | | $ | 54.33 | | | | 56,259 | | | $ | 45.45 | | | $ | 58.11 | |
Q1-Q4 2018 | | | 4,096 | | | $ | 54.31 | | | | 7,685 | | | $ | 47.77 | | | $ | 57.77 | |
| | | | | | | | | | |
| | | Oil Basis Swaps | |
Period | | Index | | Volume (Bbls/d) | | | Weighted Average Differential to
WTI ($/Bbl) | |
Q1-Q4 2017 | | Western Canadian Select | | | 26,910 | | | $ | (15.24 | ) |
Q1-Q4 2017 | | Midland Sweet | | | 17,534 | | | $ | (0.41 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | Natural Gas Commodity Hedges | |
| | | Price Swaps | | | Price Collars | |
Period | | Volume
(MMBtu/d) | | | Weighted
Average Price
($/MMBtu) | | | Volume
(MMBtu/d) | | | Weighted
Average Floor
Price ($/MMBtu) | | | Weighted
Average Ceiling
Price ($/MMBtu) | |
Q1-Q4 2017 | | | 209,863 | | | $ | 3.16 | | | | 360,425 | | | $ | 2.99 | | | $ | 3.40 | |
Q1-Q4 2018 | | | 44,500 | | | $ | 3.32 | | | | 33,904 | | | $ | 3.29 | | | $ | 3.64 | |
Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index. Commodity hedge positions are shown as of February 7, 2017.
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