OKLAHOMA CITY--()--Devon Energy Corporation (NYSE:DVN) today reported a net loss of $357 million for the quarter ended December 31, 2012, or $0.89 per common share ($0.89 per diluted share). The company’s fourth quarter financial results were impacted by a non-cash asset impairment charge of $896 million. Excluding the asset impairment charge and other items securities analysts typically exclude from estimates, Devon earned $316 million or $0.78 per diluted share in the fourth quarter of 2012.
“This is evident through the strong oil production growth we delivered during the year and the impressive growth in oil reserves.”
Asset impairments also led to a loss of $206 million for the year ended December 31, 2012, or $0.52 per common share ($0.52 per diluted share). Excluding adjusting items, the company earned $1.3 billion or $3.26 per diluted share in 2012.
“In spite of a challenging commodity price environment that impacted our financial results, Devon delivered solid operating results in 2012. During the year, we continued to make significant progress toward the conversion of our asset portfolio to a higher oil weighting,” commented John Richels, Devon’s president and chief executive officer. “This is evident through the strong oil production growth we delivered during the year and the impressive growth in oil reserves.”
Strong Oil Growth Drives Record Production
Total production of oil, natural gas, and natural gas liquids increased to 250 million oil-equivalent barrels (Boe) in 2012. This is the highest annual production total in the company’s history from its North American property base and represents a 10 million Boe increase compared to 2011. The increase in 2012 production was driven almost entirely by growth in oil production. Devon’s oil production increased 20 percent year-over-year, more than offsetting declines in natural gas volumes due to reduced activity levels.
The company also delivered strong oil production growth in the fourth quarter of 2012. Oil production averaged 151,000 barrels per day, a 13 percent increase compared to the fourth quarter of 2011. The most significant growth in oil production came from the U.S., where fourth-quarter year-over-year oil production increased 30 percent.
Permian Basin Results Lead Fourth-Quarter Operating Highlights
- Permian Basin oil production increased 31 percent over the fourth quarter of 2011. Oil accounted for 60 percent of the company’s 66,000 Boe per day produced in the Permian Basin during the quarter.
- In the Bone Spring play in the Permian Basin, the company brought 10 new wells on production in the fourth quarter of 2012. Initial 30-day production from these wells averaged 790 Boe per day.
- Also in the Permian Basin, Devon completed six wells in the Midland-Wolfcamp Shale during the fourth quarter. This activity was highlighted by the Cortes 1H well with initial 30-day production averaging 795 Boe per day.
- In the Mississippian Lime play in Oklahoma, the company brought seven wells online within its Sinopec joint venture acreage in the fourth quarter of 2012. Initial 30-day production from these wells averaged approximately 335 Boe per day, including 210 barrels of oil per day. Devon has a 57 percent working interest in these wells.
- Net production from Devon’s Jackfish 1 and Jackfish 2 oil sands projects averaged a record 49,000 barrels of oil per day in the fourth quarter of 2012. Compared to the fourth quarter of 2011, this represents a 15 percent increase in production.
- Construction of Devon’s third Jackfish oil sands project is now approximately 50 percent complete, with startup expected by year-end 2014.
- The company brought seven operated Granite Wash wells online, including three Hogshooter wells, in the fourth quarter of 2012. The average 30-day production rate from these seven wells was 1,625 Boe per day, including 1,010 barrels of oil per day.
- In the Cana-Woodford Shale play, Devon established production from 29 operated wells in the fourth quarter. The average 30-day initial production rate was 6.5 million cubic feet of gas equivalent per day, including 135 barrels of oil per day and 420 barrels of natural gas liquids per day.
- Fourth quarter production from the company’s Cana-Woodford Shale averaged 326 million cubic feet of natural gas equivalent per day. Fourth-quarter liquids production increased 68 percent compared to the prior-year quarter to 18,000 barrels per day. Liquids now account for 32 percent of Devon’s net production from the play.
- Net daily production in the Barnett Shale averaged 1.4 billion cubic feet of natural gas equivalent per day during the fourth quarter of 2012. Liquids production increased 3 percent year-over-year to 48,000 barrels per day.
Proved Oil Reserves Exhibit Robust Growth
At December 31, 2012, Devon’s estimated proved reserves totaled 3.0 billion oil-equivalent barrels. During the year, oil reserves increased 13 percent compared to 2011, mitigating declines in natural gas reserves.
In 2012, the company added 381 million Boe through successful drilling (extensions, discoveries, and revisions other than price). Associated drill-bit capital invested during the year totaled $7.5 billion. For reporting purposes, $1.3 billion of cash proceeds received from the closing of two joint ventures were not subtracted from the company’s 2012 drill-bit capital total. However, these proceeds effectively reimbursed Devon for leasing and exploration costs incurred.
“Devon’s capital program delivered excellent drill-bit results in 2012. Our oil-focused drilling program replaced nearly 260 percent of our oil produced during the year,” said Dave Hager, executive vice president, exploration and production. “Even before the benefits of our joint venture agreements, these reserve additions were added at very competitive finding costs.”
Reserve revisions related to lower prices resulted in a decrease in Devon’s proved reserves of 171 million Boe at December 31, 2012. These price revisions impacted only natural gas and natural gas liquids reserves. The company’s reserve life index (proved reserves divided by annual production) remained at approximately 12 years, and its proved developed reserves accounted for 72 percent of total proved reserves.
Oil and Gas Sales Total $7.2 Billion; Devon Adds Oil and Gas Hedges
Although total production increased, revenue from oil, natural gas, and natural gas liquids sales declined 14 percent to $7.2 billion in 2012. However, cash settlements related to the company’s oil and gas hedges increased revenue by $870 million or $3.48 per Boe in 2012, partially offsetting lower realized prices for all three products.
The strong oil price environment has provided Devon the opportunity to add oil hedges for 2013. The company now has entered into contracts to hedge 115,000 barrels per day of oil production. Of this total, 55,000 barrels per day are swapped at a weighted average price of $101 per barrel. The remaining 60,000 barrels per day utilize costless collars with a weighted average ceiling of $113 per barrel and a floor of $90 per barrel.
The company also recently increased its natural gas hedging position. For the full-year 2013, Devon now has approximately 1.3 billion cubic feet per day protected at a weighted average floor price of $3.87. This position covers approximately 60 percent of the company’s expected natural gas production in 2013.
Operating Costs Reflect Increased Oil Activity
In aggregate, the company’s pre-tax, cash costs totaled $14.36 per Boe in 2012, a 7 percent increase compared to 2011. Devon’s cost management efforts and efficient operations partially offset the full impact of industry inflation and a shift toward oil projects. In general, oil projects are more expensive to develop and have higher operating costs than gas projects.
In the fourth quarter of 2012, expenses in most categories were generally in line with expectations. However, general and administrative expenses of $198 million or $3.17 per Boe exceeded estimates. This was primarily due to $21 million of costs associated with the early settlement of pension obligations during the fourth quarter.
Depreciation, depletion, and amortization expense (DD&A) increased to $11.73 per Boe in the fourth quarter. The DD&A rate was attributable to the impact of price-related reserve revisions and an upward adjustment in future development cost assumptions.
Joint Ventures Strengthen Balance Sheet and Liquidity
In 2012, Devon successfully entered into two exploration-based joint ventures, delivering almost $4.0 billion in value to the company. The transactions included $1.3 billion in cash payments along with $2.6 billion of drilling carries that fund roughly 70 percent of the company’s capital requirements in the joint ventures.
During the year, Devon generated cash flow from operations of $5.0 billion. When combined with cash payments from the closing of two joint venture agreements and other minor asset sales, Devon’s cash inflows totaled $6.5 billion in 2012.
The company exited 2012 with a very strong balance sheet. At December 31, 2012, the company’s cash and short-term investments totaled $7.0 billion, and Devon’s net debt to adjusted capitalization was 18 percent.
Impairment Charge Methodology
On a quarterly basis, the carrying value of Devon’s oil and natural gas assets are subject to a “ceiling test.” Under the full-cost method of accounting, the net book value of the company’s oil and gas properties, less related deferred income taxes, may not exceed a calculated ceiling. The ceiling is the estimated future net cash flow from proved oil and gas properties, discounted at 10 percent per year. Any excess is written off as a non-cash expense and may not be reversed in future periods, even though higher oil and gas prices may subsequently increase the ceiling. Future net cash flows are calculated assuming continuation of prices and costs in effect at the time of the calculation, except for changes that are fixed and determinable by existing contracts. Trailing 12-month average prices at the end of each quarter are used in the future net cash flow calculation. Impairment charges have no impact on cash flow or cash balances and are not reflective of the fair value of oil and gas assets.
Non-GAAP Reconciliations
Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Adjusted earnings, drill-bit capital, net debt, and adjusted capitalization are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided beginning on page 13.
Conference Call to be Webcast Today
Devon will discuss its 2012 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) and may be accessed from Devon’s home page at www.devonenergy.com.
This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; unforeseen changes in the rate of production from our oil and gas properties; uncertainties in future exploration and drilling results; uncertainties inherent in estimating the cost of drilling and completing wells; drilling risks; competition for leases, materials, people and capital; midstream capacity constraints and potential interruptions in production; risk related to our hedging activities; environmental risks; political or regulatory changes; and our limited control over third parties who operate our oil and gas properties. 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.
The United States Securities and Exchange Commission 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 and exploration target size. 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. U.S. investors are urged to consider closely the disclosure in our Form 10-K, available from us at Devon Energy Corporation, Attn. Investor Relations, 333 West Sheridan Avenue, Oklahoma City, OK 73102-5015. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.
Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For more information about Devon, please visit our website at www.devonenergy.com.
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DEVON ENERGY CORPORATION |
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| PRODUCTION (net of royalties) | Quarter Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | ||||||||||||||||
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Total Period Production: |
2012 | 2011 | 2012 | 2011 | |||||||||||||
| Natural Gas (Bcf) | |||||||||||||||||
| United States | 186.7 | 191.8 | 751.9 | 739.7 | |||||||||||||
| Canada | 43.3 | 52.5 | 186.1 | 212.8 | |||||||||||||
| Total Natural Gas | 230.0 | 244.3 | 938.0 | 952.5 | |||||||||||||
| Oil / Bitumen (MMBbls) | |||||||||||||||||
|
|
United States | 6.0 | 4.6 | 21.5 | 16.8 | ||||||||||||
|
|
Canada | 7.9 | 7.7 | 32.0 | 27.9 | ||||||||||||
| Total Oil / Bitumen | 13.9 | 12.3 | 53.5 | 44.7 | |||||||||||||
| Natural Gas Liquids (MMBbls) | |||||||||||||||||
|
|
United States | 9.3 | 8.7 | 36.1 | 33.0 | ||||||||||||
|
|
Canada | 0.9 | 0.9 | 3.8 | 3.6 | ||||||||||||
| Total Natural Gas Liquids | 10.2 | 9.6 | 39.9 | 36.6 | |||||||||||||
| Oil Equivalent (MMBoe) | |||||||||||||||||
|
|
United States | 46.4 | 45.2 | 182.9 | 173.1 | ||||||||||||
|
|
Canada | 16.0 | 17.4 | 66.8 | 67.0 | ||||||||||||
| Total Oil Equivalent | 62.4 | 62.6 | 249.7 | 240.1 | |||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
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Average Daily Production: |
2012 | 2011 | 2012 | 2011 | |||||||||||||
| Natural Gas (MMcf) | |||||||||||||||||
| United States | 2,029.0 | 2,084.5 | 2,054.5 | 2,026.6 | |||||||||||||
| Canada | 471.2 | 571.1 | 508.3 | 583.1 | |||||||||||||
| Total Natural Gas | 2,500.2 | 2,655.6 | 2,562.8 | 2,609.7 | |||||||||||||
| Oil / Bitumen (MBbls) | |||||||||||||||||
| United States | 64.8 | 49.7 | 58.7 | 46.0 | |||||||||||||
| Canada | 86.2 | 83.8 | 87.4 | 76.5 | |||||||||||||
| Total Oil / Bitumen | 151.0 | 133.5 | 146.1 | 122.5 | |||||||||||||
| Natural Gas Liquids (MBbls) | |||||||||||||||||
| United States | 101.4 | 94.5 | 98.6 | 90.4 | |||||||||||||
| Canada | 9.5 | 9.8 | 10.5 | 9.9 | |||||||||||||
| Total Natural Gas Liquids | 110.9 | 104.3 | 109.1 | 100.3 | |||||||||||||
| Oil Equivalent (MBoe) | |||||||||||||||||
| United States | 504.4 | 491.7 | 499.7 | 474.1 | |||||||||||||
| Canada | 174.2 | 188.7 | 182.6 | 183.6 | |||||||||||||
| Total Oil Equivalent | 678.6 | 680.4 | 682.3 | 657.7 | |||||||||||||
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DEVON ENERGY CORPORATION |
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| BENCHMARK PRICES | Quarter Ended | Year Ended | |||||||||||||||||||
| (average prices) | December 31, | December 31, | |||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
| Natural Gas ($/Mcf) – Henry Hub | $ | 3.41 | $ | 3.54 | $ | 2.79 | $ | 4.04 | |||||||||||||
| Oil ($/Bbl) – West Texas Intermediate (Cushing) | $ | 88.16 | $ | 93.96 | $ | 94.21 | $ | 95.06 | |||||||||||||
| REALIZED PRICES | Quarter Ended December 31, 2012 | ||||||||||||||||||||
| Oil / Bitumen | Gas | NGLs | Total | ||||||||||||||||||
| (Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | ||||||||||||||||||
| United States | $ | 83.18 | $ | 2.93 | $ | 26.12 | $ | 27.72 | |||||||||||||
| Canada | $ | 52.31 | $ | 3.26 | $ | 47.64 | $ | 37.28 | |||||||||||||
| Realized price without hedges | $ | 65.56 | $ | 2.99 | $ | 27.96 | $ | 30.17 | |||||||||||||
| Cash settlements | $ | 8.76 | $ | 0.34 | $ | 0.07 | $ | 3.24 | |||||||||||||
| Realized price, including cash settlements | $ | 74.32 | $ | 3.33 | $ | 28.03 | $ | 33.41 | |||||||||||||
| Quarter Ended December 31, 2011 | |||||||||||||||||||||
| Oil / Bitumen | Gas | NGLs | Total | ||||||||||||||||||
| (Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | ||||||||||||||||||
| United States | $ | 91.19 | $ | 3.08 | $ | 40.66 | $ | 30.10 | |||||||||||||
| Canada | $ | 71.36 | $ | 3.45 | $ | 56.19 | $ | 45.02 | |||||||||||||
| Realized price without hedges | $ | 78.75 | $ | 3.16 | $ | 42.11 | $ | 34.24 | |||||||||||||
| Cash settlements | $ | (0.28 | ) | $ | 0.63 | $ | 0.05 | $ | 2.42 | ||||||||||||
| Realized price, including cash settlements | $ | 78.47 | $ | 3.79 | $ | 42.16 | $ | 36.66 | |||||||||||||
| Year Ended December 31, 2012 | |||||||||||||||||||||
| Oil / Bitumen | Gas | NGLs | Total | ||||||||||||||||||
| (Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | ||||||||||||||||||
| United States | $ | 88.68 | $ | 2.32 | $ | 28.49 | $ | 25.59 | |||||||||||||
| Canada | $ | 57.01 | $ | 2.49 | $ | 48.63 | $ | 37.01 | |||||||||||||
| Realized price without hedges | $ | 69.73 | $ | 2.36 | $ | 30.42 | $ | 28.65 | |||||||||||||
| Cash settlements | $ | 4.84 | $ | 0.65 | $ | 0.04 | $ | 3.48 | |||||||||||||
| Realized price, including cash settlements | $ | 74.57 | $ | 3.01 | $ | 30.46 | $ | 32.13 | |||||||||||||
| Year Ended December 31, 2011 | |||||||||||||||||||||
| Oil / Bitumen | Gas | NGLs | Total | ||||||||||||||||||
| (Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | ||||||||||||||||||
| United States | $ | 91.19 | $ | 3.50 | $ | 39.47 | $ | 31.31 | |||||||||||||
| Canada | $ | 66.97 | $ | 3.87 | $ | 55.99 | $ | 43.23 | |||||||||||||
| Realized price without hedges | $ | 76.06 | $ | 3.58 | $ | 41.10 | $ | 34.64 | |||||||||||||
| Cash settlements | $ | (0.58 | ) | $ | 0.44 | $ | 0.07 | $ | 1.63 | ||||||||||||
| Realized price, including cash settlements | $ | 75.48 | $ | 4.02 | $ | 41.17 | $ | 36.27 | |||||||||||||
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DEVON ENERGY CORPORATION |
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| CONSOLIDATED STATEMENTS OF OPERATIONS | Quarter Ended | Year Ended | |||||||||||||||||||||||
| (in millions, except per share amounts) | December 31, | December 31, | |||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||
| Oil, gas and NGL sales | $ | 1,883 | $ | 2,144 | $ | 7,153 | $ | 8,315 | |||||||||||||||||
| Oil, gas and NGL derivatives | 178 | (105 | ) | 693 | 881 | ||||||||||||||||||||
| Marketing and midstream revenues | 520 | 546 | 1,656 | 2,258 | |||||||||||||||||||||
| Total revenues | 2,581 | 2,585 | 9,502 | 11,454 | |||||||||||||||||||||
| Expenses and other, net: | |||||||||||||||||||||||||
| Lease operating expenses | 534 | 499 | 2,074 | 1,851 | |||||||||||||||||||||
| Marketing and midstream operating costs and expenses | 399 | 412 | 1,246 | 1,716 | |||||||||||||||||||||
| Depreciation, depletion and amortization | 731 | 626 | 2,811 | 2,248 | |||||||||||||||||||||
| General and administrative expenses | 198 | 182 | 692 | 585 | |||||||||||||||||||||
| Taxes other than income taxes | 108 | 88 | 414 | 424 | |||||||||||||||||||||
| Interest expense | 110 | 82 | 406 | 352 | |||||||||||||||||||||
| Restructuring costs | 74 | - | 74 | (2 | ) | ||||||||||||||||||||
| Asset impairments | 896 | - | 2,024 | - | |||||||||||||||||||||
| Other, net | 32 | (98 | ) | 78 | (10 | ) | |||||||||||||||||||
| Total expenses and other, net | 3,082 | 1,791 | 9,819 | 7,164 | |||||||||||||||||||||
| Earnings (loss) from continuing operations before income taxes | (501 | ) | 794 | (317 | ) | 4,290 | |||||||||||||||||||
| Current income tax expense (benefit) | 44 | 158 | 52 | (143 | ) | ||||||||||||||||||||
| Deferred income tax expense (benefit) | (188 | ) | 115 | (184 | ) | 2,299 | |||||||||||||||||||
| Earnings (loss) from continuing operations | (357 | ) | 521 | (185 | ) | 2,134 | |||||||||||||||||||
| Earnings (loss) from discontinued operations, net of tax | - | (14 | ) | (21 | ) | 2,570 | |||||||||||||||||||
| Net earnings (loss) | $ | (357 | ) | $ | 507 | $ | (206 | ) | $ | 4,704 | |||||||||||||||
| Basic net earnings (loss) per share: | |||||||||||||||||||||||||
| Basic earnings (loss) from continuing operations per share | $ | (0.89 | ) | $ | 1.29 | $ | (0.47 | ) | $ | 5.12 | |||||||||||||||
| Basic earnings (loss) from discontinued operations per share | - | (0.04 | ) | (0.05 | ) | 6.17 | |||||||||||||||||||
| Basic net earnings (loss) per share | $ | (0.89 | ) | $ | 1.25 | $ | (0.52 | ) | $ | 11.29 | |||||||||||||||
| Diluted net earnings (loss) per share: | |||||||||||||||||||||||||
| Diluted earnings (loss) from continuing operations per share | $ | (0.89 | ) | $ | 1.29 | $ | (0.47 | ) | $ | 5.10 | |||||||||||||||
| Diluted earnings (loss) from discontinued operations per share | - | (0.04 | ) | (0.05 | ) | 6.15 | |||||||||||||||||||
| Diluted net earnings (loss) per share | $ | (0.89 | ) | $ | 1.25 | $ | (0.52 | ) | $ | 11.25 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||||
| Basic | 405 | 404 | 404 | 417 | |||||||||||||||||||||
| Diluted | 405 | 405 | 404 | 418 | |||||||||||||||||||||
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DEVON ENERGY CORPORATION |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||
| (in millions) | Quarter Ended | Year Ended | |||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||||
| Net earnings (loss) | $ | (357 | ) | $ | 507 | $ | (206 | ) | $ | 4,704 | |||||||||||||||
| (Earnings) loss from discontinued operations, net of tax | - | 14 | 21 | (2,570 | ) | ||||||||||||||||||||
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Adjustments to reconcile earnings from continuing operations to net cash from operating activities: |
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| Depreciation, depletion and amortization | 731 | 626 | 2,811 | 2,248 | |||||||||||||||||||||
| Asset impairments | 896 | - | 2,024 | - | |||||||||||||||||||||
| Deferred income tax expense (benefit) | (188 | ) | 115 | (184 | ) | 2,299 | |||||||||||||||||||
| Unrealized change in fair value of financial instruments | 32 | 260 | 205 | (401 | ) | ||||||||||||||||||||
| Other noncash charges | 104 | 56 | 240 | 241 | |||||||||||||||||||||
| Net cash from operating activities before balance sheet changes | 1,218 | 1,578 | 4,911 | 6,521 | |||||||||||||||||||||
| Net decrease (increase) in working capital | (98 | ) | 493 | (50 | ) | 185 | |||||||||||||||||||
| Decrease (increase) in long-term other assets | (14 | ) | (18 | ) | (36 | ) | 33 | ||||||||||||||||||
| Increase (decrease) in long-term other liabilities | 37 | (34 | ) | 105 | (493 | ) | |||||||||||||||||||
| Cash from operating activities - continuing operations | 1,143 | 2,019 | 4,930 | 6,246 | |||||||||||||||||||||
| Cash from operating activities - discontinued operations | - | (9 | ) | 26 | (22 | ) | |||||||||||||||||||
| Net cash from operating activities | 1,143 | 2,010 | 4,956 | 6,224 | |||||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||
| Capital expenditures | (1,997 | ) | (2,019 | ) | (8,225 | ) | (7,534 | ) | |||||||||||||||||
| Proceeds from property and equipment divestitures | 71 | 116 | 1,468 | 129 | |||||||||||||||||||||
| Purchases of short-term investments | (1,137 | ) | (940 | ) | (4,106 | ) | (6,691 | ) | |||||||||||||||||
| Redemptions of short-term investments | 958 | 668 | 3,266 | 5,333 | |||||||||||||||||||||
| Other | (4 | ) | (6 | ) | 14 | (29 | ) | ||||||||||||||||||
| Cash from investing activities - continuing operations | (2,109 | ) | (2,181 | ) | (7,583 | ) | (8,792 | ) | |||||||||||||||||
| Cash from investing activities - discontinued operations | (1 | ) | (16 | ) | 57 | 3,146 | |||||||||||||||||||
| Net cash from investing activities | (2,110 | ) | (2,197 | ) | (7,526 | ) | (5,646 | ) | |||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||
| Proceeds from borrowings of long-term debt, net of issuance costs | (7 | ) | - | 2,458 | 2,221 | ||||||||||||||||||||
| Net short-term borrowings (repayments) | 361 | 530 | (537 | ) | 3,726 | ||||||||||||||||||||
| Debt repayments | - | - | - | (1,760 | ) | ||||||||||||||||||||
| Credit facility borrowings | - | - | 750 | - | |||||||||||||||||||||
| Credit facility repayments | - | - | (750 | ) | - | ||||||||||||||||||||
| Proceeds from stock option exercises | 2 | - | 27 | 101 | |||||||||||||||||||||
| Repurchases of common stock | - | (345 | ) | - | (2,332 | ) | |||||||||||||||||||
| Dividends paid on common stock | (82 | ) | (69 | ) | (324 | ) | (278 | ) | |||||||||||||||||
| Excess tax benefits related to share-based compensation | - | 2 | 5 | 13 | |||||||||||||||||||||
| Net cash from financing activities | 274 | 118 | 1,629 | 1,691 | |||||||||||||||||||||
| Effect of exchange rate changes on cash | (8 | ) | 6 | 23 | (4 | ) | |||||||||||||||||||
| Net change in cash and cash equivalents | (701 | ) | (63 | ) | (918 | ) | 2,265 | ||||||||||||||||||
| Cash and cash equivalents at beginning of period | 5,338 | 5,618 | 5,555 | 3,290 | |||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 4,637 | $ | 5,555 | $ | 4,637 | $ | 5,555 | |||||||||||||||||
|
DEVON ENERGY CORPORATION |
||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| (in millions) | December 31, | December 31, | ||||||||||||
| 2012 | 2011 | |||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 4,637 | $ | 5,555 | ||||||||||
| Short-term investments | 2,343 | 1,503 | ||||||||||||
| Accounts receivable | 1,245 | 1,379 | ||||||||||||
| Other current assets | 746 | 868 | ||||||||||||
| Total current assets | 8,971 | 9,305 | ||||||||||||
| Property and equipment, at cost: | ||||||||||||||
| Oil and gas, based on full cost accounting: | ||||||||||||||
| Subject to amortization | 69,410 | 61,696 | ||||||||||||
| Not subject to amortization | 3,308 | 3,982 | ||||||||||||
| Total oil and gas | 72,718 | 65,678 | ||||||||||||
| Other | 5,630 | 5,098 | ||||||||||||
| Total property and equipment, at cost | 78,348 | 70,776 | ||||||||||||
| Less accumulated depreciation, depletion and amortization | (51,032 | ) | (46,002 | ) | ||||||||||
| Property and equipment, net | 27,316 | 24,774 | ||||||||||||
| Goodwill | 6,079 | 6,013 | ||||||||||||
| Other long-term assets | 960 | 1,025 | ||||||||||||
| Total assets | $ | 43,326 | $ | 41,117 | ||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 1,451 | $ | 1,471 | ||||||||||
| Revenues and royalties payable | 750 | 678 | ||||||||||||
| Short-term debt | 3,189 | 3,811 | ||||||||||||
| Other current liabilities | 613 | 778 | ||||||||||||
| Total current liabilities | 6,003 | 6,738 | ||||||||||||
| Long-term debt | 8,455 | 5,969 | ||||||||||||
| Asset retirement obligations | 1,996 | 1,496 | ||||||||||||
| Other long-term liabilities | 901 | 721 | ||||||||||||
| Deferred income taxes | 4,693 | 4,763 | ||||||||||||
| Stockholders' equity: | ||||||||||||||
| Common stock | 41 | 40 | ||||||||||||
| Additional paid-in capital | 3,688 | 3,507 | ||||||||||||
| Retained earnings | 15,778 | 16,308 | ||||||||||||
| Accumulated other comprehensive earnings | 1,771 | 1,575 | ||||||||||||
| Total stockholders' equity | 21,278 | 21,430 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 43,326 | $ | 41,117 | ||||||||||
| Common shares outstanding | 406 | 404 | ||||||||||||
|
DEVON ENERGY CORPORATION |
|||||||||||||||||||||
| RESERVES RECONCILIATION | |||||||||||||||||||||
| Total | |||||||||||||||||||||
| Oil / Bitumen | Gas | NGLs | Total | ||||||||||||||||||
| (MMBbls) | (Bcf) | (MMBbls) | (MMBoe) | ||||||||||||||||||
| As of December 31, 2011: | |||||||||||||||||||||
| Proved developed | 309 | 8,908 | 428 | 2,223 | |||||||||||||||||
| Proved undeveloped | 396 | 1,578 | 124 | 782 | |||||||||||||||||
| Total Proved | 705 | 10,486 | 552 | 3,005 | |||||||||||||||||
| Revisions due to prices | 8 | (930 | ) | (24 | ) | (171 | ) | ||||||||||||||
| Revisions other than price | (1 | ) | (320 | ) | (13 | ) | (68 | ) | |||||||||||||
| Extensions and discoveries | 139 | 1,158 | 116 | 449 | |||||||||||||||||
| Purchase of reserves | - | 2 | - | - | |||||||||||||||||
| Production | (53 | ) | (938 | ) | (40 | ) | (250 | ) | |||||||||||||
| Sale of reserves | - | (12 | ) | - | (2 | ) | |||||||||||||||
| As of December 31, 2012: | |||||||||||||||||||||
| Proved developed | 327 | 8,070 | 451 | 2,123 | |||||||||||||||||
| Proved undeveloped | 471 | 1,376 | 140 | 840 | |||||||||||||||||
| Total Proved | 798 | 9,446 | 591 | 2,963 | |||||||||||||||||
| United States | |||||||||||||||||||||
|
Oil / Bitumen |
Gas | NGLs | Total | ||||||||||||||||||
| (MMBbls) | (Bcf) | (MMBbls) | (MMBoe) | ||||||||||||||||||
| As of December 31, 2011: | |||||||||||||||||||||
| Proved developed | 146 | 7,957 | 402 | 1,875 | |||||||||||||||||
| Proved undeveloped | 22 | 1,550 | 123 | 403 | |||||||||||||||||
| Total Proved | 168 | 9,507 | 525 | 2,278 | |||||||||||||||||
| Revisions due to prices | (1 | ) | (831 | ) | (19 | ) | (159 | ) | |||||||||||||
| Revisions other than price | (6 | ) | (287 | ) | (13 | ) | (67 | ) | |||||||||||||
| Extensions and discoveries | 65 | 1,124 | 114 | 367 | |||||||||||||||||
| Purchase of reserves | - | 2 | - | - | |||||||||||||||||
| Production | (21 | ) | (752 | ) | (36 | ) | (183 | ) | |||||||||||||
| Sale of reserves | - | (1 | ) | - | - | ||||||||||||||||
| As of December 31, 2012: | |||||||||||||||||||||
| Proved developed | 166 | 7,391 | 431 | 1,829 | |||||||||||||||||
| Proved undeveloped | 39 | 1,371 | 140 | 407 | |||||||||||||||||
| Total Proved | 205 | 8,762 | 571 | 2,236 | |||||||||||||||||
| Canada | |||||||||||||||||||||
|
Oil / Bitumen |
Gas | NGLs | Total | ||||||||||||||||||
| (MMBbls) | (Bcf) | (MMBbls) | (MMBoe) | ||||||||||||||||||
| As of December 31, 2011: | |||||||||||||||||||||
| Proved developed | 163 | 951 | 26 | 348 | |||||||||||||||||
| Proved undeveloped | 374 | 28 | 1 | 379 | |||||||||||||||||
| Total Proved | 537 | 979 | 27 | 727 | |||||||||||||||||
| Revisions due to prices | 9 | (99 | ) | (5 | ) | (12 | ) | ||||||||||||||
| Revisions other than price | 5 | (33 | ) | - | (1 | ) | |||||||||||||||
| Extensions and discoveries | 74 | 34 | 2 | 82 | |||||||||||||||||
| Production | (32 | ) | (186 | ) | (4 | ) | (67 | ) | |||||||||||||
| Sale of reserves | - | (11 | ) | - | (2 | ) | |||||||||||||||
| As of December 31, 2012: | |||||||||||||||||||||
| Proved developed | 161 | 679 | 20 | 294 | |||||||||||||||||
| Proved undeveloped | 432 | 5 | - | 433 | |||||||||||||||||
| Total Proved | 593 | 684 | 20 | 727 | |||||||||||||||||
|
DEVON ENERGY CORPORATION |
|||||||||||
| COSTS INCURRED | |||||||||||
| (in millions) | Total | ||||||||||
| Year Ended December 31, | |||||||||||
| 2012 | 2011 | ||||||||||
| Property acquisition costs: | |||||||||||
| Proved properties | $ | 73 | $ | 48 | |||||||
| Unproved properties | 1,178 | 939 | |||||||||
| Exploration costs | 655 | 538 | |||||||||
| Development costs | 6,099 | 5,418 | |||||||||
| Costs Incurred | $ | 8,005 | $ | 6,943 | |||||||
| United States | |||||||||||
| Year Ended December 31, | |||||||||||
| 2012 | 2011 | ||||||||||
| Property acquisition costs: | |||||||||||
| Proved properties | $ | 2 | $ | 34 | |||||||
| Unproved properties | 1,135 | 851 | |||||||||
| Exploration costs | 351 | 272 | |||||||||
| Development costs | 4,408 | 4,130 | |||||||||
| Costs Incurred | $ | 5,896 | $ | 5,287 | |||||||
| Canada | |||||||||||
| Year Ended December 31, | |||||||||||
| 2012 | 2011 | ||||||||||
| Property acquisition costs: | |||||||||||
| Proved properties | $ | 71 | $ | 14 | |||||||
| Unproved properties | 43 | 88 | |||||||||
| Exploration costs | 304 | 266 | |||||||||
| Development costs | 1,691 | 1,288 | |||||||||
| Costs Incurred | $ | 2,109 | $ | 1,656 | |||||||
| COMPANY OPERATED RIGS | |||||||||
| As of December 31, | |||||||||
| 2012 | 2011 | ||||||||
| Number of Company Operated Rigs Running: | |||||||||
| United States | 74 | 53 | |||||||
| Canada | 8 | 7 | |||||||
| Total | 82 | 60 | |||||||
|
DEVON ENERGY CORPORATION |
|||||||||||||
| KEY OPERATING STATISTICS BY REGION | |||||||||||||
| Quarter Ended December 31, 2012 | |||||||||||||
| Avg. Production | Operated Rigs at | Gross Wells | |||||||||||
| (MBOED) | December 31, 2012 | Drilled | |||||||||||
| Barnett Shale | 227.4 | 10 | 73 | ||||||||||
| Canadian Oilsands - Jackfish / Pike | 48.9 | - | - | ||||||||||
| Cana-Woodford Shale | 54.3 | 11 | 44 | ||||||||||
| Granite Wash | 18.8 | 4 | 8 | ||||||||||
| Gulf Coast / East Texas | 57.3 | 4 | 21 | ||||||||||
| Lloydminster | 33.6 | - | 69 | ||||||||||
| Mississippian | 1.8 | 14 | 29 | ||||||||||
| Permian Basin | 66.3 | 26 | 65 | ||||||||||
| Rocky Mountains | 56.2 | 5 | 11 | ||||||||||
| Other | 114.0 | 8 | 35 | ||||||||||
| Total | 678.6 | 82 | 355 | ||||||||||
| CAPITAL EXPENDITURES | |||||||||||||||
| (in millions) | Quarter Ended December 31, 2012 | ||||||||||||||
| United States | Canada | Total | |||||||||||||
| Exploration | $ | 246 | 71 | $ | 317 | ||||||||||
| Development | 994 | 543 | 1,537 | ||||||||||||
| Exploration and development capital | $ | 1,240 | 614 | $ | 1,854 | ||||||||||
| Capitalized G&A | 77 | ||||||||||||||
| Capitalized interest | 10 | ||||||||||||||
| Midstream capital | 166 | ||||||||||||||
| Other capital | 84 | ||||||||||||||
| Total Continuing Operations | $ | 2,191 | |||||||||||||
| Discontinued operations | - | ||||||||||||||
| Total Operations | $ | 2,191 | |||||||||||||
| CAPITAL EXPENDITURES | |||||||||||||||
| (in millions) | Year Ended December 31, 2012 | ||||||||||||||
| United States | Canada | Total | |||||||||||||
| Exploration | $ | 1,463 | 292 | $ | 1,755 | ||||||||||
| Development | 4,009 | 1,431 | 5,440 | ||||||||||||
| Exploration and development capital | $ | 5,472 | 1,723 | $ | 7,195 | ||||||||||
| Capitalized G&A | 359 | ||||||||||||||
| Capitalized interest | 36 | ||||||||||||||
| Midstream capital | 530 | ||||||||||||||
| Other capital | 354 | ||||||||||||||
| Total Continuing Operations | $ | 8,474 | |||||||||||||
| Discontinued operations | 13 | ||||||||||||||
| Total Operations | $ | 8,487 | |||||||||||||
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. 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. The following tables summarize the effects of these items on fourth-quarter and full-year 2012 earnings.
|
|
|||||||||||
| RECONCILIATION TO GAAP INFORMATION | |||||||||||
| (in millions) | |||||||||||
| Quarter Ended December 31, 2012 | |||||||||||
| Before-Tax | After-Tax | ||||||||||
| Net earnings (GAAP) | $ | (357 | ) | ||||||||
| Asset impairments | 896 | 589 | |||||||||
| Restructuring costs | 74 | 49 | |||||||||
| Income tax accrual adjustments | - | 17 | |||||||||
| Oil, gas and NGL derivatives | 24 | 13 | |||||||||
| Interest rate and other financial instruments | 10 | 5 | |||||||||
| Adjusted earnings (Non-GAAP) | $ | 316 | |||||||||
| Diluted share count | 405 | ||||||||||
| Adjusted diluted earnings per share (Non-GAAP) | $ | 0.78 | |||||||||
|
|
|
|
|||||||||
| Year Ended December 31, 2012 | |||||||||||
| Before-Tax | After-Tax | ||||||||||
| Net earnings (GAAP) | $ | (185 | ) | ||||||||
| Asset impairments | 2,024 | 1,308 | |||||||||
| Restructuring costs | 74 | 49 | |||||||||
| Income tax accrual adjustments | - | 17 | |||||||||
| Oil, gas and NGL derivatives | 177 | 112 | |||||||||
| Interest rate and other financial instruments | 32 | 21 | |||||||||
| Adjusted earnings (Non-GAAP) | $ | 1,322 | |||||||||
| Diluted share count | 404 | ||||||||||
| Adjusted diluted earnings per share (Non-GAAP) | $ | 3.26 | |||||||||
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
NON-GAAP FINANCIAL MEASURES
Devon believes that using net debt for the calculation of “net debt to adjusted capitalization” provides a better measure than using debt. Devon defines net debt as debt less cash, cash equivalents and short-term investments. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt.
| RECONCILIATION TO GAAP INFORMATION | |||||||||||
| (in millions) | |||||||||||
| December 31, | |||||||||||
| 2012 | 2011 | ||||||||||
| Total debt (GAAP) | $ | 11,644 | $ | 9,780 | |||||||
| Adjustments: | |||||||||||
| Cash and short-term investments | 6,980 | 7,058 | |||||||||
| Net debt (Non-GAAP) | $ | 4,664 | $ | 2,722 | |||||||
| Total debt | $ | 11,644 | $ | 9,780 | |||||||
| Stockholders' equity | 21,278 | 21,430 | |||||||||
| Total capitalization (GAAP) | $ | 32,922 | $ | 31,210 | |||||||
| Net debt | $ | 4,664 | $ | 2,722 | |||||||
| Stockholders' equity | 21,278 | 21,430 | |||||||||
| Adjusted capitalization (Non-GAAP) | $ | 25,942 | $ | 24,152 | |||||||
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
NON-GAAP FINANCIAL MEASURES
Drill-bit capital is defined as costs incurred less asset retirement costs and proved acquisition costs. Drill-bit capital is a Non-GAAP measure. Devon believes drill-bit capital 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 reserve bookings.
| RECONCILIATION TO GAAP INFORMATION | ||||||||||||
| (in millions) | ||||||||||||
| Total | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2012 | 2011 | |||||||||||
| Costs Incurred (GAAP) | $ | 8,005 | $ | 6,943 | ||||||||
| Less: | ||||||||||||
| Asset retirement costs | 415 |
(4 |
) |
|||||||||
| Proved acquisition costs | 73 | 48 | ||||||||||
| Drill-bit capital (Non-GAAP) | $ | 7,517 |
$ |
6,899 |
||||||||
| United States | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2012 | 2011 | |||||||||||
| Costs Incurred (GAAP) | $ | 5,896 | $ | 5,287 | ||||||||
| Less: | ||||||||||||
| Asset retirement costs | 146 |
(6 |
) |
|||||||||
| Proved acquisition costs | 2 | 34 | ||||||||||
| Drill-bit capital (Non-GAAP) | $ | 5,748 |
$ |
5,259 |
||||||||
| Canada | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2012 | 2011 | |||||||||||
| Costs Incurred (GAAP) | $ | 2,109 | $ | 1,656 | ||||||||
| Less: | ||||||||||||
| Asset retirement costs | 269 |
2 |
||||||||||
| Proved acquisition costs | 71 | 14 | ||||||||||
| Drill-bit capital (Non-GAAP) | $ | 1,769 |
$ |
1,640 |
||||||||
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