Devon Energy Reports Third-Quarter 2015 Results

  • Produced Company record 282,000 barrels of oil per day
  • Exceeded oil production guidance for fifth consecutive quarter
  • Raised oil production growth for the second time in 2015
  • Reduced lease operating expenses 14 percent year over year
  • Decreased G&A costs by 8 percent from second quarter
  • Improved 2015 capital and operating cost outlook

OKLAHOMA CITY--()--Devon Energy Corp. (NYSE: DVN) today announced core earnings of $316 million, or $0.76 per diluted share, for the third quarter of 2015. This level of earnings generated cash flow from operations of $1.6 billion in the third quarter, a 41 percent increase compared to the second quarter of 2015.

“Devon delivered another outstanding operational performance in the third quarter,” said Dave Hager, president and CEO. “Our strategy of operating in North America’s best resource plays, coupled with a focus on delivering best-in-class execution, continues to generate top-tier results. Across our asset portfolio, well performance has consistently exceeded type curve expectations through higher production rates, declining capital costs and lower operating expenses.”

“Based on these strong results, we are raising our full-year oil production outlook for the second time this year,” Hager said. “And we are delivering this incremental production growth with significantly lower costs. We are now on pace to save around $1 billion of capital and operating costs in 2015 versus original expectations.”

“Looking ahead, we will continue to take the appropriate actions to preserve operational momentum and protect our balance sheet,” Hager said. “Our teams will maximize the value of production by aggressively pursuing cost reductions and we will maintain the flexibility of our capital programs. The advantage of having minimal long-term commitments allows us to dynamically allocate capital to our highest-returning areas while balancing investment with cash flow.”

On a reported basis, due to non-cash, asset-impairment charges, Devon had a net loss of $3.5 billion, or $8.64 per diluted share, for the third quarter of 2015. This compares with third-quarter 2014 reported net earnings of $1.0 billion, or $2.47 per diluted share.

Record Oil Production Exceeds Guidance for Fifth Consecutive Quarter

Devon delivered record oil production of 282,000 barrels per day, a 31 percent increase compared to the third quarter of 2014. This result surpassed the top end of guidance by 2,000 barrels per day, marking the fifth consecutive quarter the Company has exceeded oil production expectations.

The majority of Devon’s record-setting oil production was attributable to its U.S. resource plays, which are delivering the Company’s highest margins. U.S. oil production averaged 161,000 barrels per day in the third quarter, an increase of 18 percent compared to the third quarter of 2014. Growth in U.S. production was largely attributable to the Company’s Eagle Ford, Delaware Basin and Rockies assets. In the third quarter, Devon’s world-class Eagle Ford assets continued to deliver prolific well results. Net production in the Eagle Ford averaged 113,000 oil-equivalent barrels (Boe) per day, a 43 percent increase year over year. The Company also had another quarter of strong production results from its stacked-pay position in the Delaware Basin, where net production increased to 61,000 Boe per day in the third quarter, a 32 percent increase compared to the year-ago period. Another key contributor to Devon’s growth for the quarter was a 61 percent increase in oil production from its Rockies assets. Driven by development drilling in the Power River Basin, oil production in the Rockies averaged 16,000 barrels per day in the third quarter.

In Canada, Devon’s heavy-oil operations also delivered impressive production growth. In total, the Company’s heavy-oil production increased to a record 121,000 barrels of oil per day in the third quarter. Driven by the ramp-up of the Jackfish 3 facility to nameplate capacity four months ahead of schedule, Canadian oil production increased 52 percent compared to the third quarter of 2014.

Total production of oil, gas and natural gas liquids averaged 680,000 Boe per day during the third quarter. This result exceeded the top end of the Company’s guidance by 4,000 Boe per day and represents a 6 percent increase compared to the third quarter of 2014. With the strong growth in high-margin production, oil is now the largest component of the Devon’s product mix at 41 percent of total production.

Devon Raises Full-Year Production Outlook

Based on strong operating results year to date, Devon has raised its 2015 oil production guidance by 2 percent to a mid-point of 276,000 barrels per day. This marks the second time in 2015 the Company has increased its oil production outlook. Total oil production growth in 2015 is now expected to range from 31 to 33 percent. Due to the improving outlook for oil production, the Company has also raised its top-line production growth guidance for 2015 to a range of 8 to 10 percent.

Full-Year Capital Savings to Reach $500 Million

In addition to higher production, Devon is also benefiting from lower capital spending. The Company’s 2015 E&P capital program, excluding acquisitions, is now expected to range from $3.8 to $4.0 billion, a $100 million decrease compared to previous guidance. Combined with additional non-E&P capital savings, Devon’s total 2015 capital spending is expected to be $150 million lower than previous guidance. As a result of these additional savings, Devon has now reduced its 2015 capital spending guidance by $500 million compared to its original expectations issued in February.

Operations Report Highlights

For additional details on Devon’s E&P operations, please refer to the Company’s third-quarter 2015 Operations Report at www.devonenergy.com. Highlights from the report include:

  • Bone Spring basin type curve raised
  • Leonard Shale program delivers excellent results
  • Eagle Ford delivers record-setting well results
  • Jackfish 3 reaches nameplate capacity ahead of schedule
  • Meramec appraisal success expands potential

Hedges Increase Upstream Revenue; EnLink Profit Expands

Revenue from oil, natural gas and natural gas liquids sales totaled $1.3 billion in the third quarter of 2015, with oil revenue accounting for nearly 70 percent of total upstream revenues. This increased oil sales weighting was attributable to the Company’s substantial growth in both U.S. and Canadian oil production.

Cash settlements related to oil and natural gas hedges increased revenue by more than $600 million, or approximately $10 per Boe, in the third quarter. At the end of September, the Company’s remaining commodity hedges had a fair-market value of approximately $650 million.

Devon’s midstream business generated operating profits of $212 million in the third quarter, bringing the year-to-date total to $630 million. The majority of this profitability was attributable to the Company’s investment in EnLink Midstream. Year-to-date, EnLink-related operating profits have expanded by 15 percent compared to the same period in 2014.

Lease Operating Expenses Decline 14 Percent; Lowering Full-Year Cost Outlook

The Company has several cost-reduction initiatives under way that positively impacted third-quarter results. Field-level operating costs, which include both lease operating expenses (LOE) and production taxes, declined 18 percent compared to the third quarter of 2014 to $9.59 per Boe.

The most significant operating cost savings came from LOE, which is Devon’s largest field-level cost. LOE declined 14 percent compared to the year-ago period to $8.14 per Boe and was 9 percent below the low end of Devon’s guidance range. These LOE cost savings were realized across all regions of the Company’s portfolio.

Devon also realized significant general and administrative (G&A) cost savings in the third quarter. G&A expenses totaled $198 million, or $3.17 per Boe, an 8 percent improvement compared to the second quarter of 2015, and this strong cost performance was 7 percent below the low end of guidance.

Based on year-to-date cost savings, Devon now anticipates its field-level operating costs and G&A to decline to around $13.80 per Boe for the full-year 2015. These declines represent incremental savings of around $150 million based on the Company’s most recent guidance. Compared to Devon’s original guidance in February, this implies a full-year cash cost savings of around $550 million.

Balance Sheet and Liquidity Remain Strong

Devon’s financial position remains exceptionally strong with investment-grade credit ratings and excellent liquidity. The Company exited the quarter with net debt, excluding non-recourse EnLink obligations, totaling just over $7 billion. Devon had cash balances of $1.8 billion at quarter end, and has no borrowings under its $3.0 billion senior credit facility.

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). Core earnings and net debt are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided later in 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 at www.devonenergy.com. The Company’s third-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Nov. 4, 2015, 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 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 changes; changes in laws or regulations; our limited control over third parties who operate our oil and gas properties; our ability to successfully complete mergers, acquisitions and divestitures; and other risks 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.

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 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. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. 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.

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 visit www.devonenergy.com.

                       
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
 
Quarter Ended Nine Months Ended
PRODUCTION NET OF ROYALTIES September 30, September 30,
2015 2014 2015 2014
 
Oil and bitumen (MBbls/d)
United States 161 136 167 121
Canada 121 80 107 78
Retained assets 282 216 274 199
Divested assets - 3 - 7
Total 282 219 274 206
Natural gas liquids (MBbls/d)
United States 134 138 136 129
Divested assets - 5 - 9
Total 134 143 136 138
Gas (MMcf/d)
United States 1,570 1,690 1,598 1,656
Canada 16 26 21 24
Retained assets 1,586 1,716 1,619 1,680
Divested assets - 138 - 311
Total 1,586 1,854 1,619 1,991
Oil equivalent (MBoe/d)
United States 556 556 569 526
Canada 124 84 111 82
Retained assets 680 640 680 608
Divested assets - 31 - 68
Total 680 671 680 676
                 
KEY OPERATING STATISTICS BY REGION
Quarter Ended September 30, 2015
Avg. Production Gross Wells Operated Rigs at
(MBoe/d) Drilled September 30, 2015
Delaware Basin 61 40 10
Midland Basin 48 2 -
Eagle Ford 113 74 -
Canadian Heavy Oil 124 7 1
Anadarko Basin 83 45 5
Barnett Shale 176 - -
Rockies 28 14 2
Other assets 47 - -
Total 680 182 18
                             
PRODUCTION TREND 2014 2014 2015 2015 2015
Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3
 
Oil (MBbls/d)
Delaware Basin 27 27 33 41 41
Midland Basin 29 28 27 26 23
Eagle Ford 47 60 75 67 62
Canadian Heavy Oil 80 93 104 98 121
Anadarko Basin 10 10 9 10 9
Barnett Shale 2 2 1 1 1
Rockies 10 9 12 16 16
Other assets 11 10 11 11 9
Retained assets 216 239 272 270 282
Divested assets 3 - - - -
Total 219 239 272 270 282
Natural gas liquids (MBbls/d)
Delaware Basin 7 8 8 10 8
Midland Basin 12 12 11 11 12
Eagle Ford 14 18 23 24 26
Anadarko Basin 34 34 30 24 27
Barnett Shale 54 53 51 49 44
Rockies 1 1 1 1 2
Other assets 16 15 15 15 15
Retained assets 138 141 139 134 134
Divested assets 5 - - - -
Total 143 141 139 134 134
Gas (MMcf/d)
Delaware Basin 68 66 66 75 70
Midland Basin 68 71 71 77 76
Eagle Ford 109 127 143 146 154
Canadian Heavy Oil 26 23 28 20 16
Anadarko Basin 323 329 297 290 278
Barnett Shale 896 878 827 805 788
Rockies 66 58 53 62 58
Other assets 160 155 160 152 146
Retained assets 1,716 1,707 1,645 1,627 1,586
Divested assets 138 3 - - -
Total 1,854 1,710 1,645 1,627 1,586
Oil equivalent (MBoe/d)
Delaware Basin 46 46 52 64 61
Midland Basin 52 52 50 49 48
Eagle Ford 79 99 122 114 113
Canadian Heavy Oil 84 97 109 101 124
Anadarko Basin 98 100 88 82 83
Barnett Shale 205 201 191 185 176
Rockies 22 19 22 27 28
Other assets 54 50 51 52 47
Retained assets 640 664 685 674 680
Divested assets 31 1 - - -
Total 671 665 685 674 680
                       
BENCHMARK PRICES
(average prices) Quarter Ended September 30, Nine Months Ended September 30,
  2015   2014   2015     2014  
Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 46.69 $ 97.26 $ 51.11 $ 99.67
Natural Gas ($/Mcf) - Henry Hub $ 2.77 $ 4.07 $ 2.80 $ 4.57
 
REALIZED PRICES Quarter Ended September 30, 2015
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 42.09 $ 8.80 $ 2.26 $ 20.66
Canada (1) $ 25.10  

$

N/M

$ 0.09   $ 24.55  
Realized price without hedges $ 34.78 $ 8.80 $ 2.24 $ 21.37
Cash settlements $ 21.16   $ - $ 0.47   $ 9.86  
Realized price, including cash settlements $ 55.94   $ 8.80 $ 2.71   $ 31.23  
 
Quarter Ended September 30, 2014
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 90.23 $ 25.82 $ 3.61 $ 38.90
Canada (1) $ 65.88   $ 63.46 $ 0.76   $ 63.23  
Realized price without hedges $ 81.37 $ 25.90 $ 3.57 $ 41.92
Cash settlements $ (1.06 ) $ 0.01 $ 0.15   $ 0.07  
Realized price, including cash settlements $ 80.31   $ 25.91 $ 3.72   $ 41.99  
 
Nine Months Ended September 30, 2015
Oil NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 45.91 $ 9.50 $ 2.30 $ 22.18
Canada (1) $ 27.84  

$

N/M

$ 0.61   $ 27.06  
Realized price without hedges $ 38.81 $ 9.50 $ 2.27 $ 22.98
Cash settlements $ 19.48   $ - $ 0.53   $ 9.11  
Realized price, including cash settlements $ 58.29   $ 9.50 $ 2.80   $ 32.09  
 
Nine Months Ended September 30, 2014
Oil NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 92.55 $ 26.80 $ 4.04 $ 39.81
Canada (1) $ 65.54   $ 50.57 $ 3.80   $ 55.85  
Realized price without hedges $ 81.84 $ 27.34 $ 4.02 $ 42.38
Cash settlements $ (2.43 ) $ - $ (0.12 ) $ (1.11 )
Realized price, including cash settlements $ 79.41   $ 27.34 $ 3.90   $ 41.27  
 

 

(1) The reported Canadian gas volumes include volumes that are produced from certain of our leases and then transported to our Jackfish operations where the gas is used as fuel. However, the revenues and expenses related to this consumed gas are eliminated in our consolidated financials.
                       
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts) Quarter Ended Nine Months Ended
September 30, September 30,
  2015     2014   2015     2014  
Oil, gas and NGL sales $ 1,338 $ 2,588 $ 4,264 $ 7,824
Oil, gas and NGL derivatives 414 748 426 29
Marketing and midstream revenues   1,849     2,000   5,569     5,718  
Total operating revenues   3,601     5,336   10,259     13,571  
Lease operating expenses 510 584 1,625 1,764
Marketing and midstream operating expenses 1,637 1,781 4,939 5,092
General and administrative expenses 198 195 661 595
Production and property taxes 91 140 315 427
Depreciation, depletion and amortization 744 842 2,488 2,409
Asset impairments 5,851 - 15,479 -
Restructuring costs - 2 - 44
Gains and losses on asset sales 3 - 2 (1,072 )
Other operating items   11     18   52     74  
Total operating expenses   9,045     3,562   25,561     9,333  
Operating income (loss) (5,444 ) 1,774 (15,302 ) 4,238
Net financing costs 136 116 378 359
Other nonoperating items   43     4   46     111  
Earnings (loss) before income taxes (5,623 ) 1,654 (15,726 ) 3,768
Income tax expense (benefit)   (1,714 )   613   (5,435 )   1,698  
Net earnings (loss) (3,909 ) 1,041 (10,291 ) 2,070
Net earnings (loss) attributable to noncontrolling interests   (402 )   25   (369 )   55  
Net earnings (loss) attributable to Devon $ (3,507 ) $ 1,016 $ (9,922 ) $ 2,015  
 
Net earnings (loss) per share attributable to Devon:
Basic $ (8.64 ) $ 2.48 $ (24.45 ) $ 4.94
Diluted $ (8.64 ) $ 2.47 $ (24.45 ) $ 4.91
 
Weighted average common shares outstanding:
Basic 411 409 411 408
Diluted 411 411 411 410
                       
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Quarter Ended Nine Months Ended
September 30, September 30,
  2015     2014     2015     2014  
Cash flows from operating activities:
Net earnings (loss) $ (3,909 ) $ 1,041 $ (10,291 ) $ 2,070
Adjustments to reconcile net earnings (loss)
to net cash from operating activities:
Depreciation, depletion and amortization 744 842 2,488 2,409
Asset impairments 5,851 - 15,479 -
Gains and losses on asset sales 3 - 2 (1,072 )
Deferred income tax expense (benefit) (1,708 ) 23 (5,348 ) 800
Derivatives and other financial instruments (481 ) (804 ) (606 ) (43 )
Cash settlements on derivatives and financial instruments 730 44 1,913 (201 )
Other noncash charges 168 128 435 357
Net change in working capital 67 296 93 766
Change in long-term other assets 52 (38 ) 211 (115 )
Change in long-term other liabilities   36     27     (74 )   47  
Net cash from operating activities   1,553     1,559     4,302     5,018  
 
Cash flows from investing activities:
Capital expenditures (1,080 ) (1,672 ) (4,229 ) (5,013 )
Acquisitions of property, equipment and businesses (113 ) (31 ) (530 ) (6,255 )
Divestitures of property and equipment 27 2,260 35 5,202
Redemptions of long-term investments - - - 57
Other   (3 )   3     (8 )   87  
Net cash from investing activities   (1,169 )   560     (4,732 )   (5,922 )
 
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs 277 438 3,328 4,158
Repayments of long-term debt (252 ) (275 ) (1,773 ) (4,265 )
Net short-term debt repayments (169 ) (456 ) (932 ) (1,318 )
Stock option exercises - 9 4 92
Sale of subsidiary units - - 654 -
Issuance of subsidiary units 9 52 13 72
Dividends paid on common stock (99 ) (98 ) (296 ) (287 )
Distributions to noncontrolling interests (68 ) (46 ) (186 ) (187 )
Other   2     (13 )   (10 )   (4 )
Net cash from financing activities   (300 )   (389 )   802     (1,739 )
Effect of exchange rate changes on cash   (22 )   (28 )   (65 )   (15 )
Net change in cash and cash equivalents 62 1,702 307 (2,658 )
 
Cash and cash equivalents at beginning of period   1,725     1,706     1,480     6,066  
 
Cash and cash equivalents at end of period $ 1,787   $ 3,408   $ 1,787   $ 3,408  
           
CONSOLIDATED BALANCE SHEETS
(in millions)
September 30, December 31,
Current assets:   2015     2014  
Cash and cash equivalents $ 1,787 $ 1,480
Accounts receivable 1,318 1,959
Derivatives, at fair value 690 1,993
Income taxes receivable 8 522
Other current assets   495     544  
Total current assets   4,298     6,498  
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization 77,093 75,738
Not subject to amortization   2,688     2,752  
Total oil and gas 79,781 78,490
Midstream and other   10,410     9,695  
Total property and equipment, at cost 90,191 88,185
Less accumulated depreciation, depletion and amortization   (67,416 )   (51,889 )
Property and equipment, net   22,775     36,296  
Goodwill 5,775 6,303
Other long-term assets   1,503     1,540  
Total assets $ 34,351   $ 50,637  
 
Current liabilities:
Accounts payable $ 940 $ 1,400
Revenues and royalties payable 985 1,193
Short-term debt 500 1,432
Deferred income taxes 261 730
Other current liabilities   815     1,180  
Total current liabilities   3,501     5,935  
Long-term debt 11,400 9,830
Asset retirement obligations 1,377 1,339
Other long-term liabilities 818 948
Deferred income taxes 1,333 6,244
Stockholders' equity:
Common stock 41 41
Additional paid-in capital 4,773 4,088
Retained earnings 6,413 16,631
Accumulated other comprehensive earnings   321     779  
Total stockholders' equity attributable to Devon 11,548 21,539
Noncontrolling interests   4,374     4,802  
Total stockholders' equity   15,922     26,341  
Total liabilities and stockholders' equity $ 34,351   $ 50,637  
Common shares outstanding 411 409
                       
CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)
Quarter Ended September 30, 2015
Devon U.S. & Canada EnLink Eliminations Total
Oil, gas and NGL sales $ 1,338 $ - $ - $ 1,338
Oil, gas and NGL derivatives 414 - - 414
Marketing and midstream revenues   850     1,171     (172 )   1,849  
Total operating revenues   2,602     1,171     (172 )   3,601  
Lease operating expenses 510 - - 510
Marketing and midstream operating expenses 849 960 (172 ) 1,637
General and administrative expenses 163 35 - 198
Production and property taxes 84 7 - 91
Depreciation, depletion and amortization 644 100 - 744
Asset impairments 5,052 799 - 5,851
Gains and losses on asset sales - 3 - 3
Other operating items   11     -     -     11  
Total operating expenses   7,313     1,904     (172 )   9,045  
Operating loss (4,711 ) (733 ) - (5,444 )
Net financing costs 106 30 - 136
Other nonoperating items   48     (5 )   -     43  
Loss before income taxes (4,865 ) (758 ) - (5,623 )
Income tax expense (benefit)   (1,721 )   7     -     (1,714 )
Net loss (3,144 ) (765 ) - (3,909 )
Net loss attributable to noncontrolling interests   -     (402 )   -     (402 )
Net loss attributable to Devon $ (3,144 ) $ (363 ) $ -   $ (3,507 )
                       

OTHER KEY STATISTICS

(in millions) Quarter Ended September 30, 2015

Devon U.S.
& Canada

EnLink Eliminations Total
Cash flow statement related items:
Operating cash flow $ 1,337 $ 216 $ - $ 1,553
Capital expenditures $ (979 ) $ (101 ) $ - $ (1,080 )
Acquisitions of property, equipment and businesses $ (107 ) $ (6 ) $ - $ (113 )
EnLink distributions received (paid) $ 65 $ (133 ) $ - $ (68 )
 
Balance sheet statement items:
Net debt(1) $ 7,344 $ 2,769 $ - $ 10,113
 
(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.
           
CAPITAL EXPENDITURES
(in millions)
Quarter Ended September 30, 2015 Nine Months Ended September 30, 2015
Exploration and development capital $ 834 $ 3,043
Capitalized G&A and interest 105 327
Acquisitions 113 199
Midstream (1) 12 48
Corporate and other   18   66
Devon capital expenditures $ 1,082 $ 3,683
 
(1) Excludes $105 and $777 million attributable to EnLink for the third quarter and first nine months of 2015, respectively.
 

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.
 

CORE EARNINGS

(in millions)
 
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 diluted share. 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 third-quarter 2015 earnings.
           
Quarter Ended September 30, 2015
Before-Tax

After-Tax and
Noncontrolling Interests

 
Net loss attributable to Devon (GAAP) $ (3,507 )
Asset impairments 5,851 3,622
Fair value changes in financial instruments and foreign currency 254   201  
Core earnings attributable to Devon (non-GAAP) $ 316  
Diluted share count 414
Core diluted earnings per share attributable to Devon (non-GAAP) $ 0.76  
 

NET DEBT

(in millions)
 
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.
                 
September 30, 2015
Devon U.S. & Canada EnLink Devon Consolidated
 
Total debt (GAAP) $ 9,048 $ 2,852 $ 11,900
Less cash and cash equivalents   (1,704 )   (83 )   (1,787 )
Net debt (non-GAAP) $ 7,344   $ 2,769   $ 10,113  
           
DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 
 
PRODUCTION GUIDANCE Quarter 4
Low High
 
Oil and bitumen (MBbls/d)
United States 158 163
Canada   118     123  
Total   276     286  
Natural gas liquids (MBbls/d)
United States 130 135
Gas (MMcf/d)
United States 1,520 1,550
Canada   15     15  
Total   1,535     1,565  
Oil equivalent (MBoe/d)
United States 541 556
Canada   121     126  
Total   662     682  
 
 
 
PRICE REALIZATIONS GUIDANCE Quarter 4
Low High
 
Oil and bitumen - % of WTI
United States 87 % 97 %
Canada 44 % 54 %
NGL - realized price $ 7 $ 12
Natural gas - % of Henry Hub 78 % 88 %
     
OTHER GUIDANCE ITEMS Quarter 4
($ millions, except Boe) Low       High
 
Marketing & midstream operating profit $ 195 $ 225
Lease operating expenses per Boe $ 8.00 $ 8.50
General & administrative expenses per Boe $ 3.00 $ 3.30
Production and property taxes as % of upstream sales 6.3 % 7.3 %
Depreciation, depletion and amortization per Boe $ 10.50 $ 11.50
Other operating items $ 15 $ 20
Net financing costs $ 130 $ 140
Current income tax rate 0.0 % 5.0 %
Deferred income tax rate   30.0 %   35.0 %
Total income tax rate   30.0 %   40.0 %
 
Net earnings attributable to noncontrolling interests $ 10 $ 30
 
CAPITAL EXPENDITURES GUIDANCE Quarter 4
(in millions) Low High
 
Exploration and development $ 800 $ 900
Capitalized G&A and interest 95 115
Midstream (1) 5 15
Corporate and other   15     25  
Devon capital expenditures $ 915   $ 1,055  

 

(1) Excludes capital expenditures related to EnLink.
 
COMMODITY HEDGES
      Oil Commodity Hedges
Price Swaps       Price Collars       Call Options Sold
Period

Volume
(Bbls/d)

     

Weighted
Average
Price ($/Bbl)

Volume
(Bbls/d)

     

Weighted
Average Floor
Price
($/Bbl)

     

Weighted
Average
Ceiling Price
($/Bbl)

Volume
(Bbls/d)

     

Weighted
Average Price
($/Bbl)

Q4 2015 107,000 $ 90.61 44,000 $ 81.36 $ 88.63 28,000 $ 116.43
                 
Oil Basis Swaps
Period Index Volume (Bbls/d)

Weighted Average Differential to
WTI ($/Bbl)

Q4 2015 Western Canadian Select 40,000 $ (15.58 )
                                         
Natural Gas Commodity Hedges
Price Swaps Price Collars Call Options Sold
Period

Volume
(MMBtu/d)

Weighted
Average Price
($/MMBtu)

Volume
(MMBtu/d)

Weighted
Average Floor
Price
($/MMBtu)

Weighted
Average
Ceiling Price
($/MMBtu)

Volume
(MMBtu/d)

Weighted
Average Price
($/MMBtu)

Q4 2015 250,000 $ 4.32 480,000 $ 3.52 $ 3.83 550,000 $ 5.09
 

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.

Contacts

Devon Energy Corporation
Investor Contacts
Howard Thill, 405-552-3693
Scott Coody, 405-552-4735
Shea Snyder, 405-552-4782
Media Contact
John Porretto, 405-228-7506

Contacts

Devon Energy Corporation
Investor Contacts
Howard Thill, 405-552-3693
Scott Coody, 405-552-4735
Shea Snyder, 405-552-4782
Media Contact
John Porretto, 405-228-7506