NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
Summary of Significant Accounting Policies
|
Devon Energy Corporation (Devon) is a leading independent energy company engaged primarily in the
exploration, development and production of oil, natural gas and NGLs. Devons operations are concentrated in various North American onshore areas in the U.S. and Canada. Devon also owns natural gas pipelines, plants and treatment facilities in
many of its producing areas, making it one of North Americas larger processors of natural gas.
Accounting policies used
by Devon and its subsidiaries conform to accounting principles generally accepted in the United States of America and reflect industry practices. The more significant of such policies are discussed below.
Principles of Consolidation
The accounts of Devon and its wholly owned and controlled subsidiaries are included in the accompanying financial statements. All significant intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items
subject to such estimates and assumptions include the following:
|
|
|
proved reserves and related present value of future net revenues;
|
|
|
|
the carrying value of oil and gas properties;
|
|
|
|
derivative financial instruments;
|
|
|
|
the fair value of reporting units and related assessment of goodwill for impairment;
|
|
|
|
asset retirement obligations;
|
|
|
|
obligations related to employee pension and postretirement benefits; and
|
|
|
|
legal and environmental risks and exposures.
|
Revenue Recognition and Gas Balancing
Oil, gas and NGL sales are
recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is probable. Delivery occurs and title is transferred when production has been
delivered to a pipeline, railcar or truck. Cash received relating to future production is deferred and recognized when all revenue recognition criteria are met. Taxes assessed by governmental authorities on oil, gas and NGL sales are presented
separately from such revenues in the accompanying comprehensive statements of earnings.
Devon follows the sales method of
accounting for gas production imbalances. The volumes of gas sold may differ from the volumes to which Devon is entitled based on its interests in the properties. These differences
55
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
create imbalances that are recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the underproduced owner to recoup its entitled share through
production. The liability is measured based on current market prices. No receivables are recorded for those wells where Devon has taken less than its share of production unless all revenue recognition criteria are met. If an imbalance exists at the
time the wells reserves are depleted, settlements are made among the joint interest owners under a variety of arrangements.
Marketing and midstream revenues are recorded at the time products are sold or services are provided to third parties at a fixed or determinable price, delivery or performance has occurred, title has
transferred and collectability of the revenue is probable. Revenues and expenses attributable to oil, gas and NGL purchases, transportation and processing contracts are reported on a gross basis when Devon takes title to the products and has risks
and rewards of ownership.
During 2013, 2012 and 2011, no purchaser accounted for more than 10 percent of Devons
operating revenues from continuing operations.
Derivative Financial Instruments
Devon is exposed to certain risks relating to its ongoing business operations, including risks related to commodity prices, interest rates
and Canadian to U.S. dollar exchange rates. As discussed more fully below, Devon uses derivative instruments primarily to manage commodity price risk, interest rate risk and foreign exchange risk. Devon does not intend to issue or hold derivative
financial instruments for speculative trading purposes.
Devon periodically enters into derivative financial instruments with
respect to a portion of its oil, gas and NGL production to hedge future prices received. These instruments are used to manage the inherent uncertainty of future revenues due to commodity price volatility. Devons derivative financial
instruments typically include financial price swaps, basis swaps, costless price collars and call options. Under the terms of the price swaps, Devon receives a fixed price for its production and pays a variable market price to the contract
counterparty. For the basis swaps, Devon receives a fixed differential between two regional index prices and pays a variable differential on the same two index prices to the contract counterparty. The price collars set a floor and ceiling price for
the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, Devon will cash-settle the difference with the counterparty to the collars. The call options give
counterparties the right to purchase production at a predetermined price.
Devon periodically enters into interest rate swaps
to manage its exposure to interest rate volatility. Devon periodically enters into foreign exchange forward contracts to manage its exposure to fluctuations in exchange rates.
All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the balance sheet. Changes in the fair value of these derivative financial instruments
are recorded in earnings unless specific hedge accounting criteria are met. For derivative financial instruments held during the three-year period ended December 31, 2013, Devon chose not to meet the necessary criteria to qualify its derivative
financial instruments for hedge accounting treatment. Cash settlements with counterparties on Devons derivative financial instruments are also recorded in earnings.
By using derivative financial instruments to hedge exposures to changes in commodity prices, interest rates and foreign currency rates, Devon is exposed to credit risk. Credit risk is the failure of the
counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with
56
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a number of counterparties whom Devon believes are acceptable credit risks. It is Devons policy to enter into derivative contracts only with investment grade rated counterparties deemed by
management to be competent and competitive market makers. Additionally, Devons derivative contracts generally require cash collateral to be posted if either its or the counterpartys credit rating falls below certain credit rating levels.
The mark-to-market exposure threshold, above which collateral must be posted, decreases as the debt rating falls further below such credit levels. As of December 31, 2013, Devon held $3 million of cash collateral, which represented the
estimated fair value of certain derivative positions in excess of Devons credit guidelines. The collateral is reported in other current liabilities in the accompanying balance sheet.
General and Administrative Expenses
General and administrative
expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by Devon and net of amounts capitalized pursuant to the full cost method of accounting.
Share Based Compensation
Devon grants stock options, restricted stock awards and other types of share-based awards to members of its Board of Directors and selected employees. All such awards are measured at fair value on the
date of grant and are generally recognized as a component of general and administrative expenses in the accompanying comprehensive statements of earnings over the applicable requisite service periods. As a result of Devons consolidation of its
U.S. operations announced in October 2012, certain share based awards were accelerated and recognized as a component of restructuring costs in the accompanying comprehensive statements of earnings.
Generally, Devon uses new shares from approved incentive programs to grant share-based awards and to issue shares upon stock option
exercises. Shares repurchased under approved programs are available to be issued as part of Devons share based awards. However, Devon has historically cancelled these shares upon repurchase.
Income Taxes
Devon is subject to current income taxes assessed by the federal and various state jurisdictions in the U.S. and by other foreign
jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of
existing tax net operating loss carryforwards and other types of carryforwards. If the future utilization of some portion of carryforwards is determined to be unlikely, a valuation allowance is provided to reduce the recorded tax benefits from such
assets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Devon does not recognize U.S. deferred income taxes on the unremitted earnings of its foreign subsidiaries that are deemed to be
indefinitely reinvested. When such earnings are no longer deemed indefinitely reinvested, Devon recognizes the appropriate deferred, or even current, income tax liabilities.
Devon recognizes the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing
authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not
57
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the
tax position is expected to be settled within the upcoming year, in which case the liabilities are included in other current liabilities. Interest and penalties related to unrecognized tax benefits are included in current income tax expense.
Net Earnings (Loss) Per Common Share
Devons basic earnings per share amounts have been computed based on the average number of shares of common stock outstanding for the period. Basic earnings per share includes the effect of
participating securities, which primarily consist of Devons outstanding restricted stock awards. Diluted earnings per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially
dilutive securities. Such securities primarily consist of outstanding stock options.
Cash and Cash Equivalents
Devon considers all highly liquid investments with original contractual maturities of three months or less to be cash equivalents.
Investments
Devon periodically invests excess cash in United States and Canadian treasury securities and other marketable securities. Devon considers securities with original contractual maturities in excess of three
months, but less than one year to be short-term investments. Investments with contractual maturities in excess of one year are classified as long-term, unless such investments are classified as trading or available-for-sale.
Devon reports its investments and other marketable securities at fair value, except for debt securities in which management has the
ability and intent to hold until maturity. Such debt securities totaled $62 million and $64 million at December 31, 2013 and 2012, respectively, and are included in other long-term assets in the accompanying balance sheet. Devon has the ability
to hold the securities until maturity.
Property and Equipment
Devon follows the full cost method of accounting for its oil and gas properties. Accordingly, all costs incidental to the acquisition,
exploration and development of oil and gas properties, including costs of undeveloped leasehold, dry holes and leasehold equipment, are capitalized. Internal costs incurred that are directly identified with acquisition, exploration and development
activities undertaken by Devon for its own account, and that are not related to production, general corporate overhead or similar activities, are also capitalized. Interest costs incurred and attributable to unproved oil and gas properties under
current evaluation and major development projects of oil and gas properties are also capitalized. All costs related to production activities, including workover costs incurred solely to maintain or increase levels of production from an existing
completion interval, are charged to expense as incurred.
Capitalized costs are depleted by an equivalent unit-of-production
method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on
current costs) to be incurred in developing proved reserves, net of estimated salvage values.
Costs associated with unproved
properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. Devon assesses its unproved properties for impairment quarterly. Significant unproved properties are
assessed individually. Costs of insignificant unproved properties are transferred into the depletion calculation over holding periods ranging from three to four years.
58
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
No gain or loss is recognized upon disposal of oil and gas properties unless such
disposal significantly alters the relationship between capitalized costs and proved reserves in a particular country.
Under
the full cost method of accounting, capitalized costs of oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the full cost ceiling at the end of each quarter. The ceiling is calculated separately
for each country and is based on the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent per annum, net of related tax effects. The estimated future net revenues exclude future cash outflows
associated with settling asset retirement obligations included in the net book value of oil and gas properties.
Estimated
future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. Prices are held constant indefinitely and are not changed except
where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including derivative contracts in place that qualify for hedge accounting treatment. None of Devons derivative contracts
held during the three-year period ended December 31, 2013, qualified for hedge accounting treatment.
Any excess of the
net book value, less related deferred taxes, over the ceiling is written off as an expense. An expense recorded in one period may not be reversed in a subsequent period even though higher commodity prices may have increased the ceiling applicable to
the subsequent period.
Costs for midstream assets that are in use are depreciated over the assets estimated useful
lives, using either the unit-of-production or straight-line method. Depreciation and amortization of other property and equipment, including corporate and leasehold improvements, are provided using the straight-line method based on estimated useful
lives ranging from three to 60 years. Interest costs incurred and attributable to major midstream and corporate construction projects are also capitalized.
Devon recognizes liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites and midstream pipelines and processing plants when there is a legal
obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost
recorded as an increase to the associated property and equipment on the consolidated balance sheet. When the assumptions used to estimate a recorded asset retirement obligation change, a revision is recorded to both the asset retirement obligation
and the asset retirement cost. Devons asset retirement obligations include estimated environmental remediation costs which arise from normal operations and are associated with the retirement of such long-lived assets. The asset retirement cost
is depreciated using a systematic and rational method similar to that used for the associated property and equipment.
Goodwill
Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets
acquired and is tested for impairment at least annually. Such test includes an assessment of qualitative and quantitative factors. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. The
fair value of each reporting unit is estimated and compared to the net book value of the reporting unit. If the estimated fair value of the reporting unit is less than the net book value, including goodwill, then the goodwill is written down to the
implied fair value of the goodwill through a charge to expense. Because quoted market prices are not available for Devons reporting units, the fair values of the reporting units are estimated based upon several valuation analyses, including
comparable companies, comparable transactions and premiums paid.
59
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Devon performed annual impairment tests of goodwill in the fourth quarters of 2013, 2012
and 2011. Based on these assessments, no impairment of goodwill was required.
The table below provides a summary of
Devons goodwill, by assigned reporting unit. The decrease in Devons goodwill from 2012 to 2013 was primarily due to changes in the exchange rate between the United States dollar and the Canadian dollar.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
U.S.
|
|
$
|
3,020
|
|
|
$
|
3,046
|
|
Canada
|
|
|
2,838
|
|
|
|
3,033
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,858
|
|
|
$
|
6,079
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably
estimated. Liabilities for environmental remediation or restoration claims resulting from improper operation of assets are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Expenditures
related to such environmental matters are expensed or capitalized in accordance with Devons accounting policy for property and equipment.
Fair Value Measurements
Certain of Devons assets and liabilities are measured at fair value at each reporting date. Fair value represents the price that would be received to sell the asset or paid to transfer the liability
in an orderly transaction between market participants. This price is commonly referred to as the exit price. Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques.
This hierarchy consists of three broad levels:
|
|
|
Level 1 Inputs consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. When
available, Devon measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value.
|
|
|
|
Level 2 Inputs consist of quoted prices that are generally observable for the asset or liability. Common examples of Level 2 inputs include
quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in markets not considered to be active.
|
|
|
|
Level 3 Inputs are not observable from objective sources and have the lowest priority. The most common Level 3 fair value measurement is an
internally developed cash flow model.
|
Discontinued Operations
All amounts related to Devons International operations that were sold in 2012 and 2011 are classified as discontinued operations.
Foreign Currency Translation Adjustments
The United States dollar is the functional currency for Devons consolidated operations except its Canadian subsidiaries, which use the Canadian dollar as the functional currency. Assets and
liabilities of the Canadian subsidiaries are translated to United States dollars using the applicable exchange rate as of the end of a reporting
60
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
period. Revenues, expenses and cash flow are translated using an average exchange rate during the reporting period. Translation adjustments have no effect on net income and are included in
accumulated other comprehensive earnings in stockholders equity.
2.
|
Derivative Financial Instruments
|
Commodity Derivatives
As of December 31, 2013, Devon had the following open oil derivative positions. Devons oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures
price.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
Q1-Q4 2014
|
|
|
75,000
|
|
|
$
|
94.14
|
|
|
|
70,453
|
|
|
$
|
89.38
|
|
|
$
|
100.58
|
|
|
|
42,000
|
|
|
$
|
116.43
|
|
Q1-Q4 2015
|
|
|
37,500
|
|
|
$
|
90.15
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
22,000
|
|
|
$
|
115.45
|
|
Q1-Q4 2016
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
12,500
|
|
|
$
|
95.00
|
|
As of December 31, 2013, Devon had the following open natural gas derivative positions. The first
table presents Devons natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devons natural gas derivatives that settle against the AECO index.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
Q1-Q4 2014
|
|
|
800,000
|
|
|
$
|
4.42
|
|
|
|
460,000
|
|
|
$
|
4.03
|
|
|
$
|
4.51
|
|
|
|
500,000
|
|
|
$
|
5.00
|
|
Q1-Q4 2015
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
550,000
|
|
|
$
|
5.09
|
|
Q1-Q4 2016
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
110,000
|
|
|
$
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swaps
|
|
Period
|
|
Index
|
|
|
Volume (MMBtu/d)
|
|
|
Weighted Average
Differential
to Henry Hub
($/MMBtu)
|
|
Q1-Q4 2014
|
|
|
AECO
|
|
|
|
94,781
|
|
|
$
|
(0.52
|
)
|
As of December 31, 2013, Devon had the following open NGL derivative positions. Devons NGL
positions settle against the average of the prompt month OPIS Mont Belvieu, Texas Index.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swaps
|
|
Period
|
|
Pay
|
|
|
Volume
(Bbls/d)
|
|
|
Weighted Average
Differential
to WTI
($/Bbl)
|
|
Q1-Q4 2014
|
|
|
Natural Gasoline
|
|
|
|
329
|
|
|
$
|
(10.85
|
)
|
61
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Currency Derivatives
As of December 31, 2013, Devon had the following open foreign currency derivative position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Contract
|
|
Currency
|
|
Contract
Type
|
|
|
CAD
Notional
|
|
|
Weighted Average
Fixed Rate Received
|
|
|
Expiration
|
|
|
|
|
|
|
(In millions)
|
|
|
(CAD-USD)
|
|
|
|
|
Canadian Dollar
|
|
|
Sell
|
|
|
$
|
1,002
|
|
|
|
0.938
|
|
|
|
March 2014
|
|
Financial Statement Presentation
The following table presents the net gains and losses recognized in the accompanying comprehensive statements of earnings associated with derivative financial instruments. Net gains and losses associated
with Devons commodity derivatives are presented in oil, gas and NGL derivatives in the accompanying comprehensive statements of earnings. Net gains and losses associated with Devons interest rate and foreign currency derivatives are
presented in other nonoperating items in the accompanying comprehensive statements of earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Commodity derivatives
|
|
$
|
(191
|
)
|
|
$
|
693
|
|
|
$
|
881
|
|
Interest rate derivatives
|
|
|
|
|
|
|
(15
|
)
|
|
|
(11
|
)
|
Foreign currency derivatives
|
|
|
56
|
|
|
|
(18
|
)
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) recognized in comprehensive statements of earnings
|
|
$
|
(135
|
)
|
|
$
|
660
|
|
|
$
|
886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the derivative fair values included in the accompanying balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
Balance Sheet Caption
|
|
2013
|
|
|
2012
|
|
|
|
|
|
(In millions)
|
|
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
|
Other current assets
|
|
$
|
75
|
|
|
$
|
379
|
|
Commodity derivatives
|
|
Other long-term assets
|
|
|
28
|
|
|
|
22
|
|
Interest rate derivatives
|
|
Other current assets
|
|
|
|
|
|
|
23
|
|
Foreign currency derivatives
|
|
Other current assets
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset derivatives
|
|
|
|
$
|
103
|
|
|
$
|
425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability derivatives:
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
|
Other current liabilities
|
|
$
|
58
|
|
|
$
|
3
|
|
Commodity derivatives
|
|
Other long-term liabilities
|
|
|
62
|
|
|
|
29
|
|
Foreign currency derivatives
|
|
Other current liabilities
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liability derivatives
|
|
|
|
$
|
121
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
62
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
|
Share-Based Compensation
|
On June 3, 2009, Devons stockholders adopted the 2009 Long-Term Incentive Plan, which expires on
June 2, 2019. This plan authorizes the Compensation Committee, which consists of independent non-management members of Devons Board of Directors, to grant nonqualified and incentive stock options, restricted stock awards, performance
restricted stock awards, Canadian restricted stock units, performance share units, stock appreciation rights and cash-out rights to eligible employees. The plan also authorizes the grant of nonqualified stock options, restricted stock awards,
restricted stock units and stock appreciation rights to directors.
In the second quarter of 2012, Devons stockholders
adopted an amendment to the 2009 Long-Term Incentive Plan, which also expires June 2, 2019. This amendment increases the number of shares authorized for issuance from 21.5 million shares to 47.0 million shares. To calculate shares
issued under the 2009 Long-Term Incentive Plan subsequent to this amendment, options and stock appreciation rights represent one share and other awards represent 2.38 shares.
Devon also has a stock option plan that was adopted in 2005 under which stock options were issued to certain employees. Options granted under this plan remain exercisable by the employees owning such
options, but no new options or restricted stock awards will be granted under this plan.
Devon did not have an annual
long-term incentive grant in 2013 due to revisions in the timing of the employee compensation cycle. The annual long-term incentive grant related to 2013 performance was granted in February 2014. The following table presents the effects of
share-based compensation included in Devons accompanying comprehensive statements of earnings. The vesting for certain share-based awards was accelerated as part of Devons consolidation of its U.S. operations announced in October 2012.
The associated expense for these accelerated awards is included in restructuring costs in the accompanying comprehensive statements of earnings. See Note 6 for further details.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Gross general and administrative expense
|
|
$
|
157
|
|
|
$
|
179
|
|
|
$
|
181
|
|
Share-based compensation expense capitalized pursuant to the full cost method of accounting for oil and gas
properties
|
|
$
|
60
|
|
|
$
|
56
|
|
|
$
|
56
|
|
Related income tax benefit
|
|
$
|
22
|
|
|
$
|
31
|
|
|
$
|
33
|
|
Stock Options
In accordance with Devons incentive plans, the exercise price of stock options granted may not be less than the market value of the stock at the date of grant. In addition, options granted are
exercisable during a period established for each grant, which may not exceed eight years from the date of grant. The recipient must pay the exercise price in cash or in common stock, or a combination thereof, at the time that the option is
exercised. Generally, the service requirement for vesting ranges from zero to four years.
The fair value of stock options on
the date of grant is expensed over the applicable vesting period. Devon estimates the fair values of stock options granted using a Black-Scholes option valuation model, which requires Devon to make several assumptions. The volatility of Devons
common stock is based on the historical volatility of the market price of Devons common stock over a period of time equal to the expected term of the option and ending on the grant date. The dividend yield is based on Devons historical
and current yield in effect at the date
63
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of grant. The risk-free interest rate is based on the zero-coupon United States Treasury yield for the expected term of the option at the date of grant. The expected term of the options is based
on historical exercise and termination experience for various groups of employees and directors. Each group is determined based on the similarity of their historical exercise and termination behavior. The following table presents a summary of the
grant-date fair values of stock options granted and the related assumptions for 2012 and 2011. All such amounts represent the weighted-average amounts for each year. No stock options were granted in 2013.
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Grant-date fair value
|
|
$
|
22.20
|
|
|
$
|
23.11
|
|
Volatility factor
|
|
|
42.5
|
%
|
|
|
46.0
|
%
|
Dividend yield
|
|
|
1.2
|
%
|
|
|
1.0
|
%
|
Risk-free interest rate
|
|
|
1.1
|
%
|
|
|
0.8
|
%
|
Expected term (in years)
|
|
|
6.0
|
|
|
|
4.2
|
|
The following table presents a summary of Devons outstanding stock options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Remaining
Term
|
|
|
Intrinsic
Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In years)
|
|
|
(In millions)
|
|
Outstanding at December 31, 2012
|
|
|
7,828
|
|
|
$
|
69.12
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(61
|
)
|
|
$
|
57.66
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,212
|
)
|
|
$
|
68.47
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(109
|
)
|
|
$
|
69.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
6,446
|
|
|
$
|
69.35
|
|
|
|
3.76
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2013
|
|
|
6,416
|
|
|
$
|
69.36
|
|
|
|
3.75
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2013
|
|
|
5,361
|
|
|
$
|
69.50
|
|
|
|
3.39
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of stock options that were exercised during 2013, 2012 and 2011 was $0.3
million, $34 million and $81 million, respectively. As of December 31, 2013, Devons unrecognized compensation cost related to unvested stock options was $19 million. Such cost is expected to be recognized over a weighted-average period of
1.6 years.
64
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted Stock Awards and Units
Restricted stock awards and units are subject to the terms, conditions, restrictions and limitations, if any, that the Compensation
Committee deems appropriate, including restrictions on continued employment. Generally, the service requirement for vesting ranges from zero to four years. During the vesting period, recipients of restricted stock awards receive dividends that are
not subject to restrictions or other limitations. Devon estimates the fair values of restricted stock awards and units as the closing price of Devons common stock on the grant date of the award or unit, which is expensed over the applicable
vesting period. The following table presents a summary of Devons unvested restricted stock awards and units.
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Awards
& Units
|
|
|
Weighted
Average
Grant-Date
Fair
Value
|
|
|
|
(In thousands)
|
|
|
|
|
Unvested at December 31, 2012
|
|
|
5,740
|
|
|
$
|
61.75
|
|
Granted
|
|
|
258
|
|
|
$
|
57.27
|
|
Vested
|
|
|
(2,365
|
)
|
|
$
|
64.13
|
|
Forfeited
|
|
|
(341
|
)
|
|
$
|
59.82
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2013
|
|
|
3,292
|
|
|
$
|
59.76
|
|
|
|
|
|
|
|
|
|
|
The aggregate fair value of restricted stock awards and units that vested during 2013, 2012 and 2011 was
$141 million, $112 million and $145 million, respectively. As of December 31, 2013, Devons unrecognized compensation cost related to unvested restricted stock awards and units was $166 million. Such cost is expected to be recognized over
a weighted-average period of 2.2 years.
Performance Based Restricted Stock Awards
Performance based restricted stock awards are granted to certain members of Devons senior management. Vesting of the awards is
dependent on Devon meeting certain internal performance targets and the recipient meeting certain service requirements. Generally, the service requirement for vesting ranges from zero to four years. If Devon meets or exceeds the performance target,
the awards vest after the recipient meets the related requisite service period. If the performance target and service period requirement are not met, the award does not vest. Once vested, recipients are entitled to dividends on the awards. Devon
estimates the fair values of the awards as the closing price of Devons common stock on the grant date of the award, which is expensed over the applicable vesting period. The following table presents a summary of Devons performance based
restricted stock awards.
|
|
|
|
|
|
|
|
|
|
|
Performance
Restricted
Stock Awards
|
|
|
Weighted
Average
Grant-Date
Fair
Value
|
|
|
|
(In thousands)
|
|
|
|
|
Unvested at December 31, 2012
|
|
|
408
|
|
|
$
|
58.25
|
|
Vested
|
|
|
(92
|
)
|
|
$
|
65.10
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2013
|
|
|
316
|
|
|
$
|
56.25
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, Devons unrecognized compensation cost related to these awards was $3
million. Such cost is expected to be recognized over a weighted-average period of 1.4 years.
65
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Performance Share Units
Performance share units are granted to certain members of Devons senior management. Each unit that vests entitles the recipient to
one share of Devon common stock. The vesting of these units is based on comparing Devons total shareholder return (TSR) to the TSR of a predetermined group of fourteen peer companies over the specified two- or three-year
performance period. The vesting of units may be between zero and 200 percent of the units granted depending on Devons TSR as compared to the peer group on the vesting date.
At the end of the vesting period, recipients receive dividend equivalents with respect to the number of units vested. The fair value of
each performance share unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a risk-free interest rate based on United States Treasury rates as of
the grant date; (ii) a volatility assumption based on the historical realized price volatility of Devon and the designated peer group; and (iii) an estimated ranking of Devon among the designated peer group. The fair value of the unit on
the date of grant is expensed over the applicable vesting period. The following table presents a summary of the grant-date fair values of performance share units granted and the related assumptions.
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
Grant-date fair value
|
|
$61.27 $63.48
|
|
$61.27 $63.48
|
|
$80.24 $83.15
|
Risk-free interest rate
|
|
0.26% 0.36%
|
|
0.26% 0.36%
|
|
0.28% 0.43%
|
Volatility factor
|
|
30.3%
|
|
30.3%
|
|
41.8%
|
Contractual term (in years)
|
|
3.0
|
|
3.0
|
|
3.0
|
The following table presents a summary of Devons performance share units.
|
|
|
|
|
|
|
|
|
|
|
Performance
Share Units
|
|
|
Weighted
Average
Grant-Date
Fair
Value
|
|
|
|
(In thousands)
|
|
|
|
|
Unvested at December 31, 2012
|
|
|
878
|
|
|
$
|
66.93
|
|
Granted
|
|
|
55
|
|
|
$
|
61.57
|
|
Forfeited
|
|
|
(8
|
)
|
|
$
|
63.37
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2013
(1)
|
|
|
925
|
|
|
$
|
66.64
|
|
|
|
|
|
|
|
|
|
|
(1)
|
A maximum of 1.9 million common shares could be awarded based upon Devons final TSR ranking.
|
As of December 31, 2013, Devons unrecognized compensation cost related to unvested units was $24 million. Such cost is
expected to be recognized over a weighted-average period of 1.6 years.
66
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2013 and 2012, Devon recognized asset impairments related to its oil and gas property and equipment and its U.S.
midstream assets as presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
|
Gross
|
|
|
Net of Taxes
|
|
|
Gross
|
|
|
Net of Taxes
|
|
|
|
(In millions)
|
|
U.S. oil and gas assets
|
|
$
|
1,110
|
|
|
$
|
707
|
|
|
$
|
1,793
|
|
|
$
|
1,142
|
|
Canada oil and gas assets
|
|
|
843
|
|
|
|
632
|
|
|
|
163
|
|
|
|
122
|
|
Midstream assets
|
|
|
23
|
|
|
|
14
|
|
|
|
68
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset impairments
|
|
$
|
1,976
|
|
|
$
|
1,353
|
|
|
$
|
2,024
|
|
|
$
|
1,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Impairments
Under the full cost method of accounting, capitalized costs of oil and gas properties are subject to a quarterly full cost ceiling test, which is discussed in Note 1.
The oil and gas impairments resulted primarily from declines in the U.S. and Canada full cost ceilings. The lower ceiling values resulted
primarily from decreases in the 12-month average trailing prices for oil, natural gas and NGLs, which reduced proved reserve values.
Midstream Impairments
Due to declining natural gas production resulting from low natural gas and NGL prices, Devon determined that the carrying amounts of
certain of its midstream facilities were not recoverable from estimated future cash flows. Consequently, the assets were written down to their estimated fair values, which were determined using discounted cash flow models. The fair value of
Devons midstream assets is considered a Level 3 fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Accretion of asset retirement obligations
|
|
$
|
115
|
|
|
$
|
110
|
|
|
$
|
92
|
|
(Gain) loss on sale of assets
|
|
|
9
|
|
|
|
(13
|
)
|
|
|
(2
|
)
|
Other
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating items
|
|
$
|
121
|
|
|
$
|
92
|
|
|
$
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2011, Devon received $88 million of excess insurance recoveries related to certain weather and
operational claims.
Office Consolidation
In October 2012, Devon announced plans to consolidate its U.S. personnel into a single operations group centrally located at the companys corporate headquarters in Oklahoma City. As a result, Devon
closed its office in Houston, transferred operational responsibilities for assets in south Texas, east Texas and Louisiana to Oklahoma City and incurred $134 million of restructuring costs associated with the consolidation.
67
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Divestiture of Offshore Assets
In the fourth quarter of 2009, Devon announced plans to divest its offshore assets. As of December 31, 2012, Devon had divested all
of its U.S. Offshore and International assets and incurred $196 million of restructuring costs associated with the divestitures.
Financial Statement Presentation
The schedule below summarizes restructuring costs presented in the accompanying comprehensive statements of earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Office consolidation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance and retention
|
|
$
|
13
|
|
|
$
|
77
|
|
|
$
|
|
|
Lease obligations and other
|
|
|
41
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
54
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offshore divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance
|
|
$
|
|
|
|
$
|
(3
|
)
|
|
$
|
8
|
|
Lease obligations and other
|
|
|
|
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs
|
|
$
|
54
|
|
|
$
|
74
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance and retention
As of December 31, 2013, Devon had incurred $90
million of employee severance and retention costs associated with the office consolidation. This included amounts related to cash severance costs and accelerated vesting of share-based grants.
Lease obligations and other
As of December 31, 2013, Devon had incurred $28 million of restructuring costs related to
certain office space that is subject to non-cancellable operating lease agreements and that it ceased using as a part of the office consolidation. Devons estimate of lease obligations was based upon certain key estimates that could change over
the term of the leases. These estimates include the estimated sublease income that it may receive over the term of the leases, as well as the amount of variable operating costs that it will be required to pay under the leases.
The schedule below summarizes Devons restructuring liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Current
Liabilities
|
|
|
Other
Long-Term
Liabilities
|
|
|
Total
|
|
|
|
(In millions)
|
|
Balance as of December 31, 2011
|
|
$
|
29
|
|
|
$
|
16
|
|
|
$
|
45
|
|
Employee severance Office consolidation
|
|
|
49
|
|
|
|
|
|
|
|
49
|
|
Lease obligations Offshore
|
|
|
(17
|
)
|
|
|
(7
|
)
|
|
|
(24
|
)
|
Employee severance Offshore
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
|
52
|
|
|
|
9
|
|
|
|
61
|
|
Employee severance Office consolidation
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
Lease obligations Offshore
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(5
|
)
|
Lease obligations and other Office consolidation
|
|
|
21
|
|
|
|
11
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
$
|
27
|
|
|
$
|
18
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Tax Expense (Benefit)
Devons income tax components are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Current income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
United States federal
|
|
$
|
73
|
|
|
$
|
60
|
|
|
$
|
(143
|
)
|
Various states
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
20
|
|
Canada and various provinces
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense (benefit)
|
|
|
72
|
|
|
|
52
|
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
United States federal
|
|
|
198
|
|
|
|
(188
|
)
|
|
|
1,986
|
|
Various states
|
|
|
59
|
|
|
|
34
|
|
|
|
95
|
|
Canada and various provinces
|
|
|
(160
|
)
|
|
|
(30
|
)
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax expense (benefit)
|
|
|
97
|
|
|
|
(184
|
)
|
|
|
2,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
169
|
|
|
$
|
(132
|
)
|
|
$
|
2,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) differed from the amounts computed by applying the United States
federal income tax rate to earnings from continuing operations before income taxes as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Expected income tax expense (benefit) based on United States statutory tax rate of 35%
|
|
$
|
52
|
|
|
$
|
(111
|
)
|
|
$
|
1,502
|
|
Repatriations
|
|
|
97
|
|
|
|
|
|
|
|
725
|
|
State income taxes
|
|
|
35
|
|
|
|
20
|
|
|
|
70
|
|
Taxation on Canadian operations
|
|
|
14
|
|
|
|
(19
|
)
|
|
|
(91
|
)
|
Other
|
|
|
(29
|
)
|
|
|
(22
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
169
|
|
|
$
|
(132
|
)
|
|
$
|
2,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant to the completed and planned divestitures of Devons International assets located outside
North America, a portion of Devons foreign earnings had been deemed to no longer be indefinitely reinvested. As of December 31, 2012, Devon had recognized a $936 million deferred income tax liability related to assumed repatriations of
earnings from its foreign subsidiaries, including $725 million of deferred income tax expense recognized in 2011.
In the
second and fourth quarters of 2013, Devon repatriated to the U. S. a total of $4.3 billion of its cash held outside of the U. S. In the fourth quarter of 2013, Devon announced plans to divest of its Canadian conventional assets. These events
resulted in an incremental income tax expense of $97 million. The incremental expense included $180 million of current income tax expense offset by $83 million of deferred income tax benefit. The $83 million deferred tax benefit was comprised of
$180 million of deferred tax benefits that offset the incremental current income tax expense and an additional $97 million of deferred income tax expense accrued in the fourth quarter for assumed repatriations.
69
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred Tax Assets and Liabilities
The tax effects of temporary differences that gave rise to Devons deferred tax assets and liabilities are presented below:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Asset retirement obligations
|
|
$
|
673
|
|
|
$
|
618
|
|
Foreign tax credits
|
|
|
248
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
183
|
|
|
|
427
|
|
Alternative minimum tax credits
|
|
|
105
|
|
|
|
198
|
|
Pension benefit obligations
|
|
|
104
|
|
|
|
129
|
|
Other
|
|
|
163
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
1,476
|
|
|
|
1,506
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(5,895
|
)
|
|
|
(4,970
|
)
|
Long-term debt
|
|
|
(161
|
)
|
|
|
(198
|
)
|
Taxes on unremitted foreign earnings
|
|
|
(157
|
)
|
|
|
(936
|
)
|
Fair value of financial instruments
|
|
|
(7
|
)
|
|
|
(141
|
)
|
Other
|
|
|
(52
|
)
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(6,272
|
)
|
|
|
(6,321
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(4,796
|
)
|
|
$
|
(4,815
|
)
|
|
|
|
|
|
|
|
|
|
Devon has recognized a $248 million deferred tax asset related to foreign tax credit carryforwards which
expire between 2019 and 2023. Devon expects the tax benefits from the foreign tax credits to be utilized between 2014 and 2016. Devon also has recognized $183 million of deferred tax assets related to various net operating loss carryforwards
available to offset future income taxes. The carryforwards consist of $673 million of Canadian net operating loss carryforwards, which expire between 2028 and 2033, and $197 million of state net operating loss carryforwards, which expire primarily
between 2014 and 2032. Devon expects the tax benefits from the Canadian net operating loss carryforwards to be utilized between 2014 and 2017 and the state net operating loss carryforwards to be utilized between 2014 and 2020. Devon has also
recognized a $105 million deferred tax asset related to alternative minimum tax credits which have no expiration date and will be available for use against tax on future taxable income.
The expected utilization of Devons carryforwards and credits is based upon current estimates of taxable income, considering
limitations on the annual utilization of these benefits as set forth by tax regulations. Significant changes in such estimates caused by variables such as future oil, gas and NGL prices or capital expenditures could alter the timing of the eventual
utilization of such carryforwards. There can be no assurance that Devon will generate any specific level of continuing taxable earnings. However, management believes that Devons future taxable income will more likely than not be sufficient to
utilize its tax carryforwards and credits prior to their expiration.
As of December 31, 2013, Devons unremitted
foreign earnings totaled approximately $4.3 billion. Of this amount, approximately $1.5 billion was deemed to be indefinitely reinvested into the development and growth of Devons Canadian business. Therefore, Devon has not recognized a
deferred tax liability for United States
70
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
income taxes associated with such earnings. If such earnings were to be repatriated to the U.S., Devon may be subject to United States income taxes and foreign withholding taxes. However, it is
not practical to estimate the amount of such additional taxes that may be payable due to the inter-relationship of the various factors involved in making such an estimate.
Devon has deemed the remaining $2.8 billion of unremitted earnings not to be indefinitely reinvested. Consequently, Devon has recognized a $157 million deferred tax liability associated with such
unremitted earnings as of December 31, 2013.
Unrecognized Tax Benefits
The following table presents changes in Devons unrecognized tax benefits.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Balance at beginning of year
|
|
$
|
216
|
|
|
$
|
165
|
|
Tax positions taken in prior periods
|
|
|
(17
|
)
|
|
|
(46
|
)
|
Tax positions taken in current year
|
|
|
42
|
|
|
|
92
|
|
Accrual of interest related to tax positions taken
|
|
|
5
|
|
|
|
7
|
|
Lapse of statute of limitations
|
|
|
|
|
|
|
(3
|
)
|
Foreign currency translation
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
243
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
Devons unrecognized tax benefit balance at December 31, 2013 and 2012, included $32 million
and $27 million, respectively, of interest and penalties. If recognized, $198 million of Devons unrecognized tax benefits as of December 31, 2013 would affect Devons effective income tax rate. Included below is a summary of the tax
years, by jurisdiction, that remain subject to examination by taxing authorities.
|
|
|
|
|
Jurisdiction
|
|
Tax Years Open
|
|
United States federal
|
|
|
2008-2013
|
|
Various U.S. states
|
|
|
2008-2013
|
|
Canada federal
|
|
|
2004-2013
|
|
Various Canadian provinces
|
|
|
2004-2013
|
|
Certain statute of limitation expirations are scheduled to occur in the next twelve months. However,
Devon is currently in various stages of the administrative review process for certain open tax years. In addition, Devon is currently subject to various income tax audits that have not reached the administrative review process. As a result, Devon
cannot reasonably anticipate the extent that the liabilities for unrecognized tax benefits will increase or decrease within the next twelve months.
71
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table reconciles earnings from continuing operations and common shares outstanding used in the
calculations of basic and diluted earnings per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
|
|
|
Common
Shares
|
|
|
Earnings (loss)
per
Share
|
|
|
|
(In millions, except per share amounts)
|
|
Year Ended December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(20
|
)
|
|
|
406
|
|
|
|
|
|
Attributable to participating securities
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
|
(22
|
)
|
|
|
402
|
|
|
$
|
(0.06
|
)
|
Dilutive effect of potential common shares issuable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(22
|
)
|
|
|
402
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(185
|
)
|
|
|
404
|
|
|
|
|
|
Attributable to participating securities
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
|
(188
|
)
|
|
|
400
|
|
|
$
|
(0.47
|
)
|
Dilutive effect of potential common shares issuable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(188
|
)
|
|
|
400
|
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2,134
|
|
|
|
417
|
|
|
|
|
|
Attributable to participating securities
|
|
|
(23
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
2,111
|
|
|
|
412
|
|
|
$
|
5.12
|
|
Dilutive effect of potential common shares issuable
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
2,111
|
|
|
|
414
|
|
|
$
|
5.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain options to purchase shares of Devons common stock were excluded from the dilution
calculations because the options were antidilutive. These excluded options totaled 7 million, 9 million and 3 million in 2013, 2012 and 2011, respectively.
72
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9.
|
Other Comprehensive Earnings
|
Components of other comprehensive earnings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Foreign currency translation:
|
|
|
|
|
Beginning accumulated foreign currency translation
|
|
$
|
1,996
|
|
|
$
|
1,802
|
|
|
$
|
1,993
|
|
Change in cumulative translation adjustment
|
|
|
(574
|
)
|
|
|
203
|
|
|
|
(200
|
)
|
Income tax benefit (expense)
|
|
|
26
|
|
|
|
(9
|
)
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending accumulated foreign currency translation
|
|
|
1,448
|
|
|
|
1,996
|
|
|
|
1,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated pension and postretirement benefits
|
|
|
(225
|
)
|
|
|
(227
|
)
|
|
|
(233
|
)
|
Net actuarial gain (loss) and prior service cost arising in current year
|
|
|
48
|
|
|
|
(47
|
)
|
|
|
(21
|
)
|
Recognition of net actuarial loss and prior service cost in earnings
(1)
|
|
|
24
|
|
|
|
51
|
|
|
|
30
|
|
Income tax expense
|
|
|
(27
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending accumulated pension and postretirement benefits
|
|
|
(180
|
)
|
|
|
(225
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive earnings, net of tax
|
|
$
|
1,268
|
|
|
$
|
1,771
|
|
|
$
|
1,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of general and
administrative expenses on the accompanying comprehensive statements of earnings (see Retirement Plans note for additional details).
|
10.
|
Supplemental Information to Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Net change in working capital accounts:
|
|
|
|
|
Accounts receivable
|
|
$
|
(288
|
)
|
|
$
|
140
|
|
|
$
|
(185
|
)
|
Other current assets
|
|
|
49
|
|
|
|
(128
|
)
|
|
|
125
|
|
Accounts payable
|
|
|
26
|
|
|
|
(8
|
)
|
|
|
64
|
|
Revenues and royalties payable
|
|
|
35
|
|
|
|
19
|
|
|
|
144
|
|
Other current liabilities
|
|
|
(120
|
)
|
|
|
(73
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in working capital
|
|
$
|
(298
|
)
|
|
$
|
(50
|
)
|
|
$
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid (net of capitalized interest)
|
|
$
|
406
|
|
|
$
|
334
|
|
|
$
|
325
|
|
Income taxes paid (received)
|
|
$
|
13
|
|
|
$
|
100
|
|
|
$
|
(383
|
)
|
11.
|
Short-Term Investments
|
The components of short-term investments include the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2013
|
|
|
December
31,
2012
|
|
|
|
(In millions)
|
|
Canadian treasury, agency and provincial securities
|
|
$
|
|
|
|
$
|
1,865
|
|
United States treasuries
|
|
|
|
|
|
|
429
|
|
Other
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
|
|
|
$
|
2,343
|
|
|
|
|
|
|
|
|
|
|
73
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of accounts receivable include the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
|
(In millions)
|
|
Oil, gas and NGL sales
|
|
$
|
851
|
|
|
$
|
752
|
|
Joint interest billings
|
|
|
447
|
|
|
|
270
|
|
Marketing and midstream revenues
|
|
|
172
|
|
|
|
161
|
|
Other
|
|
|
61
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
Gross accounts receivable
|
|
|
1,531
|
|
|
|
1,255
|
|
Allowance for doubtful accounts
|
|
|
(11
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
Net accounts receivable
|
|
$
|
1,520
|
|
|
$
|
1,245
|
|
|
|
|
|
|
|
|
|
|
13.
|
Acquisitions and Divestitures
|
Crosstex Merger
On October 21, 2013, Devon, Crosstex Energy, Inc. and Crosstex Energy, L.P. (collectively Crosstex) announced plans to combine substantially all of Devons U.S. midstream assets with
Crosstexs assets to form a new midstream business. The new business will consist of EnLink Midstream Partners, L.P. (the Partnership) and EnLink Midstream, LLC (EnLink), a master limited partnership and a general
partner entity, which will both be publicly traded entities.
In exchange for a controlling interest in both EnLink and
the Partnership, Devon will contribute its equity interest in a newly formed Devon subsidiary (EnLink Holdings) and $100 million in cash. EnLink Holdings will own Devons midstream assets in the Barnett
Shale in north Texas and the Cana and Arkoma Woodford Shales in Oklahoma, as well as Devons economic interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. The Partnership and EnLink will each own 50% of EnLink
Holdings. The completion of these transactions is subject to Crosstex Energy, Inc. shareholder approval. Devon expects Crosstex Energy, Inc. shareholders will approve the transaction, allowing Devon and Crosstex to complete the transaction near the
end of the first quarter of 2014.
Upon closing of the transactions, the pro forma ownership of EnLink will be approximately:
|
|
|
70% Devon Energy Corporation
|
|
|
|
30% Current Crosstex Energy, Inc. public stockholders
|
Upon closing of the transactions, the pro forma ownership of the Partnership will be approximately:
|
|
|
53% Devon Energy Corporation
|
|
|
|
40% Current Crosstex Energy, L.P. public unitholders
|
|
|
|
7% the General Partner
|
GeoSouthern Acquisition
On November 20, 2013, Devon entered
into an agreement with GeoSouthern Intermediate Holdings, LLC, to acquire certain oil and gas properties, leasehold mineral interests and related assets located in the Eagle Ford Shale in south Texas for $6 billion in cash. The transaction is
expected to close in the first quarter of 2014.
74
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Subsequent Event (unaudited)
In conjunction with the announcement of the GeoSouthern acquisition, Devon also announced plans to divest certain non-core properties
located throughout Canada and the U.S. On February 19, 2014, Devon announced its first transaction as part of this divestiture program, in which it agreed to sell the majority of its Canadian conventional assets to Canadian Natural Resources Limited
for approximately $2.8 billion ($3.125 billion in Canadian dollars). This transaction is expected to close early in the second quarter of 2014.
14.
|
Debt and Related Expenses
|
A summary of Devons debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Commercial paper
|
|
$
|
1,317
|
|
|
$
|
3,189
|
|
Other debentures and notes:
|
|
|
|
|
|
|
|
|
5.625% due January 15, 2014
|
|
|
500
|
|
|
|
500
|
|
Floating rate due December 15, 2015
|
|
|
500
|
|
|
|
|
|
2.40% due July 15, 2016
|
|
|
500
|
|
|
|
500
|
|
Floating rate due December 15, 2016
|
|
|
350
|
|
|
|
|
|
1.20% due December 15, 2016
|
|
|
650
|
|
|
|
|
|
1.875% due May 15, 2017
|
|
|
750
|
|
|
|
750
|
|
8.25% due July 1, 2018
|
|
|
125
|
|
|
|
125
|
|
2.25% due December 15, 2018
|
|
|
750
|
|
|
|
|
|
6.30% due January 15, 2019
|
|
|
700
|
|
|
|
700
|
|
4.00% due July 15, 2021
|
|
|
500
|
|
|
|
500
|
|
3.25% due May 15, 2022
|
|
|
1,000
|
|
|
|
1,000
|
|
7.50% due September 15, 2027
|
|
|
150
|
|
|
|
150
|
|
7.875% due September 30, 2031
|
|
|
1,250
|
|
|
|
1,250
|
|
7.95% due April 15, 2032
|
|
|
1,000
|
|
|
|
1,000
|
|
5.60% due July 15, 2041
|
|
|
1,250
|
|
|
|
1,250
|
|
4.75% due May 15, 2042
|
|
|
750
|
|
|
|
750
|
|
Net discount on debentures and notes
|
|
|
(20
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
12,022
|
|
|
|
11,644
|
|
Less amount classified as short-term debt
(1)
|
|
|
4,066
|
|
|
|
3,189
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
7,956
|
|
|
$
|
8,455
|
|
|
|
|
|
|
|
|
|
|
(1)
|
2013 short-term debt consists of $2.25 billion of senior notes recently issued in conjunction with the planned GeoSouthern acquisition, $1.3 billion of commercial paper
and $500 million of senior notes due January 15, 2014.
|
75
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Debt maturities as of December 31, 2013, excluding premiums and discounts, are as
follows (in millions):
|
|
|
|
|
2014
|
|
$
|
4,067
|
|
2015
|
|
|
|
|
2016
|
|
|
500
|
|
2017
|
|
|
750
|
|
2018
|
|
|
125
|
|
2019 and thereafter
|
|
|
6,600
|
|
|
|
|
|
|
Total
|
|
$
|
12,042
|
|
|
|
|
|
|
Credit Lines
Devon has a $3.0 billion syndicated, unsecured revolving line of credit (the Senior Credit Facility) that matures on October 24, 2018. However, prior to the maturity date, Devon has the
option to extend the maturity for up to one additional one-year period, subject to the approval of the lenders.
Amounts
borrowed under the Senior Credit Facility may, at the election of Devon, bear interest at various fixed rate options for periods of up to twelve months. Such rates are generally less than the prime rate. However, Devon may elect to borrow at the
prime rate. The Senior Credit Facility currently provides for an annual facility fee of $3.8 million that is payable quarterly in arrears. As of December 31, 2013, there were no borrowings under the Senior Credit Facility.
The Senior Credit Facility contains only one material financial covenant. This covenant requires Devons ratio of total funded debt
to total capitalization, as defined in the credit agreement, to be no greater than 65 percent. The credit agreement contains definitions of total funded debt and total capitalization that include adjustments to the respective amounts reported in the
accompanying financial statements. Also, total capitalization is adjusted to add back noncash financial write-downs such as full cost ceiling impairments or goodwill impairments. As of December 31, 2013, Devon was in compliance with this
covenant with a debt-to-capitalization ratio of 25.7 percent.
Commercial Paper
Devon has access to $3.0 billion of short-term credit under its commercial paper program. Commercial paper debt generally has a maturity
of between 1 and 90 days, although it can have a maturity of up to 365 days, and bears interest at rates agreed to at the time of the borrowing. The interest rate is generally based on a standard index such as the Federal Funds Rate, LIBOR, or the
money market rate as found in the commercial paper market. As of December 31, 2013, Devons weighted average borrowing rate on its commercial paper borrowings was 0.30 percent.
Other Debentures and Notes
Following are descriptions of the
various other debentures and notes outstanding at December 31, 2013, as listed in the table presented at the beginning of this note.
GeoSouthern Debt
In
December 2013, in conjunction with the planned GeoSouthern acquisition, Devon issued $2.25 billion aggregate principal amount of fixed and floating rate senior notes resulting in cash proceeds of approximately
76
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$2.2 billion, net of discounts and issuance costs. The floating rate senior notes due in 2015 bear interest at a rate equal to three-month LIBOR plus 0.45 percent, which rate will be reset
quarterly. The floating rate senior notes due in 2016 bears interest at a rate equal to three-month LIBOR plus 0.54 percent, which rate will be reset quarterly. The schedule below summarizes the key terms of these notes ($ in millions).
|
|
|
|
|
Floating rate due December 15, 2015
|
|
$
|
500
|
|
Floating rate due December 15, 2016
|
|
|
350
|
|
1.20% due December 15, 2016
|
|
|
650
|
|
2.25% due December 15, 2018
|
|
|
750
|
|
Discount and issuance costs
|
|
|
(2
|
)
|
|
|
|
|
|
Net proceeds
|
|
$
|
2,248
|
|
|
|
|
|
|
In the event that GeoSouthern acquisition is not completed on or prior to June 30, 2014, Devon is
required to redeem each series of new senior notes at 101% of the aggregate principal amount of such series, plus accrued and unpaid interest. Due to the redemption features, these senior notes were classified as short-term debt on Devons
consolidated balance sheet as of December 31, 2013 and will be reclassified as long-term debt once the acquisition is completed.
Additionally, during December 2013, Devon entered into a term loan agreement with a group of major financial institutions pursuant to which Devon may draw up to $2.0 billion to finance, in part, the
GeoSouthern acquisition and to pay transaction costs. Half of any loans under the term loan agreement will have a maturity of three years and the other half will have a maturity of five years (the 5-Year Loans). The 5-Year Loans will
provide for the partial amortization of principal during the last two years that they are outstanding. Loans borrowed under the term loan agreement may, at the election of Devon, bear interest at various fixed rate options for periods up to six
months. Such rates are generally less than the prime rate. However, Devon may elect to borrow at the prime rate. There were no borrowings under the term loan agreement as of December 31, 2013.
Other Notes
In 2012,
2011, 2009 and 2002 Devon issued senior notes that are unsecured and unsubordinated obligations of Devon. Devon used the net proceeds to repay outstanding commercial paper and credit facility borrowings. The schedule below summarizes the key terms
of these notes ($ in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Issued
|
|
|
|
May 2012
|
|
|
July 2011
|
|
|
January 2009
|
|
|
March 2002
|
|
1.875% due May 15, 2017
|
|
$
|
750
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
3.25% due May 15, 2022
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.75% due May 15, 2042
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.40% due July 15, 2016
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
4.00% due July 15, 2021
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
5.60% due July 15, 2041
|
|
|
|
|
|
|
1,250
|
|
|
|
|
|
|
|
|
|
5.625% due January 15, 2014
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
6.30% due January 15, 2019
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
|
|
7.95% due April 15, 2032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Discount and issuance costs
|
|
|
(35
|
)
|
|
|
(29
|
)
|
|
|
(13
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds
|
|
$
|
2,465
|
|
|
$
|
2,221
|
|
|
$
|
1,187
|
|
|
$
|
986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Ocean Debt
On April 25, 2003, Devon merged with Ocean Energy, Inc. and assumed certain debt instruments. The table below summarizes the debt assumed that remains outstanding as of December 31, 2013,
including the fair value of the debt at April 25, 2003, and the effective interest rate of the debt after determining the fair values using April 25, 2003, market interest rates. The premiums resulting from fair values exceeding face
values are being amortized using the effective interest method. Both notes are general unsecured obligations of Devon.
|
|
|
|
|
|
|
|
|
Debt Assumed
|
|
Fair Value of
Debt Assumed
|
|
|
Effective Rate of
Debt Assumed
|
|
|
(In millions)
|
|
|
|
|
8.250% due July 2018 (principal of $125 million)
|
|
$
|
147
|
|
|
|
5.5
|
%
|
7.500% due September 2027 (principal of $150 million)
|
|
$
|
169
|
|
|
|
6.5
|
%
|
7.875% Debentures due September 30, 2031
In October 2001, Devon, through Devon Financing Corporation, U.L.C. (Devon Financing), a wholly owned finance subsidiary, sold
debentures, which are unsecured and unsubordinated obligations of Devon Financing. Devon has fully and unconditionally guaranteed on an unsecured and unsubordinated basis the obligations of Devon Financing under the debt securities. The proceeds
were used to fund a portion of the acquisition of Anderson Exploration.
Net financing costs
The following schedule includes the components of net financing costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Interest based on debt outstanding
|
|
$
|
466
|
|
|
$
|
440
|
|
|
$
|
414
|
|
Capitalized interest
|
|
|
(56
|
)
|
|
|
(48
|
)
|
|
|
(72
|
)
|
Other fees and expenses
|
|
|
27
|
|
|
|
14
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
437
|
|
|
|
406
|
|
|
|
352
|
|
Interest income
|
|
|
(20
|
)
|
|
|
(36
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing costs
|
|
$
|
417
|
|
|
$
|
370
|
|
|
$
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15.
|
Asset Retirement Obligations
|
The schedule below summarizes changes in Devons asset retirement obligations.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Asset retirement obligations as of beginning of period
|
|
$
|
2,095
|
|
|
$
|
1,563
|
|
Liabilities incurred
|
|
|
112
|
|
|
|
90
|
|
Liabilities settled
|
|
|
(83
|
)
|
|
|
(86
|
)
|
Revision of estimated obligation
|
|
|
104
|
|
|
|
420
|
|
Liabilities assumed by others
|
|
|
(28
|
)
|
|
|
(23
|
)
|
Accretion expense on discounted obligation
|
|
|
115
|
|
|
|
110
|
|
Foreign currency translation adjustment
|
|
|
(87
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations as of end of period
|
|
|
2,228
|
|
|
|
2,095
|
|
Less current portion
|
|
|
88
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations, long-term
|
|
$
|
2,140
|
|
|
$
|
1,996
|
|
|
|
|
|
|
|
|
|
|
During 2012, Devon recognized revisions to its asset retirement obligations totaling $420 million. The
primary factor contributing to this revision was an overall increase in abandonment cost estimates for certain of its production operations facilities.
Devon has various non-contributory defined benefit pension plans, including qualified plans and nonqualified plans. The
qualified plans provide retirement benefits for certain U.S. and Canadian employees meeting certain age and service requirements. Benefits for the qualified plans are based on the employees years of service and compensation and are funded from
assets held in the plans trusts.
The nonqualified plans provide retirement benefits for certain employees whose
benefits under the qualified plans are limited by income tax regulations. The nonqualified plans benefits are based on the employees years of service and compensation. For certain nonqualified plans, Devon has established trusts to fund
these plans benefit obligations. The total value of these trusts was $27 million and $31 million at December 31, 2013 and 2012, respectively, and is included in other long-term assets in the accompanying balance sheets. For the remaining
nonqualified plans for which trusts have not been established, benefits are funded from Devons available cash and cash equivalents.
Devon also has defined benefit postretirement plans that provide benefits for substantially all U.S. employees. The plans provide medical and, in some cases, life insurance benefits and are either
contributory or non-contributory, depending on the type of plan. Benefit obligations for such plans are estimated based on Devons future cost-sharing intentions. Devons funding policy for the plans is to fund the benefits as they become
payable with available cash and cash equivalents.
79
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Benefit Obligations and Funded Status
The following table presents the funded status of Devons qualified and nonqualified pension and postretirement benefit plans. The
benefit obligation for pension plans represents the projected benefit obligation, while the benefit obligation for the postretirement benefit plans represents the accumulated benefit obligation. The accumulated benefit obligation differs from the
projected benefit obligation in that the former includes no assumption about future compensation levels. The accumulated benefit obligation for pension plans was $1.1 billion and $1.2 billion at December 31, 2013 and 2012, respectively.
Devons benefit obligations and plan assets are measured each year as of December 31. Devons 2012 plan settlements relate to a plan amendment which removed a dollar cap on lump sum payments and revised optional forms of payment to
include a lump sum distribution feature. The projected benefit obligation for Devons qualified plans was fully funded as of December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
1,360
|
|
|
$
|
1,303
|
|
|
$
|
34
|
|
|
$
|
37
|
|
Service cost
|
|
|
36
|
|
|
|
43
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
51
|
|
|
|
60
|
|
|
|
1
|
|
|
|
1
|
|
Actuarial loss (gain)
|
|
|
(158
|
)
|
|
|
95
|
|
|
|
(3
|
)
|
|
|
(4
|
)
|
Plan amendments
|
|
|
2
|
|
|
|
14
|
|
|
|
(8
|
)
|
|
|
|
|
Plan curtailments
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
1
|
|
Plan settlements
|
|
|
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
Foreign exchange rate changes
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Benefits paid
|
|
|
(112
|
)
|
|
|
(43
|
)
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
1,177
|
|
|
|
1,360
|
|
|
|
24
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
1,165
|
|
|
|
1,187
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
(57
|
)
|
|
|
102
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
11
|
|
|
|
11
|
|
|
|
1
|
|
|
|
2
|
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Plan settlements
|
|
|
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(112
|
)
|
|
|
(43
|
)
|
|
|
(4
|
)
|
|
|
(5
|
)
|
Foreign exchange rate changes
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
1,006
|
|
|
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(171
|
)
|
|
$
|
(195
|
)
|
|
$
|
(24
|
)
|
|
$
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
$
|
47
|
|
|
$
|
62
|
|
|
$
|
|
|
|
$
|
|
|
Current liabilities
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Noncurrent liabilities
|
|
|
(206
|
)
|
|
|
(245
|
)
|
|
|
(21
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount
|
|
$
|
(171
|
)
|
|
$
|
(195
|
)
|
|
$
|
(24
|
)
|
|
$
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
279
|
|
|
$
|
340
|
|
|
$
|
(13
|
)
|
|
$
|
(11
|
)
|
Prior service cost (credit)
|
|
|
23
|
|
|
|
25
|
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
302
|
|
|
$
|
365
|
|
|
$
|
(24
|
)
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The plan assets for pension benefits in the table above exclude the assets held in
trusts for the nonqualified plans. However, employer contributions for pension benefits in the table above include $11 million and $10 million for 2013 and 2012, respectively, which were transferred from the trusts established for the nonqualified
plans.
Certain of Devons pension plans have a projected benefit obligation and accumulated benefit obligation in excess
of plan assets at December 31, 2013 and 2012 as presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Projected benefit obligation
|
|
$
|
218
|
|
|
$
|
257
|
|
Accumulated benefit obligation
|
|
$
|
179
|
|
|
$
|
216
|
|
Fair value of plan assets
|
|
$
|
|
|
|
$
|
|
|
Net Periodic Benefit Cost and Other Comprehensive Earnings
The following table presents the components of net periodic benefit cost and other comprehensive earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement
Benefits
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
36
|
|
|
$
|
43
|
|
|
$
|
37
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
|
|
51
|
|
|
|
60
|
|
|
|
60
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Expected return on plan assets
|
|
|
(62
|
)
|
|
|
(64
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment and settlement expense
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
(3
|
)
|
Recognition of net actuarial loss (gain)
(1)
|
|
|
22
|
|
|
|
24
|
|
|
|
32
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
Recognition of prior service cost
(1)
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost
(2)
|
|
|
51
|
|
|
|
92
|
|
|
|
90
|
|
|
|
|
|
|
|
1
|
|
|
|
(2
|
)
|
Other comprehensive loss (earnings):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss (gain) arising in current year
|
|
|
(39
|
)
|
|
|
37
|
|
|
|
23
|
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(7
|
)
|
Prior service cost (credit) arising in current year
|
|
|
2
|
|
|
|
14
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
5
|
|
Recognition of net actuarial loss, including settlement expense, in net periodic benefit cost
|
|
|
(22
|
)
|
|
|
(45
|
)
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
Recognition of prior service cost, including curtailment, in net periodic benefit cost
|
|
|
(4
|
)
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss (earnings)
|
|
|
(63
|
)
|
|
|
(2
|
)
|
|
|
(12
|
)
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized
|
|
$
|
(12
|
)
|
|
$
|
90
|
|
|
$
|
78
|
|
|
$
|
(9
|
)
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period.
|
(2)
|
Net periodic benefit cost is a component of general and administrative expenses on the accompanying comprehensive statements of earnings.
|
81
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the estimated net actuarial loss and prior service cost
that will be amortized from accumulated other comprehensive earnings into net periodic benefit cost during 2014.
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
|
Postretirement
Benefits
|
|
|
|
(In millions)
|
|
Net actuarial loss (gain)
|
|
$
|
18
|
|
|
$
|
(1
|
)
|
Prior service cost (credit)
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Assumptions
The following table presents the weighted average actuarial assumptions used to determine obligations and periodic costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Assumptions to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.80
|
%
|
|
|
3.85
|
%
|
|
|
4.65
|
%
|
|
|
3.65
|
%
|
|
|
3.30
|
%
|
|
|
4.25
|
%
|
Rate of compensation increase
|
|
|
4.48
|
%
|
|
|
4.48
|
%
|
|
|
4.97
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Assumptions to determine net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
3.85
|
%
|
|
|
4.65
|
%
|
|
|
5.50
|
%
|
|
|
3.30
|
%
|
|
|
4.25
|
%
|
|
|
4.90
|
%
|
Expected return on plan assets
|
|
|
5.48
|
%
|
|
|
5.48
|
%
|
|
|
6.48
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
4.48
|
%
|
|
|
4.97
|
%
|
|
|
6.94
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Discount rate
Future pension and postretirement obligations are discounted at the end of
each year based on the rate at which obligations could be effectively settled, considering the timing of estimated future cash flows related to the plans. This rate is based on high-quality bond yields, after allowing for call and default risk.
Rate of compensation increase
For measurement of the 2013 benefit obligation for the pension plans, a 4.48
percent compensation increase was assumed.
Expected return on plan assets
The expected rate of return on plan
assets was determined by evaluating input from external consultants and economists, as well as long-term inflation assumptions. Devon expects the long-term asset allocation to approximate the targeted allocation. Therefore, the expected long-term
rate of return on plan assets is based on the target allocation of investment types. See the pension plan assets section below for more information on Devons target allocations.
Other assumptions
For measurement of the 2013 benefit obligation for the other postretirement medical plans, a 7.9 percent
annual rate of increase in the per capita cost of covered health care benefits was assumed for 2014. The rate was assumed to decrease annually to an ultimate rate of 5 percent in the year 2029 and remain at that level thereafter. Assumed health care
cost-trend rates affect the amounts reported for retiree health care costs. A one-percentage-point change in the assumed health care cost-trend rates would have changed the postretirement benefits obligation as of December 31, 2013, by less
than $1 million and would change the 2014 service and interest cost components of net periodic benefit cost by less than $1 million.
82
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension Plan Assets
Devons overall investment objective for its pension plans assets is to achieve stability of the plans funded status
while providing long-term growth of invested capital and income to ensure benefit payments can be funded when required. To assist in achieving this objective, Devon has established certain investment strategies, including target allocation
percentages and permitted and prohibited investments, designed to mitigate risks inherent with investing. Derivatives or other speculative investments considered high risk are generally prohibited. The following table presents Devons target
allocation for its pension plan assets.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Fixed income
|
|
|
70
|
%
|
|
|
70
|
%
|
Equity
|
|
|
20
|
%
|
|
|
20
|
%
|
Other
|
|
|
10
|
%
|
|
|
10
|
%
|
The fair values of Devons pension assets are presented by asset class in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
Actual
Allocation
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
|
(In millions)
|
|
Fixed-income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
24.0
|
%
|
|
$
|
241
|
|
|
$
|
69
|
|
|
$
|
172
|
|
|
$
|
|
|
Corporate bonds
|
|
|
39.5
|
%
|
|
|
398
|
|
|
|
286
|
|
|
|
112
|
|
|
|
|
|
Other bonds
|
|
|
3.1
|
%
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed-income securities
|
|
|
66.6
|
%
|
|
|
670
|
|
|
|
386
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global (large, mid, small cap)
|
|
|
19.0
|
%
|
|
|
190
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge fund & alternative investments
|
|
|
12.5
|
%
|
|
|
127
|
|
|
|
15
|
|
|
|
|
|
|
|
112
|
|
Short-term investment funds
|
|
|
1.9
|
%
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
14.4
|
%
|
|
|
146
|
|
|
|
15
|
|
|
|
19
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
100.0
|
%
|
|
$
|
1,006
|
|
|
$
|
401
|
|
|
$
|
493
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
Actual
Allocation
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
|
(In millions)
|
|
Fixed-income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
39.4
|
%
|
|
$
|
459
|
|
|
$
|
65
|
|
|
$
|
394
|
|
|
$
|
|
|
Corporate bonds
|
|
|
26.5
|
%
|
|
|
308
|
|
|
|
256
|
|
|
|
52
|
|
|
|
|
|
Other bonds
|
|
|
2.4
|
%
|
|
|
28
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed-income securities
|
|
|
68.3
|
%
|
|
|
795
|
|
|
|
349
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global (large, mid, small cap)
|
|
|
20.5
|
%
|
|
|
239
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge fund & alternative investments
|
|
|
10.3
|
%
|
|
|
120
|
|
|
|
17
|
|
|
|
|
|
|
|
103
|
|
Short-term investment funds
|
|
|
0.9
|
%
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
11.2
|
%
|
|
|
131
|
|
|
|
17
|
|
|
|
11
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
100.0
|
%
|
|
$
|
1,165
|
|
|
$
|
366
|
|
|
$
|
696
|
|
|
$
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following methods and assumptions were used to estimate the fair values in the tables above.
Fixed-income securities
Devons fixed-income securities consist of United States Treasury obligations,
bonds issued by investment-grade companies from diverse industries, and asset-backed securities. These fixed-income securities are actively traded securities that can be redeemed upon demand. The fair values of these Level 1 securities are
based upon quoted market prices.
Devons fixed income securities also include commingled funds that primarily invest in
long-term bonds and United States Treasury securities. These fixed income securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by the investment
managers.
Equity securities
Devons equity securities include a commingled global equity fund that invests
in large, mid and small capitalization stocks across the worlds developed and emerging markets. These equity securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net
asset values provided by the investment managers.
Other securities
Devons other securities include
commingled, short-term investment funds. These securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by investment managers.
Devons hedge fund and alternative investments include an investment in an actively traded global mutual fund that focuses on
alternative investment strategies and a hedge fund of funds that invests both long and short using a variety of investment strategies. Devons hedge fund of funds is not actively traded and Devon is subject to redemption restrictions with
regards to this investment. The fair value of this Level 3 investment represents the fair value as determined by the hedge fund manager.
84
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Included below is a summary of the changes in Devons Level 3 plan assets (in
millions).
|
|
|
|
|
December 31, 2011
|
|
$
|
90
|
|
Purchases
|
|
|
6
|
|
Investment returns
|
|
|
7
|
|
|
|
|
|
|
December 31, 2012
|
|
|
103
|
|
Purchases
|
|
|
|
|
Investment returns
|
|
|
9
|
|
|
|
|
|
|
December 31, 2013
|
|
$
|
112
|
|
|
|
|
|
|
Expected Cash Flows
The following table presents expected cash flow information for Devons pension and postretirement benefit plans.
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
|
Postretirement
Benefits
|
|
|
|
(In millions)
|
|
Devons 2014 contributions
|
|
$
|
12
|
|
|
$
|
3
|
|
Benefit payments:
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
71
|
|
|
$
|
3
|
|
2015
|
|
$
|
74
|
|
|
$
|
3
|
|
2016
|
|
$
|
75
|
|
|
$
|
3
|
|
2017
|
|
$
|
78
|
|
|
$
|
3
|
|
2018
|
|
$
|
81
|
|
|
$
|
3
|
|
2019 to 2023
|
|
$
|
450
|
|
|
$
|
9
|
|
Expected contributions included in the table above include amounts related to Devons qualified
plans, nonqualified plans and postretirement plans. Of the benefits expected to be paid in 2014, the $12 million of pension benefits is expected to be funded from the trusts established for the nonqualified plans and the $3 million of postretirement
benefits is expected to be funded from Devons available cash and cash equivalents. Expected employer contributions and benefit payments for other postretirement benefits are presented net of employee contributions.
Defined Contribution Plans
Devon maintains several defined contribution plans covering its employees in the U.S. and Canada. Such plans include Devons 401(k) plan, enhanced contribution plan and Canadian pension and savings
plan. Contributions are primarily based upon percentages of annual compensation and years of service. In addition, each plan is subject to regulatory limitations by each respective government. The following table presents Devons expense
related to these defined contribution plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
401(k) and enhanced contribution plans
|
|
$
|
41
|
|
|
$
|
36
|
|
|
$
|
33
|
|
Canadian pension and savings plans
|
|
|
26
|
|
|
|
23
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
67
|
|
|
$
|
59
|
|
|
$
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The authorized capital stock of Devon consists of 1 billion shares of common stock, par value $0.10 per share, and
4.5 million shares of preferred stock, par value $1.00 per share. The preferred stock may be issued in one or more series, and the terms and rights of such stock will be determined by the Board of Directors.
Devons Board of Directors has designated 2.9 million shares of the preferred stock as Series A Junior Participating Preferred
Stock (the Series A Junior Preferred Stock). At December 31, 2013, there were no shares of Series A Junior Preferred Stock issued or outstanding. The Series A Junior Preferred Stock is entitled to receive cumulative quarterly
dividends per share equal to the greater of $1.00 or 100 times the aggregate per share amount of all dividends (other than stock dividends) declared on common stock since the immediately preceding quarterly dividend payment date or, with respect to
the first payment date, since the first issuance of Series A Junior Preferred Stock. Holders of the Series A Junior Preferred Stock are entitled to 100 votes per share on all matters submitted to a vote of the stockholders. Devon, at its option, may
redeem shares of the Series A Junior Participating Preferred Stock in whole at any time and in part from time to time, at a redemption price equal to 100 times the current per share market price of Devons common stock on the date of the
mailing of the notice of redemption. The Series A Junior Preferred Stock ranks prior to the common stock but junior to all other classes of Preferred Stock.
Stock Repurchases
In the fourth quarter of 2011, Devon completed
its 2010 repurchase program. In total, Devon repurchased 49.2 million shares for $3.5 billion, or $71.18 per share.
Dividends
Devon paid common stock dividends of $348 million, $324 million and $278 million in 2013, 2012 and 2011 respectively.
The quarterly cash dividend was $0.16 per share in the first quarter of 2011. Devon increased the dividend rate to $0.17 per share in the second quarter of 2011 and further increased the dividend rate to $0.20 per share in the first quarter of 2012.
Devon increased the dividend rate to $0.22 per share in the second quarter of 2013.
18.
|
Commitments and Contingencies
|
Devon is party to various legal actions arising in the normal course of business. Matters that are probable of
unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devons estimates of the outcomes of such matters and its experience in contesting, litigating and
settling similar matters. None of the actions are believed by management to involve future amounts that would be material to Devons financial position or results of operations after consideration of recorded accruals. Actual amounts could
differ materially from managements estimates.
Royalty Matters
Numerous natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments.
The suits allege that the producers and related parties used below-market prices, made improper deductions, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment
of royalties in connection with natural gas and NGLs produced and sold. Devons largest exposure for such matters relates to royalties in New Mexico. Devon does not currently believe that it is subject to material exposure with respect to such
royalty matters.
86
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Environmental Matters
Devon is subject to certain laws and regulations relating to environmental remediation activities associated with past operations, such as
the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devons
monetary exposure for environmental matters is not expected to be material.
Other Matters
Devon is involved in other various routine legal proceedings incidental to its business. However, to Devons knowledge, there were no
other material pending legal proceedings to which Devon is a party or to which any of its property is subject.
Commitments
The following is a schedule by year of Devons commitments that have initial or remaining noncancelable terms in
excess of one year as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Purchase
Obligations
|
|
|
Drilling
and
Facility
Obligations
|
|
|
Operational
Agreements
|
|
|
Office and
Equipment
Leases
|
|
|
|
(In millions)
|
|
2014
|
|
$
|
852
|
|
|
$
|
341
|
|
|
$
|
519
|
|
|
$
|
41
|
|
2015
|
|
|
874
|
|
|
|
18
|
|
|
|
477
|
|
|
|
38
|
|
2016
|
|
|
945
|
|
|
|
7
|
|
|
|
399
|
|
|
|
34
|
|
2017
|
|
|
871
|
|
|
|
|
|
|
|
388
|
|
|
|
33
|
|
2018
|
|
|
885
|
|
|
|
|
|
|
|
335
|
|
|
|
28
|
|
Thereafter
|
|
|
1,998
|
|
|
|
|
|
|
|
1,331
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,425
|
|
|
$
|
366
|
|
|
$
|
3,449
|
|
|
$
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligation amounts represent contractual commitments primarily to purchase condensate at market
prices for use at Devons heavy oil projects in Canada. Devon has entered into these agreements because condensate is an integral part of the heavy oil transportation process. Any disruption in Devons ability to obtain condensate could
negatively affect its ability to transport heavy oil at these locations. Devons total obligation related to condensate purchases expires in 2021. The value of the obligation in the table above is based on the contractual volumes and
Devons internal estimate of future condensate market prices.
Devon has certain drilling and facility obligations under
contractual agreements with third-party service providers to procure drilling rigs and other related services for developmental and exploratory drilling and facilities construction.
Devon has certain operational agreements whereby Devon has committed to transport or process certain volumes of oil, gas and NGLs for a
fixed fee. Devon has entered into these agreements to aid the movement of its production to downstream markets.
Devon leases
certain office space and equipment under operating lease arrangements. Total rental expense included in general and administrative expenses under operating leases, net of sub-lease income, was $26 million, $42 million and $42 million in 2013, 2012
and 2011, respectively.
87
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19.
|
Fair Value Measurements
|
The following tables provide carrying value and fair value measurement information for certain of Devons
financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other payables and accrued expenses included in the accompanying balance sheets approximated fair value at
December 31, 2013 and December 31, 2012. Therefore, such financial assets and liabilities are not presented in the following tables. Additionally, information regarding the fair values of Devons midstream and pension plan assets is
provided in Note 4 and Note 16, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
Carrying
Amount
|
|
|
Total Fair
Value
|
|
|
Level 1
Inputs
|
|
|
Level
2
Inputs
|
|
|
Level 3
Inputs
|
|
|
|
(In millions)
|
|
December 31, 2013 assets (liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
5,305
|
|
|
$
|
5,305
|
|
|
$
|
4,191
|
|
|
$
|
1,114
|
|
|
$
|
|
|
Long-term investments
|
|
$
|
62
|
|
|
$
|
62
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
62
|
|
Commodity derivatives
|
|
$
|
103
|
|
|
$
|
103
|
|
|
$
|
|
|
|
$
|
103
|
|
|
$
|
|
|
Commodity derivatives
|
|
$
|
(120
|
)
|
|
$
|
(120
|
)
|
|
$
|
|
|
|
$
|
(120
|
)
|
|
$
|
|
|
Foreign currency derivatives
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
Debt
|
|
$
|
(12,022
|
)
|
|
$
|
(12,908
|
)
|
|
$
|
|
|
|
$
|
(12,908
|
)
|
|
$
|
|
|
|
|
|
|
|
|
December 31, 2012 assets (liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
4,149
|
|
|
$
|
4,149
|
|
|
$
|
32
|
|
|
$
|
4,117
|
|
|
$
|
|
|
Short-term investments
|
|
$
|
2,343
|
|
|
$
|
2,343
|
|
|
$
|
429
|
|
|
$
|
1,914
|
|
|
$
|
|
|
Long-term investments
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
64
|
|
Commodity derivatives
|
|
$
|
401
|
|
|
$
|
401
|
|
|
$
|
|
|
|
$
|
401
|
|
|
$
|
|
|
Commodity derivatives
|
|
$
|
(32
|
)
|
|
$
|
(32
|
)
|
|
$
|
|
|
|
$
|
(32
|
)
|
|
$
|
|
|
Interest rate derivatives
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
|
|
Foreign currency derivatives
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
|
|
Debt
|
|
$
|
(11,644
|
)
|
|
$
|
(13,435
|
)
|
|
$
|
|
|
|
$
|
(13,435
|
)
|
|
$
|
|
|
The following methods and assumptions were used to estimate the fair values in the tables above.
Level 1 Fair Value Measurements
Cash equivalents and short-term investments
Amounts consist primarily of United States and Canadian treasury securities and money market investments. The fair value approximates the carrying
value.
Level 2 Fair Value Measurements
Cash equivalents and short-term investments
Amounts consist primarily of Canadian agency and provincial securities and commercial paper investments. The fair value approximates the carrying
value.
Commodity, interest rate and foreign currency derivatives
The fair values of commodity, interest rate
and foreign currency derivatives are estimated using internal discounted cash flow calculations based upon forward curves and data obtained from independent third parties for contracts with similar terms or data obtained from counterparties to the
agreements.
Debt
Devons debt instruments do not actively trade in an established market. The fair values
of its fixed-rate debt and floating-rate debt are estimated based on rates available for debt with similar terms and maturity. The fair value of Devons commercial paper and credit facility borrowings are the carrying values.
88
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Level 3 Fair Value Measurements
Long-term investments
Devons long-term investments presented in the tables above consisted entirely of auction rate
securities. Due to auction failures and the lack of an active market for Devons auction rate securities, quoted market prices for these securities were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs
to estimate the fair values of its long-term auction rate securities. These inputs were based on continued receipts of principal at par, the collection of all accrued interest to date, the probability of full repayment of the securities considering
the United States government guarantees substantially all of the underlying student loans, and the AAA credit rating of the securities. As a result of using these inputs, Devon concluded the estimated fair values of its long-term auction rate
securities approximated the par values as of December 31, 2013 and December 31, 2012.
Included below is a summary
of the changes in Devons Level 3 fair value measurements.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In millions)
|
|
Long-term investments balance at beginning of period
|
|
$
|
64
|
|
|
$
|
84
|
|
Redemptions of principal
|
|
|
(2
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Long-term investments balance at end of period
|
|
$
|
62
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
20.
|
Discontinued Operations
|
Revenues related to Devons discontinued operations totaled $43 million during 2011. Devon did not have revenues
related to its discontinued operations during 2013 or 2012. The following table presents the earnings (loss) from Devons discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Operating earnings
|
|
$
|
|
|
|
$
|
|
|
|
$
|
38
|
|
Gain (loss) on sale of oil and gas properties
|
|
|
|
|
|
|
(16
|
)
|
|
|
2,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
|
|
|
|
|
(16
|
)
|
|
|
2,590
|
|
Income tax expense
|
|
|
|
|
|
|
5
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations
|
|
$
|
|
|
|
$
|
(21
|
)
|
|
$
|
2,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devon manages its operations through distinct operating segments, which are defined primarily by geographic areas. For
financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of the businesses. However, Devons Canadian operating segment is reported as a separate reporting segment primarily
due to the significant differences between the U.S. and Canadian regulatory environments. Devons segments are all primarily engaged in oil and gas producing activities, and certain information regarding such activities for each segment is
included in Note 22. Segment revenues are all from external customers.
89
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Year Ended December 31, 2013:
|
|
|
|
|
Oil, gas and NGL sales
|
|
$
|
5,964
|
|
|
$
|
2,558
|
|
|
$
|
8,522
|
|
Oil, gas and NGL derivatives
|
|
$
|
(197
|
)
|
|
$
|
6
|
|
|
$
|
(191
|
)
|
Marketing and midstream revenues
|
|
$
|
1,974
|
|
|
$
|
92
|
|
|
$
|
2,066
|
|
Depreciation, depletion and amortization
|
|
$
|
1,931
|
|
|
$
|
849
|
|
|
$
|
2,780
|
|
Interest expense
|
|
$
|
392
|
|
|
$
|
45
|
|
|
$
|
437
|
|
Asset impairments
|
|
$
|
1,133
|
|
|
$
|
843
|
|
|
$
|
1,976
|
|
Earnings (loss) from continuing operations before income taxes
|
|
$
|
646
|
|
|
$
|
(497
|
)
|
|
$
|
149
|
|
Income tax expense (benefit)
|
|
$
|
325
|
|
|
$
|
(156
|
)
|
|
$
|
169
|
|
Earnings (loss) from continuing operations
|
|
$
|
321
|
|
|
$
|
(341
|
)
|
|
$
|
(20
|
)
|
Property and equipment, net
|
|
$
|
19,969
|
|
|
$
|
8,478
|
|
|
$
|
28,447
|
|
Total assets
|
|
$
|
29,317
|
|
|
$
|
13,560
|
|
|
$
|
42,877
|
|
Capital expenditures
|
|
$
|
4,802
|
|
|
$
|
1,841
|
|
|
$
|
6,643
|
|
|
|
|
|
Year Ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, gas and NGL sales
|
|
$
|
4,679
|
|
|
$
|
2,474
|
|
|
$
|
7,153
|
|
Oil, gas and NGL derivatives
|
|
$
|
681
|
|
|
$
|
12
|
|
|
$
|
693
|
|
Marketing and midstream revenues
|
|
$
|
1,541
|
|
|
$
|
114
|
|
|
$
|
1,655
|
|
Depreciation, depletion and amortization
|
|
$
|
1,824
|
|
|
$
|
987
|
|
|
$
|
2,811
|
|
Interest expense
|
|
$
|
343
|
|
|
$
|
63
|
|
|
$
|
406
|
|
Asset impairments
|
|
$
|
1,861
|
|
|
$
|
163
|
|
|
$
|
2,024
|
|
Loss from continuing operations before income taxes
|
|
$
|
(263
|
)
|
|
$
|
(54
|
)
|
|
$
|
(317
|
)
|
Income tax benefit
|
|
$
|
(97
|
)
|
|
$
|
(35
|
)
|
|
$
|
(132
|
)
|
Loss from continuing operations
|
|
$
|
(166
|
)
|
|
$
|
(19
|
)
|
|
$
|
(185
|
)
|
Property and equipment, net
|
|
$
|
18,361
|
|
|
$
|
8,955
|
|
|
$
|
27,316
|
|
Total assets
|
|
$
|
24,256
|
|
|
$
|
19,070
|
|
|
$
|
43,326
|
|
Capital expenditures
|
|
$
|
6,511
|
|
|
$
|
1,963
|
|
|
$
|
8,474
|
|
|
|
|
|
Year Ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, gas and NGL sales
|
|
$
|
5,418
|
|
|
$
|
2,897
|
|
|
$
|
8,315
|
|
Oil, gas and NGL derivatives
|
|
$
|
881
|
|
|
$
|
|
|
|
$
|
881
|
|
Marketing and midstream revenues
|
|
$
|
2,050
|
|
|
$
|
199
|
|
|
$
|
2,249
|
|
Depreciation, depletion and amortization
|
|
$
|
1,439
|
|
|
$
|
809
|
|
|
$
|
2,248
|
|
Interest expense
|
|
$
|
204
|
|
|
$
|
148
|
|
|
$
|
352
|
|
Earnings from continuing operations before income taxes
|
|
$
|
3,477
|
|
|
$
|
813
|
|
|
$
|
4,290
|
|
Income tax expense
|
|
$
|
1,958
|
|
|
$
|
198
|
|
|
$
|
2,156
|
|
Earnings from continuing operations
|
|
$
|
1,519
|
|
|
$
|
615
|
|
|
$
|
2,134
|
|
Property and equipment, net
|
|
$
|
16,989
|
|
|
$
|
7,785
|
|
|
$
|
24,774
|
|
Total assets
(1)
|
|
$
|
22,622
|
|
|
$
|
18,342
|
|
|
$
|
40,964
|
|
Capital expenditures
|
|
$
|
6,101
|
|
|
$
|
1,694
|
|
|
$
|
7,795
|
|
(1)
|
Amounts in the table above do not include assets held for sale related to Devons discontinued operations, which totaled $153 million in 2011.
|
90
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
22.
|
Supplemental Information on Oil and Gas Operations (Unaudited)
|
Supplemental unaudited information regarding Devons oil and gas activities is presented in this note. The
information is provided separately by country. Unless otherwise noted, this supplemental information excludes amounts for all periods presented related to Devons discontinued operations.
Costs Incurred
The following tables reflect the costs incurred in oil and gas property acquisition, exploration, and development activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Property acquisition costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties
|
|
$
|
19
|
|
|
$
|
3
|
|
|
$
|
22
|
|
Unproved properties
|
|
|
213
|
|
|
|
3
|
|
|
|
216
|
|
Exploration costs
|
|
|
443
|
|
|
|
152
|
|
|
|
595
|
|
Development costs
|
|
|
3,838
|
|
|
|
1,251
|
|
|
|
5,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred
|
|
$
|
4,513
|
|
|
$
|
1,409
|
|
|
$
|
5,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Property acquisition costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties
|
|
$
|
2
|
|
|
$
|
71
|
|
|
$
|
73
|
|
Unproved properties
|
|
|
1,135
|
|
|
|
32
|
|
|
|
1,167
|
|
Exploration costs
|
|
|
351
|
|
|
|
315
|
|
|
|
666
|
|
Development costs
|
|
|
4,408
|
|
|
|
1,691
|
|
|
|
6,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred
|
|
$
|
5,896
|
|
|
$
|
2,109
|
|
|
$
|
8,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Property acquisition costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties
|
|
$
|
34
|
|
|
$
|
14
|
|
|
$
|
48
|
|
Unproved properties
|
|
|
851
|
|
|
|
72
|
|
|
|
923
|
|
Exploration costs
|
|
|
272
|
|
|
|
282
|
|
|
|
554
|
|
Development costs
|
|
|
4,130
|
|
|
|
1,288
|
|
|
|
5,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred
|
|
$
|
5,287
|
|
|
$
|
1,656
|
|
|
$
|
6,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred in the tables above include additions and revisions to Devons asset retirement
obligations. The proceeds received from our joint venture transactions at closing have not been netted against the costs incurred. At December 31, 2013, our partners remaining commitments to fund our future costs associated with these
joint venture transactions totaled approximately $1.4 billion.
Pursuant to the full cost method of accounting, Devon
capitalizes certain of its general and administrative expenses that are related to property acquisition, exploration and development activities. Such capitalized expenses, which are included in the costs shown in the preceding tables, were $368
million, $359 million and
91
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$337 million in the years 2013, 2012 and 2011, respectively. Also, Devon capitalizes interest costs incurred and attributable to unproved oil and gas properties and major development projects of
oil and gas properties. Capitalized interest expenses, which are included in the costs shown in the preceding tables, were $42 million, $36 million and $45 million in the years 2013, 2012 and 2011, respectively.
Capitalized Costs
The following tables reflect the aggregate capitalized costs related to oil and gas activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Proved properties
|
|
$
|
51,366
|
|
|
$
|
22,629
|
|
|
$
|
73,995
|
|
Unproved properties
|
|
|
1,277
|
|
|
|
1,514
|
|
|
|
2,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil & gas properties
|
|
|
52,643
|
|
|
|
24,143
|
|
|
|
76,786
|
|
Accumulated DD&A
|
|
|
(35,848
|
)
|
|
|
(16,613
|
)
|
|
|
(52,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capitalized costs
|
|
$
|
16,795
|
|
|
$
|
7,530
|
|
|
$
|
24,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Proved properties
|
|
$
|
46,570
|
|
|
$
|
22,840
|
|
|
$
|
69,410
|
|
Unproved properties
|
|
|
1,703
|
|
|
|
1,605
|
|
|
|
3,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil & gas properties
|
|
|
48,273
|
|
|
|
24,445
|
|
|
|
72,718
|
|
Accumulated DD&A
|
|
|
(33,098
|
)
|
|
|
(16,039
|
)
|
|
|
(49,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capitalized costs
|
|
$
|
15,175
|
|
|
$
|
8,406
|
|
|
$
|
23,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of Devons oil and gas properties not subject to amortization as of
December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Incurred In
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Prior to
2011
|
|
|
Total
|
|
|
|
(In millions)
|
|
Acquisition costs
|
|
$
|
207
|
|
|
$
|
725
|
|
|
$
|
62
|
|
|
$
|
848
|
|
|
$
|
1,842
|
|
Exploration costs
|
|
|
226
|
|
|
|
129
|
|
|
|
118
|
|
|
|
30
|
|
|
|
503
|
|
Development costs
|
|
|
113
|
|
|
|
132
|
|
|
|
66
|
|
|
|
9
|
|
|
|
320
|
|
Capitalized interest
|
|
|
41
|
|
|
|
33
|
|
|
|
33
|
|
|
|
19
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil and gas properties not subject to amortization
|
|
$
|
587
|
|
|
$
|
1,019
|
|
|
$
|
279
|
|
|
$
|
906
|
|
|
$
|
2,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the $2.8 billion of oil and gas properties not subject to amortization are approximately $1.6
billion of costs that we deem significant for individual assessment. These costs relate to our investments in the Pike thermal oil project in Canada, the Mississippian-Woodford Trend in Oklahoma and a portion of our properties in the Permian Basin
in Texas. Based on our development plans, we expect to begin including the Pike costs in the amortization computation in 2015 when we receive regulatory approval for the first phase of this project and subsequently begin recognizing the associated
proved reserves. We are evaluating and developing the Mississippian-Woodford and Permian properties over the next 3 to 4 years. We expect to include the costs in the amortization computation as we complete our evaluation activities.
92
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Results of Operations
The following tables include revenues and expenses associated with Devons oil and gas producing activities. They do not include any
allocation of Devons interest costs or general corporate overhead and, therefore, are not necessarily indicative of the contribution to net earnings of Devons oil and gas operations. Income tax expense has been calculated by applying
statutory income tax rates to oil, gas and NGL sales after deducting costs, including depreciation, depletion and amortization and after giving effect to permanent differences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Oil, gas and NGL sales
|
|
$
|
5,964
|
|
|
$
|
2,558
|
|
|
$
|
8,522
|
|
Lease operating expenses
|
|
|
(1,257
|
)
|
|
|
(1,011
|
)
|
|
|
(2,268
|
)
|
General and administrative expenses
|
|
|
(125
|
)
|
|
|
(77
|
)
|
|
|
(202
|
)
|
Production and property taxes
|
|
|
(380
|
)
|
|
|
(59
|
)
|
|
|
(439
|
)
|
Depreciation, depletion and amortization
|
|
|
(1,640
|
)
|
|
|
(825
|
)
|
|
|
(2,465
|
)
|
Asset impairments
|
|
|
(1,110
|
)
|
|
|
(843
|
)
|
|
|
(1,953
|
)
|
Accretion of asset retirement obligations
|
|
|
(47
|
)
|
|
|
(64
|
)
|
|
|
(111
|
)
|
Income tax benefit (expense)
|
|
|
(510
|
)
|
|
|
88
|
|
|
|
(422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of operations
|
|
$
|
895
|
|
|
$
|
(233
|
)
|
|
$
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization per Boe
|
|
$
|
8.69
|
|
|
$
|
12.87
|
|
|
$
|
9.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Oil, gas and NGL sales
|
|
$
|
4,679
|
|
|
$
|
2,474
|
|
|
$
|
7,153
|
|
Lease operating expenses
|
|
|
(1,059
|
)
|
|
|
(1,015
|
)
|
|
|
(2,074
|
)
|
General and administrative expenses
|
|
|
(159
|
)
|
|
|
(137
|
)
|
|
|
(296
|
)
|
Production and property taxes
|
|
|
(340
|
)
|
|
|
(55
|
)
|
|
|
(395
|
)
|
Depreciation, depletion and amortization
|
|
|
(1,563
|
)
|
|
|
(963
|
)
|
|
|
(2,526
|
)
|
Asset impairments
|
|
|
(1,793
|
)
|
|
|
(163
|
)
|
|
|
(1,956
|
)
|
Accretion of asset retirement obligations
|
|
|
(40
|
)
|
|
|
(69
|
)
|
|
|
(109
|
)
|
Income tax benefit (expense)
|
|
|
99
|
|
|
|
(3
|
)
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of operations
|
|
$
|
(176
|
)
|
|
$
|
69
|
|
|
$
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization per Boe
|
|
$
|
8.55
|
|
|
$
|
14.41
|
|
|
$
|
10.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Oil, gas and NGL sales
|
|
$
|
5,418
|
|
|
$
|
2,897
|
|
|
$
|
8,315
|
|
Lease operating expenses
|
|
|
(925
|
)
|
|
|
(926
|
)
|
|
|
(1,851
|
)
|
General and administrative expenses
|
|
|
(132
|
)
|
|
|
(119
|
)
|
|
|
(251
|
)
|
Production and property taxes
|
|
|
(357
|
)
|
|
|
(45
|
)
|
|
|
(402
|
)
|
Depreciation, depletion and amortization
|
|
|
(1,201
|
)
|
|
|
(786
|
)
|
|
|
(1,987
|
)
|
Accretion of asset retirement obligations
|
|
|
(34
|
)
|
|
|
(57
|
)
|
|
|
(91
|
)
|
Income tax expense
|
|
|
(1,005
|
)
|
|
|
(250
|
)
|
|
|
(1,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of operations
|
|
$
|
1,764
|
|
|
$
|
714
|
|
|
$
|
2,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization per Boe
|
|
$
|
6.94
|
|
|
$
|
11.74
|
|
|
$
|
8.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved Reserves
The following tables present Devons estimated proved reserves by product by country.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MMBbls)
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved developed and undeveloped reserves:
|
|
|
|
|
December 31, 2010
|
|
|
148
|
|
|
|
93
|
|
|
|
241
|
|
Revisions due to prices
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
Revisions other than price
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
Extensions and discoveries
|
|
|
36
|
|
|
|
6
|
|
|
|
42
|
|
Production
|
|
|
(17
|
)
|
|
|
(15
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
168
|
|
|
|
80
|
|
|
|
248
|
|
Revisions due to prices
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
Revisions other than price
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
(8
|
)
|
Extensions and discoveries
|
|
|
65
|
|
|
|
7
|
|
|
|
72
|
|
Production
|
|
|
(21
|
)
|
|
|
(15
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
205
|
|
|
|
65
|
|
|
|
270
|
|
Revisions due to prices
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
Revisions other than price
|
|
|
(18
|
)
|
|
|
|
|
|
|
(18
|
)
|
Extensions and discoveries
|
|
|
69
|
|
|
|
7
|
|
|
|
76
|
|
Purchase of reserves
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Production
|
|
|
(28
|
)
|
|
|
(15
|
)
|
|
|
(43
|
)
|
Sale of reserves
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
229
|
|
|
|
56
|
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
131
|
|
|
|
82
|
|
|
|
213
|
|
December 31, 2011
|
|
|
146
|
|
|
|
73
|
|
|
|
219
|
|
December 31, 2012
|
|
|
166
|
|
|
|
62
|
|
|
|
228
|
|
December 31, 2013
|
|
|
194
|
|
|
|
56
|
|
|
|
250
|
|
Proved developed-producing reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
123
|
|
|
|
72
|
|
|
|
195
|
|
December 31, 2011
|
|
|
139
|
|
|
|
65
|
|
|
|
204
|
|
December 31, 2012
|
|
|
155
|
|
|
|
56
|
|
|
|
211
|
|
December 31, 2013
|
|
|
178
|
|
|
|
51
|
|
|
|
229
|
|
Proved undeveloped reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
17
|
|
|
|
11
|
|
|
|
28
|
|
December 31, 2011
|
|
|
22
|
|
|
|
7
|
|
|
|
29
|
|
December 31, 2012
|
|
|
39
|
|
|
|
3
|
|
|
|
42
|
|
December 31, 2013
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
94
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bitumen (MMBbls)
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved developed and undeveloped reserves:
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
440
|
|
|
|
440
|
|
Revisions due to prices
|
|
|
|
|
|
|
(16
|
)
|
|
|
(16
|
)
|
Revisions other than price
|
|
|
|
|
|
|
16
|
|
|
|
16
|
|
Extensions and discoveries
|
|
|
|
|
|
|
30
|
|
|
|
30
|
|
Production
|
|
|
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
457
|
|
|
|
457
|
|
Revisions due to prices
|
|
|
|
|
|
|
14
|
|
|
|
14
|
|
Revisions other than price
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
Extensions and discoveries
|
|
|
|
|
|
|
67
|
|
|
|
67
|
|
Production
|
|
|
|
|
|
|
(17
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
528
|
|
|
|
528
|
|
Revisions due to prices
|
|
|
|
|
|
|
(11
|
)
|
|
|
(11
|
)
|
Revisions other than price
|
|
|
|
|
|
|
16
|
|
|
|
16
|
|
Extensions and discoveries
|
|
|
|
|
|
|
38
|
|
|
|
38
|
|
Production
|
|
|
|
|
|
|
(19
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
|
|
|
552
|
|
|
|
552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
44
|
|
|
|
44
|
|
December 31, 2011
|
|
|
|
|
|
|
90
|
|
|
|
90
|
|
December 31, 2012
|
|
|
|
|
|
|
99
|
|
|
|
99
|
|
December 31, 2013
|
|
|
|
|
|
|
111
|
|
|
|
111
|
|
Proved developed-producing reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
44
|
|
|
|
44
|
|
December 31, 2011
|
|
|
|
|
|
|
90
|
|
|
|
90
|
|
December 31, 2012
|
|
|
|
|
|
|
99
|
|
|
|
99
|
|
December 31, 2013
|
|
|
|
|
|
|
111
|
|
|
|
111
|
|
Proved undeveloped reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
396
|
|
|
|
396
|
|
December 31, 2011
|
|
|
|
|
|
|
367
|
|
|
|
367
|
|
December 31, 2012
|
|
|
|
|
|
|
429
|
|
|
|
429
|
|
December 31, 2013
|
|
|
|
|
|
|
441
|
|
|
|
441
|
|
95
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (Bcf)
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved developed and undeveloped reserves:
|
|
|
|
|
December 31, 2010
|
|
|
9,065
|
|
|
|
1,218
|
|
|
|
10,283
|
|
Revisions due to prices
|
|
|
(1
|
)
|
|
|
(60
|
)
|
|
|
(61
|
)
|
Revisions other than price
|
|
|
(243
|
)
|
|
|
(38
|
)
|
|
|
(281
|
)
|
Extensions and discoveries
|
|
|
1,410
|
|
|
|
58
|
|
|
|
1,468
|
|
Purchase of reserves
|
|
|
16
|
|
|
|
20
|
|
|
|
36
|
|
Production
|
|
|
(740
|
)
|
|
|
(213
|
)
|
|
|
(953
|
)
|
Sale of reserves
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
9,507
|
|
|
|
979
|
|
|
|
10,486
|
|
Revisions due to prices
|
|
|
(831
|
)
|
|
|
(99
|
)
|
|
|
(930
|
)
|
Revisions other than price
|
|
|
(287
|
)
|
|
|
(33
|
)
|
|
|
(320
|
)
|
Extensions and discoveries
|
|
|
1,124
|
|
|
|
34
|
|
|
|
1,158
|
|
Purchase of reserves
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Production
|
|
|
(752
|
)
|
|
|
(186
|
)
|
|
|
(938
|
)
|
Sale of reserves
|
|
|
(1
|
)
|
|
|
(11
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
8,762
|
|
|
|
684
|
|
|
|
9,446
|
|
Revisions due to prices
|
|
|
405
|
|
|
|
161
|
|
|
|
566
|
|
Revisions other than price
|
|
|
(299
|
)
|
|
|
67
|
|
|
|
(232
|
)
|
Extensions and discoveries
|
|
|
471
|
|
|
|
19
|
|
|
|
490
|
|
Purchase of reserves
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Production
|
|
|
(709
|
)
|
|
|
(165
|
)
|
|
|
(874
|
)
|
Sale of reserves
|
|
|
(81
|
)
|
|
|
(8
|
)
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
8,550
|
|
|
|
758
|
|
|
|
9,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
7,280
|
|
|
|
1,144
|
|
|
|
8,424
|
|
December 31, 2011
|
|
|
7,957
|
|
|
|
951
|
|
|
|
8,908
|
|
December 31, 2012
|
|
|
7,391
|
|
|
|
679
|
|
|
|
8,070
|
|
December 31, 2013
|
|
|
7,707
|
|
|
|
752
|
|
|
|
8,459
|
|
Proved developed-producing reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
6,702
|
|
|
|
1,031
|
|
|
|
7,733
|
|
December 31, 2011
|
|
|
7,409
|
|
|
|
862
|
|
|
|
8,271
|
|
December 31, 2012
|
|
|
7,091
|
|
|
|
624
|
|
|
|
7,715
|
|
December 31, 2013
|
|
|
7,425
|
|
|
|
680
|
|
|
|
8,105
|
|
Proved undeveloped reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
1,785
|
|
|
|
74
|
|
|
|
1,859
|
|
December 31, 2011
|
|
|
1,550
|
|
|
|
28
|
|
|
|
1,578
|
|
December 31, 2012
|
|
|
1,371
|
|
|
|
5
|
|
|
|
1,376
|
|
December 31, 2013
|
|
|
843
|
|
|
|
6
|
|
|
|
849
|
|
96
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Liquids (MMBbls)
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved developed and undeveloped reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
449
|
|
|
|
30
|
|
|
|
479
|
|
Revisions due to prices
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
3
|
|
Revisions other than price
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Extensions and discoveries
|
|
|
102
|
|
|
|
2
|
|
|
|
104
|
|
Purchase of reserves
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Production
|
|
|
(33
|
)
|
|
|
(4
|
)
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
525
|
|
|
|
27
|
|
|
|
552
|
|
Revisions due to prices
|
|
|
(19
|
)
|
|
|
(5
|
)
|
|
|
(24
|
)
|
Revisions other than price
|
|
|
(13
|
)
|
|
|
|
|
|
|
(13
|
)
|
Extensions and discoveries
|
|
|
114
|
|
|
|
2
|
|
|
|
116
|
|
Production
|
|
|
(36
|
)
|
|
|
(4
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
571
|
|
|
|
20
|
|
|
|
591
|
|
Revisions due to prices
|
|
|
8
|
|
|
|
3
|
|
|
|
11
|
|
Revisions other than price
|
|
|
(50
|
)
|
|
|
3
|
|
|
|
(47
|
)
|
Extensions and discoveries
|
|
|
64
|
|
|
|
1
|
|
|
|
65
|
|
Production
|
|
|
(41
|
)
|
|
|
(4
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
552
|
|
|
|
23
|
|
|
|
575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
353
|
|
|
|
28
|
|
|
|
381
|
|
December 31, 2011
|
|
|
402
|
|
|
|
26
|
|
|
|
428
|
|
December 31, 2012
|
|
|
431
|
|
|
|
20
|
|
|
|
451
|
|
December 31, 2013
|
|
|
468
|
|
|
|
23
|
|
|
|
491
|
|
Proved developed-producing reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
318
|
|
|
|
26
|
|
|
|
344
|
|
December 31, 2011
|
|
|
372
|
|
|
|
24
|
|
|
|
396
|
|
December 31, 2012
|
|
|
406
|
|
|
|
19
|
|
|
|
425
|
|
December 31, 2013
|
|
|
442
|
|
|
|
21
|
|
|
|
463
|
|
Proved undeveloped reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
96
|
|
|
|
2
|
|
|
|
98
|
|
December 31, 2011
|
|
|
123
|
|
|
|
1
|
|
|
|
124
|
|
December 31, 2012
|
|
|
140
|
|
|
|
|
|
|
|
140
|
|
December 31, 2013
|
|
|
84
|
|
|
|
|
|
|
|
84
|
|
97
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (MMBoe)
(1)
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved developed and undeveloped reserves:
|
|
|
|
|
December 31, 2010
|
|
|
2,107
|
|
|
|
766
|
|
|
|
2,873
|
|
Revisions due to prices
|
|
|
6
|
|
|
|
(27
|
)
|
|
|
(21
|
)
|
Revisions other than price
|
|
|
(41
|
)
|
|
|
6
|
|
|
|
(35
|
)
|
Extensions and discoveries
|
|
|
374
|
|
|
|
47
|
|
|
|
421
|
|
Purchase of reserves
|
|
|
5
|
|
|
|
3
|
|
|
|
8
|
|
Production
|
|
|
(173
|
)
|
|
|
(67
|
)
|
|
|
(240
|
)
|
Sale of reserves
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
2,278
|
|
|
|
727
|
|
|
|
3,005
|
|
Revisions due to prices
|
|
|
(159
|
)
|
|
|
(12
|
)
|
|
|
(171
|
)
|
Revisions other than price
|
|
|
(67
|
)
|
|
|
(1
|
)
|
|
|
(68
|
)
|
Extensions and discoveries
|
|
|
367
|
|
|
|
82
|
|
|
|
449
|
|
Production
|
|
|
(183
|
)
|
|
|
(67
|
)
|
|
|
(250
|
)
|
Sale of reserves
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
2,236
|
|
|
|
727
|
|
|
|
2,963
|
|
Revisions due to prices
|
|
|
76
|
|
|
|
18
|
|
|
|
94
|
|
Revisions other than price
|
|
|
(117
|
)
|
|
|
29
|
|
|
|
(88
|
)
|
Extensions and discoveries
|
|
|
212
|
|
|
|
49
|
|
|
|
261
|
|
Purchase of reserves
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Production
|
|
|
(189
|
)
|
|
|
(64
|
)
|
|
|
(253
|
)
|
Sale of reserves
|
|
|
(14
|
)
|
|
|
(1
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
2,205
|
|
|
|
758
|
|
|
|
2,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
1,696
|
|
|
|
346
|
|
|
|
2,042
|
|
December 31, 2011
|
|
|
1,875
|
|
|
|
348
|
|
|
|
2,223
|
|
December 31, 2012
|
|
|
1,829
|
|
|
|
294
|
|
|
|
2,123
|
|
December 31, 2013
|
|
|
1,947
|
|
|
|
315
|
|
|
|
2,262
|
|
Proved developed-producing reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
1,557
|
|
|
|
314
|
|
|
|
1,871
|
|
December 31, 2011
|
|
|
1,746
|
|
|
|
323
|
|
|
|
2,069
|
|
December 31, 2012
|
|
|
1,743
|
|
|
|
278
|
|
|
|
2,021
|
|
December 31, 2013
|
|
|
1,857
|
|
|
|
297
|
|
|
|
2,154
|
|
Proved undeveloped reserves as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
411
|
|
|
|
420
|
|
|
|
831
|
|
December 31, 2011
|
|
|
403
|
|
|
|
379
|
|
|
|
782
|
|
December 31, 2012
|
|
|
407
|
|
|
|
433
|
|
|
|
840
|
|
December 31, 2013
|
|
|
258
|
|
|
|
443
|
|
|
|
701
|
|
(1)
|
Gas reserves are converted to Boe at the rate of six Mcf per Bbl of oil, based upon the approximate relative energy content of gas and oil. This rate is not necessarily
indicative of the relationship of natural gas and oil prices. Bitumen and natural gas liquids reserves are converted to Boe on a one-to-one basis with oil.
|
98
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Proved Undeveloped Reserves
The following table presents the changes in Devons total proved undeveloped reserves during 2013 (in MMBoe).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
Proved undeveloped reserves as of December 31, 2012
|
|
|
407
|
|
|
|
433
|
|
|
|
840
|
|
Extensions and discoveries
|
|
|
57
|
|
|
|
38
|
|
|
|
95
|
|
Revisions due to prices
|
|
|
1
|
|
|
|
(10
|
)
|
|
|
(9
|
)
|
Revisions other than price
|
|
|
(91
|
)
|
|
|
13
|
|
|
|
(78
|
)
|
Conversion to proved developed reserves
|
|
|
(116
|
)
|
|
|
(31
|
)
|
|
|
(147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved undeveloped reserves as of December 31, 2013
|
|
|
258
|
|
|
|
443
|
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013, Devon had 701 MMBoe of proved undeveloped reserves. This represents a 17
percent decrease as compared to 2012 and represents 24 percent of total proved reserves. Drilling and development activities increased Devons proved undeveloped reserves 95 MMBoe and resulted in the conversion of 147 MMBoe, or 18 percent, of
the 2012 proved undeveloped reserves to proved developed reserves. Costs incurred related to the development and conversion of Devons proved undeveloped reserves were $1.9 billion for 2013. Additionally, revisions other than price decreased
Devons proved undeveloped reserves 78 MMBoe primarily due to evaluations of certain U.S. onshore dry-gas areas, which Devon does not expect to develop in the next five years. The largest revisions relate to the dry-gas areas in the
Cana-Woodford Shale in western Oklahoma, Carthage in east Texas and the Barnett Shale in north Texas.
A significant amount of
Devons proved undeveloped reserves at the end of 2013 related to its Jackfish operations. At December 31, 2013 and 2012, Devons Jackfish proved undeveloped reserves were 441 MMBoe and 429 MMBoe, respectively. Development schedules
for the Jackfish reserves are primarily controlled by the need to keep the processing plants at their 35,000 barrel daily facility capacity. Processing plant capacity is controlled by factors such as total steam processing capacity, steam-oil ratios
and air quality discharge permits. As a result, these reserves are classified as proved undeveloped for more than five years. Currently, the development schedule for these reserves extends though the year 2031.
Price Revisions
2013
Reserves increased 94 MMBoe primarily due to higher gas prices. Of this increase, 43 MMBoe related to the Barnett Shale
and 19 MMBoe related to the Rocky Mountain area.
2012
Reserves decreased 171 MMBoe primarily due to lower gas
prices. Of this decrease, 100 MMBoe related to the Barnett Shale and 25 MMBoe related to the Rocky Mountain area.
2011
Reserves decreased 21 MMBoe due to lower gas prices and higher oil prices. The higher oil prices increased Devons Canadian royalty burden, which reduced Devons oil reserves.
Revisions Other Than Price
Total revisions other than price for 2013, 2012 and 2011 primarily related to Devons evaluation of certain dry gas regions, with the largest revisions being made in the Cana-Woodford Shale, Barnett
Shale and Carthage area.
99
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Extensions and Discoveries
2013
Of the 261 MMBoe of extensions and discoveries, 76 MMBoe related to the Permian Basin in west Texas and southeast New
Mexico, 54 MMBoe related to the Barnett Shale, 42 MMBoe related to the Anadarko Basin, 38 MMBoe related to Jackfish in northeast Alberta, Canada and 32 MMBoe related to the Mississippian-Woodford Trend in north Oklahoma.
The 2013 extensions and discoveries included 175 MMBoe related to additions from Devons infill drilling activities, including 23
MMBoe at the Cana-Woodford Shale, 54 MMBoe at the Barnett Shale, 38 MMBoe at Jackfish, 33 MMBoe at the Permian Basin and 20 MMBoe at the Mississippian-Woodford Trend.
2012
Of the 449 MMBoe of extensions and discoveries, 151 MMBoe related to the Cana-Woodford Shale, 95 MMBoe related to the Barnett Shale, 72 MMBoe related to the Permian Basin, 67 MMBoe
related to Jackfish, 16 MMBoe related to the Rocky Mountain area and 18 MMBoe related to the Granite Wash area.
The 2012
extensions and discoveries included 229 MMBoe related to additions from Devons infill drilling activities, including 134 MMBoe at the Cana-Woodford Shale and 82 MMBoe at the Barnett Shale.
2011
Of the 421 MMBoe of extensions and discoveries, 162 MMBoe related to the Cana-Woodford Shale, 115 MMBoe related to the
Barnett Shale, 39 MMBoe related to the Permian Basin, 30 MMBoe related to Jackfish, 19 MMBoe related to the Rocky Mountain area and 17 MMBoe related to the Granite Wash area.
The 2011 extensions and discoveries included 168 MMBoe related to additions from Devons infill drilling activities, including 80 MMBoe at the Cana-Woodford Shale and 77 MMBoe at the Barnett Shale.
Standardized Measure
The tables below reflect Devons standardized measure of discounted future net cash flows from its proved reserves.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Future cash inflows
|
|
$
|
61,983
|
|
|
$
|
33,305
|
|
|
$
|
95,288
|
|
Future costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
(5,448
|
)
|
|
|
(5,308
|
)
|
|
|
(10,756
|
)
|
Production
|
|
|
(26,663
|
)
|
|
|
(15,709
|
)
|
|
|
(42,372
|
)
|
Future income tax expense
|
|
|
(9,046
|
)
|
|
|
(2,327
|
)
|
|
|
(11,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flow
|
|
|
20,826
|
|
|
|
9,961
|
|
|
|
30,787
|
|
10% discount to reflect timing of cash flows
|
|
|
(10,346
|
)
|
|
|
(4,700
|
)
|
|
|
(15,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows
|
|
$
|
10,480
|
|
|
$
|
5,261
|
|
|
$
|
15,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Future cash inflows
|
|
$
|
55,297
|
|
|
$
|
33,570
|
|
|
$
|
88,867
|
|
Future costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
(6,556
|
)
|
|
|
(6,211
|
)
|
|
|
(12,767
|
)
|
Production
|
|
|
(24,265
|
)
|
|
|
(16,611
|
)
|
|
|
(40,876
|
)
|
Future income tax expense
|
|
|
(6,542
|
)
|
|
|
(1,992
|
)
|
|
|
(8,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flow
|
|
|
17,934
|
|
|
|
8,756
|
|
|
|
26,690
|
|
10% discount to reflect timing of cash flows
|
|
|
(9,036
|
)
|
|
|
(4,433
|
)
|
|
|
(13,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows
|
|
$
|
8,898
|
|
|
$
|
4,323
|
|
|
$
|
13,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
Total
|
|
|
|
(In millions)
|
|
Future cash inflows
|
|
$
|
69,305
|
|
|
$
|
36,786
|
|
|
$
|
106,091
|
|
Future costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
(6,817
|
)
|
|
|
(4,678
|
)
|
|
|
(11,495
|
)
|
Production
|
|
|
(26,217
|
)
|
|
|
(15,063
|
)
|
|
|
(41,280
|
)
|
Future income tax expense
|
|
|
(11,432
|
)
|
|
|
(3,763
|
)
|
|
|
(15,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flow
|
|
|
24,839
|
|
|
|
13,282
|
|
|
|
38,121
|
|
10% discount to reflect timing of cash flows
|
|
|
(13,492
|
)
|
|
|
(6,785
|
)
|
|
|
(20,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows
|
|
$
|
11,347
|
|
|
$
|
6,497
|
|
|
$
|
17,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future cash inflows, development costs and production costs were computed using the same assumptions for
prices and costs that were used to estimate Devons proved oil and gas reserves at the end of each year. For 2013 estimates, Devons future realized prices were assumed to be $88.19 per barrel of oil, $47.44 per barrel of bitumen, $3.10
per Mcf of gas and $26.28 per barrel of natural gas liquids. Of the $10.8 billion of future development costs as of the end of 2013, $1.9 billion, $1.5 billion and $0.7 billion are estimated to be spent in 2014, 2015 and 2016, respectively.
Future development costs include not only development costs, but also future asset retirement costs. Included as part of the
$10.8 billion of future development costs are $2.7 billion of future asset retirement costs. The future income tax expenses have been computed using statutory tax rates, giving effect to allowable tax deductions and tax credits under current laws.
101
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The principal changes in Devons standardized measure of discounted future net cash
flows are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
(In millions)
|
|
Beginning balance
|
|
$
|
13,221
|
|
|
$
|
17,844
|
|
|
$
|
16,352
|
|
Net changes in prices and production costs
|
|
|
3,018
|
|
|
|
(9,889
|
)
|
|
|
1,875
|
|
Oil, bitumen, gas and NGL sales, net of production costs
|
|
|
(5,613
|
)
|
|
|
(4,388
|
)
|
|
|
(5,811
|
)
|
Changes in estimated future development costs
|
|
|
399
|
|
|
|
(1,094
|
)
|
|
|
(440
|
)
|
Extensions and discoveries, net of future development costs
|
|
|
4,047
|
|
|
|
4,669
|
|
|
|
3,714
|
|
Purchase of reserves
|
|
|
14
|
|
|
|
18
|
|
|
|
57
|
|
Sales of reserves in place
|
|
|
(44
|
)
|
|
|
(25
|
)
|
|
|
(2
|
)
|
Revisions of quantity estimates
|
|
|
(1,040
|
)
|
|
|
162
|
|
|
|
(228
|
)
|
Previously estimated development costs incurred during the period
|
|
|
1,986
|
|
|
|
1,321
|
|
|
|
1,302
|
|
Accretion of discount
|
|
|
1,940
|
|
|
|
1,420
|
|
|
|
2,248
|
|
Other, primarily changes in timing and foreign exchange rates
|
|
|
(583
|
)
|
|
|
113
|
|
|
|
(294
|
)
|
Net change in income taxes
|
|
|
(1,604
|
)
|
|
|
3,070
|
|
|
|
(929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
15,741
|
|
|
$
|
13,221
|
|
|
$
|
17,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.
|
Supplemental Quarterly Financial Information (Unaudited)
|
Following is a summary of Devons unaudited interim results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Full
Year
|
|
|
|
(In millions, except per share amounts)
|
|
Operating revenues
|
|
$
|
1,971
|
|
|
$
|
3,088
|
|
|
$
|
2,714
|
|
|
$
|
2,624
|
|
|
$
|
10,397
|
|
Earnings (loss) before income taxes
|
|
$
|
(1,962
|
)
|
|
$
|
997
|
|
|
$
|
639
|
|
|
$
|
475
|
|
|
$
|
149
|
|
Net earnings (loss)
|
|
$
|
(1,339
|
)
|
|
$
|
683
|
|
|
$
|
429
|
|
|
$
|
207
|
|
|
$
|
(20
|
)
|
Basic net earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(3.34
|
)
|
|
$
|
1.69
|
|
|
$
|
1.06
|
|
|
$
|
0.51
|
|
|
$
|
(0.06
|
)
|
Diluted net earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(3.34
|
)
|
|
$
|
1.68
|
|
|
$
|
1.05
|
|
|
$
|
0.51
|
|
|
$
|
(0.06
|
)
|
102
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Full
Year
|
|
|
|
(In millions, except per share amounts)
|
|
Operating revenues
|
|
$
|
2,495
|
|
|
$
|
2,561
|
|
|
$
|
1,865
|
|
|
$
|
2,580
|
|
|
$
|
9,501
|
|
Earnings (loss) from continuing operations before income taxes
|
|
$
|
611
|
|
|
$
|
734
|
|
|
$
|
(1,161
|
)
|
|
$
|
(501
|
)
|
|
$
|
(317
|
)
|
Earnings (loss) from continuing operations
|
|
$
|
414
|
|
|
$
|
477
|
|
|
$
|
(719
|
)
|
|
$
|
(357
|
)
|
|
$
|
(185
|
)
|
Loss from discontinued operations
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
393
|
|
|
$
|
477
|
|
|
$
|
(719
|
)
|
|
$
|
(357
|
)
|
|
$
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
1.03
|
|
|
$
|
1.18
|
|
|
$
|
(1.80
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.47
|
)
|
Loss from discontinued operations
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
0.97
|
|
|
$
|
1.18
|
|
|
$
|
(1.80
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
1.03
|
|
|
$
|
1.18
|
|
|
$
|
(1.80
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.47
|
)
|
Loss from discontinued operations
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
0.97
|
|
|
$
|
1.18
|
|
|
$
|
(1.80
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) from Continuing Operations
The first quarter of 2013 includes U.S. and Canadian asset impairments totaling $1.9 billion ($1.3 billion after income taxes, or $3.25
per diluted share).
The fourth quarter of 2012 includes U.S. and Canadian asset impairments totaling $0.9 billion ($0.6
billion after income taxes, or $1.46 per diluted share).
The third quarter of 2012 includes U.S. asset impairments totaling
$1.1 billion ($0.7 billion after income taxes, or $1.78 per diluted share).
103