- Achieved record oil production
exceeding company guidance
- Generated U.S. oil production growth of
77 percent year over year
- Increased full-year production
outlook
- Improved pre-tax cash margin by 20
percent year over year
- Closed $2.3 billion asset sale further
enhancing strong financial position
Devon Energy Corporation (NYSE:DVN) today reported net earnings
of $1.0 billion or $2.48 per common share ($2.47 per diluted share)
for the quarter ended Sept. 30, 2014. This compares with
third-quarter 2013 net earnings of $429 million or $1.06 per common
share ($1.05 per diluted share).
Adjusting for items securities analysts typically exclude from
their published estimates, the company earned $552 million or $1.34
per diluted share in the third quarter. This represents a 4 percent
increase in adjusted earnings compared to the third quarter of
2013.
Devon generated cash flow from operations totaling $1.6 billion
in the third quarter. Combined with $2.3 billion of pre-tax
proceeds from the sale of non-core U.S. assets, Devon’s total cash
inflows for the quarter approached $4 billion.
“Devon’s repositioned portfolio delivered outstanding growth in
production and margins in the third quarter,” said John Richels,
president and CEO. “With our strong position in many of North
America’s best resource plays and our focused efforts to deliver
high-quality performance, we saw profitability continue to
expand.”
“Based on our strong year-to-date results and the confidence we
have in our portfolio, we are raising our full-year production
growth outlook to 14 percent, up from our previous guidance of 11
percent,” Richels said. “And we are delivering this incremental
production growth without any increase in capital spending.”
Oil Production Exceeds Expectations
In the third quarter, total production from Devon’s retained
assets averaged 640,000 oil-equivalent barrels (Boe) per day. This
result exceeded the company’s guidance range and represents a 19
percent increase year over year. Oil and liquids production
accounted for 55 percent of the company’s retained asset production
mix in the third quarter.
Devon delivered record oil production in North America during
the third quarter of 2014. Oil production from retained assets
averaged 216,000 barrels per day, exceeding the top end of the
company’s guidance range by 6,000 barrels per day. This represents
a 44 percent increase compared to the third quarter of 2013. The
most significant growth came from the company’s U.S. operations,
where oil production increased a substantial 77 percent year over
year.
Growth in U.S. production was largely attributable to strong
results from Devon’s oil development plays. In the third quarter,
the company’s world-class Eagle Ford assets continued to deliver
prolific well results. Net production in the Eagle Ford increased
to an average of 87,000 Boe per day in September, an increase of 76
percent compared to Devon’s first month of ownership in March 2014.
In the Permian Basin, led by outstanding results from the Bone
Spring play, total production increased to 98,000 Boe per day. This
represents a 20 percent increase in Permian production compared to
the year-ago quarter.
In Canada, Devon achieved first oil from its Jackfish 3 project
in the third quarter, commencing another leg of multi-year oil
production growth from its heavy oil business. Additionally, the
start-up of Jackfish 3 will begin a new era from the Jackfish
complex, with the potential to generate up to a $1 billion per year
of free cash flow, after maintenance capital.
Devon Raises Full-Year Production Outlook
Detailed forward-looking guidance for the fourth quarter of 2014
is provided later in the release. Based on year-to-date results and
Devon’s fourth-quarter outlook, most operating and financial
metrics remain relatively unchanged compared to previous full-year
guidance disclosures. A notable update is the company raising the
midpoint of its 2014 production outlook from retained assets by 3
percent to approximately 617,000 Boe per day. This incremental
production growth is expected to be delivered without additional
capital spending.
Operations Report
For additional details on Devon’s core and emerging assets,
please refer to the company’s third-quarter 2014 operations report
at www.devonenergy.com. Highlights from the operations report
include:
- Raising the Bone Spring type curve
- Eagle Ford on track to meet production
targets
- Canadian heavy-oil results outperform
guidance
- Raising Cana-Woodford type curve
- Powder River Basin delivers high-rate
development wells
Oil Revenue Grows and Margins Expand
Revenue from oil, natural gas and natural gas liquids sales
totaled $2.6 billion in the third quarter, an 11 percent increase
compared to the third quarter of 2013. This growth in revenue was
attributable to the company’s significant increase in oil
production, partially offset by the sale of gas-weighted
divestiture assets in both the U.S. and Canada. Third-quarter oil
sales accounted for 63 percent of Devon’s total upstream
revenues.
Devon’s marketing and midstream operating profit reached $219
million, which exceeded the company’s guidance and represented a 68
percent increase compared to the third quarter of 2013. The
year-over-year increase in operating profit was due to expanded
margins related to EnLink Midstream.
The company’s strong cost-containment efforts were reflected in
third-quarter expense results. Pre-tax cash costs totaled $16.06
per Boe, a 3 percent decrease compared to the previous quarter.
Costs in several categories were lower than guidance, most notably
Devon’s largest cash cost, lease operating expenses (LOE). On a
unit-of-production basis, LOE totaled $9.47 per Boe, flat compared
to the year-ago period and 1 percent lower than the second quarter
of 2014.
Overall, the benefits of higher-margin oil production and a
low-cost structure resulted in expanded cash margin for Devon.
Pre-tax cash margin reached $29.42 per Boe in the third quarter, a
20 percent increase compared to the year-ago period.
Balance Sheet and Liquidity Remain Strong
With investment-grade credit ratings and cash balances of $3.4
billion at the end of the third quarter, Devon’s financial position
remains exceptionally strong. At Sept. 30, the company’s net debt
totaled $8.7 billion, of which $1.9 billion was attributable to the
consolidation of EnLink Midstream and is non-recourse to Devon.
Subsequent to quarter end, in mid-October, Devon announced the
redemption of $1.9 billion in senior notes, utilizing a portion of
its asset divestiture proceeds. This redemption includes all of the
company’s outstanding 2.4% senior notes due 2016, 1.2% senior notes
due 2016 and 1.875% senior notes due 2017. Upon redemption later in
the month, Devon will complete the debt repayment plan associated
with its portfolio transformation.
Attractive Hedges Protect Future Cash Flow
With rapid growth in high-margin production, the company has
taken measures to protect its future cash flow. For the fourth
quarter of 2014, the company has entered into various
swap-and-collar contracts to hedge approximately 60 percent of its
expected oil production at an average floor price of $92 per
barrel. Nearly 80 percent of Devon’s expected fourth-quarter
natural gas production is locked in at an average floor price of
$4.28 per thousand cubic feet.
For full-year 2015, the company has 138,000 barrels per day
protected through swaps and collars at an average floor price of
$91 per barrel. Devon also has 0.5 billion cubic feet per day
hedged at an average floor price of $4.20. These hedge positions
cover more than 50 percent of Devon’s expected oil production in
2015 and around 30 percent of gas production.
Portfolio Transformation Complete
On Aug. 29, Devon closed the sale of its U.S. non-core assets
for $2.3 billion, officially completing its portfolio
transformation announced last November. In less than a year, the
company transformed its portfolio through three significant steps:
an accretive Eagle Ford entry, the creation of EnLink Midstream,
and the sale of more than $5 billion of non-core properties in both
the U.S. and Canada.
Devon’s retained asset portfolio is now concentrated in some of
the most attractive North American resource plays. This formidable
and focused asset base creates a platform that supports
competitive, high-margin growth for many years.
Non-GAAP Reconciliations
Pursuant to regulatory disclosure requirements, Devon is
required to reconcile non-GAAP financial measures to the related
GAAP information (GAAP refers to general accepted accounting
principles). Adjusted earnings, net debt and pre-tax cash margin
are non-GAAP financial measures referenced within this release.
Reconciliations of these non-GAAP measures are provided later in
this release.
Conference Call Webcast and Supplemental Earnings
Materials
Please note that as soon as practicable today, Devon will post
additional information, consisting of an operations report and
management commentary with associated slides, to its website at
www.devonenergy.com. The company’s third-quarter 2014 conference
call will be held at 10 a.m. Central (11 a.m. Eastern) on
Wednesday, Nov. 5, 2014, and will serve primarily as a forum for
analyst and investor questions and answers.
Forward-Looking Statements
This press release includes "forward-looking statements" as
defined by the Securities and Exchange Commission (SEC). Such
statements are those concerning strategic plans, expectations and
objectives for future operations. All statements, other than
statements of historical facts, included in this press release that
address activities, events or developments that the company
expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are
beyond the control of the company. Statements regarding future
drilling and production are subject to all of the risks and
uncertainties normally incident to the exploration for and
development and production of oil and gas. These risks include, but
are not limited to, the volatility of oil, natural gas and NGL
prices; uncertainties inherent in estimating oil, natural gas and
NGL reserves; the extent to which we are successful in acquiring
and discovering additional reserves; unforeseen changes in the rate
of production from our oil and gas properties; uncertainties in
future exploration and drilling results; uncertainties inherent in
estimating the cost of drilling and completing wells; drilling
risks; competition for leases, materials, people and capital;
midstream capacity constraints and potential interruptions in
production; risk related to our hedging activities; environmental
risks; political changes; changes in laws or regulations; our
limited control over third parties who operate our oil and gas
properties; our ability to successfully complete mergers,
acquisitions and divestitures; and other risks identified in our
Form 10-K and our other filings with the SEC. Investors are
cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ
materially from those projected in the forward-looking statements.
The forward-looking statements in this press release are made as of
the date of this press release, even if subsequently made available
by Devon on its website or otherwise. Devon does not undertake any
obligation to update the forward-looking statements as a result of
new information, future events or otherwise.
The SEC permits oil and gas companies, in their filings with the
SEC, to disclose only proved, probable and possible reserves that
meet the SEC's definitions for such terms, and price and cost
sensitivities for such reserves, and prohibits disclosure of
resources that do not constitute such reserves. This release
may contain certain terms, such as resource potential
and exploration target size. These estimates are by their
nature more speculative than estimates of proved, probable and
possible reserves and accordingly are subject to substantially
greater risk of being actually realized. The SEC guidelines
strictly prohibit us from including these estimates in filings with
the SEC. U.S. investors are urged to consider closely the
disclosure in our Form 10-K, available at www.devonenergy.com. You
can also obtain this form from the SEC by calling 1-800-SEC-0330 or
from the SEC’s website at www.sec.gov.
About Devon Energy
Devon Energy Corporation is an Oklahoma City-based independent
energy company engaged in oil and gas exploration and production.
Devon is a leading U.S.-based independent oil and gas producer and
is included in the S&P 500 Index. For more information about
Devon, please visit our website at www.devonenergy.com.
Quarter Ended Nine Months Ended
PRODUCTION NET OF ROYALTIES September 30,
September 30, 2014 2013 2014
2013 Oil / Bitumen (MBbls/d) United States 136
77 121 70 Canada 80 73 78 79 Retained assets 216 150 199 149
Divested assets 3 15 7 16 Total Oil / Bitumen 219 165 206 165
Natural Gas (MMcf/d) United States 1,690 1,656 1,656 1,666
Canada 26 17 24 29 Retained assets 1,716 1,673 1,680 1,695 Divested
assets 138 710 311 720 Total Natural Gas 1,854 2,383 1,991 2,415
Natural Gas Liquids (MBbls/d) United States 138 110 129 105
Divested assets 5 19 9 19 Total Natural Gas Liquids 143 129 138 124
Oil Equivalent (Mboe/d) United States 556 462 526 453 Canada
84 76 82 84 Retained assets 640 538 608 537 Divested assets 31 153
68 155 Total Oil Equivalent 671 691 676 692
KEY OPERATING
STATISTICS BY REGION Quarter Ended September 30, 2014
Avg. Production(MBoe/d)
Gross WellsDrilled
Operated Rigs atSeptember 30,
2014
Permian Basin 98 81 21 Eagle Ford 78 57 3 Canadian Heavy Oil 84 57
5 Barnett Shale 205 13 - Anadarko Basin 98 38 3
Mississippian-Woodford Trend 21 52 6 Rockies 22 17 4 Other Assets
34 - -
Retained Assets - Total 640 315 42 Divested assets 31
- -
Devon - Total 671 315 42
PRODUCTION TREND 2013 2014 Quarter
3 Quarter 4 Quarter 1 Quarter 2 Quarter
3 Oil (MBbls/d) Permian Basin 49 50 55 55 56
Eagle Ford - - 11 40 46 Canadian Heavy Oil 73 81 78 77 80 Barnett
Shale 2 2 2 2 2 Anadarko Basin 10 9 9 11 10 Mississippian-Woodford
Trend 5 8 10 9 10 Rockies 8 8 8 8 10 Other assets 3 3 2 3 2
Retained assets 150 161 175 205 216 Divested assets 15 16 15 4 3
Total 165 177 190 209 219
Gas (MMcf/d) Permian Basin 109 116
121 134 136 Eagle Ford - - 22 86 107 Canadian Heavy Oil 17 28 19 23
26 Barnett Shale 1,009 995 931 932 896 Anadarko Basin 297 294 281
309 323 Mississippian-Woodford Trend 14 19 28 28 32 Rockies 76 75
65 67 66 Other assets 151 141 140 135 130 Retained assets 1,673
1,668 1,607 1,714 1,716 Divested assets 710 660 585 217 138 Total
2,383 2,328 2,192 1,931 1,854
NGL (MBbls/d) Permian Basin 15
16 16 18 19 Eagle Ford - - 3 10 14 Canadian Heavy Oil - - - - -
Barnett Shale 57 56 55 55 54 Anadarko Basin 24 27 29 31 34
Mississippian-Woodford Trend 1 3 5 5 6 Rockies 1 1 1 1 1 Other
assets 12 11 10 10 10 Retained assets 110 114 119 130 138 Divested
assets 19 18 16 6 5 Total 129 132 135 136 143
Combined
(MBoe/d) Permian Basin 82 86 91 95 98 Eagle Ford - - 17 65 78
Canadian Heavy Oil 76 86 81 81 84 Barnett Shale 226 224 213 212 205
Anadarko Basin 83 85 85 93 98 Mississippian-Woodford Trend 9 14 19
18 21 Rockies 23 21 20 21 22 Other assets 39 37 37 35 34 Retained
assets 538 553 563 620 640 Divested assets 153 143 128 47 31 Total
691 696 691 667 671
BENCHMARK PRICES (average prices)
Quarter
3 September YTD FY2014 FY2013
FY2014 FY2013 Natural Gas ($/Mcf) - Henry Hub $ 4.07
$ 3.58 $ 4.57 $ 3.67 Oil ($/Bbl) - West Texas Intermediate
(Cushing) $ 97.26 $ 105.94 $ 99.67 $ 98.18
REALIZED
PRICES Quarter Ended September 30, 2014
Oil /Bitumen
Gas NGL Total (Per Bbl) (Per
Mcf) (Per Bbl) (Per Boe) United States $ 90.23 $
3.61 $ 25.82 $ 38.90 Canada (1) $ 65.88 $ 0.76 $
63.46 $ 63.23 Realized price without hedges $ 81.37 $ 3.57 $
25.90 $ 41.92 Cash settlements $ (1.06 ) $ 0.15 $ 0.01 $
0.07 Realized price, including cash settlements $ 80.31
$ 3.72 $ 25.91 $ 41.99
Quarter Ended
September 30, 2013 Oil /Bitumen Gas NGL
Total (Per Bbl) (Per Mcf) (Per Bbl)
(Per Boe) United States $ 101.40 $ 3.08 $ 24.36 $ 32.72
Canada (1) $ 79.88 $ 2.67 $ 48.48 $ 49.65
Realized price without hedges $ 90.51 $ 3.00 $ 26.23 $ 36.84 Cash
settlements $ (4.00 ) $ 0.24 $ 0.02 $ (0.12 ) Realized
price, including cash settlements $ 86.51 $ 3.24 $
26.25 $ 36.72
Nine Months Ended September 30,
2014 Oil Gas NGL Total (Per
Bbl) (Per Mcf) (Per Bbl) (Per Boe) United
States $ 92.55 $ 4.04 $ 26.80 $ 39.81 Canada (1) $ 65.54 $
3.80 $ 50.57 $ 55.85 Realized price without hedges $
81.84 $ 4.02 $ 27.34 $ 42.38 Cash settlements $ (2.43 ) $ (0.12 ) $
- $ (1.11 ) Realized price, including cash settlements $ 79.41
$ 3.90 $ 27.34 $ 41.27
Nine Months
Ended September 30, 2013 Oil Gas NGL
Total (Per Bbl) (Per Mcf) (Per Bbl)
(Per Boe) United States $ 93.94 $ 3.13 $ 25.12 $ 31.12
Canada (1) $ 60.14 $ 3.05 $ 46.54 $ 41.29
Realized price without hedges $ 75.48 $ 3.11 $ 26.83 $ 33.71 Cash
settlements $ 0.02 $ 0.14 $ 0.08 $ 0.50
Realized price, including cash settlements $ 75.50 $ 3.25
$ 26.91 $ 34.21
(1) The reported Canadian gas volumes include volumes that are
produced from certain of our leases and then transported to our
Jackfish operations where the gas is used as fuel. However, the
revenues and expenses related to this consumed gas are eliminated
in our consolidated financials.
CONSOLIDATED STATEMENTS OF OPERATIONS (in
millions, except per share amounts)
Quarter Ended Nine
Months Ended September 30, September 30,
2014 2013 2014
2013 Oil, gas and NGL sales $ 2,588 $ 2,341 $
7,824 $ 6,367 Oil, gas and NGL derivatives 748 (141 ) 29 (95 )
Marketing and midstream revenues 2,000 514
5,718 1,501 Total operating revenues
5,336 2,714 13,571 7,773
Lease operating expenses 584 600 1,764 1,684 Marketing and
midstream operating expenses 1,781 383 5,092 1,128 General and
administrative expenses 195 143 595 460 Production and property
taxes 140 115 427 353 Depreciation, depletion and amortization 842
691 2,409 2,069 Asset impairments - 7 - 1,960 Restructuring costs 2
4 44 50 Gains and losses on asset sales - 11 (1,072 ) 11 Other
operating items 18 27 74
82 Total operating expenses 3,562 1,981
9,333 7,797 Operating income (loss)
1,774 733 4,238 (24 ) Net financing costs 116 100 359 306 Other
nonoperating items 4 (6 ) 111 (4
) Earnings (loss) before income taxes 1,654 639 3,768 (326 ) Income
tax expense (benefit) 613 210 1,698
(99 ) Net earnings (loss) 1,041 429 2,070 (227 ) Net
earnings attributable to noncontrolling interests 25
- 55 - Net earnings (loss)
attributable to Devon $ 1,016 $ 429 $ 2,015 $ (227 )
Net earnings (loss) per share attributable to Devon: Basic $
2.48 $ 1.06 $ 4.94 $ (0.57 ) Diluted $ 2.47 $ 1.05 $ 4.91 $ (0.57 )
Weighted average common shares outstanding: Basic 409 406
408 406 Diluted 411 407 410 407
CONSOLIDATED
STATEMENTS OF OPERATIONS (in millions)
Quarter ended
September 30, 2014
Devon U.S.& Canada
EnLink Eliminations Total Oil, gas and NGL
sales $ 2,588 $ - $ - $ 2,588 Oil, gas and NGL derivatives 748 - -
748 Marketing and midstream revenues 1,344 855
(199 ) 2,000 Total operating revenues 4,680
855 (199 ) 5,336 Lease operating
expenses 584 - - 584 Marketing and midstream expenses 1,320 660
(199 ) 1,781 General and administrative expenses 170 25 - 195
Production and property taxes 132 8 - 140 Depreciation, depletion
and amortization 768 74 - 842 Restructuring costs 2 - - 2 Other
operating items 20 (2 ) - 18
Total operating expenses 2,996 765 (199
) 3,562 Operating income 1,684 90 - 1,774 Net financing
costs 102 14 - 116 Other nonoperating items 12 (8 )
- 4 Earnings before income taxes 1,570 84 -
1,654 Income tax expense 595 18 -
613 Net earnings 975 66 - 1,041 Net earnings
attributable to noncontrolling interests - 25
- 25 Net earnings attributable to Devon $ 975
$ 41 $ - $ 1,016
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in millions)
Quarter Ended
Nine Months September 30, Ended September 30,
2014 2013
2014 2013 Cash flows from
operating activities: Net earnings (loss) $ 1,041 $ 429 $ 2,070 $
(227 ) Adjustments to reconcile net earnings (loss) to net cash
from operating activities: Depreciation, depletion and amortization
842 691 2,409 2,069 Gains and losses on asset sales - 11 (1,072 )
11 Asset impairments - 7 - 1,960 Deferred income tax expense
(benefit) 23 260 800 (181 ) Derivatives and other financial
instruments (804 ) 168 (43 ) 65 Cash settlements on derivatives and
financial instruments 44 (2 ) (201 ) 147 Other noncash charges 128
19 357 195 Net change in working capital 296 24 766 (104 ) Change
in long-term other assets (38 ) (50 ) (115 ) (28 ) Change in
long-term other liabilities 27 44
47 92 Net cash from operating
activities 1,559 1,601 5,018
3,999 Cash flows from investing
activities: Acquisitions of property, equipment and businesses
(31
)
-
(6,255
) - Capital expenditures
(1,672
) (1,650 )
(5,013
) (5,219 ) Proceeds from property and equipment divestitures 2,260
282 5,202 316 Purchases of short-term investments - - - (1,076 )
Redemptions of short-term investments - 869 - 3,419 Redemptions of
long-term investments - - 57 - Other 3 1
87 83 Net cash from investing
activities 560 (498 ) (5,922 )
(2,477 ) Cash flows from financing activities: Proceeds from
borrowings of long-term debt, net of issuance costs 438 - 4,158 -
Net short-term debt repayments (456 ) (82 ) (1,318 ) (1,577 )
Long-term debt repayments (275 ) - (4,265 ) - Proceeds from stock
option exercises 9 - 92 1 Proceeds from issuance of subsidiary
units 52 - 72 - Dividends paid on common stock (98 ) (89 ) (287 )
(259 ) Distributions to noncontrolling interests (46 ) - (187 ) -
Other (13 ) - (4 ) 5 Net
cash from financing activities (389 ) (171 )
(1,739 ) (1,830 ) Effect of exchange rate changes on cash
(28 ) 25 (15 ) (9 ) Net change
in cash and cash equivalents 1,702 957 (2,658 ) (317 ) Cash
and cash equivalents at beginning of period 1,706
3,363 6,066 4,637
Cash and cash equivalents at end of period $ 3,408 $ 4,320
$ 3,408 $ 4,320
CONSOLIDATED BALANCE
SHEETS (in millions)
September 30, December 31, Current assets:
2014 2013 Cash and cash
equivalents $ 3,408 $ 6,066 Accounts receivable 2,009 1,520 Other
current assets 556 419 Total current
assets 5,973 8,005 Property and
equipment, at cost:
Oil and gas, based on full-cost
accounting:
Subject to amortization 73,733 73,995 Not subject to amortization
3,642 2,791 Total oil and gas 77,375
76,786 Other 9,204 6,195 Total property
and equipment, at cost 86,579 82,981 Less accumulated depreciation,
depletion and amortization (51,410 ) (54,534 )
Property and equipment, net 35,169 28,447
Goodwill 8,310 5,858 Other long-term assets 1,387
567 Total assets $ 50,839 $ 42,877
Current liabilities: Accounts payable $ 1,344 $ 1,229
Revenues and royalties payable 1,455 786 Short-term debt 1,898
4,066 Income taxes payable 651 1 Other current liabilities
646 573 Total current liabilities 5,994
6,655 Long-term debt 10,161 7,956 Asset
retirement obligations 1,348 2,140 Other long-term liabilities 926
834 Deferred income taxes 5,642 4,793 Stockholders' equity: Common
stock 41 41 Additional paid-in capital 4,004 3,780 Retained
earnings 17,138 15,410 Accumulated other comprehensive earnings
993 1,268 Total stockholders' equity
attributable to Devon 22,176 20,499 Noncontrolling interests
4,592
-
Total stockholders' equity 26,768
20,499 Total liabilities and stockholders' equity $ 50,839
$ 42,877 Common shares outstanding 409 406
CAPITAL
EXPENDITURES (in millions)
Quarter Ended September 30,
2014 U.S. Canada Total Exploration $ 49 $
2 $ 51 Development
1,044
213
1,257 Exploration and development capital $
1,093
$
215
$ 1,308 Capitalized G&A 94 Capitalized interest 12 Acquisitions
6 Devon midstream capital 96 Other capital 32 Total (1) $
1,548 (1) Excludes $207 million attributable to EnLink.
Nine Months Ended September 30, 2014 U.S.
Canada Total Exploration $ 187 $ 34 $ 221 Development
2,872 684 3,556 Exploration and development capital $
3,059 $ 718 $ 3,777 Capitalized G&A 268 Capitalized interest 32
Eagle Ford, Cana and other acquisitions 6,366 Devon midstream
capital 275 Other capital 85 Total (1) $ 10,803 (1)
Excludes $491 million attributable to EnLink.
NON-GAAP FINANCIAL MEASURES
The United States Securities and Exchange Commission has adopted
disclosure requirements for public companies such as Devon
concerning Non-GAAP financial measures. (GAAP refers to generally
accepted accounting principles). The Company must reconcile the
Non-GAAP financial measure to related GAAP information.
ADJUSTED EARNINGS(in millions)
Devon’s reported net earnings include items of income and
expense that are typically excluded by securities analysts in their
published estimates of the company’s financial results. Devon
believes these non-GAAP measures facilitate comparisons of its
performance to earnings estimates published by securities analysts.
Devon also believes these non-GAAP measures can facilitate
comparisons of its performance between periods and to the
performance of its peers. The following table summarizes the
effects of these items on third-quarter 2014 earnings.
Quarter Ended
September 30, 2014 Before-Tax After-Tax
Net earnings attributable to Devon (GAAP) $ 1,016 Fair value
changes in financial instruments and foreign currency (733 ) (466 )
Restructuring costs 2 2 Current tax on property divestiture(1)
-
543
Deferred tax on property divestiture(1)
-
(543
)
Adjusted earnings attributable to Devon (Non-GAAP) $ 552
Diluted share count 411 Adjusted diluted earnings per share
attributable to Devon (Non-GAAP) $ 1.34
(1) In the third quarter of 2014, Devon completed its U.S.
non-core divestiture program. In conjunction with the divestiture
closing, Devon recognized $543 million of current income tax
expense. The current tax expense was entirely offset by the
recognition of deferred tax benefits.
NET DEBT(in millions)
Devon defines net debt as debt less cash and cash equivalents as
presented in the following table. Devon believes that netting these
sources of cash against debt provides a clearer picture of the
future demands on cash to repay debt.
September 30,
2014 2013 Total debt (GAAP) $
12,059 $ 10,068 Adjustments: Cash and cash equivalents 3,408
4,320 Net debt (Non-GAAP) $ 8,651 $ 5,748
PRE-TAX CASH MARGIN
Devon defines pre-tax cash margin as revenues from commodity
sales and marketing and midstream operations, less expenses for
lease operations, marketing and midstream operations, cash-based
general and administrative, production and property taxes and net
financing costs, with the result divided by total production. Devon
believes that pre-tax cash margin can facilitate comparisons of our
performance between periods and to the performance of our
peers.
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
PRODUCTION GUIDANCE
Quarter 4 Low High Oil and bitumen
(MBbls/d) United States 145 150 Canada 83 88 Total 228 238
Natural gas (MMcf/d) United States 1,610 1,660 Canada 19 24
Total 1,629 1,684
Natural gas liquids (MBbls/d) United
States 131 136
Total Boe (MBoe/d) United States 544 563
Canada 86 92 Total 630 655
PRICE REALIZATIONS GUIDANCE Quarter 4
Low High Oil and bitumen - % of WTI United
States 86 % 96 % Canada 63 % 73 % Natural gas - % of Henry Hub 87 %
93 % NGL - realized price $ 20 $ 30
OTHER GUIDANCE ITEMS Quarter 4 ($
millions, except Boe)
Low High Marketing &
midstream operating profit $ 200 $ 220 Lease operating expenses per
Boe $ 9.75 $ 9.95 General & administrative expenses per Boe $
3.50 $ 3.70 Production and property taxes as % of upstream sales
4.8 % 5.8 % Depreciation, depletion and amortization per Boe $
13.75 $ 14.75 Net financing costs $ 115 $ 125 Current income tax
rate 5.0 % 8.0 % Deferred income tax rate 24.0 % 30.0
% Total income tax rate 29.0 % 38.0 % Net
earnings attributable to noncontrolling interests $ 20 $ 30
CAPITAL EXPENDITURES
GUIDANCE Quarter 4 (in millions)
Low High
Exploration and development $ 1,400 $ 1,500 Capitalized
G&A and interest 100 120 Total oil and gas
1,500 1,620 Midstream (1) 50 80 Corporate and other
40 60 Devon capital expenditures $ 1,590 $ 1,760 (1)
Excludes capital expenditures related to EnLink.
COMMODITY HEDGES Oil Commodity Hedges Price
Swaps Price Collars Call Options Sold Period
Volume(Bbls/d)
WeightedAveragePrice ($/Bbl)
Volume(Bbls/d)
WeightedAverage FloorPrice ($/Bbl)
WeightedAverageCeiling Price($/Bbl)
Volume(Bbls/d)
WeightedAverage Price($/Bbl)
Q4 2014 75,000 $ 94.14 64,750 $ 89.33 $ 100.00 42,000 $ 116.43
Oil Basis Swaps Period Index Volume (Bbls/d)
Weighted Average Differential toWTI
($/Bbl)
Q4 2014 Western Canadian Select 50,000 $ (17.40 )
Natural Gas Commodity Hedges Price Swaps Price
Collars Call Options Sold Period
Volume(MMBtu/d)
WeightedAverage Price($/MMBtu)
Volume(MMBtu/d)
WeightedAverage FloorPrice($/MMBtu)
WeightedAverageCeiling Price($/MMBtu)
Volume(MMBtu/d)
WeightedAverage Price($/MMBtu)
Q4 2014 800,000 $ 4.42 460,000 $ 4.03 $ 4.51 500,000 $ 5.00
Natural Gas Basis Swaps Period Index Volume (MMBtu/d)
Weighted Average Differentialto Henry Hub
($/MMBtu)
Q4 2014 AECO 94,781 $ (0.52 )
Devon’s oil derivatives that settle against the average of the
prompt month NYMEX West Texas Intermediate futures price. Devon’s
natural gas derivatives that settle against the Inside FERC first
of the month Henry Hub index.
Devon Energy CorporationInvestor Contacts:Howard Thill,
405-552-3693Scott Coody, 405-552-4735Shea Snyder, 405-552-4782Media
Contact:John Porretto, 405-228-7506
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