DVN Devon Energy Corp

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2014

 

 

DEVON ENERGY CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

DELAWARE		001-32318		73-1567067
(State or Other Jurisdiction of Incorporation or Organization)		(Commission File Number)		(IRS Employer Identification Number)

 

333 W. SHERIDAN AVE., OKLAHOMA CITY, OK		73102
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (405) 235-3611

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

---

Item 2.02

Results of Operations and Financial Condition

Devon Energy Corporation hereby furnishes the information set forth in its news release dated November 4, 2014 announcing third quarter 2014 financial results, a copy of which is attached as Exhibit 99.1.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits

 

99.1		Devon Energy Corporation news release dated November 4, 2014.

 

Page 2 of 3

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

 

Date: November 4, 2014

 

Page 3 of 3

Exhibit 99.1

 

		Devon Energy Corporation
		333 West Sheridan Avenue
		Oklahoma City, OK 73102-5015

NEWS RELEASE

Devon Energy Reports Third-Quarter 2014 Results

 

•

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

OKLAHOMA CITY – Nov. 4, 2014 – 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.

 

Page 1 of 15

---

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.

 

Page 2 of 15

---

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

 

Page 3 of 15

---

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.

Investor Contacts

Howard Thill, 405-552-3693

Scott Coody, 405-552-4735

Shea Snyder, 405-552-4782

Media Contact

John Porretto, 405-228-7506

 

Page 4 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

		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 Wells Drilled				Operated Rigs at September 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

 

Page 5 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

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

 

Page 6 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

BENCHMARK PRICES

 

		Quarter 3								September YTD
(average prices)		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 (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (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 (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (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 (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (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 (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (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.

 

Page 7 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Quarter Ended September 30,								Nine Months Ended September 30,
(in millions, except per share amounts)		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

 

Page 8 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Quarter ended September 30, 2014
(in millions)		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

 

Page 9 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Quarter Ended September 30,								Nine Months Ended September 30,
(in millions)		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

 

Page 10 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED BALANCE SHEETS

 

(in millions)		September 30, 2014				December 31, 2013
Current assets:
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

 

Page 11 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CAPITAL EXPENDITURES

 

		Quarter Ended September 30, 2014
(in millions)		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.

 

Page 12 of 15

---

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

NON-GAAP FINANCIAL MEASURES

The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles). The Company must reconcile the Non-GAAP financial measure to related GAAP information.

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.

 

 

Page 13 of 15

---

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

 

Page 14 of 15

---

DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

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)				Weighted Average Price ($/Bbl)				Volume (Bbls/d)				Weighted Average Floor Price ($/Bbl)				Weighted Average Ceiling Price ($/Bbl)				Volume (Bbls/d)				Weighted Average Price ($/Bbl)
Q4 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 to WTI ($/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)				Weighted Average Price ($/MMBtu)				Volume (MMBtu/d)				Weighted Average Floor Price ($/MMBtu)				Weighted Average Ceiling Price ($/MMBtu)				Volume (MMBtu/d)				Weighted Average Price ($/MMBtu)
Q4 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 Differential to 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.

 

Page 15 of 15