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): August 4, 2015

 

 

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))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

Devon Energy Corporation hereby furnishes the information set forth in its news release dated August 4, 2015 announcing second quarter 2015 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 August 4, 2015.

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: August 4, 2015

 

Page 2 of 2

EXHIBIT 99.1

 

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

 

NEWS RELEASE

Devon Energy Reports Second-Quarter 2015 Results

 

•

Delivered record oil production in U.S.

 

•

Exceeded oil production expectations for fourth consecutive quarter

 

•

Reduced operating costs 8 percent year over year

 

•

Improved 2015 capital spending and operating cost outlook

OKLAHOMA CITY – Aug.4, 2015 – Devon Energy Corp. (NYSE:DVN) today announced core earnings of $320 million, or $0.78 per diluted share, for the second quarter of 2015. This compares with first-quarter 2015 core earnings of $89 million, or $0.22 per diluted share.

“Devon delivered another high-quality performance in the second quarter as we continued to realize significant operational improvements across our portfolio,” said Dave Hager, president and CEO. “Our oil-focused drilling programs in North America’s best resource plays achieved outstanding well performance, and we made substantial progress reducing well costs and operating expenses. This superior execution contributed to more than 30 percent growth in total oil production year over year and record oil output in the U.S., led by our Eagle Ford and Delaware Basin assets.”

“With current industry conditions, we are focused on maintaining flexibility in our capital programs,” Hager said. “To ensure this optionality, we have minimal exposure to long-term service contracts, no long-term project commitments and negligible leasehold expiration issues. This allows us to dynamically allocate capital to our highest-returning areas while balancing investment with cash flow. We believe this advantage, combined with our high-quality asset base and strong balance sheet, positions Devon as well as anyone in the E&P space.”

On a reported basis, due to a non-cash, full-cost ceiling charge, Devon had a net loss of $2.8 billion, or $6.94 per diluted share, for the second-quarter 2015. This compares with second-quarter 2014 reported net earnings of $675 million, or $1.64 per diluted share.

Oil Production Exceeds Expectations for Fourth Consecutive Quarter

Devon’s oil-driven capital program continued to deliver strong results in the second quarter of 2015. Total oil production averaged 270,000 barrels per day, a 32 percent increase compared to the second quarter of 2014. This result surpassed the midpoint of guidance by 5,000 barrels per day, marking the fourth consecutive quarter the Company has exceeded oil production expectations.

The most significant growth came from the Company’s U.S. operations, where oil production averaged a record high 172,000 barrels per day. This result was 35 percent higher than the year-ago quarter and exceeded the top end of guidance expectations by 2,000 barrels per day. Growth in U.S. production was largely attributable to the Company’s Eagle Ford and Delaware Basin assets. Net production in the Eagle Ford averaged 114,000 Boe per day in the second quarter, a 75 percent increase compared to the second quarter of 2014. In the Delaware Basin, led by outstanding results from the Bone Spring play, production increased to 64,000 Boe per day in the second quarter, a 40 percent increase compared to the year-ago period.

In Canada, net production from the Company’s heavy-oil projects reached an average 98,000 barrels of oil per day in the second quarter. Driven by the continued ramp-up of the Jackfish 3 facility, Canadian oil production increased 27 percent compared to the second quarter of 2014. Scheduled maintenance at the Company’s Jackfish 1 oil sands project limited production by approximately 11,000 barrels per day in the quarter.

 

Page 1 of 16

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In total, Devon’s production averaged 674,000 Boe per day during the second quarter of 2015. This result represents a 9 percent increase compared to the second quarter of 2014, with liquids accounting for 60 percent of the Company’s production mix.

Operations Report

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

 

•

Delaware Basin type curves improving

 

•

Eagle Ford produces best-in-class well results

 

•

Heavy oil output continues to grow while margins expand

 

•

Cana and Meramec plays generate high-rate wells

 

•

Powder River Basin delivers substantial growth rates

Upstream Revenue Increases 18 Percent; Midstream Profit Expands

Revenue from oil, natural gas and natural gas liquids sales totaled $1.6 billion, an 18 percent increase compared to the first quarter of 2015. The revenue growth was attributable to the increase in higher margin U.S. oil production combined with improved oil price realizations. These factors resulted in second-quarter oil sales increasing to more than 70 percent of Devon’s total upstream revenues.

Cash settlements related to oil and natural gas hedges increased revenue by nearly $500 million, or $8 per Boe in the second quarter. At the end of June, the Company’s remaining commodity hedges had a fair-market value of approximately $850 million. This attractive hedging position represents 55 percent of forecasted oil production and 45 percent of expected natural gas production for the remaining two quarters of 2015.

Devon’s midstream operating profit reached $225 million, which exceeded the Company’s guidance and was 16 percent higher than the first quarter of 2015. The increase in operating profit was driven by growth from EnLink Midstream.

Cost Reduction Initiatives Delivering Results

The Company has several cost reduction initiatives underway that positively impacted second-quarter results. Field-level operating costs, which includes both lease operating expenses and production taxes, declined 8 percent compared to the second quarter of 2014 to $11.05 per Boe. These cost savings were realized across all regions of Devon’s asset portfolio.

Significant general and administrative (G&A) cost savings also were achieved in the second quarter. G&A expenses totaled $212 million, which was below the low end of guidance and a 16 percent decline compared to the first quarter.

Based on year-to-date cost savings, Devon now anticipates its field-level operating costs and G&A to decline to around $14.50 per Boe for the full-year 2015. Compared to original guidance, this implies a full-year cost savings of around $400 million.

Balance Sheet and Liquidity Remain Strong

Operating cash flow in the second quarter, excluding the consolidation of EnLink Midstream, reached $1.0 billion. Combined with the sale of the Victoria Express Pipeline, EnLink secondary offering proceeds and EnLink partnership distributions, Devon’s second-quarter cash inflows totaled $1.3 billion.

Devon’s financial position remained exceptionally strong with investment-grade credit ratings and cash balances of $1.7 billion at the end of the quarter. The Company’s net debt, excluding non-recourse EnLink obligations, totaled $7.6 billion.

 

Page 2 of 16

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Production Outlook on Track; Additional Capital Cost Savings Expected

Detailed forward-looking guidance for the third quarter and full-year 2015 is provided later in the release. Given the strong year-to-date production performance, the Company is well positioned to deliver on its 2015 oil growth target of 25 to 35 percent. Devon also remains on track to increase top-line production by 5 to 10 percent.

The Company expects to achieve these attractive production growth targets with lower capital cost requirements. Since the beginning of the year, Devon has reduced projected 2015 capital spending by approximately $350 million.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Core earnings and net debt are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided later in this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post additional information, consisting of an operations report and management commentary with associated slides, to its website at www.devonenergy.com. The Company’s second-quarter 2015 conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, August 5, 2015, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; unforeseen changes in the rate of production from our oil and gas properties; uncertainties in future exploration and drilling results; uncertainties inherent in estimating the cost of drilling and completing wells; drilling risks; competition for leases, materials, people and capital; midstream capacity constraints and potential interruptions in production; risk related to our hedging activities; environmental risks; political changes; changes in laws or regulations; our limited control over third parties who operate our oil and gas properties; our ability to successfully complete mergers, acquisitions and divestitures; and other risks identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential and exploration target size. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

 

Page 3 of 16

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About Devon Energy

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The Company is the second-largest oil producer among North American onshore independents. For more information, please visit www.devonenergy.com.

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 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

PRODUCTION NET OF ROYALTIES

 

		Quarter Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Oil and bitumen (MBbls/d)
United States			172				128				170				112
Canada			98				77				101				78
Retained assets			270				205				271				190
Divested assets			—				4				—				10
Total			270				209				271				200
Natural gas liquids (MBbls/d)
United States			134				130				136				125
Divested assets			—				6				—				11
Total			134				136				136				136
Gas (MMcf/d)
United States			1,607				1,689				1,612				1,638
Canada			20				23				24				22
Retained assets			1,627				1,712				1,636				1,660
Divested assets			—				219				—				401
Total			1,627				1,931				1,636				2,061
Oil equivalent (MBoe/d)
United States			573				539				574				511
Canada			101				81				105				81
Retained assets			674				620				679				592
Divested assets			—				47				—				87
Total			674				667				679				679

KEY OPERATING STATISTICS BY REGION

 

		Quarter Ended June 30, 2015
		Avg. Production (MBoe/d)				Gross Wells Drilled				Operated Rigs at June 30, 2015
Permian Basin			113				61				14
Eagle Ford			114				55				—
Canadian Heavy Oil			101				10				1
Anadarko Basin			82				22				6
Barnett Shale			185				—				—
Rockies			27				21				2
Other assets			52				20				—
Total			674				189				23

 

Page 5 of 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

PRODUCTION TREND

 

		2014				2014				2014				2015				2015
		Quarter 2				Quarter 3				Quarter 4				Quarter 1				Quarter 2
Oil (MBbls/d)
Permian Basin			55				56				55				60				67
Eagle Ford			40				47				60				75				67
Canadian Heavy Oil			77				80				93				104				98
Anadarko Basin			11				10				10				9				10
Barnett Shale			2				2				2				1				1
Rockies			8				10				9				12				16
Other assets			12				11				10				11				11
Retained assets			205				216				239				272				270
Divested assets			4				3				—				—				—
Total			209				219				239				272				270
Natural gas liquids (MBbls/d)
Permian Basin			18				19				20				19				21
Eagle Ford			11				14				18				23				24
Anadarko Basin			31				34				34				30				24
Barnett Shale			55				54				53				51				49
Rockies			1				1				1				1				1
Other assets			14				16				15				15				15
Retained assets			130				138				141				139				134
Divested assets			6				5				—				—				—
Total			136				143				141				139				134
Gas (MMcf/d)
Permian Basin			134				136				137				137				152
Eagle Ford			88				109				127				143				146
Canadian Heavy Oil			23				26				23				28				20
Anadarko Basin			309				323				329				297				290
Barnett Shale			932				896				878				827				805
Rockies			67				66				58				53				62
Other assets			159				160				155				160				152
Retained assets			1,712				1,716				1,707				1,645				1,627
Divested assets			219				138				3				—				—
Total			1,931				1,854				1,710				1,645				1,627
Oil equivalent (MBoe/d)
Permian Basin			95				98				98				102				113
Eagle Ford			65				79				99				122				114
Canadian Heavy Oil			81				84				97				109				101
Anadarko Basin			93				98				100				88				82
Barnett Shale			212				205				201				191				185
Rockies			21				22				19				22				27
Other assets			53				54				50				51				52
Retained assets			620				640				664				685				674
Divested assets			47				31				1				—				—
Total			667				671				665				685				674

 

Page 6 of 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

BENCHMARK PRICES

(average prices)

 

		Quarter Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Oil ($/Bbl) - West Texas Intermediate (Cushing)		$	57.78			$	103.09			$	53.33			$	100.87
Natural Gas ($/Mcf) - Henry Hub		$	2.65			$	4.68			$	2.82			$	4.81

REALIZED PRICES

 

		Quarter Ended June 30, 2015
		Oil /Bitumen				NGL				Gas				Total
		(Per Bbl)				(Per Bbl)				(Per Mcf)				(Per Boe)
United States		$	52.52			$	10.31			$	2.16			$	24.18
Canada (1)		$	36.49			$	N/M			$	0.33			$	35.33
Realized price without hedges		$	46.69			$	10.31			$	2.13			$	25.86
Cash settlements		$	16.08			$	—			$	0.58			$	7.83
Realized price, including cash settlements		$	62.77			$	10.31			$	2.71			$	33.69
		Quarter Ended June 30, 2014
		Oil /Bitumen				NGL				Gas				Total
		(Per Bbl)				(Per Bbl)				(Per Mcf)				(Per Boe)
United States		$	95.71			$	25.22			$	4.19			$	41.06
Canada (1)		$	69.45			$	N/M			$	1.56			$	65.96
Realized price without hedges		$	86.00			$	25.13			$	4.15			$	44.12
Cash settlements		$	(4.17	)		$	—			$	(0.16	)		$	(1.78	)
Realized price, including cash settlements		$	81.83			$	25.13			$	3.99			$	42.34
		Six Months Ended June 30, 2015
		Oil				NGL				Gas				Total
		(Per Bbl)				(Per Bbl)				(Per Mcf)				(Per Boe)
United States		$	47.74			$	9.85			$	2.31			$	22.93
Canada (1)		$	29.51			$	N/M			$	0.79			$	28.56
Realized price without hedges		$	40.94			$	9.85			$	2.29			$	23.80
Cash settlements		$	18.59			$	—			$	0.55			$	8.72
Realized price, including cash settlements		$	59.53			$	9.85			$	2.84			$	32.52
		Six Months Ended June 30, 2014
		Oil				NGL				Gas				Total
		(Per Bbl)				(Per Bbl)				(Per Mcf)				(Per Boe)
United States		$	93.96			$	27.34			$	4.26			$	40.30
Canada (1)		$	65.37			$	50.17			$	3.97			$	53.26
Realized price without hedges		$	82.10			$	28.11			$	4.23			$	42.61
Cash settlements		$	(3.19	)		$	—			$	(0.25	)		$	(1.70	)
Realized price, including cash settlements		$	78.91			$	28.11			$	3.98			$	40.91

 

(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 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts)

 

		Quarter Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Oil, gas and NGL sales		$	1,587			$	2,679			$	2,926			$	5,236
Oil, gas and NGL derivatives			(282	)			(399	)			12				(719	)
Marketing and midstream revenues			2,088				2,230				3,720				3,718
Total operating revenues			3,393				4,510				6,658				8,235
Lease operating expenses			562				582				1,115				1,180
Marketing and midstream operating expenses			1,863				2,006				3,302				3,311
General and administrative expenses			212				189				463				400
Production and property taxes			116				150				224				287
Depreciation, depletion and amortization			814				828				1,744				1,567
Asset impairments			4,168				—				9,628				—
Restructuring costs			—				5				—				42
Gains and losses on asset sales			(1	)			(1,057	)			(1	)			(1,072	)
Other operating items			22				33				41				56
Total operating expenses			7,756				2,736				16,516				5,771
Operating income (loss)			(4,363	)			1,774				(9,858	)			2,464
Net financing costs			125				131				242				243
Other nonoperating items			(9	)			89				3				107
Earnings (loss) before income taxes			(4,479	)			1,554				(10,103	)			2,114
Income tax expense (benefit)			(1,686	)			854				(3,721	)			1,085
Net earnings (loss)			(2,793	)			700				(6,382	)			1,029
Net earnings attributable to noncontrolling interests			23				25				33				30
Net earnings (loss) attributable to Devon		$	(2,816	)		$	675			$	(6,415	)		$	999
Net earnings (loss) per share attributable to Devon:
Basic		$	(6.94	)		$	1.65			$	(15.81	)		$	2.45
Diluted		$	(6.94	)		$	1.64			$	(15.81	)		$	2.44
Weighted average common shares outstanding:
Basic			411				408				411				408
Diluted			411				411				411				410

 

Page 8 of 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

		Quarter Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Cash flows from operating activities:
Net earnings (loss)		$	(2,793	)		$	700			$	(6,382	)		$	1,029
Adjustments to reconcile net earnings (loss)to net cash from operating activities:
Depreciation, depletion and amortization			814				828				1,744				1,567
Asset impairments			4,168				—				9,628				—
Gains and losses on asset sales			(1	)			(1,057	)			(1	)			(1,072	)
Deferred income tax expense (benefit)			(1,593	)			569				(3,640	)			777
Derivatives and other financial instruments			305				454				(125	)			761
Cash settlements on derivatives and financial instruments			464				(191	)			1,183				(245	)
Other noncash charges			42				106				267				229
Net change in working capital			(189	)			622				26				470
Change in long-term other assets			18				11				159				(77	)
Change in long-term other liabilities			(134	)			7				(110	)			20
Net cash from operating activities			1,101				2,049				2,749				3,459
Cash flows from investing activities:
Capital expenditures			(1,432	)			(1,758	)			(3,149	)			(3,341	)
Acquisitions of property, equipment and businesses			(13	)			(289	)			(417	)			(6,224	)
Divestitures of property and equipment			6				2,800				8				2,942
Redemptions of long-term investments			—				—				—				57
Other			(8	)			47				(5	)			84
Net cash from investing activities			(1,447	)			800				(3,563	)			(6,482	)
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs			2,094				374				3,051				3,720
Net short-term debt repayments			(778	)			(1,119	)			(763	)			(862	)
Repayments of long-term debt			(1,034	)			(2,413	)			(1,521	)			(3,990	)
Stock option exercises			4				72				4				83
Sale of subsidiary units			85				—				654				—
Issuance of subsidiary units			2				20				4				20
Dividends paid on common stock			(98	)			(99	)			(197	)			(189	)
Distributions to noncontrolling interests			(65	)			(41	)			(118	)			(141	)
Other			—				12				(12	)			9
Net cash from financing activities			210				(3,194	)			1,102				(1,350	)
Effect of exchange rate changes on cash			3				24				(43	)			13
Net change in cash and cash equivalents			(133	)			(321	)			245				(4,360	)
Cash and cash equivalents at beginning of period			1,858				2,027				1,480				6,066
Cash and cash equivalents at end of period		$	1,725			$	1,706			$	1,725			$	1,706

 

Page 9 of 16

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED BALANCE SHEETS

(in millions)

 

		June 30,				December 31,
		2015				2014
Current assets:
Cash and cash equivalents		$	1,725			$	1,480
Accounts receivable			1,602				1,959
Derivatives, at fair value			924				1,993
Income taxes receivable			9				522
Other current assets			470				544
Total current assets			4,730				6,498
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization			77,191				75,738
Not subject to amortization			2,685				2,752
Total oil and gas			79,876				78,490
Midstream and other			10,354				9,695
Total property and equipment, at cost			90,230				88,185
Less accumulated depreciation, depletion and amortization			(62,406	)			(51,889	)
Property and equipment, net			27,824				36,296
Goodwill			6,349				6,303
Other long-term assets			1,703				1,540
Total assets		$	40,606			$	50,637
Current liabilities:
Accounts payable		$	1,035			$	1,400
Revenues and royalties payable			1,095				1,193
Short-term debt			670				1,432
Deferred income taxes			346				730
Other current liabilities			852				1,180
Total current liabilities			3,998				5,935
Long-term debt			11,375				9,830
Asset retirement obligations			1,391				1,339
Other long-term liabilities			782				948
Deferred income taxes			2,909				6,244
Stockholders’ equity:
Common stock			41				41
Additional paid-in capital			4,736				4,088
Retained earnings			10,018				16,631
Accumulated other comprehensive earnings			528				779
Total stockholders’ equity attributable to Devon			15,323				21,539
Noncontrolling interests			4,828				4,802
Total stockholders’ equity			20,151				26,341
Total liabilities and stockholders’ equity		$	40,606			$	50,637
Common shares outstanding			411				409

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATING STATEMENTS OF OPERATIONS

(in millions)

 

		Quarter Ended June 30, 2015
		Devon U.S. & Canada				EnLink				Eliminations				Total
Oil, gas and NGL sales		$	1,587			$	—			$	—			$	1,587
Oil, gas and NGL derivatives			(282	)			—				—				(282	)
Marketing and midstream revenues			985				1,274				(171	)			2,088
Total operating revenues			2,290				1,274				(171	)			3,393
Lease operating expenses			562				—				—				562
Marketing and midstream operating expenses			970				1,064				(171	)			1,863
General and administrative expenses			184				28				—				212
Production and property taxes			104				12				—				116
Depreciation, depletion and amortization			716				98				—				814
Asset impairments			4,168				—				—				4,168
Gains and losses on asset sales			(1	)			—				—				(1	)
Other operating items			22				—				—				22
Total operating expenses			6,725				1,202				(171	)			7,756
Operating income (loss)			(4,435	)			72				—				(4,363	)
Net financing costs			99				26				—				125
Other nonoperating items			—				(9	)			—				(9	)
Earnings (loss) before income taxes			(4,534	)			55				—				(4,479	)
Income tax expense (benefit)			(1,696	)			10				—				(1,686	)
Net earnings (loss)			(2,838	)			45				—				(2,793	)
Net earnings attributable to noncontrolling interests			1				22				—				23
Net earnings (loss) attributable to Devon		$	(2,839	)		$	23			$	—			$	(2,816	)

OTHER KEY STATISITICS

(in millions)

 

		Quarter Ended June 30, 2015
		Devon U.S. & Canada				EnLink				Eliminations				Total
Cash flow statement items:
Operating cash flow		$	995			$	106			$	—			$	1,101
Capital expenditures		$	(1,243	)		$	(189	)		$	—			$	(1,432	)
Acquisitions of property, equipment and businesses		$	—			$	(13	)		$	—			$	(13	)
Sale of subsidiary units		$	85			$	—			$	—			$	85
EnLink distributions received (paid) (1)		$	236			$	(301	)		$	—			$	(65	)
Balance sheet statement items:
Net debt(2)		$	7,565			$	2,755			$	—			$	10,320

 

(1)	Includes $171 million for the sale of the Victoria Express Pipeline.

(2)	Net debt is a Non-GAAP measure. For a reconciliation of the comparable GAAP measure, see “Non-GAAP Financial Measures” later in this release.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CAPITAL EXPENDITURES

(in millions)

 

		Quarter Ended June 30, 2015				Six Months Ended June 30, 2015
Exploration and development capital		$	882			$	2,208
Capitalized G&A and interest			116				223
Acquisitions			—				92
Midstream(1)			21				37
Corporate and other			14				41
Devon capital expenditures		$	1,033			$	2,601

 

(1)	Excludes $158 million and $672 million attributable to EnLink for the second quarter and first six months of 2015, respectively.

 

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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.

CORE EARNINGS

(in millions)

Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the Company’s financial results. Accordingly, the Company also uses the measures of core earnings and core earnings per diluted share. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on second-quarter 2015 earnings.

 

		Quarter Ended June 30, 2015
		Before-Tax				After-Tax
Net loss attributable to Devon (GAAP)						$	(2,816	)
Asset impairments			4,168				2,646
Fair value changes in financial instruments and foreign currency			761				490
Core earnings attributable to Devon (Non-GAAP)						$	320
Diluted share count							414
Core diluted earnings per share attributable to Devon (Non-GAAP)						$	0.78

NET DEBT

(in millions)

Devon defines net debt as debt less cash and cash equivalents and net debt attributable to the consolidation of EnLink Midstream as presented in the following table. Devon believes that netting these sources of cash against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.

 

		June 30, 2015
		Devon U.S. & Canada				EnLink				Devon Consolidated
Total debt (GAAP)		$	9,218			$	2,827			$	12,045
Less cash and cash equivalents			(1,653	)			(72	)			(1,725	)
Net debt (Non-GAAP)		$	7,565			$	2,755			$	10,320

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

PRODUCTION GUIDANCE

 

		Quarter 3								Full Year
		Low				High				Low				High
Oil and bitumen (MBbls/d)
United States			155				165				160				170
Canada			105				115				100				110
Total			260				280				260				280
Natural gas liquids (MBbls/d)
United States			125				135				128				134
Gas (MMcf/d)
United States			1,500				1,550				1,550				1,600
Canada			15				20				15				20
Total			1,515				1,570				1,565				1,620
Oil equivalent (MBoe/d)
United States			530				558				546				571
Canada			108				118				103				113
Total			638				676				649				684

PRICE REALIZATIONS GUIDANCE

 

		Quarter 3								Full Year
		Low				High				Low				High
Oil and bitumen - % of WTI
United States			84	%			94	%			85	%			95	%
Canada			58	%			68	%			53	%			63	%
NGL - realized price		$	7			$	12			$	6			$	16
Natural gas - % of Henry Hub			78	%			88	%			78	%			88	%

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

OTHER GUIDANCE ITEMS

($ millions, except Boe)

 

		Quarter 3								Full Year
		Low				High				Low				High
Marketing & midstream operating profit		$	195			$	225			$	830			$	890
Lease operating expenses per Boe		$	8.90			$	9.40			$	8.80			$	9.30
General & administrative expenses per Boe		$	3.40			$	3.70			$	3.40			$	3.90
Production and property taxes as % of upstream sales			6.7	%			7.7	%			6.7	%			7.7	%
Depreciation, depletion and amortization per Boe		$	12.50			$	13.50			$	13.00			$	14.00
Other operating items		$	15			$	20			$	60			$	80
Net financing costs		$	130			$	140			$	480			$	540
Current income tax rate			0.0	%			5.0	%			0.0	%			5.0	%
Deferred income tax rate			30.0	%			35.0	%			30.0	%			35.0	%
Total income tax rate			30.0	%			40.0	%			30.0	%			40.0	%
Net earnings attributable to noncontrolling interests		$	10			$	30			$	50			$	100

CAPITAL EXPENDITURES GUIDANCE

(in millions)

 

		Quarter 3								Full Year
		Low				High				Low				High
Exploration and development		$	900			$	1,000			$	3,900			$	4,100
Capitalized G&A and interest			100				120				380				480
Midstream(1)			10				20				70				120
Corporate and other			15				25				60				110
Devon capital expenditures		$	1,025			$	1,165			$	4,410			$	4,810

 

(1)	Excludes capital expenditures related to EnLink.

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

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)
Q3-Q4 2015			106,000			$	90.85				42,000			$	82.40			$	89.78				28,000			$	116.43

 

Oil Basis Swaps

Period

Index

Volume (Bbls/d)

Weighted Average Differential to WTI ($/Bbl)

Q3-Q4 2015

Western Canadian Select

40,000

$ (15.79

)

 

		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)
Q3-Q4 2015			250,000			$	4.32				462,500			$	3.55			$	3.85				550,000			$	5.09

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index.

 

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