DVN Devon Energy Corp

Devon Energy Corp. (NYSE: DVN) today reported operational and financial results for the fourth quarter and full-year 2016. Also included within the release is the company’s guidance outlook for the first quarter and full-year 2017.

Highlights

• Exceeded fourth-quarter production expectations
• Achieved record-setting well productivity in 2016
• Reduced operating expenses in U.S. by 42 percent from peak rates
• Attained $1.3 billion in annual cost savings
• Delivered proved reserves growth at attractive finding costs
• Improved growth outlook driven by accelerated capital investment

“For Devon, 2016 was a transformational year,” said Dave Hager, president and CEO. “We successfully reshaped our asset portfolio to focus on our top two franchise assets, the STACK and Delaware Basin, providing us a sustainable, multi-decade growth platform. With these world-class assets, we delivered outstanding operational performance throughout the year. Our drilling programs generated the best well productivity in Devon’s 45-year history and we maximized the value of every barrel produced with cost-reduction efforts that reached $1.3 billion of annual savings.”

“We also took important steps during the year to strengthen our investment-grade financial position with the timely completion of our $3.2 billion asset divestiture program,” Hager said. “These accretive transactions provided us with the financial capacity to further accelerate investment across our best-in-class U.S. resource plays in 2017 and beyond. This increased drilling activity will continue to rapidly shift our production mix to higher-margin products, positioning us to deliver peer-leading cash flow expansion at today’s market prices.”

Fourth-Quarter Production Exceeds Midpoint Guidance

Devon’s reported oil production averaged 244,000 barrels per day in the fourth quarter of 2016. With the shift to higher-margin production, oil accounted for the largest component of the company’s product mix at 45 percent of total volumes.

Total companywide production in the fourth quarter reached 537,000 oil-equivalent barrels (Boe) per day, exceeding the midpoint of guidance by 2,000 Boe per day. In an effort to maximize profitability, Devon chose to reject approximately 12,000 barrels per day of ethane in the fourth quarter.

Record-Setting Well Productivity in U.S. Resource Plays

The majority of the company’s production was attributable to its U.S. resource plays, which averaged 396,000 Boe per day during the fourth quarter. Production within the U.S. during 2016 benefited from drilling activity that achieved the best new well productivity in Devon’s 45-year history. Led by results from the STACK, Delaware Basin and Eagle Ford assets, the company’s initial 90-day production rates in the U.S. increased for the fourth consecutive year, advancing more than 300 percent from 2012.

The substantial improvement in well productivity was driven by activity focused in top resource plays, improved subsurface reservoir characterization, leading-edge completion designs and improvements in lateral placement.

In Canada, Devon’s heavy-oil operations also delivered impressive results with net oil production averaging 139,000 barrels per day in the fourth quarter. Driven by the industry-leading performance of the Jackfish complex, Canadian oil production increased 14 percent compared to the fourth quarter of 2015.

Reserve Report Highlights Operational Excellence

Devon’s estimated proved reserves were 2.1 billion Boe on Dec. 31, 2016, a 3 percent increase compared to the company’s retained asset portfolio in 2015. Proved developed reserves accounted for 80 percent of the total. At year-end, higher-margin, liquids reserves totaled 1.1 billion Boe, or approximately 55 percent of total reserves.

The most significant reserve growth came from the company’s U.S. operations where proved reserves increased 7 percent to 1.6 billion Boe. Devon’s capital programs within the U.S. added 275 million Boe of reserves (extensions, discoveries and performance revisions) during 2016. This represents a replacement rate of approximately 175 percent (on a retained asset basis). Excluding property acquisition costs, these reserves were added at a finding cost of only $5 per Boe added during the year. These attractive reserve results in the U.S. were driven by new-well activity that achieved record-setting productivity, a materially improved operating cost structure and successful base production initiatives.

In Canada, the company’s heavy oil reserves amounted to 504 million Boe at year end. Beyond proved reserves, tremendous upside exists with Devon’s top-tier Canadian assets, with more than 1.4 billion Boe of risked resource.

Lease Operating Costs Improve by 42 Percent in U.S. Resource Plays

Devon continued to make progress lowering operating costs in the fourth quarter. Lease operating expenses (LOE) totaled $367 million for the quarter and were 4 percent below the midpoint of guidance. The $1.1 billion sale of Access Pipeline in Canada added $28 million of incremental LOE during the quarter. The strong fourth-quarter result was driven by the company’s U.S. asset portfolio, where LOE costs improved by 42 percent from peak rates in early 2015. The decrease in LOE was primarily driven by improved power and water-handling infrastructure, reduced labor expense and lower supply chain costs.

The company also maintained its significantly improved general and administrative (G&A) cost structure in the fourth quarter. Including capitalized costs, G&A expenses totaled $224 million, a nearly 40 percent improvement compared to peak costs in late 2014. The significantly lower overhead costs were driven by lower personnel expenses.

Cost Savings Reach $1.3 Billion in 2016

In aggregate, Devon’s cost-savings initiatives achieved $1.3 billion of operating and G&A expense reductions in 2016 compared to peak levels in 2014.

The company expects these cost savings to be sustainable in 2017 due to structural improvements and efficiency gains within its field operations and corporate support groups.

EnLink Positioned to Deliver Double-Digit Growth in 2017

Devon’s midstream business generated $212 million of operating profit in the fourth quarter, driven entirely by the company’s strategic investment in EnLink Midstream. For the full-year 2016, EnLink-related operating profit expanded to $879 million, a 6 percent improvement compared to 2015.

In 2017, with strong growth expected from EnLink, Devon projects its midstream operating profits will advance to a range of $900 million to $950 million. Based on the midpoint of guidance, this estimate represents approximately a 10 percent increase compared to 2016. EnLink’s growth is derived from an asset base that is positioned in some of the most attractive markets in North America, including the STACK, Midland Basin, Delaware Basin and an NGL business that services end-user demand along the Gulf Coast.

Devon has a 64 percent ownership in EnLink’s general partner (NYSE: ENLC) and a 24 percent interest in the limited partner (NYSE: ENLK). In aggregate, the company’s ownership in EnLink has a market value of approximately $4 billion and is expected to generate cash distributions of around $270 million annually.

Fourth-Quarter 2016 Operations Report

For additional details on Devon’s E&P operations, please refer to the company’s fourth-quarter 2016 operations report at www.devonenergy.com. Highlights from the report include:

• Meramec drilling inventory increases by 40 percent
• Leonard Shale and Delaware Sands resource potential expands
• Staggered spacing tests successful in Eagle Ford
• Jackfish complex delivers record production
• Barnett cash flow generation accelerates

Divestitures and Hedging Position Enhance Strong Financial Position

On Oct. 6, 2016, the company closed on the sale of its 50 percent interest in the Access Pipeline for USD $1.1 billion. This accretive transaction officially completed Devon’s $3.2 billion non-core asset divestiture program.

The majority of divestiture proceeds were utilized to retire $2.5 billion of debt through tender offerings and repayments in the second half of 2016. As a result of the debt-reduction efforts, the company expects its recurring, go-forward financing costs to decline by around $120 million annually, with no significant debt maturities until mid-2021. Devon exited the fourth quarter with investment-grade credit ratings and significant liquidity, which consisted of $2 billion of cash on hand and an undrawn credit facility of $3 billion.

In addition to an investment-grade balance sheet, Devon’s financial position is bolstered by a significantly increased commodity hedging position in 2017. The company currently has approximately 50 percent of its estimated oil and gas production hedged in the upcoming year and will continue to build out its hedging position in the future.

Earnings Beat Wall Street Consensus by 20 Percent

Devon’s reported net earnings totaled $331 million or $0.63 per diluted share in the fourth quarter. Adjusting for items securities analysts typically exclude from their published estimates, the company’s core earnings were $131 million or $0.25 per diluted share in the fourth quarter. This strong earnings result exceeded analyst consensus estimates by 20 percent.

The company’s significantly improved profitability in the fourth quarter was attributable to higher commodity prices and an improved cost structure. These factors also strengthened Devon’s operating cash flow to $536 million in the fourth quarter. Combined with proceeds received from asset sales, the company’s total cash inflows for the quarter reached $1.8 billion.

Devon Positioned to Deliver Peer-Leading Cash Flow Expansion

Detailed forward-looking guidance for the first quarter and full-year 2017 is provided later in the release. In 2017, Devon expects to further accelerate activity in its U.S. resource plays to as many as 20 operated rigs by year end. With this level of planned activity, the company expects to invest between $2.0 billion and $2.3 billion of E&P capital in 2017, with nearly 90 percent of the capital devoted to U.S. resource plays.

Devon’s upstream capital plans are expected to drive 13 to 17 percent oil production growth in the U.S. during 2017 compared to the fourth quarter of 2016, which marks the low point of Devon’s production profile. This resumption of growth in high-margin production will begin in the first quarter of 2017. The operational momentum created by accelerated drilling activity in the STACK and Delaware Basin in the upcoming year is expected to advance light-oil production in the U.S. by approximately 20 percent in 2018 compared to 2017. This rapid growth in high-margin production, combined with a significantly improved cost structure, positions Devon to deliver peer-leading cash flow expansion at today’s market prices.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP (generally accepted accounting principles) financial measures to the related GAAP information. Finding cost, core earnings and core earnings per share referenced within the commentary of this release are non-GAAP financial measures. Reconciliations of these and other non-GAAP measures are provided within the tables of this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post an operations report to its website at www.devonenergy.com. The company’s fourth-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Feb. 15, 2017, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding our business and operations 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, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties 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, potential locations, risked and unrisked locations, estimated ultimate recovery (or EUR), exploration target size and other similar terms. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

About Devon Energy

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

           

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  Quarter Ended Year Ended PRODUCTION NET OF ROYALTIES December 31, December 31, 2016       2015 2016       2015

 

Oil and bitumen (MBbls/d) U. S. - Core 105 139 119 142 Heavy Oil 139 121 131 111 Retained assets 244 260 250 253 Divested assets — 18 10 22 Total 244 278 260 275 Natural gas liquids (MBbls/d) U. S. - Core 90 115 103 110 Divested assets — 24 13 26 Total 90 139 116 136 Gas (MMcf/d) U. S. - Core 1,203 1,327 1,270 1,333 Heavy Oil 18 24 20 22 Retained assets 1,221 1,351 1,290 1,355 Divested assets — 232 123 255 Total 1,221 1,583 1,413 1,610 Oil equivalent (MBoe/d) U. S. - Core 396 475 434 474 Heavy Oil 141 126 134 115 Retained assets 537 601 568 589 Divested assets — 80 43 91 Total 537 681 611 680       KEY OPERATING STATISTICS BY REGION       Quarter Ended December 31, 2016 Avg. Production       Gross Wells Operated Rigs at (MBoe/d) Drilled December 31, 2016 STACK 88 55 6 Delaware Basin 54 15 3 Eagle Ford 60 29 — Heavy Oil 141 12 3 Barnett Shale 163 — — Rockies Oil 15 11 1 Other assets 16 11 — Total 537 133 13         Year Ended December 31, 2016 Avg. Production Gross Wells (MBoe/d) Drilled STACK 93 133 Delaware Basin 60 58 Eagle Ford 76 63 Heavy Oil 134 25 Barnett Shale 169 — Rockies Oil 19 19 Other assets 17 28 Retained assets 568 326 Divested assets 43 14 Total 611 340             PRODUCTION TREND 2015 2016 Quarter 4 Quarter 1       Quarter 2       Quarter 3       Quarter 4 Oil and bitumen (MBbls/d) STACK 9 15 19 21 19 Delaware Basin 42 38 36 31 29 Eagle Ford 60 59 41 33 34 Heavy Oil 121 126 121 137 139 Barnett Shale 1 1 1 1 1 Rockies Oil 15 17 15 11 11 Other assets 12 12 11 11 11 Retained assets 260 268 244 245 244 Divested assets 18 17 15 6 — Total 278 285 259 251 244 Natural gas liquids (MBbls/d) STACK 24 30 30 23 21 Delaware Basin 11 12 13 12 10 Eagle Ford 27 24 17 13 11 Barnett Shale 49 46 46 44 43 Rockies Oil 1 1 1 1 1 Other assets 3 2 3 3 4 Retained assets 115 115 110 96 90 Divested assets 24 22 21 8 — Total 139 137 131 104 90 Gas (MMcf/d) STACK 253 306 289 292 284 Delaware Basin 82 84 99 92 89 Eagle Ford 152 144 103 85 90 Heavy Oil 24 15 28 18 18 Barnett Shale 786 768 757 730 710 Rockies Oil 38 32 31 19 17 Other assets 16 17 14 13 13 Retained assets 1,351 1,366 1,321 1,249 1,221 Divested assets 232 215 206 75 — Total 1,583 1,581 1,527 1,324 1,221 Oil equivalent (MBoe/d) STACK 75 96 97 92 88 Delaware Basin 66 63 65 59 54 Eagle Ford 113 107 76 61 60 Heavy Oil 126 129 126 140 141 Barnett Shale 181 175 173 166 163 Rockies Oil 23 23 21 16 15 Other assets 17 18 16 16 16 Retained assets 601 611 574 550 537 Divested assets 80 74 70 27 — Total 681 685 644 577 537                         BENCHMARK PRICES   (average prices) Quarter 4 December YTD   2016     2015     2016     2015   Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 49.21 $ 42.15 $ 43.36 $ 48.87 Natural Gas ($/Mcf) - Henry Hub $ 2.98 $ 2.27 $ 2.46 $ 2.67   REALIZED PRICES Quarter Ended December 31, 2016 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf)   (Per Boe) United States $ 46.74 $ 13.81 $ 2.37 $ 22.78 Canada $ 25.90     N/M     N/M   $ 25.39   Realized price without hedges $ 34.90 $ 13.81 $ 2.34 $ 23.47 Cash settlements $ —   $ (0.31 ) $ (0.11 ) $ (0.30 ) Realized price, including cash settlements $ 34.90   $ 13.50   $ 2.23   $ 23.17     Quarter Ended December 31, 2015 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf)   (Per Boe) United States $ 38.04 $ 8.81 $ 1.76 $ 17.90 Canada $ 18.03     N/M  

 

N/M

  $ 17.62   Realized price without hedges $ 29.31 $ 8.81 $ 1.75 $ 17.85 Cash settlements $ 24.36   $ —   $ 0.70   $ 11.59   Realized price, including cash settlements $ 53.67   $ 8.81   $ 2.45   $ 29.44     Year Ended December 31, 2016 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf)   (Per Boe) United States $ 38.92 $ 9.81 $ 1.84 $ 18.34 Canada $ 20.53     N/M     N/M   $ 20.07   Realized price without hedges $ 29.65 $ 9.81 $ 1.84 $ 18.72 Cash settlements $ (0.43 ) $ (0.11 ) $ 0.07   $ (0.05 ) Realized price, including cash settlements $ 29.22   $ 9.70   $ 1.91   $ 18.67     Year Ended December 31, 2015 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf)     (Per Boe) United States $ 44.01 $ 9.32 $ 2.17 $ 21.12 Canada $ 25.14     N/M  

 

N/M

  $ 24.46   Realized price without hedges $ 36.39 $ 9.32 $ 2.14 $ 21.68 Cash settlements $ 20.72   $ —   $ 0.57   $ 9.74   Realized price, including cash settlements $ 57.11   $ 9.32   $ 2.71   $ 31.42                           CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share amounts) Quarter Ended Year Ended December 31, December 31,   2016     2015     2016     2015   Oil, gas and NGL sales $ 1,159 $ 1,118 $ 4,182 $ 5,382 Oil, gas and NGL derivatives (171 ) 77 (201 ) 503 Marketing and midstream revenues 1,820 1,691 6,323 7,260 Asset dispositions and other   542     —     1,893     —   Total revenues and other   3,350     2,886     12,197     13,145   Lease operating expenses 367 479 1,582 2,104 Marketing and midstream operating expenses 1,608 1,481 5,492 6,420 General and administrative expenses 163 194 645 855 Production and property taxes 55 73 275 388 Depreciation, depletion and amortization 372 641 1,792 3,129 Asset impairments 124 5,341 4,975 20,820 Restructuring and transaction costs 1 78 267 78 Other operating items   23     24     64     78   Total operating expenses   2,713     8,311     15,092     33,872   Operating income (loss) 637 (5,425 ) (2,895 ) (20,727 ) Net financing costs 334 139 904 517 Other nonoperating items   (72 )   (22 )   78     24   Earnings (loss) before income taxes 375 (5,542 ) (3,877 ) (21,268 ) Income tax expense (benefit)   55     (630 )   (173 )   (6,065 ) Net earnings (loss) 320 (4,912 ) (3,704 ) (15,203 ) Net earnings (loss) attributable to noncontrolling interests   (11 )   (380 )   (402 )   (749 ) Net earnings (loss) attributable to Devon $ 331   $ (4,532 ) $ (3,302 ) $ (14,454 ) Net earnings (loss) per share attributable to Devon: Basic $ 0.63 $ (11.12 ) $ (6.52 ) $ (35.55 ) Diluted $ 0.63 $ (11.12 ) $ (6.52 ) $ (35.55 )   Weighted average common shares outstanding: Basic 524 413 513 412 Diluted 527 413 513 412                         CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Quarter Ended Year Ended December 31, December 31,   2016     2015     2016     2015   Cash flows from operating activities: Net earnings (loss) $ 320 $ (4,912 ) $ (3,704 ) $ (15,203 ) Adjustments to reconcile net earnings (loss) to net cash

from operating activities:

Depreciation, depletion and amortization 372 641 1,792 3,129 Asset impairments 124 5,341 4,975 20,820 Gains and losses on asset sales (536 ) — (1,887 ) — Deferred income tax expense (benefit) 27 (480 ) (273 ) (5,828 ) Derivatives and other financial instruments 27 (132 ) 386 (738 ) Cash settlements on derivatives and financial instruments (9 ) 775 (142 ) 2,688 Asset retirement obligation accretion 17 19 75 75 Amortization of stock-based compensation 31 44 194 181 Other 334 37 303 281 Net change in working capital (189 ) (404 ) (8 ) (311 ) Change in long-term other assets 26 74 36 285 Change in long-term other liabilities   (8 )   68     (1 )   (6 ) Net cash from operating activities   536     1,071     1,746     5,373   Cash flows from investing activities: Capital expenditures (671 ) (1,079 ) (2,330 ) (5,308 ) Acquisitions of property, equipment and businesses — (577 ) (1,641 ) (1,107 ) Divestitures of property and equipment 1,229 72 3,118 107 Other   (26 )   (8 )   (19 )   (16 ) Net cash from investing activities   532     (1,592 )   (872 )   (6,324 ) Cash flows from financing activities: Borrowings of long-term debt, net of issuance costs 483 1,444 2,145 4,772 Repayments of long-term debt (1,687 ) (861 ) (4,409 ) (2,634 ) Net short-term debt repayments — 625 (626 ) (307 ) Early retirement of debt (183 ) — (265 ) — Issuance of common stock — — 1,469 — Sale of subsidiary units — — — 654 Issuance of subsidiary units 57 12 892 25 Dividends paid on common stock (31 ) (100 ) (221 ) (396 ) Contributions from noncontrolling interests 17 4 168 16 Distributions to noncontrolling interests (80 ) (68 ) (304 ) (254 ) Other   (4 )   —     (13 )   (18 ) Net cash from financing activities   (1,428 )   1,056     (1,164 )   1,858   Effect of exchange rate changes on cash   (66 )   (12 )   (61 )   (77 ) Net change in cash and cash equivalents (426 ) 523 (351 ) 830 Cash and cash equivalents at beginning of period   2,385     1,787     2,310     1,480   Cash and cash equivalents at end of period $ 1,959   $ 2,310   $ 1,959   $ 2,310               CONSOLIDATED BALANCE SHEETS (in millions) December 31, December 31,   2016     2015   Current assets: Cash and cash equivalents $ 1,959 $ 2,310 Accounts receivable 1,356 1,105 Assets held for sale 193 — Other current assets   264     606   Total current assets   3,772     4,021   Property and equipment, at cost: Oil and gas, based on full cost accounting: Subject to amortization 75,648 78,190 Not subject to amortization   3,437     2,584   Total oil and gas 79,085 80,774 Midstream and other   10,455     10,380   Total property and equipment, at cost 89,540 91,154 Less accumulated depreciation, depletion and amortization   (73,350 )   (72,086 ) Property and equipment, net   16,190     19,068   Goodwill 3,964 5,032 Other long-term assets   1,987     1,330   Total assets $ 25,913   $ 29,451     Current liabilities: Accounts payable $ 642 $ 906 Revenues and royalties payable 908 763 Short-term debt — 976 Other current liabilities   1,066     650   Total current liabilities   2,616     3,295   Long-term debt 10,154 12,056 Asset retirement obligations 1,226 1,370 Other long-term liabilities 894 853 Deferred income taxes 648 888 Stockholders’ equity: Common stock 52 42 Additional paid-in capital 7,237 4,996 Retained earnings (accumulated deficit) (1,646 ) 1,781 Accumulated other comprehensive earnings   284     230   Total stockholders’ equity attributable to Devon 5,927 7,049 Noncontrolling interests   4,448     3,940   Total stockholders’ equity   10,375     10,989   Total liabilities and stockholders’ equity $ 25,913   $ 29,451   Common shares outstanding 523 418                         CONSOLIDATING STATEMENTS OF OPERATIONS (in millions) Quarter Ended December 31, 2016

Devon U.S.& Canada

EnLink Eliminations Total Oil, gas and NGL sales $ 1,159 $ — $ — $ 1,159 Oil, gas and NGL derivatives (171 ) — — (171 ) Marketing and midstream revenues 758 1,225 (163 ) 1,820 Asset dispositions and other   558     (16 )   —     542   Total revenues and other   2,304     1,209     (163 )   3,350   Lease operating expenses 367 — — 367 Marketing and midstream operating expenses 769 1,002 (163 ) 1,608 General and administrative expenses 133 30 — 163 Production and property taxes 48 7 — 55 Depreciation, depletion and amortization 241 131 — 372 Asset impairments 124 — — 124 Restructuring and transaction costs 1 — — 1 Other operating items   23     —     —     23   Total operating expenses   1,706     1,170     (163 )   2,713   Operating income 598 39 — 637 Net financing costs 284 50 — 334 Other nonoperating items   (92 )   20     —     (72 ) Earnings (loss) before income taxes 406 (31 ) — 375 Income tax expense (benefit)   56     (1 )   —     55   Net earnings (loss) 350 (30 ) — 320 Net loss attributable to noncontrolling interests   —     (11 )   —     (11 ) Net earnings (loss) attributable to Devon $ 350   $ (19 ) $ —   $ 331                          

OTHER KEY STATISTICS

(in millions) Quarter Ended December 31, 2016

Devon U.S.& Canada

EnLink Eliminations Total Cash flow statement related items: Operating cash flow $ 383 $ 153 $ — $ 536 Capital expenditures $ (432 ) $ (239 ) $ — $ (671 ) Divestitures of property and equipment $ 1,141 $ 88 $ — $ 1,229 Repayments of long-term debt $ (1,254 ) $ (433 ) $ — $ (1,687 ) EnLink distributions received (paid) $ 66 $ (146 ) $ — $ (80 ) Issuance of subsidiary units $ — $ 57 $ — $ 57   Balance sheet statement items: Net debt (1) $ 4,911 $ 3,284 $ — $ 8,195   (1) Net debt is a non-GAAP measure. For a reconciliation of the comparable GAAP measure, see "Non-GAAP Financial Measures" later in this release.             CAPITAL EXPENDITURES (in millions) Quarter Ended December 31, 2016 Year Ended December 31, 2016 Exploration and development capital(1) $ 363 $ 1,166 Capitalized G&A and interest 78 308 Acquisitions 36 1,595 Other   20   40 Devon capital expenditures(2) $ 497 $ 3,109   (1) Exploration and development capital in this table is presented before capitalized G&A and interest. The full-year amount excludes a $95 million positive revision to future asset retirement obligations, which is included in costs incurred. The fourth quarter and full-year amounts include $8 million and $32 million for abandonment expenditures paid during each respective period, which are not included in costs incurred.   (2) Excludes $266 and $1,082 million attributable to EnLink for the fourth quarter and year end of 2016, respectively.       COSTS INCURRED Total (in millions) Year Ended December 31,   2016         2015 Property acquisition costs: Proved properties $ 237 $ 195 Unproved properties 1,358 717 Exploration costs 394 587 Development costs   1,143   3,671 Costs Incurred $ 3,132 $ 5,170     United States Year Ended December 31,   2016   2015 Property acquisition costs: Proved properties $ 237 $ 193 Unproved properties 1,356 634 Exploration costs 345 478 Development costs   1,034   3,269 Costs Incurred $ 2,972 $ 4,574     Canada Year Ended December 31,   2016   2015 Property acquisition costs: Proved properties $ — $ 2 Unproved properties 2 83 Exploration costs 49 109 Development costs   109   402 Costs Incurred $ 160 $ 596                         RESERVES RECONCILIATION   Total

Oil / Bitumen(MMBbls)

Gas(Bcf)

NGL(MMBbls)

Total(MMBoe)

As of December 31, 2015: Proved developed 444 5,707 411 1,806 Proved undeveloped 340   114   17   376   Total Proved 784   5,821   428   2,182   Revisions due to prices 3 (103 ) (13 ) (27 ) Revisions other than price (18 ) 638 48 137 Extensions and discoveries 38 280 42 126 Purchase of reserves 8 33 7 20 Production (95 ) (517 ) (42 ) (223 ) Sale of reserves (25 ) (521 ) (45 ) (157 ) As of December 31, 2016: Proved developed 367 5,377 387 1,649 Proved undeveloped 328   254   38   409   Total Proved 695   5,631   425   2,058     United States

Oil / Bitumen(MMBbls)

Gas(Bcf)

NGL(MMBbls)

Total(MMBoe)

As of December 31, 2015: Proved developed 203 5,694 411 1,563 Proved undeveloped 39   114   17   75   Total Proved 242   5,808   428   1,638   Revisions due to prices (18 ) (103 ) (13 ) (48 ) Revisions other than price (2 ) 628 48 151 Extensions and discoveries 36 280 42 124 Purchase of reserves 8 33 7 20 Production (47 ) (510 ) (42 ) (174 ) Sale of reserves (25 ) (521 ) (45 ) (157 ) As of December 31, 2016: Proved developed 160 5,361 387 1,439 Proved undeveloped 34   254   38   115   Total Proved 194   5,615   425   1,554     Canada

Oil / Bitumen(MMBbls)

Gas(Bcf)

NGL(MMBbls)

Total(MMBoe)

As of December 31, 2015: Proved developed 241 13 — 243 Proved undeveloped 301   —   —   301   Total Proved 542   13   —   544   Revisions due to prices 21 — — 21 Revisions other than price (16 ) 10 — (14 ) Extensions and discoveries 2 — — 2 Production (48 ) (7 ) —   (49 ) As of December 31, 2016: Proved developed 207 16 — 210 Proved undeveloped 294   —   —   294   Total Proved 501   16   —   504    

NON-GAAP FINANCIAL MEASURES

This press release includes non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.

CORE EARNINGS

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 share attributable to Devon. 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 fourth-quarter 2016 earnings.

      (in millions, except per share amounts) Quarter Ended December 31, 2016 Before-tax       After-tax      

AfterNoncontrollingInterests

      Per Share Earnings attributable to Devon (GAAP) $ 375 $ 320 $ 331 $ 0.63 Adjustments: Gains and losses on asset sales (539 ) (455 ) (462 ) (0.87 ) Asset impairments 145 107 100 0.19 Deferred tax asset valuation allowance — (16 ) (16 ) (0.03 ) Restructuring and transaction costs 1 1 1 — Fair value changes in financial instruments and foreign currency 69 62 59 0.11 Early retirement of debt   185     118     118     0.22   Core earnings attributable to Devon (Non-GAAP) $ 236   $ 137   $ 131   $ 0.25    

NET DEBT

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.

      (in millions) December 31, 2016 Devon U.S. & Canada       EnLink       Devon Consolidated Total debt (GAAP) $ 6,859 $ 3,295 $ 10,154 Less cash and cash equivalents   (1,948 )   (11 )   (1,959 ) Net debt (Non-GAAP) $ 4,911   $ 3,284   $ 8,195    

FINDING COST

Finding cost is defined as costs incurred less acquisitions costs. Devon believes finding cost is relevant because it provides additional insight into costs associated with current year exploration and development activities. Certain securities analysts also use this methodology to measure Devon’s performance. It should be noted that the actual costs of reserves added through Devon’s drilling program will differ, sometimes significantly, from the direct comparison of capital spent and reserves added in any given period due to the timing of capital expenditures and reserves bookings.

      (in millions) Year Ended December 31, 2016 United States Costs Incurred (GAAP) $ 2,972 Less: Acquisition costs   1,593 Finding cost (Non-GAAP) $ 1,379   Revisions other than price 151 Extensions and discoveries   124 Total   275   Finding cost per BOE (Non-GAAP) $ 5.01  

UPSTREAM CASH FLOW

Devon defines upstream cash flow as cash flow from operations less EnLink cash flow from operations, less cash flow from divested assets and debt repayments, plus distributions received from EnLink. Devon believes upstream cash flow is relevant because it provides a clearer picture of cash flow generation ability from Devon’s retained upstream assets and its investment in EnLink.

      (in millions) Year Ended December 31, 2016 Consolidated cash flow from operations (GAAP) $ 1,746 Less: EnLink cash flow from operations   666 Devon cash flow from operations 1,080   Less: cash flow from divested assets 150 Less: cash associated with debt repayments 265 Add: EnLink distributions received 265   Upstream cash flow (Non-GAAP) $ 930              

DEVON ENERGY CORPORATION

FORWARD-LOOKING GUIDANCE

  PRODUCTION GUIDANCE Quarter 1 Full Year Low       High Low       High Oil and bitumen (MBbls/d) U.S. 114 118 119 123 Heavy Oil 133 138 130 135 Total 247 256 249 258 Natural gas liquids (MBbls/d) Total 88 93 95 100 Gas (MMcf/d) U.S. 1,190 1,220 1,160 1,200 Heavy Oil 14 18 14 16 Total 1,204 1,238 1,174 1,216 Oil equivalent (MBoe/d) U.S. 400 414 407 423 Heavy Oil 135 141 132 138 Total 535 555 539 561             PRICE REALIZATIONS GUIDANCE Quarter 1 Full Year Low       High Low       High Oil and bitumen - % of WTI U.S. 88 % 98 % 88 % 98 % Canada 45 % 55 % 48 % 58 % NGL - realized price $ 12 $ 15 $ 12 $ 15 Natural gas - % of Henry Hub 78 % 88 % 78 % 88 %             OTHER GUIDANCE ITEMS Quarter 1 Full Year ($ millions, except %) Low       High Low       High Marketing & midstream operating profit $ 200 $ 220 $ 900 $ 950 Lease operating expenses $ 350 $ 400 $ 1,500 $ 1,600 General & administrative expenses - Devon $ 130 $ 150 $ 500 $ 550 General & administrative expenses - EnLink $ 35 $ 45 $ 130 $ 140 Production and property taxes $ 75 $ 85 $ 275 $ 325 Depreciation, depletion and amortization $ 375 $ 425 $ 1,650 $ 1,750 Other operating items $ 15 $ 25 $ 70 $ 80 Net financing costs $ 125 $ 135 $ 485 $ 535 Current income tax rate 5.0 % 15.0 % 5.0 % 15.0 % Deferred income tax rate   20.0 %   30.0 %   20.0 %   30.0 % Total income tax rate   25.0 %   45.0 %   25.0 %   45.0 %   Net earnings attributable to noncontrolling interests $ — $ 5 $ 50 $ 100             CAPITAL EXPENDITURES GUIDANCE Quarter 1 Full Year (in millions) Low       High Low       High Exploration and development $ 450 $ 500 $ 2,000 $ 2,300 Capitalized G&A 55 65 200 250 Capitalized interest 15 20 60 90 Other   5   10   25   50 Devon capital expenditures (1) $ 525 $ 595 $ 2,285 $ 2,690   (1) Excludes capital expenditures related to EnLink.                               COMMODITY HEDGES   Oil Commodity Hedges Price Swaps Price Collars Period Volume (Bbls/d)

WeightedAverage Price($/Bbl)

Volume(Bbls/d)

WeightedAverage FloorPrice ($/Bbl)

WeightedAverage CeilingPrice ($/Bbl)

Q1-Q4 2017 73,760 $ 54.33 56,259 $ 45.45 $ 58.11 Q1-Q4 2018 4,096 $ 54.31 7,685 $ 47.77 $ 57.77       Oil Basis Swaps Period Index       Volume (Bbls/d)      

Weighted Average Differential toWTI ($/Bbl)

Q1-Q4 2017 Western Canadian Select 26,910 $ (15.24 ) Q1-Q4 2017 Midland Sweet 17,534 $ (0.41 )   Natural Gas Commodity Hedges Price Swaps   Price Collars Period

Volume(MMBtu/d)

 

WeightedAverage Price($/MMBtu)

Volume(MMBtu/d)

 

WeightedAverage FloorPrice ($/MMBtu)

 

WeightedAverage CeilingPrice ($/MMBtu)

Q1-Q4 2017 209,863 $ 3.16 360,425 $ 2.99 $ 3.40 Q1-Q4 2018 44,500 $ 3.32 33,904 $ 3.29 $ 3.64  

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. Commodity hedge positions are shown as of February 7, 2017.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170214006351/en/

Devon Energy CorporationInvestor ContactsScott Coody, 405-552-4735Chris Carr, 405-228-2496Media ContactJohn Porretto, 405-228-7506