DVN Devon Energy Corp

Highlights

• Delaware Basin and STACK drive U.S. oil production beat
• Light-oil production growth on track to expand 16 percent in 2018
• EnLink ownership interests monetized at 12 times cash flow
• Industry-leading share-repurchase program increased to $4 billion
• Field-level cash margins expand by 31 percent year over year
• Corporate cost structure to improve by $475 million annually

Devon Energy Corp. (NYSE: DVN) today reported operational and financial results for the second quarter of 2018. Also included within the release is the company’s guidance outlook for the third quarter and full-year 2018.

“Devon is executing at a very high level on our 2020 Vision,” said Dave Hager, president and CEO. “Operationally, our second-quarter performance was headlined by strong well productivity in the Delaware Basin and STACK, which drove light-oil production above the high end of our guidance expectations. Importantly, we converted this volume growth into higher profits with our access to premium pricing in advantaged markets and through our success in driving both field-level and corporate costs lower.

“With the strong well productivity we’ve achieved year to date in the U.S., light-oil production growth is on track to advance 16 percent in 2018, which is 200 basis points above our original budget expectations,” said Hager. “We expect to deliver this improved outlook without any increase to our planned activity, and this disciplined investment program positions us to generate substantial amounts of free cash flow at today’s market prices.

“In addition to our strong operating results, we took a significant step forward in achieving our 2020 Vision by further simplifying our asset portfolio through our monetization of EnLink,” said Hager. “This highly accretive transaction provides a strategic exit from EnLink at a value of 12 times cash flow, and we’re returning the sales proceeds to our shareholders through our industry-leading $4 billion share-repurchase program.”

Delaware Basin and STACK Drive U.S. Oil Production Beat

Production results in the quarter were highlighted by oil growth from Devon’s U.S. resource plays, which are attaining the highest margins and returns in Devon’s portfolio. In the quarter, light-oil production in the U.S. averaged 136,000 barrels per day, a 12 percent increase compared to the first quarter of 2018. This result exceeded the top end of guidance by 2,000 barrels per day.

The strongest asset-level performance during the second quarter was from the company’s Delaware Basin assets. Light-oil production increased 54 percent year over year in the quarter, driving total volumes in the Delaware to 79,000 oil-equivalent barrels (Boe) per day. Growth in the Delaware was driven by prolific well productivity, where the top 10 wells in the quarter averaged initial 30-day rates of approximately 3,000 Boe per day.

Devon’s STACK assets also delivered strong results during the quarter. Total production in the STACK advanced 26 percent compared to the second quarter of 2017. Driven by several strong wells across the play, oil production delivered the highest growth rate, increasing 41 percent year over year.

In Canada, net oil production averaged 109,000 barrels per day in the second quarter. Scheduled maintenance at the company’s Jackfish facility curtailed production by approximately 15,000 barrels per day. Also contributing to lower production was a 2 percentage point increase in royalty rates because of higher commodity prices and improved profitability.

Overall, total companywide production averaged 541,000 Boe per day in the second quarter. Oil accounted for the largest component of the product mix at 45 percent of total volumes. For additional details on Devon’s E&P operations in the quarter, please refer to the company’s second-quarter 2018 operations report at www.devonenergy.com.

Light-Oil Production Growth on Track to Increase 16 Percent in 2018

With the strong well productivity Devon has achieved year to date in the U.S., light-oil production growth is on track to advance 16 percent in 2018. This growth rate is trending at approximately 200 basis points above the company’s original budget expectations.

The incremental oil growth in the U.S. is expected to be delivered without an increase to Devon’s capital activity. This disciplined investment program positions the company to generate free cash flow in the second half of 2018 at today’s market prices.

EnLink Ownership Interests Monetized at 12 Times Cash Flow

In mid-July, Devon completed the sale of its ownership interests in EnLink Midstream Partners, LP (NYSE: ENLK) and EnLink Midstream, LLC (NYSE: ENLC) for $3.125 billion. The company’s interests in EnLink generated $265 million of cash distributions over the past year, valuing the investment at approximately 12 times cash flow. Devon expects no incremental corporate cash taxes resulting from this sale.

With the closing of the EnLink transaction, combined with other minor asset sales achieved to date, total proceeds from Devon’s divestiture program have now reached $4.2 billion. The company expects to monetize an additional $1 billion of minor, non-core assets across the United States by year-end. These divestiture packages include undeveloped leasehold in the southern Delaware Basin, enhanced oil recovery projects in the Rockies and Midland Basin along with Wise County acreage in the Barnett Shale. Data rooms are open for the majority of these packages and bids are expected throughout the second half of 2018.

Industry-Leading Share-Repurchase Program Increased to $4 Billion

In conjunction with closing the EnLink transaction, Devon’s board of directors authorized an increase in the company’s share-repurchase program to $4 billion. This authorization represents the largest share-repurchase program in the upstream industry when measured as a percentage of market capitalization. At the end of July, Devon had repurchased 24 million shares, or nearly 5 percent of outstanding shares, at a total cost of approximately $1 billion.

For the remaining share-repurchase authorization, the company plans to utilize a series of accelerated stock repurchase programs (ASR) that are expected to commence in early August. With these ASR programs, Devon expects to complete its $4 billion share-repurchase program during the first half of 2019. Detailed forward-looking guidance on share count is provided later in this release.

Financial Reporting Impact of EnLink Monetization

With the closing of the EnLink transaction, the financial results of EnLink Midstream will no longer be consolidated with Devon’s upstream business, and historical results related to EnLink will be presented as discontinued operations in the company’s consolidated financial statements.

To assist with this financial reporting transition, Devon has provided pro forma financial statements for its upstream business in a Form 8-K filing in July. Additionally, updated detailed forward-looking guidance for financial statement line items impacted by this transaction in 2018 is provided later in this release.

Upstream Revenue Benefits from Premium Gulf Coast Pricing

Devon’s upstream revenue, excluding commodity derivatives, totaled $1.6 billion in the second quarter, a 15 percent improvement compared to the previous quarter. The strong growth in revenue was driven by growth in higher-margin, light-oil production coupled with improved price realizations across the company’s asset portfolio.

Also contributing to the improving price realizations in the quarter were Devon’s firm transport and marketing agreements that provide the majority of U.S. oil production direct access to premium Gulf Coast markets. Combined with the price protection provided by regional basis swaps, second-quarter oil realizations in the U.S. averaged approximately 98 percent of the West Texas Intermediate benchmark. Importantly, the company is positioned to maintain these strong U.S. oil price realizations through the end of the decade.

In Canada, Devon continues to benefit from Western Canadian Select (WCS) basis swaps on approximately 50 percent of its estimated oil production in 2018. These attractive WCS basis swaps are locked in at $15 off the WTI benchmark price and have generated cash settlements of $109 million year to date.

U.S. Operating Costs Improve and Field-Level Margins Expand

Devon continued to effectively manage operating costs during the second quarter. Production expense, which represents field-level operating costs, totaled $572 million in the second quarter. The largest components of production expense are lease operating expense and transportation, which totaled $493 million in the quarter. Taxes also contributed $79 million to production expense during the second quarter.

The company’s U.S. resource plays delivered the strongest cost performance, where lease operating expense and transportation costs declined 3 percent on a per-unit basis compared to the first quarter. In Canada, production expense in the quarter was impacted by $21 million of non-recurring costs associated with maintenance work at the Jackfish complex.

Overall, the benefits of higher-margin oil production, improved price realizations and a lower cost structure resulted in expanded margins for Devon. Field-level cash margin reached $20.19 per Boe in the second quarter, a 31 percent increase compared to the year-ago period. Field-level cash margin is computed as upstream revenues, excluding commodity derivatives, less production expenses with the result divided by oil equivalent production volumes.

Corporate Cost Structure to Improve by $475 Million Annually

Further expanding Devon’s profitability is its improving general and administrative (G&A) cost structure. Upstream-related G&A expenses totaled $153 million, a 22 percent improvement compared to the first quarter. The significantly lower overhead costs were driven by reduced personnel expenses.

The company has also reduced financing costs. With the early retirement of $807 million of debt early in the year, the company expects to reduce net financing costs by approximately $64 million on an annual basis.

The aforementioned cost savings, combined with the financial benefits related to the sale of EnLink Midstream, position Devon’s go-forward G&A and interest expense to improve by approximately $475 million annually.

Investment-Grade Financial Position Continues to Strengthen

Devon’s financial position remains exceptionally strong, with investment-grade credit ratings and excellent liquidity. The company exited the second quarter with $1.5 billion of cash on hand. Adjusted for the sale of EnLink Midstream in July, pro forma cash balances reached $4.6 billion and the company’s consolidated debt declined by 40 percent to $6.1 billion.

Second-Quarter Earnings and Cash-Flow Results

The company reported a net loss attributable to Devon of $425 million or $0.83 per diluted share in the second quarter. Excluding the impact of noncontrolling interests, the company reported a net loss of $335 million. Devon’s results were impacted by certain items securities analysts typically exclude from their published estimates. After excluding adjusting items, the company’s core earnings totaled $177 million or $0.34 per diluted share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) reached $1.0 billion in the quarter.

Devon’s operating cash flow from continuing operations totaled $269 million in the second quarter. Operating cash flow in the quarter was impacted by several non-recurring or unusual items, including a non-cash foreign exchange loss, restructuring charges, EnLink’s reclassification to discontinued operations and working capital changes. The most significant item was related to a non-cash, foreign exchange loss. This impact was driven by foreign currency denominated intercompany loan activity resulting in a realized loss of $244 million as a result of the strengthening of the U.S. dollar in relation to the Canadian dollar. For more understanding of the company’s cash flow performance during the quarter please refer to the explanations and reconciliations provided later in this release.

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP (generally accepted accounting principles) financial measures to the related GAAP information. Reconciliations of these non-GAAP measures are provided within the tables of this release.

Conference Call Webcast and Supplemental Earnings Materials

Also provided with today’s release is the company’s detailed operations report that is available on the company’s website at www.devonenergy.com. The company’s second-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Aug. 1, 2018, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This 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 oil and gas operations; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks related to our hedging activities; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; the extent to which insurance covers any losses we may experience; competition for leases, materials, people and capital; our ability to successfully complete mergers, acquisitions and divestitures; 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 release are made as of the date of this 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 achieving strong returns and capital-efficient cash flow growth. For more information, please visit www.devonenergy.com.

                                     

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  PRODUCTION NET OF ROYALTIES Quarter Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Oil and bitumen (MBbls/d) U. S. - Core 136 113 129 117 Heavy Oil   109   122   119   130 Retained assets 245 235 248 247 Divested assets   —   3   —   2 Total   245   238   248   249 Natural gas liquids (MBbls/d) U. S. - Core 105 90 98 89 Divested assets   4   7   5   8 Total   109   97   103   97 Gas (MMcf/d) U. S. - Core 1,013 1,010 1,007 1,012 Heavy Oil   12   14   12   18 Retained assets 1,025 1,024 1,019 1,030 Divested assets   103   184   133   188 Total   1,128   1,208   1,152   1,218 Total oil equivalent (MBoe/d) U. S. - Core 409 371 395 375 Heavy Oil   111   124   121   133 Retained assets 520 495 516 508 Divested assets   21   41   27   42 Total   541   536   543   550                                          

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  PRODUCTION TREND 2017 2018 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Oil and bitumen (MBbls/d) STACK 25 27 30 35 35 Delaware Basin 30 31 32 36 46 Rockies Oil 13 12 15 18 16 Heavy Oil 122 121 132 129 109 Eagle Ford 34 28 27 23 28 Barnett Shale 1 1 1 1 1 Other   10   11   9   9   10 Retained assets 235 231 246 251 245 Divested assets   3   2   —   —   — Total   238   233   246   251   245 Natural gas liquids (MBbls/d) STACK 31 32 34 37 38 Delaware Basin 10 11 13 11 16 Rockies Oil 1 1 1 2 2 Eagle Ford 10 12 13 8 13 Barnett Shale 35 29 36 31 34 Other   3   2   3   2   2 Retained assets 90 87 100 91 105 Divested assets   7   7   6   6   4 Total   97   94   106   97   109 Gas (MMcf/d) STACK 298 313 316 344 352 Delaware Basin 94 90 89 97 100 Rockies Oil 17 13 14 18 18 Heavy Oil 14 16 15 12 12 Eagle Ford 92 86 87 63 74 Barnett Shale 496 498 466 470 460 Other   13   10   13   10   9 Retained assets 1,024 1,026 1,000 1,014 1,025 Divested assets   184   175   175   163   103 Total   1,208   1,201   1,175   1,177   1,128 Total oil equivalent (MBoe/d) STACK 105 111 117 129 132 Delaware Basin 55 57 60 64 79 Rockies Oil 17 16 19 23 21 Heavy Oil 124 124 134 131 111 Eagle Ford 60 54 55 41 54 Barnett Shale 118 113 114 110 111 Other   16   14   13   13   12 Retained assets 495 489 512 511 520 Divested assets   41   38   36   33   21 Total   536   527   548   544   541                          

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  BENCHMARK PRICES (average prices) Quarter 2 June YTD 2018 2017 2018 2017 Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 67.83 $ 48.32 $ 65.38 $ 50.16 Natural Gas ($/Mcf) - Henry Hub $ 2.80 $ 3.19 $ 2.90 $ 3.25   REALIZED PRICES Quarter Ended June 30, 2018 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf) (Per Boe) United States $ 65.41 $ 24.10 $ 2.01 $ 31.97 Canada $ 31.70   N/M   N/M $ 31.17   Realized price without hedges $ 50.43 $ 24.10 $ 2.01 $ 31.81 Cash settlements $ (5.80 ) $ (1.66 ) $ 0.13 $ (2.68 ) Realized price, including cash settlements $ 44.63   $ 22.44   $ 2.14 $ 29.13     Quarter Ended June 30, 2017 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf) (Per Boe) United States $ 46.65 $ 13.26 $ 2.50 $ 23.58 Canada $ 29.05   N/M   N/M $ 28.50   Realized price without hedges $ 37.63 $ 13.26 $ 2.50 $ 24.72 Cash settlements $ 0.29   $ (0.03

)

$ 0.04 $ 0.22   Realized price, including cash settlements $ 37.92   $ 13.23   $ 2.54 $ 24.94     Six Months Ended June 30, 2018 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf) (Per Boe) United States $ 63.71 $ 23.38 $ 2.21 $ 31.20 Canada $ 25.24   N/M   N/M $ 24.84   Realized price without hedges $ 45.25 $ 23.38 $ 2.21 $ 29.79 Cash settlements $ (2.93 ) $ (1.13 ) $ 0.16 $ (1.23 ) Realized price, including cash settlements $ 42.32   $ 22.25   $ 2.37 $ 28.56     Six Months Ended June 30, 2017 Oil /Bitumen NGL Gas Total (Per Bbl) (Per Bbl) (Per Mcf) (Per Boe) United States $ 48.18 $ 14.36 $ 2.59 $ 24.72 Canada $ 27.60   N/M   N/M $ 27.03   Realized price without hedges $ 37.48 $ 14.36 $ 2.59 $ 25.28 Cash settlements $ 0.39   $ (0.02 ) $ — $ 0.19   Realized price, including cash settlements $ 37.87   $ 14.34   $ 2.59 $ 25.47                            

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, 2018 2017 2018 2017 Upstream revenues $ 1,069 $ 1,332 $ 2,388 $ 2,873 Marketing revenues   1,180     833     2,059     1,692   Total revenues   2,249     2,165     4,447     4,565   Production expenses 572 455 1,115 912 Exploration expenses 68 57 101 152 Marketing expenses 1,160 849 2,033 1,728 Depreciation, depletion and amortization 420 369 819 769 Asset impairments 154 — 154 — Asset dispositions 23 (22 ) 11 (30 ) General and administrative expenses 153 181 352 376 Financing costs, net 62 77 449 160 Restructuring and transaction costs 94 — 94 — Other expenses   24     (8 )   45     (22 ) Total expenses   2,730     1,958     5,173     4,045   Earnings (loss) from continuing operations before income taxes (481 ) 207 (726 ) 520 Income tax benefit   (7 )   (5 )   (41 )   —   Net earnings (loss) from continuing operations (474 ) 212 (685 ) 520 Net earnings from discontinued operations, net of income tax expense   139     33     197     42   Net earnings (loss) (335 ) 245 (488 ) 562 Net earnings attributable to noncontrolling interests   90     26     134     40   Net earnings (loss) attributable to Devon $ (425 ) $ 219   $ (622 ) $ 522     Basic net earnings (loss) per share: Basic earnings (loss) from continuing operations per share $ (0.92 ) $ 0.40 $ (1.33 ) $ 0.99 Basic earnings from discontinued operations per share   0.09     0.01     0.13     —   Basic net earnings (loss) per share $ (0.83 ) $ 0.41   $ (1.20 ) $ 0.99   Diluted net earnings (loss) per share: Diluted earnings (loss) from continuing operations per share $ (0.92 ) $ 0.40 $ (1.33 ) $ 0.99 Diluted earnings from discontinued operations per share   0.09     0.01     0.13     —   Diluted net earnings (loss) per share $ (0.83 ) $ 0.41   $ (1.20 ) $ 0.99   Weighted average common shares outstanding: Basic 521 526 524 525 Diluted 524 529 527 528     UPSTREAM REVENUES (in millions) Quarter Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Oil, gas and NGL sales $ 1,566 $ 1,206 $ 2,926 $ 2,515 Derivative cash settlements (131 ) 11 (120 ) 19 Derivative valuation changes   (366 )   115     (418 )   339   Upstream revenues $ 1,069   $ 1,332   $ 2,388   $ 2,873       PRODUCTION EXPENSES (in millions) Quarter Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Lease operating expense $ 269 $ 239 $ 510 $ 462 Gathering, processing & transportation 224 160 452 323 Production taxes 67 41 126 96 Property taxes   12     15     27     31   Production expense $ 572   $ 455   $ 1,115   $ 912                            

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Quarter Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Cash flows from operating activities: Net earnings (loss) $ (335 ) $ 245 $ (488 ) $ 562 Adjustments to reconcile net earnings to net cash

from operating activities:

Earnings from discontinued operations, net of tax (139 ) (33 ) (197 ) (42 ) Depreciation, depletion and amortization 420 369 819 769 Asset impairments 154 — 154 — Leasehold impairments 53 22 61 64 Accretion on discounted liabilities 15 15 31 32 Total (gains) losses on commodity derivatives 497 (126 ) 538 (358 ) Cash settlements on commodity derivatives (131 ) 11 (120 ) 19 (Gains) and losses on asset dispositions 23 (22 ) 11 (30 ) Deferred income tax expense (benefit) 20 (17 ) (18 ) (32 ) Share-based compensation 58 45 96 81 Early retirement of debt — — 312 — Total (gains) losses on foreign exchange 31 (49 ) 81 (64 ) Settlements of intercompany foreign denominated assets/liabilities (244 ) 1 (243 ) 10 Other (20 ) 23 (50 ) 11 Changes in assets and liabilities, net   (133 )   102     (108 )   133   Net cash from operating activities - continuing operations   269     586     879     1,155   Cash flows from investing activities: Capital expenditures (602 ) (434 ) (1,253 ) (831 ) Acquisitions of property and equipment (10 ) (13 ) (16 ) (33 ) Divestitures of property and equipment   560     75     607     107   Net cash from investing activities - continuing operations   (52 )   (372 )   (662 )   (757 ) Cash flows from financing activities: Repayments of long-term debt principal — — (807 ) — Early retirement of debt — — (304 ) — Repurchases of common stock (428 ) — (499 ) — Dividends paid on common stock (42 ) (33 ) (74 ) (65 ) Shares exchanged for tax withholdings (6 ) (3 ) (44 ) (56 ) Net cash from financing activities - continuing operations (476 ) (36 ) (1,728 ) (121 ) Effect of exchange rate changes on cash: Settlements of intercompany foreign denominated assets/liabilities 244 (1 ) 243 (10 ) Other (17 ) 9   (31 ) 10   Total effect of exchange rate changes on cash – continuing operations 227   8   212   —   Net change in cash, cash equivalents and restricted cash of

continuing operations

(32 ) 186   (1,299 ) 277   Cash flows from discontinued operations: Operating activities 236 151 430 328 Investing activities (222 ) (215 ) (402 ) (284 ) Financing activities   73     128     112     89   Net change in cash, cash equivalents and restricted cash of

discontinued operations

  87     64     140     133   Net change in cash, cash equivalents and restricted cash 55 250 (1,159 ) 410 Cash, cash equivalents and restricted cash at beginning of period   1,470     2,119     2,684     1,959   Cash, cash equivalents and restricted cash at end of period $ 1,525   $ 2,369   $ 1,525   $ 2,369     Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,460 $ 2,358 $ 1,460 $ 2,358 Restricted cash included in other current assets 28 — 28 — Cash and cash equivalents included in current assets held for sale   37     11     37     11   Total cash, cash equivalents and restricted cash $ 1,525   $ 2,369   $ 1,525   $ 2,369                

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

  CONSOLIDATED BALANCE SHEETS (in millions) June 30, December 31, 2018 2017 Current assets: Cash and cash equivalents $ 1,460 $ 2,642 Accounts receivable 1,141 989 Current assets held for sale 10,764 760 Other current assets   455   400 Total current assets 13,820 4,791 Oil and gas property and equipment, based on successful efforts accounting, net 12,957 13,318 Other property and equipment, net   1,164   1,266 Total property and equipment, net 14,121 14,584 Goodwill 841 841 Other long-term assets 377 296 Long-term assets held for sale   —   9,729 Total assets $ 29,159 $ 30,241   Current liabilities: Accounts payable $ 771 $ 633 Revenues and royalties payable 959 748 Short-term debt 277 115 Current liabilities held for sale 5,291 991 Other current liabilities   1,079   828 Total current liabilities   8,377   3,315 Long-term debt 5,790 6,749 Asset retirement obligations 1,088 1,099 Other long-term liabilities 624 549 Long-term liabilities held for sale — 3,936 Deferred income taxes 432 489 Equity: Common stock 51 53 Additional paid-in capital 6,888 7,333 Retained earnings 6 702 Accumulated other comprehensive earnings 1,091 1,166 Treasury stock, at cost, 0.5 million shares in 2018   (22)   — Total stockholders’ equity attributable to Devon 8,014 9,254 Noncontrolling interests   4,834   4,850 Total equity   12,848   14,104 Total liabilities and equity $ 29,159 $ 30,241   Common shares outstanding 515 525                       CAPITAL EXPENDITURES (in millions) Quarter Ended Six Months Ended June 30, 2018 June 30, 2018 Upstream capital $ 607 $ 1,271 Land and other acquisitions   12   18 Exploration and production (E&P) capital 619 1,289 Capitalized interest 17 35 Other   9   22 Devon capital expenditures $ 645 $ 1,346  

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

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 second-quarter 2018 earnings.

      (in millions, except per share amounts) Quarter Ended June 30, 2018 Before-tax       After-tax      

AfterNoncontrollingInterests

     

Per DilutedShare

Continuing Operations Loss attributable to Devon (GAAP) $ (481 ) $ (474 ) $ (474 ) $ (0.92 ) Adjustments: Asset dispositions 23 18 18 0.03 Asset and exploration impairments 207 159 159 0.31 Deferred tax asset valuation allowance — 73 73 0.14 Fair value changes in financial instruments and foreign currency 376 291 291 0.56 Restructuring and transaction costs   94     72     72     0.14   Core earnings attributable to Devon (Non-GAAP) $ 219   $ 139   $ 139   $ 0.26     Discontinued Operations Earnings attributable to Devon (GAAP) $ 149 $ 139 $ 49 $ 0.09 Adjustments: Fair value changes and minimum volume commitment settlement   (36 )   (30 )   (11 )   (0.01 ) Core earnings attributable to Devon (Non-GAAP) $ 113   $ 109   $ 38   $ 0.08     Total Loss attributable to Devon (GAAP) $ (332 ) $ (335 ) $ (425 ) $ (0.83 ) Adjustments: Continuing Operations 700 613 613 1.18 Discontinued Operations   (36 )   (30 )   (11 )   (0.01 ) Core earnings attributable to Devon (Non-GAAP) $ 332   $ 248   $ 177   $ 0.34    

NET DEBT

Devon defines net debt as debt less cash and cash equivalents. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash from Devon to repay debt.

(in millions)   June 30, 2018 Total debt (GAAP)(1) $ 6,067 Less cash and cash equivalents   (1,460) Net debt (Non-GAAP) $ 4,607   (1) Excludes EnLink since its debt-related amounts are included in liabilities held for sale.  

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

ADJUSTED EBITDA

We define Adjusted EBITDA, a non-GAAP financial measure, as EBITDA adjusted for certain items presented in the accompanying reconciliation. We believe that EBITDA is widely used by investors to measure a company’s performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. In addition, Adjusted EBITDA generally excludes certain other items that management believes affect the comparability of operating results or are not related to Devon’s ongoing operations. Management uses Adjusted EBITDA to evaluate the company’s operational trends and performance relative to other oil and gas companies.

                  ADJUSTED EBITDA (in millions) Quarter Ended June 30, 2018 Continuing Discontinued Operations Operations Total Net earnings (loss) $ (474) $ 139 $ (335) Financing costs, net 62 45 107 Income tax expense (benefit) (7) 10 3 Depreciation, depletion and amortization 420 106 526 Accretion of discounted liabilities   15   —   15 EBITDA $ 16 $ 300 $ 316 Non-cash stock compensation 32 10 42 Asset and leasehold impairments 207 — 207 Asset disposition losses 23 — 23 Restructuring and transaction costs 94 — 94 Derivative and financial instrument valuation changes 376 12 388 EnLink minimum volume commitment settlement   —   (48)   (48) Adjusted EBITDA $ 748 $ 274 $ 1,022  

PRO FORMA CASH & CASH EQUIVALENTS

Devon defines pro forma cash and cash equivalents as cash and cash equivalents plus proceeds from the recently closed EnLink Midstream sale. Devon believes adjusting for this item provides a clearer picture of Devon’s financial position.

(in millions)       June 30, 2018 Cash and cash equivalents (GAAP) $ 1,460 Proceeds from EnLink Midstream monetization that closed in mid-July   3,125 Pro forma cash and cash equivalents (Non-GAAP) $ 4,585  

DEVON ENERGY CORPORATIONFORWARD LOOKING GUIDANCE

PRODUCTION GUIDANCE                                 Quarter 3 Full Year Low High Low High Oil and bitumen (MBbls/d) U.S. – retained assets 132 137 130 135 Heavy Oil   115   120   120   125 Total – retained assets   247   257   250   260 Natural gas liquids (MBbls/d) Total – retained assets 100 105 100 104 Gas (MMcf/d) U.S. – retained assets 1,010 1,060 1,000 1,050 Heavy Oil   11   13   11   13 Total – retained assets   1,021   1,073   1,011   1,063 Total oil equivalent (MBoe/d) U.S. – retained assets 400 419 397 414 Heavy Oil   117   122   122   127 Total – retained assets   517   541   519   541                          

PRICE REALIZATIONS GUIDANCE

Quarter 3 Full Year Low High Low High Oil and bitumen - % of WTI U.S.(1) 88 %(1) 93 %(1) 92 %(1) 97 %(1) Canada(1) 40 %(1) 50 %(1) 37 %(1) 42 %(1) NGL - realized price $ 23 $ 28 $ 22 $ 27 Natural gas - % of Henry Hub 70 % 80 % 70 % 80 %   (1) Does not include benefits from basis swaps and firm transportation agreements.   OTHER GUIDANCE ITEMS                         Quarter 3 Full Year ($ millions, except Boe and %) Low High Low High Marketing & midstream operating profit $ 5 $ 15 $ 40 $ 50 LOE & GP&T per BOE $ 9.50 $ 9.75 $ 9.40 $ 9.90 Production & Property Tax (% of upstream sales) 5.20 % 5.40 % 5.20 % 5.40 % Exploration expenses $ 20 $ 30 $ 90 $ 100 Depreciation, depletion and amortization $ 420 $ 470 $ 1,700 $ 1,800 General & administrative expenses $ 150 $ 170 $ 650 $ 700 Financing costs, net(2) $

70

(2)

$

80

(2)

$

285

(2)

$

295

(2)

Other expenses $ 15 $ 20 $ 60 $ 80 Current income tax rate 0 % 5 % 0 % 5 % Deferred income tax rate   20 %   25 %   20 %   25 % Total income tax rate   20 %   30 %   20 %   30 %  

Average basic share count outstanding (MM)

493 496 500 505   (2) On a go-forward basis interest expense that had been historically capitalized will now be included in financing costs, net.     CAPITAL EXPENDITURES GUIDANCE Quarter 3 Full Year (in millions) Low High Low High Upstream capital $ 550 $ 600 $ 2,200 $ 2,400 Capitalized interest and other(2)   20     30     100     150   Total $ 570   $ 630   $ 2,300   $ 2,550    

DEVON ENERGY CORPORATIONFORWARD LOOKING GUIDANCE

Oil Commodity Hedges                               Price Swaps Price Collars Period Volume (Bbls/d)

WeightedAverage Price($/Bbl)

Volume (Bbls/d)

WeightedAverage FloorPrice ($/Bbl)

Weighted AverageCeiling Price($/Bbl)

Q3-Q4 2018 91,300 $ 58.15 100,700 $ 52.27 $ 62.87 Q1-Q4 2019 54,225 $ 59.34 65,875 $ 52.76 $ 62.76                                       Oil Basis Swaps Oil Basis Swaps Oil Basis Collars Period Index

Volume (Bbls/d)

WeightedAverageDifferential toWTI ($/Bbl)

Volume (Bbls/d)

WeightedAverage FloorDifferential toWTI ($/Bbl)

WeightedAverageCeilingDifferential toWTI ($/Bbl)

Q3-Q4 2018 Midland Sweet 23,000 $ (1.02 ) — $ — $ — Q3-Q4 2018 Argus LLS 12,000 $ 3.95 — $ — $ — Q3-Q4 2018 Argus MEH 15,832 $ 2.82 — $ — $ — Q3-Q4 2018 NYMEX Roll 21,315 $ 0.63 — $ — $ — Q3-Q4 2018 Western Canadian Select 78,000 $ (14.91 ) 2,000 $ (15.50 ) $ (13.93 ) Q1-Q4 2019 Midland Sweet 28,000 $ (0.46 ) — $ — $ — Q1-Q4 2019 Argus LLS 1,000 $ 4.60 — $ — $ — Q1-Q4 2019 Argus MEH 16,000 $ 2.84 — $ — $ — Q1-Q4 2019 NYMEX Roll 24,000 $ 0.51 — $ — $ — Q1-Q4 2020 NYMEX Roll 24,000 $ 0.31 — $ — $ —                           Natural Gas Commodity Hedges - Henry Hub       Price Swaps Price Collars Period

Volume (MMBtu/d)

WeightedAverage Price($/MMBtu)

Volume (MMBtu/d)

WeightedAverage FloorPrice ($/MMBtu)

Weighted AverageCeiling Price($/MMBtu)

Q3-Q4 2018 278,750 $ 2.91 246,500 $ 2.76 $ 3.09 Q1-Q4 2019 194,000 $ 2.81 155,750 $ 2.64 $ 3.03               Natural Gas Basis Swaps Period       Index

Volume (MMBtu/d)

Weighted AverageDifferential toHenry Hub($/MMBtu)

Q3-Q4 2018 Panhandle Eastern Pipe Line 120,000 $ (0.51 ) Q3-Q4 2018 El Paso Natural Gas 100,000 $ (1.25 ) Q3-Q4 2018 Houston Ship Channel 115,000 $ 0.01 Q3-Q4 2018 Transco Zone 4 15,000 $ (0.03 ) Q1-Q4 2019 Panhandle Eastern Pipe Line 62,500 $ (0.77 ) Q1-Q4 2019 El Paso Natural Gas 120,000 $ (1.48 ) Q1-Q4 2019 Houston Ship Channel 100,000 $ (0.01 ) Q1-Q4 2019 Transco Zone 4 7,500 $ (0.03 )  

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 July 27, 2018.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180731005843/en/

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