Devon Energy Reports Third-Quarter 2016 Results
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Highlights
- Achieved record-setting well results in U.S. resource plays
- Increased STACK production 38 percent year over year
- Decreased lease operating expenses 37 percent from peak rates
-
Expected cost savings to reach
$1 billion in 2016 -
Completed
$3.2 billion asset divestiture program -
Repurchased
$1.2 billion of debt
“Devon delivered an outstanding operational performance in the third
quarter,” said
“In addition to our strong operating performance, we were able to
successfully complete our
Record-Setting Well Results in U.S. Resource Plays
Total production averaged 577,000 oil-equivalent barrels (Boe) per day in the third quarter of 2016. Excluding divestiture properties, production from Devon’s retained asset base amounted to 550,000 Boe per day. With the shift to higher-margin production, oil is now the largest component of the company’s product mix at 45 percent of total volumes. To further enhance the profitability of production, Devon rejected approximately 6,000 barrels per day of ethane during the third quarter.
The majority of Devon’s retained asset production was attributable to its U.S. resource plays, which averaged 410,000 Boe per day. Production in the third quarter benefited from new well activity that achieved record-setting productivity. In aggregate, Devon commenced production on 20 development wells, with initial 30-day rates averaging an all-time quarterly high of 2,000 Boe per day. These prolific results were concentrated in the company’s STACK play, where production increased 38 percent year over year.
In
In the upcoming fourth quarter, oil production from retained assets is expected to be relatively stable compared to the third quarter, ranging between 238,000 and 248,000 barrels per day. Key drivers of the stabilized oil production are high activity levels in the STACK and accelerated completion activity in the Eagle Ford. Top-line production from retained assets is projected to range between 524,000 and 546,000 Boe per day in the fourth quarter.
Operating and G&A Cost Savings to Reach
Devon’s successful cost-reduction initiatives resulted in lease
operating expenses (LOE) of
The company also realized significant general and administrative (G&A)
cost savings. Net G&A expenditures declined to
Due to the strong cost performance achieved year to date, the company is
lowering its full-year 2016 LOE outlook by
Upstream Revenue Rises; EnLink Profitability Expands
Improving commodity prices advanced the company’s upstream revenue to
Devon’s midstream results also improved, with operating profits totaling
EnLink’s growing profitability is derived from an asset base that is
positioned in some of the most attractive markets in
Third-Quarter 2016 Operations Report
For additional details on Devon’s E&P operations, please refer to the company’s third-quarter 2016 operations report at www.devonenergy.com. Highlights from the report include:
- Record-setting well results in the STACK
-
Raising Meramec and
Woodford type curves -
Accelerating
Delaware Basin rig activity - Wolfcamp drilling to ramp up in 2017
- Eagle Ford resumes completion activity
- Jackfish complex production exceeds nameplate capacity
Divestiture Program Complete: Proceeds Reach
Devon’s divestiture program is now complete with total proceeds reaching
Subsequent to quarter end, on
Significant Liquidity and Financial Strength
Devon’s financial position remains exceptionally strong, with
investment-grade credit ratings and excellent liquidity. The company
exited the third quarter with
In August, the company successfully tendered for
At the end of September, the company’s consolidated debt totaled
Devon Increases Hedging Position in 2017
In recent months, Devon has had the opportunity to materially increase its hedging position in 2017. For oil volumes, Devon has utilized a combination of swaps and collars to hedge 83,000 barrels per day of production. For gas volumes, Devon now has 390 million cubic feet per day of production. These hedging positions represent more than 30 percent of current oil and natural gas production.
The company expects to continue to add to its hedging position and is targeting to have approximately 50 percent of its estimated revenues protected in 2017. This risk-management program will be a combination of systematic hedges added on a quarterly basis and discretionary hedges that take advantage of favorable market conditions.
Operating Cash Flow Grows 117 Percent; Earnings
Operating cash flow reached
Devon’s reported net earnings totaled
Devon’s core earnings calculation in the third quarter was negatively
impacted by an
Updated 2016 Outlook
Detailed forward-looking guidance for the fourth quarter of 2016 is provided later in the release. Based on year-to-date results and Devon’s fourth-quarter outlook, most operating and financial metrics remain relatively unchanged compared to previous guidance disclosures.
Of note, in the fourth quarter, the company expects to increase its rig
activity in the U.S. from five operated rigs running in the third
quarter to as many as 10 operated rigs by year end. This activity is
expected to result in approximately
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. Net debt, adjusted net debt, core earnings, and core earnings per share referenced within the commentary of this release are non-GAAP financial measures. Reconciliations and other important information regarding these 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 third-quarter conference call will be held at
Forward-Looking Statements
This press release includes "forward-looking statements" as defined
by the
The
About
DEVON ENERGY CORPORATION |
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FINANCIAL AND OPERATIONAL INFORMATION |
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Quarter Ended | Nine Months Ended | |||||||||||||||
PRODUCTION NET OF ROYALTIES | September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Oil and bitumen (MBbls/d) |
|
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U. S. - Core | 108 | 140 | 124 | 143 | ||||||||||||
Heavy Oil | 137 | 121 | 128 | 107 | ||||||||||||
Retained assets | 245 | 261 | 252 | 250 | ||||||||||||
Divested assets | 6 | 21 | 13 | 24 | ||||||||||||
Total | 251 | 282 | 265 | 274 | ||||||||||||
Natural gas liquids (MBbls/d) | ||||||||||||||||
U. S. - Core | 96 | 108 | 107 | 109 | ||||||||||||
Divested assets | 8 | 26 | 17 | 27 | ||||||||||||
Total | 104 | 134 | 124 | 136 | ||||||||||||
Gas (MMcf/d) | ||||||||||||||||
U. S. - Core | 1,231 | 1,319 | 1,292 | 1,336 | ||||||||||||
Heavy Oil | 18 | 16 | 20 | 21 | ||||||||||||
Retained assets | 1,249 | 1,335 | 1,312 | 1,357 | ||||||||||||
Divested assets | 75 | 251 | 165 | 262 | ||||||||||||
Total | 1,324 | 1,586 | 1,477 | 1,619 | ||||||||||||
Oil equivalent (MBoe/d) | ||||||||||||||||
U. S. - Core | 410 | 467 | 446 | 474 | ||||||||||||
Heavy Oil | 140 | 124 | 132 | 111 | ||||||||||||
Retained assets | 550 | 591 | 578 | 585 | ||||||||||||
Divested assets | 27 | 89 | 57 | 95 | ||||||||||||
Total | 577 | 680 | 635 | 680 | ||||||||||||
KEY OPERATING STATISTICS BY REGION | ||||||||||||
Quarter Ended September 30, 2016 | ||||||||||||
Avg. Production | Gross Wells | Operated Rigs at | ||||||||||
(MBoe/d) | Drilled | September 30, 2016 | ||||||||||
STACK | 92 | 37 | 4 | |||||||||
Delaware Basin | 59 | 8 | 1 | |||||||||
Eagle Ford | 61 | 4 | — | |||||||||
Heavy Oil | 140 | 3 | 1 | |||||||||
Barnett Shale | 166 | — | — | |||||||||
Rockies Oil | 16 | — | — | |||||||||
Other assets | 16 | — | — | |||||||||
Retained assets | 550 | 52 | 6 | |||||||||
Divested assets | 27 | — | — | |||||||||
Total | 577 | 52 | 6 | |||||||||
PRODUCTION TREND | 2015 | 2016 | ||||||||||||||||||
Quarter 3 | Quarter 4 | Quarter 1 | Quarter 2 | Quarter 3 | ||||||||||||||||
Oil and bitumen (MBbls/d) | ||||||||||||||||||||
STACK | 7 | 9 | 15 | 19 | 21 | |||||||||||||||
Delaware Basin | 41 | 42 | 38 | 36 | 31 | |||||||||||||||
Eagle Ford | 62 | 60 | 59 | 41 | 33 | |||||||||||||||
Heavy Oil | 121 | 121 | 126 | 121 | 137 | |||||||||||||||
Barnett Shale | 1 | 1 | 1 | 1 | 1 | |||||||||||||||
Rockies Oil | 16 | 15 | 17 | 15 | 11 | |||||||||||||||
Other assets | 13 | 12 | 12 | 11 | 11 | |||||||||||||||
Retained assets | 261 | 260 | 268 | 244 | 245 | |||||||||||||||
Divested assets | 21 | 18 | 17 | 15 | 6 | |||||||||||||||
Total | 282 | 278 | 285 | 259 | 251 | |||||||||||||||
Natural gas liquids (MBbls/d) | ||||||||||||||||||||
STACK | 22 | 24 | 30 | 30 | 23 | |||||||||||||||
Delaware Basin | 8 | 11 | 12 | 13 | 12 | |||||||||||||||
Eagle Ford | 26 | 27 | 24 | 17 | 13 | |||||||||||||||
Barnett Shale | 47 | 49 | 46 | 46 | 44 | |||||||||||||||
Rockies Oil | 2 | 1 | 1 | 1 | 1 | |||||||||||||||
Other assets | 3 | 3 | 2 | 3 | 3 | |||||||||||||||
Retained assets | 108 | 115 | 115 | 110 | 96 | |||||||||||||||
Divested assets | 26 | 24 | 22 | 21 | 8 | |||||||||||||||
Total | 134 | 139 | 137 | 131 | 104 | |||||||||||||||
Gas (MMcf/d) | ||||||||||||||||||||
STACK | 229 | 253 | 306 | 289 | 292 | |||||||||||||||
Delaware Basin | 70 | 82 | 84 | 99 | 92 | |||||||||||||||
Eagle Ford | 155 | 152 | 144 | 103 | 85 | |||||||||||||||
Heavy Oil | 16 | 24 | 15 | 28 | 18 | |||||||||||||||
Barnett Shale | 807 | 786 | 768 | 757 | 730 | |||||||||||||||
Rockies Oil | 41 | 38 | 32 | 31 | 19 | |||||||||||||||
Other assets | 17 | 16 | 17 | 14 | 13 | |||||||||||||||
Retained assets | 1,335 | 1,351 | 1,366 | 1,321 | 1,249 | |||||||||||||||
Divested assets | 251 | 232 | 215 | 206 | 75 | |||||||||||||||
Total | 1,586 | 1,583 | 1,581 | 1,527 | 1,324 | |||||||||||||||
Oil equivalent (MBoe/d) | ||||||||||||||||||||
STACK | 67 | 75 | 96 | 97 | 92 | |||||||||||||||
Delaware Basin | 61 | 66 | 63 | 65 | 59 | |||||||||||||||
Eagle Ford | 113 | 113 | 107 | 76 | 61 | |||||||||||||||
Heavy Oil | 124 | 125 | 129 | 126 | 140 | |||||||||||||||
Barnett Shale | 183 | 181 | 175 | 173 | 166 | |||||||||||||||
Rockies Oil | 25 | 23 | 23 | 21 | 16 | |||||||||||||||
Other assets | 18 | 18 | 18 | 16 | 16 | |||||||||||||||
Retained assets | 591 | 601 | 611 | 574 | 550 | |||||||||||||||
Divested assets | 89 | 80 | 74 | 70 | 27 | |||||||||||||||
Total | 680 | 681 | 685 | 644 | 577 | |||||||||||||||
BENCHMARK PRICES | ||||||||||||||||||||
(average prices) | Quarter 3 | September YTD | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Oil ($/Bbl) - West Texas Intermediate (Cushing) | $ | 45.02 | $ | 46.69 | $ | 41.41 | $ | 51.11 | ||||||||||||
Natural Gas ($/Mcf) - Henry Hub | $ | 2.81 | $ | 2.77 | $ | 2.28 | $ | 2.80 | ||||||||||||
REALIZED PRICES | Quarter Ended September 30, 2016 | |||||||||||||||||||
Oil /Bitumen | NGL | Gas | Total | |||||||||||||||||
(Per Bbl) | (Per Bbl) | (Per Mcf) | (Per Boe) | |||||||||||||||||
United States | $ | 42.51 | $ | 9.80 | $ | 2.24 | $ | 20.26 | ||||||||||||
Canada | $ | 23.71 | N/M | N/M | $ | 23.23 | ||||||||||||||
Realized price without hedges | $ | 32.27 | $ | 9.80 | $ | 2.24 | $ | 20.98 | ||||||||||||
Cash settlements | $ | 0.84 | $ | 0.10 | $ | (0.04 | ) | $ | 0.32 | |||||||||||
Realized price, including cash settlements | $ | 33.11 | $ | 9.90 | $ | 2.20 | $ | 21.30 | ||||||||||||
Quarter Ended September 30, 2015 | ||||||||||||||||||||
Oil /Bitumen | NGL | Gas | Total | |||||||||||||||||
(Per Bbl) | (Per Bbl) | (Per Mcf) | (Per Boe) | |||||||||||||||||
United States | $ | 42.09 | $ | 8.80 | $ | 2.24 | $ | 20.66 | ||||||||||||
Canada | $ | 25.10 | N/M | N/M | $ | 24.55 | ||||||||||||||
Realized price without hedges | $ | 34.78 | $ | 8.80 | $ | 2.24 | $ | 21.37 | ||||||||||||
Cash settlements | $ | 21.16 | $ | — | $ | 0.47 | $ | 9.86 | ||||||||||||
Realized price, including cash settlements | $ | 55.94 | $ | 8.80 | $ | 2.71 | $ | 31.23 | ||||||||||||
Nine Months Ended September 30, 2016 | ||||||||||||||||||||
Oil /Bitumen | NGL | Gas | Total | |||||||||||||||||
(Per Bbl) | (Per Bbl) | (Per Mcf) | (Per Boe) | |||||||||||||||||
United States | $ | 36.89 | $ | 8.84 | $ | 1.70 | $ | 17.16 | ||||||||||||
Canada | $ | 18.58 | N/M | N/M | $ | 18.15 | ||||||||||||||
Realized price without hedges | $ | 28.03 | $ | 8.84 | $ | 1.70 | $ | 17.37 | ||||||||||||
Cash settlements | $ | (0.57 | ) | $ | (0.06 | ) | $ | 0.12 | $ | 0.02 | ||||||||||
Realized price, including cash settlements | $ | 27.46 | $ | 8.78 | $ | 1.82 | $ | 17.39 | ||||||||||||
Nine Months Ended September 30, 2015 | ||||||||||||||||||||
Oil /Bitumen | NGL | Gas | Total | |||||||||||||||||
(Per Bbl) | (Per Bbl) | (Per Mcf) | (Per Boe) | |||||||||||||||||
United States | $ | 45.91 | $ | 9.50 | $ | 2.27 | $ | 22.18 | ||||||||||||
Canada | $ | 27.84 | N/M | N/M | $ | 27.06 | ||||||||||||||
Realized price without hedges | $ | 38.81 | $ | 9.50 | $ | 2.27 | $ | 22.98 | ||||||||||||
Cash settlements | $ | 19.48 | $ | — | $ | 0.53 | $ | 9.11 | ||||||||||||
Realized price, including cash settlements | $ | 58.29 | $ | 9.50 | $ | 2.80 | $ | 32.09 | ||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||||||||||
(in millions, except per share amounts) | Quarter Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Oil, gas and NGL sales | $ | 1,113 | $ | 1,338 | $ | 3,023 | $ | 4,264 | ||||||||||||||||
Oil, gas and NGL derivatives | 79 | 414 | (30 | ) | 426 | |||||||||||||||||||
Marketing and midstream revenues | 1,690 | 1,849 | 4,503 | 5,569 | ||||||||||||||||||||
Gains on asset sales | 1,351 | - | 1,351 | - | ||||||||||||||||||||
Total revenues and other | 4,233 | 3,601 | 8,847 | 10,259 | ||||||||||||||||||||
Lease operating expenses | 355 | 510 | 1,215 | 1,625 | ||||||||||||||||||||
Marketing and midstream operating expenses | 1,480 | 1,637 | 3,884 | 4,939 | ||||||||||||||||||||
General and administrative expenses | 141 | 198 | 482 | 661 | ||||||||||||||||||||
Production and property taxes | 67 | 91 | 220 | 315 | ||||||||||||||||||||
Depreciation, depletion and amortization | 394 | 744 | 1,420 | 2,488 | ||||||||||||||||||||
Asset impairments | 319 | 5,851 | 4,851 | 15,479 | ||||||||||||||||||||
Restructuring and transaction costs | (5 | ) | — | 266 | — | |||||||||||||||||||
Other operating items | 17 | 14 | 41 | 54 | ||||||||||||||||||||
Total operating expenses | 2,768 | 9,045 | 12,379 | 25,561 | ||||||||||||||||||||
Operating income (loss) | 1,465 | (5,444 | ) | (3,532 | ) | (15,302 | ) | |||||||||||||||||
Net financing costs | 243 | 136 | 570 | 378 | ||||||||||||||||||||
Other nonoperating items | 44 | 43 | 150 | 46 | ||||||||||||||||||||
Earnings (loss) before income taxes | 1,178 | (5,623 | ) | (4,252 | ) | (15,726 | ) | |||||||||||||||||
Income tax expense (benefit) | 171 | (1,714 | ) | (228 | ) | (5,435 | ) | |||||||||||||||||
Net earnings (loss) | 1,007 | (3,909 | ) | (4,024 | ) | (10,291 | ) | |||||||||||||||||
Net earnings (loss) attributable to noncontrolling interests | 14 | (402 | ) | (391 | ) | (369 | ) | |||||||||||||||||
Net earnings (loss) attributable to Devon | $ | 993 | $ | (3,507 | ) | $ | (3,633 | ) | $ | (9,922 | ) | |||||||||||||
Net earnings (loss) per share attributable to Devon: | ||||||||||||||||||||||||
Basic | $ | 1.90 | $ | (8.64 | ) | $ | (7.22 | ) | $ | (24.45 | ) | |||||||||||||
Diluted | $ | 1.89 | $ | (8.64 | ) | $ | (7.22 | ) | $ | (24.45 | ) | |||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||
Basic | 524 | 411 | 509 | 411 | ||||||||||||||||||||
Diluted | 527 | 411 | 509 | 411 | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net earnings (loss) | $ | 1,007 | $ | (3,909 | ) | $ | (4,024 | ) | $ | (10,291 | ) | |||||||||||||
Adjustments to reconcile net earnings (loss) to net cash
from operating activities: |
||||||||||||||||||||||||
Depreciation, depletion and amortization | 394 | 744 | 1,420 | 2,488 | ||||||||||||||||||||
Asset impairments | 319 | 5,851 | 4,851 | 15,479 | ||||||||||||||||||||
Gains on asset sales | (1,351 | ) | - | (1,351 | ) | - | ||||||||||||||||||
Deferred income tax expense (benefit) | 86 | (1,708 | ) | (300 | ) | (5,348 | ) | |||||||||||||||||
Derivatives and other financial instruments | (58 | ) | (481 | ) | 359 | (606 | ) | |||||||||||||||||
Cash settlements on derivatives and financial instruments | 15 | 730 | (133 | ) | 1,913 | |||||||||||||||||||
Other | 169 | 171 | 190 | 437 | ||||||||||||||||||||
Net change in working capital | 136 | 67 | 181 | 93 | ||||||||||||||||||||
Change in long-term other assets | (3 | ) | 52 | 10 | 211 | |||||||||||||||||||
Change in long-term other liabilities | 12 | 36 | 7 | (74 | ) | |||||||||||||||||||
Net cash from operating activities | 726 | 1,553 | 1,210 | 4,302 | ||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Capital expenditures | (421 | ) | (1,080 | ) | (1,659 | ) | (4,229 | ) | ||||||||||||||||
Acquisitions of property, equipment and businesses | (3 | ) | (113 | ) | (1,641 | ) | (530 | ) | ||||||||||||||||
Divestitures of property and equipment | 1,680 | 27 | 1,889 | 35 | ||||||||||||||||||||
Other | 34 | (3 | ) | 7 | (8 | ) | ||||||||||||||||||
Net cash from investing activities | 1,290 | (1,169 | ) | (1,404 | ) | (4,732 | ) | |||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Borrowings of long-term debt, net of issuance costs | 816 | 277 | 1,662 | 3,328 | ||||||||||||||||||||
Repayments of long-term debt | (2,173 | ) | (252 | ) | (2,722 | ) | (1,773 | ) | ||||||||||||||||
Net short-term debt repayments | — | (169 | ) | (626 | ) | (932 | ) | |||||||||||||||||
Early retirement of debt | (82 | ) | — | (82 | ) | — | ||||||||||||||||||
Issuance of common stock | — | — | 1,469 | — | ||||||||||||||||||||
Sale of subsidiary units | — | — | — | 654 | ||||||||||||||||||||
Issuance of subsidiary units | 59 | 9 | 835 | 13 | ||||||||||||||||||||
Dividends paid on common stock | (32 | ) | (99 | ) | (190 | ) | (296 | ) | ||||||||||||||||
Contributions from noncontrolling interests | 146 | 5 | 151 | 12 | ||||||||||||||||||||
Distributions to noncontrolling interests | (77 | ) | (68 | ) | (224 | ) | (186 | ) | ||||||||||||||||
Other | (2 | ) | (3 | ) | (9 | ) | (18 | ) | ||||||||||||||||
Net cash from financing activities | (1,345 | ) | (300 | ) | 264 | 802 | ||||||||||||||||||
Effect of exchange rate changes on cash | (9 | ) | (22 | ) | 5 | (65 | ) | |||||||||||||||||
Net change in cash and cash equivalents | 662 | 62 | 75 | 307 | ||||||||||||||||||||
Cash and cash equivalents at beginning of period | 1,723 | 1,725 | 2,310 | 1,480 | ||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 2,385 | $ | 1,787 | $ | 2,385 | $ | 1,787 | ||||||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
(in millions) | September 30, | December 31, | ||||||||||
2016 | 2015 | |||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 2,385 | $ | 2,310 | ||||||||
Accounts receivable | 1,092 | 1,105 | ||||||||||
Assets held for sale | 717 | — | ||||||||||
Other current assets | 257 | 606 | ||||||||||
Total current assets | 4,451 | 4,021 | ||||||||||
Property and equipment, at cost: | ||||||||||||
Oil and gas, based on full cost accounting: | ||||||||||||
Subject to amortization | 75,431 | 78,190 | ||||||||||
Not subject to amortization | 3,637 | 2,584 | ||||||||||
Total oil and gas | 79,068 | 80,774 | ||||||||||
Midstream and other | 10,320 | 10,380 | ||||||||||
Total property and equipment, at cost | 89,388 | 91,154 | ||||||||||
Less accumulated depreciation, depletion and amortization | (73,219 | ) | (72,086 | ) | ||||||||
Property and equipment, net | 16,169 | 19,068 | ||||||||||
Goodwill | 3,963 | 5,032 | ||||||||||
Other long-term assets | 2,230 | 1,330 | ||||||||||
Total assets | $ | 26,813 | $ | 29,451 | ||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 529 | $ | 906 | ||||||||
Revenues and royalties payable | 860 | 763 | ||||||||||
Short-term debt | 350 | 976 | ||||||||||
Liabilities held for sale | 202 | — | ||||||||||
Other current liabilities | 910 | 650 | ||||||||||
Total current liabilities | 2,851 | 3,295 | ||||||||||
Long-term debt | 11,004 | 12,056 | ||||||||||
Asset retirement obligations | 1,230 | 1,370 | ||||||||||
Other long-term liabilities | 1,036 | 853 | ||||||||||
Deferred income taxes | 631 | 888 | ||||||||||
Stockholders’ equity: | ||||||||||||
Common stock | 52 | 42 | ||||||||||
Additional paid-in capital | 7,487 | 4,996 | ||||||||||
Retained earnings (accumulated deficit) | (1,977 | ) | 1,781 | |||||||||
Accumulated other comprehensive earnings | 278 | 230 | ||||||||||
Total stockholders’ equity attributable to Devon | 5,840 | 7,049 | ||||||||||
Noncontrolling interests | 4,221 | 3,940 | ||||||||||
Total stockholders’ equity | 10,061 | 10,989 | ||||||||||
Total liabilities and stockholders’ equity | $ | 26,813 | $ | 29,451 | ||||||||
Common shares outstanding | 524 | 418 | ||||||||||
CONSOLIDATING STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Quarter Ended September 30, 2016 | ||||||||||||||||||||||||
Devon U.S. |
EnLink | Eliminations | Total | |||||||||||||||||||||
Oil, gas and NGL sales | $ | 1,113 | $ | — | $ | — | $ | 1,113 | ||||||||||||||||
Oil, gas and NGL derivatives | 79 | — | — | 79 | ||||||||||||||||||||
Marketing and midstream revenues |
766 |
1,104 | (180 | ) | 1,690 | |||||||||||||||||||
Gains on asset sales | 1,351 | — | — | 1,351 | ||||||||||||||||||||
Total revenues and other | 3,309 | 1,104 | (180 | ) | 4,233 | |||||||||||||||||||
Lease operating expenses | 355 | — | — | 355 | ||||||||||||||||||||
Marketing and midstream operating expenses | 784 | 876 | (180 | ) | 1,480 | |||||||||||||||||||
General and administrative expenses | 111 | 30 | — | 141 | ||||||||||||||||||||
Production and property taxes | 57 | 10 | — | 67 | ||||||||||||||||||||
Depreciation, depletion and amortization | 268 | 126 | — | 394 | ||||||||||||||||||||
Asset impairments | 319 | — | — | 319 | ||||||||||||||||||||
Restructuring and transaction costs | (5 | ) | — | — | (5 | ) | ||||||||||||||||||
Other operating items | 20 | (3 | ) | — | 17 | |||||||||||||||||||
Total operating expenses | 1,909 | 1,039 | (180 | ) | 2,768 | |||||||||||||||||||
Operating income | 1,400 | 65 | — | 1,465 | ||||||||||||||||||||
Net financing costs | 195 | 48 | — | 243 | ||||||||||||||||||||
Other nonoperating items | 46 | (2 | ) | — | 44 | |||||||||||||||||||
Earnings before income taxes | 1,159 | 19 | — | 1,178 | ||||||||||||||||||||
Income tax expense | 164 | 7 | — | 171 | ||||||||||||||||||||
Net earnings | 995 | 12 | — | 1,007 | ||||||||||||||||||||
Net earnings attributable to noncontrolling interests | — | 14 | — | 14 | ||||||||||||||||||||
Net earnings (loss) attributable to Devon | $ | 995 | $ | (2 | ) | $ | — | $ | 993 | |||||||||||||||
OTHER KEY STATISTICS | |||||||||||||||||||||||
(in millions) | Quarter Ended September 30, 2016 | ||||||||||||||||||||||
Devon U.S. |
EnLink | Eliminations | Total | ||||||||||||||||||||
Cash flow statement related items: | |||||||||||||||||||||||
Operating cash flow | $ | 517 | $ | 209 | $ | — | $ | 726 | |||||||||||||||
Capital expenditures | $ | (285 | ) | $ | (136 | ) | $ | — | $ | (421 | ) | ||||||||||||
Divestitures of property and equipment | $ | 1,676 | $ | 4 | $ | — | $ | 1,680 | |||||||||||||||
EnLink distributions received (paid) | $ | 66 | $ | (143 | ) | $ | — | $ | (77 | ) | |||||||||||||
Issuance of subsidiary units | $ | — | $ | 59 | $ | — | $ | 59 | |||||||||||||||
Balance sheet statement items: | |||||||||||||||||||||||
Net debt (1) |
$ | 5,784 | $ | 3,185 | $ | — | $ | 8,969 | |||||||||||||||
(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 September 30, 2016 | Nine Months Ended September 30, 2016 | |||||||||
Exploration and development capital | $ | 231 | $ | 816 | ||||||
Capitalized G&A and interest | 71 | 230 | ||||||||
Acquisitions | 16 | 1,547 | ||||||||
Other | 7 | 19 | ||||||||
Devon capital expenditures (1) | $ | 325 | $ | 2,612 | ||||||
(1) Excludes
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 third-quarter 2016 earnings.
(in millions, except per share amounts) | Quarter Ended September 30, 2016 | |||||||||||||||||||||||
Before-tax | After-tax |
After |
Per Share | |||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Earnings attributable to Devon (GAAP) | $ | 1,178 | $ | 1,007 | $ | 993 | $ | 1.89 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Gains on asset sales | (1,351 | ) | (787 | ) | (787 | ) | (1.48 | ) | ||||||||||||||||
Deferred tax asset valuation allowance | — | (408 | ) | (408 | ) | (0.78 | ) | |||||||||||||||||
Fair value changes in financial instruments and foreign currency | (16 | ) | (3 | ) | (3 | ) | (0.01 | ) | ||||||||||||||||
Restructuring and transaction costs | (5 | ) | (3 | ) | (3 | ) | (0.01 | ) | ||||||||||||||||
Early retirement of debt | 84 | 53 | 53 | 0.10 | ||||||||||||||||||||
Asset impairments | 319 | 202 | 202 | 0.38 | ||||||||||||||||||||
Core earnings attributable to Devon (Non-GAAP) (1) | $ | 209 | $ | 61 | $ | 47 | $ | 0.09 | ||||||||||||||||
(1) Devon's core earning calculation was negatively impacted by an
NET DEBT AND ADJUSTED 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. Adjusted net debt is net debt further adjusted for the proceeds Devon received from the Access Pipeline divestiture transaction that closed in October of 2016 or the cash consideration for the Felix acquisition. Devon believes that adjusting for these items, including the asset sale proceeds and the Felix cash consideration, 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) | September 30, 2016 | |||||||||||||||||
Devon U.S. & Canada | EnLink | Devon Consolidated | ||||||||||||||||
Total debt (GAAP) | $ | 8,109 | $ | 3,245 | $ | 11,354 | ||||||||||||
Less cash and cash equivalents | (2,325 | ) | (60 | ) | (2,385 | ) | ||||||||||||
Net debt (Non-GAAP) | 5,784 | 3,185 | 8,969 | |||||||||||||||
Proceeds from asset sales | (1,100 | ) | — | (1,100 | ) | |||||||||||||
Adjusted net debt (Non-GAAP) | $ | 4,684 | $ | 3,185 | $ | 7,869 | ||||||||||||
(in millions) | December 31, 2015 | |||||||||||||||||
Devon U.S. & Canada | EnLink | Devon Consolidated | ||||||||||||||||
Total debt (GAAP) | $ | 10,023 | $ | 3,090 | $ | 13,113 | ||||||||||||
Less cash and cash equivalents | (2,292 | ) | (18 | ) | (2,310 | ) | ||||||||||||
Net debt (Non-GAAP) | 7,731 | 3,072 | 10,803 | |||||||||||||||
Cash consideration for Felix acquisition | 850 | — | 850 | |||||||||||||||
Adjusted net debt (Non-GAAP) | $ | 8,581 | $ | 3,072 | $ | 11,653 | ||||||||||||
DEVON ENERGY CORPORATION |
|||||||||
FORWARD LOOKING GUIDANCE |
|||||||||
PRODUCTION GUIDANCE | Quarter 4 | ||||||||
Low | High | ||||||||
Oil and bitumen (MBbls/d) |
|
||||||||
U.S. | 103 | 108 | |||||||
Heavy Oil | 135 | 140 | |||||||
Total | 238 | 248 | |||||||
Natural gas liquids (MBbls/d) | |||||||||
Total | 85 | 90 | |||||||
Gas (MMcf/d) | |||||||||
U.S. | 1,190 | 1,230 | |||||||
Heavy Oil | 14 | 16 | |||||||
Total | 1,204 | 1,246 | |||||||
Oil equivalent (MBoe/d) | |||||||||
U.S. |
387 |
403 | |||||||
Heavy Oil | 137 | 143 | |||||||
Total | 524 | 546 | |||||||
PRICE REALIZATIONS GUIDANCE | Quarter 4 | |||||||||||
Low | High | |||||||||||
Oil and bitumen - % of WTI | ||||||||||||
U.S. | 86 | % | 96 | % | ||||||||
Canada | 50 | % | 60 | % | ||||||||
NGL - realized price | $ |
8 |
$ |
13 |
||||||||
Natural gas - % of Henry Hub | 78 | % | 88 | % | ||||||||
OTHER GUIDANCE ITEMS | Quarter 4 | |||||||||||
($ millions, except %) | Low | High | ||||||||||
Marketing & midstream operating profit | $ | 205 | $ | 225 | ||||||||
Lease operating expenses | $ | 360 | $ | 400 | ||||||||
General & administrative expenses | $ | 140 | $ | 160 | ||||||||
Production and property taxes | $ | 55 | $ | 65 | ||||||||
Depreciation, depletion and amortization | $ | 400 | $ | 450 | ||||||||
Other operating items | $ | 20 | $ | 30 | ||||||||
Net financing costs (1) | $ | 140 | $ | 160 | ||||||||
Current income tax rate | 0.0 | % | 0.0 | % | ||||||||
Deferred income tax rate | 35.0 | % | 45.0 | % | ||||||||
Total income tax rate |
35.0 | % | 45.0 | % | ||||||||
Net earnings attributable to noncontrolling interests | $ | - | $ | - | ||||||||
(1) Fourth quarter includes
CAPITAL EXPENDITURES GUIDANCE | Quarter 4 | |||||||||
(in millions) | Low | High | ||||||||
Exploration and development | $ | 400 | $ | 425 | ||||||
Capitalized G&A | 50 | 60 | ||||||||
Capitalized interest | 15 | 20 | ||||||||
Other | 5 | 15 | ||||||||
Devon capital expenditures (2) | $ | 470 | $ | 520 | ||||||
(2) Excludes capital expenditures related to EnLink.
COMMODITY HEDGES | ||||||||||||||||||||||||||||||||
Oil Commodity Hedges | ||||||||||||||||||||||||||||||||
Price Swaps | Price Collars | Call Options Sold | ||||||||||||||||||||||||||||||
Period |
Volume |
Weighted |
Volume |
Weighted |
Weighted |
Volume |
Weighted |
|||||||||||||||||||||||||
Q4-2016 | 40,848 | $ | 49.02 | 20,000 | $ | 40.85 | $ | 50.85 | 18,500 | $ | 55.00 | |||||||||||||||||||||
Q1-Q4 2017 | 31,075 | $ | 52.48 | 51,744 | $ | 45.06 | $ | 57.96 | - | $ | - | |||||||||||||||||||||
Q1-Q4 2018 | 740 | $ | 51.26 | 1,973 | $ | 45.96 | $ | 55.96 | - | $ | - |
Oil Basis Swaps | ||||||||||||
Period | Index | Volume (Bbls/d) |
Weighted Average Differential to |
|||||||||
Q4-2016 | Western Canadian Select | 33,000 | (13.40) | |||||||||
Natural Gas Commodity Hedges | ||||||||||||||||||||||||||||||||
Price Swaps | Price Collars | Call Options Sold | ||||||||||||||||||||||||||||||
Period |
Volume |
Weighted |
Volume |
Weighted |
Weighted |
Volume |
Weighted |
|||||||||||||||||||||||||
Q4 2016 | 155,000 | $ | 2.83 | 385,000 | $ | 2.74 | $ | 2.97 | 400,000 | $ | 2.80 | |||||||||||||||||||||
Q1-Q4 2017 | 159,151 | $ | 3.08 | 230,904 | $ | 2.91 | $ | 3.31 | - | $ | - | |||||||||||||||||||||
Q1-Q4 2018 | 11,096 | $ | 3.35 | 8,630 | $ | 3.18 | $ | 3.48 | - | $ | - | |||||||||||||||||||||
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
View source version on businesswire.com: http://www.businesswire.com/news/home/20161101006642/en/
Source:
Devon Energy Corporation
Investor Contacts
Scott Coody,
405-552-4735
Chris Carr, 405-228-2496
Media Contact
John
Porretto, 405-228-7506