Newsroom - News Release 

Devon Energy's Second-Quarter 2010 Net Earnings Increase 125 Percent to $706 Million

OKLAHOMA CITY, Aug 04, 2010 (BUSINESS WIRE) --

Devon Energy Corporation (NYSE:DVN) today reported net earnings of $706 million for the quarter ended June 30, 2010, or $1.59 per common share ($1.58 per diluted common share). This is a 125 percent increase compared with Devon's second-quarter 2009 net earnings of $314 million, or $0.71 per common share ($0.70 per diluted common share).

For the six months ended June 30, 2010, Devon reported net earnings of $1.9 billion, or $4.26 per common share ($4.24 per diluted common share). This compared with a net loss for the six months ended June 30, 2009, of $3.6 billion, or $8.21 per common share ($8.21 per diluted common share).

Devon's second-quarter 2010 financial results were impacted by certain items securities analysts typically exclude from their published estimates. Excluding these adjusting items, the company earned $685 million, or $1.53 per diluted common share. The adjusting items are discussed in more detail later in this news release.

Gulf of Mexico Divestitures Completed; Share Repurchase Plan Progressing

In the second quarter of 2010, Devon completed the sale of its Gulf of Mexico operations and closed on the sale of its Panyu development in the South China Sea. To date, Devon has received aggregate pre-tax proceeds of $4.6 billion and has announced sale agreements for the majority of the remaining international assets. The company expects to close on the remaining asset packages throughout the second half of 2010. Devon expects the total proceeds from the divestitures to approximate $10 billion with after-tax proceeds approximating $8 billion.

As of June 30, 2010, the company had utilized a portion of divestiture proceeds to repurchase 7.6 million shares of its common stock for $495 million and to reduce debt balances by $1.7 billion. Devon also has directed $500 million of proceeds to acquire a 50 percent interest in the Kirby-Pike oil sands leases.

Oil and Liquids Production Growth Leads Second-Quarter Operating Highlights

Devon drilled 315 wells in the second quarter of 2010 with an overall success rate of 100 percent. The following are operational highlights of the second-quarter 2010:

  • Devon's North American onshore oil and liquids production totaled 197 thousand barrels per day in the second quarter of 2010. This represents a six percent increase in both oil and natural gas liquids production compared to the first quarter of 2010.
  • In the Permian Basin, the company drilled 26 successful Wolfberry oil wells during the second quarter, including Devon's best well to date in the play.
  • During the second quarter Devon continued to add oil and liquids-rich acreage in the Permian Basin. As of June 30, 2010, Devon had assembled more than 700,000 net acres of leasehold targeting the Avalon Shale, Bone Spring, Wolfberry and other conventional formations. The company currently is running 11 rigs to de-risk and develop its Permian Basin acreage position.
  • Construction for Devon's second Jackfish project remains on schedule and is now approximately 85 percent complete. Located in Alberta, the 100 percent Devon-owned project is sized to produce an average of 35,000 barrels of production per day before royalties. Devon expects to complete construction of the facilities in the first quarter of 2011, and first production is expected by the end of 2011.
  • Devon plans to file a regulatory application for a third phase of its Jackfish project in the third quarter of 2010. In aggregate, the three Jackfish projects are expected to produce more than 100 thousand gross barrels of oil per day or 90 thousand barrels of oil per day after royalties. Over the life of the projects, the company expects to recover approximately 900 million gross barrels or approximately 800 million barrels after royalties.
  • Also in Canada, the company will begin drilling on its Kirby-Pike oil sands leasehold in the fourth quarter of 2010. The Kirby-Pike acreage lies adjacent to Devon's highly successful Jackfish project and has estimated gross recoverable resources of up to 1.5 billion barrels. Devon operates Kirby-Pike with a 50 percent working interest.
  • Devon increased its average net production in the Cana-Woodford Shale to 105 million cubic feet of natural gas equivalent per day in the second quarter. This was an increase of more than 200 percent over production in the second quarter of 2009.
  • Devon initiated production on two Granite Wash wells in the second quarter. Initial daily production from the two wells averaged 29 million cubic feet of natural gas equivalent per day, including 585 barrels per day of oil and 1,330 barrels per day of natural gas liquids. Devon's working interest in the two wells is 70 percent.
  • Net production from the Barnett Shale field in north Texas exceeded 1.1 billion cubic feet of natural gas equivalent per day in the second quarter, up 3 percent from the previous quarter. Devon expects to reach its previous Barnett Shale production record of 1.2 billion cubic feet of natural gas equivalent per day during the third quarter of 2010.

Earnings Climb on Higher Revenues

Earnings from continuing operations for the second quarter of 2010 increased 85 percent over the second quarter of 2009 to $352 million. The earnings increase was driven by higher revenues from the sale of oil, natural gas and natural gas liquids. Second-quarter sales of oil, natural gas and natural gas liquids increased 23 percent to $1.8 billion. Higher realized prices for all three products more than offset a three percent decrease in overall production.

Devon's second-quarter average realized oil price increased 23 percent to $62.35 per barrel compared with $50.84 per barrel in the second quarter of 2009. The average realized price for natural gas, before the impact of hedges, increased 24 percent in the second quarter of 2010 to $3.62 per thousand cubic feet. This compares with $2.91 per thousand cubic feet in the second quarter of 2009. The company's average second-quarter realized natural gas liquids price increased 39 percent over the year-ago period to $30.90 per barrel.

Oil and gas production from continuing operations averaged 643 thousand oil-equivalent barrels (Boe) per day in the second quarter of 2010. This compares with second quarter 2009 average production of 666 thousand Boe per day. The most significant component of this production decline was the impact of property divestitures in the Gulf of Mexico.

Second-quarter 2010 lease operating expenses (LOE) increased to $442 million, or 8 percent higher than the year-ago quarter. The increase in LOE reflects the strengthening of the Canadian dollar and generally higher expenditures for oilfield services and supplies.

Taxes other than income taxes increased to $92 million in the second quarter. The $13 million increase over the second quarter of 2009 was primarily attributable to higher production taxes resulting from increased oil and gas revenues.

Compared with the second quarter of 2009, depreciation, depletion and amortization expense (DD&A) of oil and gas properties declined by one percent to $426 million. Unit DD&A was $7.28 per Boe in the second quarter of 2010.

Second-quarter general and administrative expenses declined by 25 percent to $130 million in 2010 compared with 2009. Lower personnel costs and efficiencies gained through the company's strategic repositioning drove most of the savings.

Interest expense for the second quarter of 2010 increased 24 percent to $111 million. Second-quarter 2010 interest expense included a $19 million charge attributable to the early redemption in June of $350 million of 7.25 percent senior notes.

Second-quarter income tax expense from continuing operations totaled $261 million, or 43 percent of pre-tax earnings. This compared to second-quarter 2009 income tax expense of $109 million, or 37 percent of pre-tax earnings. The higher tax rate primarily resulted from a $52 million non-cash charge related to the expected repatriation of foreign earnings.

Additionally, in the second quarter of 2010, current income tax from continuing operations increased to $707 million while deferred taxes declined to a benefit of $446 million. A taxable gain on the sale of Gulf of Mexico assets increased Devon's current tax expense by $622 million in the second quarter.

Divestiture Proceeds and Debt Repayments Further Strengthen Balance Sheet

Devon generated $1.4 billion of cash flow from operating activities in the second quarter of 2010. In addition, the company received $2.6 billion of after-tax divestiture proceeds. Devon utilized this cash in the second quarter to fully fund its capital program, to repurchase $495 million of common stock and to reduce debt balances by $461 million. Devon ended the quarter with cash on hand of $2.9 billion and a net debt to adjusted capitalization ratio of just 14 percent. A reconciliation of net debt and adjusted capitalization, a non-GAAP measure, is provided in this release.

Divestitures Impact Reported Financial and Operational Results

In accordance with accounting standards, Devon has reclassified the assets, liabilities and results of its international segment as discontinued operations for all accounting periods presented in this release. Although revenues and expenses for prior periods were reclassified, there was no impact upon previously reported net earnings. Included with this release is a table of revenues, expenses, and production categories and the amounts reclassified as discontinued operations for each period presented.

Devon's Gulf of Mexico assets do not qualify as discontinued operations under accounting standards and are included within results from continuing operations. However, information is provided within this release to enable the reader to isolate results of the company's operations that have been retained following the divestitures.

Items Excluded from Published Earnings Estimates

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. These items and their effects upon reported earnings for the second quarter of 2010 were as follows:

Items affecting continuing operations:

  • A change in fair value of oil and natural gas derivatives decreased second-quarter earnings by $207 million pre-tax ($132 million after tax).
  • A change in fair value of non-oil and gas financial instruments decreased second-quarter earnings by $85 million pre-tax ($55 million after tax).
  • U.S. income taxes on foreign earnings assumed to be repatriated to the U.S. decreased second-quarter earnings by $52 million.
  • Additional interest expense attributable to the early redemption of 7.25 percent senior notes decreased second-quarter earnings by $19 million pre-tax ($12 million after tax).
  • A change in the estimate of severance and restructuring costs increased second-quarter earnings by $8 million pre-tax ($6 million after tax).

Items affecting discontinued operations:

  • The decision to divest all international assets generated financial benefits that increased second-quarter earnings by $44 million pre-tax ($28 million after tax).
  • A change in the estimate of severance and restructuring costs increased second-quarter earnings by $5 million pre-tax ($3 million after tax).
  • Divestitures of assets in China resulted in a second-quarter gain of $308 million pre-tax ($235 million after tax).

The following tables summarize the effects of these items on second-quarter 2010 earnings, income taxes and cash flow. Included in the tables are the tax effects resulting from oil and gas property divestitures that did not affect net earnings.

Summary of Items Typically Excluded by Securities Analysts (in millions)
Continuing Operations - Second Quarter 2010

Pre-tax

Earnings

Income Tax Effect

After-tax

Earnings

Cash Flow Before

Balance Sheet

Effect

Current Deferred Total

Effect

Changes Effect

Oil and gas derivatives $ (207 ) - (75 ) (75 ) (132 ) -
Non-oil and gas financial instruments (85 ) - (30 ) (30 ) (55 ) -
U.S. income taxes on foreign earnings - - 52 52 (52 ) -
Additional interest costs on debt retirement (19 ) - (7 ) (7 ) (12 ) (17 )
Severance and restructuring costs 8 1 1 2 6 1
Effects of oil and gas property divestitures - 622 (622 ) - - (622 )
Totals $ (303 ) 623 (681 ) (58 ) (245 ) (638 )
Discontinued Operations - Second Quarter 2010

Pre-tax

Earnings

Income Tax Effect

After-tax

Earnings

Cash Flow Before

Balance Sheet

Effect

Current Deferred Total

Effect

Changes Effect

Financial benefits of decision to divest assets $ 44 - 16 16 28 -
Severance and restructuing costs $ 5 1 1 2 3 1
Gain on sale of assets $ 308 110 (37 ) 73 235 (110 )
Totals $ 357 111 (20 ) 91 266

(109 )

In aggregate, these items increased second-quarter 2010 net earnings by $21 million, or five cents per common share (five cents per diluted share). These items and their associated tax effects decreased second-quarter 2010 cash flow before balance sheet changes by $747 million.

Conference Call to be Webcast Today

Devon will discuss its second-quarter 2010 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon's internet home page at www.devonenergy.com.

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. These risks include, but are not limited to, the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; political or regulatory changes; the availability of goods and services; and the occurrence, timing and completion of property divestitures. 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.

Effective January 1, 2010, the United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential and exploration target size. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized.The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K for the fiscal year ended December 31, 2009, available from us at Devon Energy Corporation, Attn. Investor Relations, 20 North Broadway, Oklahoma City, OK 73102. 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.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For more information about Devon, please visit our website at www.devonenergy.com.

PRODUCTION (net of royalties) Quarter Ended Six Months Ended
Excludes discontinued operations June 30, June 30,
2010 2009 2010 2009
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 173.4 183.2 339.3 364.2
Canada 57.4 60.1 108.1 112.8
North American Onshore 230.8 243.3 447.4 477.0
U.S. Offshore 6.9 10.5 16.8 21.3
Total Natural Gas 237.7 253.8 464.2 498.3
Oil (MMBbls)

U.S. Onshore

3.3 2.9 6.3 5.9

Canada

6.7 6.6 13.1 12.9
North American Onshore 10.0 9.5 19.4 18.8
U.S. Offshore 0.8 1.2 1.9 2.3
Total Oil 10.8 10.7 21.3 21.1
Natural Gas Liquids (MMBbls)

U.S. Onshore

7.0 6.4 13.5 12.6

Canada

0.9 1.0 1.8 2.0
North American Onshore 7.9 7.4 15.3 14.6
U.S. Offshore 0.2 0.2 0.3 0.4
Total Natural Gas Liquids 8.1 7.6 15.6 15.0
Oil Equivalent (MMBoe)

U.S. Onshore

39.2 39.9 76.3 79.2

Canada

17.2 17.6 33.0 33.7
North American Onshore 56.4 57.5 109.3 112.9
U.S. Offshore 2.1 3.1 5.0 6.2
Total Oil Equivalent 58.5 60.6 114.3 119.1
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,905.9 2,013.1 1,874.6 2,012.4
Canada 630.2 660.2 597.3 623.0
North American Onshore 2,536.1 2,673.3 2,471.9 2,635.4
U.S. Offshore 76.2 115.5 92.7 117.4
Total Natural Gas 2,612.3 2,788.8 2,564.6 2,752.8
Oil (MBbls)
U.S. Onshore 36.5 32.0 34.8 32.5
Canada 73.9 72.1 72.4 71.3
North American Onshore 110.4 104.1 107.2 103.8
U.S. Offshore 8.2 13.0 10.5 12.5
Total Oil 118.6 117.1 117.7 116.3
Natural Gas Liquids (MBbls)
U.S. Onshore 76.5 70.8 74.5 69.7
Canada 10.3 11.1 10.1 10.8
North American Onshore 86.8 81.9 84.6 80.5
U.S. Offshore 1.7 2.0 1.8 2.2
Total Natural Gas Liquids 88.5 83.9 86.4 82.7
Oil Equivalent (MBoe)
U.S. Onshore 430.6 438.2 421.7 437.6
Canada 189.3 193.3 182.0 185.9
North American Onshore 619.9 631.5 603.7 623.5
U.S. Offshore 22.6 34.2 27.8 34.3
Total Oil Equivalent 642.5 665.7 631.5 657.8
BENCHMARK PRICES Quarter Ended Six Months Ended
(average prices) June 30, June 30,
2010 2009 2010 2009
Natural Gas ($/Mcf) - Henry Hub $ 4.09 $ 3.51 $ 4.70 $ 4.21
Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 78.16 $ 59.83 $ 78.35 $ 51.51
Quarter Ended June 30, 2010 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $ 74.65 $ 3.47 $ 28.73 $ 26.77
Canada $ 54.43 $ 3.99 $ 46.18 $ 37.08
North American Onshore $ 61.11 $ 3.60 $ 30.81 $ 29.92
U.S. Offshore $ 79.09 $ 4.39 $ 35.59 $ 46.17
Realized price without hedges $ 62.35 $ 3.62 $ 30.90 $ 30.49
Cash settlements $ - $ 1.06 $ - $ 4.31
Realized price, including cash settlements $ 62.35 $ 4.68 $ 30.90 $ 34.80
Quarter Ended June 30, 2009 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $ 54.66 $ 2.75 $ 20.81 $ 19.98
Canada $ 48.14 $ 3.25 $ 30.99 $ 30.85
North American Onshore $ 50.14 $ 2.87 $ 22.20 $ 23.31
U.S. Offshore $ 56.44 $ 3.76 $ 23.69 $ 35.49
Realized price without hedges $ 50.84 $ 2.91 $ 22.24 $ 23.93
Cash settlements $ - $ 0.45 $ - $ 1.89
Realized price, including cash settlements $ 50.84 $ 3.36 $ 22.24 $ 25.82
Six Months Ended June 30, 2010 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $ 74.73 $ 4.05 $ 31.39 $ 29.71
Canada $ 58.36 $ 4.50 $ 47.52 $ 40.62
North American Onshore $ 63.67 $ 4.16 $ 33.31 $ 33.00
U.S. Offshore $ 77.81 $ 5.12 $ 38.22 $ 49.06
Realized price without hedges $ 64.93 $ 4.19 $ 33.41 $ 33.70
Cash settlements $ - $ 0.75 $ - $ 3.04
Realized price, including cash settlements $ 64.93 $ 4.94 $ 33.41 $ 36.74
Six Months Ended June 30, 2009 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $ 44.67 $ 3.09 $ 19.16 $ 20.57
Canada $ 38.19 $ 3.82 $ 28.52 $ 29.11
North American Onshore $ 40.22 $ 3.26 $ 20.41 $ 23.12
U.S. Offshore $ 49.69 $ 4.46 $ 21.96 $ 34.85
Realized price without hedges $ 41.24 $ 3.31 $ 20.45 $ 23.73
Cash settlements $ - $ 0.47 $ - $ 1.95
Realized price, including cash settlements $ 41.24 $ 3.78 $ 20.45 $ 25.68
CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended Six Months Ended
(in millions, except per share amounts) June 30, June 30,
2010 2009 2010 2009
Revenues
Oil, gas, and NGL sales $ 1,782 $ 1,450 $ 3,852 $ 2,825
Oil and gas derivatives 45 13 665 167
Marketing and midstream revenues 405 359 935 730
Total revenues 2,232 1,822 5,452 3,722
Expenses and other, net
Lease operating expenses 442 410 856 850
Taxes other than income taxes 92 79 193 168
Marketing and midstream operating costs and expenses 280 230 677 454
Depreciation, depletion and amortization of oil and gas properties 426 430 852 990
Depreciation and amortization of non-oil and gas properties 63 74 126 144
Accretion of asset retirement obligation 24 23 50 46
General and administrative expenses 130 173 268 336
Restructuring costs (8 ) - (8 ) -
Interest expense 111 90 197 173
Non-oil and gas financial instruments 81 (10 ) 66 (15 )
Reduction of carrying value of oil and gas properties - - - 6,408
Other, net (22 ) 24 (26 ) 31
Total expenses and other, net 1,619 1,523 3,251 9,585
Earnings (loss) from continuing operations before income taxes 613 299 2,201 (5,863 )
Income tax expense (benefit)
Current 707 58 1,006 50
Deferred (446 ) 51 (231 ) (2,221 )
Total income tax expense (benefit) 261 109 775 (2,171 )
Earnings (loss) from continuing operations 352 190 1,426 (3,692 )
Discontinued operations
Earnings from discontinued operations before income taxes 473 143 610 77
Discontinued operations income tax expense 119 19 138 30
Earnings from discontinued operations 354 124 472 47
Net earnings (loss) $ 706 $ 314 $ 1,898 $ (3,645 )
Basic earnings (loss) from continuing operations per share $ 0.79 $ 0.43 $ 3.20 $ (8.32 )
Basic earnings from discontinued operations per share 0.80 0.28 1.06 0.11
Basic net earnings (loss) per share $ 1.59 $ 0.71 $ 4.26 $ (8.21 )
Diluted earnings (loss) from continuing operations per share $ 0.79 $ 0.42 $ 3.19 $ (8.32 )
Diluted earnings from discontinued operations per share 0.79 0.28 1.05 0.11
Diluted net earnings (loss) per share $ 1.58 $ 0.70 $ 4.24 $ (8.21 )
Weighted average common shares outstanding
Basic 445 444 446 444
Diluted 446 446 447 446
CONSOLIDATED BALANCE SHEETS
(in millions) June 30, December 31,
2010 2009
Assets (Audited)
Current assets:
Cash and cash equivalents $ 2,174 $ 646
Accounts receivable 1,205 1,208
Current assets held for sale 1,020 657
Other current assets 650 481
Total current assets 5,049 2,992
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization 51,851 52,352
Not subject to amortization 3,239 4,078
Total oil and gas 55,090 56,430
Other 4,229 4,045
Total property and equipment, at cost 59,319 60,475
Less accumulated depreciation, depletion and amortization (42,478 ) (41,708 )
Property and equipment, net 16,841 18,767
Goodwill 5,892 5,930
Long-term assets held for sale 1,340 1,250
Other long-term assets 849 747
Total Assets $ 29,971 $ 29,686
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable - trade $ 1,133 $ 1,137
Revenues and royalties due to others 466 486
Short-term debt 53 1,432
Current liabilities associated with assets held for sale 548 234
Other current liabilities 1,202 513
Total current liabilities 3,402 3,802
Long-term debt 5,571 5,847
Asset retirement obligations 1,346 1,418
Liabilities associated with assets held for sale 189 213
Other long-term liabilities 919 937
Deferred income taxes 1,714 1,899
Stockholders' equity:
Common stock 44 45
Additional paid-in capital 6,186 6,527
Retained earnings 9,369 7,613
Accumulated other comprehensive earnings 1,296 1,385
Treasury stock, at cost (65 ) -
Total Stockholders' Equity 16,830 15,570
Total Liabilities and Stockholders' Equity $ 29,971 $ 29,686
Common Shares Outstanding 439 447
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Six Months Ended June 30,
2010 2009
Cash Flows From Operating Activities
Earnings (loss) from continuing operations $ 1,426 $ (3,692 )
Adjustments to reconcile earnings (loss) from continuing operations
to net cash provided by operating activities:
Depreciation, depletion and amortization 978 1,134
Deferred income tax benefit (231 ) (2,221 )
Reduction of carrying value of oil and gas properties - 6,408
Unrealized change in fair value of financial instruments (231 ) 71
Other noncash charges 81 125
Net decrease in working capital 581 52
Decrease in long-term other assets 14 25
Increase in long-term other liabilities 1 21
Cash from operating activities - continuing operations 2,619 1,923
Cash from operating activities - discontinued operations 273 154
Net cash from operating activities 2,892 2,077
Cash Flows From Investing Activities
Proceeds from property and equipment divestitures 4,129 2
Capital expenditures (3,221 ) (2,945 )
Redemptions of long-term investments 18 4
Cash from investing activities - continuing operations 926 (2,939 )
Cash from investing activities - discontinued operations 429 (254 )
Net cash from investing activities 1,355 (3,193 )
Cash Flows From Financing Activities
Proceeds from borrowings of long term debt, net of issuance costs - 1,187
Net commercial paper repayments (1,432 ) 325
Debt repayments (350 ) (1 )
Proceeds from stock option exercises 15 9
Repurchases of common stock (430 ) -
Dividends paid on common stock (142 ) (142 )
Excess tax benefits related to share-based compensation 6 5
Net cash from financing activities (2,333 ) 1,383
Effect of exchange rate changes on cash (9 ) 5
Net increase in cash and cash equivalents 1,905 272
Cash and cash equivalents at beginning of period (including assets held for sale) 1,011 384
Cash and cash equivalents at end of period (including assets held for sale) $ 2,916 $ 656
COMPANY OPERATED RIGS
As of June 30,
2010 2009
Number of Company Operated Rigs Running
U.S. Onshore 59 21
Canada 6 1
North American Onshore 65 22
U.S. Offshore - 2
Total 65 24
DRILLING ACTIVITY Quarter Ended Six Months Ended
Gross wells drilled June 30, June 30,
2010 2009 2010 2009
Exploration Wells Drilled
U.S. Onshore 5 1 9 8
Canada 4 7 28 29
North American Onshore 9 8 37 37
U.S. Offshore - 1 - 1
Total 9 9 37 38
Exploration Wells Success Rate
U.S. Onshore 100 % 0 % 100 % 88 %
Canada 100 % 100 % 96 % 100 %
North American Onshore 100 % 88 % 97 % 97 %
U.S. Offshore n/a 100 % n/a 0 %
Total 100 % 89 % 97 % 97 %
Development Wells Drilled
U.S. Onshore 270 159 567 447
Canada 33 22 161 143
North American Onshore 303 181 728 590
U.S. Offshore 3 1 4 7
Total 306 182 732 597
Development Wells Success Rate
U.S. Onshore 100 % 100 % 100 % 100 %
Canada 100 % 100 % 100 % 99 %
North American Onshore 100 % 100 % 100 % 99 %
U.S. Offshore 100 % 100 % 100 % 71 %
Total 100 % 100 % 100 % 99 %
Total Wells Drilled
U.S. Onshore 275 160 576 455
Canada 37 29 189 172
North American Onshore 312 189 765 627
U.S. Offshore 3 2 4 8
Total 315 191 769 635
Total Wells Success Rate
U.S. Onshore 100 % 99 % 100 % 99 %
Canada 100 % 100 % 99 % 99 %
North American Onshore 100 % 99 % 100 % 99 %
U.S. Offshore 100 % 100 % 100 % 62 %
Total 100 % 99 % 100 % 99 %
CAPITAL EXPENDITURES (in millions)
Quarter Ended June 30, 2010
U.S. Onshore Canada N.A. Onshore U.S. Offshore Total
Capital Expenditures
Exploration $ 179 87 $ 266 75 $ 341
Development 659 169 828 35 863
Exploration and development capital $ 838 256 $ 1,094 110 $ 1,204
Kirby-Pike property acquisition 500
Capitalized G&A 79
Capitalized interest 4
Midstream capital 48
Other capital 95
Total Continuing Operations $ 1,930
Discontinued operations 142
Total Operations $ 2,072
CAPITAL EXPENDITURES (in millions)
Six Months Ended June 30, 2010
U.S. Onshore Canada N.A. Onshore U.S. Offshore Total
Capital Expenditures
Exploration $ 278 168 $ 446 97 $ 543
Development 1,222 442 1,664 223 1,887
Exploration and development capital $ 1,500 610 $ 2,110 320 $ 2,430
Kirby-Pike property acquisition 500
Capitalized G&A 158
Capitalized interest 18
Midstream capital 107
Other capital 120
Total Continuing Operations $ 3,333
Discontinued operations 312
Total Operations $ 3,645
PRODUCTION FROM DISCONTINUED OPERATIONS Quarter Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
Production from Discontinued Operations
Oil (MMBbls) 2.9 4.7 5.8 7.9
Natural Gas (Bcf) 0.4 0.3 0.9 0.6
Total Oil Equivalent (MMBoe) 3.0 4.8 5.9 8.0
STATEMENTS OF DISCONTINUED OPERATIONS Quarter Ended Six Months Ended
(in millions) June 30, June 30,
2010 2009 2010 2009
Revenues
Oil sales $ 219 $ 267 $ 428 $ 394
Gas sales 3 1 6 2
Total revenues 222 268 434 396
Expenses and other, net
Operating expenses 57 125 132 210
Reduction of carrying value of oil and gas properties - - - 109
Gain on assets sales (308 ) - (308 ) -
Total expenses and other, net (251 ) 125 (176 ) 319
Earnings before income taxes 473 143 610 77
Income tax expense (benefit)
Current 137 (8 ) 152 2
Deferred (18 ) 27 (14 ) 28
Total income tax expense 119 19 138 30
Earnings from discontinued operations $ 354 $ 124 $ 472 $ 47

NON-GAAP FINANCIAL MEASURES

The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles.) The company must reconcile the Non-GAAP financial measure to related GAAP information. Devon believes that using net debt for the calculation of "net debt to adjusted capitalization" provides a better measure than using debt. Devon defines net debt as debt less cash and cash equivalents. Devon believes that because cash and cash equivalents can be used to repay indebtedness, netting cash and cash equivalents against debt provides a clearer picture of the future demands on cash to repay debt.

RECONCILIATION TO GAAP INFORMATION
(in millions)
June 30,
2010 2009
Total debt (GAAP) $ 5,624 $ 7,357
Adjustments:
Cash and cash equivalents (including cash from discontinued operations) 2,916 656
Net debt (Non-GAAP) $ 2,708 $ 6,701
Total debt $ 5,624 $ 7,357
Stockholders' equity 16,830 13,682
Total capitalization (GAAP) $ 22,454 $ 21,039
Net debt $ 2,708 $ 6,701
Stockholders' equity 16,830 13,682
Adjusted capitalization (Non-GAAP) $ 19,538 $ 20,383

SOURCE: Devon Energy Corporation

Devon Energy Corporation
Investor Contact:
Shea Snyder, 405-552-4782
or
Media Contact:
Chip Minty, 405-228-8647

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Devon is an industry leader in unconventional oil and gas production.

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Media Contacts 

 
 
 

U.S.:

Chip Minty
Manager, Media Relations
405.228.8647
chip.minty@dvn.com 

 

Canada:

Nadine Barber
Manager, Public Affairs and Corporate Communications
403-232-7695
nadine.barber@dvn.com