Devon Energy Reports Record Third-Quarter 2008 Net Earnings

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OKLAHOMA CITY, Nov. 5 /PRNewswire-FirstCall/ -- Devon Energy Corporation (NYSE: DVN) today reported net earnings for the quarter ended September 30, 2008, of $2.6 billion, or $5.92 per common share ($5.87 per diluted common share). Third-quarter 2008 net earnings were 256 percent greater than Devon's third-quarter 2007 net earnings of $735 million, or $1.65 per common share ($1.63 per diluted common share). This is the highest quarterly net earnings in the company's history.

For the nine months ended September 30, 2008, Devon reported net earnings of $4.7 billion, or $10.50 per common share ($10.40 per diluted common share). For the nine months ended September 30, 2007, Devon reported net earnings of $2.3 billion, or $5.13 per common share ($5.07 per diluted common share).

Earnings $3.09 per Share Excluding Items Not Estimated by Analysts

Devon's third-quarter 2008 reported net earnings of $2.6 billion were affected by certain items securities analysts typically exclude from their published estimates. Excluding these adjusting items, Devon earned $1.4 billion, or $3.09 per diluted common share. The most significant of the adjusting items was a non-cash, unrealized gain on oil and natural gas derivative instruments of $1.8 billion pre-tax ($1.2 billion after tax). This and other adjusting items are discussed in more detail later in this news release.

Third-Quarter Oil and Gas Sales Increase 62 Percent; Production Trimmed by Hurricanes

Sales of oil, natural gas and natural gas liquids from continuing operations was $3.8 billion in the quarter ended September 30, 2008, compared with $2.3 billion in the same period in 2007. This 62 percent increase in sales was attributable to higher natural gas production combined with increased oil, natural gas and natural gas liquids pricing.

Despite reduced production volumes resulting from weather and operational down time, Devon's third-quarter production increased compared with 2007. Combined oil, natural gas and natural gas liquids production from continuing operations reached 58.6 million oil-equivalent barrels (Boe) in the third quarter of 2008. This was a three percent increase compared with the same quarter in 2007. Devon produced 637 thousand Boe per day in the third quarter of 2008 compared with 618 thousand Boe per day in the third quarter of 2007.

Much of Devon's U.S. offshore oil and gas production and a portion of its U.S. onshore oil and gas production was curtailed in the month of September as a result of Hurricanes Gustav and Ike. The company estimates that the hurricanes reduced third-quarter 2008 oil and gas production by approximately 1.5 million Boe.

Third-quarter oil production was also curtailed by approximately 400,000 barrels at the ACG field in Azerbaijan. Transportation interruptions and a subsea natural gas leak required the operator to reduce production from the offshore Azeri platforms.

Third-Quarter Operations Highlight U.S., Canada and Brazil

Devon drilled 636 wells in the third quarter of 2008, with an overall success rate of 97 percent. Following are recent operating highlights:

-- Devon's net production from the Barnett Shale field in north Texas averaged a record 1.1 billion cubic feet of natural gas equivalent per day in the third quarter of 2008. The company expects to exit the year producing approximately 1.2 billion cubic feet equivalent per day from about 3,800 Barnett Shale wells.

-- Devon has completed construction of its Northridge gas processing plant in the Woodford Shale field in eastern Oklahoma. The plant, which commenced operations in early October, can process up to 200 million cubic feet of natural gas per day. Devon is rapidly growing its production from the Woodford Shale and exited the third quarter producing about 50 million cubic feet of natural gas per day from the field.

-- In the third quarter, Devon completed two high-volume natural gas wells in the company's new Haynesville Lime drilling program in the Carthage area of east Texas. The two 100-percent Devon-owned wells achieved initial production rates of 26 million and 22 million cubic feet of natural gas per day.

-- In the Groesbeck area in east Texas, Devon initiated production on three significant horizontal natural gas wells in the third quarter. Initial daily production from the three wells averaged approximately 17 million cubic feet of gas equivalent per well. Devon owns 100-percent working interests in two of the wells and 96 percent in the third.

-- In Wyoming, Devon's net production from the Powder River Basin coalbed natural gas field exceeded 100 million cubic feet of gas per day in the third quarter. This was an all-time production record for Devon in the Powder River Basin.

-- In Alberta, oil production from the first phase of Devon's wholly-owned Jackfish Canadian oil sands project continued to ramp up toward an expected peak rate of 35,000 barrels per day. Jackfish 2 received regulatory approval in September. Combined production from both phases of the project is expected to reach 70,000 barrels of oil per day in 2012.

-- In Brazil, Devon is evaluating the results of a pre-salt exploratory well in the offshore Campos Basin. The well on the Wahoo prospect encountered more than 150 feet of potential net oil pay. Devon has a 25 percent working interest in the prospect.

$3 Billion in African Divestitures To Date

In September, Devon closed the sale of its operations in Cote d'Ivoire for $205 million. The aggregate pre-tax value of the combined African divestitures to date is approximately $3 billion.

In accordance with U.S. accounting standards, the company has classified the assets, liabilities and results of its operations in Africa as discontinued operations for all accounting periods presented in this release. Included in this release is a table of revenues, expenses and production categories and amounts reclassified as discontinued operations for each period presented.

Marketing and Midstream Profit at $169 Million

Marketing and midstream operating profit in the third quarter of 2008 reached $169 million. This was a 28 percent increase compared with the third quarter of 2007. The increase in operating profit reflects higher throughput and higher natural gas and natural gas liquids prices.

Expenses Generally in Line with Expectations

Expenses in most categories were generally in line with expectations in the third quarter of 2008. However, hurricane-related production curtailments led to higher than anticipated unit lease operating expense (LOE). Third-quarter LOE also included $14 million of costs associated with post-hurricane inspections and repairs. On a unit basis, third-quarter LOE was $10.09 per Boe compared with $8.04 per Boe in the third quarter of 2007.

Interest expense in the third quarter of 2008 decreased by 36 percent compared with the third quarter of 2007. The decrease was attributable to lower overall debt balances.

Cash Flow $2.6 Billion; Debt Repayment and Share Repurchases Total $1.3 Billion

Cash flow before balance sheet changes increased 49 percent to $2.6 billion in the third quarter of 2008. Devon funded $2.4 billion of capital expenditures in the third quarter, leaving $265 million of free cash flow. During the third quarter, the company used free cash flow and cash on hand to redeem $983 million of exchangeable debentures.

Also in the third quarter of 2008, Devon repurchased approximately 3.6 million shares of its common stock for approximately $363 million. The company repurchased a total of 6.5 million shares of its common stock in the first nine months of 2008. The company held cash and short-term investments of $1.2 billion at September 30, 2008.

Net debt as a percentage of adjusted capitalization was 13 percent at September 30, 2008. Reconciliations of cash flow before balance sheet changes, free cash flow, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.

Accounting for Derivative Instruments

Devon accounts for derivative instruments using mark-to-market accounting. As a result, for each reporting period the company recognizes in earnings the unrealized changes in the fair values of its derivative instruments. An unrealized after-tax gain on oil and natural gas derivative instruments of $1.2 billion resulted from decreases in oil and natural gas prices during the third quarter of 2008. This third-quarter unrealized after-tax gain more than offset unrealized after-tax losses on oil and natural gas derivative instruments recorded in the first two quarters of 2008. The company will record additional unrealized gains or losses on oil and natural gas derivative instruments in the future depending upon the direction of commodity prices.

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 third quarter of 2008 were as follows:

Items affecting continuing operations --

-- A change in fair value of other financial instruments decreased third-quarter net earnings by $46 million pre-tax ($29 million after tax).

-- An unrealized gain on oil and natural gas derivative financial instruments increased third-quarter net earnings by $1.8 billion pre-tax ($1.2 billion after tax).

Item affecting discontinued operations --

-- Divestitures of assets in Africa resulted in a third-quarter 2008 gain of $79 million pre-tax ($97 million after tax).

The following tables summarize the effects of these items on third-quarter earnings and income taxes.

    Summary of Items Typically Excluded by Securities Analysts (in millions)
    Quarter Ended September 30, 2008

    Continuing                                                    Cash Flow
     Operations     Pre-tax                          After tax      Before
                    Earnings    Income Tax Effect    Earnings   Balance Sheet
                     Effect  Current Deferred Total   Effect    Changes Effect

    Change in fair
     value of other
     financial
     instruments     $(46)       -     (17)    (17)    (29)            -
    Unrealized gain
     on oil and gas
     derivative
     financial
     instruments    1,832        -     659     659   1,173             -
       Totals      $1,786        -     642     642   1,144             -



    Discontinued                                                   Cash Flow
     Operations   Pre-tax                           After tax        Before
                  Earnings   Income Tax Effect      Earnings     Balance Sheet
                   Effect  Current Deferred Total    Effect     Changes Effect
    Gain on
     sale
     of West
     African
     assets         79         -      (18)   (18)      97              -
       Totals      $79         -      (18)   (18)      97              -

In aggregate, these items increased third-quarter 2008 net earnings by $1.2 billion, or $2.80 per common share ($2.78 per diluted share).

Conference Call to be Webcast Today

Devon will discuss its third-quarter 2008 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 http://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. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. 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 United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. This release may contain certain terms, such as resource potential, reserve potential, probable reserves, possible reserves and exploration target size. The SEC guidelines strictly prohibit us from including these terms in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K, File No. 001-32318, 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.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is the largest 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 http://www.devonenergy.com.

                           DEVON ENERGY CORPORATION
               UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION

    PRODUCTION (net of royalties)            Quarter Ended   Nine Months Ended
    Excludes discontinued operations          September 30,     September 30,
                                              2008     2007     2008     2007
    Total Period Production
    Natural Gas (Bcf)
      U.S. Onshore                            172.1    144.2    486.9    407.8
      U.S. Offshore                            12.5     19.9     45.0     57.3
      Total U.S.                              184.6    164.1    531.9    465.1
      Canada                                   53.8     57.9    158.5    170.3
      International                             0.5      0.5      1.5      1.3
      Total Natural Gas                       238.9    222.5    691.9    636.7
    Oil (MMBbls)
      U.S. Onshore                              2.6      2.8      8.3      8.4
      U.S. Offshore                             1.3      2.1      4.9      5.8
      Total U.S.                                3.9      4.9     13.2     14.2
      Canada                                    5.5      4.2     15.4     11.7
      International                             2.7      4.3     10.8     15.2
      Total Oil                                12.1     13.4     39.4     41.1
    Natural Gas Liquids (MMBbls)
      U.S. Onshore                              5.5      5.1     17.1     15.0
      U.S. Offshore                             0.1      0.2      0.5      0.6
      Total U.S.                                5.6      5.3     17.6     15.6
      Canada                                    1.0      1.0      3.0      3.2
      International                               -        -        -        -
      Total Natural Gas Liquids                 6.6      6.3     20.6     18.8
    Oil Equivalent (MMBoe)
      U.S. Onshore                             36.8     31.9    106.5     91.4
      U.S. Offshore                             3.5      5.7     12.9     16.0
      Total U.S.                               40.3     37.6    119.4    107.4
      Canada                                   15.5     14.8     44.8     43.2
      International                             2.8      4.4     11.1     15.4
      Total Oil Equivalent                     58.6     56.8    175.3    166.0
    Average Daily Production
    Natural Gas (MMcf)
      U.S. Onshore                          1,871.0  1,567.4  1,777.1  1,493.7
      U.S. Offshore                           135.9    215.8    164.3    210.0
      Total U.S.                            2,006.9  1,783.2  1,941.4  1,703.7
      Canada                                  584.9    629.5    578.4    623.6
      International                             5.6      5.4      5.4      4.7
      Total Natural Gas                     2,597.4  2,418.1  2,525.2  2,332.0
    Oil (MBbls)
      U.S. Onshore                             28.8     30.0     30.2     30.7
      U.S. Offshore                            13.8     23.3     17.9     21.5
      Total U.S.                               42.6     53.3     48.1     52.2
      Canada                                   59.3     45.5     56.3     42.9
      International                            29.7     47.1     39.6     55.5
      Total Oil                               131.6    145.9    144.0    150.6
    Natural Gas Liquids (MBbls)
      U.S. Onshore                             59.7     55.1     62.4     54.9
      U.S. Offshore                             1.1      2.9      1.7      2.2
      Total U.S.                               60.8     58.0     64.1     57.1
      Canada                                   11.2     10.7     10.9     11.6
      International                               -        -        -        -
      Total Natural Gas Liquids                72.0     68.7     75.0     68.7
    Oil Equivalent (MBoe)
      U.S. Onshore                            400.4    346.4    388.8    334.6
      U.S. Offshore                            37.6     62.1     46.9     58.6
      Total U.S.                              438.0    408.5    435.7    393.2
      Canada                                  168.0    161.2    163.6    158.4
      International                            30.6     48.0     40.5     56.3
      Total Oil Equivalent                    636.6    617.7    639.8    607.9



    BENCHMARK PRICES                       Quarter Ended   Nine Months Ended
     (average prices)                      September 30,      September 30,
                                           2008     2007     2008     2007
    Natural Gas ($/Mcf) - Henry Hub        $10.25   $6.16    $9.74   $6.83
    Oil ($/Bbl) - West Texas Intermediate
     (Cushing)                            $118.52  $75.21  $113.49  $66.21



    REALIZED PRICES
    (Excludes the effects of
     unrealized gains and
     losses from hedging)

    Quarter Ended September 30, 2008      Oil       Gas      NGLs      Total
                                       (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    U.S. Onshore                        $116.26    $8.48    $51.24    $55.65
    U.S. Offshore                       $123.78   $11.05    $65.35    $87.42
    Total U.S.                          $118.70    $8.66    $51.50    $58.38
    Canada                               $92.98    $9.36    $72.19    $70.24
    International                       $117.97   $10.72        $-   $116.35
    Realized price without
     hedges                             $106.95    $8.82    $54.72    $64.29
    Cash settlements                     $(0.01)  $(1.01)       $-    $(4.10)
    Realized price, including
     cash settlements                   $106.94    $7.81    $54.72    $60.19



    Quarter Ended September 30, 2007      Oil       Gas      NGLs     Total
                                       (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    U.S. Onshore                         $69.95    $5.07    $36.77    $34.85
    U.S. Offshore                        $77.36    $6.43    $36.92    $53.04
    Total U.S.                           $73.19    $5.23    $36.78    $37.62
    Canada                               $53.40    $5.40    $46.77    $39.28
    International                        $74.43    $6.61        $-    $73.77
    Realized price without hedges        $67.41    $5.28    $38.34    $40.86
    Cash settlements                         $-    $0.06        $-     $0.24
    Realized price, including cash
     settlements                         $67.41   $5.34     $38.34    $41.10



    Nine Months Ended September 30, 2008  Oil       Gas      NGLs     Total
                                      (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    U.S. Onshore                        $110.07    $8.34    $48.81   $54.51
    U.S. Offshore                       $115.12   $10.25    $54.80   $81.65
    Total U.S.                          $111.94    $8.50    $48.96   $57.43
    Canada                               $87.28    $8.90    $70.00   $66.16
    International                       $108.73    $9.95        $-  $107.63
    Realized price without hedges       $101.42    $8.60    $52.03   $62.84
    Cash settlements                         $-   $(0.80)       $-   $(3.15)
    Realized price, including cash
     settlements                        $101.42    $7.80    $52.03   $59.69



    Nine Months Ended September 30, 2007  Oil       Gas      NGLs     Total
                                       (Per Bbl) (Per Mcf) (Per Bbl)(Per Boe)
    U.S. Onshore                         $60.60    $5.69    $32.65   $36.35
    U.S. Offshore                        $66.45    $7.14    $33.39   $51.12
    Total U.S.                           $63.01    $5.87    $32.68   $38.55
    Canada                               $48.01    $6.16    $42.36   $40.33
    International                        $66.10    $5.73        $-   $65.66
    Realized price without hedges        $59.88    $5.95    $34.31   $41.52
    Cash settlements                         $-    $0.05        $-    $0.19
    Realized price, including cash
     settlements                         $59.88    $6.00    $34.31   $41.71



    CONSOLIDATED STATEMENTS OF OPERATIONS   Quarter Ended   Nine Months Ended
     (in millions, except per share          September 30,    September 30,
      amounts)                               2008     2007    2008     2007

    Revenues
      Oil sales                             $1,296    $905   $4,001   $2,461
      Gas sales                              2,107   1,175    5,947    3,787
      NGL sales                                362     242    1,069      643
      Net gain (loss) on oil and gas
       derivative financial instruments      1,592       7     (411)       1
      Marketing and midstream revenues         621     434    1,895    1,273
        Total revenues                       5,978   2,763   12,501    8,165
    Expenses and other income, net
      Lease operating expenses                 591     457    1,634    1,326
      Production taxes                         152      85      462      255
      Marketing and midstream operating
       costs and expenses                      452     301    1,349      912
      Depreciation, depletion and
       amortization of oil and gas
       properties                              781     705    2,280    1,937
      Depreciation and amortization of
       non-oil and gas properties               67      51      186      146
      Accretion of asset retirement
       obligation                               22      19       66       55
      General and administrative expenses      146     126      474      358
      Interest expense                          69     108      261      325
      Change in fair value of other
       financial instruments                    46     (22)      22      (31)
      Other income, net                        (83)    (28)    (121)     (71)
        Total expenses and other
         income, net                         2,243   1,802    6,613    5,212
    Earnings from continuing operations
     before income tax expense               3,735     961    5,888    2,953
    Income tax expense
      Current                                  226      96      743      459
      Deferred                               1,000     221    1,391      452
        Total income tax expense             1,226     317    2,134      911
    Earnings from continuing operations      2,509     644    3,754    2,042
    Discontinued operations
      Earnings from discontinued
       operations before income tax expense     93     177    1,133      442
      Income tax (benefit) expense             (16)     86      219      194
        Earnings from discontinued
         operations                            109      91      914      248
    Net earnings                             2,618     735    4,668    2,290
    Preferred stock dividends                    -       2        5        7
    Net earnings applicable to common
     stockholders                            2,618    $733   $4,663   $2,283

    Basic net earnings per share
      Earnings from continuing operations    $5.67   $1.45    $8.44    $4.57
      Earnings from discontinued
       operations                            $0.25   $0.20    $2.06    $0.56
      Net earnings                           $5.92   $1.65   $10.50    $5.13

    Diluted net earnings per share
      Earnings from continuing operations    $5.63   $1.43    $8.36    $4.52
      Earnings from discontinued
       operations                            $0.24   $0.20    $2.04    $0.55
      Net earnings                           $5.87   $1.63   $10.40    $5.07

    Weighted average common shares
     outstanding
      Basic                                    442     445      444      445
      Diluted                                  446     450      448      450



    CONSOLIDATED BALANCE SHEETS
     (in millions)                                  September 30, December 31,
                                                        2008          2007
    Assets                                                          (Audited)
    Current assets
      Cash and cash equivalents                         $1,193       $1,364
      Short-term investments, at fair value                  1          372
      Accounts receivable                                1,710        1,779
      Current assets held for sale                          88          120
      Other current assets, including $142
       million at fair value in 2008                       427          279
        Total current assets                             3,419        3,914
    Property and equipment, at cost, based on
     the full cost method of accounting for oil
     and gas properties ($4,073 and $3,417 excluded
     from amortization in 2008 and 2007,
     respectively)                                      53,750       48,473
      Less accumulated depreciation, depletion and
       amortization                                     22,300       20,394
      Net property and equipment                        31,450       28,079
    Investment in Chevron Corporation common stock,
     at fair value                                       1,170        1,324
    Goodwill                                             5,966        6,172
    Long-term assets held for sale                          19        1,512
    Other long-term assets, including $158 million
     at fair value in 2008                                 631          455
    Total Assets                                       $42,655      $41,456
    Liabilities and Stockholders' Equity
    Current liabilities
      Accounts payable - trade                          $1,559       $1,360
      Revenues and royalties due to others                 775          578
      Income taxes payable                                 188           97
      Short-term debt                                        -        1,004
      Current portion of asset retirement obligation,
       at fair value                                       115           82
      Current liabilities associated with assets
       held for sale                                        12          145
      Accrued expenses and other current liabilities       410          391
        Total current liabilities                        3,059        3,657
    Debentures exchangeable into shares of
     Chevron Corporation common stock                        -          641
    Other long-term debt                                 4,837        6,283
    Derivative financial instruments, at fair value          -          488
    Asset retirement obligation, at fair value           1,456        1,236
    Long-term liabilities associated with assets
     held for sale                                           1          404
    Other long-term liabilities                            833          699
    Deferred income taxes                                7,179        6,042
    Stockholders' equity
      Preferred stock                                        -            1
      Common stock                                          44           44
      Additional paid-in capital                         6,219        6,743
      Retained earnings                                 17,265       12,813
      Accumulated other comprehensive income             1,762        2,405
    Total Stockholders' Equity                          25,290       22,006
    Total Liabilities and Stockholders' Equity         $42,655      $41,456
    Common Shares Outstanding                              441          444



    CONSOLIDATED STATEMENTS OF CASH FLOWS
     (in millions)                             Nine Months Ended September 30,
                                                    2008              2007
    Cash Flows From Operating Activities
      Net earnings                                 $4,668            $2,290
      Earnings from discontinued
       operations, net of tax                        (914)             (248)
      Adjustments to reconcile earnings
       from continuing operations to net
       cash provided by operating activities:
         Depreciation, depletion and
          amortization                              2,466             2,083
         Deferred income tax expense                1,391               452
         Net unrealized (gain) loss on
          oil and gas derivative
          financial instruments                      (140)               30
         Other noncash charges                        217                94
        (Increase) decrease in assets:
          Accounts receivable                          32               (12)
          Other current assets                        (85)              (65)
          Other long-term assets                      (63)              (53)
        Increase (decrease) in
         liabilities:
          Accounts payable                            223               113
          Revenues and royalties due to
           others                                     278                (2)
          Income taxes payable                         36               139
          Other current liabilities                  (124)              (78)
          Other long-term liabilities                  94                (4)
      Cash provided by operating
       activities - continuing operations           8,079             4,739
      Cash provided by operating
       activities - discontinued
       operations                                     102               370
    Net cash provided by operating
     activities                                     8,181             5,109

    Cash Flows From Investing Activities
      Proceeds from sales of property and
       equipment                                      116                39
      Capital expenditures                         (6,179)           (4,477)
      Purchases of short-term investments             (50)             (659)
      Redemptions of short-term and long-
       term investments                               297               892
      Cash used in investing activities -
       continuing operations                       (5,816)           (4,205)
      Cash provided by (used in) investing
       activities - discontinued
       operations                                   1,854              (153)
    Net cash used in investing activities          (3,962)           (4,358)

    Cash Flows From Financing Activities
      Credit facility repayments                   (3,191)                -
      Credit facility borrowings                    1,741               400
      Net commercial paper repayments              (1,004)             (129)
      Principal payments on debt                   (1,031)             (166)
      Preferred stock redemption                     (150)                -
      Proceeds from stock option exercises            109                71
      Repurchases of common stock                    (665)             (133)
      Dividends paid on common and
       preferred stock                               (216)             (193)
      Excess tax benefits related to
       share-based compensation                        58                20
    Net cash used in financing activities          (4,349)             (130)

    Effect of exchange rate changes on
     cash                                             (47)               44
    Net (decrease) increase in cash and
     cash equivalents                                (177)              665
    Cash and cash equivalents at
     beginning of period (including
     assets held for sale)                          1,373               756
    Cash and cash equivalents at end of
     period (including assets held for
     sale)                                         $1,196            $1,421

    Supplementary cash flow data:
     Interest paid (net of capitalized
      interest)                                      $298              $226
     Income taxes paid - continuing and
      discontinued operations                      $1,162              $293



    DRILLING ACTIVITY                       Quarter Ended   Nine Months Ended
                                             September 30,    September 30,
                                             2008    2007     2008     2007
    Exploration Wells Drilled
      U.S.                                      4       5       21       32
      Canada                                   18      19       76       83
      International                             -       -        7        1
      Total                                    22      24      104      116
    Exploration Wells Success Rate
      U.S.                                    75%     60%      71%      78%
      Canada                                  94%    100%      95%      96%
      International                             -       -       0%       0%
      Total                                   91%     92%      84%      91%
    Development Wells Drilled
      U.S.                                    430     422    1,207    1,046
      Canada                                  171     139      430      445
      International                            13      14       35       23
      Total                                   614     575    1,672    1,514
    Development Wells Success Rate
      U.S.                                    98%     98%      98%      98%
      Canada                                  98%    100%      99%     100%
      International                           92%    100%      91%     100%
      Total                                   98%     98%      98%      98%
    Total Wells Drilled
      U.S.                                    434     427    1,228    1,078
      Canada                                  189     158      506      528
      International                            13      14       42       24
      Total                                   636     599    1,776    1,630
    Total Wells Success Rate
      U.S.                                    97%     97%      98%      97%
      Canada                                  98%    100%      99%      99%
      International                           92%    100%      76%      96%
      Total                                   97%     98%      97%      98%




                                                          September 30,
                                                        2008        2007
    Number of Company Operated Rigs Running
      U.S.                                                92          76
      Canada                                              12          12
      International                                        2           1
      Total                                              106          89



    CAPITAL EXPENDITURES (in millions)
    Quarter Ended September 30, 2008

                                   U.S.     U.S.
                                 Onshore  Offshore  Canada International Total
    Capital Expenditures
       Exploration                 $247     136      268        59        $710
       Development                1,024      61      207        54       1,346
       Exploration and
        development
        capital                  $1,271     197      475       113      $2,056
       Capitalized G&A                                                      99
       Capitalized interest                                                 28
       Discontinued operations                                               7
       Midstream capital                                                   110
       Other capital                                                        64
    Total Capital Expenditures                                          $2,364



    CAPITAL EXPENDITURES (in millions)
    Nine Months Ended September 30, 2008

                                   U.S.     U.S.
                                 Onshore  Offshore  Canada International Total

    Capital Expenditures
       Exploration                 $428     540       451       201     $1,620
       Development                2,845     261       640       169      3,915
       Exploration and
        development
        capital                  $3,273     801     1,091       370     $5,535
       Capitalized G&A                                                     298
       Capitalized interest                                                 70
       Discontinued operations                                              30
       Midstream capital                                                   308
       Other capital                                                       110
    Total Capital Expenditures                                          $6,351



    PRODUCTION FROM DISCONTINUED
     OPERATIONS                              Quarter Ended   Nine Months Ended
                                             September 30,     September 30,
                                             2008     2007     2008     2007
    Production from Discontinued
     Operations
      Oil (MMBbls)                            0.0      2.6      3.2      8.9
      Natural Gas (Bcf)                       0.4      1.2      2.6      3.8
      Total Oil Equivalent (MMBoe)            0.1      2.9      3.6      9.6


    STATEMENTS OF DISCONTINUED OPERATIONS   Quarter Ended    Nine Months Ended
    (in millions)                            September 30,     September 30,
                                             2008     2007      2008     2007
    Revenues
      Oil sales                                 $5    $196     $323     $571
      Gas sales                                  2       4       11       12
      Marketing and midstream revenues          10       6       15       13
      Total revenues                            17     206      349      596
    Expenses and other income, net
      Lease operating expenses                   1      20       25       59
      Marketing and midstream operating
       costs and expenses                        2       2        5        5
      Depreciation, depletion and
       amortization of oil and gas
       properties                                -       2        -       20
      Accretion of asset retirement
       obligation                                -       1        1        3
      Gain on sale of oil and gas
       properties                              (79)      -     (815)       -
      Reduction of carrying value of
       assets held for sale                      -       4        -       67
      Total expenses and other income, net     (76)     29     (784)     154
    Earnings before income tax expense          93     177    1,133      442
    Income tax expense (benefit)
      Current                                    2      69      643      184
      Deferred                                 (18)     17     (424)      10
      Total income tax expense (benefit)       (16)     86      219      194
    Earnings from discontinued operations     $109     $91     $914     $248


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.

Cash flow before balance sheet changes and free cash flow are Non-GAAP financial measures. Devon believes cash flow before balance sheet changes is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt. Devon believes free cash flow is relevant because it is a measure of cash available to pay dividends, service debt, or buy back stock. Cash flow before balance sheet changes and free cash flow are used by certain securities analysts as a measure of Devon's financial results.

    RECONCILIATION TO GAAP INFORMATION      Quarter Ended   Nine Months Ended
     (in millions)                           September 30,     September 30,
                                             2008     2007     2008     2007
    Net Cash Provided By Operating
     Activities (GAAP)                      $2,995   $1,760   $8,181   $5,109
      Changes in assets and liabilities -
       continuing operations                  (393)      65     (391)     (37)
      Changes in assets and liabilities -
       discontinued operations                  27      (59)      88      (23)
    Cash flow before balance sheet
     changes (Non-GAAP)                     $2,629   $1,766   $7,878   $5,049
    Less:
      Capital expenditures                   2,364    1,618    6,351    4,624
    Free cash flow (Non-GAAP)                 $265     $148   $1,527     $425


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 short-term investments. Devon believes that because cash and short-term investments can be used to repay indebtedness, netting cash and short-term investments against debt provides a clearer picture of the future demands on cash to repay debt.

    RECONCILIATION TO GAAP INFORMATION
     (in millions)
                                                          September 30,
                                                     2008              2007
    Total debt (GAAP)                               $4,837            $7,949
    Adjustments:
      Cash and short-term investments                 1,194             1,733
      Net Debt (Non-GAAP)                            $3,643            $6,216

    Total debt                                       $4,837            $7,949
    Stockholders' equity                             25,290            20,832
      Total Capitalization (GAAP)                   $30,127           $28,781

    Net debt                                         $3,643            $6,216
    Stockholders' equity                             25,290            20,832
      Adjusted Capitalization (Non-GAAP)            $28,933           $27,048

SOURCE Devon Energy Corporation

CONTACT: Investors, Zack Hager, +1-405-552-4526, or Media, Chip Minty, +1-405-228-8647, both of Devon Energy