Devon Energy Reports First-Quarter 2009 Results
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Earnings
Devon's first-quarter 2009 financial results were impacted by certain
items securities analysts typically exclude from their published estimates.
The most significant of these items was a
The non-cash charge resulted from application of the ceiling test as
prescribed by the
Production Growth Offset by Lower Realized Prices
Combined oil, gas and natural gas liquids production averaged 685 thousand
oil-equivalent barrels (Boe) per day in the first quarter of 2009. This was a
seven percent increase in production compared with the first quarter of 2008.
The production growth was concentrated in onshore fields within the
Although production increased, sales of oil, gas and natural gas liquids
decreased 53 percent to
Devon's realized price for natural gas decreased 49 percent in the first
quarter of 2009, to
Operating Highlights Show Production Gains
Devon drilled 451 wells in the first quarter of 2009 compared with 646 wells it drilled in the first quarter of 2008. The company has reduced drilling activity and related capital expenditures in response to declines in natural gas and oil prices. Despite the reduced level of drilling, Devon achieved several notable operational accomplishments in the first quarter:
-- Devon increased its net production from the Barnett Shale field in
north Texas to an all-time high of 1.2 billion cubic feet of gas
equivalent per day. The company is by far the largest producer in the
Barnett.
-- The company increased its net production in the Arkoma-Woodford Shale
in eastern Oklahoma to 86 million cubic feet of gas equivalent per
day.
-- In its emerging Cana-Woodford Shale play in western Oklahoma , Devon
established production from nine wells in the first quarter with an
average initial production rate of 4.3 million cubic feet of gas per
day.
-- At Groesbeck in east Texas , Devon drilled two high-volume wells in the
Nan-Su-Gail field in the first quarter. The Neal B 14H (93 percent
working interest) had initial production of 23 million cubic feet of
gas per day. The Hill 17H (100 percent working interest) initiated
production at 19 million cubic feet of gas per day.
-- In the Powder River Basin in Wyoming , Devon's net production reached
an all-time high of 114 million cubic feet of gas per day.
-- In Canada, Devon began injecting steam into the final pair of wells at
its Jackfish oil sands project in March. All 24 well-pairs are now
operational.
-- Jackfish production reached 28,000 barrels of oil per day in March.
The company expects Jackfish to reach its design capacity of 35,000
barrels of oil per day in the second or third quarter of 2009.
Marketing and Midstream Profit Declines with Prices
Marketing and midstream operating profit was
Costs Begin Improving
First-quarter 2009 expenses in most categories decreased in comparison to
the first quarter of 2008. Unit lease operating expenses (LOE) decreased by
two percent to
Production taxes declined 68 percent to
Depreciation, depletion and amortization (DD&A) of oil and gas properties
decreased 19 percent to
First-quarter 2009 general and administrative expenses (G&A) increased 12
percent to
Interest expense for the first quarter of 2009 decreased to
Retaining Balance Sheet Strength and Liquidity
Devon's net debt to adjusted capitalization ratio was 34 percent at
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 first quarter of 2009 were as follows:
-- An unrealized gain on oil and natural gas derivative instruments
increased first-quarter earnings by $36 million pre-tax ($23 million
after tax).
-- A change in fair value of other financial instruments decreased
first-quarter earnings by $11 million pre-tax ($8 million after tax).
-- A reduction in the carrying value of oil and gas properties decreased
first-quarter earnings by $6.5 billion pre-tax ($4.2 billion after
tax).
The following tables summarize the effects of these items on first-quarter earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts - First Quarter
2009
(in millions) Cash Flow
Before
After Balance
Pre-tax Income Tax Effect tax Sheet
Earnings ----------------- Earnings Changes
Effect Current Deferred Total Effect Effect
Unrealized gain on
oil and gas
derivative
instruments $36 - 13 13 23 -
Change in fair
value of other
financial
instruments (11) - (3) (3) (8) -
Reduction in
the carrying
value of oil
and gas
properties (6,516) - (2,326) (2,326) (4,190) -
Totals $(6,491) - (2,316) (2,316) (4,175) -
In aggregate, these items decreased first-quarter 2009 net earnings by
Conference Call to be Webcast Today
Devon will discuss its first-quarter 2009 financial and operating results
in a conference call webcast today. The webcast will begin at
This press release includes "forward-looking statements" as defined by the
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties) Quarter Ended
Excludes discontinued operations March 31,
2009 2008
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 181.1 152.6
U.S. Offshore 10.7 18.3
Total U.S. 191.8 170.9
Canada 52.7 51.6
International 0.3 0.5
Total Natural Gas 244.8 223.0
Oil (MMBbls)
U.S. Onshore 3.0 2.8
U.S. Offshore 1.1 1.8
Total U.S. 4.1 4.6
Canada 6.3 4.7
International 3.1 4.9
Total Oil 13.5 14.2
Natural Gas Liquids (MMBbls)
U.S. Onshore 6.2 5.8
U.S. Offshore 0.2 0.2
Total U.S. 6.4 6.0
Canada 0.9 1.0
International - -
Total Natural Gas Liquids 7.3 7.0
Oil Equivalent (MMBoe)
U.S. Onshore 39.3 34.0
U.S. Offshore 3.1 5.0
Total U.S. 42.4 39.0
Canada 16.1 14.3
International 3.1 5.0
Total Oil Equivalent 61.6 58.3
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 2,011.7 1,676.4
U.S. Offshore 119.4 201.2
Total U.S. 2,131.1 1,877.6
Canada 585.5 567.4
International 3.4 6.0
Total Natural Gas 2,720.0 2,451.0
Oil (MBbls)
U.S. Onshore 33.0 30.9
U.S. Offshore 12.1 19.9
Total U.S. 45.1 50.8
Canada 70.5 51.4
International 34.4 53.4
Total Oil 150.0 155.6
Natural Gas Liquids (MBbls)
U.S. Onshore 68.7 63.4
U.S. Offshore 2.4 1.9
Total U.S. 71.1 65.3
Canada 10.5 10.9
International - -
Total Natural Gas Liquids 81.6 76.2
Oil Equivalent (MBoe)
U.S. Onshore 437.0 373.7
U.S. Offshore 34.4 55.3
Total U.S. 471.4 429.0
Canada 178.5 156.9
International 35.0 54.4
Total Oil Equivalent 684.9 640.3
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
BENCHMARK PRICES Quarter Ended
(average prices) March 31,
2009 2008
Natural Gas ($/Mcf) - Henry Hub $4.91 $8.03
Oil ($/Bbl) - West Texas Intermediate (Cushing) $43.18 $97.67
REALIZED PRICES
(excludes the effects of unrealized gains and losses from hedging)
Quarter Ended March 31, 2009 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $34.88 $3.43 $17.43 $21.16
U.S. Offshore $42.38 $5.15 $20.48 $34.21
Total U.S. $36.89 $3.53 $17.53 $22.11
Canada $27.89 $4.48 $25.85 $27.21
International $41.00 $3.47 $- $40.68
Realized price without hedges $33.61 $3.73 $18.60 $24.39
Cash settlements $- $0.48 $- $1.91
Realized price, including
cash settlements $33.61 $4.21 $18.60 $26.30
Quarter Ended March 31, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $93.61 $7.05 $44.72 $46.97
U.S. Offshore $98.95 $8.78 $49.65 $69.23
Total U.S. $95.70 $7.24 $44.86 $49.84
Canada $72.68 $7.53 $62.67 $55.42
International $96.08 $8.41 $- $95.24
Realized price without hedges $88.23 $7.31 $47.40 $55.07
Cash settlements $- $(0.04) $- $(0.14)
Realized price, including
cash settlements $88.23 $7.27 $47.40 $54.93
CAPITAL EXPENDITURES (in millions)
Quarter Ended March 31, 2009
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $26 83 50 40 $199
Development 721 119 230 17 1,087
Exploration and
development capital $747 202 280 57 $1,286
Capitalized G&A 104
Capitalized interest 25
Discontinued operations 21
Midstream capital 87
Other capital 20
Total Capital Expenditures $1,543
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended
(in millions, except per share data) March 31,
2009 2008
Revenues
Oil sales $454 $1,250
Gas sales 913 1,630
NGL sales 136 328
Net gain (loss) on oil and gas derivative financial
instruments 154 (788)
Marketing and midstream revenues 371 555
Total revenues 2,028 2,975
Expenses and other income, net
Lease operating expenses 524 506
Production taxes 42 134
Marketing and midstream operating costs and expenses 229 382
Depreciation, depletion and amortization of oil and
gas properties 599 737
Depreciation and amortization of non-oil and gas
properties 70 57
Accretion of asset retirement obligation 24 22
General and administrative expenses 166 148
Interest expense 83 102
Change in fair value of other financial instruments (5) 16
Reduction of carrying value of oil and gas properties 6,516 -
Other expense (income), net 7 (21)
Total expenses and other income, net 8,255 2,083
(Loss) earnings from continuing operations before
income taxes (6,227) 892
Income tax (benefit) expense
Current 2 103
Deferred (2,271) 138
Total income tax (benefit) expense (2,269) 241
(Loss) earnings from continuing operations (3,958) 651
Discontinued operations
(Loss) earnings from discontinued operations before
income taxes (1) 189
Income tax expense - 91
(Loss) earnings from discontinuing operations (1) 98
Net (loss) earnings (3,959) 749
Preferred stock dividends - 2
Net (loss) earnings applicable to common stockholders $(3,959) $747
Basic net (loss) earnings per share
(Loss) earnings from continuing operations $(8.92) $1.46
Earnings from discontinued operations $- $0.22
Net (loss) earnings $(8.92) $1.68
Diluted net (loss) earnings per share
(Loss) earnings from continuing operations $(8.92) $1.44
Earnings from discontinued operations $- $0.22
Net (loss) earnings $(8.92) $1.66
Weighted average common shares outstanding
Basic 444 445
Diluted 444 449
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions) March 31, December 31,
2009 2008
Assets (Audited)
Current assets
Cash and cash equivalents $397 $379
Accounts receivable 1,221 1,412
Income taxes receivable 106 334
Derivative financial instruments, at fair value 327 282
Other current assets 325 277
Total current assets 2,376 2,684
Property and equipment, at cost, based on the
full cost method of accounting for oil and gas
properties ($4,186 and $4,540 excluded from
amortization in 2009 and 2008, respectively) 56,784 55,657
Less accumulated depreciation, depletion and
amortization 39,568 32,683
Property and equipment, net 17,216 22,974
Goodwill 5,509 5,579
Other long-term assets, including $177 million
and $199 million at fair value in 2009 and
2008, respectively 622 671
Total Assets $25,723 $31,908
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $1,261 $1,819
Revenues and royalties due to others 373 496
Short-term debt 1,073 180
Current portion of asset retirement
obligation, at fair value 157 138
Accrued expenses and other current liabilities 370 502
Total current liabilities 3,234 3,135
Long-term debt 5,851 5,661
Asset retirement obligation, at fair value 1,340 1,347
Other long-term liabilities 992 1,026
Deferred income taxes 1,364 3,679
Stockholders' equity
Common stock 44 44
Additional paid-in capital 6,310 6,257
Retained earnings 6,347 10,376
Accumulated other comprehensive income 241 383
Total Stockholders' Equity 12,942 17,060
Total Liabilities and Stockholders' Equity $25,723 $31,908
Common Shares Outstanding 444 444
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Quarter Ended March 31,
2009 2008
Cash Flows From Operating Activities
Net (loss) earnings $(3,959) $749
Loss (earnings) from discontinued operations,
net of tax 1 (98)
Adjustments to reconcile (loss) earnings
from continuing operations to net
cash provided by operating activities:
Depreciation, depletion and amortization 669 794
Deferred income tax (benefit) expense (2,271) 138
Reduction of carrying value of oil and
gas properties 6,516 -
Net unrealized (gain) loss on oil and
gas derivative financial instruments (36) 780
Other noncash charges 68 74
Net decrease (increase) in working capital 83 (377)
Decrease (increase) in long-term other assets 2 (11)
(Decrease) increase in long-term other
liabilities (31) 21
Cash provided by operating activities
- continuing operations 1,042 2,070
Cash provided by operating activities
- discontinued operations 5 185
Net cash provided by operating activities $1,047 $ 2,255
Cash Flows From Investing Activities
Proceeds from sales of property and equipment 1 105
Capital expenditures (2,019) (1,862)
Purchases of short-term investments - (50)
Sales of long-term and short-term investments 2 270
Cash used in investing activities - continuing
operations (2,016) (1,537)
Cash used in investing activities - discontinued
operations (14) (24)
Net cash used in investing activities $(2,030) $(1,561)
Cash Flows From Financing Activities
Debt issuance 1,187 -
Credit facility repayments - (1,450)
Credit facility borrowings - 920
Net commercial paper (repayments) borrowings (111) 442
Debt repayments (1) (41)
Proceeds from stock option exercises 4 74
Repurchases of common stock - (64)
Dividends paid on common and preferred stock (70) (73)
Excess tax benefits related to share-based
compensation 2 27
Net cash provided by (used in) financing activities $1,011 $ (165)
Effect of exchange rate changes on cash (11) (19)
Net increase in cash and cash equivalents 17 510
Cash and cash equivalents at beginning of period
(including assets held for sale) 384 1,373
Cash and cash equivalents at end of period
(including assets held for sale) $401 $1,883
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
DRILLING ACTIVITY Quarter Ended
March 31,
2009 2008
Exploration Wells Drilled
U.S. 7 9
Canada 22 51
International 1 6
Total 30 66
Exploration Wells Success Rate
U.S. 86% 56%
Canada 100% 96%
International 0% 0%
Total 93% 82%
Development Wells Drilled
U.S. 294 372
Canada 121 198
International 6 10
Total 421 580
Development Wells Success Rate
U.S. 99% 98%
Canada 98% 100%
International 100% 90%
Total 99% 99%
Total Wells Drilled
U.S. 301 381
Canada 143 249
International 7 16
Total 451 646
Total Wells Success Rate
U.S. 98% 97%
Canada 99% 99%
International 86% 56%
Total 98% 97%
COMPANY OPERATED RIGS Quarter Ended
March 31,
2009 2008
Number of Company Operated Rigs Running
U.S. 26 72
Canada 2 2
International 2 2
Total 30 76
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
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 is a Non-GAAP financial measure. 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. Cash flow before balance sheet changes is also used by
certain securities analysts as a measure of Devon's financial results.
RECONCILIATION TO GAAP INFORMATION
(in millions) March 31,
2009 2008
Net Cash Provided By Operating Activities (GAAP) $1,047 $2,255
Changes in assets and liabilities - continuing
operations (54) 367
Changes in assets and liabilities - discontinued
operations (5) (63)
Cash flow before balance sheet changes (Non-GAAP) $988 $2,559
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 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) March 31,
2009 2008
Total debt (GAAP) $6,924 $7,817
Adjustments:
Cash and cash equivalents 397 1,898
Net Debt (Non-GAAP) $6,527 $5,919
Total debt $6,924 $7,817
Stockholders' equity 12,942 22,398
Total Capitalization (GAAP) $19,866 $30,215
Net debt $6,527 $5,919
Stockholders' equity 12,942 22,398
Adjusted Capitalization (Non-GAAP) $19,469 $28,317
SOURCE
CONTACT: Investors
or
Media
Chip Minty,
+1-405-228-8647
both of
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