Devon Energy Reports 2009 Financial Results, Record Production and Record Proved Reserves
DownloadOKLAHOMA CITY, Feb 17, 2010 /PRNewswire via COMTEX/ -- Devon Energy Corporation (NYSE: DVN) today reported 2009 full-year and fourth-quarter financial results. The company also reported that its 2009 full-year oil and gas production from continuing operations reached an all-time high. In addition, Devon reported record-high proved oil and natural gas reserves at December 31, 2009. Production and changes to proved reserves are discussed in more detail later in this report.
For the year ended December 31, 2009, Devon reported a net loss of $2.5 billion, or $5.58 per common share ($5.58 per diluted common share). Devon's 2009 financial results were impacted by certain items securities analysts typically exclude from their published estimates. The most significant of these items was a $4.2 billion after-tax reduction of the carrying value of oil and gas properties recorded in the first quarter of 2009. This was the result of a non-cash, full-cost ceiling adjustment. The charge resulted from application of the ceiling test as prescribed by the Securities and Exchange Commission for companies that follow the full-cost method of accounting.
Excluding the reduction of carrying value of oil and gas properties and other adjusting items, Devon earned $1.8 billion or $4.03 per diluted common share in 2009. The adjusting items are discussed in more detail later in this news release.
For the year ended December 31, 2008, Devon reported a net loss of $2.1 billion, or $4.85 per common share ($4.85 per diluted common share). The company's 2008 financial results included a $7.1 billion non-cash, after-tax reduction in the carrying value of oil and gas properties.
Devon reported net earnings of $667 million, or $1.50 per common share ($1.49 per diluted common share), for the quarter ended December 31, 2009. Excluding adjusting items, the company earned $713 million, or $1.60 per diluted common share in the fourth quarter of 2009.
For the quarter ended December 31, 2008, Devon reported a net loss of $6.8 billion or, $15.42 per common share ($15.42 per diluted common share).
North American Onshore Proved Reserves at Record 2.6 Billion Boe;
Drill-Bit Reserve Additions More than Double Record Production
"2009 was a pivotal year for Devon as we began repositioning the company to focus entirely on our high-return, North American onshore natural gas and oil portfolio," commented J. Larry Nichols, chairman and chief executive officer. "We grew North American onshore production by more than six percent in 2009 and replaced more than twice our production with the drill bit at very attractive costs. We expect to receive after-tax proceeds of $4.5 billion to $7.5 billion as we divest our offshore and international properties this year. This will further strengthen our rock-solid balance sheet and enable us to accelerate growth across our U.S. and Canadian asset base."
In accordance with accounting standards, Devon's year-end reserve reporting pertains to the company's continuing operations, which include its Gulf of Mexico properties. Following is a discussion of proved reserves pertaining only to Devon's North American onshore assets.
Devon increased North American onshore estimated proved reserves by 20 percent to a record 2,641 million oil-equivalent barrels (Boe) at December 31, 2009. The company added 669 million Boe to its North American onshore proved reserves from all sources. Costs incurred applicable to North American onshore properties were $3.3 billion.
Successful drilling (extensions, discoveries and performance revisions) accounted for 492 million Boe of North American onshore proved reserve additions. The company invested $3.2 billion of associated drill-bit capital during the year. Revisions related to changes in oil, natural gas and natural gas liquids prices increased 2009 North American onshore proved reserves by 176 million Boe.
North American onshore oil and gas production increased more than six percent to 220 million Boe in 2009. The reserve life index (proved reserves divided by annual production) for the North American onshore properties is approximately 12 years.
Proved developed reserves of 1,869 million Boe at December 31, 2009, represented 71 percent of total North American onshore proved reserves. Proved undeveloped reserves were 29 percent of the total. Year-end North American onshore proved reserves included 653 million barrels of crude oil, 9.4 trillion cubic feet of natural gas and 419 million barrels of natural gas liquids.
Costs Incurred and Reserves Summary (1)
Year Ended December 31,
-----------------------
North American Onshore
----------------------
2009 2008
---- ----
Costs Incurred (in millions) $3,279 $8,092
Total Reserves Additions (MMBoe) 669 139
(1) Detailed tables are also provided in this release.
Drill-bit Capital and Reserves Summary (1)
Year Ended December 31,
-----------------------
North American Onshore
----------------------
2009 2008
---- ----
Drill-bit Capital (in millions) $3,244 $7,270
------------------------------- ------ ------
Reserves Data (MMBoe)
---------------------
Extensions and discoveries 446 536
Revisions other than price 46 21
-------------------------- --- ---
Drill-bit and performance reserve additions 492 557
------------------------------------------- --- ---
(1) Detailed tables and non-GAAP reconciliations are also provided in
this release.
Divestitures Make Way for North American Onshore Growth
The company plans to direct the proceeds of the divestitures of its Gulf of Mexico and international properties to its U.S. and Canadian onshore operations and to retire debt. In accordance with accounting standards, Devon has reclassified the assets, liabilities and results of its international operations 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 the financial information that follows are tables of revenues, expenses, production, proved reserves and costs incurred and the amounts reclassified as discontinued operations for each period presented.
In spite of Devon's plans to divest its Gulf of Mexico assets, these properties do not qualify as discontinued operations under accounting standards. However, information is provided in this release that will enable the reader to isolate certain results of the company's North American onshore operations.
Shale Gas Development and Jackfish Ramp-up Led 2009 Operating Highlights
Devon drilled 1,135 wells in 2009 applicable to its continuing operations with a 99 percent success rate. Following are operational highlights and updates for selected exploration and development projects:
- The company drilled 336 wells in the Barnett Shale field in north Texas in 2009, bringing its total producing wells in the field to almost 4,200 at year end. Devon exited 2009 with net Barnett Shale production at just over 1 billion cubic feet of natural gas equivalent per day. The company drilled its 2,000th horizontal well in the field in early 2010 and is currently running 16 operated drilling rigs. Devon expects to drill 370 total Barnett Shale wells during the year.
- Devon drilled 47 successful wells in the Cana-Woodford Shale in western Oklahoma in 2009. During 2009 the company increased its net production from this important new shale-gas resource to an average of 39 million cubic feet of gas equivalent per day. Devon has increased its lease position in the Cana-Woodford Shale to 118,000 net acres and expects to drill approximately 85 wells in the field in 2010.
- The company drilled eight Haynesville Shale wells in the greater Carthage area of east Texas in 2009. These wells have significantly de-risked Devon's 110,000 net Haynesville Shale acres in the Carthage area. The company expects to recover up to four trillion cubic feet equivalent of natural gas from its Carthage area Haynesville acreage.
- In Canada, Devon's 100-percent owned Jackfish oil sands project in Alberta was operational throughout 2009. As measured by production per well and steam-oil ratio, Jackfish is one of Canada's most commercially successful steam-assisted gravity drainage (SAGD) projects. In late 2009, Jackfish production reached 33,700 barrels of oil per day. The addition of four more producing wells is expected to push production to the facility's capacity of 35,000 barrels per day in early 2010.
- Construction continued throughout 2009 on a second phase of the Jackfish SAGD project. Jackfish 2 is also sized to produce 35,000 barrels of oil per day and will commence operations in 2011. Devon expects to file a regulatory application for a third phase of the project in the third quarter of 2010.
- Offshore Brazil, Devon participated in two significant deepwater discoveries in 2009. The Devon-operated Itaipu exploratory discovery followed a successful appraisal of the 2008 Wahoo discovery. Both Itaipu and Wahoo are pre-salt prospects located in the Campos Basin. Devon plans to divest its Brazilian assets along with all of its other international properties in 2010. The Itaipu and Wahoo discoveries significantly enhance the value of the company's international assets to prospective buyers.
Continuing Operations Show Strong Production Growth
Combined oil, gas and natural gas liquids production from continuing operations averaged 639 thousand Boe per day in 2009. This compares with 2008 average daily production of 610 thousand Boe per day.
Sharp declines in the average prices of oil, gas and natural gas liquids led to a 48 percent reduction in combined sales from continuing operations. Comparable sales for the years 2009 and 2008 were $6.1 billion and $11.7 billion, respectively. Furthermore, marketing and midstream operating profit decreased 25 percent to $512 million in 2009, reflecting lower prices for natural gas and natural gas liquids.
Cash Flow Totals $4.7 Billion
Cash flow before balance sheet changes decreased 50 percent to $4.7 billion in 2009. During the year Devon funded $5.1 billion of capital expenditures and paid $284 million in dividends utilizing cash flow and short-term borrowing. In spite of the increase in short-term borrowing, Devon's balance sheet remains strong with a ratio of net debt to adjusted capitalization of 29 percent. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.
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 full year and fourth quarter of 2009 were as follows:
Items affecting continuing operations:
- A change in the fair value of oil and natural gas derivative instruments decreased full-year earnings by $121 million pre-tax ($77 million after tax) and an unrealized gain increased fourth-quarter earnings by $48 million pre-tax ($31 million after tax).
- A change in fair value of other financial instruments increased full-year earnings by $66 million pre-tax ($42 million after tax) and increased fourth-quarter earnings by $81 million pre-tax ($52 million after tax).
- Severance and restructuring costs decreased full-year earnings by $128 million pre-tax ($82 million after tax) and decreased fourth-quarter earnings by $105 million pre-tax ($67 million after tax).
- A reduction of the carrying value of oil and gas properties decreased full-year earnings by $6.4 billion pre-tax ($4.1 billion after tax).
- U.S. income taxes on foreign earnings now expected to be repatriated to the U.S. decreased full-year and fourth-quarter earnings by $55 million.
- Income tax accrual adjustments increased full-year earnings by $59 million.
Items affecting discontinued operations:
- A post-closing adjustment from the divestiture of West African assets in 2008 resulted in a full-year gain of $16 million pre-tax ($16 million after tax).
- Severance and restructuring costs decreased full-year earnings by $57 million pre-tax ($37 million after tax) and decreased fourth-quarter earnings by $48 million pre-tax ($31 million after tax).
- A reduction of the carrying value of oil and gas properties decreased full-year earnings by $108 million pre-tax ($105 million after tax).
- Income tax benefits related to unsuccessful international drilling increased full-year earnings by $22 million.
- The decision to divest all international assets generated financial benefits that increased full-year and fourth-quarter earnings by $37 million pre-tax ($24 million after tax).
The following tables summarize the full-year and fourth-quarter effects of these items on 2009 earnings, income taxes and cash flow.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Cash Flow
Before
Continuing Balance
Operations Pre-tax Income Tax Effect After-tax Sheet
-Full Year Earnings -------------------------- Earnings Changes
2009 Effect Current Deferred Total Effect Effect
-------- ------- -------- ----- --------- ---------
Change in fair
value of oil
and gas
derivative
instruments $(121) - (44) (44) (77) -
Change in fair
value of
other financial
instruments 66 - 24 24 42 -
Severance and
restructuring
costs (128) (9) (37) (46) (82) (54)
Reduction of
the carrying
value of
oil and gas
properties (6,408) - (2,323) (2,323) (4,085) -
U.S. income
taxes on
foreign
earnings - - 55 55 (55) -
Income tax
accrual
adjustment - (9) (50) (59) 59 9
----------- --- --- --- --- --- ---
Totals $(6,591) (18) (2,375) (2,393) (4,198) (45)
------ ------- --- ------ ------ ------ ---
Cash Flow
Before
Discontinued Balance
Operations Pre-tax Income Tax Effect After-tax Sheet
-Full Year Earnings -------------------------- Earnings Changes
2009 Effect Current Deferred Total Effect Effect
-------- ------- -------- ----- --------- ---------
Post-closing
adjustment on
sale of West
African assets $16 - - - 16 -
Severance and
restructuring
costs (57) (2) (18) (20) (37) (15)
Reduction of
the carrying
value of oil
and gas assets (108) - (3) (3) (105) -
Income tax
benefit on
international
drilling - (22) - (22) 22 22
Financial
benefits
of decision
to divest
assets 37 - 13 13 24 -
------------ --- --- --- --- --- ---
Totals $(112) (24) (8) (32) (80) 7
------ ----- --- --- --- --- ---
In aggregate, these items decreased full-year 2009 net earnings by
$4.3 billion, or $9.63 per common share ($9.61 per diluted share). These
items and their associated tax effects decreased full-year 2009 cash flow
before balance sheet changes by $38 million.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Cash Flow
Continuing Before
Operations - Balance
Fourth Pre-tax Income Tax Effect After-tax Sheet
Quarter Earnings -------------------------- Earnings Changes
2009 Effect Current Deferred Total Effect Effect
-------- ------- -------- ----- --------- ---------
Change in fair
value of oil
and gas
derivative
instruments $48 - 17 17 31 -
Change in fair
value of other
financial
instruments 81 - 29 29 52 -
Restructuring
costs (105) - (38) (38) (67) (42)
U.S. income
taxes on
foreign
earnings - - 55 55 (55) -
----------- --- --- --- --- --- ---
Totals $24 - 63 63 (39) (42)
------ --- --- --- --- --- ---
Cash Flow
Discontinued Before
Operations - Balance
Fourth Pre-tax Income Tax Effect After-tax Sheet
Quarter Earnings -------------------------- Earnings Changes
2009 Effect Current Deferred Total Effect Effect
-------- ------- -------- ----- --------- ---------
Restructuring
costs (48) - (17) (17) (31) (15)
Financial
benefits of
decision to
divest assets $37 - 13 13 24 -
-------------- --- --- --- --- --- ---
Totals $(11) - (4) (4) (7) (15)
------ ---- --- --- --- --- ---
In aggregate, these items decreased fourth-quarter 2009 net earnings by
$46 million, or 10 cents per common share (11 cents per diluted share).
These items and their associated tax effects decreased fourth-quarter 2009
cash flow before balance sheet changes by $57 million.
Conference Call to be Webcast Today
Devon will discuss its 2009 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. 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 the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or 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 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 atwww.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.
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties) Year Ended Quarter Ended
Excludes discontinued operations December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Total Period Production
-----------------------
Natural Gas (Bcf)
U.S. Onshore 698.7 668.1 162.8 181.2
Canada 222.8 212.1 51.6 53.6
----- ----- ---- ----
North American Onshore 921.5 880.2 214.4 234.8
U.S. Offshore 44.9 57.6 11.4 12.6
------------- ---- ---- ---- ----
Total Natural Gas 966.4 937.8 225.8 247.4
----------------- ----- ----- ----- -----
Oil (MMBbls)
U.S. Onshore 11.6 11.3 2.9 3.0
Canada 25.3 21.6 6.6 6.2
---- ---- --- ---
North American Onshore 36.9 32.9 9.5 9.2
U.S. Offshore 5.0 5.9 1.3 1.0
------------- --- --- --- ---
Total Oil 41.9 38.8 10.8 10.2
--------- ---- ---- ---- ----
Natural Gas Liquids (MMBbls)
U.S. Onshore 25.7 23.6 6.5 6.5
Canada 3.8 4.0 1.0 1.0
--- --- --- ---
North American Onshore 29.5 27.6 7.5 7.5
U.S. Offshore 0.7 0.6 0.2 0.1
------------- --- --- --- ---
Total Natural Gas Liquids 30.2 28.2 7.7 7.6
------------------------- ---- ---- --- ---
Oil Equivalent (MMBoe)
U.S. Onshore 153.7 146.2 36.5 39.7
Canada 66.3 60.9 16.2 16.1
---- ---- ---- ----
North American Onshore 220.0 207.1 52.7 55.8
U.S. Offshore 13.2 16.1 3.4 3.2
------------- ---- ---- --- ---
Total Oil Equivalent 233.2 223.2 56.1 59.0
-------------------- ----- ----- ---- ----
Average Daily Production
------------------------
Natural Gas (MMcf)
U.S. Onshore 1,914.3 1,825.5 1,769.7 1,969.6
Canada 610.5 579.4 560.5 582.7
----- ----- ----- -----
North American Onshore 2,524.8 2,404.9 2,330.2 2,552.3
U.S. Offshore 123.0 157.3 123.8 136.3
------------- ----- ----- ----- -----
Total Natural Gas 2,647.8 2,562.2 2,454.0 2,688.6
----------------- ------- ------- ------- -------
Oil (MBbls)
U.S. Onshore 31.6 30.7 31.3 32.1
Canada 69.3 59.0 72.0 67.4
---- ---- ---- ----
North American Onshore 100.9 89.7 103.3 99.5
U.S. Offshore 13.8 16.2 13.7 11.3
------------- ---- ---- ---- ----
Total Oil 114.7 105.9 117.0 110.8
--------- ----- ----- ----- -----
Natural Gas Liquids (MBbls)
U.S. Onshore 70.4 64.6 71.1 71.2
Canada 10.4 10.9 10.2 10.9
---- ---- ---- ----
North American Onshore 80.8 75.5 81.3 82.1
U.S. Offshore 2.0 1.5 2.2 1.1
------------- --- --- --- ---
Total Natural Gas Liquids 82.8 77.0 83.5 83.2
------------------------- ---- ---- ---- ----
Oil Equivalent (MBoe)
U.S. Onshore 421.1 399.5 397.4 431.5
Canada 181.5 166.5 175.6 175.4
----- ----- ----- -----
North American Onshore 602.6 566.0 573.0 606.9
U.S. Offshore 36.3 44.0 36.5 35.1
------------- ---- ---- ---- ----
Total Oil Equivalent 638.9 610.0 609.5 642.0
-------------------- ----- ----- ----- -----
BENCHMARK PRICES Year Ended Quarter Ended
(average prices) December 31, December 31,
----------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Natural Gas ($/Mcf) - Henry Hub $3.99 $9.04 $4.16 $6.95
Oil ($/Bbl) - West Texas
Intermediate (Cushing) $61.82 $99.75 $76.00 $58.51
------ ------ ------ ------
REALIZED PRICES
(excludes the effects of unrealized
gains and losses from hedging)
Quarter Ended December 31, 2009 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
--------- --------- --------- ---------
U.S. Onshore $71.62 $3.65 $30.48 $27.35
Canada $58.43 $4.13 $41.88 $39.58
------ ------ ------ ------
North American Onshore $62.43 $3.77 $31.92 $31.10
U.S. Offshore $74.45 $4.45 $37.59 $45.26
------ ------ ------ ------
Realized price without hedges $63.84 $3.80 $32.07 $31.95
Cash settlements $ - $0.65 $ - $2.60
------ ------ ------ ------
Realized price, including
cash settlements $63.84 $4.45 $32.07 $34.55
------ ------ ------ ------
Quarter Ended December 31, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
--------- --------- --------- ---------
U.S. Onshore $55.11 $4.98 $20.52 $30.21
Canada $30.67 $6.02 $35.95 $34.02
------ ----- ------ ------
North American Onshore $38.56 $5.22 $22.57 $31.31
U.S. Offshore $56.80 $6.95 $34.28 $46.31
------ ----- ------ ------
Realized price without hedges $40.42 $5.30 $22.73 $32.13
Cash settlements $2.69 $0.52 $ - $2.62
----- ----- ----- -----
Realized price, including
cash settlements $43.11 $5.82 $22.73 $34.75
------ ----- ------ ------
Year Ended December 31, 2009 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
--------- --------- --------- ---------
U.S. Onshore $56.17 $3.14 $23.40 $22.41
Canada $47.35 $3.66 $33.09 $32.29
------ ----- ------ ------
North American Onshore $50.11 $3.27 $24.65 $25.38
U.S. Offshore $60.75 $4.20 $27.42 $38.83
------ ----- ------ ------
Realized price without hedges $51.39 $3.31 $24.71 $26.15
Cash settlements $ - $0.52 $ - $2.16
------ ----- ------ -----
Realized price, including
cash settlements $51.39 $3.83 $24.71 $28.31
------ ----- ------ ------
Year Ended December 31, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
--------- --------- --------- ---------
U.S. Onshore $95.63 $7.43 $40.97 $47.91
Canada $71.04 $8.17 $61.45 $57.65
------ ----- ------ ------
North American Onshore $79.45 $7.61 $43.94 $50.78
U.S. Offshore $104.90 $9.53 $51.11 $74.55
------- ----- ------ ------
Realized price without hedges $83.35 $7.73 $44.08 $52.49
Cash settlements $0.70 $(0.46) $ - $(1.78)
----- ------ ------ ------
Realized price, including
cash settlements $84.05 $7.27 $44.08 $50.71
------ ----- ------ ------
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts) Year Ended Quarter Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues
--------
Oil, gas, and NGL sales $6,097 $11,720 $1,791 $1,898
Net gain (loss) on oil and gas
derivative financial instruments 384 (154) 194 257
Marketing and midstream revenues 1,534 2,292 460 397
-------------------------------- ----- ----- --- ---
Total revenues 8,015 13,858 2,445 2,552
-------------- ----- ------ ----- -----
Expenses and other income, net
------------------------------
Lease operating expenses 1,670 1,851 404 486
Taxes other than income taxes 314 476 65 69
Marketing and midstream operating
costs and expenses 1,022 1,611 327 272
Depreciation, depletion and
amortization of oil and gas
properties 1,832 2,948 418 840
Depreciation and amortization of
non-oil and gas properties 276 255 68 70
Accretion of asset retirement
obligation 91 80 23 18
General and administrative expenses 648 645 176 177
Restructuring costs 105 - 105 -
Interest expense 349 329 86 68
Change in fair value of other
financial instruments (106) 149 (86) 127
Reduction of carrying value of oil
and gas properties 6,408 9,891 - 9,891
Other income, net (68) (217) (7) (113)
----------------- --- ---- --- ----
Total expenses and other
income, net 12,541 18,018 1,579 11,905
------------------------ ------ ------ ----- ------
(Loss) earnings from continuing
operations before income tax expense (4,526) (4,160) 866 (9,353)
------------------------------------- ------ ------ --- ------
Income tax (benefit) expense
----------------------------
Current 241 441 106 (136)
Deferred (2,014) (1,562) 203 (2,947)
-------- ------ ------ --- ------
Total income tax (benefit)
expense (1,773) (1,121) 309 (3,083)
-------------------------- ------ ------ --- ------
(Loss) earnings from continuing
operations (2,753) (3,039) 557 (6,270)
------------------------------- ------ ------ --- ------
Discontinued operations
-----------------------
Earnings (loss) from discontinued
operations before income taxes 322 1,258 124 (570)
Discontinued operations income tax
expense (benefit) 48 367 14 (24)
---------------------------------- --- --- --- ---
Earnings (loss) from
discontinued operations 274 891 110 (546)
----------------------- --- --- --- ----
Net (loss) earnings (2,479) (2,148) 667 (6,816)
Preferred stock dividends - 5 - -
------------------------- --- --- --- ---
Net (loss) earnings applicable to
common stockholders $(2,479) $(2,153) $667 $(6,816)
--------------------------------- ------- ------- ---- -------
Basic net (loss) earnings per share
(Loss) earnings from continuing
operations per share $(6.20) $(6.86) $1.25 $(14.19)
Earnings (loss) from discontinued
operations per share 0.62 2.01 0.25 (1.23)
--------------------------------- ---- ---- ---- -----
Net (loss) earnings per share $(5.58) $(4.85) $1.50 $(15.42)
----------------------------- ------ ------ ----- -------
Diluted net earnings (loss) per share
(Loss) earnings from continuing
operations per share $(6.20) $(6.86) $1.25 $(14.19)
Earnings (loss) from discontinued
operations per share 0.62 2.01 0.24 (1.23)
--------------------------------- ---- ---- ---- -----
Net (loss) earnings per share $(5.58) $(4.85) $1.49 $(15.42)
----------------------------- ------ ------ ----- -------
Weighted average common shares
outstanding
Basic 444 444 445 442
Diluted 446 447 447 444
CONSOLIDATED BALANCE SHEETS
(in millions) December 31,
------------
2009 2008
---- ----
Assets
------
Current assets
--------------
Cash and cash equivalents $646 $195
Accounts receivable 1,208 1,300
Derivative financial instruments, at fair value 211 282
Current assets held for sale 657 392
Other current assets 270 515
-------------------- --- ---
Total current assets 2,992 2,684
-------------------- ----- -----
Property and equipment, at cost, based on the
full cost method of accounting for oil and gas
properties ($4,078 and $4,248 excluded from
amortization in 2009 and 2008, respectively) 60,475 53,391
Less accumulated depreciation, depletion and
amortization 41,708 31,360
---------------------------------------- ------ ------
Property and equipment, net 18,767 22,031
--------------------------- ------ ------
Goodwill 5,930 5,511
Long-term assets held for sale 1,250 1,128
Other long-term assets 747 554
---------------------- --- ---
Total Assets $29,686 $31,908
------------ ------- -------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities
-------------------
Accounts payable - trade $1,137 $1,612
Revenues and royalties due to others 486 490
Short-term debt 1,432 180
Current portion of asset retirement obligation,
at fair value 95 138
Current liabilities associated with assets held
for sale 234 365
Other current liabilities 418 350
------------------------- --- ---
Total current liabilities 3,802 3,135
------------------------- ----- -----
Long-term debt 5,847 5,661
Asset retirement obligation, at fair value 1,418 1,249
Liabilities associated with assets held for sale 213 166
Other long-term liabilities 937 1,023
Deferred income taxes 1,899 3,614
--------------------- ----- -----
Stockholders' equity
--------------------
Common stock 45 44
Additional paid-in capital 6,527 6,257
Retained earnings 7,613 10,376
Accumulated other comprehensive income 1,385 383
-------------------------------------- ----- ---
Total Stockholders' Equity 15,570 17,060
-------------------------- ------ ------
Total Liabilities and Stockholders' Equity $29,686 $31,908
------------------------------------------ ------- -------
Common Shares Outstanding 447 444
------------------------- --- ---
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended
(in millions) December 31,
------------
2009 2008
---- ----
Cash Flows From Operating Activities
------------------------------------
Net loss $(2,479) $(2,148)
Net earnings from discontinued operations (274) (891)
Adjustments to reconcile loss from continuing
operations to net cash provided by operating
activities:
Depreciation, depletion and amortization 2,108 3,203
Deferred income tax benefit (2,014) (1,562)
Reduction of carrying value of oil and gas
properties 6,408 9,891
Net unrealized loss (gain) on oil and gas
derivative financial instruments 121 (243)
Other noncash charges 222 410
Net decrease (increase) in working capital 149 (207)
Increase in long-term other assets (6) (53)
(Decrease) increase in long-term other liabilities (3) 48
-------------------------------------- --- ---
Cash provided by operating activities - continuing
operations 4,232 8,448
Cash provided by operating activities - discontinued
operations 505 960
---------------------------------------------------- --- ---
Net cash provided by operating activities 4,737 9,408
----------------------------------------- ----- -----
Cash Flows From Investing Activities
------------------------------------
Proceeds from sales of property and equipment 34 117
Capital expenditures (4,879) (8,843)
Proceeds from exchange of investment in Chevron
Corporation common stock - 280
Purchases of short-term investments - (50)
Sales of long-term investments 7 300
Other (17) -
----- --- ---
Cash used in investing activities -continuing
operations (4,855) (8,196)
Cash (used in) provided by investing activities
-discontinued operations (499) 1,323
----------------------------------------------- ---- -----
Net cash used in investing activities (5,354) (6,873)
------------------------------------- ------ ------
Cash Flows From Financing Activities
------------------------------------
Proceeds from borrowings of long term debt, net
of issuance costs 1,187 -
Credit facility repayments - (3,191)
Credit facility borrowings - 1,741
Net commercial paper borrowings 426 1
Debt repayments (178) (1,031)
Redemption of preferred stock - (150)
Proceeds from stock option exercises 42 116
Repurchases of common stock - (665)
Dividends paid on common and preferred stock (284) (289)
Excess tax benefits related to share-based
compensation 8 60
------------------------------------------ --- ---
Net cash provided by (used in) financing activities 1,201 (3,408)
--------------------------------------------------- ----- ------
Effect of exchange rate changes on cash 43 (116)
--------------------------------------- --- ----
Net increase (decrease) in cash and cash equivalents 627 (989)
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) $1,011 $384
------------------------------------------ ------ ----
RESERVES RECONCILIATION
Total North American Onshore
------------------------------- -------------------------------
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
-------- ----- -------- ------- -------- ----- -------- -------
As of
December 31,
2008:
Proved
developed 243 8,038 292 1,875 221 7,826 291 1,816
Proved
undevel-
oped 58 1,841 60 424 46 1,663 59 382
---- ----- ---- ----- ---- ----- --- -----
Total proved 301 9,879 352 2,299 267 9,489 350 2,198
---- ----- ---- ----- ---- ----- --- -----
Revisions
due to
prices 302 (694) (9) 177 300 (690) (9) 176
Revisions
other
than price (7) 43 37 38 (8) 105 36 46
Extensions
and
discoveries 133 1,518 71 458 131 1,454 71 446
Purchase
of reserves - 7 - 1 - 7 - 1
Production (42) (966) (30) (233) (37) (921) (29) (220)
Sale of
reserves (1) (30) - (7) - (29) - (6)
As of
December 31,
2009:
Proved
developed 289 7,845 326 1,922 268 7,660 325 1,869
Proved
undevel-
oped 397 1,912 95 811 385 1,755 94 772
---- ----- ---- ----- ---- ----- --- -----
Total Proved 686 9,757 421 2,733 653 9,415 419 2,641
---- ----- ---- ----- ---- ----- --- -----
U.S. Onshore Canada
------------------------------- -------------------------------
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
-------- ----- -------- ------- -------- ----- -------- -------
As of
December
31, 2008:
Proved
devel-
oped 111 6,469 260 1,449 110 1,357 31 367
Proved
undevel-
oped 22 1,510 55 328 24 153 4 54
---- ----- ---- ----- ---- ----- --- -----
Total
proved 133 7,979 315 1,777 134 1,510 35 421
---- ----- ---- ----- ---- ----- --- -----
Revisions
due to
prices 9 (661) (11) (113) 291 (29) 2 289
Revisions
other
than
price - 119 36 57 (8) (14) - (11)
Extensions
and
discoveries 9 1,387 70 311 122 67 1 135
Purchase
of
reserves - 1 - - - 6 - 1
Production (12) (698) (25) (154) (25) (223) (4) (66)
Sale of
reserves - - - - - (29) - (6)
As of
December
31, 2009:
Proved
devel-
oped 119 6,447 293 1,486 149 1,213 32 383
Proved
undevel-
oped 20 1,680 92 392 365 75 2 380
---- ----- ---- ----- ---- ----- --- -----
Total
Proved 139 8,127 385 1,878 514 1,288 34 763
---- ----- ---- ----- ---- ----- --- -----
U.S. Offshore
------------------------------
Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
-------------------------------
As of December 31, 2008:
Proved developed 22 212 1 59
Proved undeveloped 12 178 1 42
---- ----- ---- -----
Total proved 34 390 2 101
---- ----- ---- -----
Revisions due to prices 2 (4) - 1
Revisions other than price 1 (62) 1 (8)
Extensions and discoveries 2 64 - 12
Purchase of reserves - - - -
Production (5) (45) (1) (13)
Sale of reserves (1) (1) - (1)
As of December 31, 2009:
Proved developed 21 185 1 53
Proved undeveloped 12 157 1 39
---- ----- ---- -----
Total Proved 33 342 2 92
---- ----- ---- -----
COSTS INCURRED Total North American Onshore
(in millions) Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2009 2008 2009 2008
---- ---- ---- ----
Property Acquisition
Costs:
--------------------
Total proved $35 $822 $35 $822
------------ --- ---- --- ----
Total unproved 135 1,763 124 1,578
-------------- --- ----- --- -----
Exploration and
development costs 3,917 6,881 3,120 5,692
------------------ ----- ----- ----- -----
Costs Incurred $4,087 $9,466 $3,279 $8,092
-------------- ------ ------ ------ ------
U.S. Onshore Canada
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2009 2008 2009 2008
---- ---- ---- ----
Property Acquisition
Costs:
--------------------
Total proved $17 $822 $18 $-
------------ --- ---- --- ---
Total unproved 52 1,226 72 352
-------------- --- ----- --- ---
Exploration and
development costs 2,133 4,388 987 1,304
------------------ ----- ----- --- -----
Costs Incurred $2,202 $6,436 $1,077 $1,656
-------------- ------ ------ ------ ------
U.S. Offshore
Year Ended December 31,
-----------------------
2009 2008
---- ----
Property Acquisition Costs:
---------------------------
Total proved $- $-
------------ --- ---
Total unproved 11 185
-------------- --- ---
Exploration and development costs 797 1,189
--------------------------------- --- -----
Costs Incurred $808 $1,374
-------------- ---- ------
Devon capitalizes certain general and administrative expenses related to
property acquisition, exploration and development activities. These
capitalized expenses were $332 million and $337 million in 2009 and 2008,
respectively. Devon also capitalizes certain interest expenses related to
property acquisition, exploration and development activities. These
capitalized expenses were $74 million and $71 million in 2009 and 2008,
respectively. These capitalized general and administrative expenses and
interest expenses are included in the costs shown in the preceding tables.
DRILLING ACTIVITY Year Ended
December 31,
------------
2009 2008
---- ----
Exploration Wells Drilled
-------------------------
U.S. Onshore 11 22
Canada 42 90
------ --- ---
North American Onshore 53 112
U.S. Offshore 1 6
------------- --- ---
Total 54 118
----- --- ---
Exploration Wells Success Rate
------------------------------
U.S. Onshore 82% 91%
Canada 100% 96%
------ --- ---
North American Onshore 96% 95%
U.S. Offshore 0% 17%
------------- --- ---
Total 94% 91%
----- --- ---
Development Wells Drilled
-------------------------
U.S. Onshore 734 1,622
Canada 343 631
------ --- ---
North American Onshore 1,077 2,253
U.S. Offshore 4 17
------------- --- ---
Total 1,081 2,270
----- ----- -----
Development Wells Success Rate
------------------------------
U.S. Onshore 100% 98%
Canada 100% 99%
------ --- ---
North American Onshore 100% 99%
U.S. Offshore 50% 94%
------------- --- ---
Total 99% 99%
----- --- ---
Total Wells Drilled
-------------------
U.S. Onshore 745 1,644
Canada 385 721
------ --- ---
North American Onshore 1,130 2,365
U.S. Offshore 5 23
------------- --- ---
Total 1,135 2,388
----- ----- -----
Total Wells Success Rate
------------------------
U.S. Onshore 99% 98%
Canada 100% 99%
------ --- ---
North American Onshore 99% 98%
U.S. Offshore 40% 74%
------------- --- ---
Total 99% 98%
----- --- ---
COMPANY OPERATED RIGS Year Ended
December 31,
------------
2009 2008
---- ----
Number of Company Operated Rigs Running
---------------------------------------
U.S. Onshore 46 78
Canada 17 13
------ --- ---
North American Onshore 63 91
U.S. Offshore 1 4
------------- --- ---
Total 64 95
----- --- ---
CAPITAL EXPENDITURES (in millions)
Quarter Ended December 31, 2009
U.S. U.S.
Onshore Canada Offshore Total
------- ------ -------- -----
Capital Expenditures
--------------------
Exploration $82 139 29 $250
Development 397 222 133 752
----------- --- --- --- ---
Exploration and development capital $479 361 162 $1,002
Capitalized G&A 80
Capitalized interest 18
Discontinued operations 139
Midstream capital 98
Other capital 121
------------- ---
Total Capital Expenditures $1,458
-------------------------- ------
CAPITAL EXPENDITURES (in millions)
Year Ended December 31, 2009
U.S. U.S.
Onshore Canada Offshore Total
------- ------ -------- -----
Capital Expenditures
--------------------
Exploration $157 215 182 554
Development 1,835 819 534 3,188
----------- ----- --- --- -----
Exploration and development capital $1,992 1,034 716 3,742
Capitalized G&A 332
Capitalized interest 74
Discontinued operations 446
Midstream capital 305
Other capital 197
------------- ---
Total Capital Expenditures 5,096
-------------------------- -----
PRODUCTION FROM DISCONTINUED OPERATIONS Year Ended Quarter Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Production from Discontinued Operations
---------------------------------------
Oil (MMBbls) 15.7 17.4 4.1 3.4
Natural Gas (Bcf) 1.5 4.8 0.5 0.7
----------------- --- --- --- ---
Total Oil Equivalent (MMBoe) 16.0 18.2 4.2 3.5
---------------------------- ---- ---- --- ---
STATEMENTS OF DISCONTINUED OPERATIONS Year Ended Quarter Ended
(in millions) December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues
--------
Total operating revenues $945 $1,702 $299 $158
------------------------ ---- ------ ---- ----
Expenses and other income, net
------------------------------
Operating expenses 484 769 127 234
Restructuring costs 48 - 48 -
Reduction of carrying value
of oil and gas properties 108 494 - 494
Gain on sale of oil and gas properties (17) (819) - -
-------------------------------------- --- ---- --- ---
Total expenses and other income, net 623 444 175 728
------------------------------------ --- --- --- ---
Earnings (loss) before income tax expense 322 1,258 124 (570)
----------------------------------------- --- ----- --- ----
Income tax expense (benefit)
----------------------------
Current 44 755 24 (54)
Deferred 4 (388) (10) 30
-------- --- ---- --- ---
Total income tax expense (benefit) 48 367 14 (24)
---------------------------------- --- --- --- ---
Earnings (loss) from discontinued
operations $274 $891 $110 $(546)
--------------------------------- ---- ---- ---- -----
RESERVES DATA FOR DISCONTINUED OPERATIONS Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
-------- ----- -------- -------
As of December 31, 2008:
------------------------
Proved developed 58 6 - 59
Proved undeveloped 70 - - 70
------------------ --- --- --- ---
Total proved 128 6 - 129
Revisions due to prices (6) - - (6)
Revisions other than price - 3 - -
Extensions and discoveries 1 - - 1
Production (16) (1) - (16)
As of December 31, 2009:
------------------------
Proved developed 54 8 - 55
Proved undeveloped 53 - - 53
------------------ --- --- --- ---
Total proved 107 8 - 108
------------ --- --- --- ---
COSTS INCURRED FOR DISCONTINUED OPERATIONS
(in millions) Year Ended December 31,
-----------------------
2009 2008
---- ----
Costs Incurred $450 $617
-------------- ---- ----
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 Year Ended Quarter Ended
(in millions) December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Net Cash Provided By
Operating Activities (GAAP) $4,737 $9,408 $1,445 $1,227
---------------------------- ------ ------ ------ ------
Changes in assets and liabilities
-continuing operations (140) 212 (74) 496
Changes in assets and liabilities
-discontinued operations 90 (6) 15 13
--------------------------------- --- --- --- ---
Cash flow before balance sheet changes
(Non-GAAP) $4,687 $9,614 $1,386 $1,736
-------------------------------------- ------ ------ ------ ------
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)
December 31,
------------
2009 2008
---- ----
Total debt (GAAP) $7,279 $5,841
Adjustments:
Cash and cash equivalents (including
cash from discontinued operations) 1,011 384
----- ---
Net debt (Non-GAAP) $6,268 $5,457
------------------- ------ ------
Total debt $7,279 $5,841
Stockholders' equity 15,570 17,060
-------------------- ------ ------
Total capitalization (GAAP) $22,849 $22,901
--------------------------- ------- -------
Net debt $6,268 $5,457
Stockholders' equity 15,570 17,060
-------------------- ------ ------
Adjusted capitalization (Non-GAAP) $21,838 $22,517
---------------------------------- ------- -------
Drill-bit capital is defined as costs incurred less proved acquisition
costs, unproved acquisition costs resulting from business combinations and
other significant similar transactions. Drill-bit capital is a Non-GAAP
measure. Devon believes drill-bit capital is relevant because it provides
additional insight into costs associated with current year exploration and
and development activity. It should be noted that the actual costs of
reserves added through Devon's drilling program will differ, sometimes
significantly, from the direct comparison of capital spent and reserves
added in any given period due to the timing of capital expenditures and
reserve bookings. Certain securities analysts also use this methodology
to measure Devon's performance.
RECONCILIATION TO
GAAP INFORMATION Total North America Onshore
(in millions) Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2009 2008 2009 2008
---- ---- ---- ----
Costs Incurred (GAAP) $4,087 $9,466 $3,279 $8,092
--------------------- ------ ------ ------ ------
Less:
Proved acquisition
costs 35 822 35 822
------------------ --- --- --- ---
Drill-bit capital
(Non-GAAP) $4,052 $8,644 $3,244 $7,270
----------------- ------ ------ ------ ------
U.S. Onshore Canada
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2009 2008 2009 2008
---- ---- ---- ----
Costs Incurred (GAAP) $2,202 $6,436 $1,077 $1,656
--------------------- ------ ------ ------ ------
Less:
Proved acquisition
costs 17 822 18 -
------------ --- --- --- ---
Drill-bit capital
(Non-GAAP) $2,185 $5,614 $1,059 $1,656
----------------- ------ ------ ------ ------
U.S. Offshore
Year Ended December 31,
-----------------------
2009 2008
---- ----
Costs Incurred (GAAP) $808 $1,374
--------------------- ---- ------
Less:
Proved acquisition costs - -
------------------------ --- ---
Drill-bit capital (Non-GAAP) $808 $1,374
---------------------------- ---- ------
SOURCE Devon Energy Corporation