Devon Energy Reports Second-Quarter 2015 Results

• Delivered record oil production in U.S.
• Exceeded oil production expectations for fourth consecutive quarter
• Reduced operating costs 8 percent year over year
• Improved 2015 capital spending and operating cost outlook

OKLAHOMA CITY--(BUSINESS WIRE)-- Devon Energy Corp. (NYSE:DVN) today announced core earnings of $320 million, or $0.78 per diluted share, for the second quarter of 2015. This compares with first-quarter 2015 core earnings of $89 million, or $0.22 per diluted share.

“Devon delivered another high-quality performance in the second quarter as we continued to realize significant operational improvements across our portfolio,” said Dave Hager, president and CEO. “Our oil-focused drilling programs in North America’s best resource plays achieved outstanding well performance, and we made substantial progress reducing well costs and operating expenses. This superior execution contributed to more than 30 percent growth in total oil production year over year and record oil output in the U.S., led by our Eagle Ford and Delaware Basin assets.”

“With current industry conditions, we are focused on maintaining flexibility in our capital programs,” Hager said. “To ensure this optionality, we have minimal exposure to long-term service contracts, no long-term project commitments and negligible leasehold expiration issues. This allows us to dynamically allocate capital to our highest-returning areas while balancing investment with cash flow. We believe this advantage, combined with our high-quality asset base and strong balance sheet, positions Devon as well as anyone in the E&P space.”

On a reported basis, due to a non-cash, full-cost ceiling charge, Devon had a net loss of $2.8 billion, or $6.94 per diluted share, for the second-quarter 2015. This compares with second-quarter 2014 reported net earnings of $675 million, or $1.64 per diluted share.

Oil Production Exceeds Expectations for Fourth Consecutive Quarter

Devon’s oil-driven capital program continued to deliver strong results in the second quarter of 2015. Total oil production averaged 270,000 barrels per day, a 32 percent increase compared to the second quarter of 2014. This result surpassed the midpoint of guidance by 5,000 barrels per day, marking the fourth consecutive quarter the Company has exceeded oil production expectations.

The most significant growth came from the Company’s U.S. operations, where oil production averaged a record high 172,000 barrels per day. This result was 35 percent higher than the year-ago quarter and exceeded the top end of guidance expectations by 2,000 barrels per day. Growth in U.S. production was largely attributable to the Company’s Eagle Ford and Delaware Basin assets. Net production in the Eagle Ford averaged 114,000 Boe per day in the second quarter, a 75 percent increase compared to the second quarter of 2014. In the Delaware Basin, led by outstanding results from the Bone Spring play, production increased to 64,000 Boe per day in the second quarter, a 40 percent increase compared to the year-ago period.

In Canada, net production from the Company’s heavy-oil projects reached an average 98,000 barrels of oil per day in the second quarter. Driven by the continued ramp-up of the Jackfish 3 facility, Canadian oil production increased 27 percent compared to the second quarter of 2014. Scheduled maintenance at the Company’s Jackfish 1 oil sands project limited production by approximately 11,000 barrels per day in the quarter.

In total, Devon’s production averaged 674,000 Boe per day during the second quarter of 2015. This result represents a 9 percent increase compared to the second quarter of 2014, with liquids accounting for 60 percent of the Company’s production mix.

Operations Report

For additional details on Devon’s E&P operations, please refer to the Company’s second-quarter 2015 Operations Report at www.devonenergy.com. Highlights from the report include:

• Delaware Basin type curves improving
• Eagle Ford produces best-in-class well results
• Heavy oil output continues to grow while margins expand
• Cana and Meramec plays generate high-rate wells
• Powder River Basin delivers substantial growth rates

Upstream Revenue Increases 18 Percent; Midstream Profit Expands

Revenue from oil, natural gas and natural gas liquids sales totaled $1.6 billion, an 18 percent increase compared to the first quarter of 2015. The revenue growth was attributable to the increase in higher margin U.S. oil production combined with improved oil price realizations. These factors resulted in second-quarter oil sales increasing to more than 70 percent of Devon’s total upstream revenues.

Cash settlements related to oil and natural gas hedges increased revenue by nearly $500 million, or $8 per Boe in the second quarter. At the end of June, the Company’s remaining commodity hedges had a fair-market value of approximately $850 million. This attractive hedging position represents 55 percent of forecasted oil production and 45 percent of expected natural gas production for the remaining two quarters of 2015.

Devon’s midstream operating profit reached $225 million, which exceeded the Company’s guidance and was 16 percent higher than the first quarter of 2015. The increase in operating profit was driven by growth from EnLink Midstream.

Cost Reduction Initiatives Delivering Results

The Company has several cost reduction initiatives underway that positively impacted second-quarter results. Field-level operating costs, which includes both lease operating expenses and production taxes, declined 8 percent compared to the second quarter of 2014 to $11.05 per Boe. These cost savings were realized across all regions of Devon’s asset portfolio.

Significant general and administrative (G&A) cost savings also were achieved in the second quarter. G&A expenses totaled $212 million, which was below the low end of guidance and a 16 percent decline compared to the first quarter.

Based on year-to-date cost savings, Devon now anticipates its field-level operating costs and G&A to decline to around $14.50 per Boe for the full-year 2015. Compared to original guidance, this implies a full-year cost savings of around $400 million.

Balance Sheet and Liquidity Remain Strong

Operating cash flow in the second quarter, excluding the consolidation of EnLink Midstream, reached $1.0 billion. Combined with the sale of the Victoria Express Pipeline, EnLink secondary offering proceeds and EnLink partnership distributions, Devon’s second-quarter cash inflows totaled $1.3 billion.

Devon’s financial position remained exceptionally strong with investment-grade credit ratings and cash balances of $1.7 billion at the end of the quarter. The Company’s net debt, excluding non-recourse EnLink obligations, totaled $7.6 billion.

Production Outlook on Track; Additional Capital Cost Savings Expected

Detailed forward-looking guidance for the third quarter and full-year 2015 is provided later in the release. Given the strong year-to-date production performance, the Company is well positioned to deliver on its 2015 oil growth target of 25 to 35 percent. Devon also remains on track to increase top-line production by 5 to 10 percent.

The Company expects to achieve these attractive production growth targets with lower capital cost requirements. Since the beginning of the year, Devon has reduced projected 2015 capital spending by approximately $350 million.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Core earnings and net debt are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided later in this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post additional information, consisting of an operations report and management commentary with associated slides, to its website at www.devonenergy.com. The Company’s second-quarter 2015 conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, August 5, 2015, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “outlook” and other similar terminology. 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; the extent to which we are successful in acquiring and discovering additional reserves; unforeseen changes in the rate of production from our oil and gas properties; uncertainties in future exploration and drilling results; uncertainties inherent in estimating the cost of drilling and completing wells; drilling risks; competition for leases, materials, people and capital; midstream capacity constraints and potential interruptions in production; risk related to our hedging activities; environmental risks; political changes; changes in laws or regulations; our limited control over third parties who operate our oil and gas properties; our ability to successfully complete mergers, acquisitions and divestitures; and other risks identified in our Form 10-K and our other filings with the SEC. 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.

The SEC 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. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The Company is the second-largest oil producer among North American onshore independents. For more information, please visit www.devonenergy.com.

DEVON ENERGY CORPORATION
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.

CORE EARNINGS
(in millions)

Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the Company’s financial results. Accordingly, the Company also uses the measures of core earnings and core earnings per diluted share. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on second-quarter 2015 earnings.

NET DEBT
(in millions)

Devon defines net debt as debt less cash and cash equivalents and net debt attributable to the consolidation of EnLink Midstream as presented in the following table. Devon believes that netting these sources of cash against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.

DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE