OKLAHOMA CITY, Feb. 4 /PRNewswire-FirstCall/ -- Devon Energy Corporation
(NYSE: DVN) today reported a net loss of $2.1 billion, or $4.85 per common
share ($4.85 per diluted common share), for the year ended December 31, 2008.
Increased natural gas and liquids production and sales were more than offset
by a $7.1 billion non-cash, after-tax reduction in the carrying value of oil
and gas properties, which is explained in detail below. In the year ended
December 31, 2007, Devon earned $3.6 billion, or $8.08 per common share ($8.00
per diluted common share).
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), also
reflecting the $7.1 billion non-cash charge. In the fourth quarter of 2007,
the company reported net earnings of $1.3 billion or, $2.96 per common share
($2.92 per diluted common share).
2008 Earnings $9.91 per Share Excluding Items Not Estimated by Analysts;
Non-Cash Ceiling Adjustment Triggered by Declining Prices
Devon's full-year and fourth-quarter 2008 financial results were impacted
by certain items securities analysts typically exclude from their published
estimates. The most significant of these items was a $7.1 billion after-tax
reduction in the carrying value of oil and gas properties. This was the result
of a non-cash, full-cost ceiling adjustment in the fourth quarter of 2008.
This charge resulted from application of the ceiling test as prescribed by the
Securities and Exchange Commission (SEC) for companies that follow the
full-cost method of accounting.
Under the full-cost method of accounting, a company's net book value of
its oil and gas properties, less related deferred income taxes, may not exceed
a calculated "ceiling." The test is performed separately for each country in
which the company operates. The ceiling is the estimated after-tax stream of
future net revenues from proved oil and gas properties, discounted at 10
percent per year, using year-end costs and prices held flat plus the cost of
unevaluated properties. Any excess is written off as a non-cash expense. The
expense may not be reversed in future periods, even though higher oil and gas
prices may subsequently increase the ceiling. Full-cost companies must use the
prices in effect at the end of each accounting quarter to calculate the
ceiling value of reserves. Future net revenues are calculated assuming
continuation of prices and costs in effect at the time of the calculation,
except for changes that are fixed and determinable by existing contracts.
Although the SEC recently modified its rules applicable to the ceiling test,
the new rules do not take effect until year-end 2009.
Excluding the reduction in carrying value of oil and gas properties and
other adjusting items, Devon earned $4.4 billion or $9.91 per diluted common
share in 2008. In the fourth quarter of 2008, excluding adjusting items, the
company earned $297 million, or 67 cents per diluted common share. The
adjusting items are discussed in more detail later in this news release.
"Despite the effects of the sharp fourth-quarter declines in oil and
natural gas prices, 2008 was a very successful year for the company," said
J.
Larry Nichols
, chairman and chief executive officer. "Cash flow reached an
all-time record of nearly $10 billion. We increased oil and gas production by
six percent and drilled 2,441 wells with a 98 percent success rate. In
addition, we added 584 million barrels of proved reserves before price
revisions at a very attractive cost per barrel."
Cash Flow a Record $9.6 Billion
Cash flow before balance sheet changes increased 31 percent to a record
$9.6 billion in 2008. Other sources of cash included $1.9 billion in after-tax
proceeds from the African divestiture program and $280 million from an
exchange of assets with Chevron Corporation. Devon utilized these sources of
cash and cash on hand to fund $10.5 billion of capital expenditures,
repurchase $815 million of common and preferred stock, pay $289 million in
dividends and reduce total debt by $2.1 billion during the year. The company
exited 2008 with cash of $379 million and a net debt to adjusted
capitalization ratio of less than 25 percent. Reconciliations of cash flow
before balance sheet changes, net debt and adjusted capitalization, which are
non-GAAP measures, are provided in this release.
Drill-bit Reserve Additions More Than Double Production
Capital and Reserve Summary
(detailed tables and non-GAAP reconciliations are also Year Ended
provided in this release) December 31,
2008 2007
Drill-bit Capital (in millions) $9,012 $5,812
Reserve Data (MMBoe)
Discoveries and extensions 546 315
Revisions other than price 38 75
Drill-bit and performance reserve additions 584 390
In 2008, Devon added 584 million oil-equivalent barrels (Boe) to its
proved oil and gas reserves through successful drilling (discoveries,
extensions and performance revisions). The company invested $9 billion of
associated drill-bit capital during the year.
Devon also acquired 66 million Boe through purchases of proved reserves.
Revisions related to changes in year-end oil, natural gas and natural gas
liquids prices decreased 2008 proved reserves by 473 million Boe. More than 70
percent of the price-related reserve revisions resulted from the impact of
year-end prices on heavy oil reserves at Devon's Jackfish oil sands project in
Canada.
Oil and gas production from continuing operations increased six percent to
238 million Boe in 2008. Estimated proved reserves at December 31, 2008, were
2,428 million Boe.
Proved developed reserves were 1,934 million Boe at December 31, 2008.
This represented 80 percent of total proved reserves. Year-end proved reserves
included 429 million barrels of crude oil, 9.9 trillion cubic feet of natural
gas and 352 million barrels of natural gas liquids. Devon's reserve life index
(proved reserves divided by annual production) is approximately 10 years.
Barnett Shale Growth and Start-Up at Jackfish Paced 2008 Operations
Devon drilled 2,441 wells in 2008 with a 98 percent success rate.
Following are operational highlights from 2008:
-- The company drilled 659 wells in the Barnett Shale field in north
Texas during the year. Devon had 3,809 producing wells in the field at
December 31, 2008.
-- Devon produced 398 billion cubic feet of gas equivalent (Bcfe) from
the Barnett Shale field in 2008. This was a 31 percent increase
compared with its 2007 net Barnett production.
-- Net production from the Barnett Shale reached nearly 1.2 Bcfe per day
during the fourth quarter of 2008. Devon had exited 2007 producing
about 950 million cubic feet equivalent (MMcfe) per day.
-- In east Texas, Devon increased production from its Carthage area by
nearly 10 percent in 2008 to more than 300 MMcfe per day. The company
drilled 132 wells at Carthage during the year, including 20 horizontal
wells.
-- Devon added another 40,000 net acres to its industry-leading lease
position in the Haynesville Shale play in eastern Texas and western
Louisiana in the fourth quarter of 2008. The company now holds some
570,000 net acres in the Haynesville Shale and is evaluating its
position through drilling, coring and testing.
-- In the Arkoma Basin in Oklahoma, Devon increased net production from
the Woodford Shale to about 64 million cubic feet of gas equivalent
per day. This is a 165 percent increase compared with the fourth
quarter of 2007. Also in 2008, the company completed construction and
commenced operation of its Northridge gas processing plant, which can
process up to 200 million cubic feet of natural gas per day.
-- Devon began successful development of a new shale play in the Anadarko
Basin in Oklahoma in 2008. The company has assembled a lease position
of 112,000 net acres in the "Cana" play and drilled 10 Devon-operated
wells during the year. Devon's net production from Cana was nearly 20
MMcfe per day at December 31, 2008. The company believes its net
risked resource potential in the Cana play represents nearly four
trillion cubic feet of natural gas equivalent.
-- Devon continued to advance its Lower Tertiary projects in the Gulf of
Mexico in 2008. At Cascade, the company commenced drilling the first
of two initial producing wells and continued work on the production
facilities and subsea equipment. When Cascade begins producing in
2010, it will utilize the Gulf's first floating production, storage
and offloading vessel, or FPSO.
-- Devon ramped up production from Jackfish, its 100-percent owned
Canadian oil sands project, throughout 2008. Production reached 22,000
barrels per day in the fourth quarter and is expected to peak at
35,000 barrels per day in 2009.
-- Jackfish is expected to produce at 35,000 barrels per day for more
than 20 years. Devon sanctioned and began work on a second phase,
Jackfish 2, in 2008. Jackfish 2 is also sized to produce 35,000
barrels per day, with production commencing by the end of 2011.
African Divestitures Substantially Completed
Devon completed the sales of its West African producing assets in 2008.
The aggregate pre-tax value of the combined African divestitures was
approximately $3 billion. In accordance with U.S. accounting standards, the
company classified the assets, liabilities and results of its operations in
Africa as discontinued operations for all accounting periods presented.
Included in this release is a table of revenues, expenses and production
categories and amounts reclassified as discontinued operations for each period
presented.
Oil and Gas Sales Increase 36 Percent
Sales of oil, gas and natural gas liquids from continuing operations
increased 36 percent to $13.1 billion in the year ended December 31, 2008.
Comparable sales for the year ended December 31, 2007, were $9.6 billion. The
combined effects of increased natural gas and liquids production and higher
realized oil, natural gas and natural gas liquids prices led to the increase
in sales.
Combined oil, gas and natural gas liquids production from continuing
operations averaged 650 thousand Boe per day in 2008. This was a six percent
increase compared with Devon's 2007 average daily production.
Marketing and midstream operating profit increased 31 percent to $668
million in 2008. The increase in operating profit was attributable to higher
throughput and higher natural gas and natural gas liquids prices.
Expenses Generally in Line with Expectations
With the exception of depreciation, depletion and amortization of oil and
gas properties (DD&A), most expense items were in line with expectations. Unit
DD&A in 2008 increased to $13.68 per Boe compared with $11.85 per Boe in 2007.
The higher than expected DD&A rate was attributable to the impact on estimated
proved reserves of low commodity prices at December 31, 2008.
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 2008 were as follows:
Items affecting continuing operations-
-- An unrealized gain on oil and natural gas derivative instruments
increased full-year earnings by $243 million pre-tax ($156 million
after tax) and increased fourth-quarter earnings by $103 million
pre-tax ($65 million after tax).
-- A change in fair value of other financial instruments decreased
full-year earnings by $151 million pre-tax ($97 million after tax) and
decreased fourth-quarter earnings by $129 million pre-tax ($82 million
after tax).
-- A reduction in the carrying value of oil and gas properties decreased
full-year and fourth-quarter earnings by $10.4 billion pre-tax ($7.1
billion after tax).
-- Income tax expense related to the repatriation of cash from outside
the United States and a related change in an income tax election
decreased full-year after-tax earnings by $312 million.
-- A modification to the company's stock compensation vesting policy
decreased full-year earnings by $27 million pre-tax ($17 million after
tax).
-- A reduction in Canadian statutory income tax rates increased full-year
after-tax earnings by $7 million.
Items affecting discontinued operations-
-- Divestitures of assets in Africa resulted in a full-year gain of $819
million pre-tax ($769 million after tax) and a fourth-quarter gain of
$4 million pre-tax ($25 million after tax).
-- A reduction in the carrying value of oil and gas properties decreased
full-year and fourth-quarter earnings by $6 million pre-tax ($6
million after tax).
-- The decisions to exit Africa generated other financial benefits that
increased full-year earnings by $55 million pre-tax ($27 million after
tax).
The following tables summarize the full-year and fourth-quarter effects of
these items on 2008 earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Continuing Operations - Full Year 2008
Cash Flow
Before
After- Balance
Pre-tax tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Unrealized gain on oil
and gas derivative
instruments $243 - 87 87 156 -
Change in fair value
of other financial
instruments (151) - (54) (54) (97) -
Reduction in the
carrying value of
oil and gas assets (10,379) - (3,264) (3,264) (7,115) -
Taxes on repatriation
and tax policy
elections - 295 17 312 (312) (295)
Stock compensation
vesting (27) - (10) (10) (17) -
Change in Canadian
income tax rate - - (7) (7) 7 -
Totals $(10,314) 295 (3,231) (2,936) (7,378) (295)
Discontinued Operations - Full Year 2008
Cash Flow
Before
After- Balance
Pre-tax tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Gain on sale of West
African assets $819 518 (468) 50 769 -
Reduction in the
carrying value of
oil and gas assets (6) - - - (6) -
Financial benefits of
decision to exit Africa 55 - 28 28 27 -
Totals $868 518 (440) 78 790 -
In aggregate, these items decreased full-year 2008 net earnings by $6.6
billion, or $14.85 per common share ($14.76 per diluted share). These
items and their associated tax effects decreased full-year 2008 cash flow
before balance sheet changes by $295 million.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Continuing Operations - Fourth Quarter 2008
Cash Flow
Before
After- Balance
Pre-tax tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Unrealized gain on oil
and gas derivative
instruments $103 - 38 38 65 -
Change in fair value
of other financial
instruments (129) - (47) (47) (82) -
Reduction in the
carrying value of
oil and gas assets (10,379) - (3,264) (3,264) (7,115) -
Totals $(10,405) - (3,273) (3,273) (7,132) -
Discontinued Operations - Fourth Quarter 2008
Cash Flow
Before
After- Balance
Pre-tax tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Gain on sale of West
African assets $4 - (21) (21) 25 -
Reduction in the
carrying value of
oil and gas assets (6) - - - (6) -
Totals $(2) - (21) (21) 19 -
In aggregate, these items decreased fourth-quarter 2008 net earnings by
$7.1 billion, or $16.09 per common share ($16.09 per diluted share).
Conference Call to be Webcast Today
Devon will discuss its 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 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.
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
www.devonenergy.com.
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties)
Excludes discontinued Year Ended Quarter Ended
operations December 31, December 31,
2008 2007 2008 2007
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 668.1 557.9 181.2 150.1
U.S. Offshore 57.6 77.0 12.6 19.6
Total U.S. 725.7 634.9 193.8 169.7
Canada 212.1 226.0 53.6 55.8
International 2.2 1.7 0.7 0.5
Total Natural Gas 940.0 862.6 248.1 226.0
Oil (MMBbls)
U.S. Onshore 11.3 11.2 3.0 2.8
U.S. Offshore 5.9 7.8 1.0 1.9
Total U.S. 17.2 19.0 4.0 4.7
Canada 21.6 16.1 6.2 4.4
International 14.2 19.5 3.4 4.3
Total Oil 53.0 54.6 13.6 13.4
Natural Gas Liquids (MMBbls)
U.S. Onshore 23.6 20.6 6.5 5.7
U.S. Offshore 0.6 0.8 0.1 0.2
Total U.S. 24.2 21.4 6.6 5.9
Canada 4.0 4.3 1.0 1.1
International - - - -
Total Natural Gas Liquids 28.2 25.7 7.6 7.0
Oil Equivalent (MMBoe)
U.S. Onshore 146.2 124.8 39.7 33.5
U.S. Offshore 16.1 21.4 3.2 5.4
Total U.S. 162.3 146.2 42.9 38.9
Canada 60.9 58.1 16.1 14.8
International 14.6 19.8 3.5 4.4
Total Oil Equivalent 237.8 224.1 62.5 58.1
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,825.5 1,528.5 1,969.6 1,631.5
U.S. Offshore 157.3 210.9 136.3 213.4
Total U.S. 1,982.8 1,739.4 2,105.9 1,844.9
Canada 579.4 619.2 582.7 606.2
International 6.1 4.8 8.1 5.0
Total Natural Gas 2,568.3 2,363.4 2,696.7 2,456.1
Oil (MBbls)
U.S. Onshore 30.7 30.7 32.1 30.6
U.S. Offshore 16.2 21.3 11.3 20.8
Total U.S. 46.9 52.0 43.4 51.4
Canada 59.0 44.2 67.4 48.2
International 38.8 53.4 36.2 47.2
Total Oil 144.7 149.6 147.0 146.8
Natural Gas Liquids (MBbls)
U.S. Onshore 64.6 56.6 71.2 61.4
U.S. Offshore 1.5 2.1 1.1 2.0
Total U.S. 66.1 58.7 72.3 63.4
Canada 10.9 11.7 10.9 12.1
International - - - -
Total Natural Gas Liquids 77.0 70.4 83.2 75.5
Oil Equivalent (MBoe)
U.S. Onshore 399.5 342.0 431.5 363.9
U.S. Offshore 44.0 58.5 35.1 58.4
Total U.S. 443.5 400.5 466.6 422.3
Canada 166.5 159.1 175.4 161.3
International 39.8 54.2 37.6 48.0
Total Oil Equivalent 649.8 613.8 679.6 631.6
BENCHMARK PRICES Year Ended Quarter Ended
(average prices) December 31, December 31,
2008 2007 2008 2007
Natural Gas ($/Mcf) -
Henry Hub $9.04 $6.86 $6.95 $6.97
Oil ($/Bbl) - West
Texas Intermediate (Cushing) $99.75 $72.39 $58.51 $90.92
REALIZED PRICES
(excludes the effects of unrealized gains and losses from hedging)
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
U.S. Offshore $56.80 $6.95 $34.28 $46.31
Total U.S. $55.56 $5.11 $20.73 $31.42
Canada $30.67 $6.02 $35.95 $34.02
International $46.24 $4.90 $- $45.63
Realized price without hedges $41.86 $5.30 $22.73 $32.88
Cash settlements $2.02 $0.52 $- $2.47
Realized price, including
cash settlements $43.88 $5.82 $22.73 $35.35
Quarter Ended December 31, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $87.46 $5.69 $45.19 $40.47
U.S. Offshore $88.82 $7.26 $47.48 $59.81
Total U.S. $88.01 $5.87 $45.27 $43.15
Canada $54.54 $6.49 $56.64 $44.94
International $86.29 $7.58 $- $85.59
Realized price without hedges $76.46 $6.03 $47.08 $46.83
Cash settlements $- $0.04 $- $0.15
Realized price, including
cash settlements $76.46 $6.07 $47.08 $46.98
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
U.S. Offshore $104.90 $9.53 $51.11 $74.55
Total U.S. $98.83 $7.59 $41.21 $50.55
Canada $71.04 $8.17 $61.45 $57.65
International $94.05 $8.27 $- $92.91
Realized price without hedges $86.22 $7.73 $44.08 $54.97
Cash settlements $0.51 $(0.45) $- $(1.67)
Realized price, including
cash settlements $86.73 $7.28 $44.08 $53.30
Year Ended December 31, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $67.34 $5.69 $36.08 $37.45
U.S. Offshore $71.95 $7.17 $36.78 $53.30
Total U.S. $69.23 $5.87 $36.11 $39.77
Canada $49.80 $6.24 $46.07 $41.51
International $70.60 $6.22 $- $70.11
Realized price without hedges $63.98 $5.97 $37.76 $42.90
Cash settlements $- $0.04 $- $0.18
Realized price, including
cash settlements $63.98 $6.01 $37.76 $43.08
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except Year Ended Quarter Ended
per share amounts) December 31, December 31,
2008 2007 2008 2007
Revenues
Oil sales $4,567 $3,493 $566 $1,032
Gas sales 7,263 5,149 1,316 1,362
NGL sales 1,243 970 174 327
Net (loss) gain on oil
and gas derivative
financial instruments (154) 14 257 13
Marketing and midstream
revenues 2,292 1,736 397 463
Total revenues 15,211 11,362 2,710 3,197
Expenses and other income, net
Lease operating expenses 2,217 1,828 583 502
Production taxes 522 340 60 85
Marketing and midstream
operating costs and expenses 1,624 1,227 275 315
Depreciation, depletion and
amortization of oil and gas
properties 3,253 2,655 973 718
Depreciation and amortization
of non-oil and gas properties 256 203 70 57
Accretion of asset retirement
obligation 86 74 20 19
General and administrative
expenses 653 513 179 155
Interest expense 329 430 68 105
Change in fair value of other
financial instruments 149 (34) 127 (3)
Reduction of carrying value
of oil and gas properties 10,379 - 10,379 -
Other income, net (224) (98) (103) (27)
Total expenses and other
income, net 19,244 7,138 12,631 1,926
(Loss) earnings from continuing
operations before income tax
expense (4,033) 4,224 (9,921) 1,271
Income tax (benefit) expense
Current 619 500 (124) 41
Deferred (1,573) 578 (2,964) 126
Total income tax (benefit)
expense (954) 1,078 (3,088) 167
(Loss) earnings from continuing
operations (3,079) 3,146 (6,833) 1,104
Discontinued operations
Earnings (loss) from
discontinued operations
before income tax expense 1,131 696 (2) 254
Income tax expense (benefit) 200 236 (19) 42
Earnings from discontinued
operations 931 460 17 212
Net (loss) earnings (2,148) 3,606 (6,816) 1,316
Preferred stock dividends 5 10 - 3
Net (loss) earnings applicable
to common stockholders $(2,153) $3,596 $(6,816) $1,313
Basic net (loss) earnings per
share
(Loss) earnings from
continuing operations $(6.95) $7.05 $(15.46) $2.48
Earnings from discontinued
operations 2.10 1.03 0.04 0.48
Net (loss) earnings $(4.85) $8.08 $(15.42) $2.96
Diluted net (loss) earnings
per share
(Loss) earnings from
continuing operations $(6.95) $6.97 $(15.46) $2.45
Earnings from discontinued
operations 2.10 1.03 0.04 0.47
Net (loss) earnings $(4.85) $8.00 $(15.42) $2.92
Weighted average common shares
outstanding
Basic 444 445 442 444
Diluted 447 450 444 449
CONSOLIDATED BALANCE SHEETS
(in millions) December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $379 $1,364
Short-term investments, at fair value - 372
Accounts receivable 1,412 1,779
Income taxes receivable 334 30
Derivative financial instruments, at
fair value 282 12
Current assets held for sale 27 120
Other current assets 250 237
Total current assets 2,684 3,914
Property and equipment, at cost, based
on the full cost method of accounting
for oil and gas properties ($4,540 and
$3,417 excluded from amortization in
2008 and 2007, respectively) 55,657 48,473
Less accumulated depreciation,
depletion and amortization 32,683 20,394
Net property and equipment 22,974 28,079
Investment in Chevron Corporation
common stock, at fair value - 1,324
Goodwill 5,579 6,172
Long-term assets held for sale 19 1,512
Other long-term assets, including
$199 million at fair value in 2008 652 455
Total Assets $31,908 $41,456
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $1,819 $1,360
Revenues and royalties due to others 496 578
Income taxes payable 37 97
Short-term debt 180 1,004
Current portion of asset retirement
obligation, at fair value 138 82
Current liabilities associated with
assets held for sale 13 145
Accrued expenses and other current
liabilities 452 391
Total current liabilities 3,135 3,657
Debentures exchangeable into shares of
Chevron Corporation common stock - 641
Other long-term debt 5,661 6,283
Derivative financial instruments, at
fair value - 488
Asset retirement obligation, at fair value 1,347 1,236
Liabilities associated with assets held
for sale - 404
Other long-term liabilities 1,026 699
Deferred income taxes 3,679 6,042
Stockholders' equity
Preferred stock - 1
Common stock 44 44
Additional paid-in capital 6,257 6,743
Retained earnings 10,376 12,813
Accumulated other comprehensive income 383 2,405
Total Stockholders' Equity 17,060 22,006
Total Liabilities and Stockholders'
Equity $31,908 $41,456
Common Shares Outstanding 444 444
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended
(in millions) December 31,
2008 2007
Cash Flows From Operating Activities
Net (loss) earnings $(2,148) $3,606
Earnings from discontinued operations,
net of tax (931) (460)
Adjustments to reconcile (loss)
earnings from continuing operations
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 3,509 2,858
Deferred income tax (benefit)
expense (1,573) 578
Net gain on sales of non-oil and
gas property and equipment (1) (1)
Reduction of carrying value of oil
and gas properties 10,379 -
Other noncash charges 187 177
Net increase in operating working
capital (138) (499)
Increase in long-term other assets (59) (92)
Increase (decrease) in long-term
other liabilities 48 (5)
Cash provided by operating activities
- continuing operations 9,273 6,162
Cash provided by operating activities
- discontinued operations 135 489
Net cash provided by operating activities 9,408 6,651
Cash Flows From Investing Activities
Proceeds from sales of property and
equipment 117 76
Capital expenditures (9,375) (6,158)
Proceeds from exchange of investment
in Chevron Corporation common stock 280 -
Purchases of short-term investments (50) (934)
Sales of short-term investments 300 1,136
Cash used in investing activities
- continuing operations (8,728) (5,880)
Cash provided by investing activities
- discontinued operations 1,855 166
Net cash used in investing activities (6,873) (5,714)
Cash Flows From Financing Activities
Credit facility repayments (3,191) (757)
Credit facility borrowings 1,741 2,207
Net commercial paper borrowings
(repayments) 1 (804)
Principal payments on debt (1,031) (567)
Preferred stock redemption (150) -
Proceeds from stock option exercises 116 91
Repurchases of common stock (665) (326)
Dividends paid on common and
preferred stock (289) (259)
Excess tax benefits related to
share-based compensation 60 44
Net cash used in financing activities (3,408) (371)
Effect of exchange rate changes on cash (116) 51
Net (decrease) increase in cash and
cash equivalents (989) 617
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) $384 $1,373
RESERVE RECONCILIATION
Total Total U.S.
------------------------------ ------------------------------
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December
31, 2007:
Proved
developed 391 7,255 274 1,874 148 5,743 244 1,349
Proved
undeveloped 286 1,739 47 622 22 1,400 38 293
Total proved 677 8,994 321 2,496 170 7,143 282 1,642
Production (53) (940) (28) (238) (17) (726) (24) (162)
Discoveries
and
extensions 132 2,077 67 546 12 1,966 65 405
Divestitures (6) (5) - (7) (1) (1) - (1)
Acquisitions 18 252 6 66 18 250 6 66
Revisions due
to prices (355) (588) (20) (473) (20) (369) (18) (100)
Revisions
other
than price 16 95 6 38 5 106 6 28
As of December
31, 2008:
Proved
developed 301 8,044 292 1,934 133 6,681 261 1,508
Proved
undeveloped 128 1,841 60 494 34 1,688 56 370
Total Proved 429 9,885 352 2,428 167 8,369 317 1,878
U.S. Onshore U.S. Offshore
------------------------------ ------------------------------
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December
31, 2007:
Proved
developed 122 5,547 243 1,290 26 196 1 59
Proved
undeveloped 9 1,218 38 249 13 182 - 44
Total proved 131 6,765 281 1,539 39 378 1 103
Production (11) (669) (24) (146) (6) (57) - (16)
Discoveries
and
extensions 11 1,916 65 395 1 50 - 10
Divestitures (1) (1) - (1) - - - -
Acquisitions 18 250 6 66 - - - -
Revisions due
to prices (17) (367) (18) (97) (3) (2) - (3)
Revisions other
than price 2 85 5 21 3 21 1 7
As of December
31, 2008:
Proved
developed 111 6,469 260 1,449 22 212 1 59
Proved
undeveloped 22 1,510 55 328 12 178 1 42
Total Proved 133 7,979 315 1,777 34 390 2 101
Canada International
------------------------------ ------------------------------
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December
31, 2007:
Proved
developed 195 1,506 30 476 48 6 - 49
Proved
undeveloped 193 338 9 258 71 1 - 71
Total proved 388 1,844 39 734 119 7 - 120
Production (22) (212) (4) (61) (14) (2) - (15)
Discoveries
and
extensions 120 111 2 141 - - - -
Divestitures (5) (4) - (6) - - - -
Acquisitions - 2 - - - - - -
Revisions due
to prices (349) (219) (2) (387) 14 - - 14
Revisions other
than price 2 (12) - - 9 1 - 10
As of December
31, 2008:
Proved
developed 110 1,357 31 367 58 6 - 59
Proved
undeveloped 24 153 4 54 70 - - 70
Total Proved 134 1,510 35 421 128 6 - 129
COSTS INCURRED Total Total U.S.
(in millions) Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Property Acquisition Costs:
Total proved $822 $10 $822 $3
Total unproved 1,764 206 1,411 156
Exploration and development
costs 7,464 5,885 5,577 4,111
Costs Incurred $10,050 $6,101 $7,810 $4,270
U.S. Onshore U.S. Offshore
Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Property Acquisition Costs:
Total proved $822 $3 $- $-
Total unproved 1,226 77 185 79
Exploration and development
costs 4,388 3,378 1,189 733
Costs Incurred $6,436 $3,458 $1,374 $812
Canada International
Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Property Acquisition Costs:
Total proved $- $7 $- $-
Total unproved 352 49 1 1
Exploration and development
costs 1,304 1,309 583 465
Costs Incurred $1,656 $1,365 $584 $466
Devon capitalizes certain general and administrative expenses related to
property acquisition, exploration and development activities. These
capitalized expenses were $406 million and $312 million in 2008 and
2007, respectively. Devon also capitalizes certain interest expenses
related to property development activities. These capitalized expenses
were $96 million and $65 million in 2008 and 2007, 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,
2008 2007
Exploration Wells Drilled
U.S. 28 35
Canada 90 122
International 8 1
Total 126 158
Exploration Wells Success Rate
U.S. 75% 71%
Canada 96% 98%
International 0% 0%
Total 85% 91%
Development Wells Drilled
U.S. 1,639 1,627
Canada 631 626
International 45 29
Total 2,315 2,282
Development Wells Success Rate
U.S. 98% 98%
Canada 99% 100%
International 93% 100%
Total 98% 99%
Total Wells Drilled
U.S. 1,667 1,662
Canada 721 748
International 53 30
Total 2,441 2,440
Total Wells Success Rate
U.S. 98% 98%
Canada 99% 99%
International 79% 97%
Total 98% 98%
COMPANY OPERATED RIGS Year Ended
December 31,
2008 2007
Number of Company Operated Rigs Running
U.S. 82 72
Canada 13 14
International 1 1
Total 96 87
CAPITAL EXPENDITURES (in millions)
Quarter Ended December 31, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $96 175 53 50 $374
Development 1,085 230 347 52 1,714
(1) Unproved acreage
acquisition 894 9 12 - 915
(2) Proved property
acquisition 794 - - - 794
Exploration and
development capital $2,869 414 412 102 $3,797
Capitalized G&A 107
Capitalized interest 26
Discontinued operations 4
Midstream capital 183
Other capital 76
Total Capital Expenditures $4,193
(1) $220 million is due to an asset exchange with Chevron and did not
require the use of cash.
(2) $390 million is due to an asset exchange with Chevron and did not
require the use of cash.
CAPITAL EXPENDITURES (in millions)
Year Ended December 31, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $ 192 539 164 249 $1,144
Development 3,903 491 986 222 5,602
(1) Unproved acreage
acquisition 1,226 185 352 1 1,764
(2) Proved property
acquisition 822 - - - 822
Exploration and
development capital $6,143 1,215 1,502 472 $9,332
Capitalized G&A 406
Capitalized interest 96
Discontinued operations 34
Midstream capital 490
Other capital 186
Total Capital Expenditures $10,544
(1) $220 million is due to an asset exchange with Chevron and did not
require the use of cash.
(2) $390 million is due to an asset exchange with Chevron and did not
require the use of cash.
PRODUCTION FROM DISCONTINUED OPERATIONS Year Ended Quarter Ended
December 31, December 31,
2008 2007 2008 2007
Production from Discontinued Operations
Oil (MMBbls) 3.2 10.9 - 2.0
Natural Gas (Bcf) 2.6 5.0 - 1.2
Total Oil Equivalent (MMBoe) 3.6 11.8 - 2.2
STATEMENTS OF DISCONTINUED OPERATIONS
(in millions) Year Ended Quarter Ended
December 31, December 31,
2008 2007 2008 2007
Revenues
Oil sales $323 $746 $- $175
Gas sales 11 15 - 3
Marketing and midstream revenues 15 20 - 7
Total revenues 349 781 - 185
Expenses and other income, net
Lease operating expenses 25 75 - 16
Marketing and midstream
operating costs and expenses 5 7 - 2
Depreciation, depletion and
amortization of oil and gas
properties - 20 - -
Accretion of asset retirement
obligation 1 3 - -
Gain on sale of oil and gas
properties (819) (90) (4) (90)
Reduction of carrying value
of assets held for sale 6 70 6 3
Total expenses and other income,
net (782) 85 2 (69)
Earnings (loss) before income
tax expense 1,131 696 (2) 254
Income tax expense (benefit)
Current 576 230 (67) 46
Deferred (376) 6 48 (4)
Total income tax expense
(benefit) 200 236 (19) 42
Earnings from discontinued
operations $931 $460 $17 $212
RESERVE DATA FOR DISCONTINUED OPERATIONS
Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December 31, 2007:
Proved developed 30 28 - 35
Proved undeveloped 30 62 - 40
Total proved 60 90 - 75
As of December 31, 2008:
Proved developed - - - -
Proved undeveloped - - - -
Total proved - - - -
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) Year Ended Quarter Ended
December 31, December 31,
2008 2007 2008 2007
Net Cash Provided By Operating
Activities (GAAP) $9,408 $6,651 $1,227 $1,542
Changes in assets and
liabilities - continuing
operations 149 596 540 633
Changes in assets and
liabilities - discontinued
operations 57 71 (31) 94
Cash flow before balance sheet
changes (Non-GAAP) $9,614 $7,318 $1,736 $2,269
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)
December 31,
2008 2007
Total debt (GAAP) $5,841 $7,928
Adjustments:
Cash and short-term investments 379 1,736
Net debt (Non-GAAP) $5,462 $6,192
Total debt $5,841 $7,928
Stockholders' equity 17,060 22,006
Total capitalization (GAAP) $22,901 $29,934
Net debt $5,462 $6,192
Stockholders' equity 17,060 22,006
Adjusted capitalization (Non-GAAP) $22,522 $28,198
Drill-bit capital is defined as costs incurred less proved acquisition
costs, unproved acquisition costs resulting from business combinations and
other significant similar transactions, and the net difference of accrued
future asset retirement costs less actual cash retirement expenditures.
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 drilling, facilities and unproved acreage acquisitions
unrelated to business combinations and other significant similar
transactions. 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 Total U.S.
(in millions) Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Costs Incurred (GAAP) $10,050 $6,101 $7,810 $4,270
Less:
Proved acquisition costs 822 10 822 3
Unproved portion of Chief
acquisition - (13) - (13)
Accrued asset retirement costs 297 365 177 223
Plus: Actual retirement
expenditures 81 73 56 48
Drill-bit capital (Non-GAAP) $9,012 $5,812 $6,867 $4,105
U.S. Onshore U.S. Offshore
Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Costs Incurred (GAAP) $6,436 $3,458 $1,374 $812
Less:
Proved acquisition costs 822 3 - -
Unproved portion of Chief
acquisition - (13) - -
Accrued asset retirement
costs 102 96 75 127
Plus: Actual retirement
expenditures 11 10 45 38
Drill-bit capital (Non-GAAP) $5,523 $3,382 $1,344 $723
Canada International
Year Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Costs Incurred (GAAP) $1,656 $1,365 $584 $466
Less:
Proved acquisition costs - 7 - -
Accrued asset retirement
costs 102 129 18 13
Plus: Actual retirement
expenditures 25 25 - -
Drill-bit capital (Non-GAAP) $1,579 $1,254 $566 $453
SOURCE Devon Energy Corporation
CONTACT: Investors
Zack Hager
, +1-405-552-4526
or
Media
Chip Minty,
+1-405-228-8647
both of Devon Energy Corporation
Company News On-Call: http://www.prnewswire.com/comp/118040.html/
/Web Site: http://www.devonenergy.com