Stock Quote: NYSE

OKLAHOMA CITY--(BUSINESS WIRE)-- Devon Energy Corp. (NYSE: DVN) today reported operational and financial results for the second quarter of 2016 and provided guidance for the third quarter and full-year 2016.

Highlights

• Exceeded production expectations in U.S. resource plays
• Raised 2016 production guidance for retained assets by 3 percent
• Reduced lease operating expenses 26 percent year over year
• Improved operating and G&A expense outlook
• Completed asset divestiture program with proceeds totaling $3.2 billion
• Increased E&P capital investment by $200 million in 2016

“Devon Energy’s strategy of operating in North America’s best resource plays, coupled with a focus on delivering best-in-class execution, led to another quarter of excellent operational results,” said Dave Hager, president and CEO. “Production from our U.S. resource plays once again exceeded guidance expectations and we were able to deliver this outperformance with dramatically lower costs. With the cost savings achieved year to date, we are now on pace to reduce operating and G&A expenses by nearly $1 billion in 2016.

“In addition to our strong operating performance, we were able to significantly improve our financial strength over the past several months with the timely completion of our non-core asset divestiture program,” Hager said. “Total divestitures reached $3.2 billion and surpassed the top end of our $2 billion to $3 billion guidance range. The majority of the sales proceeds will be utilized to reduce debt and position us to further accelerate investment in our best-in-class U.S. resource plays, led by the STACK and Delaware Basin.”

Production Exceeds Expectations in U.S. Resource Plays

Devon’s reported net production averaged 644,000 oil-equivalent barrels (Boe) per day during the second quarter of 2016. Of this amount, 545,000 Boe per day was attributable to the Company’s core assets, where investment will be directed going forward. Production from core assets exceeded the mid-point of guidance by 6,000 Boe per day, driven entirely by Devon’s U.S. resource plays.

Within the Company’s U.S. resource plays, production averaged 419,000 Boe per day. This performance was highlighted by strong results from the STACK and Delaware Basin where aggregate production increased 27 percent year over year. Light-oil production from U.S. resource plays, which is Devon’s highest margin product, averaged 110,000 barrels per day. This result exceeded the top end of guidance by 2,000 barrels per day.

In Canada, net oil production from Devon’s heavy-oil projects averaged 121,000 barrels per day in the second quarter. Driven by the industry-leading performance of the Jackfish 3 facility, Canadian oil production increased 24 percent compared to the second quarter of 2015. Scheduled maintenance at the Company’s Jackfish 2 facility curtailed production by 11,000 barrels per day in the quarter.

Retained Midland Assets Enhance 2016 Production Outlook

With the earlier than expected completion of Devon’s asset divestiture program, the Company is updating its third quarter and full-year 2016 production expectations for its retained, go-forward asset base. The most significant change to previous guidance is Devon’s decision to retain select assets in the Midland Basin that were previously categorized as non-core. These legacy Midland Basin assets have extremely low declines and are expected to produce approximately 15,000 Boe per day in the second half of 2016.

Due to the retention of Midland assets and other minor operating interests, Devon is raising the mid-point of its 2016 production guidance from its retained, go-forward asset base by 18,000 Boe per day, or 3 percent. The largest portion of this production raise is attributable to oil, where 2016 mid-point guidance increased by 4 percent or 10,000 barrels per day.

Lease Operating Expenses Decline 26 Percent; Additional Savings Expected

The Company has several cost-reduction initiatives underway that positively impacted second-quarter results. The most significant operating cost savings came from lease operating expenses (LOE), which is Devon’s largest field-level cost. LOE declined 26 percent compared to the second quarter of 2015 to $416 million, and was 5 percent below the low end of guidance. The decrease in LOE was primarily driven by improved power and water-handling infrastructure, declining labor expense and lower supply chain costs.

Due to the operating cost performance achieved year to date and the impact of recently announced asset divestitures, the Company is lowering its full-year 2016 LOE outlook by $150 million to a range of $1.6 billion to $1.7 billion. With this improved outlook, Devon is now on track to reduce LOE and production taxes by nearly $600 million compared to 2015.

G&A Cost Savings Initiatives Ahead of Schedule

Devon also realized substantial general and administrative (G&A) cost savings in the second quarter. G&A expenses totaled $147 million, a 30 percent improvement compared to the second quarter of 2015. The significantly lower overhead costs were driven by reduced personnel expenses.

The Company now anticipates G&A expenses to decline to a range of $600 million to $650 million for the full-year 2016. Combined with reductions in capitalized G&A, Devon projects its total overhead costs to decline by approximately $400 million compared to 2015.

Accelerating Upstream Investment Activity

Devon continued to effectively control capital costs during the second quarter. Devon’s accrued upstream capital spending, which accounts for activity that was incurred during the reporting period, amounted to $221 million in the quarter. This result was $29 million below the low end of the Company’s guidance range.

As previously announced in June, Devon expects its full-year 2016 upstream capital program to range between $1.1 billion and $1.3 billion, an increase of $200 million from previous guidance. The incremental capital will be deployed in the STACK and Delaware Basin, with the potential to add as many as 7 operated rigs between these prolific plays in the second half of 2016. The additional capital investment is expected to deliver incremental production in early 2017.

Second-Quarter 2016 Operations Report

For additional details on Devon’s E&P operations, please refer to the Company’s second-quarter 2016 operations report at www.devonenergy.com. Highlights from the report include:

• Record-setting Meramec oil well brought online
• Successful spacing tests in STACK
• Bone Spring development wells outperform type curve
• Another high-rate well in the Leonard Shale
• Significant free cash flow generation in Eagle Ford
• Jackfish complex production exceeds nameplate capacity by 9 percent

Divestiture Program Complete and Exceeds Expectations

In the second quarter of 2016, Devon announced multiple agreements to monetize $2 billion of non-core upstream assets in the U.S. Several of these transactions have closed and the Company expects the remaining transactions to close in the third quarter. The Company expects to incur minimal cash taxes associated with these divestitures.

Subsequent to quarter end, the Company announced an agreement to sell its 50 percent interest in the Access Pipeline for CAD $1.4 billion, or USD $1.1 billion. This transaction is expected to close in the third quarter of 2016. With the announced sale of Access Pipeline, Devon’s divestiture program is now complete reaching $3.2 billion, exceeding the top end of the Company’s $2 billion to $3 billion guidance range. At least two-thirds of the sales proceeds are expected to be utilized for debt reduction, while the remaining amount will be reinvested in the Company’s U.S. resource plays.

Significant Liquidity and Financial Strength

Devon exited the second quarter with $1.7 billion of cash on hand. Pro-forma for the recent asset sales, cash balances will increase to $4.6 billion and the Company had no borrowings on its $3 billion senior credit facility.

The Company’s consolidated debt was $12.7 billion at the end of the second quarter. Adjusted for asset sales, Devon’s net debt, which excludes non-recourse EnLink obligations, declines to $4.7 billion. The Company’s ownership in EnLink is valued at greater than $3 billion and is expected to generate cash distributions of $270 million in 2016.

Cash Inflow Exceeds $800 Million

In the second quarter of 2016 Devon had a reported net loss of $1.6 billion, or $3.04 per share. Adjusting for items that securities analysts typically exclude from their published estimates, Devon’s core earnings totaled $33 million, or $0.06 per share.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) reached $649 million in the second quarter of 2016. The closing of the Company’s non-core Mississippian assets added approximately $200 million of additional cash flow in the second quarter of 2016, bringing cash inflows to more than $800 million.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP (generally accepted accounting principles) financial measures to the related GAAP information. Net debt, adjusted net debt, core earnings, core earnings per share and adjusted EBITDA referenced within the commentary of this release are non-GAAP financial measures. Reconciliations of these non-GAAP measures are provided within the tables of this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post an operations report to its website at www.devonenergy.com. The Company’s second-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Aug. 3, 2016, 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 “expects,” “believes,” “will,” “would,” “could,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “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 our business and operations 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, gas and NGL prices, including the currently depressed commodity price environment; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties 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
				Quarter Ended								Six Months Ended
PRODUCTION NET OF ROYALTIES				June 30,								June 30,
				2016				2015				2016				2015
Oil and bitumen (MBbls/d)
U. S. - Core				110				131				119				129
Heavy Oil				121				98				124				101
Core assets				231				229				243				230
Other				28				41				29				41
Total				259				270				272				271
Natural gas liquids (MBbls/d)
U. S. - Core				103				100				105				102
Other				28				34				29				34
Total				131				134				134				136
Gas (MMcf/d)
U. S. - Core				1,239				1,288				1,267				1,296
Heavy Oil				28				20				22				24
Core assets				1,267				1,308				1,289				1,320
Other				260				319				265				316
Total				1,527				1,627				1,554				1,636
Oil equivalent (MBoe/d)
U. S. - Core				419				446				436				448
Heavy Oil				126				101				127				105
Core assets				545				547				563				553
Other				99				127				102				126
Total				644				674				665				679

KEY OPERATING STATISTICS BY REGION
				Quarter Ended June 30, 2016
				Avg. Production				Gross Wells				Operated Rigs at
				(MBoe/d)				Drilled				June 30, 2016
STACK				91				24				2
Delaware Basin				65				14				—
Eagle Ford				75				6				—
Rockies Oil				21				—				—
Heavy Oil				126				—				—
Barnett Shale				167				—				—
Core assets				545				44				2

PRODUCTION TREND				2015												2016
				Quarter 2				Quarter 3				Quarter 4				Quarter 1				Quarter 2
Oil and bitumen (MBbls/d)
STACK				6				6				7				14				17
Delaware Basin				41				41				42				38				36
Eagle Ford				67				62				60				59				41
Rockies Oil				16				16				16				17				15
Heavy Oil				98				121				121				126				121
Barnett Shale				1				1				1				1				1
Core assets				229				247				247				255				231
Other				41				35				31				30				28
Total				270				282				278				285				259
Natural gas liquids (MBbls/d)
STACK				16				22				23				29				29
Delaware Basin				10				8				11				12				13
Eagle Ford				24				26				27				24				17
Rockies Oil				1				2				1				1				1
Barnett Shale				49				44				46				42				43
Core assets				100				102				108				108				103
Other				34				32				31				29				28
Total				134				134				139				137				131
Gas (MMcf/d)
STACK				221				216				235				286				267
Delaware Basin				75				70				82				84				99
Eagle Ford				146				154				151				144				103
Rockies Oil				41				41				38				32				31
Heavy Oil				20				16				24				15				28
Barnett Shale				805				788				768				749				739
Core assets				1,308				1,285				1,298				1,310				1,267
Other				319				301				285				271				260
Total				1,627				1,586				1,583				1,581				1,527
Oil equivalent (MBoe/d)
STACK				59				64				70				91				91
Delaware Basin				64				61				66				63				65
Eagle Ford				114				113				111				107				75
Rockies Oil				24				25				23				23				21
Heavy Oil				101				124				126				129				126
Barnett Shale				185				176				175				168				167
Core assets				547				563				571				581				545
Other				127				117				110				104				99
Total				674				680				681				685				644

BENCHMARK PRICES
(average prices)				Quarter 2												June YTD
				2016						2015						2016					2015
Oil ($/Bbl) - West Texas Intermediate (Cushing)				$	45.54					$	57.78					$	39.60				$	53.33
Natural Gas ($/Mcf) - Henry Hub				$	1.95					$	2.65					$	2.02				$	2.82
REALIZED PRICES				Quarter Ended June 30, 2016
				Oil /Bitumen						NGL						Gas					Total
				(Per Bbl)						(Per Bbl)						(Per Mcf)					(Per Boe)
United States				$	41.56					$	10.14					$	1.40				$	17.68
Canada				$	22.53						N/M						N/M				$	21.85
Realized price without hedges				$	32.64					$	10.14					$	1.40				$	18.50
Cash settlements				$	(2.57	)				$	(0.25	)				$	0.24				$	(0.53	)
Realized price, including cash settlements				$	30.07					$	9.89					$	1.64				$	17.97
				Quarter Ended June 30, 2015
				Oil /Bitumen						NGL						Gas					Total
				(Per Bbl)						(Per Bbl)						(Per Mcf)					(Per Boe)
United States				$	52.52					$	10.31					$	2.13				$	24.18
Canada				$	36.49						N/M						N/M				$	35.33
Realized price without hedges				$	46.69					$	10.31					$	2.13				$	25.86
Cash settlements				$	16.08					$	—					$	0.58				$	7.83
Realized price, including cash settlements				$	62.77					$	10.31					$	2.71				$	33.69
				Six Months Ended June 30, 2016
				Oil /Bitumen						NGL						Gas					Total
				(Per Bbl)						(Per Bbl)						(Per Mcf)					(Per Boe)
United States				$	34.70					$	8.46					$	1.47				$	15.89
Canada				$	15.71						N/M						N/M				$	15.33
Realized price without hedges				$	26.05					$	8.46					$	1.47				$	15.78
Cash settlements				$	(1.23	)				$	(0.13	)				$	0.18				$	(0.10	)
Realized price, including cash settlements				$	24.82					$	8.33					$	1.65				$	15.68
				Six Months Ended June 30, 2015
				Oil /Bitumen						NGL						Gas					Total
				(Per Bbl)						(Per Bbl)						(Per Mcf)					(Per Boe)
United States				$	47.74					$	9.85					$	2.29				$	22.93
Canada				$	29.51						N/M						N/M				$	28.56
Realized price without hedges				$	40.94					$	9.85					$	2.29				$	23.80
Cash settlements				$	18.59					$	—					$	0.55				$	8.72
Realized price, including cash settlements				$	59.53					$	9.85					$	2.84				$	32.52

CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)				Quarter Ended												Six Months Ended
				June 30,												June 30,
				2016						2015						2016						2015
Oil, gas and NGL sales				$	1,085					$	1,587					$	1,910					$	2,926
Oil, gas and NGL derivatives					(142	)					(282	)					(109	)					12
Marketing and midstream revenues					1,545						2,088						2,813						3,720
Total operating revenues					2,488						3,393						4,614						6,658
Lease operating expenses					416						562						860						1,115
Marketing and midstream operating expenses					1,338						1,863						2,404						3,302
General and administrative expenses					147						212						341						463
Production and property taxes					75						116						153						224
Depreciation, depletion and amortization					484						814						1,026						1,744
Asset impairments					1,497						4,168						4,532						9,628
Restructuring and transaction costs					24						—						271						—
Other operating items					4						21						24						40
Total operating expenses					3,985						7,756						9,611						16,516
Operating loss					(1,497	)					(4,363	)					(4,997	)					(9,858	)
Net financing costs					163						125						327						242
Other nonoperating items					85						(9	)					106						3
Loss before income taxes					(1,745	)					(4,479	)					(5,430	)					(10,103	)
Income tax benefit					(182	)					(1,686	)					(399	)					(3,721	)
Net loss					(1,563	)					(2,793	)					(5,031	)					(6,382	)
Net earnings (loss) attributable to noncontrolling interests					7						23						(405	)					33
Net loss attributable to Devon				$	(1,570	)				$	(2,816	)				$	(4,626	)				$	(6,415	)
Net loss per share attributable to Devon:
Basic				$	(3.04	)				$	(6.94	)				$	(9.33	)				$	(15.81	)
Diluted				$	(3.04	)				$	(6.94	)				$	(9.33	)				$	(15.81	)
Weighted average common shares outstanding:
Basic					524						411						502						411
Diluted					524						411						502						411

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
				Quarter Ended												Six Months Ended
				June 30,												June 30,
				2016						2015						2016						2015
Cash flows from operating activities:
Net loss				$	(1,563	)				$	(2,793	)				$	(5,031	)				$	(6,382	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation, depletion and amortization					484						814						1,026						1,744
Asset impairments					1,497						4,168						4,532						9,628
Deferred income tax benefit					(179	)					(1,593	)					(386	)					(3,640	)
Derivatives and other financial instruments					223						305						417						(125	)
Cash settlements on derivatives and financial instruments					(44	)					464						(148	)					1,183
Other noncash charges					88						41						21						266
Net change in working capital					(153	)					(189	)					45						26
Change in long-term other assets					(40	)					18						13						159
Change in long-term other liabilities					22						(134	)					(5	)					(110	)
Net cash from operating activities					335						1,101						484						2,749
Cash flows from investing activities:
Capital expenditures					(489	)					(1,432	)					(1,238	)					(3,149	)
Acquisitions of property, equipment and businesses					(11	)					(13	)					(1,638	)					(417	)
Divestitures of property and equipment					191						6						209						8
Other					(26	)					(8	)					(27	)					(5	)
Net cash from investing activities					(335	)					(1,447	)					(2,694	)					(3,563	)
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs					450						2,094						846						3,051
Repayments of long-term debt					(290	)					(1,034	)					(549	)					(1,521	)
Net short-term repayments					—						(778	)					(626	)					(763	)
Issuance of common stock					—						—						1,469						—
Sale of subsidiary units					—						85						—						654
Issuance of subsidiary units					49						2						776						4
Dividends paid on common stock					(33	)					(98	)					(158	)					(197	)
Distributions to noncontrolling interests					(74	)					(65	)					(147	)					(118	)
Other					(2	)					4						(2	)					(8	)
Net cash from financing activities					100						210						1,609						1,102
Effect of exchange rate changes on cash					(12	)					3						14						(43	)
Net change in cash and cash equivalents					88						(133	)					(587	)					245
Cash and cash equivalents at beginning of period					1,635						1,858						2,310						1,480
Cash and cash equivalents at end of period				$	1,723					$	1,725					$	1,723					$	1,725

CONSOLIDATED BALANCE SHEETS
(in millions)				June 30,						December 31,
				2016						2015
Current assets:
Cash and cash equivalents				$	1,723					$	2,310
Accounts receivable					1,167						1,105
Assets held for sale					728						—
Other current assets					364						606
Total current assets					3,982						4,021
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization					80,066						78,190
Not subject to amortization					3,798						2,584
Total oil and gas					83,864						80,774
Midstream and other					10,243						10,380
Total property and equipment, at cost					94,107						91,154
Less accumulated depreciation, depletion and amortization					(77,292	)					(72,086	)
Property and equipment, net					16,815						19,068
Goodwill					4,159						5,032
Other long-term assets					2,288						1,330
Total assets				$	27,244					$	29,451
Current liabilities:
Accounts payable				$	545					$	906
Revenues and royalties payable					819						763
Short-term debt					350						976
Liabilities held for sale					205						—
Other current liabilities					1,010						650
Total current liabilities					2,929						3,295
Long-term debt					12,357						12,056
Asset retirement obligations					1,473						1,370
Other long-term liabilities					1,011						853
Deferred income taxes					555						888
Stockholders’ equity:
Common stock					52						42
Additional paid-in capital					7,500						4,996
Retained earnings (accumulated deficit)					(2,970	)					1,781
Accumulated other comprehensive earnings					265						230
Total stockholders’ equity attributable to Devon					4,847						7,049
Noncontrolling interests					4,072						3,940
Total stockholders’ equity					8,919						10,989
Total liabilities and stockholders’ equity				$	27,244					$	29,451
Common shares outstanding					524						418

CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)
				Quarter Ended June 30, 2016
				Devon U.S. & Canada						EnLink						Eliminations						Total
Oil, gas and NGL sales				$	1,085					$	—					$	—					$	1,085
Oil, gas and NGL derivatives					(142	)					—						—						(142	)
Marketing and midstream revenues					688						1,033						(176	)					1,545
Total operating revenues					1,631						1,033						(176	)					2,488
Lease operating expenses					416						—						—						416
Marketing and midstream operating expenses					692						822						(176	)					1,338
General and administrative expenses					118						29						—						147
Production and property taxes					64						11						—						75
Depreciation, depletion and amortization					359						125						—						484
Asset impairments					1,497						—						—						1,497
Restructuring and transaction costs					23						1						—						24
Other operating items					4						—						—						4
Total operating expenses					3,173						988						(176	)					3,985
Operating earnings (loss)					(1,542	)					45						—						(1,497	)
Net financing costs					117						46						—						163
Other nonoperating items					85						—						—						85
Loss before income taxes					(1,744	)					(1	)					—						(1,745	)
Income tax benefit					(180	)					(2	)					—						(182	)
Net earnings (loss)					(1,564	)					1						—						(1,563	)
Net earnings attributable to noncontrolling interests					1						6						—						7
Net loss attributable to Devon				$	(1,565	)				$	(5	)				$	—					$	(1,570	)

OTHER KEY STATISTICS
(in millions)				Quarter Ended June 30, 2016
				Devon U.S. & Canada						EnLink						Eliminations					Total
Cash flow statement related items:
Operating cash flow				$	225					$	110					$	—				$	335
Capital expenditures				$	(336	)				$	(153	)				$	—				$	(489	)
Acquisitions of property, equipment and businesses				$	(17	)				$	6					$	—				$	(11	)
EnLink distributions received (paid)				$	66					$	(140	)				$	—				$	(74	)
Issuance of subsidiary units				$	—					$	49					$	—				$	49
Balance sheet statement items:
Net debt (1)				$	7,630					$	3,354					$	—				$	10,984

(1) Net debt is a non-GAAP measure. For a reconciliation of the comparable GAAP measure, see "Non-GAAP Financial Measures" later in this release.

CAPITAL EXPENDITURES
(in millions)
				Quarter Ended June 30, 2016					Six Months Ended June 30, 2016
Exploration and development capital				$	221				$	584
Capitalized G&A and interest					73					160
Acquisitions					12					1,530
Other					7					13
Devon capital expenditures (1)				$	313				$	2,287

(1) Excludes $139 million and $684 million attributable to EnLink for the second quarter and first six months of 2016, respectively.

NON-GAAP FINANCIAL MEASURES

This press release includes non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.

CORE EARNINGS

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 share attributable to Devon. 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 2016 earnings.

(in millions, except per share amounts)				Quarter Ended June 30, 2016
				Before-tax						After-tax						After Noncontrolling Interests						Per Share
Loss attributable to Devon (GAAP)				$	(1,745	)				$	(1,563	)				$	(1,570	)				$	(3.04	)
Adjustments:
Fair value changes in financial instruments and foreign currency					205						134						130						0.25
Restructuring and transaction costs					24						16						16						0.03
Deferred tax asset valuation allowance					—						467						467						0.91
Asset impairments					1,497						990						990						1.91
Core earnings (loss) attributable to Devon (Non-GAAP)				$	(19	)				$	44					$	33					$	0.06

ADJUSTED EBITDA

We define Adjusted EBITDA, a non-GAAP financial measure, as EBITDA adjusted for certain items presented in the accompanying reconciliation. We believe that EBITDA is widely used by investors to measure a company’s performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. In addition, Adjusted EBITDA generally excludes certain other items that management believes affect the comparability of operating results or are not related to Devon’s ongoing operations. Management uses Adjusted EBITDA to evaluate the company’s operational trends and performance relative to other oil and gas companies.

(in millions)				Quarter Ended June 30, 2016
Net loss (GAAP)				$	(1,563	)
Net financing costs					163
Income taxes					(182	)
Depreciation, depletion and amortization and impairments					1,981
Asset retirement obligation accretion					21
EBITDA					420
Restructuring and transaction costs					24
Fair value changes in financial instruments and foreign currency					205
Adjusted EBITDA (Non-GAAP)				$	649

NET DEBT AND ADJUSTED NET DEBT

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. Adjusted net debt is net debt further adjusted for the estimated proceeds Devon expects to receive from the asset divestitures that have closed or will close in the third quarter of 2016. Devon believes that netting these sources of cash, including the estimated asset sale proceeds, against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.

(in millions)				June 30, 2016
				Devon U.S. & Canada						EnLink						Devon Consolidated
Total debt (GAAP)				$	9,343					$	3,364					$	12,707
Less cash and cash equivalents					(1,713	)					(10	)					(1,723	)
Net debt (non-GAAP)					7,630						3,354						10,984
Proceeds from assets sales					(2,932	)					—						(2,932	)
Adjusted net debt (Non-GAAP)				$	4,698					$	3,354					$	8,052

DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
PRODUCTION GUIDANCE				Quarter 3								Full Year
				Low				High				Low				High
Oil and bitumen (MBbls/d)
U. S.				106				111				117				122
Heavy Oil				131				136				126				131
Retained assets				237				247				243				253
Divested assets				3				7				8				10
Total				240				254				251				263
Natural gas liquids (MBbls/d)
U. S.				101				105				105				109
Divested assets				5				10				12				14
Total				106				115				117				123
Gas (MMcf/d)
U. S.				1,200				1,230				1,245				1,275
Heavy Oil				14				18				15				20
Retained assets				1,214				1,248				1,260				1,295
Divested assets				70				80				120				125
Total				1,284				1,328				1,380				1,420
Oil equivalent (MBoe/d)
U. S.				407				421				430				444
Heavy Oil				133				139				128				134
Retained assets				540				560				558				578
Divested assets				20				30				40				45
Total				560				590				598				623

PRICE REALIZATIONS GUIDANCE				Quarter 3												Full Year
				Low						High						Low						High
Oil and bitumen - % of WTI
U. S.					86	%					96	%					83	%					93	%
Canada					47	%					57	%					38	%					48	%
NGL - realized price				$	8					$	12					$	8					$	12
Natural gas - % of Henry Hub					78	%					88	%					73	%					83	%

OTHER GUIDANCE ITEMS				Quarter 3												Full Year
($ millions, except %)				Low						High						Low						High
Marketing & midstream operating profit				$	200					$	220					$	825					$	875
Lease operating expenses				$	380					$	420					$	1,600					$	1,700
General & administrative expenses				$	135					$	155					$	600					$	650
Production and property taxes				$	70					$	80					$	285					$	315
Depreciation, depletion and amortization				$	425					$	475					$	1,900					$	2,100
Other operating items				$	15					$	20					$	50					$	75
Net financing costs (1)				$	160					$	170					$	650					$	700
Current income tax rate					0.0	%					0.0	%					0.0	%					0.0	%
Deferred income tax rate					35.0	%					45.0	%					35.0	%					45.0	%
Total income tax rate					35.0	%					45.0	%					35.0	%					45.0	%
Net earnings attributable to noncontrolling interests				$	—					$	—					$	—					$	—

(1) Full year 2016 includes $50 million of non-cash accretion on EnLink’s installment purchase obligations.

CAPITAL EXPENDITURES GUIDANCE				Quarter 3										Full Year
(in millions)				Low					High					Low					High
Exploration and development				$	275				$	325				$	1,100				$	1,300
Capitalized G&A					50					60					200					250
Capitalized interest					10					20					40					50
Other					5					15					30					45
Devon capital expenditures (2)				$	340				$	420				$	1,370				$	1,645

(2) Excludes capital expenditures related to EnLink.

COMMODITY HEDGES
				Oil Commodity Hedges
				Price Swaps									Price Collars														Call Options Sold
Period				Volume (Bbls/d)				Weighted Average Price ($/Bbl)					Volume (Bbls/d)				Weighted Average Floor Price ($/Bbl)					Weighted Average Ceiling Price ($/Bbl)					Volume (Bbls/d)				Weighted Average Price ($/Bbl)
Q3-2016				33,000				$	48.37				65,000				$	40.37				$	46.91				18,500				$	55.00
Q4-2016				30,000				$	48.58				20,000				$	40.85				$	50.85				18,500				$	55.00
Q1-Q4 2017				6,470				$	51.24				10,115				$	46.44				$	56.44				-					-

				Oil Basis Swaps
Period				Index				Volume (Bbls/d)				Weighted Average Differential to WTI ($/Bbl)
Q3-2016				Western Canadian Select				50,000				(13.45	)
Q4-2016				Western Canadian Select				33,000				(13.40	)

				Natural Gas Commodity Hedges
				Price Swaps									Price Collars														Call Options Sold
Period				Volume (MMBtu/d)				Weighted Average Price ($/MMBtu)					Volume (MMBtu/d)				Weighted Average Floor Price ($/MMBtu)					Weighted Average Ceiling Price ($/MMBtu)					Volume (MMBtu/d)				Weighted Average Price ($/MMBtu)
Q3-2016				140,000				$	2.78				105,000				$	2.57				$	2.85				400,000				$	2.80
Q4-2016				155,000				$	2.83				305,000				$	2.71				$	2.92				400,000				$	2.80
Q1-Q4 2017				99,329				$	3.03				62,315				$	3.01				$	3.31				-					-

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index. Commodity hedge positions are shown as of July 27, 2016.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160802006880/en/

Source: Devon Energy Corporation