Form 8-K DEVON ENERGY CORP/DE For: Feb 17

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 17, 2015

 

 

DEVON ENERGY CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

DELAWARE		001-32318		73-1567067
(State or Other Jurisdiction of Incorporation or Organization)		(Commission File Number)		(IRS Employer Identification Number)

 

333 W. SHERIDAN AVE., OKLAHOMA CITY, OK		73102
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (405) 235-3611

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

Devon Energy Corporation hereby furnishes the information set forth in its news release dated February 17, 2015 announcing fourth quarter and full-year 2014 financial results, a copy of which is attached as Exhibit 99.1.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits

 

99.1		Devon Energy Corporation news release dated February 17, 2015.

 

Page 2 of 3

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

 

Date: February 17, 2015

 

Page 3 of 3

EXHIBIT 99.1

 

		Devon Energy Corporation
		333 West Sheridan Avenue
		Oklahoma City, OK 73102-5015

NEWS RELEASE

Devon Energy Reports Fourth-Quarter and Full-Year 2014 Results; Provides 2015 Capital and Production Outlook

 

•

Achieved record Q4 oil production exceeding company guidance

 

•

Generated U.S. oil production growth of 82 percent in Q4 year over year

 

•

Increased proved oil reserves to highest level in company history

 

•

Maintained excellent financial strength and liquidity

 

•

Reiterated 2015 oil production growth outlook of 20 to 25 percent

 

•

Decreased 2015 E&P capital budget by 20 percent

OKLAHOMA CITY – Feb. 17, 2015 – Devon Energy Corporation (NYSE: DVN) today reported net earnings for the full-year 2014 of $1.6 billion, or $3.93 per common share ($3.91 per diluted share). This compares to a net loss of $20 million in 2013, or $0.06 per common share ($0.06 per diluted share).

Devon generated cash flow from operations of $6.0 billion in 2014, a 10 percent increase compared to 2013. Including $5.1 billion of cash received from the sale of non-core assets, the company’s total cash inflows for the year exceeded $11 billion.

For the fourth quarter of 2014, Devon’s core earnings totaled $343 million, or $0.84 per common share ($0.83 per diluted share). The company reported a net loss of $408 million, or $1.01 per common share ($1.01 per diluted share) in the fourth quarter.

“Devon delivered another exceptional performance in the fourth quarter, rounding out an outstanding year for the company, including a significant repositioning of the portfolio,” said John Richels, president and CEO. “Production from our top-tier asset portfolio exceeded guidance for all products, proved oil reserves reached a record level and our midstream business increased profitability to an all-time high.

“We expect to sustain operational momentum in 2015 with the significant improvements we have seen in our completion designs and a capital program focused on development drilling,” said Richels. “With strong results from our enhanced completions and a focus on core development areas, we expect growth in oil production to be between 20 and 25 percent in 2015, even with a projected reduction of approximately 20 percent in E&P capital spending compared to 2014.”

Repositioned Portfolio Exceeds Production Expectations

Total production from Devon’s retained assets averaged 664,000 oil-equivalent barrels (Boe) per day during the fourth quarter of 2014. This result exceeded the company’s guidance range by 9,000 Boe per day and represents a 20 percent increase compared to the fourth quarter of 2013. This high-margin growth increased liquids production to 57 percent of the company’s retained asset mix in the fourth quarter.

Devon also delivered record oil production of 239,000 barrels per day in the fourth quarter. This result exceeded the top end of the company’s guidance range and represents a 48 percent increase compared to the fourth quarter of 2013. The most significant growth came from the company’s U.S. operations, where oil production increased a substantial 82 percent for the quarter year over year.

The strong growth in U.S. oil production during the quarter was largely attributable to prolific well results from the company’s world-class Eagle Ford assets. Net production in the Eagle Ford averaged 98,000 Boe per day in the fourth quarter, a 100 percent increase compared to Devon’s first month of ownership in March 2014. The company also achieved another quarter of strong production growth in

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the Permian Basin. Led by outstanding results from Devon’s Delaware Basin assets, total Permian Basin production increased to 98,000 Boe per day in the fourth quarter, a 14 percent increase compared to the year-ago period.

In Canada, net oil production from the company’s heavy-oil projects increased to a record high of 93,000 barrels per day in the fourth quarter. This strong result exceeded the top end of Devon’s guidance range by 5,000 barrels per day and represents a 15 percent increase in production compared to the fourth quarter of 2013. This growth was driven by the continued ramp-up of the company’s newest heavy-oil facility, Jackfish 3, which exited the year averaging 13,000 barrels per day.

Reserves from Retained Assets Grow; Oil Reserves Climb to Record Levels

Devon’s estimated proved reserves totaled 2.8 billion oil-equivalent barrels on Dec. 31, 2014, a 7 percent increase in reserves compared to the company’s retained asset portfolio in 2013. At year-end, proved oil reserves reached a record 895 million barrels.

The most significant reserve growth came from Devon’s U.S. operations, where oil reserves from retained properties increased 65 percent year over year to 351 million barrels. The substantial growth in U.S. oil reserves is largely attributable to the company’s Eagle Ford acquisition and its Delaware Basin operations. During the year, the company’s U.S. drilling programs added 94 million barrels of light-oil reserves through successful drilling (extensions and discoveries). This represents a replacement rate of approximately 200 percent of the light oil produced during 2014.

Overall, the company’s reserve life index (proved reserves divided by annual production from retained properties) remained at approximately 12 years, and its proved undeveloped reserves accounted for only 25 percent of proved reserves.

Operations Report

For additional details on Devon’s core and emerging assets, please refer to the company’s fourth-quarter 2014 Operations Report at www.devonenergy.com. Highlights from the operations report include:

 

•

Prolific Q4 results, increasing type curve for Eagle Ford

 

•

Improved completion design delivers excellent results in Delaware Basin

 

•

Ramp-up exceeds expectations at Jackfish 3

 

•

High-rate development wells from Cana-Woodford

Upstream Revenue Increases 16 Percent; Midstream Profit Rises

Revenue from oil, natural gas and natural gas liquids sales totaled $9.9 billion in 2014, a 16 percent increase compared to 2013. The growth in revenue was attributable to the company’s significant increase in U.S. light-oil production. This high-margin growth increased oil sales to 60 percent of Devon’s total upstream revenues during the year.

In the fourth quarter, upstream revenue was $2.1 billion, a 3 percent decrease compared to the fourth quarter of 2013. Cash settlements related to the company’s oil and natural gas hedges increased revenue by $4.23 per Boe in the fourth quarter of 2014, partially offsetting lower realized oil and natural gas liquids prices. At Dec. 31, 2014, Devon’s attractive commodity hedges had a fair market value of nearly $2.0 billion.

The company’s marketing and midstream business also delivered excellent results in 2014, with operating profits reaching an all-time high of $852 million, a 66 percent increase compared to 2013. The year-over-year increase in operating profit was largely driven by growth from EnLink Midstream.

 

Page 2 of 21

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Cash Operating Costs Decline

The company’s successful cost containment efforts resulted in lease operating expenses (LOE), the largest cash cost, of $9.29 per Boe in the fourth quarter. LOE was 5 percent below the low end of Devon’s guidance range and 2 percent lower than the third quarter of 2014. The company’s significant scale in core plays coupled with a consistent focus on efficient operations continues to position Devon as a low-cost producer.

Production and property taxes were $108 million in the quarter, essentially flat compared to the fourth quarter of 2013. Compared to the previous quarter, lower commodity prices drove a decline in production and property taxes of 23 percent.

Net financing costs totaled $167 million in the fourth quarter of 2014, an increase of 50 percent compared to the year-ago quarter. The higher financing costs were due to a $48 million charge attributable to the early redemption of $1.9 billion in senior notes.

General and administrative expenses totaled $252 million in the fourth quarter of 2014. This compares with $157 million in the fourth quarter of 2013. The year-over-year increase resulted from the consolidation of EnLink Midstream and higher employee-related costs.

Depreciation, depletion and amortization expense (DD&A) amounted to $14.89 per Boe in the fourth quarter. For the full-year, DD&A was $13.51 per Boe and compares to a rate of $10.99 in 2013. The increase in DD&A rate was primarily attributable to the company’s Eagle Ford acquisition and EnLink Midstream transaction.

Devon incurred a $1.9 billion non-cash impairment of goodwill in the fourth quarter of 2014. The goodwill was recorded more than a decade ago and was related to an acquisition comprised almost entirely of conventional gas assets in Canada that Devon no longer owns. This non-cash impairment was related to the recent drop in oil prices.

Full-year 2014 income tax expense was $2.4 billion, or 58 percent of pre-tax earnings. This unusually high tax rate resulted principally from the goodwill impairment charge that lowered pre-tax earnings but did not impact the company’s full-year tax obligations. Excluding this impairment charge and other non-recurring items, Devon’s income tax rate was 35 percent of adjusted pre-tax earnings for the full year.

Balance Sheet and Liquidity Remain Strong

Devon’s financial position remains exceptionally strong with investment-grade credit ratings and cash balances of $1.5 billion at the end of the fourth quarter. During the quarter, the company redeemed $1.9 billion in senior notes, completing the debt repayment plan associated with its portfolio transformation. At Dec. 31, the company’s net debt, excluding non-recourse EnLink obligations, totaled $7.8 billion.

2015 Outlook: Production Guidance Unchanged; E&P Capital Reduced 20 Percent

Detailed forward-looking guidance for the first quarter and full year of 2015 is provided later in the release. A notable component of this outlook is Devon’s 2015 E&P capital budget of $4.1 to $4.4 billion. This level of investment implies around a 20 percent decline in E&P spending compared to 2014 and is designed to better balance capital expenditures with expected cash inflows.

Even with reduced E&P capital investment in 2015, the company’s production growth outlook remains unchanged. With significant improvements in completion design and a capital program focused on development drilling, Devon expects to deliver oil production growth of 20 to 25 percent year over year on a retained property basis. This production outlook is driven by balanced oil growth in both the U.S. and Canada.

 

Page 3 of 21

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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 general 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 fourth-quarter 2014 conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Feb. 18, 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 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; 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. U.S. 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.

 

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About Devon Energy

Devon Energy Corp. (NYSE: DVN) 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.

Investor Contacts

Howard Thill, 405-552-3693

Scott Coody, 405-552-4735

Shea Snyder, 405-552-4782

Media Contact

John Porretto, 405-228-7506

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

PRODUCTION NET OF ROYALTIES

 

		Quarter Ended December 31,								Year Ended December 31,
		2014				2013				2014				2013
Oil / Bitumen (MBbls/d)
United States			146				80				127				73
Canada			93				81				82				79
Retained assets			239				161				209				152
Divested assets			—				16				5				16
Total Oil / Bitumen			239				177				214				168
Natural Gas (MMcf/d)
United States			1,684				1,639				1,662				1,658
Canada			23				28				23				28
Retained assets			1,707				1,667				1,685				1,686
Divested assets			3				661				235				707
Total Natural Gas			1,710				2,328				1,920				2,393
Natural Gas Liquids (MBbls/d)
United States			141				114				132				107
Divested assets			—				18				7				19
Total Natural Gas Liquids			141				132				139				126
Oil Equivalent (Mboe/d)
United States			567				467				536				456
Canada			97				86				86				85
Retained assets			664				553				622				541
Divested assets			1				143				51				152
Total Oil Equivalent			665				696				673				693

 

Page 6 of 21

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

KEY OPERATING STATISTICS BY REGION

 

		Quarter Ended December 31, 2014
		Avg. Production (MBoe/d)				Gross Wells Drilled				Operated Rigs at December 31, 2014
Permian Basin			98				80				18
Eagle Ford			98				78				3
Canadian Heavy Oil			97				78				11
Barnett Shale			201				14				—
Anadarko Basin			100				30				5
Mississippian-Woodford Trend			20				53				2
Rockies			19				9				4
Other Assets			31				4				—
Retained Assets - Total			664				346				43
Divested assets			1				—				—
Devon - Total			665				346				43

 

		Year Ended December 31, 2014
		Avg. Production (MBoe/d)				Gross Wells Drilled
Permian Basin			96				324
Eagle Ford			65				242
Canadian Heavy Oil			86				205
Barnett Shale			208				84
Anadarko Basin			94				130
Mississippian-Woodford Trend			20				236
Rockies			20				40
Other Assets			33				5
Retained Assets - Total			622				1,266
Divested assets			51				—
Devon - Total			673				1,266

 

Page 7 of 21

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

PRODUCTION TREND

 

		2013				2014
		Quarter 4				Quarter 1				Quarter 2				Quarter 3				Quarter 4
Oil (MBbls/d)
Permian Basin			50				55				55				56				55
Eagle Ford			—				11				40				46				60
Canadian Heavy Oil			81				78				77				80				93
Barnett Shale			2				2				2				2				2
Anadarko Basin			9				9				11				10				10
Mississippian-Woodford Trend			8				10				9				10				9
Rockies			8				8				8				10				9
Other assets			3				2				3				2				1
Retained assets			161				175				205				216				239
Divested assets			16				15				4				3				—
Total			177				190				209				219				239
Gas (MMcf/d)
Permian Basin			116				121				134				136				137
Eagle Ford			—				22				86				107				126
Canadian Heavy Oil			28				19				23				26				23
Barnett Shale			995				931				932				896				878
Anadarko Basin			294				281				309				323				329
Mississippian-Woodford Trend			19				28				28				32				31
Rockies			75				65				67				66				58
Other assets			140				140				135				130				125
Retained assets			1,667				1,607				1,714				1,716				1,707
Divested assets			661				585				217				138				3
Total			2,328				2,192				1,931				1,854				1,710
NGL (MBbls/d)
Permian Basin			16				16				18				19				20
Eagle Ford			—				3				10				14				18
Canadian Heavy Oil			—				—				—				—				—
Barnett Shale			56				55				55				54				53
Anadarko Basin			27				29				31				34				34
Mississippian-Woodford Trend			3				5				5				6				6
Rockies			1				1				1				1				1
Other assets			11				10				10				10				9
Retained assets			114				119				130				138				141
Divested assets			18				16				6				5				—
Total			132				135				136				143				141
Combined (MBoe/d)
Permian Basin			86				91				95				98				98
Eagle Ford			—				17				65				78				98
Canadian Heavy Oil			86				81				81				84				97
Barnett Shale			224				213				212				205				201
Anadarko Basin			85				85				93				98				100
Mississippian-Woodford Trend			14				19				18				21				20
Rockies			21				20				21				22				19
Other assets			37				37				35				34				31
Retained assets			553				563				620				640				664
Divested assets			143				128				47				31				1
Total			696				691				667				671				665

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

BENCHMARK PRICES

 

		Quarter 4								December YTD
(average prices)		FY2014				FY2013				FY2014				FY2013
Natural Gas ($/Mcf) - Henry Hub		$	4.04			$	3.60			$	4.43			$	3.65
Oil ($/Bbl) - West Texas Intermediate (Cushing)		$	73.05			$	97.53			$	93.01			$	98.02
REALIZED PRICES
		Quarter Ended December 31, 2014
		Oil /Bitumen (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (Per Boe)
United States		$	68.19			$	3.53			$	17.79			$	32.45
Canada(1)		$	45.71			$	0.87			$	54.32			$	44.01
Realized price without hedges		$	59.46			$	3.49			$	17.75			$	34.14
Cash settlements		$	10.34			$	0.20			$	0.04			$	4.23
Realized price, including cash settlements		$	69.80			$	3.69			$	17.79			$	38.37
		Quarter Ended December 31, 2013
		Oil /Bitumen (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (Per Boe)
United States		$	96.04			$	3.01			$	27.51			$	32.96
Canada(1)		$	48.50			$	3.07			$	45.00			$	35.74
Realized price without hedges		$	71.45			$	3.02			$	28.73			$	33.65
Cash settlements		$	3.33			$	0.23			$	(0.19	)		$	1.59
Realized price, including cash settlements		$	74.78			$	3.25			$	28.54			$	35.24
		Year Ended December 31, 2014
		Oil (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (Per Boe)
United States		$	85.64			$	3.92			$	24.46			$	37.96
Canada(1)		$	60.05			$	3.64			$	50.52			$	53.11
Realized price without hedges		$	75.55			$	3.90			$	24.89			$	40.33
Cash settlements		$	1.16			$	(0.05	)		$	0.02			$	0.22
Realized price, including cash settlements		$	76.71			$	3.85			$	24.91			$	40.55
		Year Ended December 31, 2013
		Oil (Per Bbl)				Gas (Per Mcf)				NGL (Per Bbl)				Total (Per Boe)
United States		$	94.52			$	3.10			$	25.75			$	31.59
Canada(1)		$	57.18			$	3.05			$	46.17			$	39.91
Realized price without hedges		$	74.41			$	3.09			$	27.33			$	33.70
Cash settlements		$	0.90			$	0.16			$	0.01			$	0.77
Realized price, including cash settlements		$	75.31			$	3.25			$	27.34			$	34.47

 

(1)	The reported Canadian gas volumes include volumes that are produced from certain of our leases and then transported to our Jackfish operations where the gas is used as fuel. However, the revenues and expenses related to this consumed gas are eliminated in our consolidated financials.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Quarter Ended December 31,								Year Ended December 31,
(in millions, except per share amounts)		2014				2013				2014				2013
Oil, gas and NGL sales		$	2,086			$	2,155			$	9,910			$	8,522
Oil, gas and NGL derivatives			1,960				(96	)			1,989				(191	)
Marketing and midstream revenues			1,949				565				7,667				2,066
Total operating revenues			5,995				2,624				19,566				10,397
Lease operating expenses			568				584				2,332				2,268
Marketing and midstream operating expenses			1,723				425				6,815				1,553
General and administrative expenses			252				157				847				617
Production and property taxes			108				108				535				461
Depreciation, depletion and amortization			910				711				3,319				2,780
Asset impairments			1,953				16				1,953				1,976
Restructuring costs			2				4				46				54
Gains and losses on asset sales			—				(2	)			(1,072	)			9
Other operating items			19				30				93				112
Total operating expenses			5,535				2,033				14,868				9,830
Operating income			460				591				4,698				567
Net financing costs			167				111				526				417
Other nonoperating items			2				5				113				1
Earnings from continuing operations before income taxes			291				475				4,059				149
Income tax expense			670				268				2,368				169
Net earnings (loss)			(379	)			207				1,691				(20	)
Net earnings attributable to noncontrolling interests			29				—				84				—
Net earnings (loss) attributable to Devon		$	(408	)		$	207			$	1,607			$	(20	)
Net earnings (loss) per share attributable to Devon:
Basic earnings (loss) from discontinued operations per share		$	(1.01	)		$	0.51			$	3.93			$	(0.06	)
Diluted earnings (loss) from continuing operations per share		$	(1.01	)		$	0.51			$	3.91			$	(0.06	)
Weighted average common shares outstanding:
Basic			409				406				409				406
Diluted			409				407				411				406

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Quarter Ended December 31, 2014
(in millions)		Devon U.S. & Canada				EnLink				Eliminations				Total
Oil, gas and NGL sales		$	2,086			$	—			$	—			$	2,086
Oil, gas and NGL derivatives			1,960				—				—				1,960
Marketing and midstream revenues			1,141				995				(187	)			1,949
Total operating revenues			5,187				995				(187	)			5,995
Lease operating expenses			568				—				—				568
Marketing and midstream expenses			1,139				771				(187	)			1,723
General and administrative expenses			222				30				—				252
Production and property taxes			100				8				—				108
Depreciation, depletion and amortization			826				84				—				910
Asset impairments			1,953				—				—				1,953
Restructuring costs			2				—				—				2
Other operating items			19				—				—				19
Total operating expenses			4,829				893				(187	)			5,535
Operating income			358				102				—				460
Net financing costs			147				20				—				167
Other nonoperating items			9				(7	)			—				2
Earnings before income taxes			202				89				—				291
Income tax expense			654				16				—				670
Net earnings (loss)			(452	)			73				—				(379	)
Net earnings attributable to noncontrolling interests			—				29				—				29
Net earnings (loss) attributable to Devon		$	(452	)		$	44			$	—			$	(408	)

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Quarter Ended December 31,								Year Ended December 31,
(in millions)		2014				2013				2014				2013
Cash flows from operating activities:
Net earnings (loss)		$	(379	)		$	207			$	1,691			$	(20	)
Adjustments to reconcile earnings (loss) from continuing operations to net cash from operating activities:
Depreciation, depletion and amortization			910				711				3,319				2,780
Asset impairments			1,953				16				1,953				1,976
Gains and losses on asset sales			—				(2	)			(1,072	)			9
Deferred income tax expense			1,091				278				1,891				97
Derivatives and other financial instruments			(2,027	)			70				(2,070	)			135
Cash settlements on derivatives and financial instruments			305				130				104				277
Other noncash charges			100				114				457				309
Net change in working capital			(716	)			(194	)			50				(298	)
Change in long-term other assets			(306	)			38				(421	)			10
Change in long-term other liabilities			32				69				79				161
Net cash from operating activities			963				1,437				5,981				5,436
Cash flows from investing activities:
Capital expenditures			(1,975	)			(1,539	)			(6,988	)			(6,758	)
Acquisitions of property, equipment and businesses			(207	)			—				(6,462	)			—
Proceeds from property and equipment divestitures			(82	)			103				5,120				419
Purchases of short-term investments			—				—				—				(1,076	)
Redemptions of short-term investments			—				—				—				3,419
Redemptions of long-term investments			—				—				57				—
Other			2				(86	)			89				(3	)
Net cash from investing activities			(2,262	)			(1,522	)			(8,184	)			(3,999	)
Cash flows from financing activities:
Proceeds from borrowings of long-term debt, net of issuance costs			1,182				2,233				5,340				2,233
Net short-term debt borrowings (repayments)			933				(295	)			(385	)			(1,872	)
Long-term debt repayments			(2,924	)			—				(7,189	)			—
Proceeds from stock option exercises			1				2				93				3
Proceeds from issuance of subsidiary units			338				—				410				—
Dividends paid on common stock			(99	)			(89	)			(386	)			(348	)
Distributions to noncontrolling interests			(48	)			—				(235	)			—
Other			2				(1	)			(2	)			4
Net cash from financing activities			(615	)			1,850				(2,354	)			20
Effect of exchange rate changes on cash			(14	)			(19	)			(29	)			(28	)
Net change in cash and cash equivalents			(1,928	)			1,746				(4,586	)			1,429
Cash and cash equivalents at beginning of period			3,408				4,320				6,066				4,637
Cash and cash equivalents at end of period		$	1,480			$	6,066			$	1,480			$	6,066

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED BALANCE SHEETS

 

(in millions)		December 31, 2014				December 31, 2013
Current assets:
Cash and cash equivalents		$	1,480			$	6,066
Accounts receivable			1,959				1,520
Derivatives, at fair value			1,993				75
Income taxes receivable			522				89
Other current assets			544				255
Total current assets			6,498				8,005
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization			75,738				73,995
Not subject to amortization			2,752				2,791
Total oil and gas			78,490				76,786
Midstream and other			9,695				6,195
Total property and equipment, at cost			88,185				82,981
Less accumulated depreciation, depletion and amortization			(51,889	)			(54,534	)
Property and equipment, net			36,296				28,447
Goodwill			6,303				5,858
Other long-term assets			1,540				567
Total assets		$	50,637			$	42,877
Current liabilities:
Accounts payable			1,400				1,229
Revenues and royalties payable			1,193				786
Short-term debt			1,432				4,066
Deferred income taxes			730				19
Other current liabilities			1,180				555
Total current liabilities			5,935				6,655
Long-term debt			9,830				7,956
Asset retirement obligations			1,339				2,140
Other long-term liabilities			948				834
Deferred income taxes			6,244				4,793
Stockholders’ equity:
Common Stock			41				41
Additional paid-in capital			4,088				3,780
Retained earnings			16,631				15,410
Accumulated other comprehensive earnings			779				1,268
Total stockholders’ equity attributable to Devon			21,539				20,499
Noncontrolling interests			4,802				—
Total stockholders’ equity			26,341				20,499
Total liabilities and stockholders’ equity		$	50,637			$	42,877
Common shares outstanding			409				406

 

Page 13 of 21

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CAPITAL EXPENDITURES

 

		Quarter Ended December 31, 2014
(in millions)		U.S.				Canada				Total
Exploration		$	105			$	6			$	111
Development			1,243				224				1,467
Exploration and development capital		$	1,348			$	230			$	1,578
Capitalized G&A											108
Capitalized interest											13
Acquisitions											10
Devon midstream capital											37
Other capital											40
Total(1)										$	1,786

 

(1)	Excludes $479 million attributable to EnLink.

 

		Year Ended December 31, 2014
		U.S.				Canada				Total
Exploration		$	292			$	40			$	332
Development			4,115				908				5,023
Exploration and development capital		$	4,407			$	948			$	5,355
Capitalized G&A											376
Capitalized interest											45
Eagle Ford, Cana and other acquisitions											6,376
Devon midstream capital											312
Other capital											125
Total(1)										$	12,589

 

(1)	Excludes $970 million attributable to EnLink.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

COSTS INCURRED

 

		Total
		Year Ended December 31,
(in millions)		2014				2013
Property acquisition costs:
Proved properties		$	5,210			$	22
Unproved properties			1,177				216
Exploration costs			322				595
Development costs			5,463				5,089
Costs Incurred		$	12,172			$	5,922
		United States
		Year Ended December 31,
		2014				2013
Property acquisition costs:
Proved properties		$	5,210			$	19
Unproved properties			1,176				213
Exploration costs			270				443
Development costs			4,400				3,838
Costs Incurred		$	11,056			$	4,513
		Canada
		Year Ended December 31,
		2014				2013
Property acquisition costs:
Proved properties		$	—			$	3
Unproved properties			1				3
Exploration costs			52				152
Development costs			1,063				1,251
Costs Incurred		$	1,116			$	1,409

 

Page 15 of 21

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

RESERVES RECONCILIATION

 

		Total
		Oil / Bitumen (MMBbls)				Gas (Bcf)				NGL (MMBbls)				Total (MMBoe)
As of December 31, 2013:
Proved developed			361				8,459				491				2,262
Proved undeveloped			476				849				84				701
Total Proved			837				9,308				575				2,963
Revisions due to prices			(38	)			236				8				9
Revisions other than price			(19	)			(295	)			2				(65	)
Extensions and discoveries			107				343				47				211
Purchase of reserves			132				457				57				265
Production			(78	)			(701	)			(51	)			(246	)
Sale of reserves			(46	)			(1,661	)			(60	)			(383	)
As of December 31, 2014:
Proved developed			415				6,984				486				2,065
Proved undeveloped			480				703				92				689
Total Proved			895				7,687				578				2,754
		United States
		Oil / Bitumen (MMBbls)				Gas (Bcf)				NGL (MMBbls)				Total (MMBoe)
As of December 31, 2013:
Proved developed			194				7,707				468				1,947
Proved undeveloped			35				843				84				258
Total Proved			229				8,550				552				2,205
Revisions due to prices			(1	)			191				7				38
Revisions other than price			(38	)			(299	)			2				(86	)
Extensions and discoveries			94				335				47				197
Purchase of reserves			132				457				57				265
Production			(48	)			(660	)			(50	)			(207	)
Sale of reserves			(17	)			(923	)			(37	)			(207	)
As of December 31, 2014:
Proved developed			255				6,948				486				1,900
Proved undeveloped			96				703				92				305
Total Proved			351				7,651				578				2,205
		Canada
		Oil / Bitumen (MMBbls)				Gas (Bcf)				NGL (MMBbls)				Total (MMBoe)
As of December 31, 2013:
Proved developed			167				752				23				315
Proved undeveloped			441				6				—				443
Total Proved			608				758				23				758
Revisions due to prices			(37	)			45				1				(29	)
Revisions other than price			19				4				—				21
Extensions and discoveries			13				8				—				14
Purchase of reserves			—				—				—				—
Production			(30	)			(41	)			(1	)			(39	)
Sale of reserves			(29	)			(738	)			(23	)			(176	)
As of December 31, 2014:
Proved developed			160				36				—				165
Proved undeveloped			384				—				—				384
Total Proved			544				36				—				549

 

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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 analyst in their published estimates of the company’s financial results. 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 tables summarize the effects of these items on fourth-quarter and total-year 2014 earnings.

 

		Quarter Ended December 31, 2014
		Before-Tax				After-Tax
Net loss attributable to Devon (GAAP)						$	(408	)
Asset impairments			1,953				1,948
Fair value changes in financial instruments and foreign currency			(1,721	)			(1,086	)
Gain on asset sales and related repatriation			—				(143	)
Early retirement of debt			48				31
Restructuring costs			2				1
Core earnings attributable to Devon (Non-GAAP)						$	343
Diluted share count							411
Core diluted earnings per share attributable to Devon (Non-GAAP)						$	0.83

 

		Year Ended December 31, 2014
		Before-Tax				After-Tax
Net earnings attributable to Devon (GAAP)						$	1,607
Asset impairments			1,953				1,948
Fair value changes in financial instruments and foreign currency			(1,945	)			(1,231	)
Gain on asset sales and related repatriation			(955	)			(421	)
Investment in EnLink deferred income tax			—				48
Restructuring costs			46				35
Early retirement of debt			48				31
Core earnings attributable to Devon (Non-GAAP)						$	2,017
Diluted share count							411
Core diluted earnings per share attributable to Devon (Non-GAAP)						$	4.91

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

NET DEBT

(in millions)

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

 

		December 31,
		2014				2013
Total debt (GAAP)		$	11,262			$	12,022
Adjustments:
Cash and cash equivalents			1,480				6,066
Net debt (Non-GAAP)		$	9,782			$	5,956

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

PRODUCTION GUIDANCE

 

		Quarter 1								Full Year
		Low				High				Low				High
Oil and bitumen (MBbls/d)
United States			150				155				150				155
Canada			100				105				100				105
Total			250				260				250				260
Natural gas (MMcf/d)
United States			1,600				1,650				1,550				1,600
Canada			20				20				20				20
Total			1,620				1,670				1,570				1,620
Natural gas liquids (MBbls/d)
United States			130				135				126				132
Total Boe (MBoe/d)
United States			547				565				534				554
Canada			103				108				103				108
Total			650				673				637				662

PRICE REALIZATIONS GUIDANCE

 

		Quarter 1								Full Year
		Low				High				Low				High
Oil and bitumen - % of WTI
United States			83	%			93	%			85	%			95	%
Canada			46	%			56	%			55	%			65	%
Natural gas - % of Henry Hub			83	%			93	%			83	%			93	%
NGL - realized price		$	9			$	14			$	8			$	18

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

OTHER GUIDANCE ITEMS

 

		Quarter 1								Full Year
($ millions, except Boe)		Low				High				Low				High
Marketing & midstream operating profit		$	180			$	210			$	860			$	920
Lease operating expenses per Boe		$	9.60			$	10.20			$	9.70			$	10.30
General & administrative expenses per Boe		$	4.00			$	4.30			$	3.75			$	4.25
Production and property taxes as % of upstream sales			7.1	%			8.1	%			6.7	%			7.7	%
Depreciation, depletion and amortization per Boe		$	14.75			$	15.75			$	15.25			$	16.25
Other operating items		$	20			$	25			$	80			$	100
Net financing costs		$	110			$	130			$	440			$	500
Current income tax rate			5.0	%			10.0	%			5.0	%			10.0	%
Deferred income tax rate			25.0	%			30.0	%			25.0	%			30.0	%
Total income tax rate			30.0	%			40.0	%			30.0	%			40.0	%
Net earnings attributable to noncontrolling interests		$	—			$	20			$	50			$	100

CAPITAL EXPENDITURES GUIDANCE

 

		Quarter 1								Full Year
(in millions)		Low				High				Low				High
Exploration and development		$	1,300			$	1,400			$	4,100			$	4,400
Capitalized G&A and interest			100				120				400				500
Total oil and gas			1,400				1,520				4,500				4,900
Midstream(1)			50				70				110				160
Corporate and other			30				40				100				150
Devon capital expenditures		$	1,480			$	1,630			$	4,710			$	5,210

 

(1)	Excludes capital expenditures related to EnLink.

 

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DEVON ENERGY CORPORATION

FORWARD LOOKING GUIDANCE

 

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)
Q1-Q4 2015			107,203			$	91.07				31,500			$	89.67			$	97.84				28,000			$	116.43
Q1-Q4 2016			—			$	—				—			$	—			$	—				18,500			$	103.11

 

Oil Basis Swaps

Period

Index

Volume (Bbls/d)

Weighted Average Differential to WTI ($/Bbl)

Q1-Q4 2015

Western Canadian Select

31,682

$

(17.42

)

 

		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)
Q1-Q4 2015			250,000			$	4.32				328,452			$	4.05			$	4.36				550,000			$	5.09
Q1-Q4 2016			—			$	—				—			$	—			$	—				400,000			$	5.00

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.

 

Page 21 of 21