In 2012, the company added 381 million Boe through successful drilling (extensions, discoveries, and revisions other than price). Associated drill-bit capital invested during the year totaled $7.5 billion. For reporting purposes, $1.3 billion of cash proceeds received from the closing of two joint ventures were not subtracted from the company’s 2012 drill-bit capital total. However, these proceeds effectively reimbursed Devon for leasing and exploration costs incurred.
“Devon’s capital program delivered excellent drill-bit results in 2012. Our oil-focused drilling program replaced nearly 260 percent of our oil produced during the year,” said Dave Hager, executive vice president, exploration and production. “Even before the benefits of our joint venture agreements, these reserve additions were added at very competitive finding costs.”
Reserve revisions related to lower prices resulted in a decrease in Devon’s proved reserves of 171 million Boe at December 31, 2012. These price revisions impacted only natural gas and natural gas liquids reserves. The company’s reserve life index (proved reserves divided by annual production) remained at approximately 12 years, and its proved developed reserves accounted for 72 percent of total proved reserves.
Oil and Gas Sales Total $7.2 Billion; Devon Adds Oil and Gas HedgesAlthough total production increased, revenue from oil, natural gas, and natural gas liquids sales declined 14 percent to $7.2 billion in 2012. However, cash settlements related to the company’s oil and gas hedges increased revenue by $870 million or $3.48 per Boe in 2012, partially offsetting lower realized prices for all three products. The strong oil price environment has provided Devon the opportunity to add oil hedges for 2013. The company now has entered into contracts to hedge 115,000 barrels per day of oil production. Of this total, 55,000 barrels per day are swapped at a weighted average price of $101 per barrel. The remaining 60,000 barrels per day utilize costless collars with a weighted average ceiling of $113 per barrel and a floor of $90 per barrel.