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Devon Energy Reports Fourth-Quarter And Full-Year 2012 Results

Stocks in this article: DVN

Impairment Charge Methodology

On a quarterly basis, the carrying value of Devon’s oil and natural gas assets are subject to a “ceiling test.” Under the full-cost method of accounting, the net book value of the company’s oil and gas properties, less related deferred income taxes, may not exceed a calculated ceiling. The ceiling is the estimated future net cash flow from proved oil and gas properties, discounted at 10 percent per year. Any excess is written off as a non-cash expense and may not be reversed in future periods, even though higher oil and gas prices may subsequently increase the ceiling. Future net cash flows 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. Trailing 12-month average prices at the end of each quarter are used in the future net cash flow calculation. Impairment charges have no impact on cash flow or cash balances and are not reflective of the fair value of oil and gas assets.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Adjusted earnings, drill-bit capital, net debt, and adjusted capitalization are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided beginning on page 13.

Conference Call to be Webcast Today

Devon will discuss its 2012 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) and may be accessed from Devon’s 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; 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 or regulatory changes; and our limited control over third parties who operate our oil and gas properties. 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, 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 from us at Devon Energy Corporation, Attn. Investor Relations, 333 West Sheridan Avenue, Oklahoma City, OK 73102-5015. 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 .

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading 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 CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
PRODUCTION (net of royalties)       Quarter Ended       Year Ended
  December 31, December 31,

Total Period Production:

2012       2011 2012       2011
Natural Gas (Bcf)
United States 186.7 191.8 751.9 739.7
Canada 43.3 52.5 186.1 212.8
Total Natural Gas 230.0 244.3 938.0 952.5
Oil / Bitumen (MMBbls)

 

United States 6.0 4.6 21.5 16.8

 

Canada 7.9 7.7 32.0 27.9
Total Oil / Bitumen 13.9 12.3 53.5 44.7
Natural Gas Liquids (MMBbls)

 

United States 9.3 8.7 36.1 33.0

 

Canada 0.9 0.9 3.8 3.6
Total Natural Gas Liquids 10.2 9.6 39.9 36.6
Oil Equivalent (MMBoe)

 

United States 46.4 45.2 182.9 173.1

 

Canada 16.0 17.4 66.8 67.0
Total Oil Equivalent 62.4 62.6 249.7 240.1
 
 
Quarter Ended Year Ended
December 31, December 31,

Average Daily Production:

2012 2011 2012 2011
Natural Gas (MMcf)
United States 2,029.0 2,084.5 2,054.5 2,026.6
Canada 471.2 571.1 508.3 583.1
Total Natural Gas 2,500.2 2,655.6 2,562.8 2,609.7
Oil / Bitumen (MBbls)
United States 64.8 49.7 58.7 46.0
Canada 86.2 83.8 87.4 76.5
Total Oil / Bitumen 151.0 133.5 146.1 122.5
Natural Gas Liquids (MBbls)
United States 101.4 94.5 98.6 90.4
Canada 9.5 9.8 10.5 9.9
Total Natural Gas Liquids 110.9 104.3 109.1 100.3
Oil Equivalent (MBoe)
United States 504.4 491.7 499.7 474.1
Canada 174.2 188.7 182.6 183.6
Total Oil Equivalent 678.6 680.4 682.3 657.7
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
BENCHMARK PRICES       Quarter Ended       Year Ended
(average prices) December 31, December 31,
2012       2011 2012       2011
Natural Gas ($/Mcf) – Henry Hub $ 3.41 $ 3.54 $ 2.79 $ 4.04
Oil ($/Bbl) – West Texas Intermediate (Cushing) $ 88.16 $ 93.96 $ 94.21 $ 95.06
 
 
REALIZED PRICES Quarter Ended December 31, 2012
Oil / Bitumen Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
United States $ 83.18 $ 2.93 $ 26.12 $ 27.72
Canada $ 52.31   $ 3.26 $ 47.64 $ 37.28
Realized price without hedges $ 65.56 $ 2.99 $ 27.96 $ 30.17
Cash settlements $ 8.76   $ 0.34 $ 0.07 $ 3.24
Realized price, including cash settlements $ 74.32   $ 3.33 $ 28.03 $ 33.41
 
 
Quarter Ended December 31, 2011
Oil / Bitumen Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
United States $ 91.19 $ 3.08 $ 40.66 $ 30.10
Canada $ 71.36   $ 3.45 $ 56.19 $ 45.02
Realized price without hedges $ 78.75 $ 3.16 $ 42.11 $ 34.24
Cash settlements $ (0.28 ) $ 0.63 $ 0.05 $ 2.42
Realized price, including cash settlements $ 78.47   $ 3.79 $ 42.16 $ 36.66
 
 
Year Ended December 31, 2012
Oil / Bitumen Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
United States $ 88.68 $ 2.32 $ 28.49 $ 25.59
Canada $ 57.01   $ 2.49 $ 48.63 $ 37.01
Realized price without hedges $ 69.73 $ 2.36 $ 30.42 $ 28.65
Cash settlements $ 4.84   $ 0.65 $ 0.04 $ 3.48
Realized price, including cash settlements $ 74.57   $ 3.01 $ 30.46 $ 32.13
 
 
Year Ended December 31, 2011
Oil / Bitumen Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
United States $ 91.19 $ 3.50 $ 39.47 $ 31.31
Canada $ 66.97   $ 3.87 $ 55.99 $ 43.23
Realized price without hedges $ 76.06 $ 3.58 $ 41.10 $ 34.64
Cash settlements $ (0.58 ) $ 0.44 $ 0.07 $ 1.63
Realized price, including cash settlements $ 75.48   $ 4.02 $ 41.17 $ 36.27
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
CONSOLIDATED STATEMENTS OF OPERATIONS       Quarter Ended       Year Ended
(in millions, except per share amounts) December 31, December 31,
  2012       2011 2012       2011
Revenues:
Oil, gas and NGL sales $ 1,883 $ 2,144 $ 7,153 $ 8,315
Oil, gas and NGL derivatives 178 (105 ) 693 881
Marketing and midstream revenues   520     546     1,656     2,258  
Total revenues   2,581     2,585     9,502     11,454  
Expenses and other, net:
Lease operating expenses 534 499 2,074 1,851
Marketing and midstream operating costs and expenses 399 412 1,246 1,716
Depreciation, depletion and amortization 731 626 2,811 2,248
General and administrative expenses 198 182 692 585
Taxes other than income taxes 108 88 414 424
Interest expense 110 82 406 352
Restructuring costs 74 - 74 (2 )
Asset impairments 896 - 2,024 -
Other, net   32     (98 )   78     (10 )
Total expenses and other, net   3,082     1,791     9,819     7,164  
Earnings (loss) from continuing operations before income taxes (501 ) 794 (317 ) 4,290
Current income tax expense (benefit) 44 158 52 (143 )
Deferred income tax expense (benefit)   (188 )   115     (184 )   2,299  
Earnings (loss) from continuing operations (357 ) 521 (185 ) 2,134
Earnings (loss) from discontinued operations, net of tax   -     (14 )   (21 )   2,570  
Net earnings (loss) $ (357 ) $ 507   $ (206 ) $ 4,704  
 
Basic net earnings (loss) per share:
Basic earnings (loss) from continuing operations per share $ (0.89 ) $ 1.29 $ (0.47 ) $ 5.12
Basic earnings (loss) from discontinued operations per share   -     (0.04 )   (0.05 )   6.17  
Basic net earnings (loss) per share $ (0.89 ) $ 1.25   $ (0.52 ) $ 11.29  
 
Diluted net earnings (loss) per share:
Diluted earnings (loss) from continuing operations per share $ (0.89 ) $ 1.29 $ (0.47 ) $ 5.10
Diluted earnings (loss) from discontinued operations per share   -     (0.04 )   (0.05 )   6.15  
Diluted net earnings (loss) per share $ (0.89 ) $ 1.25   $ (0.52 ) $ 11.25  
 
Weighted average common shares outstanding:
Basic 405 404 404 417
Diluted 405 405 404 418
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)       Quarter Ended       Year Ended
  December 31, December 31,
2012       2011 2012       2011
Cash flows from operating activities:
Net earnings (loss) $ (357 ) $ 507 $ (206 ) $ 4,704
(Earnings) loss from discontinued operations, net of tax - 14 21 (2,570 )

Adjustments to reconcile earnings from continuing operations to net cash from operating activities:

Depreciation, depletion and amortization 731 626 2,811 2,248
Asset impairments 896 - 2,024 -
Deferred income tax expense (benefit) (188 ) 115 (184 ) 2,299
Unrealized change in fair value of financial instruments 32 260 205 (401 )
Other noncash charges   104     56     240     241  
Net cash from operating activities before balance sheet changes 1,218 1,578 4,911 6,521
Net decrease (increase) in working capital (98 ) 493 (50 ) 185
Decrease (increase) in long-term other assets (14 ) (18 ) (36 ) 33
Increase (decrease) in long-term other liabilities   37     (34 )   105     (493 )
Cash from operating activities - continuing operations 1,143 2,019 4,930 6,246
Cash from operating activities - discontinued operations   -     (9 )   26     (22 )
Net cash from operating activities   1,143     2,010     4,956     6,224  
 
Cash flows from investing activities:
Capital expenditures (1,997 ) (2,019 ) (8,225 ) (7,534 )
Proceeds from property and equipment divestitures 71 116 1,468 129
Purchases of short-term investments (1,137 ) (940 ) (4,106 ) (6,691 )
Redemptions of short-term investments 958 668 3,266 5,333
Other   (4 )   (6 )   14     (29 )
Cash from investing activities - continuing operations (2,109 ) (2,181 ) (7,583 ) (8,792 )
Cash from investing activities - discontinued operations   (1 )   (16 )   57     3,146  
Net cash from investing activities   (2,110 )   (2,197 )   (7,526 )   (5,646 )
 
Cash flows from financing activities:
Proceeds from borrowings of long-term debt, net of issuance costs (7 ) - 2,458 2,221
Net short-term borrowings (repayments) 361 530 (537 ) 3,726
Debt repayments - - - (1,760 )
Credit facility borrowings - - 750 -
Credit facility repayments - - (750 ) -
Proceeds from stock option exercises 2 - 27 101
Repurchases of common stock - (345 ) - (2,332 )
Dividends paid on common stock (82 ) (69 ) (324 ) (278 )
Excess tax benefits related to share-based compensation   -     2     5     13  
Net cash from financing activities   274     118     1,629     1,691  
Effect of exchange rate changes on cash   (8 )   6     23     (4 )
Net change in cash and cash equivalents (701 ) (63 ) (918 ) 2,265
 
Cash and cash equivalents at beginning of period   5,338     5,618     5,555     3,290  
Cash and cash equivalents at end of period $ 4,637   $ 5,555   $ 4,637   $ 5,555  
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
CONSOLIDATED BALANCE SHEETS
(in millions)       December 31,       December 31,
    2012 2011
Current assets:
Cash and cash equivalents $ 4,637 $ 5,555
Short-term investments 2,343 1,503
Accounts receivable 1,245 1,379
Other current assets   746     868  
Total current assets   8,971     9,305  
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization 69,410 61,696
Not subject to amortization   3,308     3,982  
Total oil and gas 72,718 65,678
Other   5,630     5,098  
Total property and equipment, at cost 78,348 70,776
Less accumulated depreciation, depletion and amortization   (51,032 )   (46,002 )
Property and equipment, net   27,316     24,774  
Goodwill 6,079 6,013
Other long-term assets   960     1,025  
Total assets $ 43,326   $ 41,117  
 
Current liabilities:
Accounts payable $ 1,451 $ 1,471
Revenues and royalties payable 750 678
Short-term debt 3,189 3,811
Other current liabilities   613     778  
Total current liabilities   6,003     6,738  
Long-term debt 8,455 5,969
Asset retirement obligations 1,996 1,496
Other long-term liabilities 901 721
Deferred income taxes 4,693 4,763
Stockholders' equity:
Common stock 41 40
Additional paid-in capital 3,688 3,507
Retained earnings 15,778 16,308
Accumulated other comprehensive earnings   1,771     1,575  
Total stockholders' equity   21,278     21,430  
Total liabilities and stockholders' equity $ 43,326   $ 41,117  
Common shares outstanding 406 404
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
RESERVES RECONCILIATION
        Total
Oil / Bitumen       Gas       NGLs       Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December 31, 2011:        
Proved developed 309 8,908 428 2,223
Proved undeveloped 396   1,578   124   782  
Total Proved 705   10,486   552   3,005  
Revisions due to prices 8 (930 ) (24 ) (171 )
Revisions other than price (1 ) (320 ) (13 ) (68 )
Extensions and discoveries 139 1,158 116 449
Purchase of reserves - 2 - -
Production (53 ) (938 ) (40 ) (250 )
Sale of reserves - (12 ) - (2 )
As of December 31, 2012:        
Proved developed 327 8,070 451 2,123
Proved undeveloped 471   1,376   140   840  
Total Proved 798   9,446   591   2,963  
 
United States

Oil / Bitumen

Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December 31, 2011:        
Proved developed 146 7,957 402 1,875
Proved undeveloped 22   1,550   123   403  
Total Proved 168   9,507   525   2,278  
Revisions due to prices (1 ) (831 ) (19 ) (159 )
Revisions other than price (6 ) (287 ) (13 ) (67 )
Extensions and discoveries 65 1,124 114 367
Purchase of reserves - 2 - -
Production (21 ) (752 ) (36 ) (183 )
Sale of reserves - (1 ) - -
As of December 31, 2012:        
Proved developed 166 7,391 431 1,829
Proved undeveloped 39   1,371   140   407  
Total Proved 205   8,762   571   2,236  
 
Canada

Oil / Bitumen

Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December 31, 2011:        
Proved developed 163 951 26 348
Proved undeveloped 374   28   1   379  
Total Proved 537   979   27   727  
Revisions due to prices 9 (99 ) (5 ) (12 )
Revisions other than price 5 (33 ) - (1 )
Extensions and discoveries 74 34 2 82
Production (32 ) (186 ) (4 ) (67 )
Sale of reserves - (11 ) - (2 )
As of December 31, 2012:        
Proved developed 161 679 20 294
Proved undeveloped 432   5   -   433  
Total Proved 593   684   20   727  
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
COSTS INCURRED
(in millions)       Total
  Year Ended December 31,
2012       2011
Property acquisition costs:
Proved properties $ 73 $ 48
Unproved properties 1,178 939
Exploration costs 655 538
Development costs   6,099   5,418
Costs Incurred $ 8,005 $ 6,943
 
United States
Year Ended December 31,
2012 2011
Property acquisition costs:
Proved properties $ 2 $ 34
Unproved properties 1,135 851
Exploration costs 351 272
Development costs   4,408   4,130
Costs Incurred $ 5,896 $ 5,287
 
Canada
Year Ended December 31,
2012 2011
Property acquisition costs:
Proved properties $ 71 $ 14
Unproved properties 43 88
Exploration costs 304 266
Development costs   1,691   1,288
Costs Incurred $ 2,109 $ 1,656
 
COMPANY OPERATED RIGS
        As of December 31,
2012       2011
Number of Company Operated Rigs Running:
United States 74 53
Canada 8 7
Total 82 60
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

 
 
KEY OPERATING STATISTICS BY REGION
        Quarter Ended December 31, 2012
Avg. Production       Operated Rigs at       Gross Wells
(MBOED) December 31, 2012 Drilled
Barnett Shale 227.4 10 73
Canadian Oilsands - Jackfish / Pike 48.9 - -
Cana-Woodford Shale 54.3 11 44
Granite Wash 18.8 4 8
Gulf Coast / East Texas 57.3 4 21
Lloydminster 33.6 - 69
Mississippian 1.8 14 29
Permian Basin 66.3 26 65
Rocky Mountains 56.2 5 11
Other 114.0 8 35
Total 678.6 82 355
 
 
CAPITAL EXPENDITURES
(in millions)       Quarter Ended December 31, 2012
  United States       Canada       Total
Exploration $ 246 71 $ 317
Development   994 543   1,537
Exploration and development capital $ 1,240 614 $ 1,854
Capitalized G&A 77
Capitalized interest 10
Midstream capital 166
Other capital   84
Total Continuing Operations $ 2,191
Discontinued operations   -
Total Operations $ 2,191
 
 
CAPITAL EXPENDITURES
(in millions) Year Ended December 31, 2012
United States Canada Total
Exploration $ 1,463 292 $ 1,755
Development   4,009 1,431   5,440
Exploration and development capital $ 5,472 1,723 $ 7,195
Capitalized G&A 359
Capitalized interest 36
Midstream capital 530
Other capital   354
Total Continuing Operations $ 8,474
Discontinued operations   13
Total Operations $ 8,487
 
 

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL INFORMATION

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