Devon Energy Reports 2009 Financial Results, Record Production and Record Proved Reserves
OKLAHOMA CITY, Feb. 17 /PRNewswire-FirstCall/ -- Devon Energy Corporation (NYSE: DVN) today reported 2009 full-year and fourth-quarter financial results. The company also reported that its 2009 full-year oil and gas production from continuing operations reached an all-time high. In addition, Devon reported record-high proved oil and natural gas reserves at December 31, 2009. Production and changes to proved reserves are discussed in more detail later in this report.
For the year ended December 31, 2009, Devon reported a net loss of $2.5 billion, or $5.58 per common share ($5.58 per diluted common share). Devon's 2009 financial results were impacted by certain items securities analysts typically exclude from their published estimates. The most significant of these items was a $4.2 billion after-tax reduction of the carrying value of oil and gas properties recorded in the first quarter of 2009. This was the result of a non-cash, full-cost ceiling adjustment. The charge resulted from application of the ceiling test as prescribed by the Securities and Exchange Commission for companies that follow the full-cost method of accounting.
Excluding the reduction of carrying value of oil and gas properties and other adjusting items, Devon earned $1.8 billion or $4.03 per diluted common share in 2009. The adjusting items are discussed in more detail later in this news release.
For the year ended December 31, 2008, Devon reported a net loss of $2.1 billion, or $4.85 per common share ($4.85 per diluted common share). The company's 2008 financial results included a $7.1 billion non-cash, after-tax reduction in the carrying value of oil and gas properties.
Devon reported net earnings of $667 million, or $1.50 per common share ($1.49 per diluted common share), for the quarter ended December 31, 2009. Excluding adjusting items, the company earned $713 million, or $1.60 per diluted common share in the fourth quarter of 2009.
For the quarter ended December 31, 2008, Devon reported a net loss of $6.8 billion or, $15.42 per common share ($15.42 per diluted common share).
North American Onshore Proved Reserves at Record 2.6 Billion Boe;
Drill-Bit Reserve Additions More than Double Record Production
"2009 was a pivotal year for Devon as we began repositioning the company to focus entirely on our high-return, North American onshore natural gas and oil portfolio," commented J. Larry Nichols, chairman and chief executive officer. "We grew North American onshore production by more than six percent in 2009 and replaced more than twice our production with the drill bit at very attractive costs. We expect to receive after-tax proceeds of $4.5 billion to $7.5 billion as we divest our offshore and international properties this year. This will further strengthen our rock-solid balance sheet and enable us to accelerate growth across our U.S. and Canadian asset base."
In accordance with accounting standards, Devon's year-end reserve reporting pertains to the company's continuing operations, which include its Gulf of Mexico properties. Following is a discussion of proved reserves pertaining only to Devon's North American onshore assets.
Devon increased North American onshore estimated proved reserves by 20 percent to a record 2,641 million oil-equivalent barrels (Boe) at December 31, 2009. The company added 669 million Boe to its North American onshore proved reserves from all sources. Costs incurred applicable to North American onshore properties were $3.3 billion.
Successful drilling (extensions, discoveries and performance revisions) accounted for 492 million Boe of North American onshore proved reserve additions. The company invested $3.2 billion of associated drill-bit capital during the year. Revisions related to changes in oil, natural gas and natural gas liquids prices increased 2009 North American onshore proved reserves by 176 million Boe.
North American onshore oil and gas production increased more than six percent to 220 million Boe in 2009. The reserve life index (proved reserves divided by annual production) for the North American onshore properties is approximately 12 years.
Proved developed reserves of 1,869 million Boe at December 31, 2009, represented 71 percent of total North American onshore proved reserves. Proved undeveloped reserves were 29 percent of the total. Year-end North American onshore proved reserves included 653 million barrels of crude oil, 9.4 trillion cubic feet of natural gas and 419 million barrels of natural gas liquids.
Costs Incurred and Reserves Summary (1) Year Ended December 31, ----------------------- North American Onshore ---------------------- 2009 2008 ---- ---- Costs Incurred (in millions) $3,279 $8,092 Total Reserves Additions (MMBoe) 669 139 (1) Detailed tables are also provided in this release. Drill-bit Capital and Reserves Summary (1) Year Ended December 31, ----------------------- North American Onshore ---------------------- 2009 2008 ---- ---- Drill-bit Capital (in millions) $3,244 $7,270 ------------------------------- ------ ------ Reserves Data (MMBoe) --------------------- Extensions and discoveries 446 536 Revisions other than price 46 21 -------------------------- --- --- Drill-bit and performance reserve additions 492 557 ------------------------------------------- --- --- (1) Detailed tables and non-GAAP reconciliations are also provided in this release.
Divestitures Make Way for North American Onshore Growth
The company plans to direct the proceeds of the divestitures of its Gulf of Mexico and international properties to its U.S. and Canadian onshore operations and to retire debt. In accordance with accounting standards, Devon has reclassified the assets, liabilities and results of its international operations as discontinued operations for all accounting periods presented in this release. Although revenues and expenses for prior periods were reclassified, there was no impact upon previously reported net earnings. Included with the financial information that follows are tables of revenues, expenses, production, proved reserves and costs incurred and the amounts reclassified as discontinued operations for each period presented.
In spite of Devon's plans to divest its Gulf of Mexico assets, these properties do not qualify as discontinued operations under accounting standards. However, information is provided in this release that will enable the reader to isolate certain results of the company's North American onshore operations.
Shale Gas Development and Jackfish Ramp-up Led 2009 Operating Highlights
Devon drilled 1,135 wells in 2009 applicable to its continuing operations with a 99 percent success rate. Following are operational highlights and updates for selected exploration and development projects:
- The company drilled 336 wells in the Barnett Shale field in north Texas in 2009, bringing its total producing wells in the field to almost 4,200 at year end. Devon exited 2009 with net Barnett Shale production at just over 1 billion cubic feet of natural gas equivalent per day. The company drilled its 2,000th horizontal well in the field in early 2010 and is currently running 16 operated drilling rigs. Devon expects to drill 370 total Barnett Shale wells during the year.
- Devon drilled 47 successful wells in the Cana-Woodford Shale in western Oklahoma in 2009. During 2009 the company increased its net production from this important new shale-gas resource to an average of 39 million cubic feet of gas equivalent per day. Devon has increased its lease position in the Cana-Woodford Shale to 118,000 net acres and expects to drill approximately 85 wells in the field in 2010.
- The company drilled eight Haynesville Shale wells in the greater Carthage area of east Texas in 2009. These wells have significantly de-risked Devon's 110,000 net Haynesville Shale acres in the Carthage area. The company expects to recover up to four trillion cubic feet equivalent of natural gas from its Carthage area Haynesville acreage.
- In Canada, Devon's 100-percent owned Jackfish oil sands project in Alberta was operational throughout 2009. As measured by production per well and steam-oil ratio, Jackfish is one of Canada's most commercially successful steam-assisted gravity drainage (SAGD) projects. In late 2009, Jackfish production reached 33,700 barrels of oil per day. The addition of four more producing wells is expected to push production to the facility's capacity of 35,000 barrels per day in early 2010.
- Construction continued throughout 2009 on a second phase of the Jackfish SAGD project. Jackfish 2 is also sized to produce 35,000 barrels of oil per day and will commence operations in 2011. Devon expects to file a regulatory application for a third phase of the project in the third quarter of 2010.
- Offshore Brazil, Devon participated in two significant deepwater discoveries in 2009. The Devon-operated Itaipu exploratory discovery followed a successful appraisal of the 2008 Wahoo discovery. Both Itaipu and Wahoo are pre-salt prospects located in the Campos Basin. Devon plans to divest its Brazilian assets along with all of its other international properties in 2010. The Itaipu and Wahoo discoveries significantly enhance the value of the company's international assets to prospective buyers.
Continuing Operations Show Strong Production Growth
Combined oil, gas and natural gas liquids production from continuing operations averaged 639 thousand Boe per day in 2009. This compares with 2008 average daily production of 610 thousand Boe per day.
Sharp declines in the average prices of oil, gas and natural gas liquids led to a 48 percent reduction in combined sales from continuing operations. Comparable sales for the years 2009 and 2008 were $6.1 billion and $11.7 billion, respectively. Furthermore, marketing and midstream operating profit decreased 25 percent to $512 million in 2009, reflecting lower prices for natural gas and natural gas liquids.
Cash Flow Totals $4.7 Billion
Cash flow before balance sheet changes decreased 50 percent to $4.7 billion in 2009. During the year Devon funded $5.1 billion of capital expenditures and paid $284 million in dividends utilizing cash flow and short-term borrowing. In spite of the increase in short-term borrowing, Devon's balance sheet remains strong with a ratio of net debt to adjusted capitalization of 29 percent. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.
Items Excluded from Published Earnings Estimates
Devon's reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company's financial results. These items and their effects upon reported earnings for the full year and fourth quarter of 2009 were as follows:
Items affecting continuing operations:
- A change in the fair value of oil and natural gas derivative instruments decreased full-year earnings by $121 million pre-tax ($77 million after tax) and an unrealized gain increased fourth-quarter earnings by $48 million pre-tax ($31 million after tax).
- A change in fair value of other financial instruments increased full-year earnings by $66 million pre-tax ($42 million after tax) and increased fourth-quarter earnings by $81 million pre-tax ($52 million after tax).
- Severance and restructuring costs decreased full-year earnings by $128 million pre-tax ($82 million after tax) and decreased fourth-quarter earnings by $105 million pre-tax ($67 million after tax).
- A reduction of the carrying value of oil and gas properties decreased full-year earnings by $6.4 billion pre-tax ($4.1 billion after tax).
- U.S. income taxes on foreign earnings now expected to be repatriated to the U.S. decreased full-year and fourth-quarter earnings by $55 million.
- Income tax accrual adjustments increased full-year earnings by $59 million.
Items affecting discontinued operations:
- A post-closing adjustment from the divestiture of West African assets in 2008 resulted in a full-year gain of $16 million pre-tax ($16 million after tax).
- Severance and restructuring costs decreased full-year earnings by $57 million pre-tax ($37 million after tax) and decreased fourth-quarter earnings by $48 million pre-tax ($31 million after tax).
- A reduction of the carrying value of oil and gas properties decreased full-year earnings by $108 million pre-tax ($105 million after tax).
- Income tax benefits related to unsuccessful international drilling increased full-year earnings by $22 million.
- The decision to divest all international assets generated financial benefits that increased full-year and fourth-quarter earnings by $37 million pre-tax ($24 million after tax).
The following tables summarize the full-year and fourth-quarter effects of these items on 2009 earnings, income taxes and cash flow.
Summary of Items Typically Excluded by Securities Analysts (in millions) Cash Flow Before Continuing Balance Operations Pre-tax Income Tax Effect After-tax Sheet -Full Year Earnings -------------------------- Earnings Changes 2009 Effect Current Deferred Total Effect Effect -------- ------- -------- ----- --------- --------- Change in fair value of oil and gas derivative instruments $(121) - (44) (44) (77) - Change in fair value of other financial instruments 66 - 24 24 42 - Severance and restructuring costs (128) (9) (37) (46) (82) (54) Reduction of the carrying value of oil and gas properties (6,408) - (2,323) (2,323) (4,085) - U.S. income taxes on foreign earnings - - 55 55 (55) - Income tax accrual adjustment - (9) (50) (59) 59 9 ----------- --- --- --- --- --- --- Totals $(6,591) (18) (2,375) (2,393) (4,198) (45) ------ ------- --- ------ ------ ------ --- Cash Flow Before Discontinued Balance Operations Pre-tax Income Tax Effect After-tax Sheet -Full Year Earnings -------------------------- Earnings Changes 2009 Effect Current Deferred Total Effect Effect -------- ------- -------- ----- --------- --------- Post-closing adjustment on sale of West African assets $16 - - - 16 - Severance and restructuring costs (57) (2) (18) (20) (37) (15) Reduction of the carrying value of oil and gas assets (108) - (3) (3) (105) - Income tax benefit on international drilling - (22) - (22) 22 22 Financial benefits of decision to divest assets 37 - 13 13 24 - ------------ --- --- --- --- --- --- Totals $(112) (24) (8) (32) (80) 7 ------ ----- --- --- --- --- --- In aggregate, these items decreased full-year 2009 net earnings by $4.3 billion, or $9.63 per common share ($9.61 per diluted share). These items and their associated tax effects decreased full-year 2009 cash flow before balance sheet changes by $38 million. Summary of Items Typically Excluded by Securities Analysts (in millions) Cash Flow Continuing Before Operations - Balance Fourth Pre-tax Income Tax Effect After-tax Sheet Quarter Earnings -------------------------- Earnings Changes 2009 Effect Current Deferred Total Effect Effect -------- ------- -------- ----- --------- --------- Change in fair value of oil and gas derivative instruments $48 - 17 17 31 - Change in fair value of other financial instruments 81 - 29 29 52 - Restructuring costs (105) - (38) (38) (67) (42) U.S. income taxes on foreign earnings - - 55 55 (55) - ----------- --- --- --- --- --- --- Totals $24 - 63 63 (39) (42) ------ --- --- --- --- --- --- Cash Flow Discontinued Before Operations - Balance Fourth Pre-tax Income Tax Effect After-tax Sheet Quarter Earnings -------------------------- Earnings Changes 2009 Effect Current Deferred Total Effect Effect -------- ------- -------- ----- --------- --------- Restructuring costs (48) - (17) (17) (31) (15) Financial benefits of decision to divest assets $37 - 13 13 24 - -------------- --- --- --- --- --- --- Totals $(11) - (4) (4) (7) (15) ------ ---- --- --- --- --- --- In aggregate, these items decreased fourth-quarter 2009 net earnings by $46 million, or 10 cents per common share (11 cents per diluted share). These items and their associated tax effects decreased fourth-quarter 2009 cash flow before balance sheet changes by $57 million.
Conference Call to be Webcast Today
Devon will discuss its 2009 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon's internet home page at www.devonenergy.com.
This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
Effective January 1, 2010, 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 for the fiscal year ended December 31, 2009, available from us at Devon Energy Corporation, Attn. Investor Relations, 20 North Broadway, Oklahoma City, OK 73102. You can also obtain this form from the SEC by calling 1-800-SEC-0330 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 CORPORATION FINANCIAL AND OPERATIONAL INFORMATION PRODUCTION (net of royalties) Year Ended Quarter Ended Excludes discontinued operations December 31, December 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Total Period Production ----------------------- Natural Gas (Bcf) U.S. Onshore 698.7 668.1 162.8 181.2 Canada 222.8 212.1 51.6 53.6 ----- ----- ---- ---- North American Onshore 921.5 880.2 214.4 234.8 U.S. Offshore 44.9 57.6 11.4 12.6 ------------- ---- ---- ---- ---- Total Natural Gas 966.4 937.8 225.8 247.4 ----------------- ----- ----- ----- ----- Oil (MMBbls) U.S. Onshore 11.6 11.3 2.9 3.0 Canada 25.3 21.6 6.6 6.2 ---- ---- --- --- North American Onshore 36.9 32.9 9.5 9.2 U.S. Offshore 5.0 5.9 1.3 1.0 ------------- --- --- --- --- Total Oil 41.9 38.8 10.8 10.2 --------- ---- ---- ---- ---- Natural Gas Liquids (MMBbls) U.S. Onshore 25.7 23.6 6.5 6.5 Canada 3.8 4.0 1.0 1.0 --- --- --- --- North American Onshore 29.5 27.6 7.5 7.5 U.S. Offshore 0.7 0.6 0.2 0.1 ------------- --- --- --- --- Total Natural Gas Liquids 30.2 28.2 7.7 7.6 ------------------------- ---- ---- --- --- Oil Equivalent (MMBoe) U.S. Onshore 153.7 146.2 36.5 39.7 Canada 66.3 60.9 16.2 16.1 ---- ---- ---- ---- North American Onshore 220.0 207.1 52.7 55.8 U.S. Offshore 13.2 16.1 3.4 3.2 ------------- ---- ---- --- --- Total Oil Equivalent 233.2 223.2 56.1 59.0 -------------------- ----- ----- ---- ---- Average Daily Production ------------------------ Natural Gas (MMcf) U.S. Onshore 1,914.3 1,825.5 1,769.7 1,969.6 Canada 610.5 579.4 560.5 582.7 ----- ----- ----- ----- North American Onshore 2,524.8 2,404.9 2,330.2 2,552.3 U.S. Offshore 123.0 157.3 123.8 136.3 ------------- ----- ----- ----- ----- Total Natural Gas 2,647.8 2,562.2 2,454.0 2,688.6 ----------------- ------- ------- ------- ------- Oil (MBbls) U.S. Onshore 31.6 30.7 31.3 32.1 Canada 69.3 59.0 72.0 67.4 ---- ---- ---- ---- North American Onshore 100.9 89.7 103.3 99.5 U.S. Offshore 13.8 16.2 13.7 11.3 ------------- ---- ---- ---- ---- Total Oil 114.7 105.9 117.0 110.8 --------- ----- ----- ----- ----- Natural Gas Liquids (MBbls) U.S. Onshore 70.4 64.6 71.1 71.2 Canada 10.4 10.9 10.2 10.9 ---- ---- ---- ---- North American Onshore 80.8 75.5 81.3 82.1 U.S. Offshore 2.0 1.5 2.2 1.1 ------------- --- --- --- --- Total Natural Gas Liquids 82.8 77.0 83.5 83.2 ------------------------- ---- ---- ---- ---- Oil Equivalent (MBoe) U.S. Onshore 421.1 399.5 397.4 431.5 Canada 181.5 166.5 175.6 175.4 ----- ----- ----- ----- North American Onshore 602.6 566.0 573.0 606.9 U.S. Offshore 36.3 44.0 36.5 35.1 ------------- ---- ---- ---- ---- Total Oil Equivalent 638.9 610.0 609.5 642.0 -------------------- ----- ----- ----- -----
BENCHMARK PRICES Year Ended Quarter Ended (average prices) December 31, December 31, ----------- ------------- 2009 2008 2009 2008 ---- ---- ---- ---- Natural Gas ($/Mcf) – Henry Hub $3.99 $9.04 $4.16 $6.95 Oil ($/Bbl) – West Texas Intermediate (Cushing) $61.82 $99.75 $76.00 $58.51 ------ ------ ------ ------ REALIZED PRICES (excludes the effects of unrealized gains and losses from hedging) Quarter Ended December 31, 2009 Oil Gas NGLs Total (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe) --------- --------- --------- --------- U.S. Onshore $71.62 $3.65 $30.48 $27.35 Canada $58.43 $4.13 $41.88 $39.58 ------ ------ ------ ------ North American Onshore $62.43 $3.77 $31.92 $31.10 U.S. Offshore $74.45 $4.45 $37.59 $45.26 ------ ------ ------ ------ Realized price without hedges $63.84 $3.80 $32.07 $31.95 Cash settlements $ - $0.65 $ - $2.60 ------ ------ ------ ------ Realized price, including cash settlements $63.84 $4.45 $32.07 $34.55 ------ ------ ------ ------ Quarter Ended December 31, 2008 Oil Gas NGLs Total (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe) --------- --------- --------- --------- U.S. Onshore $55.11 $4.98 $20.52 $30.21 Canada $30.67 $6.02 $35.95 $34.02 ------ ----- ------ ------ North American Onshore $38.56 $5.22 $22.57 $31.31 U.S. Offshore $56.80 $6.95 $34.28 $46.31 ------ ----- ------ ------ Realized price without hedges $40.42 $5.30 $22.73 $32.13 Cash settlements $2.69 $0.52 $ - $2.62 ----- ----- ----- ----- Realized price, including cash settlements $43.11 $5.82 $22.73 $34.75 ------ ----- ------ ------ Year Ended December 31, 2009 Oil Gas NGLs Total (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe) --------- --------- --------- --------- U.S. Onshore $56.17 $3.14 $23.40 $22.41 Canada $47.35 $3.66 $33.09 $32.29 ------ ----- ------ ------ North American Onshore $50.11 $3.27 $24.65 $25.38 U.S. Offshore $60.75 $4.20 $27.42 $38.83 ------ ----- ------ ------ Realized price without hedges $51.39 $3.31 $24.71 $26.15 Cash settlements $ - $0.52 $ - $2.16 ------ ----- ------ ----- Realized price, including cash settlements $51.39 $3.83 $24.71 $28.31 ------ ----- ------ ------ Year Ended December 31, 2008 Oil Gas NGLs Total (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe) --------- --------- --------- --------- U.S. Onshore $95.63 $7.43 $40.97 $47.91 Canada $71.04 $8.17 $61.45 $57.65 ------ ----- ------ ------ North American Onshore $79.45 $7.61 $43.94 $50.78 U.S. Offshore $104.90 $9.53 $51.11 $74.55 ------- ----- ------ ------ Realized price without hedges $83.35 $7.73 $44.08 $52.49 Cash settlements $0.70 $(0.46) $ - $(1.78) ----- ------ ------ ------ Realized price, including cash settlements $84.05 $7.27 $44.08 $50.71 ------ ----- ------ ------
CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) Year Ended Quarter Ended December 31, December 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Revenues -------- Oil, gas, and NGL sales $6,097 $11,720 $1,791 $1,898 Net gain (loss) on oil and gas derivative financial instruments 384 (154) 194 257 Marketing and midstream revenues 1,534 2,292 460 397 -------------------------------- ----- ----- --- --- Total revenues 8,015 13,858 2,445 2,552 -------------- ----- ------ ----- ----- Expenses and other income, net ------------------------------ Lease operating expenses 1,670 1,851 404 486 Taxes other than income taxes 314 476 65 69 Marketing and midstream operating costs and expenses 1,022 1,611 327 272 Depreciation, depletion and amortization of oil and gas properties 1,832 2,948 418 840 Depreciation and amortization of non-oil and gas properties 276 255 68 70 Accretion of asset retirement obligation 91 80 23 18 General and administrative expenses 648 645 176 177 Restructuring costs 105 - 105 - Interest expense 349 329 86 68 Change in fair value of other financial instruments (106) 149 (86) 127 Reduction of carrying value of oil and gas properties 6,408 9,891 - 9,891 Other income, net (68) (217) (7) (113) ----------------- --- ---- --- ---- Total expenses and other income, net 12,541 18,018 1,579 11,905 ------------------------ ------ ------ ----- ------ (Loss) earnings from continuing operations before income tax expense (4,526) (4,160) 866 (9,353) ------------------------------------- ------ ------ --- ------ Income tax (benefit) expense ---------------------------- Current 241 441 106 (136) Deferred (2,014) (1,562) 203 (2,947) -------- ------ ------ --- ------ Total income tax (benefit) expense (1,773) (1,121) 309 (3,083) -------------------------- ------ ------ --- ------ (Loss) earnings from continuing operations (2,753) (3,039) 557 (6,270) ------------------------------- ------ ------ --- ------ Discontinued operations ----------------------- Earnings (loss) from discontinued operations before income taxes 322 1,258 124 (570) Discontinued operations income tax expense (benefit) 48 367 14 (24) ---------------------------------- --- --- --- --- Earnings (loss) from discontinued operations 274 891 110 (546) ----------------------- --- --- --- ---- Net (loss) earnings (2,479) (2,148) 667 (6,816) Preferred stock dividends - 5 - - ------------------------- --- --- --- --- Net (loss) earnings applicable to common stockholders $(2,479) $(2,153) $667 $(6,816) --------------------------------- ------- ------- ---- ------- Basic net (loss) earnings per share (Loss) earnings from continuing operations per share $(6.20) $(6.86) $1.25 $(14.19) Earnings (loss) from discontinued operations per share 0.62 2.01 0.25 (1.23) --------------------------------- ---- ---- ---- ----- Net (loss) earnings per share $(5.58) $(4.85) $1.50 $(15.42) ----------------------------- ------ ------ ----- ------- Diluted net earnings (loss) per share (Loss) earnings from continuing operations per share $(6.20) $(6.86) $1.25 $(14.19) Earnings (loss) from discontinued operations per share 0.62 2.01 0.24 (1.23) --------------------------------- ---- ---- ---- ----- Net (loss) earnings per share $(5.58) $(4.85) $1.49 $(15.42) ----------------------------- ------ ------ ----- ------- Weighted average common shares outstanding Basic 444 444 445 442 Diluted 446 447 447 444
CONSOLIDATED BALANCE SHEETS (in millions) December 31, ------------ 2009 2008 ---- ---- Assets ------ Current assets -------------- Cash and cash equivalents $646 $195 Accounts receivable 1,208 1,300 Derivative financial instruments, at fair value 211 282 Current assets held for sale 657 392 Other current assets 270 515 -------------------- --- --- Total current assets 2,992 2,684 -------------------- ----- ----- Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($4,078 and $4,248 excluded from amortization in 2009 and 2008, respectively) 60,475 53,391 Less accumulated depreciation, depletion and amortization 41,708 31,360 ---------------------------------------- ------ ------ Property and equipment, net 18,767 22,031 --------------------------- ------ ------ Goodwill 5,930 5,511 Long-term assets held for sale 1,250 1,128 Other long-term assets 747 554 ---------------------- --- --- Total Assets $29,686 $31,908 ------------ ------- ------- Liabilities and Stockholders' Equity ------------------------------------ Current liabilities ------------------- Accounts payable - trade $1,137 $1,612 Revenues and royalties due to others 486 490 Short-term debt 1,432 180 Current portion of asset retirement obligation, at fair value 95 138 Current liabilities associated with assets held for sale 234 365 Other current liabilities 418 350 ------------------------- --- --- Total current liabilities 3,802 3,135 ------------------------- ----- ----- Long-term debt 5,847 5,661 Asset retirement obligation, at fair value 1,418 1,249 Liabilities associated with assets held for sale 213 166 Other long-term liabilities 937 1,023 Deferred income taxes 1,899 3,614 --------------------- ----- ----- Stockholders' equity -------------------- Common stock 45 44 Additional paid-in capital 6,527 6,257 Retained earnings 7,613 10,376 Accumulated other comprehensive income 1,385 383 -------------------------------------- ----- --- Total Stockholders' Equity 15,570 17,060 -------------------------- ------ ------ Total Liabilities and Stockholders' Equity $29,686 $31,908 ------------------------------------------ ------- ------- Common Shares Outstanding 447 444 ------------------------- --- ---
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended (in millions) December 31, ------------ 2009 2008 ---- ---- Cash Flows From Operating Activities ------------------------------------ Net loss $(2,479) $(2,148) Net earnings from discontinued operations (274) (891) Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: Depreciation, depletion and amortization 2,108 3,203 Deferred income tax benefit (2,014) (1,562) Reduction of carrying value of oil and gas properties 6,408 9,891 Net unrealized loss (gain) on oil and gas derivative financial instruments 121 (243) Other noncash charges 222 410 Net decrease (increase) in working capital 149 (207) Increase in long-term other assets (6) (53) (Decrease) increase in long-term other liabilities (3) 48 -------------------------------------- --- --- Cash provided by operating activities - continuing operations 4,232 8,448 Cash provided by operating activities - discontinued operations 505 960 ---------------------------------------------------- --- --- Net cash provided by operating activities 4,737 9,408 ----------------------------------------- ----- ----- Cash Flows From Investing Activities ------------------------------------ Proceeds from sales of property and equipment 34 117 Capital expenditures (4,879) (8,843) Proceeds from exchange of investment in Chevron Corporation common stock - 280 Purchases of short-term investments - (50) Sales of long-term investments 7 300 Other (17) - ----- --- --- Cash used in investing activities -continuing operations (4,855) (8,196) Cash (used in) provided by investing activities -discontinued operations (499) 1,323 ----------------------------------------------- ---- ----- Net cash used in investing activities (5,354) (6,873) ------------------------------------- ------ ------ Cash Flows From Financing Activities ------------------------------------ Proceeds from borrowings of long term debt, net of issuance costs 1,187 - Credit facility repayments - (3,191) Credit facility borrowings - 1,741 Net commercial paper borrowings 426 1 Debt repayments (178) (1,031) Redemption of preferred stock - (150) Proceeds from stock option exercises 42 116 Repurchases of common stock - (665) Dividends paid on common and preferred stock (284) (289) Excess tax benefits related to share-based compensation 8 60 ------------------------------------------ --- --- Net cash provided by (used in) financing activities 1,201 (3,408) --------------------------------------------------- ----- ------ Effect of exchange rate changes on cash 43 (116) --------------------------------------- --- ---- Net increase (decrease) in cash and cash equivalents 627 (989) Cash and cash equivalents at beginning of period (including assets held for sale) 384 1,373 ------------------------------------------------ --- ----- Cash and cash equivalents at end of period (including assets held for sale) $1,011 $384 ------------------------------------------ ------ ----
RESERVES RECONCILIATION Total North American Onshore ------------------------------- ------------------------------- Oil Gas NGLs Total Oil Gas NGLs Total (MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe) -------- ----- -------- ------- -------- ----- -------- ------- As of December 31, 2008: Proved developed 243 8,038 292 1,875 221 7,826 291 1,816 Proved undevel- oped 58 1,841 60 424 46 1,663 59 382 ---- ----- ---- ----- ---- ----- --- ----- Total proved 301 9,879 352 2,299 267 9,489 350 2,198 ---- ----- ---- ----- ---- ----- --- ----- Revisions due to prices 302 (694) (9) 177 300 (690) (9) 176 Revisions other than price (7) 43 37 38 (8) 105 36 46 Extensions and discoveries 133 1,518 71 458 131 1,454 71 446 Purchase of reserves - 7 - 1 - 7 - 1 Production (42) (966) (30) (233) (37) (921) (29) (220) Sale of reserves (1) (30) - (7) - (29) - (6) As of December 31, 2009: Proved developed 289 7,845 326 1,922 268 7,660 325 1,869 Proved undevel- oped 397 1,912 95 811 385 1,755 94 772 ---- ----- ---- ----- ---- ----- --- ----- Total Proved 686 9,757 421 2,733 653 9,415 419 2,641 ---- ----- ---- ----- ---- ----- --- ----- U.S. Onshore Canada ------------------------------- ------------------------------- Oil Gas NGLs Total Oil Gas NGLs Total (MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe) -------- ----- -------- ------- -------- ----- -------- ------- As of December 31, 2008: Proved devel- oped 111 6,469 260 1,449 110 1,357 31 367 Proved undevel- oped 22 1,510 55 328 24 153 4 54 ---- ----- ---- ----- ---- ----- --- ----- Total proved 133 7,979 315 1,777 134 1,510 35 421 ---- ----- ---- ----- ---- ----- --- ----- Revisions due to prices 9 (661) (11) (113) 291 (29) 2 289 Revisions other than price - 119 36 57 (8) (14) - (11) Extensions and discoveries 9 1,387 70 311 122 67 1 135 Purchase of reserves - 1 - - - 6 - 1 Production (12) (698) (25) (154) (25) (223) (4) (66) Sale of reserves - - - - - (29) - (6) As of December 31, 2009: Proved devel- oped 119 6,447 293 1,486 149 1,213 32 383 Proved undevel- oped 20 1,680 92 392 365 75 2 380 ---- ----- ---- ----- ---- ----- --- ----- Total Proved 139 8,127 385 1,878 514 1,288 34 763 ---- ----- ---- ----- ---- ----- --- ----- U.S. Offshore ------------------------------ Oil Gas NGLs Total (MMBbls) (Bcf) (MMBbls) (MMBoe) ------------------------------- As of December 31, 2008: Proved developed 22 212 1 59 Proved undeveloped 12 178 1 42 ---- ----- ---- ----- Total proved 34 390 2 101 ---- ----- ---- ----- Revisions due to prices 2 (4) - 1 Revisions other than price 1 (62) 1 (8) Extensions and discoveries 2 64 - 12 Purchase of reserves - - - - Production (5) (45) (1) (13) Sale of reserves (1) (1) - (1) As of December 31, 2009: Proved developed 21 185 1 53 Proved undeveloped 12 157 1 39 ---- ----- ---- ----- Total Proved 33 342 2 92 ---- ----- ---- -----
COSTS INCURRED Total North American Onshore (in millions) Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Property Acquisition Costs: -------------------- Total proved $35 $822 $35 $822 ------------ --- ---- --- ---- Total unproved 135 1,763 124 1,578 -------------- --- ----- --- ----- Exploration and development costs 3,917 6,881 3,120 5,692 ------------------ ----- ----- ----- ----- Costs Incurred $4,087 $9,466 $3,279 $8,092 -------------- ------ ------ ------ ------ U.S. Onshore Canada Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Property Acquisition Costs: -------------------- Total proved $17 $822 $18 $- ------------ --- ---- --- --- Total unproved 52 1,226 72 352 -------------- --- ----- --- --- Exploration and development costs 2,133 4,388 987 1,304 ------------------ ----- ----- --- ----- Costs Incurred $2,202 $6,436 $1,077 $1,656 -------------- ------ ------ ------ ------ U.S. Offshore Year Ended December 31, ----------------------- 2009 2008 ---- ---- Property Acquisition Costs: --------------------------- Total proved $- $- ------------ --- --- Total unproved 11 185 -------------- --- --- Exploration and development costs 797 1,189 --------------------------------- --- ----- Costs Incurred $808 $1,374 -------------- ---- ------ Devon capitalizes certain general and administrative expenses related to property acquisition, exploration and development activities. These capitalized expenses were $332 million and $337 million in 2009 and 2008, respectively. Devon also capitalizes certain interest expenses related to property acquisition, exploration and development activities. These capitalized expenses were $74 million and $71 million in 2009 and 2008, respectively. These capitalized general and administrative expenses and interest expenses are included in the costs shown in the preceding tables.
DRILLING ACTIVITY Year Ended December 31, ------------ 2009 2008 ---- ---- Exploration Wells Drilled ------------------------- U.S. Onshore 11 22 Canada 42 90 ------ --- --- North American Onshore 53 112 U.S. Offshore 1 6 ------------- --- --- Total 54 118 ----- --- --- Exploration Wells Success Rate ------------------------------ U.S. Onshore 82% 91% Canada 100% 96% ------ --- --- North American Onshore 96% 95% U.S. Offshore 0% 17% ------------- --- --- Total 94% 91% ----- --- --- Development Wells Drilled ------------------------- U.S. Onshore 734 1,622 Canada 343 631 ------ --- --- North American Onshore 1,077 2,253 U.S. Offshore 4 17 ------------- --- --- Total 1,081 2,270 ----- ----- ----- Development Wells Success Rate ------------------------------ U.S. Onshore 100% 98% Canada 100% 99% ------ --- --- North American Onshore 100% 99% U.S. Offshore 50% 94% ------------- --- --- Total 99% 99% ----- --- --- Total Wells Drilled ------------------- U.S. Onshore 745 1,644 Canada 385 721 ------ --- --- North American Onshore 1,130 2,365 U.S. Offshore 5 23 ------------- --- --- Total 1,135 2,388 ----- ----- ----- Total Wells Success Rate ------------------------ U.S. Onshore 99% 98% Canada 100% 99% ------ --- --- North American Onshore 99% 98% U.S. Offshore 40% 74% ------------- --- --- Total 99% 98% ----- --- --- COMPANY OPERATED RIGS Year Ended December 31, ------------ 2009 2008 ---- ---- Number of Company Operated Rigs Running --------------------------------------- U.S. Onshore 46 78 Canada 17 13 ------ --- --- North American Onshore 63 91 U.S. Offshore 1 4 ------------- --- --- Total 64 95 ----- --- ---
CAPITAL EXPENDITURES (in millions) Quarter Ended December 31, 2009 U.S. U.S. Onshore Canada Offshore Total ------- ------ -------- ----- Capital Expenditures -------------------- Exploration $82 139 29 $250 Development 397 222 133 752 ----------- --- --- --- --- Exploration and development capital $479 361 162 $1,002 Capitalized G&A 80 Capitalized interest 18 Discontinued operations 139 Midstream capital 98 Other capital 121 ------------- --- Total Capital Expenditures $1,458 -------------------------- ------ CAPITAL EXPENDITURES (in millions) Year Ended December 31, 2009 U.S. U.S. Onshore Canada Offshore Total ------- ------ -------- ----- Capital Expenditures -------------------- Exploration $157 215 182 554 Development 1,835 819 534 3,188 ----------- ----- --- --- ----- Exploration and development capital $1,992 1,034 716 3,742 Capitalized G&A 332 Capitalized interest 74 Discontinued operations 446 Midstream capital 305 Other capital 197 ------------- --- Total Capital Expenditures 5,096 -------------------------- -----
PRODUCTION FROM DISCONTINUED OPERATIONS Year Ended Quarter Ended December 31, December 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Production from Discontinued Operations --------------------------------------- Oil (MMBbls) 15.7 17.4 4.1 3.4 Natural Gas (Bcf) 1.5 4.8 0.5 0.7 ----------------- --- --- --- --- Total Oil Equivalent (MMBoe) 16.0 18.2 4.2 3.5 ---------------------------- ---- ---- --- --- STATEMENTS OF DISCONTINUED OPERATIONS Year Ended Quarter Ended (in millions) December 31, December 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Revenues -------- Total operating revenues $945 $1,702 $299 $158 ------------------------ ---- ------ ---- ---- Expenses and other income, net ------------------------------ Operating expenses 484 769 127 234 Restructuring costs 48 - 48 - Reduction of carrying value of oil and gas properties 108 494 - 494 Gain on sale of oil and gas properties (17) (819) - - -------------------------------------- --- ---- --- --- Total expenses and other income, net 623 444 175 728 ------------------------------------ --- --- --- --- Earnings (loss) before income tax expense 322 1,258 124 (570) ----------------------------------------- --- ----- --- ---- Income tax expense (benefit) ---------------------------- Current 44 755 24 (54) Deferred 4 (388) (10) 30 -------- --- ---- --- --- Total income tax expense (benefit) 48 367 14 (24) ---------------------------------- --- --- --- --- Earnings (loss) from discontinued operations $274 $891 $110 $(546) --------------------------------- ---- ---- ---- ----- RESERVES DATA FOR DISCONTINUED OPERATIONS Oil Gas NGLs Total (MMBbls) (Bcf) (MMBbls) (MMBoe) -------- ----- -------- ------- As of December 31, 2008: ------------------------ Proved developed 58 6 - 59 Proved undeveloped 70 - - 70 ------------------ --- --- --- --- Total proved 128 6 - 129 Revisions due to prices (6) - - (6) Revisions other than price - 3 - - Extensions and discoveries 1 - - 1 Production (16) (1) - (16) As of December 31, 2009: ------------------------ Proved developed 54 8 - 55 Proved undeveloped 53 - - 53 ------------------ --- --- --- --- Total proved 107 8 - 108 ------------ --- --- --- --- COSTS INCURRED FOR DISCONTINUED OPERATIONS (in millions) Year Ended December 31, ----------------------- 2009 2008 ---- ---- Costs Incurred $450 $617 -------------- ---- ----
NON-GAAP FINANCIAL MEASURES The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non- GAAP financial measures. (GAAP refers to generally accepted accounting principles.) The company must reconcile the Non-GAAP financial measure to related GAAP information. Cash flow before balance sheet changes is a Non- GAAP financial measure. Devon believes cash flow before balance sheet changes is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt. Cash flow before balance sheet changes is also used by certain securities analysts as a measure of Devon's financial results. RECONCILIATION TO GAAP INFORMATION Year Ended Quarter Ended (in millions) December 31, December 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Net Cash Provided By Operating Activities (GAAP) $4,737 $9,408 $1,445 $1,227 ---------------------------- ------ ------ ------ ------ Changes in assets and liabilities -continuing operations (140) 212 (74) 496 Changes in assets and liabilities -discontinued operations 90 (6) 15 13 --------------------------------- --- --- --- --- Cash flow before balance sheet changes (Non-GAAP) $4,687 $9,614 $1,386 $1,736 -------------------------------------- ------ ------ ------ ------ Devon believes that using net debt for the calculation of "net debt to adjusted capitalization" provides a better measure than using debt. Devon defines net debt as debt less cash and cash equivalents. Devon believes that because cash and cash equivalents can be used to repay indebtedness, netting cash and cash equivalents against debt provides a clearer picture of the future demands on cash to repay debt. RECONCILIATION TO GAAP INFORMATION (in millions) December 31, ------------ 2009 2008 ---- ---- Total debt (GAAP) $7,279 $5,841 Adjustments: Cash and cash equivalents (including cash from discontinued operations) 1,011 384 ----- --- Net debt (Non-GAAP) $6,268 $5,457 ------------------- ------ ------ Total debt $7,279 $5,841 Stockholders' equity 15,570 17,060 -------------------- ------ ------ Total capitalization (GAAP) $22,849 $22,901 --------------------------- ------- ------- Net debt $6,268 $5,457 Stockholders' equity 15,570 17,060 -------------------- ------ ------ Adjusted capitalization (Non-GAAP) $21,838 $22,517 ---------------------------------- ------- -------
Drill-bit capital is defined as costs incurred less proved acquisition costs, unproved acquisition costs resulting from business combinations and other significant similar transactions. Drill-bit capital is a Non-GAAP measure. Devon believes drill-bit capital is relevant because it provides additional insight into costs associated with current year exploration and and development activity. It should be noted that the actual costs of reserves added through Devon's drilling program will differ, sometimes significantly, from the direct comparison of capital spent and reserves added in any given period due to the timing of capital expenditures and reserve bookings. Certain securities analysts also use this methodology to measure Devon's performance. RECONCILIATION TO GAAP INFORMATION Total North America Onshore (in millions) Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Costs Incurred (GAAP) $4,087 $9,466 $3,279 $8,092 --------------------- ------ ------ ------ ------ Less: Proved acquisition costs 35 822 35 822 ------------------ --- --- --- --- Drill-bit capital (Non-GAAP) $4,052 $8,644 $3,244 $7,270 ----------------- ------ ------ ------ ------ U.S. Onshore Canada Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Costs Incurred (GAAP) $2,202 $6,436 $1,077 $1,656 --------------------- ------ ------ ------ ------ Less: Proved acquisition costs 17 822 18 - ------------ --- --- --- --- Drill-bit capital (Non-GAAP) $2,185 $5,614 $1,059 $1,656 ----------------- ------ ------ ------ ------ U.S. Offshore Year Ended December 31, ----------------------- 2009 2008 ---- ---- Costs Incurred (GAAP) $808 $1,374 --------------------- ---- ------ Less: Proved acquisition costs - - ------------------------ --- --- Drill-bit capital (Non-GAAP) $808 $1,374 ---------------------------- ---- ------
SOURCE Devon Energy Corporation
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