OKLAHOMA CITY, Feb. 7 /PRNewswire-FirstCall/ -- Devon Energy
Corporation (NYSE: DVN) today reported net earnings of $2.8 billion for the
year ended December 31, 2006. Earnings per share were $6.42 per common
share ($6.34 per diluted common share). In 2005 the company earned $2.9
billion, or $6.38 per common share ($6.26 per diluted common share).
For the quarter ended December 31, 2006, Devon reported net earnings of
$582 million, or $1.31 per common share ($1.29 per diluted common share).
This compares to reported earnings of $970 million or $2.18 per common
share ($2.14 per diluted common share) in the fourth quarter of 2005.
In aggregate, items securities analysts typically exclude from their
published estimates reduced reported fourth-quarter 2006 net earnings by
$28 million, or seven cents per diluted share. These items include non-cash
charges, unrealized gains and other items discussed in detail later in this
news release.
"From almost every perspective, 2006 was an outstanding year for
Devon," commented J. Larry Nichols, chairman and chief executive officer.
"We invested over $5 billion in exploration and development projects adding
more than 400 million barrels of proved reserves. These investments
fortified our North American onshore production base and moved our major
development projects toward completion in 2007. In addition, our successful
production test in the Gulf of Mexico's Lower Tertiary Trend validated our
long-term growth strategy and set the stage to extend Devon's growth
trajectory well into the next decade."
Oil and Gas Reserves Climb to Record Levels
Capital and Reserve Summary
Year Ended
December 31,
2006 2005
Drill-bit Capital (in millions) $5,236 $3,952
Reserve Data (MMBoe)
Discoveries and extensions 433 400
Revisions other than price (6) 37
Drill-bit and performance reserve
additions 427 437
Devon's estimated proved reserves at December 31, 2006, were a record
2,376 million oil-equivalent barrels (Boe). This is a 13 percent increase
over year-end 2005 estimated proved reserves. Reserve additions from all
sources before price revisions were 533 million Boe, more than double the
company's annual oil and gas production of 214 million Boe. During 2006,
Devon's reserve life index (proved reserves divided by annual production)
increased from 9.4 years to 11.1 years.
Devon added 427 million Boe through successful drilling (discoveries,
extensions and performance revisions) in 2006. The company also acquired
106 million Boe in 2006, primarily through the purchase of Chief's Barnett
Shale natural gas properties. Revisions, largely related to changes in
year-end oil and gas prices, reduced 2006 proved reserves by 50 million
Boe.
Proved developed reserves were 1,674 million Boe at December 31, 2006,
or 70 percent of proved reserves. Year-end reserves comprised 708 million
barrels of crude oil, 8.4 trillion cubic feet of natural gas and 275
million barrels of natural gas liquids.
Active Year Yields Many Exploration and Development Achievements
Devon drilled more than 2,400 wells in 2006, with a success rate of 98
percent. Following are highlights from the year's operations activity.
* Devon dramatically increased its presence in the Barnett Shale in
north Texas in 2006 by completing the $2.2 billion acquisition of
Chief. The acquired properties include estimated proved reserves of
approximately 600 billion cubic feet of natural gas equivalent and
leasehold totaling 169,000 net acres with some 2,000 additional
drilling locations.
* The company's United States onshore properties, including the
Barnett Shale and the Groesbeck and Carthage areas in east Texas,
showed strong production growth in 2006. Total fourth-quarter
production for the U.S. onshore increased seven percent in 2006
compared with 2005.
* Devon and its co-owners conducted a successful production test of
the deepwater Jack No. 2 well in the Gulf of Mexico's Lower
Tertiary Trend. During the test, the Jack No. 2 flowed at a
sustained rate of 6,000 barrels of oil per day from approximately
40 percent of the total net pay measured in the well. The
successful production test was an important milestone in moving the
Jack project toward sanctioning and development. Devon has a 25
percent working interest in the Jack prospect.
* Also in the Lower Tertiary Trend, the company increased its working
interest in the Cascade project from 25 percent to 50 percent.
Devon and equal-partner Petrobras plan to develop Cascade using a
floating production, storage and offloading vessel. The partners
anticipate first production from Cascade in late 2009.
* Elsewhere in the Lower Tertiary Trend, Devon and its co-owners
announced an oil discovery on the Kaskida prospect. Kaskida is
Devon's fourth discovery in the Lower Tertiary Trend and its first in
the Keathley Canyon deepwater lease area. Devon has identified 12
additional exploratory prospects on its acreage in Keathley Canyon. The
company believes that Kaskida, in which it has a 20 percent working
interest, is the largest of its four Lower Tertiary discoveries to
date.
* In the fourth quarter of 2006, the company announced a Miocene-aged oil
discovery on the Mission Deep prospect in the Gulf of Mexico. The well,
in 7,300 feet of water, was drilled to 25,000 feet and encountered more
than 250 feet of net oil pay. The company has 15 additional prospects
in its deepwater Miocene inventory. Devon has a 50 percent working
interest in Mission Deep, which is operated by Anadarko.
* At the 100 percent-owned Jackfish thermal heavy oil project in Canada,
facilities construction and drilling continued in 2006. Devon expects
to commence steam injection at Jackfish in the second quarter of 2007,
with full production of 35,000 barrels per day anticipated by the end
of 2008.
* Construction and fabrication for the 50 million barrel Polvo oil
development project in Brazil continued on schedule throughout 2006.
Devon expects first production from Polvo in mid-2007. Devon operates
Polvo with a 60 percent working interest.
African Operations Designated for Divestiture
In the fourth quarter of 2006, Devon announced its intention to divest
its assets and terminate operations in Egypt. In accordance with accounting
standards, Devon reclassified the assets, liabilities and results of its
operations in Egypt as discontinued operations for all accounting periods
presented. Therefore, Devon's annual and quarterly results from continuing
operations for all periods presented in this release exclude results
attributable to Egypt. 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 is a table
of revenues, expenses and production categories and the amounts
reclassified as discontinued operations for each period presented.
Early in the first quarter of 2007, the company announced that it plans
to divest its assets and terminate operations in West Africa. Therefore,
commencing with reporting for the first quarter of 2007, Devon will also
reclassify the assets, liabilities and results of its operations in West
Africa as discontinued operations.
Oil, Gas and Liquids Sales Remain Steady
Sales of oil, gas and natural gas liquids increased less than one
percent to $8.9 billion in the year ended December 31, 2006, compared with
the year ended December 31, 2005. The positive effects of higher realized
oil and natural gas liquids prices were largely offset by lower realized
natural gas prices and a decline in oil and gas production.
Combined oil, gas and natural gas liquids production averaged 587
thousand Boe per day in 2006. This was four percent less than Devon's 2005
average daily production of 613 thousand Boe per day. This decrease in 2006
production was driven by property divestitures completed during 2005,
partially offset by growth in production from retained properties during
2006.
Devon's combined production of oil, gas and natural gas liquids
production increased throughout 2006. Fourth-quarter production climbed
seven percent from 574 thousand Boe per day in 2005 to 613 thousand Boe per
day in 2006.
Marketing and midstream operating profit totaled $448 million in 2006,
some $2 million less than Devon's marketing and midstream operating profit
for 2005. Marketing and midstream revenues decreased by $100 million while
related expenses decreased by $98 million.
Cash Flow Before Balance Sheet Changes Reaches Record Levels
Cash flow before balance sheet changes in 2006 climbed seven percent to
a record $6.1 billion. With cash flow, cash on hand and short-term
borrowings under the company's commercial paper facility, Devon funded more
than $8.0 billion of capital expenditures, including the $2.2 billion
property acquisition of Chief, and repurchased $253 million of common
stock. The company ended the year with cash and short-term investments of
approximately $1.3 billion.
At December 31, 2006, net debt to adjusted capitalization was 24
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 2006 were as
follows:
* A change in fair value of derivative financial instruments decreased
full-year earnings by $178 million pre-tax ($114 million after tax) and
decreased fourth-quarter earnings by $97 million pre-tax ($62 million
after tax).
* An unrealized gain on natural gas derivative instruments increased
full-year earnings by $37 million pre-tax ($24 million after tax) and
increased fourth-quarter earnings by $32 million pre-tax ($21 million
after tax).
* A reduction in Canadian statutory income tax rates increased full-year
after-tax earnings by $243 million.
* A new income-based tax in the state of Texas decreased full-year after-
tax earnings by $39 million.
* A reduction in the carrying value of oil and gas properties reduced
full-year earnings by $152 million pre-tax ($129 million after tax).
* The decision to exit Egypt generated financial benefits that increased
full-year and fourth-quarter earnings by $5 million pre-tax ($13
million after tax).
The following tables summarize the full-year and fourth-quarter effects
of these items on 2006 earnings and income taxes. Included in the tables
are the tax effects resulting from an income tax accrual adjustment that
did not affect net earnings.
Summary of Items Typically Excluded by Securities
Analysts - Full Year 2006
(in millions)
Cash Flow
Before
Balance
Pre-tax After-tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Change in fair
value of financial
instruments $(178) --- (64) (64) (114) ---
Unrealized gain on
natural gas
derivative
instruments 37 --- 13 13 24 ---
Change in Canadian
income tax rate --- --- (243) (243) 243 ---
Texas income-based
tax --- --- 39 39 (39) ---
Reduction in the
carrying value
of properties (152) --- (23) (23) (129) ---
Financial benefits
generated by decision
to exit Egypt 5 --- (8) (8) 13 ---
Income tax accrual
adjustment --- (35) 35 --- --- 35
Totals $(288) (35) (251) (286) (2) 35
In aggregate, these items decreased full-year 2006 net earnings by $2
million, or one cent per common share (no effect per diluted share). In
addition, a reclassification of deferred tax benefits increased cash flow
before balance sheet changes by $35 million.
Summary of Items Typically Excluded by Securities
Analysts - Fourth Quarter 2006
(in millions)
Cash Flow
Before
Balance
Pre-tax After-tax Sheet
Earnings Income Tax Effect Earnings Changes
Effect Current Deferred Total Effect Effect
Change in fair value
of financial
instruments $(97) --- (35) (35) (62) ---
Unrealized gain on
natural gas
derivatives 32 --- 11 11 21 ---
Financial benefits
generated by
decision to exit
Egypt 5 --- (8) (8) 13 ---
Totals $(60) --- (32) (32) (28) ---
In aggregate, these items decreased fourth-quarter 2006 net earnings by
$28 million, or six cents per common share (seven cents per diluted share).
Conference Call to be Webcast Today
Devon will discuss its 2006 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 http://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, inflation or lack of
availability of goods and services, environmental risks, drilling risks and
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.
Devon Energy Corporation is an Oklahoma City-based independent energy
company engaged in oil and gas exploration and production. Devon is one of
the world's leading independent oil and gas producers and is included in
the S&P 500 Index. For more information about Devon, please visit our
website at http://www.devonenergy.com .
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION DATA (net of royalties)
All periods exclude properties Year Ended Quarter Ended
discontinued in 2006 December 31, December 31,
2006 2005 2006 2005
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 487.5 462.7 129.5 119.1
U.S. Offshore 78.6 92.5 21.4 15.0
Total U.S. 566.1 555.2 150.9 134.1
Canada 240.4 261.0 57.8 61.3
International 8.1 10.8 1.8 3.2
Total Natural Gas 814.6 827.0 210.5 198.6
Oil (MMBbls)
U.S. Onshore 11.1 12.1 2.7 2.9
U.S. Offshore 8.5 13.4 2.0 2.3
Total U.S. 19.6 25.5 4.7 5.2
Canada 12.8 13.1 3.4 3.3
International 22.6 23.4 7.2 5.4
Total Oil 55.0 62.0 15.3 13.9
Natural Gas Liquids (MMBbls)
U.S. Onshore 18.1 17.3 4.7 4.3
U.S. Offshore 0.5 0.8 0.1 0.0
Total U.S. 18.6 18.1 4.8 4.3
Canada 4.7 5.3 1.1 1.4
International --- 0.3 --- 0.1
Total Natural Gas Liquids 23.3 23.7 5.9 5.8
Oil Equivalent (MMBoe)
U.S. Onshore 110.5 106.6 29.1 27.1
U.S. Offshore 22.0 29.6 5.6 4.8
Total U.S. 132.5 136.2 34.7 31.9
Canada 57.6 61.9 14.2 14.9
International 23.9 25.5 7.5 6.0
Total Oil Equivalent 214.0 223.6 56.4 52.8
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,335.6 1,267.6 1,407.5 1,295.0
U.S. Offshore 215.4 253.5 232.8 163.1
Total U.S. 1,551.0 1,521.1 1,640.3 1,458.1
Canada 658.7 715.1 627.9 665.9
International 22.1 29.5 19.5 34.2
Total Natural Gas 2,231.8 2,265.7 2,287.7 2,158.2
Oil (MBbls)
U.S. Onshore 30.5 33.2 29.9 31.6
U.S. Offshore 23.1 36.6 21.2 25.0
Total U.S. 53.6 69.8 51.1 56.6
Canada 35.2 36.0 37.1 35.8
International 61.8 64.3 78.2 58.2
Total Oil 150.6 170.1 166.4 150.6
Natural Gas Liquids (MBbls)
U.S. Onshore 49.6 47.5 51.4 46.9
U.S. Offshore 1.4 2.2 1.2 0.4
Total U.S. 51.0 49.7 52.6 47.3
Canada 12.9 14.5 12.2 15.3
International --- 0.9 --- 0.8
Total Natural Gas Liquids 63.9 65.1 64.8 63.4
Oil Equivalent (MBoe)
U.S. Onshore 302.7 292.0 315.9 294.3
U.S. Offshore 60.4 81.0 61.2 52.5
Total U.S. 363.1 373.0 377.1 346.8
Canada 157.9 169.7 153.9 162.1
International 65.5 70.0 81.5 64.7
Total Oil Equivalent 586.5 612.7 612.5 573.6
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
FULL-YEAR PRODUCTION DATA - RETAINED
PROPERTIES
Both periods exclude properties
divested in 2005 and discontinued in Year Ended
2006 December 31, YOY
2006 2005 % Change
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 487.5 455.2 7%
U.S. Offshore 78.6 80.3 -2%
Total U.S. 566.1 535.5 6%
Canada 240.4 246.6 -3%
International 8.1 10.8 -25%
Total Natural Gas 814.6 792.9 3%
Oil (MMBbls)
U.S. Onshore 11.1 11.6 -4%
U.S. Offshore 8.5 10.7 -21%
Total U.S. 19.6 22.3 -12%
Canada 12.8 12.4 3%
International 22.6 23.4 -3%
Total Oil 55.0 58.1 -5%
Natural Gas Liquids (MMBbls)
U.S. Onshore 18.1 17.1 6%
U.S. Offshore 0.5 0.6 -17%
Total U.S. 18.6 17.7 5%
Canada 4.7 5.1 -8%
International --- 0.3 -100%
Total Natural Gas Liquids 23.3 23.1 1%
Oil Equivalent (MMBoe)
U.S. Onshore 110.5 104.5 6%
U.S. Offshore 22.0 24.8 -11%
Total U.S. 132.5 129.3 2%
Canada 57.6 58.6 -2%
International 23.9 25.5 -6%
Total Oil Equivalent 214.0 213.4 0%
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,335.6 1,247.1 7%
U.S. Offshore 215.4 220.1 -2%
Total U.S. 1,551.0 1,467.2 6%
Canada 658.7 675.5 -2%
International 22.1 29.5 -25%
Total Natural Gas 2,231.8 2,172.2 3%
Oil (MBbls)
U.S. Onshore 30.5 31.8 -4%
U.S. Offshore 23.1 29.4 -21%
Total U.S. 53.6 61.2 -12%
Canada 35.2 33.9 4%
International 61.8 64.3 -4%
Total Oil 150.6 159.4 -6%
Natural Gas Liquids (MBbls)
U.S. Onshore 49.6 46.6 6%
U.S. Offshore 1.4 1.7 -18%
Total U.S. 51.0 48.3 6%
Canada 12.9 14.0 -8%
International --- 0.9 -100%
Total Natural Gas Liquids 63.9 63.2 1%
Oil Equivalent (MBoe)
U.S. Onshore 302.7 286.3 6%
U.S. Offshore 60.4 67.6 -11%
Total U.S. 363.1 353.9 3%
Canada 157.9 160.7 -2%
International 65.5 70.0 -6%
Total Oil Equivalent 586.5 584.6 0%
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
REALIZED PRICE DATA Year Ended Quarter Ended
(average realized prices) December 31, December 31,
2006 2005 2006 2005
Realized Prices
Natural Gas ($/Mcf)
U.S. Onshore $5.90 $6.90 $5.59 $9.41
U.S. Offshore $7.24 $7.95 $6.72 $11.15
Total U.S. $6.09 $7.08 $5.75 $9.61
Canada $6.05 $6.95 $5.78 $9.36
International $3.95 $3.75 $3.11 $2.74
Total Natural Gas $6.06 $6.99 $5.74 $9.42
Oil ($/Bbl)
U.S. Onshore $60.70 $51.23 $54.50 $55.58
U.S. Offshore $64.24 $32.96 $57.35 $31.08
Total U.S. $62.23 $41.64 $55.68 $44.75
Canada $46.94 $26.88 $41.08 $26.09
International $61.36 $40.26 $56.58 $41.25
Total Oil $58.30 $38.00 $52.85 $38.96
Natural Gas Liquids ($/Bbl)
U.S. Onshore $29.26 $26.50 $27.57 $31.16
U.S. Offshore $35.43 $30.61 $28.38 $47.72
Total U.S. $29.42 $26.68 $27.59 $31.29
Canada $42.67 $37.19 $37.78 $41.13
International $--- $22.81 $--- $21.07
Total Natural Gas Liquids $32.10 $28.96 $29.51 $33.53
Oil Equivalent ($/Boe)
U.S. Onshore $36.94 $40.10 $34.57 $52.34
U.S. Offshore $51.23 $40.58 $45.96 $49.73
Total U.S. $39.31 $40.21 $36.42 $51.94
Canada $39.21 $38.17 $36.45 $48.10
International $59.24 $38.80 $55.07 $38.81
Total Oil Equivalent $41.51 $39.48 $38.91 $49.38
BENCHMARK PRICES Year Ended Quarter Ended
(average prices) December 31, December 31,
2006 2005 2006 2005
Benchmark Prices
Natural Gas ($/Mcf) - Henry Hub $7.24 $8.64 $6.56 $13.00
Oil ($/Bbl) - West Texas
Intermediate (Cushing) $66.22 $56.57 $60.19 $60.00
PRICE DIFFERENTIALS, EXCLUDING
EFFECTS OF HEDGES
(average floating price
differentials from benchmark Year Ended Quarter Ended
prices) December 31, December 31,
2006 2005 2006 2005
Price Differentials
Natural Gas ($/Mcf)
U.S. Onshore $(1.41) $(1.71) $(1.21) $(3.54)
U.S. Offshore $0.00 $(0.42) $0.16 $(0.50)
Total U.S. $(1.22) $(1.50) $(1.02) $(3.20)
Canada $(1.02) $(1.46) $(0.61) $(3.26)
International $(1.15) $(3.90) $(1.90) $(9.94)
Total Natural Gas $(1.16) $(1.50) $(0.91) $(3.29)
Oil ($/Bbl)
U.S. Onshore $(5.52) $(4.85) $(5.69) $(4.42)
U.S. Offshore $(1.96) $(5.45) $(2.84) $(4.85)
Total U.S. $(3.99) $(5.16) $(4.51) $(4.61)
Canada $(19.28) $(15.48) $(19.11) $(19.64)
International $(4.86) $(7.27) $(3.61) $(7.87)
Total Oil $(7.92) $(8.14) $(7.34) $(9.44)
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in millions, except per Year Ended Quarter Ended
share data) December 31, December 31,
2006 2005 2006 2005
Revenues
Oil sales $3,205 $2,359 $809 $540
Gas sales 4,932 5,784 1,207 1,871
Natural gas liquids sales 749 687 177 195
Marketing & midstream revenues 1,692 1,792 416 582
Total revenues 10,578 10,622 2,609 3,188
Expenses and other income, net
Lease operating expenses 1,488 1,324 412 334
Production taxes 341 335 80 101
Marketing & midstream operating
costs and expenses 1,244 1,342 314 421
Depreciation, depletion and
amortization of oil and gas
properties 2,266 1,981 634 492
Depreciation and amortization of
non-oil and gas properties 176 160 47 41
Accretion of asset retirement
obligation 49 43 13 9
General & administrative expenses 397 291 113 85
Interest expense 421 533 106 105
Effects of changes in foreign
currency exchange rates --- (2) 1 2
Change in fair value of derivative
financial instruments 178 94 97 (74)
Reduction of carrying value of oil
and gas properties 121 212 --- 212
Other income, net (115) (196) (30) (17)
Total expenses and other income,
net 6,566 6,117 1,787 1,711
Earnings from continuing operations
before income tax expense 4,012 4,505 822 1,477
Income tax expense
Current 819 1,218 104 397
Deferred 370 388 159 117
Total income tax expense 1,189 1,606 263 514
Earnings from continuing
operations 2,823 2,899 559 963
Discontinued operations
Results of discontinued
operations before income
taxes 22 46 19 12
Income tax (benefit) expense (1) 15 (4) 5
Net results of discontinued
operations 23 31 23 7
Net earnings 2,846 2,930 582 970
Preferred stock dividends 10 10 3 3
Net earnings applicable to common
stockholders $2,836 $2,920 $579 $967
Net earnings per weighted average
common shares outstanding
Basic $6.42 $6.38 $1.31 $2.18
Diluted $6.34 $6.26 $1.29 $2.14
Basic weighted average shares
outstanding 442 458 443 443
Diluted weighted average shares
outstanding 448 470 448 451
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions) December 31, December 31,
2006 2005
Assets
Current assets
Cash and cash equivalents $739 $1,593
Short-term investments 574 680
Accounts receivable 1,393 1,565
Deferred income taxes 102 158
Current assets held for sale 81 66
Other current assets 323 144
Total current assets 3,212 4,206
Property and equipment, at cost, based
on the full cost method of accounting
for oil and gas properties ($3,674 and
$2,704 excluded from amortization in
2006 and 2005, respectively) 41,889 33,824
Less accumulated depreciation,
depletion and amortization 17,294 14,913
Net property and equipment 24,595 18,911
Investment in Chevron Corporation
common stock, at fair value 1,043 805
Goodwill 5,706 5,705
Assets of held for sale 185 217
Other assets 322 429
Total Assets $35,063 $30,273
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable:
Trade $1,190 $928
Revenues and royalties due to others 529 666
Income taxes payable 197 293
Current portion of long-term debt 2,205 662
Accrued interest payable 114 127
Fair value of derivative financial
instruments 6 18
Current portion of asset retirement
obligation 61 50
Current liabilities associated with
assets held for sale 5 19
Accrued expenses and other current
liabilities 338 171
Total current liabilities 4,645 2,934
Debentures exchangeable into shares
of Chevron Corporation common stock 727 709
Other long-term debt 4,841 5,248
Fair value of derivative financial
instruments 302 125
Asset retirement obligation, long-
term 833 610
Liabilities associated with assets
held for sale 25 40
Other liabilities 598 371
Deferred income taxes 5,650 5,374
Stockholders' equity
Preferred stock 1 1
Common stock 44 44
Additional paid-in capital 6,840 6,928
Retained earnings 9,114 6,477
Accumulated other comprehensive
income 1,444 1,414
Treasury stock (1) (2)
Stockholders' Equity 17,442 14,862
Total Liabilities & Stockholders'
Equity $35,063 $30,273
Common Shares Outstanding 444 443
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Year Ended December 31,
2006 2005
Cash Flows From Operating Activities
Net earnings $2,846 $2,930
Less income from discontinued
operations, net of tax (23) (31)
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation, depletion and
amortization 2,442 2,141
Deferred income tax expense 370 388
Net gain on sales of non-oil and gas
property and equipment (5) (150)
Reduction of carrying value of oil
and gas properties 121 212
Other non-cash charges 270 128
6,021 5,618
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 212 (279)
Other current assets (37) (17)
Long-term other assets (66) 48
Increase (decrease) in:
Accounts payable (183) 255
Income taxes payable (231) 69
Debt, including current
maturities --- (67)
Accrued interest and expenses 78 (34)
Long-term other liabilities 142 (79)
Cash provided by operating
activities - continuing operations 5,936 5,514
Cash provided by operating
activities - discontinued
operations 57 98
Net cash provided by operating
activities $5,993 $5,612
Cash Flows From Investing Activities
Proceeds from sales of property and
equipment $40 $2,151
Capital expenditures (7,551) (4,026)
Purchases of short-term investments (2,395) (4,020)
Sales of short-term investments 2,501 4,307
Cash used in investing activities -
continuing operations (7,405) (1,588)
Cash used in investing activities -
discontinued operations (44) (64)
Net cash used in investing activities $(7,449) $(1,652)
Cash Flows From Financing Activities
Proceeds from borrowings of debt,
net of issuance costs $1,808 $---
Principal payments on debt,
including current maturities (862) (1,258)
Proceeds from exercise of stock
options 73 124
Repurchase of common stock (253) (2,263)
Excess tax benefits related to
share-based compensation 36 ---
Dividends paid on common stock (199) (136)
Dividends paid on preferred stock (10) (10)
Net cash provided by (used in)
financing activities $593 $(3,543)
Effect of exchange rate changes on
cash $13 $37
Net (decrease) increase in cash and
cash equivalents (850) 454
Cash and cash equivalents at
beginning of year (including
discontinued operations) 1,606 1,152
Cash and cash equivalents at end of
year (including discontinued
operations) $756 $1,606
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
RESERVE RECONCILIATION
Total Total U.S.
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe)
As of December 31,
2005:
Proved developed 355 6,111 216 1,589 150 4,343 175 1,049
Proved
undeveloped 285 1,185 30 513 23 821 22 183
Total proved 640 7,296 246 2,102 173 5,164 197 1,232
Production (55) (815) (23) (214) (19) (566) (19) (132)
Discoveries and
extensions 139 1,491 45 433 16 1,298 43 274
Divestitures --- (5) --- (1) --- --- --- ---
Acquisitions --- 584 9 106 --- 580 9 105
Revisions due to
prices (21) (89) (7) (44) --- (110) (3) (22)
Revisions other
than price 5 (106) 5 (6) --- (11) 6 5
As of December 31,
2006:
Proved developed 358 6,518 229 1,674 147 4,916 196 1,163
Proved
undeveloped 350 1,838 46 702 23 1,439 37 299
Total proved 708 8,356 275 2,376 170 6,355 233 1,462
U.S. Onshore U.S. Offshore
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe)
As of December 31,
2005:
Proved developed 121 4,110 173 979 29 233 2 70
Proved
undeveloped 8 651 20 137 15 170 2 46
Total proved 129 4,761 193 1,116 44 403 4 116
Production (11) (487) (18) (110) (8) (79) (1) (22)
Discoveries and
extensions 11 1,270 43 265 5 28 --- 9
Divestitures --- --- --- --- --- --- --- ---
Acquisitions --- 580 9 105 --- --- --- ---
Revisions due to
prices --- (107) (3) (21) --- (3) --- (1)
Revisions other
than price (2) (38) 6 (2) 2 27 --- 7
As of December 31,
2006:
Proved developed 116 4,672 194 1,089 31 244 2 74
Proved
undeveloped 11 1,307 36 264 12 132 1 35
Total proved 127 5,979 230 1,353 43 376 3 109
Canada International
Oil Gas NGLs Total Oil Gas NGLs Total
(MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe)
As of December 31,
2005:
Proved developed 103 1,708 41 429 102 60 --- 111
Proved
undeveloped 150 298 8 207 112 66 --- 123
Total proved 253 2,006 49 636 214 126 --- 234
Production (13) (241) (4) (58) (23) (8) --- (24)
Discoveries and
extensions 109 193 2 145 14 --- --- 14
Divestitures --- (5) --- (1) --- --- --- ---
Acquisitions --- 4 --- 1 --- --- --- ---
Revisions due
to prices (19) 23 (4) (20) (2) (2) --- (2)
Revisions other
than price (1) (84) (1) (16) 6 (11) --- 5
As of December 31,
2006:
Proved developed 112 1,560 33 405 99 42 --- 106
Proved
undeveloped 217 336 9 282 110 63 --- 121
Total proved 329 1,896 42 687 209 105 --- 227
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
COSTS INCURRED Total Total U.S.
(in millions) Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Property Acquisition Costs:
Total proved $1,113 $54 $1,066 $5
Total unproved $1,485 $347 $1,366 $106
Exploration and Development Costs $5,124 $3,677 $3,105 $2,019
Costs Incurred $7,722 $4,078 $5,537 $2,130
U.S. Onshore U.S. Offshore
Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Property Acquisition Costs:
Total proved $1,066 $3 $--- $2
Total unproved $1,311 $86 $55 $20
Exploration and Development Costs $2,479 $1,554 $626 $465
Costs Incurred $4,856 $1,643 $681 $487
Canada International
Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Property Acquisition Costs:
Total proved $23 $49 $24 $---
Total unproved $70 $239 $49 $2
Exploration and Development Costs $1,461 $1,381 $558 $277
Costs Incurred $1,554 $1,669 $631 $279
Devon capitalizes certain general and administrative expenses which are
related to property acquisition, exploration and development activities.
Such capitalized expenses, which are included in the costs shown in the
preceding tables, were $269 million and $188 million in the years 2006 and
2005, respectively. In addition, Devon capitalizes certain interest
expenses which are related to property development activities. Such
capitalized expenses, which are also included in the costs shown in the
preceding tables, were $70 million in each of the years 2006 and 2005.
Year Ended Quarter Ended
CAPITAL EXPENDITURES DATA December 31, 2006 December 31, 2006
(in millions)
Capital expenditures
Drill-bit capital [1] $5,236 $1,433
Chief acquisition 2,210 2
Other acquisitions of proved
properties 88 33
Marketing & midstream 376 129
Other 183 60
Total $8,093 $1,657
[1] Drill-bit capital, a Non-GAAP measure, is defined in a following
table.
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
DRILLING ACTIVITY Year Ended December 31,
2006 2005
Total Wells Drilled
U.S. 1,550 1,298
Canada 877 1,020
International 41 44
Total 2,468 2,362
Total Wells Success Rate
U.S. 98% 98%
Canada 99% 98%
International 88% 82%
Total 98% 97%
COMPANY OPERATED RIGS December 31,
2006 2005
Number of Company Operated Rigs
Running
U.S. 58 53
Canada 11 16
International 2 3
Total 71 72
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
DETAIL OF RECLASSIFICATION FOR
DISCONTINUED Year Ended Quarter Ended
OPERATIONS IN EGYPT December 31, December 31,
2006 2005 2006 2005
Production from Discontinued
Operations
Oil (MMBbls) 1.9 2.4 0.6 0.5
Natural Gas (Bcf) --- --- --- ---
Natural Gas Liquids (MMBbls) --- --- --- ---
Total Oil Equivalent (MMBoe) 1.9 2.4 0.6 0.5
STATEMENT OF DISCONTINUED OPERATIONS
DATA Year Ended Quarter Ended
(US$ in millions) December 31, December 31,
2006 2005 2006 2005
Revenues
Oil sales $118 $119 $32 $30
Expenses and other income, net
Lease operating expenses 23 21 7 6
Depreciation, depletion and
amortization of oil and gas
properties 41 50 6 12
Depreciation and amortization of
non-oil and gas properties 1 1 --- ---
Accretion of asset retirement
obligation --- 1 --- ---
Reduction of carrying value of oil
and gas properties 31 --- --- ---
Total expenses and other income, net 96 73 13 18
Earnings before income tax expense 22 46 19 12
Income tax (benefit) expense
Current 15 20 (4) 9
Deferred (16) (5) --- (4)
Total income tax (benefit) expense (1) 15 (4) 5
Earnings from discontinued operations $23 $31 $23 $7
RESERVE DATA FOR EGYPT
Oil Gas NGLs Total
(MMBbls) (Bcf) (MMBbls) (MMBoe)
As of December 31, 2005:
Proved developed 10 --- --- 10
Proved undeveloped --- --- --- ---
Total proved 10 --- --- 10
As of December 31, 2006:
Proved developed 8 --- --- 8
Proved undeveloped --- --- --- ---
Total proved 8 --- --- 8
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. 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,
2006 2005 2006 2005
Net Cash Provided By Operating
Activities (GAAP) $5,993 $5,612 $1,111 $1,960
Changes in assets and
liabilities - continuing
operations 84 103 423 (202)
Changes in assets and
liabilities - discontinued
operations 14 (20) (5) (19)
Cash flow before balance sheet
changes (Non-GAAP) $6,091 $5,695 $1,529 $1,739
Devon believes that using net debt, defined as debt less cash,
short-term investments and the market value of Chevron common stock, for
the calculation of "net debt to adjusted capitalization" provides a better
measure than using debt. Devon believes that because cash and short-term
investments can be used to repay indebtedness, netting cash and short-term
investments against debt provides a clearer picture of the future demands
on cash to repay debt. Included in Devon's indebtedness are $727 million of
debentures exchangeable into 14.2 million shares of Chevron common stock
owned outright by Devon. As of December 31, 2006, the market value of the
shares ($1.0 billion) exceeded the related debt obligation. Devon believes
deducting the market value of the stock provides a clearer picture of
future demands on cash to repay debt. This methodology is also utilized by
various lenders, rating agencies and securities analysts as a measure of
Devon's indebtedness.
RECONCILIATION TO GAAP INFORMATION
(in millions) December 31,
2006 2005
Total debt (GAAP) $7,773 6,619
Adjustments:
Cash and short-term investments (1,313) (2,273)
Market value of Chevron Corporation
common stock (1,043) (805)
Net Debt (Non-GAAP) $5,417 3,541
Total Capitalization
Total debt $7,773 6,619
Stockholders' equity 17,442 14,862
Total Capitalization (GAAP) $25,215 21,481
Adjusted Capitalization
Net debt $5,417 3,541
Stockholders' equity 17,442 14,862
Adjusted Capitalization (Non-GAAP) $22,859 18,403
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
Drill-bit capital is defined as costs incurred less proved acquisition
costs, unproved acquisition costs resulting from business combinations and
other significant similar transactions, and the net difference of accrued
future asset retirement costs less actual cash retirement expenditures.
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 drilling, facilities and unproved acreage acquisitions
unrelated to business combinations and other significant similar
transactions. 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. This
methodology is also utilized by certain securities analysts as a measure of
Devon's performance.
RECONCILIATION TO GAAP INFORMATION Total Total U.S.
(in millions) Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Costs Incurred (GAAP) $7,722 $4,078 $5,537 $2,130
Less:
Proved acquisition costs 1,113 54 1,066 5
Unproved portion of Chief
acquisition 1,185 --- 1,185 ---
Accrued asset retirement costs 250 113 78 70
Plus: Actual retirement
expenditures 62 41 41 22
Drill-bit capital (Non-GAAP) $5,236 $3,952 $3,249 $2,077
U.S. Onshore U.S. Offshore
Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Costs Incurred (GAAP) $4,856 $1,643 $681 $487
Less:
Proved acquisition costs 1,066 3 --- 2
Unproved portion of Chief
acquisition 1,185 --- --- ---
Accrued asset retirement costs 36 23 42 47
Plus: Actual retirement
expenditures 6 5 35 17
Drill-bit capital (Non-GAAP) $2,575 $1,622 $674 $455
Canada International
Year Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Costs Incurred (GAAP) $1,554 $1,669 $631 $279
Less:
Proved acquisition costs 23 49 24 ---
Unproved portion of Chief
acquisition --- --- --- ---
Accrued asset retirement costs 107 37 65 6
Plus: Actual retirement
expenditures 18 16 3 3
Drill-bit capital (Non-GAAP) $1,442 $1,599 $545 $276
SOURCE Devon Energy Corporation
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Related links:
http://www.devonenergy.com
http://www.prnewswire.com/comp/118040.html /
CONTACT:
investors, Zack Hager, +1-405-552-4526, or
media, Brian Engel, +1-405-228-7750, both of Devon Energy
Corporation
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