OKLAHOMA CITY, Aug. 6 /PRNewswire-FirstCall/ -- Devon Energy
Corporation (NYSE: DVN) today reported net earnings for the quarter ended
June 30, 2008, of $1.3 billion, or $2.91 per common share ($2.88 per
diluted common share). This is a 44 percent increase compared with Devon's
second-quarter 2007 net earnings of $904 million, or $2.02 per common share
($2.00 per diluted common share).
For the six months ended June 30, 2008, Devon reported net earnings of
$2.1 billion, or $4.59 per common share ($4.55 per diluted common share).
This compares with net earnings for the six months ended June 30, 2007, of
$1.6 billion, or $3.48 per common share ($3.44 per diluted common share).
Earnings $3.39 per Share Excluding Items Not Estimated by Analysts
Second-quarter 2008 reported net earnings of $1.3 billion were affected
by certain items securities analysts typically exclude from their published
estimates. Excluding these adjusting items, Devon earned $1.5 billion or
$3.39 per diluted common share.
The most significant of the adjusting items impacting continuing
operations was a non-cash, unrealized loss on oil and natural gas
derivative instruments of $912 million pre-tax ($584 million after tax).
Also impacting continuing operations was $312 million of income tax expense
attributable to the repatriation of cash from outside the United States and
to a related income tax policy election.
The most significant adjusting item impacting discontinued operations
was a $736 million pre-tax gain ($647 million after tax) on divestitures of
assets in Africa. These and other adjusting items are discussed in more
detail later in this news release.
Oil and Gas Sales Increase by 65 Percent
Sales of oil, natural gas and natural gas liquids from continuing
operations increased 65 percent to $4 billion in the second quarter of
2008. The combined effects of increased oil and gas production and higher
oil, natural gas and natural gas liquids prices led to the increase in
sales.
Combined oil, natural gas and natural gas liquids production from
continuing operations reached 58.5 million oil-equivalent barrels (Boe) in
the second quarter of 2008. This was a four percent increase compared with
the second quarter of 2007. The company produced 643 thousand Boe per day
in the second quarter of 2008. This compares with production of 618
thousand Boe per day in the second quarter of 2007 and 640 thousand Boe per
day in the first quarter of 2008. Devon has increased oil and natural gas
production from retained properties for nine consecutive quarters.
U.S. Onshore and Canadian Operations Lead Quarterly Highlights
Devon drilled 494 wells in the second quarter of 2008, with an overall
success rate of 98 percent. Following are recent operating highlights:
-- Devon's second-quarter net exit-rate production from the Barnett
Shale field in north Texas reached almost 1.1 billion cubic feet of natural
gas equivalent per day. Devon is the largest producer in the field and
brought 189 new Barnett Shale wells on line in the second quarter of 2008.
-- Devon plans to drill more than 650 wells in the Barnett Shale in
2008 and has set a net production target of 1.2 billion cubic feet of
natural gas equivalent per day by year-end.
-- In east Texas and northwest Louisiana, Devon added to its lease
position in the Haynesville Shale play, bringing its total Haynesville
lease holdings to 483,000 net acres.
-- In the Groesbeck area in east Texas, Devon commenced production from
three high-rate gas wells in the second quarter. Devon has 100-percent
working interests in all three wells, with initial production rates
averaging 16.2 million cubic feet of natural gas per day from each well.
-- The company drilled two long-lateral horizontal wells in the
Woodford Shale in Coal County, Oklahoma, in the second quarter with
excellent results. Initial production rates from the two wells were 7.1
million and 6.7 million cubic feet of natural gas per day. Devon's working
interests in the two wells are 66 percent and 73 percent, respectively.
-- In Canada, Devon's wholly-owned Jackfish oil sands project reached a
cumulative production milestone of one million barrels of oil in the second
quarter of 2008. Second-quarter exit-rate production was about 14,500
barrels per day. Production is expected to reach plant capacity of 35,000
barrels per day in the first half of 2009.
-- Also in Canada in the second quarter, Devon increased its lease
position in the Horn River Shale play in British Columbia to more than
100,000 net acres. The company is now planning its upcoming winter drilling
program for the Horn River area.
African Divestitures Substantially Complete
Devon has now completed substantially all of its planned divestitures
in Africa. In May, the company closed the $205.5 million sale of its assets
in Gabon. In June, Devon closed the $2.2 billion sale of its assets in
Equatorial Guinea. In aggregate, the sale prices of the combined African
divestures exceeded $3 billion before taxes. The company expects to close
the remaining approximately $250 million in transactions later in 2008.
In accordance with U.S. accounting standards, Devon has classified the
assets, liabilities and results of its operations in Africa as discontinued
operations for all accounting periods presented in this release. Included
with this release is a table of revenues, expenses and production
categories and amounts reclassified as discontinued operations for each
period presented.
Marketing and Midstream Profit Rises with Product Prices
Marketing and midstream operating profit increased 71 percent to $204
million in the second quarter of 2008. For comparison, marketing and
midstream operating profit was $119 million in the second quarter of 2007.
The increase was attributable to higher throughput and higher natural gas
and natural gas liquids prices.
Expenses Track Increased Production and Activity Levels
Expenses in most categories were generally in line with expectations in
the second quarter of 2008. However, second-quarter general and
administrative expenses (G&A) exceeded previous estimates at $180 million.
This compares with $113 million in the second quarter of 2007. Higher
employee-related costs were the largest contributor to the year-over-year
increase. In addition, $27 million of the increase was a one-time charge
attributable to a change in the company's vesting policy for stock grants.
Devon believes this modified benefits policy better reflects industry
practices. Devon has also increased the size of its workforce to support
expanding levels of investment in long cycle-time exploration and
development projects.
Interest expense decreased in the second quarter of 2008 to $90
million, compared with interest expense of $107 million in the second
quarter of 2007. The decrease reflects a decline in outstanding debt as the
company repaid all of its commercial paper and credit facility balances
during the second quarter of 2008.
Repatriation of International Cash Increases Current Income Tax Rate
Current income tax expense on earnings from continuing operations was
$414 million in the second quarter of 2008. This amount included $295
million of U.S. income tax attributable to the repatriation of cash from
outside the United States and related income tax policy elections. During
the second quarter, the proceeds from Devon's African divestitures combined
with cash repatriated from foreign subsidiaries totaled approximately $3
billion.
Record Cash Flow and Debt Repayments Further Strengthen Balance Sheet
Cash flow before balance sheet changes reached a record $2.7 billion in
the second quarter of 2008. This was a 48 percent increase compared with
the second quarter of 2007. The company funded capital expenditures of $2
billion, including $1.7 billion of exploration and development capital, in
the quarter. This resulted in free cash flow of approximately $700 million
during the second quarter.
In addition to free cash flow of $700 million, Devon also received $2.4
billion of pre-tax proceeds from its African divestitures in the second
quarter. Utilizing free cash flow, proceeds of the divestitures and cash on
hand, the company deployed $2.6 billion to retire commercial paper and
other short-term borrowings and to repurchase over two million shares of
its common stock. In the first seven months of 2008, Devon repurchased 5.7
million shares of its common stock at a cost of $590 million.
Devon also redeemed its $150 million 6.49 percent Series A Cumulative
Preferred Stock in the second quarter. Cash and short-term investments were
$1.8 billion at June 30, 2008.
Net debt as a percentage of adjusted capitalization decreased to 11
percent at June 30, 2008. Reconciliations of cash flow before balance sheet
changes, free cash flow, net debt and adjusted capitalization, which are
non-GAAP measures, are provided in this release.
Accounting for Derivative Instruments
Devon accounts for derivative instruments using mark-to-market
accounting. As a result, for each reporting period the company recognizes
in earnings the unrealized changes in the fair values of its derivative
instruments. A second-quarter unrealized loss on derivative instruments was
the result of rising oil and natural gas prices during the quarter. The
company could record unrealized gains or losses on oil and natural gas
derivative instruments in subsequent quarters depending upon the direction
of commodity prices.
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 second quarter of 2008 were as follows:
Items affecting continuing operations -
-- A change in fair value of non-oil and gas derivative financial
instruments increased second-quarter earnings by $40 million pre-tax ($25
million after tax).
-- An unrealized loss on oil and natural gas derivative financial
instruments decreased second-quarter earnings by $912 million pre-tax ($584
million after tax).
-- Income tax expense related to the repatriation of cash from outside
the United States and a related change in an income tax election decreased
second-quarter after-tax earnings by $312 million.
-- A modification to the company's stock compensation vesting policy
decreased second-quarter earnings by $27 million pre-tax ($17 million after
tax).
Items affecting discontinued operations -
-- Divestitures of assets in Africa resulted in a second-quarter 2008
gain of $736 million pre-tax ($647 million after tax).
-- The decisions to exit Africa generated other financial benefits that
increased second-quarter earnings by $21 million pre-tax ($11 million after
tax).
The following tables summarize the effects of these items on
second-quarter earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Quarter Ended June 30, 2008
Continuing Pre-tax After tax Cash Flow Before
Operations Earnings Income Tax Effect Earnings Balance Sheet
Effect Current Deferred Total Effect Changes Effect
Change in
fair value
of non-oil
and gas
derivative
instruments $ 40 - 15 15 25 -
Unrealized
loss on oil
and gas
derivative
financial
instruments (912) - (328) (328) (584) -
Taxes on
repatriation
and tax policy
elections - 295 17 312 (312) (295)
Stock
compensation
vesting (27) - (10) (10) (17) -
Totals $(899) 295 (306) (11) (888) (295)
Discontinued Pre-tax After tax Cash Flow Before
Operations Earnings Income Tax Effect Earnings Balance Sheet
Effect Current Deferred Total Effect Changes Effect
Gain on sale
of West
African assets 736 518 (429) 89 647 -
Financial
benefits of
decision to
exit Africa 21 - 10 10 11 -
Totals $757 518 (419) 99 658 -
In aggregate, these items decreased second-quarter 2008 net earnings by
$230 million, or 52 cents per common share (51 cents per diluted share).
These items and their associated tax effects decreased second-quarter 2008
cash flow before balance sheet changes by $295 million.
Conference Call to be Webcast Today
Devon will discuss its second-quarter 2008 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.
The United States Securities and Exchange Commission permits oil and
gas companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or conclusive
formation tests to be economically and legally producible under existing
economic and operating conditions. This release may contain certain terms,
such as resource potential, reserve potential, probable reserves, possible
reserves and exploration target size. The SEC guidelines strictly prohibit
us from including these terms in filings with the SEC. U.S. investors are
urged to consider closely the disclosure in our Form 10-K, File No.
001-32318, 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.
Devon Energy Corporation is an Oklahoma City-based independent energy
company engaged in oil and gas exploration and production. Devon is the
largest 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 http://www.devonenergy.com.
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties) Quarter Ended Six Months Ended
Excludes discontinued operations June 30, June 30,
2008 2007 2008 2007
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 162.3 135.9 314.8 263.6
U.S. Offshore 14.2 18.9 32.5 37.5
Total U.S. 176.5 154.8 347.3 301.1
Canada 53.0 57.0 104.7 112.3
International 0.4 0.5 1.0 0.8
Total Natural Gas 229.9 212.3 453.0 414.2
Oil (MMBbls)
U.S. Onshore 2.8 2.9 5.7 5.7
U.S. Offshore 1.8 2.0 3.6 3.7
Total U.S. 4.6 4.9 9.3 9.4
Canada 5.3 4.0 9.9 7.5
International 3.3 5.5 8.1 10.8
Total Oil 13.2 14.4 27.3 27.7
Natural Gas Liquids (MMBbls)
U.S. Onshore 5.8 5.1 11.6 9.9
U.S. Offshore 0.2 0.2 0.4 0.3
Total U.S. 6.0 5.3 12.0 10.2
Canada 1.0 1.1 1.9 2.2
International - - - -
Total Natural Gas Liquids 7.0 6.4 13.9 12.4
Oil Equivalent (MMBoe)
U.S. Onshore 35.7 30.7 69.7 59.5
U.S. Offshore 4.4 5.3 9.4 10.3
Total U.S. 40.1 36.0 79.1 69.8
Canada 15.1 14.6 29.4 28.4
International 3.3 5.6 8.3 10.9
Total Oil Equivalent 58.5 56.2 116.8 109.1
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,783.0 1,493.7 1,729.7 1,456.3
U.S. Offshore 156.1 207.6 178.7 207.0
Total U.S. 1,939.1 1,701.3 1,908.4 1,663.3
Canada 582.6 626.2 575.0 620.7
International 4.8 5.6 5.4 4.3
Total Natural Gas 2,526.5 2,333.1 2,488.8 2,288.3
Oil (MBbls)
U.S. Onshore 30.9 31.5 31.0 31.1
U.S. Offshore 19.9 22.0 19.9 20.5
Total U.S. 50.8 53.5 50.9 51.6
Canada 58.0 44.0 54.7 41.5
International 35.8 60.9 44.6 59.8
Total Oil 144.6 158.4 150.2 152.9
Natural Gas Liquids (MBbls)
U.S. Onshore 64.1 56.4 63.7 54.8
U.S. Offshore 2.1 2.2 2.0 1.8
Total U.S. 66.2 58.6 65.7 56.6
Canada 10.7 11.7 10.8 12.0
International - - - -
Total Natural Gas Liquids 76.9 70.3 76.5 68.6
Oil Equivalent (MBoe)
U.S. Onshore 392.2 336.9 382.9 328.7
U.S. Offshore 48.0 58.8 51.7 56.8
Total U.S. 440.2 395.7 434.6 385.5
Canada 165.8 160.1 161.3 157.0
International 36.6 61.8 45.6 60.5
Total Oil Equivalent 642.6 617.6 641.5 603.0
Quarter Ended Six Months Ended
BENCHMARK PRICES June 30, June 30,
(average prices) 2008 2007 2008 2007
Natural Gas ($/Mcf) - Henry Hub $10.94 $7.55 $9.49 $7.16
Oil ($/Bbl) - West Texas Intermediate
(Cushing) $124.28 $65.08 $110.98 $61.71
REALIZED PRICES
(Excludes the effects of unrealized gains and losses from hedging)
Quarter Ended June 30, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $120.69 $9.40 $50.56 $60.51
U.S. Offshore $125.24 $11.43 $53.63 $91.38
Total U.S. $122.47 $9.56 $50.66 $63.88
Canada $94.35 $9.76 $75.10 $72.14
International $119.87 $11.00 $- $118.70
Realized price without hedges $110.56 $9.61 $54.08 $69.14
Cash settlements $(0.01) $(1.32) $- $(5.18)
Realized price, including cash
settlements $110.55 $8.29 $54.08 $63.96
Quarter Ended June 30, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $60.82 $6.14 $33.35 $38.52
U.S. Offshore $65.35 $7.82 $31.14 $53.24
Total U.S. $62.68 $6.35 $33.26 $40.71
Canada $46.32 $6.66 $43.82 $41.99
International $67.57 $6.19 $- $67.11
Realized price without hedges $60.01 $6.43 $35.03 $43.68
Cash settlements $- $0.03 $- $0.10
Realized price, including cash
settlements $60.01 $6.46 $35.03 $43.78
Six Months Ended June 30, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $107.15 $8.26 $47.65 $53.91
U.S. Offshore $112.07 $9.94 $51.77 $79.52
Total U.S. $109.08 $8.42 $47.78 $56.95
Canada $84.16 $8.66 $68.86 $64.01
International $105.63 $9.56 $- $104.68
Realized price without hedges $98.98 $8.48 $50.76 $62.12
Cash settlements $- $(0.69) $- $(2.67)
Realized price, including cash
settlements $98.98 $7.79 $50.76 $59.45
Six Months Ended June 30, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $56.02 $6.04 $30.54 $37.15
U.S. Offshore $60.16 $7.51 $30.52 $50.05
Total U.S. $57.67 $6.22 $30.54 $39.05
Canada $45.01 $6.55 $40.37 $40.88
International $62.76 $5.16 $- $62.39
Realized price without hedges $56.22 $6.31 $32.26 $41.87
Cash settlements $- $0.04 $- $0.16
Realized price, including cash
settlements $56.22 $6.35 $32.26 $42.03
CONSOLIDATED STATEMENTS
OF OPERATIONS Quarter Ended Six Months Ended
(in millions, except per share June 30, June 30,
amounts) 2008 2007 2008 2007
Revenues
Oil sales $1,455 $865 $2,705 $1,556
Gas sales 2,210 1,366 3,840 2,612
NGL sales 379 224 707 401
Net (loss) gain on oil and gas
derivative financial instruments (1,215) 14 (2,003) (6)
Marketing and midstream revenues 719 460 1,274 839
Total revenues 3,548 2,929 6,523 5,402
Expenses and other income, net
Lease operating expenses 537 439 1,043 869
Production taxes 176 90 310 170
Marketing and midstream operating
costs and expenses 515 341 897 611
Depreciation, depletion and
amortization of oil and gas
properties 762 645 1,499 1,232
Depreciation and amortization of
non-oil and gas properties 62 49 119 95
Accretion of asset retirement
obligation 22 18 44 36
General and administrative expenses 180 113 328 232
Interest expense 90 107 192 217
Change in fair value of non-oil and
gas derivative financial instruments (40) (10) (24) (9)
Other income, net (17) (17) (38) (43)
Total expenses and other
income, net 2,287 1,775 4,370 3,410
Earnings from continuing operations
before income tax expense 1,261 1,154 2,153 1,992
Income tax expense
Current 414 174 517 363
Deferred 253 156 391 231
Total income tax expense 667 330 908 594
Earnings from continuing operations 594 824 1,245 1,398
Discontinued operations
Earnings from discontinued
operations before income tax expense 851 128 1,040 265
Income tax expense 144 48 235 108
Earnings from discontinuing
operations 707 80 805 157
Net earnings 1,301 904 2,050 1,555
Preferred stock dividends 3 3 5 5
Net earnings applicable to common
stockholders $1,298 $901 $2,045 $1,550
Basic net earnings per share
Earnings from continuing operations $1.33 $1.84 $2.79 $3.13
Earnings from discontinued operations $1.58 $0.18 $1.80 $0.35
Net earnings $2.91 $2.02 $4.59 $3.48
Diluted net earnings per share
Earnings from continuing operations $1.31 $1.82 $2.76 $3.09
Earnings from discontinued operations $1.57 $0.18 $1.79 $0.35
Net earnings $2.88 $2.00 $4.55 $3.44
Weighted average common
shares outstanding
Basic 446 446 445 445
Diluted 450 450 450 450
CONSOLIDATED BALANCE SHEETS
(in millions) June 30, December 31,
2008 2007
Assets (Audited)
Current assets
Cash and cash equivalents $1,837 $1,364
Short-term investments, at fair value 1 372
Accounts receivable 2,460 1,779
Deferred income taxes 775 44
Current assets held for sale 105 120
Other current assets 255 235
Total current assets 5,433 3,914
Property and equipment, at cost,
based on the full cost method of
accounting for oil and gas
properties ($3,741 and $3,417
excluded from amortization in 2008
and 2007, respectively) 51,953 48,473
Less accumulated depreciation,
depletion and amortization 21,769 20,394
Net property and equipment 30,184 28,079
Investment in Chevron Corporation
common stock, at fair value 1,406 1,324
Goodwill 6,081 6,172
Long-term assets held for sale 84 1,512
Other long-term assets, including
$126 million at fair value in 2008 592 455
Total Assets $43,780 $41,456
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $1,525 $1,360
Revenues and royalties due to others 966 578
Income taxes payable 306 97
Debentures exchangeable into shares
of Chevron Corporation common stock 621 -
Other short-term debt - 1,004
Derivative financial instruments, at
fair value 2,125 -
Current portion of asset retirement
obligation, at fair value 63 82
Current liabilities associated with
assets held for sale 16 145
Accrued expenses and other current
liabilities 410 391
Total current liabilities 6,032 3,657
Debentures exchangeable into shares
of Chevron Corporation common stock - 641
Other long-term debt 4,829 6,283
Derivative financial instruments, at
fair value 83 488
Asset retirement obligation, at fair value 1,430 1,236
Long-term liabilities associated with
assets held for sale 24 404
Other long-term liabilities 905 699
Deferred income taxes 7,044 6,042
Stockholders' equity
Preferred stock - 1
Common stock 44 44
Additional paid-in capital 6,591 6,743
Retained earnings 14,717 12,813
Accumulated other comprehensive income 2,131 2,405
Treasury stock (50) -
Total Stockholders' Equity 23,433 22,006
Total Liabilities and Stockholders' Equity $43,780 $41,456
Common Shares Outstanding 445 444
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Six Months Ended June 30,
2008 2007
Cash Flows From Operating Activities
Net earnings $2,050 $1,555
Earnings from discontinued
operations, net of tax (805) (157)
Adjustments to reconcile net earnings
from continuing operations to net cash
provided by operating activities:
Depreciation, depletion and amortization 1,618 1,327
Deferred income tax expense 391 231
Net unrealized loss on oil and
gas derivative financial instruments 1,692 23
Other noncash charges 122 71
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (604) 32
Other current assets (44) (27)
Other long-term assets (40) (46)
Increase (decrease) in:
Accounts payable 120 64
Revenues and royalties due to others 348 (17)
Income taxes payable 136 178
Other current liabilities (99) (96)
Other long-term liabilities 181 14
Cash provided by operating
activities - continuing operations 5,066 3,152
Cash provided by operating
activities - discontinued operations 120 197
Net cash provided by operating activities 5,186 3,349
Cash Flows From Investing Activities
Proceeds from sales of property and equipment 108 37
Capital expenditures (3,867) (2,990)
Purchases of short-term investments (50) (589)
Redemptions of short-term and
long-term investments 295 848
Cash used in investing activities -
continuing operations (3,514) (2,694)
Cash used in investing activities -
discontinued operations 1,709 (115)
Net cash used in investing activities (1,805) (2,809)
Cash Flows From Financing Activities
Credit facility repayments (3,070) -
Credit facility borrowings 1,620 -
Net commercial paper repayments (1,004) (183)
Principal payments on debt (47) -
Preferred stock redemption (150) -
Proceeds from stock options exercises 104 60
Repurchases of common stock (252) (10)
Dividends paid on common and
preferred stock (146) (129)
Excess tax benefits related to
share-based compensation 55 17
Net cash used in financing activities (2,890) (245)
Effect of exchange rate changes on cash (19) 16
Net increase in cash and cash equivalents 472 311
Cash and cash equivalents at
beginning of period (including
assets held for sale) 1,373 756
Cash and cash equivalents at end of
period (including assets held for sale) $1,845 $1,067
Supplementary cash flow data:
Interest paid (net of capitalized interest) $189 $202
Income taxes paid - continuing and
discontinued operations $826 $159
DRILLING ACTIVITY Quarter Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Exploration Wells Drilled
U.S. 8 5 17 27
Canada 7 9 58 64
International 1 - 7 1
Total 16 14 82 92
Exploration Wells Success Rate
U.S. 88% 100% 71% 81%
Canada 86% 67% 95% 95%
International 0% - 0% 0%
Total 81% 91% 82% 90%
Development Wells Drilled
U.S. 405 360 777 624
Canada 61 54 259 306
International 12 6 22 9
Total 478 420 1,058 939
Development Wells Success Rate
U.S. 98% 98% 98% 98%
Canada 100% 100% 100% 100%
International 92% 100% 91% 100%
Total 98% 99% 98% 99%
Total Wells Drilled
U.S. 413 365 794 651
Canada 68 63 317 370
International 13 6 29 10
Total 494 434 1,140 1,031
Total Wells Success Rate
U.S. 98% 98% 98% 98%
Canada 99% 95% 99% 99%
International 85% 100% 69% 90%
Total 98% 98% 97% 98%
COMPANY OPERATED RIGS
June 30,
2008 2007
Number of Company Operated Rigs Running
U.S. 79 77
Canada 12 10
International 1 1
Total 92 88
CAPITAL EXPENDITURES (in millions)
Quarter Ended June 30, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $128 259 52 71 $510
Development 956 112 101 56 1,225
Exploration and
development capital $1,084 371 153 127 $1,735
Capitalized G&A 100
Capitalized interest 22
Discontinued operations 9
Midstream capital 99
Other capital 30
Total Capital Expenditures $1,995
CAPITAL EXPENDITURES (in millions)
Six Months Ended June 30, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $181 404 183 142 $910
Development 1,821 200 433 115 2,569
Exploration and
development capital $2,002 604 616 257 $3,479
Capitalized G&A 199
Capitalized interest 42
Discontinued operations 23
Midstream capital 198
Other capital 46
Total Capital Expenditures $3,987
PRODUCTION FROM DISCONTINUED
OPERATIONS Quarter Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Total Period Production
Oil (MMBbls) 1.1 3.2 3.2 6.3
Natural Gas (Bcf) 1.1 1.2 2.2 2.6
Total Oil Equivalent (MMBoe) 1.3 3.4 3.6 6.7
STATEMENTS OF DISCONTINUED OPERATIONS Quarter Ended Six Months Ended
(in millions) June 30, June 30,
2008 2007 2008 2007
Revenues
Oil sales $122 $205 $318 $375
Gas sales 5 4 9 8
Marketing and midstream revenues - 6 5 7
Total revenues 127 215 332 390
Expenses and other income, net
Lease operating expenses 10 19 24 39
Marketing and midstream operating
costs and expenses 2 2 3 3
Depreciation, depletion and
amortization of oil and gas properties - 2 - 18
Accretion of asset retirement
obligation - 1 1 2
Gain on sale of oil and gas
properties (736) - (736) -
Reduction of carrying value of oil
and gas properties - 63 - 63
Total expenses and other income, net (724) 87 (708) 125
Earnings before income tax expense 851 128 1,040 265
Income tax expense (benefit)
Current 574 71 641 115
Deferred (430) (23) (406) (7)
Total income tax expense 144 48 235 108
Earnings from discontinued operations $707 $80 $805 $157
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 and free cash flow are Non-GAAP
financial measures. 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. Devon believes
free cash flow is relevant because it is a measure of cash available to
service debt. Cash flow before balance sheet changes and free cash flow are
used by certain securities analysts as a measure of Devon's financial
results.
RECONCILIATION TO GAAP INFORMATION Quarter Ended Six Months Ended
(in millions) June 30, June 30,
2008 2007 2008 2007
Net Cash Provided By Operating
Activities (GAAP) $2,931 $1,832 $5,186 $3,349
Changes in assets and liabilities -
continuing operations (365) (59) 2 (102)
Changes in assets and liabilities -
discontinued operations 124 43 61 37
Cash flow before balance sheet
changes (Non-GAAP) $2,690 $1,816 $5,249 $3,284
Less:
Capital expenditures 1,995 1,428 3,987 3,005
Free cash flow (Non-GAAP) $695 $388 $1,262 $279
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 short-term investments and
debentures exchangeable into shares of Chevron Corporation common stock.
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.
Devon also believes that excluding debentures exchangeable into shares of
Chevron Corporation common stock provides a clearer view of net debt. Devon
owns 14.2 million shares of Chevron Corporation common stock. The majority
of these shares are on deposit with an exchange agent for the possible
exchange on the $621 million principal amount of exchangeable debentures.
RECONCILIATION TO GAAP INFORMATION
(in millions)
June 30,
2008 2007
Total debt (GAAP) $5,450 $7,596
Adjustments:
Cash and short-term investments (1,838) (1,357)
Debentures exchangeable into Chevron stock (621) (737)
Net Debt (Non-GAAP) $2,991 $5,502
Total debt $5,450 $7,596
Stockholders' equity 23,433 19,686
Total Capitalization (GAAP) $28,883 $27,282
Net debt $2,991 $5,502
Stockholders' equity 23,433 19,686
Adjusted Capitalization (Non-GAAP) $26,424 $25,188
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, Chip Minty, +1-405-228-8647, both of Devon Energy
Corporation
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