OKLAHOMA CITY, Nov. 1 /PRNewswire-FirstCall/ -- Devon Energy
Corporation (NYSE: DVN) today reported net earnings for the quarter ended
September 30, 2006, of $705 million, or $1.59 per common share ($1.57 per
diluted common share). These results compare with third-quarter 2005 net
earnings of $744 million, or $1.66 per common share ($1.63 per diluted
common share).
For the nine months ended September 30, 2006, Devon earned $2.3
billion, or $5.11 per common share ($5.05 per diluted common share). Net
earnings for the nine months ended September 30, 2005, were $2.0 billion,
or $4.22 per common share ($4.15 per diluted common share).
Third-quarter 2006 reported net earnings of $705 million were reduced
by certain items securities analysts typically exclude from their published
estimates. Adjusting for these items, Devon earned $743 million, or $1.66
per diluted share. The adjusting items are described in detail in this news
release.
"Our third-quarter exploration results were highlighted by the
successful test of the deepwater Jack #2 well and drilling our fourth
significant discovery in the lower Tertiary trend," said J. Larry Nichols,
chairman and chief executive officer. "Our producing properties are also
performing well. Oil and gas production in the third quarter was up both
year-over-year and sequentially as we produced more than 600 thousand
equivalent barrels per day."
Lower Tertiary Achievements Lead Operations Highlights
Devon drilled 740 exploration and development wells in the third
quarter of 2006. Of the total wells drilled, 731 were successful. Following
are highlights of third-quarter exploration and development activity:
* Devon and its co-owners announced the results of a production test of
the deepwater Jack #2 well in the Gulf of Mexico's lower Tertiary
trend. During the test, the Jack #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 is the largest of its four lower Tertiary
discoveries to date.
* In the Barnett Shale in north Texas, Devon began integrating the
properties of Chief Holdings LLC in the third quarter. Devon acquired
Chief on June 29, 2006. The company drilled and completed 141 wells in
the Barnett Shale in the third quarter bringing its total producing
wells in the field to 2,607. Devon exited the third quarter producing
approximately 660 million cubic feet of gas equivalent per day from the
Barnett Shale.
* Devon continued its successful horizontal drilling program in the
Groesbeck area in east Texas. The company's third 100 percent working
interest well in the Nan-Su-Gail field flowed natural gas at an initial
rate of 32 million cubic feet per day. The company also commenced
drilling high working interest horizontal wells in three
additional fields in the Groesbeck area in the quarter. The three wells
are in various stages of drilling and completion.
Oil and Gas Production Increases; Pre-Tax Earnings at $1 Billion
Sales of oil, gas and natural gas liquids in the third quarter of 2006
were $2.3 billion. This was unchanged from the third quarter of 2005. After
expenses, Devon's pre-tax earnings exceeded $1 billion.
Combined oil, gas and natural gas liquids production averaged 602
thousand oil equivalent barrels (Boe) per day in the third quarter of 2006.
This was one percent greater than third-quarter 2005 average production of
598 thousand Boe per day. Compared with the second quarter of 2006, daily
production increased four percent in the most recent quarter. The
properties acquired from Chief Holdings LLC in June of 2006 contributed
nine thousand Boe per day to third-quarter production.
Crude oil and natural gas liquids prices increased in the third quarter
of 2006 compared with the third quarter of 2005. Devon's third-quarter 2006
average realized oil price increased 48 percent to $64.17 per barrel
compared with $43.45 per barrel in the third quarter of 2005. The increase
in Devon's realized oil price is attributable to a higher market price for
crude oil and to the expiration of oil price hedges at December 31, 2005.
None of Devon's oil production is hedged in 2006. The average realized
price for the company's natural gas liquids increased nine percent to
$34.98 per barrel in the third quarter of 2006 compared with $32.23 per
barrel in the third quarter of 2005.
The realized price of natural gas decreased over the same comparative
period. Devon's realized price for natural gas decreased 21 percent to
$5.62 per thousand cubic feet in the third quarter of 2006 compared with
$7.13 per thousand cubic feet in third quarter of 2005.
Marketing and midstream revenues increased three percent to $417
million while related expenses increased three percent to $303 million.
This resulted in a three percent increase in marketing and midstream
operating profit to $114 million in the third quarter of 2006 compared with
the third quarter of 2005.
Lease operating expenses (LOE) increased 20 percent to $382 million in
the third quarter of 2006. Higher ad valorem taxes and repair and
maintenance costs driven by rising oil field service and supply costs
contributed to the increase. Higher well workover and transportation costs
also contributed to the increase in LOE.
Production taxes increased 13 percent to $92 million in the third
quarter of 2006. Higher international production tax rates, primarily in
China, contributed to the increase.
Depreciation, depletion and amortization (DD&A) of oil and gas
properties increased 23 percent to $604 million in the third quarter of
2006 compared with the same quarter in 2005. Unit DD&A was $10.91 per Boe
in the third quarter of 2006.
General and administrative (G&A) expenses increased 48 percent to $104
million compared with the third quarter of 2005. Higher employee-related
costs were the largest component of the increase in G&A.
Interest expense decreased 32 percent to $112 million in the third
quarter of 2006. Interest expense of $164 million in the third quarter of
2005 included $51 million resulting from early redemption of long-term
debt.
Income Tax Rate Declines to 31 Percent of Pre-Tax Earnings
Income tax expense was $317 million in the third quarter of 2006, or 31
percent of pre-tax earnings. Of the total income tax expense, $231 million
was current and $86 million was deferred. Third-quarter 2005 income tax
expense was 35 percent of pre-tax earnings.
As a result of finalizing Devon's 2005 tax return in the third quarter
of 2006, the company accelerated the utilization of certain deferred tax
benefits. This resulted in a $35 million reclassification of deferred tax
benefits to reduce current tax expense in the third quarter of 2006.
Devon Retires $678 million of Debt; Cash Flow Funds Capital
Expenditures
Devon retired $678 million of long-term debt in the third quarter of
2006. This contributed to a reduction in net debt to adjusted
capitalization to 23 percent at September 30, 2006. The ratio was unchanged
when compared to September 30, 2005, and lower when compared to the June
30, 2006, level of 26 percent.
Cash flow before balance sheet changes was $1.5 billion in the third
quarter of 2006. This allowed Devon to fund $1.4 billion in total capital
expenditures. Cash and short-term investments totaled $1.3 billion as of
September 30, 2006. 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
for the company's financial results. These items and their effects upon
third-quarter 2006 reported earnings were as follows:
* A change in fair value of derivative financial instruments decreased
earnings by $22 million pre-tax ($14 million after tax).
* An unrealized gain on natural gas derivative instruments increased
earnings by $5 million pre-tax ($3 million after tax).
* A reduction in the carrying value of oil and gas properties decreased
earnings by $51 million pre-tax ($27 million after tax).
The following table summarizes the effects of these items on
third-quarter 2006 earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts
(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 $(22) --- (8) (8) (14) ---
Unrealized gain
on natural gas
derivative
instruments 5 --- 2 2 3 ---
Reduction in the
carrying value of
properties (51) --- (24) (24) (27) ---
Income tax accrual
adjustment --- (35) 35 --- --- 35
Totals $(68) (35) 5 (30) (38) 35
In aggregate, these items decreased third-quarter 2006 net earnings by
$38 million, or nine cents per common share (nine cents per diluted share).
In addition, a reclassification of deferred tax benefits increased cash
flow before balance sheet changes by $35 million.
Conference Call to be Webcast Today
Devon will discuss its third-quarter 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, production and property
acquisitions. 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 .
PRODUCTION DATA Quarter Ended Nine Months Ended
(net of royalties) September 30, September 30,
2006 2005 2006 2005
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 127.2 113.9 358.0 343.5
U.S. Offshore 22.2 22.7 57.2 77.5
Total U.S. 149.4 136.6 415.2 421.0
Canada 60.9 66.7 182.7 199.8
International 1.8 2.5 6.3 7.6
Total Natural Gas 212.1 205.8 604.2 628.4
Oil (MMBbls)
U.S. Onshore 2.8 2.9 8.4 9.2
U.S. Offshore 2.0 2.7 6.5 11.1
Total U.S. 4.8 5.6 14.9 20.3
Canada 3.2 3.1 9.4 9.9
International 6.2 6.1 16.7 19.9
Total Oil 14.2 14.8 41.0 50.1
Natural Gas Liquids (MMBbls)
U.S. Onshore 4.5 4.2 13.4 13.0
U.S. Offshore 0.1 0.3 0.4 0.8
Total U.S. 4.6 4.5 13.8 13.8
Canada 1.2 1.3 3.6 3.9
International --- 0.1 --- 0.2
Total Natural Gas Liquids 5.8 5.9 17.4 17.9
Oil Equivalent (MMBoe)
U.S. Onshore 28.5 26.1 81.4 79.5
U.S. Offshore 5.9 6.8 16.4 24.8
Total U.S. 34.4 32.9 97.8 104.3
Canada 14.5 15.6 43.5 47.0
International 6.5 6.5 17.8 21.4
Total Oil Equivalent 55.4 55.0 159.1 172.7
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,382.8 1,238.6 1,311.3 1,258.3
U.S. Offshore 241.0 246.5 209.5 284.0
Total U.S. 1,623.8 1,485.1 1,520.8 1,542.3
Canada 662.1 725.3 669.2 731.7
International 19.5 26.8 23.0 27.9
Total Natural Gas 2,305.4 2,237.2 2,213.0 2,301.9
Oil (MBbls)
U.S. Onshore 30.1 31.1 30.7 33.7
U.S. Offshore 22.3 29.7 23.8 40.6
Total U.S. 52.4 60.8 54.5 74.3
Canada 34.4 34.2 34.6 36.1
International 67.4 65.8 61.3 73.0
Total Oil 154.2 160.8 150.4 183.4
Natural Gas Liquids (MBbls)
U.S. Onshore 48.9 45.7 49.0 47.7
U.S. Offshore 1.7 3.2 1.4 2.8
Total U.S. 50.6 48.9 50.4 50.5
Canada 12.7 14.2 13.2 14.2
International --- 0.9 --- 0.9
Total Natural Gas Liquids 63.3 64.0 63.6 65.6
Oil Equivalent (MBoe)
U.S. Onshore 309.4 283.2 298.3 291.2
U.S. Offshore 64.2 74.0 60.1 90.7
Total U.S. 373.6 357.2 358.4 381.9
Canada 157.4 169.3 159.3 172.2
International 70.7 71.2 65.1 78.6
Total Oil Equivalent 601.7 597.7 582.8 632.7
PRODUCTION DATA - RETAINED PROPERTIES YOY Sequential
All periods exclude properties % %
divested in 2005 Q3 2006 Q3 2005 Q2 2006 Change Change
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 127.2 113.9 117.3 12% 8%
U.S. Offshore 22.2 22.0 18.6 1% 19%
Total U.S. 149.4 135.9 135.9 10% 10%
Canada 60.9 66.6 62.7 -8% -3%
International 1.8 2.5 2.2 -27% -18%
Total Natural Gas 212.1 205.0 200.8 3% 6%
Oil (MMBbls)
U.S. Onshore 2.8 2.9 2.8 -3% 0%
U.S. Offshore 2.0 2.6 2.3 -21% -13%
Total U.S. 4.8 5.5 5.1 -12% -6%
Canada 3.2 3.1 3.1 1% 3%
International 6.2 6.1 5.3 2% 17%
Total Oil 14.2 14.7 13.5 -3% 5%
Natural Gas Liquids (MMBbls)
U.S. Onshore 4.5 4.2 4.4 7% 2%
U.S. Offshore 0.1 0.3 0.1 -43% 0%
Total U.S. 4.6 4.5 4.5 4% 2%
Canada 1.2 1.3 1.2 -11% 0%
International --- 0.1 --- -100% 0%
Total Natural Gas Liquids 5.8 5.9 5.7 -1% 2%
Oil Equivalent (MMBoe)
U.S. Onshore 28.5 26.1 26.8 9% 6%
U.S. Offshore 5.9 6.5 5.4 -10% 9%
Total U.S. 34.4 32.6 32.2 5% 7%
Canada 14.5 15.6 14.7 -7% -1%
International 6.5 6.5 5.7 -1% 14%
Total Oil Equivalent 55.4 54.7 52.6 1% 5%
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,382.8 1,238.1 1,288.7 12% 7%
U.S. Offshore 241.0 239.8 204.0 1% 18%
Total U.S. 1,623.8 1,477.9 1,492.7 10% 9%
Canada 662.1 723.5 689.0 -8% -4%
International 19.5 26.8 24.7 -27% -21%
Total Natural Gas 2,305.4 2,228.2 2,206.4 3% 4%
Oil (MBbls)
U.S. Onshore 30.1 31.1 30.8 -3% -2%
U.S. Offshore 22.3 28.3 24.7 -21% -10%
Total U.S. 52.4 59.4 55.5 -12% -6%
Canada 34.4 34.2 33.6 1% 2%
International 67.4 65.8 58.7 2% 15%
Total Oil 154.2 159.4 147.8 -3% 4%
Natural Gas Liquids (MBbls)
U.S. Onshore 48.9 45.7 48.5 7% 1%
U.S. Offshore 1.7 3.0 1.0 -43% 70%
Total U.S. 50.6 48.7 49.5 4% 2%
Canada 12.7 14.2 13.2 -11% -4%
International --- 0.9 --- -100% 0%
Total Natural Gas Liquids 63.3 63.8 62.7 -1% 1%
Oil Equivalent (MBoe)
U.S. Onshore 309.4 283.2 294.1 9% 5%
U.S. Offshore 64.2 71.1 59.8 -10% 7%
Total U.S. 373.6 354.3 353.9 5% 6%
Canada 157.4 169.0 161.6 -7% -3%
International 70.7 71.2 62.8 -1% 13%
Total Oil Equivalent 601.7 594.5 578.3 1% 4%
Quarter Ended Nine Months Ended
REALIZED PRICE DATA September 30, September 30,
(average realized prices)
2006 2005 2006 2005
Realized Prices
Natural Gas ($/Mcf)
U.S. Onshore $5.53 $6.98 $6.01 $6.03
U.S. Offshore $6.86 $8.59 $7.44 $7.33
Total U.S. $5.73 $7.25 $6.21 $6.27
Canada $5.40 $6.97 $6.14 $6.21
International $3.60 $4.65 $4.20 $4.18
Total Natural Gas $5.62 $7.13 $6.17 $6.23
Oil ($/Bbl)
U.S. Onshore $65.83 $58.82 $62.74 $49.86
U.S. Offshore $71.56 $33.54 $66.30 $33.35
Total U.S. $68.27 $46.48 $64.30 $40.85
Canada $54.85 $33.89 $49.06 $27.15
International $65.75 $45.62 $63.53 $40.72
Total Oil $64.17 $43.45 $60.48 $38.10
Natural Gas Liquids ($/Bbl)
U.S. Onshore $32.41 $29.70 $29.85 $24.95
U.S. Offshore $32.39 $33.10 $37.52 $29.88
Total U.S. $32.41 $29.93 $30.06 $25.23
Canada $45.23 $40.86 $44.20 $35.76
International $--- $21.07 $--- $23.36
Total Natural Gas Liquids $34.98 $32.23 $32.99 $27.48
Oil Equivalent ($/Boe)
U.S. Onshore $36.25 $41.78 $37.79 $35.94
U.S. Offshore $51.49 $43.50 $53.03 $38.80
Total U.S. $38.86 $42.14 $40.34 $36.61
Canada $38.34 $40.12 $40.11 $35.02
International $63.72 $44.20 $61.27 $39.60
Total Oil Equivalent $41.65 $41.81 $42.62 $36.55
Quarter Ended Nine Months Ended
BENCHMARK PRICES September 30, September 30,
(average prices)
2006 2005 2006 2005
Benchmark Prices
Natural Gas ($/Mcf) - Henry Hub $6.58 $8.53 $7.47 $7.18
Oil ($/Bbl) - West Texas Intermediate
(Cushing) $70.62 $63.16 $68.22 $55.43
PRICE DIFFERENTIALS, EXCLUDING
EFFECTS OF HEDGES
(average floating price
differentials from benchmark Quarter Ended Nine Months Ended
prices) September 30, September 30,
2006 2005 2006 2005
Price Differentials
Natural Gas ($/Mcf)
U.S. Onshore $(1.08) $(1.52) $(1.47) $(1.13)
U.S. Offshore $0.28 $0.25 $(0.03) $0.22
Total U.S. $(0.88) $(1.23) $(1.27) $(0.88)
Canada $(1.05) $(1.34) $(1.16) $(0.80)
International $(0.87) $(2.01) $(1.12) $(1.63)
Total Natural Gas $(0.93) $(1.27) $(1.24) $(0.86)
Oil ($/Bbl)
U.S. Onshore $(4.79) $(4.34) $(5.49) $(4.93)
U.S. Offshore $0.94 $(2.31) $(1.93) $(5.14)
Total U.S. $(2.35) $(3.35) $(3.93) $(5.05)
Canada $(15.77) $(12.88) $(19.17) $(14.10)
International $(4.87) $(6.45) $(4.70) $(6.99)
Total Oil $(6.45) $(6.65) $(7.75) $(7.60)
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in millions, except per Quarter Ended Nine Months Ended
share data) September 30, September 30,
2006 2005 2006 2005
Revenues
Oil sales $910 $643 $2,482 $1,908
Gas sales 1,191 1,466 3,725 3,913
Natural gas liquids sales 204 190 573 492
Marketing & midstream revenues 417 405 1,276 1,210
Total revenues 2,722 2,704 8,056 7,523
Expenses and Other Income, net
Lease operating expenses 382 319 1,093 1,005
Production taxes 92 81 261 234
Marketing & midstream operating
costs and expenses 303 294 930 921
Depreciation, depletion and
amortization of oil and gas
properties 604 493 1,667 1,528
Depreciation and amortization of
non-oil and gas properties 44 40 129 119
Accretion of asset retirement
obligation 13 12 37 35
General & administrative expenses 104 70 284 206
Interest expense 112 164 315 428
Effects of changes in foreign
currency exchange rates --- (15) (1) (4)
Change in fair value of derivative
financial instruments 22 134 81 168
Reduction of carrying value of oil
and gas properties 51 --- 152 ---
Other income, net (27) (27) (85) (179)
Total expenses and other income, net 1,700 1,565 4,863 4,461
Earnings before income tax expense 1,022 1,139 3,193 3,062
Income Tax Expense
Current 231 203 733 832
Deferred 86 192 196 270
Total income tax expense 317 395 929 1,102
Net earnings 705 744 2,264 1,960
Preferred stock dividends 2 2 7 7
Net earnings applicable to common
stockholders $703 $742 $2,257 $1,953
Net earnings per weighted average
common shares outstanding
Basic $1.59 $1.66 $5.11 $4.22
Diluted $1.57 $1.63 $5.05 $4.15
Basic weighted average shares
outstanding 441 446 441 463
Diluted weighted average shares
outstanding 447 454 447 471
CONSOLIDATED BALANCE SHEETS
(in millions) September 30, December 31,
2006 2005
Assets (Audited)
Current assets
Cash and cash equivalents $1,196 $1,606
Short-term investments 124 680
Accounts receivable 1,317 1,601
Deferred income taxes 71 158
Other current assets 228 161
Total current assets 2,936 4,206
Property and equipment, at cost,
based on the full cost method of
accounting for oil and gas
properties ($3,862 and $2,747 excluded
from amortization in 2006 and 2005,
respectively) 41,247 34,246
Less accumulated depreciation,
depletion and amortization 17,150 15,114
Net property and equipment 24,097 19,132
Investment in Chevron Corporation
common stock, at fair value 920 805
Goodwill 5,822 5,705
Other assets 457 425
Total Assets $34,232 $30,273
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable:
Trade $1,133 $947
Revenues and royalties due to others 524 666
Income taxes payable 278 293
Short-term debt 1,439 662
Accrued interest payable 79 127
Current portion of asset retirement
obligation 45 50
Accrued expenses and other current
liabilities 328 189
Total current liabilities 3,826 2,934
Debentures exchangeable into shares
of Chevron Corporation common stock 723 709
Other long-term debt 5,239 5,248
Fair value of derivative financial
instruments 204 125
Asset retirement obligation, long-
term 864 618
Other liabilities 534 372
Deferred income taxes 5,625 5,405
Stockholders' equity
Preferred stock 1 1
Common stock 44 44
Additional paid-in capital 6,791 6,928
Retained earnings 8,586 6,477
Accumulated other comprehensive
income 1,796 1,414
Treasury stock (1) (2)
Stockholders' Equity 17,217 14,862
Total Liabilities & Stockholders' Equity $34,232 $30,273
Common Shares Outstanding 442 443
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Nine Months Ended September 30,
2006 2005
Cash Flows From Operating Activities
Net earnings $2,264 $1,960
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation, depletion and
amortization 1,796 1,647
Deferred income tax expense 196 270
Net gain on sales of non-oil and gas
property and equipment (5) (145)
Reduction of carrying value of oil
and gas properties 152 ---
Other non-cash charges to net earnings 165 224
4,568 3,956
Changes in assets and liabilities,
net of effects of acquisitions of
businesses:
(Increase) decrease in:
Accounts receivable 341 (164)
Other current assets (55) (33)
Long-term other assets (56) 28
Increase (decrease) in:
Accounts payable (79) 133
Income taxes payable (32) (116)
Debt, including current maturities --- (67)
Accrued interest and expenses 55 (53)
Long-term other liabilities 140 (32)
Net cash provided by operating activities $4,882 $3,652
Cash Flows From Investing Activities
Proceeds from sales of property and
equipment $36 $2,150
Capital expenditures (6,146) (2,923)
Purchases of short-term investments (1,868) (3,501)
Sales of short-term investments 2,424 3,677
Net cash used in investing activities $(5,554) $(597)
Cash Flows From Financing Activities
Proceeds from borrowings of debt,
net of issuance costs $1,439 $---
Principal payments on debt,
including current maturities (860) (1,023)
Proceeds from exercise of stock
options 53 117
Repurchase of common stock (253) (2,129)
Excess tax benefits related to
share-based compensation 14 ---
Dividends paid on common stock (148) (103)
Dividends paid on preferred stock (7) (7)
Net cash provided by (used in)
financing activities $238 $(3,145)
Effect of exchange rate changes on
cash $24 $33
Net decrease in cash and cash
equivalents (410) (57)
Cash and cash equivalents at
beginning of period 1,606 1,152
Cash and cash equivalents at end of
period $1,196 $1,095
Quarter Ended Nine Months Ended
DRILLING ACTIVITY September 30, September 30,
2006 2005 2006 2005
Exploration Wells Drilled
U.S. 23 14 62 35
Canada 13 33 109 185
International --- 1 8 8
Total 36 48 179 228
Exploration Wells Success Rate
U.S. 83% 64% 87% 71%
Canada 100% 79% 99% 91%
International --- 0% 13% 38%
Total 89% 73% 91% 86%
Development Wells Drilled
U.S. 458 321 1,113 918
Canada 237 277 619 659
International 9 13 31 32
Total 704 611 1,763 1,609
Development Wells Success Rate
U.S. 100% 100% 99% 99%
Canada 99% 100% 99% 99%
International 100% 100% 97% 100%
Total 99% 100% 99% 99%
Total Wells Drilled
U.S. 481 335 1,175 953
Canada 250 310 728 844
International 9 14 39 40
Total 740 659 1,942 1,837
Total Wells Success Rate
U.S. 99% 98% 98% 98%
Canada 99% 97% 99% 97%
International 100% 93% 80% 88%
Total 99% 98% 98% 97%
COMPANY OPERATED RIGS September 30,
2006 2005
Number of Company Operated Rigs Running
U.S. 60 52
Canada 7 19
International --- 2
Total 67 73
Quarter Ended Nine Months Ended
CAPITAL EXPENDITURES DATA September 30, 2006 September 30, 2006
(in millions)
Capital Expenditures
U.S. Onshore $682 $1,772
U.S. Offshore 115 445
Total U.S. 797 2,217
Canada 279 1,113
International 113 312
Chief acquisition (15) 2,208
Marketing & midstream 91 247
Capitalized general & administrative
costs 67 185
Capitalized interest costs 18 51
Other 52 123
Total $1,402 $6,456
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 Quarter Ended Nine Months Ended
(in millions) September 30, September 30,
2006 2005 2006 2005
Net Cash Provided By
Operating Activities (GAAP) $2,064 $1,267 $4,882 $3,652
Changes in assets and
liabilities, net of effects
of acquisitions of businesses (521) 336 (314) 304
Cash flow before balance sheet
changes (Non-GAAP) $1,543 $1,603 $4,568 $3,956
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 $723 million of
debentures exchangeable into 14.2 million shares of Chevron common stock
owned outright by Devon. As of September 30, 2006, the market value of the
shares ($920 million) 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) September 30,
2006 2005
Total debt (GAAP) $7,401 6,857
Adjustments:
Cash and short-term investments (1,320) (1,886)
Market value of Chevron Corporation
common stock (920) (918)
Net Debt (Non-GAAP) $5,161 4,053
Total Capitalization
Total debt $7,401 6,857
Stockholders' equity 17,217 13,944
Total Capitalization (GAAP) $24,618 20,801
Adjusted Capitalization
Net debt $5,161 4,053
Stockholders' equity 17,217 13,944
Adjusted Capitalization (Non-GAAP) $22,378 17,997
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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