OKLAHOMA CITY, Nov. 7 /PRNewswire-FirstCall/ -- Devon Energy
Corporation (NYSE: DVN) today reported net earnings of $735 million, or
$1.65 per common share ($1.63 per diluted common share), for the quarter
ended September 30, 2007. This compares with third-quarter 2006 net
earnings of $705 million, or $1.59 per common share ($1.57 per diluted
common share).
For the nine months ended September 30, 2007, Devon reported net
earnings of $2.3 billion, or $5.13 per common share ($5.07 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).
Securities analysts typically exclude certain items from their
published estimates. In aggregate, these items increased Devon's
third-quarter 2007 net earnings by $35 million, or eight cents per diluted
share. The adjusting items are discussed in detail later in this news
release.
Sixth Consecutive Quarter of Increased Production
Oil and natural gas production from continuing operations increased in
the third quarter of 2007 to 56.8 million oil-equivalent barrels (Boe).
This was a 10 percent increase over third quarter 2006 production and was
driven by organic production growth in each of the company's producing
segments: the United States, Canada and International. The third quarter of
2007 marks the sixth consecutive quarter that Devon has increased oil and
gas production from retained properties.
Marketing and Midstream MLP Update
Devon also announced today that it has decided not to proceed at this
time with its plans to form a publicly-traded master limited partnership
(MLP). The MLP was to own a minority interest in Devon's U.S. onshore
marketing and midstream business. The company cited changing financial
market conditions for MLPs as the principal reason for the decision.
Barnett Shale Milestones Lead Operating Highlights
Devon drilled 599 wells in the third quarter of 2007 with an overall
success rate of 98 percent. Following are highlights of third-quarter
operations.
* Devon commenced drilling its 1,000th operated horizontal well in the
Barnett Shale in north Texas during the third quarter. Horizontal
drilling, initiated by Devon about five years ago in the field, has
played an important role in unlocking more of the vast potential of the
company's 735,000 net acres in the Barnett Shale.
* Devon's net production from the Barnett Shale averaged 856 million cubic
feet of natural gas equivalent per day in the third quarter,
representing a 32 percent increase over the third quarter of 2006.
* Devon commenced production from the Merganser field in the deepwater
Gulf of Mexico in August. Combined initial production from the two
Merganser wells was about 150 million cubic feet of gas per day. Devon
has a 50 percent working interest in the field, which produces into the
Independence Hub.
* Devon has sanctioned development of the Cascade project in the deepwater
Lower Tertiary trend of the Gulf of Mexico. Cascade is expected to be
one of the first two development projects to establish production in the
Gulf's Lower Tertiary trend.
* Also in the Gulf of Mexico, Devon commenced drilling its first
company-operated Lower Tertiary exploratory well in the third quarter.
The Chuck well, in 6,500 feet of water, is drilling to a target depth of
31,500 feet. Devon has a 39.5 percent working interest in the Chuck
prospect.
* In east Texas, net production in the company's Carthage area climbed to
a new high in the third quarter, averaging 260 million cubic feet of
natural gas equivalent per day. Based on the success of its vertical
and horizontal programs, Devon has increased its rig count in Carthage
to 13.
* In Canada, Devon continued an active 5-rig program in the third quarter,
drilling 125 new wells in the company's Lloydminster oil play. The
company's production in Lloydminster has increased by 50 percent over
the past 12 months to 34,600 barrels per day.
* In Brazil, the offshore Polvo project began first production in the
third quarter. Three of 10 planned producing wells have now been
completed. Gross combined production reached about 9,500 barrels of oil
per day from the first three wells. The project is expected to produce
up to 50,000 barrels per day at its peak in 2008. Devon has a
60 percent working interest in Polvo.
Oil and Gas Revenues Increase 12 Percent
Sales of oil, natural gas and natural gas liquids were $2.3 billion in
the third quarter of 2007. This was a 12 percent increase compared with the
third quarter of 2006. The increase in sales was the result of greater
production and higher realized liquids prices, partially offset by lower
natural gas prices.
The average realized price for natural gas decreased six percent in the
third quarter of 2007 to $5.31 per thousand cubic feet. This compares with
$5.63 per thousand cubic feet in the third quarter of 2006. Devon's average
realized oil price increased six percent to $67.41 per barrel in the third
quarter of 2007 compared with $63.77 per barrel in the prior-year period.
Devon's realized natural gas liquids price increased 10 percent to $38.34
per barrel from $34.98 per barrel in the third quarter of 2006.
Marketing and midstream operating profit was $133 million, compared
with $112 million in the third quarter of 2006. The 19 percent increase
resulted primarily from higher gas processing margins.
Higher Expenses Reflect High Activity Levels and Resulting Growth
Driven by higher production and activity levels coupled with rising
industry costs, expenses in most categories increased in the third quarter
of 2007. With the exception of depreciation, depletion and amortization
(DD&A) expense, Devon's expenses in the third quarter of 2007 were
generally in line with expectations. DD&A expense associated with oil and
gas properties increased to $12.41 per Boe in the third quarter. The higher
than expected third quarter DD&A rate was attributable to the impact of
unusually low natural gas prices in the Rocky Mountain producing region at
September 30, 2007.
African Divestiture Update
In October, Devon completed the sale of its operations in Egypt for an
adjusted sales price of $341 million as of the closing date. The company is
also in the process of divesting its assets and terminating operations in
West Africa. In accordance with accounting standards, Devon has
reclassified the assets, liabilities and results of its operations in Egypt
and West Africa as discontinued operations for all accounting periods
presented in this release. Although revenues and expenses for prior periods
were reclassified, there was no impact upon previously reported net
earnings. Included with the financial information that follows is a table
of revenues, expenses and production categories and the amounts
reclassified as discontinued operations for each period presented.
Cash Flow Before Balance Sheet Changes Increases 15 Percent to
$1.8 Billion
Third quarter cash flow before balance sheet changes rose 15 percent to
$1.8 billion in 2007. During the third quarter, Devon utilized cash flow to
fund $1.6 billion of capital expenditures and returned more than $180
million to shareholders through share repurchases and dividends. The
company's balance sheet continued to strengthen during the third quarter
with net debt to adjusted capitalization declining to 19 percent at
September 30, 2007. 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
third-quarter 2007 reported earnings were as follows:
* A change in fair value of financial instruments increased third-quarter
2007 earnings by $22 million pre-tax ($14 million after tax).
* An unrealized loss on natural gas derivative instruments decreased
third-quarter 2007 earnings by $6 million pre-tax ($4 million after
tax).
* The decisions to exit Egypt and West Africa generated financial benefits
that increased third-quarter 2007 earnings by $48 million pre-tax
($25 million after tax).
The following table summarizes the effects of these items on
third-quarter 2007 earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts -
Third Quarter 2007
(in millions)
Cash Flow
Pre-tax Income Tax Effect After-tax Before
Earnings ---------------------- Earnings Balance Sheet
Effect Current Deferred Total Effect Changes Effect
Change in fair
value of
financial
instruments $22 - 8 8 14 -
Unrealized loss
on natural gas
derivatives (6) - (2) (2) (4) -
Financial
benefits
generated by
decision to
exit Africa 48 - 23 23 25 -
Totals $64 - 29 29 35 -
In aggregate, these items increased third-quarter 2007 net earnings by
$35 million, or eight cents per common share (eight cents per diluted
share).
Conference Call to be Webcast Today
Devon will discuss its third-quarter 2007 financial and operating
results and changes to its full-year 2007 outlook 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 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
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION DATA (net of royalties)
All periods exclude discontinued Quarter Ended Nine Months Ended
operations from Egypt and West Africa September 30, September 30,
2007 2006 2007 2006
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 144.2 127.2 407.8 358.0
U.S. Offshore 19.9 22.2 57.3 57.2
Total U.S. 164.1 149.4 465.1 415.2
Canada 57.9 60.9 170.3 182.7
International 0.5 0.3 1.3 1.5
Total Natural Gas 222.5 210.6 636.7 599.4
Oil (MMBbls)
U.S. Onshore 2.8 2.8 8.4 8.4
U.S. Offshore 2.1 2.0 5.8 6.5
Total U.S. 4.9 4.8 14.2 14.9
Canada 4.2 3.2 11.7 9.4
International 4.3 2.9 15.2 6.1
Total Oil 13.4 10.9 41.1 30.4
Natural Gas Liquids (MMBbls)
U.S. Onshore 5.1 4.5 15.0 13.4
U.S. Offshore 0.2 0.1 0.6 0.4
Total U.S. 5.3 4.6 15.6 13.8
Canada 1.0 1.2 3.2 3.6
International - - - -
Total Natural Gas Liquids 6.3 5.8 18.8 17.4
Oil Equivalent (MMBoe)
U.S. Onshore 31.9 28.5 91.4 81.4
U.S. Offshore 5.7 5.9 16.0 16.4
Total U.S. 37.6 34.4 107.4 97.8
Canada 14.8 14.5 43.2 43.5
International 4.4 2.9 15.4 6.4
Total Oil Equivalent 56.8 51.8 166.0 147.7
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,567.4 1,382.8 1,493.7 1,311.3
U.S. Offshore 215.8 241.0 210.0 209.5
Total U.S. 1,783.2 1,623.8 1,703.7 1,520.8
Canada 629.5 662.1 623.6 669.2
International 5.4 3.1 4.7 5.8
Total Natural Gas 2,418.1 2,289.0 2,332.0 2,195.8
Oil (MBbls)
U.S. Onshore 30.0 30.1 30.7 30.7
U.S. Offshore 23.3 22.3 21.5 23.8
Total U.S. 53.3 52.4 52.2 54.5
Canada 45.5 34.4 42.9 34.6
International 47.1 31.8 55.5 22.2
Total Oil 145.9 118.6 150.6 111.3
Natural Gas Liquids (MBbls)
U.S. Onshore 55.1 48.9 54.9 49.0
U.S. Offshore 2.9 1.7 2.2 1.4
Total U.S. 58.0 50.6 57.1 50.4
Canada 10.7 12.7 11.6 13.2
International - - - -
Total Natural Gas Liquids 68.7 63.3 68.7 63.6
Oil Equivalent (MBoe)
U.S. Onshore 346.4 309.4 334.6 298.3
U.S. Offshore 62.1 64.2 58.6 60.1
Total U.S. 408.5 373.6 393.2 358.4
Canada 161.2 157.4 158.4 159.3
International 48.0 32.4 56.3 23.2
Total Oil Equivalent 617.7 563.4 607.9 540.9
Quarter Ended Nine Months Ended
REALIZED PRICE DATA September 30, September 30,
(average realized prices) 2007 2006 2007 2006
Realized Prices
Natural Gas ($/Mcf)
U.S. Onshore $5.12 $5.53 $5.70 $6.01
U.S. Offshore $6.43 $6.86 $7.14 $7.44
Total U.S. $5.28 $5.73 $5.88 $6.21
Canada $5.40 $5.40 $6.16 $6.14
International $6.61 $5.11 $5.73 $6.34
Total Natural Gas $5.31 $5.63 $5.95 $6.19
Oil ($/Bbl)
U.S. Onshore $69.95 $65.83 $60.60 $62.74
U.S. Offshore $77.36 $71.56 $66.45 $66.30
Total U.S. $73.19 $68.27 $63.01 $64.30
Canada $53.40 $54.85 $48.01 $49.06
International $74.43 $66.00 $66.10 $63.59
Total Oil $67.41 $63.77 $59.88 $59.43
Natural Gas Liquids ($/Bbl)
U.S. Onshore $36.77 $32.41 $32.65 $29.85
U.S. Offshore $36.92 $32.39 $33.39 $37.52
Total U.S. $36.78 $32.41 $32.68 $30.06
Canada $46.77 $45.23 $42.36 $44.20
International $ - $ - $ - $ -
Total Natural Gas Liquids $38.34 $34.98 $34.31 $32.99
Oil Equivalent ($/Boe)
U.S. Onshore $35.08 $36.25 $36.36 $37.79
U.S. Offshore $53.04 $51.49 $51.12 $53.03
Total U.S. $37.81 $38.86 $38.56 $40.34
Canada $39.28 $38.34 $40.33 $40.11
International $73.77 $65.42 $65.66 $62.53
Total Oil Equivalent $40.99 $40.24 $41.53 $41.23
Quarter Ended Nine Months Ended
BENCHMARK PRICES September 30, September 30,
(average prices) 2007 2006 2007 2006
Benchmark Prices
Natural Gas ($/Mcf) - Henry Hub $6.16 $6.58 $6.83 $7.47
Oil ($/Bbl) - West Texas Intermediate
(Cushing) $75.21 $70.62 $66.21 $68.22
PRICE DIFFERENTIALS, EXCLUDING
EFFECTS OF HEDGES Quarter Ended Nine Months Ended
(average floating price September 30, September 30,
differentials from benchmark prices) 2007 2006 2007 2006
Price Differentials
Natural Gas ($/Mcf)
U.S. Onshore $(1.09) $(1.08) $(1.13) $(1.46)
U.S. Offshore $ 0.27 $ 0.28 $ 0.31 $(0.03)
Total U.S. $(0.92) $(0.88) $(0.95) $(1.26)
Canada $(0.64) $(1.04) $(0.50) $(1.16)
International $ 0.45 $(1.47) $(1.10) $(1.13)
Total Natural Gas $(0.85) $(0.92) $(0.83) $(1.23)
Oil ($/Bbl)
U.S. Onshore $(5.26) $(4.79) $(5.61) $(5.48)
U.S. Offshore $ 2.15 $ 0.94 $ 0.24 $(1.92)
Total U.S. $(2.02) $(2.35) $(3.20) $(3.92)
Canada $(21.81) $(15.77) $(18.20) $(19.16)
International $(0.78) $(4.62) $(0.11) $(4.63)
Total Oil $(7.80) $(6.85) $(6.33) $(8.79)
Quarter Ended Nine Months Ended
CONSOLIDATED STATEMENTS OF OPERATIONS September 30, September 30,
(in millions, except per share data) 2007 2006 2007 2006
Revenues
Oil sales $905 $696 $2,461 $1,806
Gas sales 1,182 1,186 3,788 3,709
Natural gas liquids sales 242 204 643 573
Marketing & midstream revenues 434 413 1,273 1,261
Total revenues 2,763 2,499 8,165 7,349
Expenses and other income, net
Lease operating expenses 457 363 1,326 1,036
Production taxes 85 92 255 261
Marketing & midstream operating
costs and expenses 301 301 912 924
Depreciation, depletion and
amortization of oil and gas
properties 705 547 1,937 1,480
Depreciation and amortization of
non-oil and gas properties 51 43 146 127
Accretion of asset retirement
obligation 19 12 55 35
General & administrative expenses 126 104 358 284
Interest expense 108 112 325 315
Change in fair value of financial
instruments (22) 22 (31) 81
Reduction of carrying value of oil
and gas properties - 20 - 36
Other income, net (28) (28) (71) (86)
Total expenses and other income, net 1,802 1,588 5,212 4,493
Earnings from continuing operations
before income tax expense 961 911 2,953 2,856
Income tax expense
Current 96 147 459 471
Deferred 221 111 452 253
Total income tax expense 317 258 911 724
Earnings from continuing operations 644 653 2,042 2,132
Discontinued operations
Earnings from discontinued
operations before income tax expense 177 112 442 337
Income tax expense 86 60 194 205
Earnings from discontinuing operations 91 52 248 132
Net earnings 735 705 2,290 2,264
Preferred stock dividends 2 2 7 7
Net earnings applicable to common
stockholders $733 $703 $2,283 $2,257
Net earnings per weighted average
common shares outstanding
Basic $1.65 $1.59 $5.13 $5.11
Diluted $1.63 $1.57 $5.07 $5.05
Basic weighted average shares
outstanding 445 441 445 441
Diluted weighted average shares
outstanding 450 447 450 447
CONSOLIDATED BALANCE SHEETS September 30, December 31,
(in millions) 2007 2006
Assets (Audited)
Current assets
Cash and cash equivalents $1,392 $692
Short-term investments, at fair value 341 574
Accounts receivable 1,435 1,324
Current assets held for sale 176 232
Other current assets 340 390
Total current assets 3,684 3,212
Property and equipment, at cost, based on the
full cost method of accounting for oil and gas
properties ($3,371 and $3,293 excluded from
amortization in 2007 and 2006, respectively) 46,546 39,585
Less accumulated depreciation,
depletion and amortization 19,561 16,429
Net property and equipment 26,985 23,156
Investment in Chevron Corporation
common stock, at fair value 1,327 1,043
Goodwill 6,150 5,706
Assets held for sale 1,707 1,619
Other assets 418 327
Total Assets $40,271 $35,063
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $1,268 $1,154
Revenues and royalties due to others 529 522
Income taxes payable 187 82
Short-term debt 2,076 2,205
Accrued interest payable 191 114
Current liabilities associated with
assets held for sale 190 173
Accrued expenses and other current liabilities 325 395
Total current liabilities 4,766 4,645
Debentures exchangeable into shares
of Chevron Corporation common stock 638 727
Other long-term debt 5,235 4,841
Financial instruments, at fair value 495 302
Asset retirement obligation, at fair value 1,246 804
Liabilities associated with assets held for sale 445 429
Other liabilities 622 583
Deferred income taxes 5,992 5,290
Stockholders' equity
Preferred stock 1 1
Common stock 45 44
Additional paid-in capital 6,883 6,840
Retained earnings 11,564 9,114
Accumulated other comprehensive income 2,339 1,444
Treasury stock - (1)
Stockholders' Equity 20,832 17,442
Total Liabilities & Stockholders' Equity $40,271 $35,063
Common Shares Outstanding 445 444
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended
(in millions) September 30,
2007 2006
Cash Flows From Operating Activities
Net earnings $2,290 $2,264
Earnings from discontinued
operations, net of tax (248) (132)
Adjustments to reconcile net earnings
from continuing operations to net cash
provided by operating activities:
Depreciation, depletion and amortization 2,083 1,607
Deferred income tax expense 452 253
Net gain on sales of non-oil
and gas property and equipment (1) (5)
Reduction of carrying value of
oil and gas properties - 36
Other non-cash charges 125 163
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (12) 206
Other current assets (65) (45)
Long-term other assets (53) (37)
Increase (decrease) in:
Accounts payable 111 (59)
Income taxes payable 139 (34)
Other current liabilities (78) 197
Long-term other liabilities (4) (1)
Cash provided by operating
activities - continuing operations 4,739 4,413
Cash provided by operating activities -
discontinued operations 370 469
Net cash provided by operating activities 5,109 4,882
Cash Flows From Investing Activities
Proceeds from sales of property and
equipment 39 36
Capital expenditures, including
acquisitions of businesses (4,477) (5,959)
Purchases of short-term investments (659) (1,868)
Sales of short-term investments 892 2,424
Cash used in investing activities -
continuing operations (4,205) (5,367)
Cash used in investing activities -
discontinued operations (153) (187)
Net cash used in investing activities (4,358) (5,554)
Cash Flows From Financing Activities
Net senior credit facility
borrowings, net of issuance costs 400 -
Net commercial paper (repayments)
borrowings, net of issuance costs (129) 1,439
Principal payments on debt,
including current maturities (166) (860)
Proceeds from exercise of stock options 71 53
Repurchase of common stock (133) (253)
Excess tax benefits related to
share-based compensation 20 14
Dividends paid on common stock (186) (148)
Dividends paid on preferred stock (7) (7)
Net cash (used in) provided by
financing activities (130) 238
Effect of exchange rate changes on cash 44 24
Net increase (decrease) in cash and
cash equivalents 665 (410)
Cash and cash equivalents at beginning of
period (including assets held for sale) 756 1,606
Cash and cash equivalents at end of period
(including assets held for sale) $1,421 $1,196
Supplementary cash flow data:
Interest paid (net of capitalized interest) $226 $349
Income taxes paid $293 $581
DRILLING ACTIVITY Quarter Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Exploration Wells Drilled
U.S. 5 23 32 62
Canada 19 13 83 109
International - - 1 2
Total 24 36 116 173
Exploration Wells Success Rate
U.S. 60% 83% 78% 87%
Canada 100% 100% 96% 99%
International - - 0% 0%
Total 92% 89% 91% 93%
Development Wells Drilled
U.S. 422 458 1,046 1,113
Canada 139 237 445 619
International 14 4 23 18
Total 575 699 1,514 1,750
Development Wells Success Rate
U.S. 98% 100% 98% 99%
Canada 100% 99% 100% 99%
International 100% 100% 100% 100%
Total 98% 99% 98% 99%
Total Wells Drilled
U.S. 427 481 1,078 1,175
Canada 158 250 528 728
International 14 4 24 20
Total 599 735 1,630 1,923
Total Wells Success Rate
U.S. 97% 99% 97% 98%
Canada 100% 99% 99% 99%
International 100% 100% 96% 90%
Total 98% 99% 98% 98%
COMPANY OPERATED RIGS September 30,
2007 2006
Number of Company Operated Rigs Running
U.S. 76 60
Canada 12 7
International 1 -
Total 89 67
CAPITAL EXPENDITURES DATA (in millions)
Quarter Ended September 30, 2007
U.S. U.S. Devon
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $79 93 30 14 $216
Development 762 66 222 86 1,136
Exploration and
development capital $841 159 252 100 $1,352
Capitalized G&A 84
Capitalized interest 16
Discontinued operations 32
Property acquisitions 5
Midstream capital 105
Other capital 24
Total capital expenditures $1,618
CAPITAL EXPENDITURES DATA (in millions)
Nine Months Ended September 30, 2007
U.S. U.S. Devon
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $178 211 95 59 $543
Development 2,135 187 743 228 3,293
Exploration and
development capital $2,313 398 838 287 $3,836
Capitalized G&A 230
Capitalized interest 47
Discontinued operations 139
Property acquisitions 17
Midstream capital 273
Other capital 82
Total capital expenditures $4,624
DETAIL OF RECLASSIFICATION FOR
DISCONTINUED OPERATIONS IN EGYPT Quarter Ended Nine Months Ended
AND WEST AFRICA September 30, September 30,
2007 2006 2007 2006
Production from Discontinued Operations
Oil (MMBbls) 2.6 3.3 8.9 10.7
Natural Gas (Bcf) 1.2 1.5 3.8 4.7
Total Oil Equivalent (MMBoe) 2.9 3.5 9.6 11.4
STATEMENTS OF DISCONTINUED OPERATIONS Quarter Ended Nine Months Ended
DATA (in millions) September 30, September 30,
2007 2006 2007 2006
Revenues
Oil sales $196 $214 $571 $676
Gas sales 4 5 12 16
Marketing & midstream revenues 6 4 13 15
Total revenues 206 223 596 707
Expenses and other income, net
Lease operating expenses 20 19 59 57
Marketing & midstream operating
costs and expenses 2 2 5 6
Depreciation, depletion and amortization
of oil and gas properties 2 57 20 187
Depreciation, depletion and amortization
of non-oil and gas properties - 1 - 2
Accretion of asset retirement obligation 1 1 3 2
Reduction of carrying value of oil
and gas properties 4 31 67 116
Total expenses and other income, net 29 111 154 370
Earnings before income tax expense 177 112 442 337
Income tax (benefit) expense
Current 69 85 184 262
Deferred 17 (25) 10 (57)
Total income tax expense 86 60 194 205
Earnings from discontinued operations $91 $52 $248 $132
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,
2007 2006 2007 2006
Net Cash Provided By Operating
Activities (GAAP) $1,760 $2,064 $5,109 $4,882
Changes in assets and liabilities -
continuing operations 65 (406) (37) (232)
Changes in assets and liabilities -
discontinued operations (59) (121) (23) (88)
Cash flow before balance sheet
changes (Non-GAAP) $1,766 $1,537 $5,049 $4,562
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 $638 million of
debentures exchangeable into shares of Chevron common stock owned outright
by Devon. As of September 30, 2007, the market value of the shares ($1.3
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) September 30,
2007 2006
Total debt (GAAP) $7,949 $7,401
Adjustments:
Cash and short-term investments 1,733 1,279
Market value of Chevron Corporation
common stock 1,327 920
Net Debt (Non-GAAP) $4,889 $5,202
Total Capitalization
Total debt $7,949 $7,401
Stockholders' equity 20,832 17,217
Total Capitalization (GAAP) $28,781 $24,618
Adjusted Capitalization
Net debt $4,889 $5,202
Stockholders' equity 20,832 17,217
Adjusted Capitalization (Non-GAAP) $25,721 $22,419
SOURCE Devon Energy Corp.
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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 Corp.
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