DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2021-05-04 2021-05-04

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2021

 

 

Devon Energy Corporation

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   001-32318   73-1567067
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

333 W. SHERIDAN AVE.,
OKLAHOMA CITY, OKLAHOMA
  73102-5015
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (405) 235-3611

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading
Symbol(s)

  

Name of each exchange
on which registered

Common Stock, par value $0.10 per share    DVN    The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition.

On May 4, 2021, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarter ended March 31, 2021. In connection with this announcement, the Company provided an earnings release and certain supplemental financial information (including guidance and hedging information). Copies of these documents are furnished as Exhibits 99.1 and 99.2, respectively, to this report and, along with certain other materials, will be available on the Company’s website at www.devonenergy.com.

The information contained in this report and the exhibits hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

  (d)

Exhibits

 

Exhibit
No.

  

Description of Exhibits

99.1    Earnings release, dated May 4, 2021.
99.2    Supplemental financial information (including guidance and hedging information).
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

DEVON ENERGY CORPORATION
By:  

/s/ Jeffrey L. Ritenour

  Jeffrey L. Ritenour
  Executive Vice President and Chief Financial Officer

Date: May 4, 2021

Exhibit 99.1

 

LOGO    

    

 

Devon Energy Corporation

333 West Sheridan Avenue

Oklahoma City, OK 73102-5015

Devon Energy Reports First-Quarter 2021 Financial and Operational Results

OKLAHOMA CITY – May 4, 2021 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the first-quarter 2021. The company’s first quarter performance includes results from the merger with WPX Energy that was successfully completed on Jan. 7, 2021. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

   

Board increases fixed-plus-variable dividend payout by 13 percent to $0.34 per share

 

   

Investment-grade financial strength enhanced with redemption of $743 million of debt year-to-date

 

   

Devon reiterates its commitment to a disciplined maintenance capital program in 2021

 

   

First-quarter oil production totaled 268,000 barrels per day, exceeding guidance by 5,000 barrels per day

 

   

Delaware Basin efficiency gains drove upstream capital expenditures 5 percent below guidance in the quarter

 

   

Operating cash flow in the first quarter reached $592 million

 

   

Free cash flow generation, after adjusting for cash restructuring costs, expanded to $260 million in the first quarter

CEO PERSPECTIVE

“Devon is a premier energy company that possesses a powerful suite of assets and a disciplined strategy to maximize value for our shareholders,” said Rick Muncrief, president and CEO. “With this advantaged platform, we delivered on exactly what we promised to do in the first quarter by moderating capital investment, capturing cost synergies and returning significant value to shareholders through higher dividends and the aggressive reduction of debt.”

“With our business scaled to generate free cash flow, a clear differentiator for Devon is the ability to accelerate cash returns to shareholders through our innovative fixed-plus-variable dividend framework,” said Muncrief. “And based on the strength of our first-quarter results, I am proud to announce a 13 percent increase in our total dividend payout to $0.34 per share.

“Looking ahead to the remainder of the year, we are unwavering in our commitment to capital discipline and will remain focused on the strategic objectives that underpin our cash-return business model,” Muncrief added. “Devon has no intention of allocating capital to growth projects until demand-side fundamentals recover and it becomes evident that OPEC+’s spare oil capacity is effectively absorbed by the world markets.”

OPERATING RESULTS

First-quarter oil production averaged 268,000 barrels per day, exceeding guidance by 5,000 barrels per day. This performance was driven by the company’s Delaware Basin asset that accounted for 62 percent of total production. Devon estimates that production in the quarter was reduced by 8 percent due to severe winter weather. Production totals also exclude WPX results prior to the merger close date of Jan. 7, 2021, limiting first-quarter production by an incremental 3 percent.

Upstream capital spending was 5 percent below guidance, totaling $447 million in the first quarter. This positive variance was attributable to efficiency gains and the benefits of enhanced operating scale in the Delaware Basin. Devon’s capital activity averaged 18 operated drilling rigs and six completion crews in the quarter, with approximately 80 percent of this investment allocated to the Delaware Basin.

With capital programs focused on developing higher-margin production opportunities, oil and natural gas liquids volumes reached 74 percent of Devon’s product mix in the quarter. This exposure to higher value production expanded the company’s field-level cash margin to $28.95 per Boe, an 88 percent increase year over year.

 

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Corporate costs also declined during the quarter, driven by general and administrative expenses, which declined 30 percent year over year on a pro forma basis.

ASSET-LEVEL HIGHLIGHTS

Delaware Basin: Oil production averaged 172,000 barrels per day, a 19 percent increase year-over-year on a pro forma basis. The growth in oil production was driven by 52 wells that commenced first production in the quarter across the company’s acreage position. The completed well costs associated with this development activity improved to a record low of $534 per lateral foot in the quarter, representing a 43 percent reduction compared to 2018.

The top operating highlight from the first quarter was Devon’s Danger Noodle project in Lea County, New Mexico. This development project, targeting multiple intervals in the upper Wolfcamp, achieved average 30-day production rates of 5,100 Boe per day per well (66 percent oil). In addition to strong well productivity, returns at Danger Noodle were enhanced by completed well costs that were more than 20 percent below pre-drill expectations.

Another noteworthy event for Devon was the resumption of approvals for federal drilling permits. Since the Department of Interior’s order to temporarily suspend permitting on federal lands lapsed in late March, the company has secured more than 50 approvals for new drilling permits in Southeast New Mexico. In aggregate, Devon possesses approximately 500 federal drilling permits, representing an inventory of 4 years at the current drilling pace. Overall, only 35 percent of Devon’s 400,000 net acres in the Delaware Basin resides on federal lands.

Anadarko Basin: Production averaged 68,000 Boe per day in the quarter. Devon’s operations were headlined by the commencement of a two-rig drilling program funded by a $100 million drilling carry with Dow. With this drilling joint venture, the company spud 8 wells in the liquids-rich core of the play during the quarter and plans to drill up to 30 wells for the full-year 2021.

Williston Basin: Production averaged 61,000 Boe per day, with oil accounting for 72 percent of the product mix. Devon’s operational focus in the quarter was optimizing base production and harvesting free cash flow from this high-margin oil asset. To stabilize production, the company plans to bring online 15 to 20 new wells over the remainder of 2021.

Eagle Ford: Production averaged 30,000 Boe per day. Devon and its partner resumed capital activity in the quarter by running a two-rig drilling program and a completion crew. With this level of activity, the partnership has reestablished operational continuity and plans to bring online approximately 40 wells throughout the remainder of the year.

Powder River Basin: Production averaged 23,000 Boe per day, of which 74 percent was oil. Oil production increased by 6 percent versus the fourth quarter of 2020, resulting from 10 new wells that targeted the Parkman and Turner formations. While capital activity will be limited for the remainder of 2021, Devon’s technical teams will focus on advancing their understanding of the emerging Niobrara oil resource opportunity across the company’s 300,000 net acre position in the oil fairway.

FINANCIAL SUMMARY

Devon reported net earnings of $213 million, or $0.32 per diluted share, in the first quarter of 2021. Adjusting for items analysts typically exclude from estimates, Devon’s core earnings were $298 million or $0.45 per diluted share.

The company’s operating cash flow totaled $592 million in the first quarter, with EBITDAX reaching $959 million. This level of cash flow funded all capital requirements and generated $260 million of free cash flow after adjusting for cash restructuring charges.

Devon exited the first quarter with $1.9 billion of cash and an undrawn credit facility of $3 billion. Year-to-date, the company has made significant progress on its $1.5 billion debt reduction plan by redeeming $743 million of outstanding debt. The next step in the company’s debt reduction plan is to fully retire its callable $500 million 2026 notes in June.

 

2


FIRST-QUARTER DIVIDEND DECLARED

In a separate release issued today, Devon announced that its board of directors has declared a fixed-plus-variable dividend of $0.34 per share based on the company’s first quarter financial performance. This represents a 13 percent increase in payout compared to the dividend declared for the fourth quarter of 2020. Both the fixed quarterly dividend of $0.11 per share and the variable dividend of $0.23 per share are payable on Jun. 30, 2021 to shareholders of record at the close of business on Jun. 14, 2021.

2021 OUTLOOK

Devon remains firmly on track to achieve its full-year 2021 capital objectives. The company is committed to its maintenance capital program and has made no modifications to its full-year capital budget or production outlook. Additional details of Devon’s forward-looking guidance for the second-quarter and full-year 2021 are available on the company’s website at www.devonenergy.com.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Devon strives to deliver results that balance economic growth, environmental stewardship, strong governance and social responsibility. For access to Devon’s sustainability report, please visit www.devonenergy.com/sustainability. This report highlights the company’s commitment to operating a responsible, safe and ethical business while providing transparent reporting to all stakeholders.

CONFERENCE CALL WEBCAST AND SUPPLEMENTAL EARNINGS MATERIALS

Also provided with today’s release is the company’s detailed earnings presentation that is available on the company’s website at www.devonenergy.com. The company’s first-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, May 5, 2021, and will serve primarily as a forum for analyst and investor questions and answers.

ABOUT DEVON ENERGY

Devon Energy is a leading oil and gas producer in the U.S. with a premier multi-basin portfolio headlined by a world-class acreage position in the Delaware Basin. Devon’s disciplined cash-return business model is designed to achieve strong returns, generate free cash flow and return capital to shareholders, while focusing on safe and sustainable operations. For more information, please visit www.devonenergy.com.

 

Investor Contacts    Media Contact
Scott Coody, 405-552-4735    Lisa Adams, 405-228-1732
Chris Carr, 405-228-2496   

NON-GAAP DISCLOSURES

This press release includes non-GAAP (generally accepted accounting principles) financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of results as reported under GAAP. Reconciliations of these non-GAAP measures and other disclosures are provided within the supplemental financial tables that are available on the company’s website and in the related Form 10-Q filed with the SEC.

FORWARD LOOKING STATEMENTS

This communication includes “forward-looking statements” within the meaning of the federal securities laws. Such statements include those concerning strategic plans, our expectations and objectives for future operations, as well as other future events or conditions, and are often identified by use of the words and phrases “expects,” “believes,” “will,” “would,” “could,” “continue,” “may,” “aims,” “likely to be,” “intends,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that Devon 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 our control. Consequently, actual future results could differ materially and adversely from our expectations due to a number of factors, including, but not limited to: the volatility of oil, gas and NGL prices; risks relating to the COVID-19 pandemic or other future pandemics; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in our operations, including as a result of employee misconduct; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks related to regulatory, social and market efforts to address climate change; risks related to our hedging activities; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; our limited control over third parties who operate some of our oil and gas properties; midstream capacity constraints and

 

3


potential interruptions in production; the extent to which insurance covers any losses we may experience; competition for assets, materials, people and capital; risks related to investors attempting to effect change; our ability to successfully complete mergers, acquisitions and divestitures; risks related to the recent merger with WPX, including the risk that we may not realize the anticipated benefits of the merger or successfully integrate the two legacy businesses; and any of the other risks and uncertainties discussed in Devon’s 2020 Annual Report on Form 10-K (the “2020 Form 10-K”) or other SEC filings.

The forward-looking statements included in this communication speak only as of the date of this communication, represent current reasonable management’s expectations as of the date of this communication and are subject to the risks and uncertainties identified above as well as those described in the 2020 Form 10-K and in other documents we file from time to time with the SEC. We cannot guarantee the accuracy of our forward-looking statements, and readers are urged to carefully review and consider the various disclosures made in the 2020 Form 10-K and in other documents we file from time to time with the SEC. All subsequent written and oral forward-looking statements attributable to Devon, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements above. We do not undertake, and expressly disclaim, any duty to update or revise our forward-looking statements based on new information, future events or otherwise.

 

4

Exhibit 99.2

 

LOGO

Devon Energy First-Quarter 2021

Supplemental Tables

 

TABLE OF CONTENTS:    PAGE:  

Income Statement

     2  

Supplemental Information for Income Statement

     3  

Cash Flow Statement

     4  

Balance Sheet

     5  

Production by Asset

     6  

Capital and Well Activity by Asset

     7

Realized Price by Asset

     8  

Per-Unit Cash Margin by Asset

     9  

Non-GAAP Core Earnings (Loss),  Non-GAAP EBITDAX

     10  

Net Debt, Net Debt-to-EBITDAX, Free Cash Flow and Adjusted Free Cash Flow

     11  

Reinvestment Rate and Variable Dividend

     12  

 

1


CONSOLIDATED STATEMENTS OF EARNINGS     

 

LOGO

 

 

 

 

 

 

(in millions, except per share amounts)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Oil, gas and NGL sales

   $ 1,788   $ 786     $ 678     $ 424     $ 807  

Oil, gas and NGL derivatives (1)

     (528     (117     (87     (361     720  

Marketing and midstream revenues

     502       611       476       331       560  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,762       1,280       1,067       394       2,087  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production expenses (2)

     489       271       271       263       318  

Exploration expenses

     3       4       39       12       112  

Marketing and midstream expenses

     523       618       478       339       578  

Depreciation, depletion and amortization

     467       301       299       299       401  

Asset impairments

     —         27       —         —         2,666  

Asset dispositions

     (32     (1     —         —         —    

General and administrative expenses

     107       82       75       79       102  

Financing costs, net (3)

     77       70       66       69       65  

Restructuring and transaction costs

     189       17       32       —         —    

Other, net

     (29     1       —         13       (48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,794       1,390       1,260       1,074       4,194  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes

     (32     (110     (193     (680     (2,107

Income tax benefit

     (248     (37     (90     (3     (417
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) from continuing operations

     216       (73     (103     (677     (1,690

Net earnings (loss) from discontinued operations, net of taxes

     —         (25     13       9       (125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     216       (98     (90     (668     (1,815

Net earnings attributable to noncontrolling interests

     3       4       2       2       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Devon

   $ 213     $ (102   $ (92   $ (670   $ (1,816
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share:

          

Continuing operations

   $ 0.33     $ (0.20   $ (0.29   $ (1.80   $ (4.48

Discontinued operations

     —         (0.07     0.04       0.02       (0.34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings (loss) per share

   $ 0.33     $ (0.27   $ (0.25   $ (1.78   $ (4.82
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share:

          

Continuing operations

   $ 0.32     $ (0.20   $ (0.29   $ (1.80   $ (4.48

Discontinued operations

     —         (0.07     0.04       0.02       (0.34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings (loss) per share

   $ 0.32     $ (0.27   $ (0.25   $ (1.78   $ (4.82
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

          

Basic

     654       383       383       383       383  

Diluted

     656       383       383       383       383  

 

2


SUPPLEMENTAL INFORMATION FOR CONSLIDATED STATEMENTS OF EARNINGS     

 

LOGO

 

 

 

 

 

 

(1) OIL, GAS AND NGL DERIVATIVES                               
(in millions)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Derivative cash settlements

   $ (232   $ (27   $ 10     $ 232     $ 101  

Derivative valuation changes

     (296     (90     (97     (593     619  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Oil, gas and NGL derivatives

   $ (528   $ (117   $ (87   $ (361   $ 720  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(2) PRODUCTION EXPENSES                               
(in millions)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Lease operating expense

   $ 199     $ 91     $ 100     $ 108     $ 126  

Gathering, processing & transportation

     160       130       125       123       130  

Production taxes

     117       47       42       25       56  

Property taxes

     13       3       4       7       6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production expenses

   $ 489     $ 271     $ 271     $ 263     $ 318  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(3) FINANCING COSTS, NET                               
(in millions)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Interest on outstanding debt

   $ 105     $ 65     $ 65     $ 65     $ 65  

Gain on early retirement of debt

     (20     —         —         —         —    

Interest income

     (1     —         (5     (2     (5

Other

     (7     5       6       6       5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing costs, net

   $ 77     $ 70     $ 66     $ 69     $ 65  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

3


CONSOLIDATED STATEMENTS OF CASH FLOWS     

 

LOGO

 

 

 

 

 

 

(in millions)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Cash flows from operating activities:

          

Net earnings (loss)

   $ 216     $ (98   $ (90   $ (668   $ (1,815

Adjustments to reconcile net loss to net cash from operating activities:

          

Net (earnings) loss from discontinued operations, net of income taxes

     —         25       (13     (9     125  

Depreciation, depletion and amortization

     467       301       299       299       401  

Asset impairments

     —         27       —         —         2,666  

Leasehold impairments

     1       3       36       3       110  

(Amortization) accretion of liabilities

     (54     8       8       8       8  

Total (gains) losses on commodity derivatives

     528       117       87       361       (720

Cash settlements on commodity derivatives

     (232     (27     10       232       101  

Gains on asset dispositions

     (32     (1     —         —         —    

Deferred income tax benefit

     (243     (17     —         —         (311

Share-based compensation

     41       18       31       19       20  

Early retirement of debt

     27       —         —         —         —    

Other

     —         —         1       4       —    

Changes in assets and liabilities, net

     (127     2       58       (99     (56
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from operating activities - continuing operations

     592       358       427       150       529  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Capital expenditures

     (499     (217     (204     (307     (425

Acquisitions of property and equipment

     —         (3     —         (1     (4

Divestitures of property and equipment

     15       5       1       3       25  

WPX acquired cash

     344       —         —         —         —    

Distributions from equity method investments

     10       —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from investing activities - continuing operations

     (130     (215     (203     (305     (404
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Repayments of long-term debt

     (533     —         —         —         —    

Early retirement of debt

     (27     —         —         —         —    

Repurchases of common stock

     —         —         —         —         (38

Dividends paid on common stock

     (203     (138     (43     (42     (34

Contributions from noncontrolling interests

     —         9       1       6       5  

Distributions to noncontrolling interests

     (4     (4     (4     (3     (3

Acquisition of noncontrolling interests

     (24     —         —         —         —    

Shares exchanged for tax withholdings and other

     (33     (1     —         —         (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from financing activities - continuing operations

     (824     (134     (46     (39     (87
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash - continuing

     3       —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash of continuing operations

     (359     9       178       (194     38  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from discontinued operations:

          

Operating activities

     —         19       45       (43     (131

Investing activities

     —         310       1       171       (1

Financing activities

     —         —         —         —         —    

Effect of exchange rate changes on cash

     —         2       4       8       (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash of discontinued operations

     —         331       50       136       (155
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     (359     340       228       (58     (117

Cash, cash equivalents and restricted cash at beginning of period

     2,237       1,897       1,669       1,727       1,844  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 1,878     $ 2,237     $ 1,897     $ 1,669     $ 1,727  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of cash, cash equivalents and restricted cash:

          

Cash and cash equivalents

   $ 1,683     $ 2,047     $ 1,707     $ 1,474     $ 1,527  

Restricted cash

     195       190       190       195       200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash

   $ 1,878     $ 2,237     $ 1,897     $ 1,669     $ 1,727  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

4


CONSOLIDATED BALANCE SHEETS     

 

LOGO

 

 

 

 

 

 

(in millions)    March 31,     December 31,  
     2021     2020  

Current assets:

    

Cash, cash equivalents and restricted cash

   $ 1,878     $ 2,237  

Accounts receivable

     1,089       601  

Income tax receivable

     166       174  

Other current assets

     334       248  
  

 

 

   

 

 

 

Total current assets

     3,467       3,260  

Oil and gas property and equipment, based on successful efforts accounting, net

     13,826       4,436  

Other property and equipment, net

     1,448       957  
  

 

 

   

 

 

 

Total property and equipment, net

     15,274       5,393  

Goodwill

     753       753  

Right-of-use assets

     255       223  

Investments

     402       12  

Other long-term assets

     306       271  
  

 

 

   

 

 

 

Total assets

   $ 20,457     $ 9,912  
  

 

 

   

 

 

 

Current liabilities:

    

Accounts payable

   $ 564     $ 242  

Revenues and royalties payable

     909       662  

Short-term debt

     226       —    

Other current liabilities

     1,246       536  
  

 

 

   

 

 

 

Total current liabilities

     2,945       1,440  
  

 

 

   

 

 

 

Long-term debt

     7,042       4,298  

Lease liabilities

     260       246  

Asset retirement obligations

     455       358  

Other long-term liabilities

     1,269       551  

Stockholders’ equity:

    

Common stock

     67       38  

Additional paid-in capital

     8,172       2,766  

Retained earnings

     218       208  

Accumulated other comprehensive loss

     (104     (127
  

 

 

   

 

 

 

Total stockholders’ equity attributable to Devon

     8,353       2,885  

Noncontrolling interests

     133       134  
  

 

 

   

 

 

 

Total equity

     8,486       3,019  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 20,457     $ 9,912  
  

 

 

   

 

 

 

Common shares outstanding

     675       382  

 

5


PRODUCTION TREND (1)     

 

LOGO

 

 

 

 

 

 

     2021      2020  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Oil (MBbls/d)

              

Delaware Basin

     172        99        77        79        84  

Anadarko Basin

     13        16        19        21        24  

Williston Basin

     44        —          —          —          —    

Eagle Ford

     16        18        22        27        26  

Powder River Basin

     17        16        21        18        21  

Other

     6        7        7        8        8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     268        156        146        153        163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Natural gas liquids (MBbls/d)

              

Delaware Basin

     60        43        38        29        37  

Anadarko Basin

     21        25        30        25        30  

Williston Basin

     8        —          —          —          —    

Eagle Ford

     6        9        11        12        9  

Powder River Basin

     3        3        3        2        3  

Other

     1        —          1        1        1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     99        80        83        69        80  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas (MMcf/d)

              

Delaware Basin

     471        267        239        241        244  

Anadarko Basin

     200        233        242        262        272  

Williston Basin

     49        —          —          —          —    

Eagle Ford

     47        60        73        87        86  

Powder River Basin

     21        22        23        20        29  

Other

     3        2        3        4        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     791        584        580        614        634  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total oil equivalent (MBoe/d)

              

Delaware Basin

     310        186        155        149        162  

Anadarko Basin

     68        81        89        90        98  

Williston Basin

     61        —          —          —          —    

Eagle Ford

     30        37        46        53        50  

Powder River Basin

     23        22        28        24        29  

Other

     7        7        8        9        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     499        333        326        325        348  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Q1 2021 daily production rates exclude WPX results prior to the merger close date of January 7, 2021.

 

6


CAPITAL EXPENDITURES     

 

LOGO

 

 

 

 

 

 

(in millions)    2021      2020  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

   $ 355      $ 153      $ 179      $ 148      $ 220  

Anadarko Basin

     13        3        1        3        4  

Williston Basin

     20        —          —          —          —    

Eagle Ford

     29        2        1        10        70  

Powder River Basin

     27        22        11        39        90  

Other

     3        3        3        3        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total upstream capital

   $ 447      $ 183      $ 195      $ 203      $ 391  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Midstream

     24        3        7        8        7  

Other

     16        3        5        3        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capital

   $ 487      $ 189      $ 207      $ 214      $ 407  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

SUPPLEMENTAL INFORMATION FOR UPSTREAM CAPITAL EXPENDITURES

 

GROSS OPERATED SPUDS

 

     2021      2020  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

     60        21        35        27        38  

Anadarko Basin

     8        —          —          —          —    

Williston Basin

     7        —          —          —          —    

Eagle Ford

     14        —          —          —          10  

Powder River Basin

     —          2        —          —          12  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     89        23        35        27        60  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GROSS OPERATED WELLS TIED-IN

 

     2021      2020  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

     52        23        32        22        32  

Anadarko Basin

     —          —          —          —          4  

Williston Basin

     —          —          —          —          —    

Eagle Ford

     12        —          —          13        30  

Powder River Basin

     10        2        9        4        14  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     74        25        41        39        80  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

AVERAGE LATERAL LENGTH

 

                                                                                              
(based on wells tied-in)    2021      2020  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

     10,000’        9,800’        9,900’        9,100’        8,000’  

Anadarko Basin

     —          —          —          —          9,800’  

Williston Basin

     —          —          —          —          —    

Eagle Ford

     4,400’        —          —          5,900’        5,400’  

Powder River Basin

     9,800’        13,600’        9,800’        8,100’        9,100’  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     9,100’        10,100’        9,900’        7,900’        7,300’  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

7


REALIZED PRICING     

 

LOGO

 

 

 

 

 

 

BENCHMARK PRICES

 

(average prices)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2      Quarter 1  

Oil ($/Bbl) - West Texas Intermediate (Cushing)

   $ 57.87     $ 42.65     $ 40.86     $ 28.42      $ 46.44  

Natural Gas ($/Mcf) - Henry Hub

   $ 2.71     $ 2.67     $ 1.98     $ 1.71      $ 1.95  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 25.81     $ 20.01     $ 16.69     $ 12.57      $ 14.39  

REALIZED PRICES

           
     2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2      Quarter 1  

Oil (Per Bbl)

           

Delaware Basin

   $ 57.30     $ 40.67     $ 39.19     $ 22.70      $ 45.18  

Anadarko Basin

     55.86       40.34       37.88       19.52        45.32  

Williston Basin

     54.45       —         —         —          —    

Eagle Ford

     54.90       37.83       33.68       15.30        44.90  

Powder River Basin

     53.77       36.42       35.39       24.03        41.14  

Other

     55.65       39.93       37.33       25.45        44.53  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price without hedges

     56.36       39.84       37.56       21.25        44.59  

Cash settlements

     (9.13     (1.83     0.65       15.25        5.14  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price, including cash settlements

   $ 47.23     $ 38.01     $ 38.21     $ 36.50      $ 49.73  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Natural gas liquids (Per Bbl)

           

Delaware Basin

   $ 26.25     $ 13.67     $ 11.49     $ 7.94      $ 8.36  

Anadarko Basin

     23.14       15.65       12.68       9.31        10.90  

Williston Basin

     18.54       —         —         —          —    

Eagle Ford

     24.44       15.66       13.74       10.02        14.77  

Powder River Basin

     30.19       19.39       13.10       10.07        15.86  

Other

     31.86       24.24       21.74       10.19        15.82  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price without hedges

     25.01       14.77       12.36       8.89        10.40  

Cash settlements

     (0.20     (0.01     (0.30     0.51        0.61  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price, including cash settlements

   $ 24.81     $ 14.76     $ 12.06     $ 9.40      $ 11.01  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Gas (Per Mcf)

           

Delaware Basin

   $ 3.31     $ 1.51     $ 1.11     $ 1.05      $ 0.58  

Anadarko Basin

     2.49       2.29       1.66       1.31        1.45  

Williston Basin

     (0.48     —         —         —          —    

Eagle Ford

     3.15       2.38       1.95       1.79        2.05  

Powder River Basin

     5.27       2.70       1.94       1.80        1.71  

Other

     2.57       2.87       1.52       1.32        1.69  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price without hedges

     2.91       1.96       1.48       1.29        1.21  

Cash settlements

     (0.15     0.00       0.06       0.28        0.36  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price, including cash settlements

   $ 2.76     $ 1.96     $ 1.54     $ 1.57      $ 1.57  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total oil equivalent (Per Boe)

           

Delaware Basin

   $ 41.82     $ 26.94     $ 24.00     $ 15.39      $ 26.19  

Anadarko Basin

     25.35       19.79       16.81       10.98        18.14  

Williston Basin

     42.04       —         —         —          —    

Eagle Ford

     38.90       25.97       22.78       12.90        29.94  

Powder River Basin

     47.58       31.08       29.83       20.80        33.65  

Other

     50.58       37.67       34.15       22.95        39.15  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price without hedges

     39.84       25.63       22.60       14.37        25.43  

Cash settlements

     (5.17     (0.86     0.33       7.83        3.20  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Realized price, including cash settlements

   $ 34.67     $ 24.77     $ 22.93     $ 22.20      $ 28.63  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

8


ASSET MARGINS     

 

LOGO

 

 

 

 

 

 

BENCHMARK PRICES

 

(average prices)    2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Oil ($/Bbl) - West Texas Intermediate (Cushing)

   $ 57.87     $ 42.65     $ 40.86     $ 28.42     $ 46.44  

Natural Gas ($/Mcf) - Henry Hub

   $ 2.71     $ 2.67     $ 1.98     $ 1.71     $ 1.95  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 25.81     $ 20.01     $ 16.69     $ 12.57     $ 14.39  

PER-UNIT CASH MARGIN BY ASSET (per Boe)

          
     2021     2020  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Delaware Basin

          

Realized price

   $ 41.82     $ 26.94     $ 24.00     $ 15.39     $ 26.19  

Lease operating expenses

     (3.97     (2.38     (3.00     (3.56     (3.61

Gathering, processing & transportation

     (2.83     (2.40     (2.68     (2.88     (2.71

Production & property taxes

     (2.95     (2.08     (1.80     (1.14     (2.15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 32.07     $ 20.08     $ 16.52     $ 7.81     $ 17.72  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Anadarko Basin

          

Realized price

   $ 25.35     $ 19.79     $ 16.81     $ 10.98     $ 18.14  

Lease operating expenses

     (3.82     (2.57     (2.16     (2.42     (2.79

Gathering, processing & transportation

     (6.31     (8.39     (7.39     (6.57     (6.36

Production & property taxes

     (1.21     (0.55     (0.54     (0.32     (0.77
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 14.01     $ 8.28     $ 6.72     $ 1.67     $ 8.22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Williston Basin

          

Realized price

   $ 42.04     $ —       $ —       $ —       $ —    

Lease operating expenses

     (5.13     —         —         —         —    

Gathering, processing & transportation

     (3.39     —         —         —         —    

Production & property taxes

     (3.82     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 29.70     $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Eagle Ford

          

Realized price

   $ 38.90     $ 25.97     $ 22.78     $ 12.90     $ 29.94  

Lease operating expenses

     (3.89     (2.79     (2.47     (2.59     (2.93

Gathering, processing & transportation

     (6.73     (5.89     (4.73     (4.96     (5.96

Production & property taxes

     (1.71     (0.16     (0.92     (0.85     (1.85
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 26.57     $ 17.13     $ 14.66     $ 4.50     $ 19.20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Powder River Basin

          

Realized price

   $ 47.58     $ 31.08     $ 29.83     $ 20.80     $ 33.65  

Lease operating expenses

     (7.45     (5.47     (5.41     (6.60     (6.65

Gathering, processing & transportation

     (2.66     (3.01     (2.30     (2.71     (2.32

Production & property taxes

     (5.48     (3.91     (3.49     (2.40     (4.20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 31.99     $ 18.69     $ 18.63     $ 9.09     $ 20.48  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other

          

Realized price

   $ 50.58     $ 37.67     $ 34.15     $ 22.95     $ 39.15  

Lease operating expenses

     (17.15     (15.35     (19.92     (17.40     (18.95

Gathering, processing & transportation

     (0.62     (0.59     (0.51     (0.34     (0.31

Production & property taxes

     (4.60     (3.38     (3.62     (5.11     (4.34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 28.21     $ 18.35     $ 10.10     $ 0.10     $ 15.55  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Devon - Total

          

Realized price

   $ 39.84     $ 25.63     $ 22.60     $ 14.37     $ 25.43  

Lease operating expenses

     (4.44     (2.97     (3.32     (3.69     (3.96

Gathering, processing & transportation

     (3.57     (4.23     (4.17     (4.16     (4.11

Production & property taxes

     (2.88     (1.66     (1.52     (1.07     (1.95
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 28.95     $ 16.77     $ 13.59     $ 5.45     $ 15.41  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


NON-GAAP MEASURES     

 

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(all monetary values in millions, except per share amounts)

This press release and other earnings materials include non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding such non-GAAP measures, including reconciliations to their most directly comparable GAAP measure.

CORE EARNINGS (LOSS)

Devon’s reported net earnings (loss) include items of income and expense that are typically excluded by securities analysts in their published estimates of the company’s financial results. Accordingly, the company also uses the measures of core earnings (loss) and core earnings (loss) per share attributable to Devon. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on first-quarter 2021 earnings.

 

     Quarter Ended March 31, 2021  
     Before-tax      After-tax      After
Noncontrolling
Interests
    Per Diluted
Share
 

Total

          

Earnings (loss) (GAAP)

   $ (32    $ 216      $ 213     $ 0.32  

Adjustments:

          

Asset dispositions

     (32      (24      (24     (0.04

Asset and exploration impairments

     1        —          —         0.00  

Deferred tax asset valuation allowance

     —          (263      (263     (0.40

Fair value changes in financial instruments and foreign currency

     294        225        225       0.34  

Restructuring and transaction costs(1)

     189        162        162       0.25  

Early retirement of debt

     (20      (15      (15     (0.02
  

 

 

    

 

 

    

 

 

   

 

 

 

Core earnings (Non-GAAP)

   $ 400      $ 301      $ 298     $ 0.45  
  

 

 

    

 

 

    

 

 

   

 

 

 
(1)

Approximately $167 million of restructuring and transaction costs are cash and are excluded from the adjusted free cash flow reconciliation at the bottom of page 11.

EBITDAX

Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings from continuing operations before income tax expense; financing costs, net; exploration expenses; depreciation, depletion and amortization; asset impairments; asset disposition gains and losses; non-cash share-based compensation; non-cash valuation changes for derivatives and financial instruments; restructuring and transaction costs; accretion on discounted liabilities; and other items not related to normal operations. EBITDAX as defined by Devon may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net earnings from continuing operations.

 

     Q1 ’21  

Net earnings (loss) (GAAP)

   $ 216  

Net (earnings) loss from discontinued operations, net of tax

      

Financing costs, net

     77  

Income tax benefit

     (248

Exploration expenses

     3  

Depreciation, depletion and amortization

     467  

Asset impairments

     —    

Asset dispositions

     (32

Share-based compensation

     20  

Derivative and financial instrument non-cash valuation changes

     296  

Restructuring and transaction costs

     189  

Accretion on discounted liabilities and other

     (29
  

 

 

 

EBITDAX (Non-GAAP)

   $ 959  
  

 

 

 

Annualized EBITDAX (Non-GAAP)

   $ 3,836  

 

10


NET DEBT     

 

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Devon defines net debt as debt less cash, cash equivalents and cash restricted for discontinued operations. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash from Devon to repay debt.

 

     Quarter Ended
March 31, 2021
 

Total debt (GAAP)

   $ 7,268  

Less:

  

Cash, cash equivalents and restricted cash

     (1,878
  

 

 

 

Net debt (Non-GAAP)

   $ 5,390  
  

 

 

 

NET DEBT-TO-EBITDAX

Devon defines net debt-to-EBITDAX as net debt divided by an annualized EBITDAX measure. Due to the merger with WPX closing in the first quarter of 2021, Devon has shown Q1 2021 EBITDAX annualized divided by net debt to show a more meaningful net debt-to-EBITDAX measure. Devon believes this ratio provides information useful to investors in assessing the company’s credit position and debt leverage.

 

     Quarter Ended
March 31, 2021
 

Net debt (Non-GAAP)

   $ 5,390  

EBITDAX (annualized Q1 ‘21) (Non-GAAP)

   $ 3,836  
  

 

 

 

Net debt-to-EBITDAX (Non-GAAP)

     1.4  
  

 

 

 

FREE CASH FLOW

Devon defines free cash flow as total operating cash flow less capital expenditures. Devon believes that free cash flow provides a useful measure of available cash generated by operating activities for other investing and financing activities.

 

     Quarter Ended
March 31, 2021
 

Total operating cash flow (GAAP)

   $ 592  

Less capital expenditures:

  

Capital expenditures

     (499
  

 

 

 

Free cash flow (Non-GAAP)

   $ 93  
  

 

 

 

ADJUSTED FREE CASH FLOW

Devon defines adjusted free cash flow as total operating cash flow less capital expenditures less cash restructuring and transaction costs. Devon believes that adjusted free cash flow provides a useful measure of available cash generated by operating activities for other investing and financing activities, excluding cash restructuring and transaction costs.

 

     Quarter Ended
March 31, 2021
 

Total operating cash flow (GAAP)

   $ 592  

Less capital expenditures:

  

Capital expenditures

     (499
  

 

 

 

Free cash flow (Non-GAAP)

     93  

Cash restructuring and transaction costs (Non-GAAP)

     167  
  

 

 

 

Adjusted free cash flow (Non-GAAP)

   $ 260  
  

 

 

 

 

11


REINVESTMENT RATE     

 

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Devon defines reinvestment rate as accrued capital expenditures divided by adjusted operating cash flow. Devon believes this measure provides useful information to our investors as an indicator of the capital demands of our business relative to the cash flow generated from normal business operations.

 

     Quarter Ended
March 31, 2021
 

Capital expenditures (accrued)

   $ 487  

Operating cash flow

     592  

Cash restructuring and transaction costs (Non-GAAP)

     167  
  

 

 

 

Adjusted operating cash flow (Non-GAAP)

   $ 759  
  

 

 

 

Reinvestment rate (Non-GAAP)

     64
  

 

 

 

VARIABLE DIVIDEND CALCULATION

Devon may pay a variable dividend up to 50 percent of its excess cash flow. Each quarter’s excess cash flow is computed as adjusted cash flow less capital expenditures and the fixed dividend.

 

     Quarter Ended
March 31, 2021
 

Operating cash flow (GAAP)

   $ 592  

Changes in assets and liabilities, net

     127  
  

 

 

 

Cash from operations before balance sheet changes (Non-GAAP)

     719  

Cash restructuring and transaction costs (Non-GAAP)

     167  
  

 

 

 

Adjusted cash flow (Non-GAAP)

     886  

Capital expenditures (Accrued)

     (487
  

 

 

 

Adjusted free cash flow (Non-GAAP)

     399  

Fixed quarterly dividend ($0.11/share)

     (76
  

 

 

 

Excess free cash flow (Non-GAAP)

     323  

48% Pay out (Board Discretion: Up to 50%)

     48
  

 

 

 

Total variable dividend

   $ 155  
  

 

 

 

 

12


SECOND-QUARTER AND FULL-YEAR 2021 GUIDANCE     

 

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PRODUCTION GUIDANCE

 

                                                                           
     Quarter 2      Full Year  
     Low      High      Low      High  

Oil (MBbls/d)

     283        293        280        290  

Natural gas liquids (MBbls/d)

     117        122        110        120  

Gas (MMcf/d)

     825        875        835        895  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total oil equivalent (MBoe/d)

     538        561        529        559  
  

 

 

    

 

 

    

 

 

    

 

 

 

CAPITAL EXPENDITURES GUIDANCE

 

                                                   
     Quarter 2      Full Year  
(in millions)    Low      High      Low      High  

Upstream capital

   $ 480      $ 520      $ 1,600      $ 1,800  

Midstream capital

     35        45        80        100  

Other capital

     15        25        40        80  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total capital

   $ 530      $ 590      $ 1,720      $ 1,980  
  

 

 

    

 

 

    

 

 

    

 

 

 

PRICE REALIZATIONS GUIDANCE

 

                                           
     Quarter 2     Full Year  
     Low     High     Low     High  

Oil - % of WTI

     92     100     92     100

NGL - % of WTI

     35     45     35     45

Natural gas - % of Henry Hub

     70     80     75     85

OTHER GUIDANCE ITEMS

 

     Quarter 2     Full Year  
($ millions, except Boe and %)    Low     High     Low     High  

Marketing & midstream operating profit

   $ (10   $ (5   $ (50   $ (40

LOE & GP&T per BOE

   $ 7.80     $ 8.00     $ 7.70     $ 7.90  

Production & property taxes as % of upstream sales

     7.0     8.0     7.0     8.0

Exploration expenses

   $ —       $ 5     $ 5     $ 15  

Depreciation, depletion and amortization

   $ 500     $ 550     $ 2,000     $ 2,100  

General & administrative expenses

   $ 95     $ 105     $ 400     $ 420  

Restructuring & transaction expenses

   $ 15     $ 25     $ 205     $ 215  

Cash financing costs, net

   $ 95     $ 105     $ 395     $ 415  

Other expenses

   $ 5     $ 15     $ —       $ 10  

Current income tax rate from continuing operations

     0     0     0     0

Deferred income tax rate from continuing operations

     20     30     20     30
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income tax rate from continuing operations

     20     30     20     30

Average common shares outstanding

     675       679       669       673  

 

1


CONTINGENT PAYMENTS FOR BARNETT SHALE DIVESTITURE (4-year period beginning in 2021)     

 

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WTI Threshold      WTI Annual Earnout Amount      Henry Hub Threshold      Henry Hub Annual Earnout
Amount
 
$  50.00      $ 10,000,000      $ 2.75      $ 20,000,000  
$ 55.00      $ 12,500,000      $ 3.00      $ 25,000,000  
$ 60.00      $ 15,000,000      $ 3.25      $ 35,000,000  
$ 65.00      $ 20,000,000      $ 3.50      $ 45,000,000  

2021 & 2022 HEDGING POSITIONS

 

Oil Commodity Hedges

 

     Price Swaps      Price Collars  

Period

   Volume (Bbls/d)    Weighted
Average
Price ($/Bbl)
     Volume
(Bbls/d)
   Weighted
Average Floor
Price ($/Bbl)
     Weighted
Average Ceiling
Price ($/Bbl)
 

Q2 2021

   129,976    $ 39.46      21,000    $ 42.46      $ 52.46  

Q3 2021

   57,460    $ 41.68      53,250    $ 39.74      $ 49.74  

Q4 2021

   56,460    $ 41.44      48,250    $ 38.82      $ 48.82  

Q1-Q4 2022

   25,619    $ 43.82      20,233    $ 46.41      $ 56.41  

 

     Price Swaptions      Price Call Options  

Period

   Volume (Bbls/d)    Weighted
Average
Price ($/Bbl)
     Volume (Bbls/d)    Weighted
Average Price
($/Bbl)
 

Q2 2021

   —      $ —        5,000    $ 39.50  

Q3 2021

   10,000    $ 40.12      5,000    $ 39.50  

Q4 2021

   10,000    $ 40.12      5,000    $ 39.50  

Q1-Q4 2022

   10,323    $ 46.46      —      $ —    

Oil Basis Swaps

 

Period

   Index    Volume (Bbls/d)    Weighted Average
Differential to WTI
($/Bbl)
 

Q2-Q4 2021

   Midland Sweet    22,669    $ 0.84  

Q2-Q4 2021

   BRENT/WTI Spread    1,000    $ (8.00

Q1-Q4 2022

   BRENT/WTI Spread    1,000    $ (7.75

Natural Gas Commodity Hedges - Henry Hub

 

     Price Swaps      Price Collars  

Period

   Volume (MMBtu/d)    Weighted
Average Price
($/MMBtu)
     Volume
(MMBtu/d)
   Weighted
Average Floor
Price ($/MMBtu)
     Weighted
Average Ceiling
Price
($/MMBtu)
 

Q2 2021

   279,000    $ 2.64      228,000    $ 2.43      $ 2.93  

Q3 2021

   279,000    $ 2.64      228,000    $ 2.43      $ 2.93  

Q4 2021

   254,000    $ 2.63      133,000    $ 2.55      $ 3.05  

Q1-Q4 2022

   3,452    $ 2.85      74,110    $ 2.53      $ 3.03  

 

2


2021 & 2022 HEDGING POSITIONS (continued)     

 

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     Price Swaptions      Price Call Options  

Period

   Volume (MMBtu/d)    Weighted
Average
Price
($/MMBtu)
     Volume (MMBtu/d)    Weighted
Average Price
($/MMBtu)
 

Q2 2021

   —      $ —        50,000    $ 2.68  

Q3 2021

   —      $ —        50,000    $ 2.68  

Q4 2021

   —      $ —        50,000    $ 2.68  

Q1-Q4 2022

   100,000    $ 2.70      —      $ —    

Natural Gas Basis Swaps

 

Period

   Index    Volume (MMBtu/d)    Weighted Average
Differential to Henry
Hub ($/MMBtu)
 

Q2-Q4 2021

   El Paso Natural Gas    35,000    $ (0.92

Q2-Q4 2021

   WAHA    80,000    $ (0.65

Q1-Q4 2022

   WAHA    70,000    $ (0.57

NGL Commodity Hedges

 

          Price Swaps  

Period

   Product    Volume (Bbls/d)    Weighted Average
Price ($/Bbl)
 

Q2-Q4 2021

   Natural Gasoline    1,000    $ 47.57  

Q2-Q4 2021

   Normal Butane    1,000    $ 31.40  

Q2-Q4 2021

   Propane    1,000    $ 27.88  

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index. Devon’s NGL derivatives settle against the average of the prompt month OPIS Mont Belvieu, Texas index. Commodity hedge positions are shown as of April 29, 2021.

 

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