DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2021-11-02 2021-11-02

 

 

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): November 2, 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 November 2, 2021, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarterly period ended September 30, 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 November 2, 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: November 2, 2021

Exhibit 99.1

 

LOGO    

Devon Energy Corporation

333 West Sheridan Avenue

Oklahoma City, OK 73102-5015

 

Devon Energy Reports 46 Percent Increase in Operating Cash Flow and Record Free Cash Flow Generation in Third-Quarter 2021

OKLAHOMA CITY – Nov. 2, 2021 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the third-quarter 2021. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

   

Fixed-plus-variable dividend increased by 71 percent to $0.84 per share

 

   

Board authorizes a $1 billion share buyback, representing 4 percent of the company’s market capitalization

 

   

Delaware Basin drove third-quarter results that were favorable to guidance on production and costs

 

   

Operating cash flow increased 46 percent from the prior quarter to $1.6 billion

 

   

Disciplined capital allocation limited reinvestment rates to 30 percent of cash flow

 

   

Free cash flow generation accelerated to $1.1 billion, an 8-fold increase from the fourth quarter of 2020

 

   

Balance sheet strengthened with cash balances increasing by $782 million to a total of $2.3 billion

CEO PERSPECTIVE

“The power of Devon’s asset portfolio and disciplined cash-return strategy was evidenced by another quarter of operational and financial outperformance,” said Rick Muncrief, president and CEO. “The team’s outstanding execution, coupled with an improved cost structure, has allowed us to fully capture the benefits of rising commodity prices and deliver robust growth in free cash flow.”

“With this free cash flow, we are delivering on our commitment to accelerate the return of cash to shareholders with a 71 percent increase in the dividend and we have continued to strengthen our investment-grade balance sheet.”

“As a result of our improving financial outlook, I am excited to announce the next step in our cash-return strategy with the authorization of a $1 billion share-repurchase program,” Muncrief added. “While our market-leading dividend will remain the top priority for free cash flow, this program provides us with another avenue to opportunistically return value to shareholders and enhance per-share results.”

“Looking ahead to the remainder of this year and into 2022, we will continue to prioritize free cash flow over volume growth,” Muncrief commented. “With our operations successfully scaled to generate strong cash flow growth, we have no intention of pursuing production growth until it is clear that market fundamentals have sustainably recovered, and worldwide spare oil capacity is effectively absorbed.”

FINANCIAL SUMMARY

Devon reported net earnings of $838 million, or $1.24 per diluted share, in the third quarter of 2021. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $733 million, or $1.08 per diluted share.

Operating cash flow totaled $1.6 billion in the third quarter, a 46 percent increase from the prior quarter. With capital reinvestment rates limited to 30 percent of cash flow, the company generated $1.1 billion of free cash flow in the quarter. This represents an 8-fold increase in free cash flow compared to the fourth quarter of 2020 and is the highest quarterly amount in Devon’s 50-year history.

Based on the third-quarter financial performance, Devon’s board declared a fixed-plus-variable dividend of $0.84 per share. This payout represents a 71 percent increase compared to the payout declared from the previous quarter. The dividend is payable on Dec. 30, 2021 to shareholders of record at the close of business on Dec. 10, 2021.

 

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The company also continued to strengthen its investment-grade financial position, with cash balances increasing by $782 million in the quarter to a total of $2.3 billion. The company intends to further improve its financial strength by retiring and calling low-premium debt of approximately $1.0 billion in 2022 and 2023.

With the company’s improving financial outlook, in a separate release issued today, Devon announced the next step in its cash-return strategy with the authorization of a $1.0 billion share-repurchase program. This program is authorized through year-end 2022 and is equivalent to 4 percent of the company’s market capitalization.

OPERATING RESULTS

Devon’s total production averaged 608,000 oil-equivalent barrels (Boe) per day in the third quarter, exceeding guidance by 5 percent. This outperformance was driven by strong well productivity in the Delaware Basin and better-than-expected base production performance across the portfolio.

Upstream capital spending was in line with guidance at $442 million in the quarter. Devon exited the quarter running 16 operated drilling rigs and five completion crews, with approximately 80 percent of this activity allocated to the Delaware Basin.

Production expense for Devon totaled $9.91 per unit, a 1 percent decrease from the prior quarter. The improved cost structure was driven by operational efficiency gains and the benefits of scalable production growth in the Delaware Basin. The per-unit cost savings achieved in the field were partially offset by higher production taxes due to rising commodity prices.

The company’s corporate cost structure, which consists of general and administrative expenses and financing costs, improved by 25 percent year-over-year, on a pro forma basis. This positive result was driven by the capture of merger-related synergies that are on track to achieve $600 million in annual cash flow improvements.

ASSET-LEVEL HIGHLIGHTS

Delaware Basin: Production averaged 409,000 Boe per day, with oil reaching 52 percent of the product mix. This production result represents a 39 percent increase year over year, on a pro forma basis. The high-margin growth in the quarter was driven by 52 new wells that commenced first production across Devon’s 400,000 net acres in New Mexico and Texas. The completed well costs for this Wolfcamp-oriented development activity continued to be extremely low at $554 per lateral foot.

The top operating highlight from the quarter was the Boundary Raider project in Lea County, New Mexico. This development was a follow-up to the company’s original Bone Spring project in the area during 2018 that achieved record-setting well productivity rates in the basin. This edition of Boundary Raider developed the Upper Wolfcamp and delivered prolific initial 30-day production rates as high as 7,300 Boe per day.

Another noteworthy result in the quarter was the Thistle Cobra project. This 3-mile lateral Wolfcamp development exceeded pre-drill expectations by approximately 10 percent, with average 30-day rates reaching up to 6,300 Boe per day. This successful project also de-risked additional high-return Wolfcamp inventory in the area.

Anadarko Basin: Production averaged 75,000 Boe per day, with gas and NGLs representing over 80 percent of the total volume. During the quarter, Devon operated two drilling rigs in the basin supported by a $100 million drilling carry with Dow. The initial wells from this carry-enhanced activity were brought online in the third quarter. The four-well Miller-Miller project, targeting the Woodford formation, averaged 30-day production rates of 2,700 Boe per day. Completed well costs for this activity averaged $8 million per well.

The company is on track to drill up to 30 wells with Dow in 2021. With the recent rise in commodity prices, Devon and Dow are evaluating additional activity in 2022.

Williston Basin: Production averaged 58,000 Boe per day, with oil accounting for 67 percent. The company’s operational focus in the quarter was optimizing base production and harvesting free cash flow. For the full-year 2021, the company plans to bring online up to 20 new wells and generate more than $700 million of free cash flow from this high-margin asset.

 

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Eagle Ford: Production increased by 15 percent from the prior quarter to an average of 42,000 Boe per day. This growth was driven by 19 new development wells brought online in the quarter. Completed well costs for this activity were approximately $6 million per well and the average 30-day rates from this high-return program were 2,300 Boe per day. Devon and its partner plan to sustain production by running a two-rig drilling program for the remainder of the year.

Powder River Basin: Production averaged 20,000 Boe per day, of which 70 percent was oil. During the quarter, Devon brought online two new wells in Converse County that delivered average 30-day rates of 1,300 Boe per day (93 percent oil). The completed well cost for this activity targeting the Parkman formation averaged $5 million per well. The company has 300,000 net acres in the oil fairway of this emerging resource opportunity that is prospective for multiple benches.

OUTLOOK

Devon remains committed to a maintenance capital program and is firmly on track to meet the strategic objectives that underpin its operating plan in 2021. With efficiencies compressing cycle times and pulling forward activity, Devon now expects its production and capital spending to be at the high end of its 2021 guidance range. Detailed forward-looking guidance for the upcoming fourth quarter is available on the company’s website at www.devonenergy.com.

In 2022, due to market fundamentals, Devon will continue to prioritize free cash flow generation over the pursuit of volume growth. With this disciplined approach, the company’s preliminary plan is to maintain production in the range of 570,000 to 600,000 Boe per day, with an upstream capital investment of $1.9 billion to $2.2 billion.

ENVIRONMENTAL PERFORMANCE TARGETS

Devon recently established new environmental performance targets focused on reducing the carbon intensity of its operations. Highlights from these targets include reducing GHG emissions 50 percent by 2030, achieving net zero emissions by 2050 and initiatives to constructively engage with upstream and downstream stakeholders to improve performance. For more information, please refer to the Sustainability portion of Devon’s website at www.devonenergy.com/sustainability.

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 third-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, Nov. 3, 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

 

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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 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 Third-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 and Net Debt

     10  

Net Debt-to-EBITDAX, Free Cash Flow, Reinvestment Rate and Variable Dividend

     11  

 

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LOGO

 

CONSOLIDATED STATEMENTS OF EARNINGS

 

 

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

Oil, gas and NGL sales

   $ 2,635     $ 2,154     $ 1,757     $ 786     $ 678  

Oil, gas and NGL derivatives (1)

     (335     (703     (528     (117     (87

Marketing and midstream revenues

     1,166       966       821       611       476  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,466       2,417       2,050       1,280       1,067  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production expenses (2)

     555       513       458       271       271  

Exploration expenses

     3       3       3       4       39  

Marketing and midstream expenses

     1,165       965       842       618       478  

Depreciation, depletion and amortization

     578       536       467       301       299  

Asset impairments

     —         —         —         27       —    

Asset dispositions

     —         (87     (32     (1     —    

General and administrative expenses

     95       94       107       82       75  

Financing costs, net (3)

     86       80       77       70       66  

Restructuring and transaction costs

     18       23       189       17       32  

Other, net

     2       (14     (29     1       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,502       2,113       2,082       1,390       1,260  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from continuing operations before income taxes

     964       304       (32     (110     (193

Income tax expense (benefit)

     120       43       (248     (37     (90
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) from continuing operations

     844       261       216       (73     (103

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

     —         —         —         (25     13  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     844       261       216       (98     (90

Net earnings attributable to noncontrolling interests

     6       5       3       4       2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Devon

   $ 838     $ 256     $ 213     $ (102   $ (92
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings (loss) per share:

          

Continuing operations

   $ 1.24     $ 0.38     $ 0.33     $ (0.20   $ (0.29

Discontinued operations

     —         —         —         (0.07     0.04  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings (loss) per share

   $ 1.24     $ 0.38     $ 0.33     $ (0.27   $ (0.25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings (loss) per share:

          

Continuing operations

   $ 1.24     $ 0.38     $ 0.32     $ (0.20   $ (0.29

Discontinued operations

     —         —         —         (0.07     0.04  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings (loss) per share

   $ 1.24     $ 0.38     $ 0.32     $ (0.27   $ (0.25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

          

Basic

     677       677       654       383       383  

Diluted

     679       679       656       383       383  

 

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SUPPLEMENTAL INFORMATION FOR CONSLIDATED STATEMENTS OF EARNINGS

 

 

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

Derivative cash settlements

   $ (370   $ (367   $ (232   $ (27   $ 10  

Derivative valuation changes

     35       (336     (296     (90     (97
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Oil, gas and NGL derivatives

   $ (335   $ (703   $ (528   $ (117   $ (87
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

Lease operating expense

   $ 215      $ 210      $ 199      $ 91      $ 100  

Gathering, processing & transportation

     157        147        129        130        125  

Production taxes

     176        143        117        47        42  

Property taxes

     7        13        13        3        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Production expenses

   $ 555      $ 513      $ 458      $ 271      $ 271  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Interest based on outstanding debt

   $ 93     $ 98     $ 105     $ 65      $ 65  

Gain on early retirement of debt

     —         (10     (20     —          —    

Interest income

     (1     —         (1     —          (5

Other

     (6     (8     (7     5        6  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Financing costs, net

   $ 86     $ 80     $ 77     $ 70      $ 66  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

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

Cash flows from operating activities:

          

Net earnings (loss)

   $ 844     $ 261     $ 216     $ (98   $ (90

Adjustments to reconcile net earnings (loss) to net cash from operating activities:

          

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

     —         —         —         25       (13

Depreciation, depletion and amortization

     578       536       467       301       299  

Asset impairments

     —         —         —         27       —    

Leasehold impairments

     1       1       1       3       36  

(Amortization) accretion of liabilities

     (7     (7     (7     8       8  

Total losses on commodity derivatives

     335       703       528       117       87  

Cash settlements on commodity derivatives

     (370     (367     (232     (27     10  

Gains on asset dispositions

     —         (87     (32     (1     —    

Deferred income tax expense (benefit)

     119       24       (243     (17     —    

Share-based compensation

     19       20       41       18       31  

Early retirement of debt

     —         (10     (20     —         —    

Other

     11       2       —         —         1  

Changes in assets and liabilities, net

     68       17       (127     2       58  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from operating activities—continuing operations

     1,598       1,093       592       358       427  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Capital expenditures

     (474     (504     (499     (217     (204

Acquisitions of property and equipment

     (10     (5     —         (3     —    

Divestitures of property and equipment

     1       49       15       5       1  

WPX acquired cash

     —         —         344       —         —    

Distributions from equity method investments

     9       8       10       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from investing activities—continuing operations

     (474     (452     (130     (215     (203
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Repayments of long-term debt

     —         (710     (533     —         —    

Early retirement of debt

     —         (32     (27     —         —    

Dividends paid on common stock

     (329     (229     (203     (138     (43

Contributions from noncontrolling interests

     1       3       —         9       1  

Distributions to noncontrolling interests

     (6     (5     (4     (4     (4

Acquisition of noncontrolling interests

     —         —         (24     —         —    

Shares exchanged for tax withholdings and other

     (3     (9     (33     (1     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from financing activities—continuing operations

     (337     (982     (824     (134     (46
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash—continuing

     (5     2       3       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     782       (339     (359     9       178  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from discontinued operations:

          

Operating activities

     —         —         —         19       45  

Investing activities

     —         —         —         310       1  

Effect of exchange rate changes on cash

     —         —         —         2       4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     —         —         —         331       50  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     782       (339     (359     340       228  

Cash, cash equivalents and restricted cash at beginning of period

     1,539       1,878       2,237       1,897       1,669  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 2,321     $ 1,539     $ 1,878     $ 2,237     $ 1,897  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of cash, cash equivalents and restricted cash:

          

Cash and cash equivalents

   $ 2,144     $ 1,348     $ 1,683     $ 2,047     $ 1,707  

Restricted cash

     177       191       195       190       190  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash

   $ 2,321     $ 1,539     $ 1,878     $ 2,237     $ 1,897  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

4


LOGO

 

CONSOLIDATED BALANCE SHEETS

 

 

(in millions)    September 30,
2021
    December 31,
2020
 

Current assets:

    

Cash, cash equivalents and restricted cash

   $ 2,321     $ 2,237  

Accounts receivable

     1,517       601  

Income tax receivable

     80       174  

Other current assets

     309       248  
  

 

 

   

 

 

 

Total current assets

     4,227       3,260  

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

     13,613       4,436  

Other property and equipment, net

     1,465       957  
  

 

 

   

 

 

 

Total property and equipment, net

     15,078       5,393  

Goodwill

     753       753  

Right-of-use assets

     244       223  

Investments

     388       12  

Other long-term assets

     367       271  
  

 

 

   

 

 

 

Total assets

   $ 21,057     $ 9,912  
  

 

 

   

 

 

 

Current liabilities:

    

Accounts payable

   $ 537     $ 242  

Revenues and royalties payable

     1,443       662  

Other current liabilities

     1,525       536  
  

 

 

   

 

 

 

Total current liabilities

     3,505       1,440  

Long-term debt

     6,492       4,298  

Lease liabilities

     256       246  

Asset retirement obligations

     462       358  

Other long-term liabilities

     1,281       551  

Stockholders’ equity:

    

Common stock

     68       38  

Additional paid-in capital

     8,206       2,766  

Retained earnings

     750       208  

Accumulated other comprehensive loss

     (100     (127
  

 

 

   

 

 

 

Total stockholders’ equity attributable to Devon

     8,924       2,885  

Noncontrolling interests

     137       134  
  

 

 

   

 

 

 

Total equity

     9,061       3,019  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 21,057     $ 9,912  
  

 

 

   

 

 

 

Common shares outstanding

     677       382  

 

5


LOGO

 

PRODUCTION TREND

 

 

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

Oil (MBbls/d)

              

Delaware Basin

     213        191        172        99        77  

Anadarko Basin

     14        17        13        16        19  

Williston Basin

     39        46        44        —          —    

Eagle Ford

     20        18        16        18        22  

Powder River Basin

     14        16        17        16        21  

Other

     3        3        6        7        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     303        291        268        156        146  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Natural gas liquids (MBbls/d)

              

Delaware Basin

     100        82        60        43        38  

Anadarko Basin

     25        26        21        25        30  

Williston Basin

     9        9        8        —          —    

Eagle Ford

     11        9        6        9        11  

Powder River Basin

     3        3        3        3        3  

Other

     —          —          1        —          1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     148        129        99        80        83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas (MMcf/d)

              

Delaware Basin

     578        513        471        267        239  

Anadarko Basin

     219        225        200        233        242  

Williston Basin

     59        61        49        —          —    

Eagle Ford

     67        59        47        60        73  

Powder River Basin

     19        21        21        22        23  

Other

     1        2        3        2        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     943        881        791        584        580  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total oil equivalent (MBoe/d)

              

Delaware Basin

     409        358        310        186        155  

Anadarko Basin

     75        80        68        81        89  

Williston Basin

     58        66        61        —          —    

Eagle Ford

     42        37        30        37        46  

Powder River Basin

     20        22        23        22        28  

Other

     4        4        7        7        8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     608        567        499        333        326  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

6


LOGO

 

CAPITAL EXPENDITURES

 

 

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

Delaware Basin

   $ 363      $ 394      $ 355      $ 153      $ 179  

Anadarko Basin

     15        11        13        3        1  

Williston Basin

     13        19        20        —          —    

Eagle Ford

     34        36        29        2        1  

Powder River Basin

     15        5        27        22        11  

Other

     2        2        3        3        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total upstream capital

   $ 442      $ 467      $ 447      $ 183      $ 195  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Midstream

     11        22        24        3        7  

Other

     28        20        16        3        5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capital

   $ 481      $ 509      $ 487      $ 189      $ 207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

SUPPLEMENTAL INFORMATION FOR UPSTREAM CAPITAL EXPENDITURES

 

 

                                                                     
GROSS OPERATED SPUDS                                   
     2021      2020  
                                    
     Quarter 3      Quarter 2      Quarter 1      Quarter 4      Quarter 3  
                                    

Delaware Basin

     50        55        60        21        35  

Anadarko Basin

     9        8        8        —          —    

Williston Basin

     —          —          7        —          —    

Eagle Ford

     10        11        14        —          —    

Powder River Basin

     9        1        —          2        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     78        75        89        23        35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

                                                                     
GROSS OPERATED WELLS TIED-IN                                   
     2021      2020  
                                    
     Quarter 3      Quarter 2      Quarter 1      Quarter 4      Quarter 3  
                                    

Delaware Basin

     52        88        52        23        32  

Anadarko Basin

     4        6        —          —          —    

Williston Basin

     4        13        —          —          —    

Eagle Ford

     19        9        12        —          —    

Powder River Basin

     2        —          10        2        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     81        116        74        25        41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Delaware Basin

     9,700’        10,000’        10,000’        9,800’        9,900’  

Anadarko Basin

     9,200’        9,600’        —          —          —    

Williston Basin

     9,600’        10,000’        —          —          —    

Eagle Ford

     6,300’        5,600’        4,400’        —          —    

Powder River Basin

     10,500’        —          9,800’        13,600’        9,800’  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     8,900’        9,600’        9,100’        10,100’        9,900’  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

7


LOGO

 

REALIZED PRICING

 

 

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

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

   $ 70.64      $ 66.04      $ 57.87      $ 42.65      $ 40.86  

Natural Gas ($/Mcf) - Henry Hub

   $ 4.02      $ 2.83      $ 2.71      $ 2.67      $ 1.98  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 36.85      $ 28.54      $ 25.81      $ 20.01      $ 16.69  

 

REALIZED PRICES                               
     2021     2020  
                                
     Quarter 3     Quarter 2     Quarter 1     Quarter 4     Quarter 3  
                                

Oil (Per Bbl)

          

Delaware Basin

   $ 68.44     $ 63.93     $ 56.07     $ 40.67     $ 39.19  

Anadarko Basin

     69.11       63.51       55.86       40.34       37.88  

Williston Basin

     66.60       62.00       52.74       —         —    

Eagle Ford

     68.32       64.04       54.90       37.83       33.68  

Powder River Basin

     65.81       62.36       53.77       36.42       35.39  

Other

     75.68       72.85       55.65       39.93       37.33  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     68.19       63.63       55.28       39.84       37.56  

Cash settlements

     (10.60     (13.29     (9.13     (1.83     0.65  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 57.59     $ 50.34     $ 46.15     $ 38.01     $ 38.21  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Natural gas liquids (Per Bbl)

          

Delaware Basin

   $ 31.34     $ 23.81     $ 26.25     $ 13.67     $ 11.49  

Anadarko Basin

     33.20       25.55       23.14       15.65       12.68  

Williston Basin

     19.36       14.76       18.51       —         —    

Eagle Ford

     32.80       25.46       24.44       15.66       13.74  

Powder River Basin

     40.66       35.46       30.19       19.39       13.10  

Other

     54.51       41.19       31.86       24.24       21.74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     31.25       23.89       25.01       14.77       12.36  

Cash settlements

     (0.45     (0.25     (0.20     (0.01     (0.30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 30.80     $ 23.64     $ 24.81     $ 14.76     $ 12.06  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gas (Per Mcf)

          

Delaware Basin

   $ 3.58     $ 2.31     $ 3.19     $ 1.51     $ 1.11  

Anadarko Basin

     4.05       3.15       2.49       2.29       1.66  

Williston Basin

     0.65       (1.60     (0.48     —         —    

Eagle Ford

     4.08       3.25       3.15       2.38       1.95  

Powder River Basin

     4.15       3.54       5.27       2.70       1.94  

Other

     2.60       2.74       2.57       2.87       1.52  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     3.55       2.35       2.84       1.96       1.48  

Cash settlements

     (0.78     (0.15     (0.15     0.00       0.06  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 2.77     $ 2.20     $ 2.69     $ 1.96     $ 1.54  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total oil equivalent (Per Boe)

          

Delaware Basin

   $ 48.29     $ 42.84     $ 40.95     $ 26.94     $ 24.00  

Anadarko Basin

     35.62       30.34       25.35       19.79       16.81  

Williston Basin

     48.55       43.98       40.79       —         —    

Eagle Ford

     47.40       42.84       38.90       25.97       22.78  

Powder River Basin

     55.93       52.55       47.58       31.08       29.83  

Other

     70.49       65.37       50.58       37.67       34.15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     47.08       41.75       39.14       25.63       22.60  

Cash settlements

     (6.60     (7.11     (5.17     (0.86     0.33  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 40.48     $ 34.64     $ 33.97     $ 24.77     $ 22.93  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

8


LOGO

 

ASSET MARGINS

 

 

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

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

   $ 70.64      $ 66.04      $ 57.87      $ 42.65      $ 40.86  

Natural Gas ($/Mcf) - Henry Hub

   $ 4.02      $ 2.83      $ 2.71      $ 2.67      $ 1.98  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 36.85      $ 28.54      $ 25.81      $ 20.01      $ 16.69  

 

PER-UNIT CASH MARGIN BY ASSET (per Boe)                               
     2021     2020  
                                
     Quarter 3     Quarter 2     Quarter 1     Quarter 4     Quarter 3  
                                

Delaware Basin

          

Realized price

   $ 48.29     $ 42.84     $ 40.95     $ 26.94     $ 24.00  

Lease operating expenses

     (3.52     (3.91     (3.97     (2.38     (3.00

Gathering, processing & transportation

     (2.18     (2.06     (1.96     (2.40     (2.68

Production & property taxes

     (3.31     (3.08     (2.95     (2.08     (1.80
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 39.28     $ 33.79     $ 32.07     $ 20.08     $ 16.52  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Anadarko Basin

          

Realized price

   $ 35.62     $ 30.34     $ 25.35     $ 19.79     $ 16.81  

Lease operating expenses

     (2.58     (2.96     (3.82     (2.57     (2.16

Gathering, processing & transportation

     (6.14     (6.06     (6.31     (8.39     (7.39

Production & property taxes

     (1.70     (1.46     (1.21     (0.55     (0.54
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 25.20     $ 19.86     $ 14.01     $ 8.28     $ 6.72  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Williston Basin

          

Realized price

   $ 48.55     $ 43.98     $ 40.79     $ —       $ —    

Lease operating expenses

     (5.83     (4.87     (5.13     —         —    

Gathering, processing & transportation

     (2.13     (1.86     (2.14     —         —    

Production & property taxes

     (4.47     (4.27     (3.82     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 36.12     $ 32.98     $ 29.70     $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Eagle Ford

          

Realized price

   $ 47.40     $ 42.84     $ 38.90     $ 25.97     $ 22.78  

Lease operating expenses

     (3.43     (3.47     (3.89     (2.79     (2.47

Gathering, processing & transportation

     (4.17     (5.56     (6.73     (5.89     (4.73

Production & property taxes

     (1.99     (1.93     (1.71     (0.16     (0.92
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 37.81     $ 31.88     $ 26.57     $ 17.13     $ 14.66  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Powder River Basin

          

Realized price

   $ 55.93     $ 52.55     $ 47.58     $ 31.08     $ 29.83  

Lease operating expenses

     (8.09     (6.65     (7.45     (5.47     (5.41

Gathering, processing & transportation

     (2.93     (3.02     (2.66     (3.01     (2.30

Production & property taxes

     (6.73     (6.10     (5.48     (3.91     (3.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 38.18     $ 36.78     $ 31.99     $ 18.69     $ 18.63  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other

          

Realized price

   $ 70.49     $ 65.37     $ 50.58     $ 37.67     $ 34.15  

Lease operating expenses

     (16.42     (16.69     (17.15     (15.35     (19.92

Gathering, processing & transportation

     (0.35     (0.58     (0.62     (0.59     (0.51

Production & property taxes

     (4.19     (5.25     (4.60     (3.38     (3.62
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 49.53     $ 42.85     $ 28.21     $ 18.35     $ 10.10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Devon - Total

          

Realized price

   $ 47.08     $ 41.75     $ 39.14     $ 25.63     $ 22.60  

Lease operating expenses

     (3.85     (4.06     (4.44     (2.97     (3.32

Gathering, processing & transportation

     (2.81     (2.85     (2.87     (4.23     (4.17

Production & property taxes

     (3.25     (3.05     (2.88     (1.66     (1.52
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 37.17     $ 31.79     $ 28.95     $ 16.77     $ 13.59  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NON-GAAP MEASURES

 

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

This press release includes 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 each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.

CORE EARNINGS

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. 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 third-quarter 2021 earnings.

 

     Quarter Ended September 30, 2021  
                             
     Before-tax      After-tax      After
Noncontrolling
Interests
     Per
Diluted
Share
 
                             

Total

           

Earnings (GAAP)

   $ 964      $ 844      $ 838      $ 1.24  

Adjustments:

           

Asset and exploration impairments

     1        1        1        0.00  

Deferred tax asset valuation allowance

     —          (101      (101      (0.15

Fair value changes in financial instruments and foreign currency

     (31      (23      (23      (0.04

Restructuring and transaction costs

     18        18        18        0.03  
  

 

 

    

 

 

    

 

 

    

 

 

 

Core earnings (Non-GAAP)

   $ 952      $ 739      $ 733      $ 1.08  
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

     YTD ‘21      Q3 ‘21      Q2 ‘21      Q1 ‘21  

Net earnings (GAAP)

   $ 1,321      $ 844      $ 261      $ 216  

Financing costs, net

     243        86        80        77  

Income tax expense (benefit)

     (85      120        43        (248

Exploration expenses

     9        3        3        3  

Depreciation, depletion and amortization

     1,581        578        536        467  

Asset dispositions

     (119      —          (87      (32

Share-based compensation

     58        18        20        20  

Derivative and financial instrument non-cash valuation changes

     597        (35      336        296  

Restructuring and transaction costs

     230        18        23        189  

Accretion on discounted liabilities and other

     (41      2        (14      (29
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDAX (Non-GAAP)

   $ 3,794      $ 1,634      $ 1,201      $ 959  
  

 

 

    

 

 

    

 

 

    

 

 

 

Annualized EBITDAX (Non-GAAP)

   $ 5,059           

NET DEBT

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.

 

     September 30, 2021      June 30, 2021  

Total debt (GAAP)

   $ 6,492      $ 6,502  

Less:

     

Cash, cash equivalents and restricted cash

     (2,321      (1,539
  

 

 

    

 

 

 

Net debt (Non-GAAP)

   $ 4,171      $ 4,963  
  

 

 

    

 

 

 

 

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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 the first nine months of 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
September 30, 2021
 

Net debt (Non-GAAP)

   $ 4,171  

EBITDAX (Sep. 30, 2021 YTD annualized) (Non-GAAP)

   $ 5,059  
  

 

 

 

Net debt-to-EBITDAX (Non-GAAP)

     0.8  
  

 

 

 

FREE CASH FLOW AND ADJUSTED FREE CASH FLOW

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

 

     Quarter Ended
September 30, 2021
     Quarter Ended
June 30, 2021
     Quarter Ended
March 31, 2021
     Quarter Ended
December 31, 2020
 

Total operating cash flow (GAAP)

   $ 1,598      $ 1,093      $ 592      $ 358  

Less capital expenditures:

           

Capital expenditures

     (474      (504      (499      (217
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow (Non-GAAP)

     1,124        589        93        141  

Cash restructuring and transaction costs (Non-GAAP)

     14        23        167        17  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted free cash flow (Non-GAAP)

   $ 1,138      $ 612      $ 260      $ 158  
  

 

 

    

 

 

    

 

 

    

 

 

 

REINVESTMENT RATE

Devon defines reinvestment rate as accrued capital expenditures divided by 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
September 30, 2021
 

Capital expenditures (accrued)

   $ 481  

Operating cash flow

     1,598  
  

 

 

 

Reinvestment rate (Non-GAAP)

     30
  

 

 

 

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
September 30, 2021
 

Operating cash flow (GAAP)

   $ 1,598  

Changes in assets and liabilities, net

     (68
  

 

 

 

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

     1,530  

Cash restructuring and transaction costs (Non-GAAP)

     14  
  

 

 

 

Adjusted cash flow (Non-GAAP)

     1,544  

Capital expenditures (Accrued)

     (481
  

 

 

 

Adjusted free cash flow (Non-GAAP)

     1,063  

Fixed quarterly dividend ($0.11/share)

     (74
  

 

 

 

Excess free cash flow (Non-GAAP)

     989  

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

     50
  

 

 

 

Total variable dividend

   $ 494  
  

 

 

 

 

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FOURTH-QUARTER 2021 GUIDANCE

 

 

PRODUCTION GUIDANCE              
     Quarter 4  
     Low      High  

Oil (MBbls/d)

     293        298  

Natural gas liquids (MBbls/d)

     140        145  

Gas (MMcf/d)

     900        950  
  

 

 

    

 

 

 

Total oil equivalent (MBoe/d)

     583        601  
  

 

 

    

 

 

 

 

CAPITAL EXPENDITURES GUIDANCE              
     Quarter 4  
(in millions)    Low      High  

Upstream capital

   $ 440      $ 490  

Midstream capital

     15        25  

Other capital

     10        20  
  

 

 

    

 

 

 

Total capital

   $ 465      $ 535  
  

 

 

    

 

 

 

 

PRICE REALIZATIONS GUIDANCE             
     Quarter 4  
     Low     High  

Oil - % of WTI

     90     100

NGL - % of WTI

     42     47

Natural gas - % of Henry Hub

     80     90

 

OTHER GUIDANCE ITEMS             
     Quarter 4  
($ millions, except Boe and %)    Low     High  

Marketing & midstream operating profit

   $ (10   $ 10  

LOE & GP&T per BOE

   $ 6.25     $ 6.75  

Production & property taxes as % of upstream sales

     7.0     7.5

Exploration expenses

   $ —       $ 5  

Depreciation, depletion and amortization

   $ 550     $ 600  

General & administrative expenses

   $ 90     $ 100  

Cash financing costs, net

   $ 90     $ 100  

Other expenses

   $ —       $ 10  

Current income tax rate

     0     0

Deferred income tax rate

     20     30
  

 

 

   

 

 

 

Total income tax rate

     20     30
  

 

 

   

 

 

 

 

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

 

 

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)
 

Q4 2021

     66,460      $ 41.24        48,250      $ 38.82      $ 48.82  

Q1-Q4 2022

     26,112      $ 43.75        22,501      $ 48.36      $ 58.58  

 

     Price Swaptions      Price Call Options  

Period

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

Q4 2021

     —        $ —          5,000      $ 39.50  

Q1-Q4 2022

     10,000      $ 46.67        —        $ —    

 

Oil Basis Swaps                   

Period

  

Index

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

Q4 2021

   Midland Sweet      23,000      $ 0.84  

Q4 2021

   BRENT/WTI Spread      1,000      $ (8.00

Q4 2021

   Guernsey Light Sweet      4,000      $ (1.49

Q4 2021

   NYMEX Roll      13,000      $ 0.39  

Q1-Q4 2022

   BRENT/WTI Spread      1,000      $ (7.75

Q1-Q4 2022

   NYMEX Roll      29,000      $ 0.45  

 

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)
 

Q4 2021

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

Q1-Q4 2022

     3,452      $ 2.85        149,274      $ 2.71      $ 3.44  

 

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2021 & 2022 HEDGING POSITIONS (continued)

 

 

     Price Swaptions      Price Call Options  

Period

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

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)
 

Q4 2021

   El Paso Natural Gas      35,000      $ (0.92

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)
 

Q4 2021

   Natural Gasoline      1,000      $ 47.57  

Q4 2021

   Normal Butane      1,000      $ 31.40  

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 October 28, 2021.

 

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