DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2022-05-02 2022-05-02

 

 

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): May 2, 2022

 

 

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 2, 2022, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarterly period ended March 31, 2022. 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 2, 2022.
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 2, 2022

Exhibit 99.1

 

             LOGO  

Devon Energy Corporation

333 West Sheridan Avenue

Oklahoma City, OK 73102-5015

Devon Energy Reports First-Quarter 2022 Financial and Operational Results

OKLAHOMA CITY – May 2, 2022 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the first-quarter 2022. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

   

Delaware Basin production growth and margin expansion drove first-quarter financial performance

 

   

Operating cash flow increased 14 percent to $1.8 billion and free cash flow reached record high of $1.3 billion

 

   

First-quarter dividend payout increased by 27 percent to $1.27 per share

 

   

Board expanded share-repurchase authorization by 25 percent to $2.0 billion

 

   

Share-repurchase program to date has retired 19.1 million shares at a total cost of $891 million

 

   

Balance sheet strengthened with cash balances increasing by $354 million to a total of $2.6 billion

CEO PERSPECTIVE

“Devon’s first-quarter performance once again demonstrated the power of our disciplined capital plan, our focus on growing cash margin and the benefits of our differentiated cash-return framework,” said Rick Muncrief, president and CEO.

“The comprehensive execution we delivered across all phases of the operating plan allowed us to capture the full benefit of higher commodity prices and generate a record-setting amount of free cash flow in the quarter.

“This strong financial performance has enabled us to dramatically accelerate the return of capital to shareholders by declaring the highest dividend in Devon’s history and by expanding our share-repurchase program to further bolster per-share results.

“Looking ahead, we are unwavering in our commitment to capital discipline and remain focused on delivering the objectives that underpin our current year plan,” Muncrief commented. “Our pursuit of value over volume is further reinforced by the steep backwardation in commodity prices, supply chain constraints and the economic uncertainty arising from recent geopolitical events.”

FINANCIAL SUMMARY

Devon reported net earnings of $1.0 billion, or $1.48 per diluted share, in the first quarter of 2022. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $1.88 per diluted share.

Operating cash flow totaled $1.8 billion, a 14 percent increase from the prior quarter. This level of cash flow funded all capital requirements and resulted in record-setting free cash flow of $1.3 billion for the quarter.

Based on the first-quarter financial performance, Devon declared a fixed-plus-variable dividend payout of $1.27 per share payable on Jun. 30, 2022. This payout is a 27 percent increase from the previous quarter and includes a $0.11 per share benefit from divestiture contingency payments received in the quarter. The company also expanded its share-repurchase authorization by 25 percent to $2.0 billion. As of the end of April, Devon repurchased 19.1 million shares at a total cost of $891 million.

The company continued to strengthen its investment-grade financial position in the quarter, with cash balances increasing by $354 million to a total of $2.6 billion. Devon intends to further improve its financial strength by retiring low-premium debt of approximately $1.0 billion in 2022 and 2023.

 

1


OPERATING RESULTS

Production averaged 575,000 oil-equivalent barrels (Boe) per day in the first quarter, with oil accounting for 50 percent of the volume. This performance was driven by the company’s Delaware Basin asset which accounted for nearly 70 percent of total production. Devon estimates that first-quarter production was reduced by 15,000 Boe per day, or 3 percent, due to winter weather curtailments.

The company’s capital activity consisted of 19 operated drilling rigs and 5 completion crews in the quarter. This level of investment resulted in an upstream capital spend of $501 million, which is equivalent to 24 percent of Devon’s full-year budget.

Devon’s largest field-level cost category, lease operating and transportation costs, totaled $7.44 per Boe in the quarter. Effective cost management efforts and efficient field-level operations drove per-unit rates 3 percent below guidance expectations for the quarter.

The benefits of an oil-weighted production mix, coupled with low operating costs, expanded field-level cash margins to $49.45 per Boe in the quarter. This represents a 17 percent improvement from the fourth quarter of 2021.

The capture of merger synergies improved Devon’s corporate cost structure by 13 percent year-over-year. This performance was driven by lower personnel expenses and reduced financing costs.

ASSET-LEVEL HIGHLIGHTS

Delaware Basin: Production averaged 394,000 Boe per day, a 27 percent increase from the year ago period. During the quarter, the company brought online 52 development wells diversified across target intervals in the Avalon, Bone Spring and Wolfcamp formations. Initial 30-day production rates from these highly economic wells averaged 2,800 Boe per day (62 percent oil), with completed well costs remaining extremely low at an average of $7.5 million per well.

For the remainder of 2022, Devon plans to operate 14 rigs across its 400,000 net acres in the basin and the company remains on track to bring online approximately 220 new wells for the year. This level of activity represents approximately 70 percent of the company’s total operating plan for 2022.

Anadarko Basin: Production averaged 75,000 Boe per day, with liquids-rich gas representing 81 percent of the product mix. During the quarter, Devon operated 3 drilling rigs supported by a $100 million drilling carry with Dow. With this carry-enhanced activity, the company spud 13 wells during the quarter, with initial production from this activity expected in the second half of the year. Overall, Devon plans to bring online approximately 40 new wells in the Anadarko Basin during 2022.

Williston Basin: Production averaged 48,000 Boe per day. Due to timing of activity, no new wells were brought online during the first quarter. To manage base production, the company plans to bring online 15 to 20 new wells in 2022.

Eagle Ford: First-quarter production averaged 36,000 Boe per day. Capital activity was highlighted by the commencement of production on 8 wells in the volatile oil window of the play. This low-risk development activity resulted in average 30-day production rates of 3,300 Boe per day. Devon and its partner remain on track to bring online approximately 40 new wells in 2022 in an effort to maintain a consistent production profile throughout the year.

Powder River Basin: Production averaged 18,000 Boe per day (70 percent oil). Devon’s operational focus in 2022 is to optimize base production and advance its understanding of the emerging Niobrara oil resource opportunity across the company’s 300,000 net acre position in the oil fairway of the play.

2022 OUTLOOK

Devon remains committed to a disciplined maintenance capital program and is on track to meet the strategic objectives that underpin its operating plan in 2022. The company has not made any modifications to its previously announced plan to sustain 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.

Additional details of Devon’s forward-looking guidance for the second quarter and full-year 2022 are available on the company’s website at www.devonenergy.com.

 

2


SUSTAINABILITY REPORT

In November 2021, Devon released its sustainability report highlighting efforts to deliver industry-leading results while being a good neighbor, valued and effective community partner, responsible environmental steward, and supportive employer. This report also details the progress Devon has made toward achieving key environmental targets focused on reducing the carbon intensity of its operations. For more information, please refer to the sustainability report 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 first-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Tuesday, May 3, 2022, 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

Scott Coody, 405-552-4735

Chris Carr, 405-228-2496

  

Media Contact

Lisa Adams, 405-228-1732

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 press release 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 press release 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; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to federal lands and environmental matters; risks related to climate change; the uncertainties, costs and risks involved in our operations, including as a result of employee misconduct; 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; our ability to pay dividends and make share repurchases; and any of the other risks and uncertainties discussed in Devon’s 2021 Annual Report on Form 10-K (the “2021 Form 10-K”) or other SEC filings.

The forward-looking statements included in this press release speak only as of the date of this press release, represent management’s current reasonable expectations as of the date of this press release and are subject to the risks and uncertainties identified above as well as those described in the 2021 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 2021 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.

 

3

Exhibit 99.2

 

LOGO

Devon Energy First-Quarter 2022

Supplemental Tables

 

TABLE OF CONTENTS:    PAGE:  

Consolidated Statements of Earnings

     2  

Supplemental Information for Consolidated Statements of Earnings

     3  

Consolidated Statements of Cash Flows

     4  

Consolidated Balance Sheets

     5  

Production

     6  

Capital Expenditures and Supplemental Information for Capital Expenditures

     7  

Realized Pricing

     8  

Asset Margins

     9  

Core Earnings

     10  

Return on Capital Employed and EBITDAX

     11  

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

     12  

Reinvestment Rate and Variable Dividend

     13  

 

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CONSOLIDATED STATEMENTS OF EARNINGS

 

 

(in millions, except per share amounts)    2022     2021  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Oil, gas and NGL sales

   $ 3,175     $ 2,985     $ 2,635     $ 2,154     $ 1,757  

Oil, gas and NGL derivatives (1)

     (683     22       (335     (703     (528

Marketing and midstream revenues

     1,320       1,266       1,166       966       821  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,812       4,273       3,466       2,417       2,050  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production expenses (2)

     618       605       555       513       458  

Exploration expenses

     2       5       3       3       3  

Marketing and midstream expenses

     1,324       1,266       1,165       965       842  

Depreciation, depletion and amortization

     489       577       578       536       467  

Asset dispositions

     (1     (49     —         (87     (32

General and administrative expenses

     94       95       95       94       107  

Financing costs, net (3)

     85       86       86       80       77  

Restructuring and transaction costs

     —         28       18       23       189  

Other, net

     (61     (2     2       (14     (29
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,550       2,611       2,502       2,113       2,082  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     1,262       1,662       964       304       (32

Income tax expense (benefit) (4)

     267       150       120       43       (248
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     995       1,512       844       261       216  

Net earnings attributable to noncontrolling interests

     6       6       6       5       3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Devon

   $ 989     $ 1,506     $ 838     $ 256     $ 213  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings per share:

          

Basic net earnings per share

   $ 1.48     $ 2.24     $ 1.24     $ 0.38     $ 0.33  

Diluted net earnings per share

   $ 1.48     $ 2.23     $ 1.24     $ 0.38     $ 0.32  

Weighted average common shares outstanding:

          

Basic

     663       671       677       677       654  

Diluted

     665       673       679       679       656  

 

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SUPPLEMENTAL INFORMATION FOR CONSLIDATED STATEMENTS OF EARNINGS

 

(1) OIL, GAS AND NGL DERIVATIVES

 

(in millions)    2022     2021  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Derivative cash settlements

   $ (344   $ (493   $ (370   $ (367   $ (232

Derivative valuation changes

     (339     515       35       (336     (296
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Oil, gas and NGL derivatives

   $ (683   $ 22     $ (335   $ (703   $ (528
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(2) PRODUCTION EXPENSES

 

(in millions)    2022     2021  
   Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Lease operating expense

   $ 224     $ 235     $ 215     $ 210     $ 199  

Gathering, processing & transportation

     161       173       157       147       129  

Production taxes

     214       197       176       143       117  

Property taxes

     19       —         7       13       13  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production expenses

   $ 618      $ 605      $ 555      $ 513      $ 458   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(3) FINANCING COSTS, NET

 

(in millions)    2022     2021  
   Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Interest based on outstanding debt

   $ 92     $ 92     $ 93     $ 98     $ 105  

Gain on early retirement of debt

     —         —         —         (10     (20

Interest income

     (1     —         (1     —         (1

Other

     (6     (6     (6     (8     (7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing costs, net

   $   85      $   86      $   86      $   80      $   77  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(4) INCOME TAX EXPENSE (BENEFIT)

 

(in millions)    2022      2021  
   Quarter 1      Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Current expense (benefit)

   $ 103      $ 1     $ 1     $ 19     $ (5

Deferred expense (benefit)

     164        149       119       24       (243
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

   $   267       $   150      $   120      $   43      $ (248
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

(in millions)    2022     2021  
   Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Cash flows from operating activities:

          

Net earnings

   $ 995     $ 1,512     $ 844     $ 261     $ 216  

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

          

Depreciation, depletion and amortization

     489       577       578       536       467  

Leasehold impairments

     1       1       1       1       1  

Amortization of liabilities

     (6     (6     (7     (7     (7

Total (gains) losses on commodity derivatives

     683       (22     335       703       528  

Cash settlements on commodity derivatives

     (344     (493     (370     (367     (232

Gains on asset dispositions

     (1     (49     —         (87     (32

Deferred income tax expense (benefit)

     164       149       119       24       (243

Share-based compensation

     20       19       19       20       41  

Early retirement of debt

     —         —         —         (10     (20

Other

     (21     2       11       2       —    

Changes in assets and liabilities, net

     (143     (74     68       17       (127
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from operating activities

     1,837       1,616       1,598       1,093       592  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Capital expenditures

     (537     (512     (474     (504     (499

Acquisitions of property and equipment

     (1     (3     (10     (5     —    

Divestitures of property and equipment

     26       14       1       49       15  

WPX acquired cash

     —         —         —         —         344  

Distributions from equity method investments

     8       8       9       8       10  

Contributions to equity method investments

     (22     (25     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from investing activities

     (526     (518     (474     (452     (130
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Repayments of long-term debt

     —         —         —         (710     (533

Early retirement of debt

     —         —         —         (32     (27

Repurchases of common stock

     (211     (589     —         —         —    

Dividends paid on common stock

     (667     (554     (329     (229     (203

Contributions from noncontrolling interests

     —         —         1       3       —    

Distributions to noncontrolling interests

     (8     (6     (6     (5     (4

Acquisition of noncontrolling interests

     —         —         —         —         (24

Shares exchanged for tax withholdings and other

     (73     —         (3     (9     (33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash from financing activities

     (959     (1,149     (337     (982     (824
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash

     2       1       (5     2       3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     354       (50     782       (339     (359

Cash, cash equivalents and restricted cash at beginning of period

     2,271       2,321       1,539       1,878       2,237  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 2,625     $ 2,271     $ 2,321     $ 1,539     $ 1,878  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of cash, cash equivalents and restricted cash:

          

Cash and cash equivalents

   $ 2,459     $ 2,099     $ 2,144     $ 1,348     $ 1,683  

Restricted cash

     166       172       177       191       195  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash

   $ 2,625     $ 2,271     $ 2,321     $ 1,539     $ 1,878  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CONSOLIDATED BALANCE SHEETS

 

 

(in millions)    March 31,
2022
    December 31,
2021
 

Current assets:

    

Cash, cash equivalents and restricted cash

   $ 2,625     $ 2,271  

Accounts receivable

     2,002       1,543  

Other current assets

     346       435  
  

 

 

   

 

 

 

Total current assets

     4,973       4,249  

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

     13,566       13,536  

Other property and equipment, net

     1,508       1,472  
  

 

 

   

 

 

 

Total property and equipment, net

     15,074       15,008  

Goodwill

     753       753  

Right-of-use assets

     229       235  

Investments

     416       402  

Other long-term assets

     333       378  
  

 

 

   

 

 

 

Total assets

   $ 21,778     $ 21,025  
  

 

 

   

 

 

 

Current liabilities:

    

Accounts payable

   $ 576     $ 500  

Revenues and royalties payable

     1,672       1,456  

Other current liabilities

     1,506       1,131  
  

 

 

   

 

 

 

Total current liabilities

     3,754       3,087  

Long-term debt

     6,471       6,482  

Lease liabilities

     251       252  

Asset retirement obligations

     443       468  

Other long-term liabilities

     974       1,050  

Deferred income taxes

     450       287  

Stockholders’ equity:

    

Common stock

     66       66  

Additional paid-in capital

     7,371       7,636  

Retained earnings

     2,013       1,692  

Accumulated other comprehensive loss

     (131     (132

Treasury stock, at cost, 0.3 million shares in 2022

     (19     —    
  

 

 

   

 

 

 

Total stockholders’ equity attributable to Devon

     9,300       9,262  

Noncontrolling interests

     135       137  
  

 

 

   

 

 

 

Total equity

     9,435       9,399  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 21,778     $ 21,025  
  

 

 

   

 

 

 

Common shares outstanding

     661       663  

 

5


LOGO

 

PRODUCTION

 

 

     2022      2021  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Oil (MBbls/d)

              

Delaware Basin

     209        213        213        191        172  

Anadarko Basin

     14        14        14        17        13  

Williston Basin

     32        36        39        46        44  

Eagle Ford

     17        19        20        18        16  

Powder River Basin

     12        14        14        16        17  

Other

     4        4        3        3        6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     288        300        303        291        268  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Natural gas liquids (MBbls/d)

              

Delaware Basin

     92        107        100        82        60  

Anadarko Basin

     25        27        25        26        21  

Williston Basin

     8        9        9        9        8  

Eagle Ford

     9        9        11        9        6  

Powder River Basin

     2        2        3        3        3  

Other

     —          —          —          —          1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     136        154        148        129        99  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas (MMcf/d)

              

Delaware Basin

     561        577        578        513        471  

Anadarko Basin

     210        222        219        225        200  

Williston Basin

     54        64        59        61        49  

Eagle Ford

     61        60        67        59        47  

Powder River Basin

     19        19        19        21        21  

Other

     1        1        1        2        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     906        943        943        881        791  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total oil equivalent (MBoe/d)

              

Delaware Basin

     394        416        409        358        310  

Anadarko Basin

     75        78        75        80        68  

Williston Basin

     48        55        58        66        61  

Eagle Ford

     36        38        42        37        30  

Powder River Basin

     18        19        20        22        23  

Other

     4        5        4        4        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     575        611        608        567        499  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

6


LOGO

 

CAPITAL EXPENDITURES

 

 

(in millions)    2022      2021  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

   $ 413      $ 392      $ 363      $ 394      $ 355  

Anadarko Basin

     16        19        15        11        13  

Williston Basin

     17        25        13        19        20  

Eagle Ford

     27        21        34        36        29  

Powder River Basin

     27        27        15        5        27  

Other

     1        2        2        2        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total upstream capital

   $ 501      $ 486      $ 442      $ 467      $ 447  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Environmental (1)

     16        —          —          —          —    

Midstream

     32        14        11        22        24  

Other

     15        21        28        20        16  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capital

   $ 564      $ 521      $ 481      $ 509      $ 487  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Devon began tracking environmental capital separately in 2022.

SUPPLEMENTAL INFORMATION FOR CAPITAL EXPENDITURES

 

GROSS OPERATED SPUDS

 

     2022      2021  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

     59        54        50        55        60  

Anadarko Basin

     13        6        9        8        8  

Williston Basin

     —          9        —          —          7  

Eagle Ford

     11        9        10        11        14  

Powder River Basin

     —          4        9        1        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     83        82        78        75        89  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GROSS OPERATED WELLS TIED-IN

 

     2022      2021  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

Delaware Basin

     52        65        52        88        52  

Anadarko Basin

     —          12        4        6        —    

Williston Basin

     —          —          4        13        —    

Eagle Ford

     8        7        19        9        12  

Powder River Basin

     4        2        2        —          10  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     64        86        81        116        74  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

AVERAGE LATERAL LENGTH           
(based on wells tied-in)    2022     2021  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Delaware Basin

     8,900     10,100     9,700     10,000     10,000

Anadarko Basin

     —         11,700     9,200     9,600     —    

Williston Basin

     —         —         9,600     10,000     —    

Eagle Ford

     7,500     7,100     6,300     5,600     4,400

Powder River Basin

     10,400     9,600     10,500     —         9,800
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8,800     10,100     8,900     9,600     9,100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7


LOGO

 

REALIZED PRICING

 

BENCHMARK PRICES

 

(average prices)    2022     2021  
      Quarter 1       Quarter 4       Quarter 3       Quarter 2       Quarter 1   

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

   $ 94.45     $ 76.91     $ 70.64     $ 66.04     $ 57.87  

Natural Gas ($/Mcf) - Henry Hub

   $ 4.96     $ 5.84     $ 4.02     $ 2.83     $ 2.71  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 43.99       $ 40.39       $ 36.85      $ 28.54      $ 25.81   

REALIZED PRICES

 

     2022     2021  
      Quarter 1       Quarter 4       Quarter 3       Quarter 2       Quarter 1   

Oil (Per Bbl)

          

Delaware Basin

   $ 93.12     $ 75.67     $ 68.44     $ 63.93     $ 56.07  

Anadarko Basin

     92.70       76.07       69.11       63.51       55.86  

Williston Basin

     90.87       74.02       66.60       62.00       52.74  

Eagle Ford

     94.51       75.35       68.32       64.04       54.90  

Powder River Basin

     92.69       72.86       65.81       62.36       53.77  

Other

     94.80       76.57       75.68       72.85       55.65  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     92.94       75.36       68.19       63.63       55.28  

Cash settlements

     (11.32     (13.14     (10.60     (13.29     (9.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 81.62     $ 62.22     $ 57.59     $ 50.34     $ 46.15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Natural gas liquids (Per Bbl)

          

Delaware Basin

   $ 38.43     $ 35.56     $ 31.34     $ 23.81     $ 26.25  

Anadarko Basin

     38.38       35.66       33.20       25.55       23.14  

Williston Basin

     20.71       24.97       19.36       14.76       18.51  

Eagle Ford

     39.68       38.17       32.80       25.46       24.44  

Powder River Basin

     52.49       47.30       40.66       35.46       30.19  

Other

     56.00       66.22       54.51       41.19       31.86  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     37.76       35.36       31.25       23.89       25.01  

Cash settlements

     —         (0.54     (0.45     (0.25     (0.20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 37.76     $ 34.82     $ 30.80     $ 23.64     $ 24.81  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gas (Per Mcf)

          

Delaware Basin

   $ 3.83     $ 4.60     $ 3.58     $ 2.31     $ 3.19  

Anadarko Basin

     4.00       5.37       4.05       3.15       2.49  

Williston Basin

     0.74       1.53       0.65       (1.60     (0.48

Eagle Ford

     4.91       5.76       4.08       3.25       3.15  

Powder River Basin

     4.24       6.10       4.15       3.54       5.27  

Other

     4.09       4.11       2.60       2.74       2.57  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     3.77       4.68       3.55       2.35       2.84  

Cash settlements

     (0.62     (1.42     (0.78     (0.15     (0.15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 3.15     $ 3.26     $ 2.77     $ 2.20     $ 2.69  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total oil equivalent (Per Boe)

          

Delaware Basin

   $ 63.75     $ 54.28     $ 48.29     $ 42.84     $ 40.95  

Anadarko Basin

     42.08       41.39       35.62       30.34       25.35  

Williston Basin

     63.31       53.44       48.55       43.98       40.79  

Eagle Ford

     62.74       56.06       47.40       42.84       38.90  

Powder River Basin

     75.75       63.45       55.93       52.55       47.58  

Other

     89.47       73.63       70.49       65.37       50.58  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price without hedges

     61.40       53.12       47.08       41.75       39.14  

Cash settlements

     (6.65     (8.78     (6.60     (7.11     (5.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized price, including cash settlements

   $ 54.75     $ 44.34     $ 40.48     $ 34.64     $ 33.97  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

8


LOGO

 

ASSET MARGINS

 

BENCHMARK PRICES

 

(average prices)    2022      2021  
     Quarter 1      Quarter 4      Quarter 3      Quarter 2      Quarter 1  

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

   $ 94.45      $ 76.91      $ 70.64      $ 66.04      $ 57.87  

Natural Gas ($/Mcf) - Henry Hub

   $ 4.96      $ 5.84      $ 4.02      $ 2.83      $ 2.71  

NGL ($/Bbl) - Mont Belvieu Blended

   $ 43.99      $ 40.39      $ 36.85      $ 28.54      $ 25.81  

 

PER-UNIT CASH MARGIN BY ASSET (per Boe)           
     2022     2021  
     Quarter 1     Quarter 4     Quarter 3     Quarter 2     Quarter 1  

Delaware Basin

          

Realized price

   $ 63.75     $ 54.28     $ 48.29     $ 42.84     $ 40.95  

Lease operating expenses

     (3.79     (4.02     (3.52     (3.91     (3.97

Gathering, processing & transportation

     (2.32     (2.27     (2.18     (2.06     (1.96

Production & property taxes

     (4.65     (3.40     (3.31     (3.08     (2.95
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 52.99     $ 44.59     $ 39.28     $ 33.79     $ 32.07  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Anadarko Basin

          

Realized price

   $ 42.08     $ 41.39     $ 35.62     $ 30.34     $ 25.35  

Lease operating expenses

     (2.75     (2.70     (2.58     (2.96     (3.82

Gathering, processing & transportation

     (6.67     (6.60     (6.14     (6.06     (6.31

Production & property taxes

     (2.35     (2.44     (1.70     (1.46     (1.21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 30.31     $ 29.65     $ 25.20     $ 19.86     $ 14.01  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Williston Basin

          

Realized price

   $ 63.31     $ 53.44     $ 48.55     $ 43.98     $ 40.79  

Lease operating expenses

     (7.67     (5.76     (5.83     (4.87     (5.13

Gathering, processing & transportation

     (2.32     (2.09     (2.13     (1.86     (2.14

Production & property taxes

     (5.67     (4.64     (4.47     (4.27     (3.82
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 47.65     $ 40.95     $ 36.12     $ 32.98     $ 29.70  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Eagle Ford

          

Realized price

   $ 62.74     $ 56.06     $ 47.40     $ 42.84     $ 38.90  

Lease operating expenses

     (4.63     (3.78     (3.43     (3.47     (3.89

Gathering, processing & transportation

     (5.67     (6.65     (4.17     (5.56     (6.73

Production & property taxes

     (3.52     (2.93     (1.99     (1.93     (1.71
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 48.92     $ 42.70     $ 37.81     $ 31.88     $ 26.57  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Powder River Basin

          

Realized price

   $ 75.75     $ 63.45     $ 55.93     $ 52.55     $ 47.58  

Lease operating expenses

     (9.01     (7.49     (8.09     (6.65     (7.45

Gathering, processing & transportation

     (3.19     (2.86     (2.93     (3.02     (2.66

Production & property taxes

     (9.23     (7.49     (6.73     (6.10     (5.48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 54.32     $ 45.61     $ 38.18     $ 36.78     $ 31.99  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other

          

Realized price

   $ 89.47     $ 73.63     $ 70.49     $ 65.37     $ 50.58  

Lease operating expenses

     (21.34     (13.34     (16.42     (16.69     (17.15

Gathering, processing & transportation

     (0.24     (0.31     (0.35     (0.58     (0.62

Production & property taxes

     (5.93     (4.84     (4.19     (5.25     (4.60
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 61.96     $ 55.14     $ 49.53     $ 42.85     $ 28.21  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Devon - Total

          

Realized price

   $ 61.40     $ 53.12     $ 47.08     $ 41.75     $ 39.14  

Lease operating expenses

     (4.33     (4.18     (3.85     (4.06     (4.44

Gathering, processing & transportation

     (3.11     (3.08     (2.81     (2.85     (2.87

Production & property taxes

     (4.51     (3.49     (3.25     (3.05     (2.88
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Field-level cash margin

   $ 49.45     $ 42.37     $ 37.17     $ 31.79     $ 28.95  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


LOGO

 

NON-GAAP MEASURES

 

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

Devon’s 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 each of the non-GAAP measures used in the earnings materials, including reconciliations to their most directly comparable GAAP measure.

The earnings materials may include forward-looking non-GAAP measures. The company is unable to provide reconciliations of these forward-looking non-GAAP measures, because components of the calculations are inherently unpredictable, such as changes to current assets and liabilities, the timing of changes in capital accruals, unknown future events and estimating certain future GAAP measures. The inability to reliably quantify certain components of the calculation would significantly affect the usefulness and accuracy of a reconciliation.

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 first-quarter 2022 earnings.

 

     Quarter Ended March 31, 2022  
     Before-tax      After-tax      After
Noncontrolling
Interests
     Per Diluted
Share
 

Total

           

Earnings (GAAP)

   $ 1,262      $ 995      $ 989      $ 1.48  

Adjustments:

           

Asset dispositions

     (1      —          —          —    

Deferred tax asset valuation allowance

     —          6        6        0.01  

Fair value changes in financial instruments

     338        260        260        0.39  
  

 

 

    

 

 

    

 

 

    

 

 

 

Core earnings (Non-GAAP)

   $ 1,599      $ 1,261       $ 1,255       $ 1.88   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

*

The tax impact for the adjustments to core earnings in the table above are all deferred.

 

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

Total

           

Earnings (GAAP)

   $ 1,662      $ 1,512      $ 1,506      $ 2.23  

Adjustments:

           

Asset dispositions

     (49      (38      (38      (0.06

Asset and exploration impairments

     3        3        3        —    

Deferred tax asset valuation allowance

     —          (160      (160      (0.23

Change in tax legislation

     —          (2      (2      —    

Fair value changes in financial instruments

     (515      (397      (397      (0.59

Restructuring and transaction costs

     28        23        23        0.04  
  

 

 

    

 

 

    

 

 

    

 

 

 

Core earnings (Non-GAAP)

   $ 1,129      $ 941      $    935      $ 1.39  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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RETURN ON CAPITAL EMPLOYED

Devon defines return on capital employed as pre-interest core earnings divided by average capital employed. Devon believes return on capital employed provides a useful measure of how efficiently the company is using its capital to generate profits. Average capital employed is the average of the capital employed as of the beginning and ending of the relevant period, with capital employed calculated as debt plus stockholders’ equity attributable to Devon less cash and cash equivalents. The table below provides Devon’s return on capital employed for the most recent fiscal year. Because we completed our merger with WPX on January 7, 2021, we have adjusted the beginning capital employed amount to include the associated merger consideration amounts.

 

     Year Ended  
     December 31, 2021  

Earnings (GAAP)

   $ 2,813  

Non-GAAP adjustments

     (439
  

 

 

 

Core earnings (Non-GAAP)

     2,374  

Net financing costs (GAAP)

     329  

Less gain on early retirement of debt

     30  
  

 

 

 

Adjusted net financing costs (Non-GAAP)

     359  

Less tax impact (21%)

     (77
  

 

 

 

After-tax net financing costs (Non-GAAP)

     282  
  

 

 

 

Pre-interest core earnings (Non-GAAP)

   $ 2,656  
  

 

 

 

Beginning balance:

  

Devon legacy

   $ 4,298  

Assumed in merger

     3,562  
  

 

 

 

Gross debt

     7,860  

Devon legacy

     2,885  

Equity consideration in merger

     5,432  
  

 

 

 

Stockholders’ equity

     8,317  

Devon legacy

     (2,237

Acquired in merger

     (344
  

 

 

 

Less cash

     (2,581
  

 

 

 

Beginning capital employed

   $ 13,596  
  

 

 

 

Ending balance:

  

Gross debt

   $ 6,482  

Stockholders’ equity

     9,262  

Less cash

     (2,271
  

 

 

 

Ending capital employed

   $ 13,473  
  

 

 

 

Average capital employed

   $ 13,535  
  

 

 

 

ROCE

     20
  

 

 

 

EBITDAX

Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings 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.

 

     Q1 ‘22     Q4 ‘21     Q3 ‘21     Q2 ‘21     TTM     Q1 ‘21  

Net earnings (GAAP)

   $ 995     $ 1,512     $ 844     $ 261     $ 3,612     $ 216  

Financing costs, net

     85       86       86       80       337       77  

Income tax expense (benefit)

     267       150       120       43       580       (248

Exploration expenses

     2       5       3       3       13       3  

Depreciation, depletion and amortization

     489       577       578       536       2,180       467  

Asset dispositions

     (1     (49     —         (87     (137     (32

Share-based compensation

     20       19       18       20       77       20  

Derivative and financial instrument non-cash valuation changes

     339       (515     (35     336       125       296  

Restructuring and transaction costs

     —         28       18       23       69       189  

Accretion on discounted liabilities and other

     (61     (2     2       (14     (75     (29
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAX (Non-GAAP)

   $ 2,135     $ 1,811     $ 1,634     $ 1,201     $ 6,781     $ 959  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Annualized EBITDAX for first-quarter 2021 (Non-GAAP)

             $ 3,836  

 

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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.

 

     Mar. 31, 2022     Dec. 31, 2021     Sep. 30, 2021     Jun. 30, 2021     Mar. 31, 2021  

Total debt (GAAP)

   $ 6,471     $ 6,482     $ 6,492     $ 6,502     $ 7,268  

Less:

          

Cash, cash equivalents and restricted cash

     (2,625     (2,271     (2,321     (1,539     (1,878
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net debt (Non-GAAP)

   $ 3,846     $ 4,211     $ 4,171     $ 4,963     $ 5,390  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET DEBT-TO-EBITDAX

Devon defines net debt-to-EBITDAX as net debt divided by an annualized EBITDAX measure. Devon believes this ratio provides information useful to investors in assessing the company’s credit position and debt leverage.    

 

     March 31, 2022      December 31, 2021      March 31, 2021  

Net debt (Non-GAAP)

   $ 3,846      $ 4,211      $ 5,390  

EBITDAX (Non-GAAP) (1)

   $ 6,781      $ 5,605      $ 3,836  
  

 

 

    

 

 

    

 

 

 

Net debt-to-EBITDAX (Non-GAAP)

     0.6        0.8        1.4  
  

 

 

    

 

 

    

 

 

 

 

(1)

The first quarter 2022 EBITDAX is an annualized measure using a trailing twelve month calculation. The first quarter 2021 EBITDAX is an annualized measure. See the EBITDAX table on the previous page for details. 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.

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
Mar. 31, 2022
    Quarter Ended
Dec. 31, 2021
    Quarter Ended
Sep. 30, 2021
    Quarter Ended
Jun. 30, 2021
    Quarter Ended
Mar. 31, 2021
 

Total operating cash flow (GAAP)

   $ 1,837     $ 1,616     $ 1,598     $ 1,093     $ 592  

Less capital expenditures:

          

Capital expenditures

     (537     (512     (474     (504     (499
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow (Non-GAAP)

     1,300       1,104       1,124       589       93  

Cash restructuring and transaction costs (Non-GAAP)

     —         28       14       23       167  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted free cash flow (Non-GAAP)

   $ 1,300     $ 1,132     $ 1,138     $ 612     $ 260  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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
March 31, 2022
    Quarter Ended
December 31, 2021
 

Capital expenditures (accrued)

   $ 564     $ 521  

Operating cash flow

   $ 1,837     $ 1,616  
  

 

 

   

 

 

 

Reinvestment rate (Non-GAAP)

     31     32
  

 

 

   

 

 

 

VARIABLE DIVIDEND

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, 2022
 

Operating cash flow (GAAP)

   $ 1,837  

Changes in assets and liabilities, net

     143  
  

 

 

 

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

     1,980  

Ukraine charitable pledge

     20  
  

 

 

 

Adjusted cash flow (Non-GAAP)

     2,000  

Capital expenditures (Accrued)

     (564
  

 

 

 

Adjusted free cash flow (Non-GAAP)

     1,436  

Fixed quarterly dividend ($0.16/share)

     (109
  

 

 

 

Excess free cash flow (Non-GAAP)

     1,327  

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

     50
  

 

 

 

~50% of excess free cash flow

     663  

Contingent proceeds (Barnett and Wind River)

     69  
  

 

 

 

Total variable dividend

   $ 732  
  

 

 

 

 

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SECOND-QUARTER AND FULL-YEAR 2022 GUIDANCE

 

PRODUCTION GUIDANCE

 

     Quarter 2     Full Year  
         Low             High             Low             High      

Oil (MBbls/d)

     289          296          285          295     

Natural gas liquids (MBbls/d)

     146       151       138       148  

Gas (MMcf/d)

       900       940       880       940  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total oil equivalent (MBoe/d)

       585         604         570            600  
  

 

 

   

 

 

   

 

 

   

 

 

 

CAPITAL EXPENDITURES GUIDANCE

 

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

Upstream capital

   $ 520        $ 560        $ 1,900        $ 2,200     

Environmental capital

     20       30       80       120  

Midstream & other capital

     30       50       80       120  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total capital

   $ 570     $ 640     $ 2,060     $ 2,440  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     75     85     80     90

OTHER GUIDANCE ITEMS

 

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

Marketing & midstream operating profit

   $ (10   $ —       $ (25   $ (15

LOE & GP&T per BOE

   $ 7.30     $ 7.60     $ 7.25     $ 7.75  

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     $ 2,050     $ 2,150  

General & administrative expenses

   $ 80     $ 85     $ 330     $ 350  

Net financing costs, net

   $ 80     $ 90     $ 335     $ 345  

Other expenses

   $ —       $ 10     $ (50   $ (30

INCOME TAX GUIDANCE

 

(% of pre-tax earnings)    Quarter 2     Full Year  

Current income tax rate(1)

     9     9

Deferred income tax rate

     13     13
  

 

 

   

 

 

 

Total income tax rate

     22     22
  

 

 

   

 

 

 

 

  (1)

Assumes $95 WTI and $6 Henry Hub pricing for full-year 2022.

 

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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  

2022 & 2023 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 2022

     35,800      $ 44.29        40,000      $ 51.13      $ 68.86  

Q3 2022

     35,000      $ 44.61        42,500      $ 56.11      $ 73.82  

Q4 2022

     35,000      $ 44.61        30,500      $ 60.53      $ 84.02  

Q1-Q4 2023

     —        $ —          6,200      $ 61.32      $ 97.65  

Oil Basis Swaps

 

Period

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

Q2-Q4 2022

   BRENT/WTI Spread      1,000      $ (7.75

Q2-Q4 2022

   NYMEX Roll      29,000      $ 0.45  

Q1-Q4 2023

   Midland Sweet      3,000      $ 0.73  

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 2022

     110,000      $ 2.79        253,000      $ 2.92      $ 4.10  

Q3 2022

     110,000      $ 2.79        221,000      $ 2.98      $ 4.35  

Q4 2022

     120,000      $ 3.15        165,000      $ 3.16      $ 4.82  

Q1-Q4 2023

     7,425      $ 4.81        63,901      $ 3.43      $ 5.86  

Natural Gas Basis Swaps

 

Period

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

Q2-Q4 2022

   WAHA      70,000      $ (0.57

Q2-Q4 2022

   El Paso Permian      40,000      $ (0.82

Q2-Q4 2022

   Houston Ship Channel      18,909      $ (0.16

Q1-Q4 2023

   WAHA      70,000      $ (0.51

Q1-Q4 2023

   El Paso Permian      85,000      $ (1.47

Q1-Q4 2023

   Houston Ship Channel      30,000      $ (0.15

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 end of the month Henry Hub index. Commodity hedge positions are shown as of April 28, 2022.

 

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