UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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| 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 |
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
|
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
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 | |||
1
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 | |||||||||||||||
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| Total revenues |
3,812 | 4,273 | 3,466 | 2,417 | 2,050 | |||||||||||||||
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| 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 | ) | |||||||||||
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| Total expenses |
2,550 | 2,611 | 2,502 | 2,113 | 2,082 | |||||||||||||||
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| Earnings (loss) before income taxes |
1,262 | 1,662 | 964 | 304 | (32 | ) | ||||||||||||||
| Income tax expense (benefit) (4) |
267 | 150 | 120 | 43 | (248 | ) | ||||||||||||||
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| Net earnings |
995 | 1,512 | 844 | 261 | 216 | |||||||||||||||
| Net earnings attributable to noncontrolling interests |
6 | 6 | 6 | 5 | 3 | |||||||||||||||
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| Net earnings attributable to Devon |
$ | 989 | $ | 1,506 | $ | 838 | $ | 256 | $ | 213 | ||||||||||
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| Net earnings per share: |
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| 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: |
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| Basic |
663 | 671 | 677 | 677 | 654 | |||||||||||||||
| Diluted |
665 | 673 | 679 | 679 | 656 | |||||||||||||||
2
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 | ) | ||||||||||||
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| Oil, gas and NGL derivatives |
$ | (683 | ) | $ | 22 | $ | (335 | ) | $ | (703 | ) | $ | (528 | ) | ||||||
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(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 | |||||||||||||||
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| Production expenses |
$ | 618 | $ | 605 | $ | 555 | $ | 513 | $ | 458 | ||||||||||
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(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 | ) | ||||||||||
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| Financing costs, net |
$ | 85 | $ | 86 | $ | 86 | $ | 80 | $ | 77 | ||||||||||
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(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 | ) | ||||||||||||||
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| Income tax expense (benefit) |
$ | 267 | $ | 150 | $ | 120 | $ | 43 | $ | (248 | ) | |||||||||
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3
CONSOLIDATED STATEMENTS OF CASH FLOWS
| (in millions) | 2022 | 2021 | ||||||||||||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||||||||||||
| Cash flows from operating activities: |
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| 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 | ) | ||||||||||||
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| Net cash from operating activities |
1,837 | 1,616 | 1,598 | 1,093 | 592 | |||||||||||||||
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| Cash flows from investing activities: |
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| 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 | ) | — | — | — | |||||||||||||
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| Net cash from investing activities |
(526 | ) | (518 | ) | (474 | ) | (452 | ) | (130 | ) | ||||||||||
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| Cash flows from financing activities: |
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| 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 | ) | |||||||||||
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| Net cash from financing activities |
(959 | ) | (1,149 | ) | (337 | ) | (982 | ) | (824 | ) | ||||||||||
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| Effect of exchange rate changes on cash |
2 | 1 | (5 | ) | 2 | 3 | ||||||||||||||
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| 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 | |||||||||||||||
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| Cash, cash equivalents and restricted cash at end of period |
$ | 2,625 | $ | 2,271 | $ | 2,321 | $ | 1,539 | $ | 1,878 | ||||||||||
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| 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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
4
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
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
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
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
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 | ||||||||||
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| 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 | ) | ||||||||||
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| Field-level cash margin |
$ | 61.96 | $ | 55.14 | $ | 49.53 | $ | 42.85 | $ | 28.21 | ||||||||||
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| 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 | ) | ||||||||||
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| Field-level cash margin |
$ | 49.45 | $ | 42.37 | $ | 37.17 | $ | 31.79 | $ | 28.95 | ||||||||||
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9
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 | ||||||||||||
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| Core earnings (Non-GAAP) |
$ | 1,599 | $ | 1,261 | $ | 1,255 | $ | 1.88 | ||||||||
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| * | 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 | ||||||||||||
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| Core earnings (Non-GAAP) |
$ | 1,129 | $ | 941 | $ | 935 | $ | 1.39 | ||||||||
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10
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 | ) | ||
|
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|
|||
| Core earnings (Non-GAAP) |
2,374 | |||
| Net financing costs (GAAP) |
329 | |||
| Less gain on early retirement of debt |
30 | |||
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|
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| Adjusted net financing costs (Non-GAAP) |
359 | |||
| Less tax impact (21%) |
(77 | ) | ||
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| After-tax net financing costs (Non-GAAP) |
282 | |||
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| Pre-interest core earnings (Non-GAAP) |
$ | 2,656 | ||
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| Beginning balance: |
||||
| Devon legacy |
$ | 4,298 | ||
| Assumed in merger |
3,562 | |||
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|
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| Gross debt |
7,860 | |||
| Devon legacy |
2,885 | |||
| Equity consideration in merger |
5,432 | |||
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| Stockholders’ equity |
8,317 | |||
| Devon legacy |
(2,237 | ) | ||
| Acquired in merger |
(344 | ) | ||
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| Less cash |
(2,581 | ) | ||
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| Beginning capital employed |
$ | 13,596 | ||
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| Ending balance: |
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| Gross debt |
$ | 6,482 | ||
| Stockholders’ equity |
9,262 | |||
| Less cash |
(2,271 | ) | ||
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| Ending capital employed |
$ | 13,473 | ||
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| Average capital employed |
$ | 13,535 | ||
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| ROCE |
20 | % | ||
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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 | ) | |||||||||||||
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| EBITDAX (Non-GAAP) |
$ | 2,135 | $ | 1,811 | $ | 1,634 | $ | 1,201 | $ | 6,781 | $ | 959 | ||||||||||||
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| Annualized EBITDAX for first-quarter 2021 (Non-GAAP) |
$ | 3,836 | ||||||||||||||||||||||
11
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 | ) | ||||||||||
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| Net debt (Non-GAAP) |
$ | 3,846 | $ | 4,211 | $ | 4,171 | $ | 4,963 | $ | 5,390 | ||||||||||
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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 | ||||||
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| Net debt-to-EBITDAX (Non-GAAP) |
0.6 | 0.8 | 1.4 | |||||||||
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| (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 | ) | ||||||||||
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| Free cash flow (Non-GAAP) |
1,300 | 1,104 | 1,124 | 589 | 93 | |||||||||||||||
| Cash restructuring and transaction costs (Non-GAAP) |
— | 28 | 14 | 23 | 167 | |||||||||||||||
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| Adjusted free cash flow (Non-GAAP) |
$ | 1,300 | $ | 1,132 | $ | 1,138 | $ | 612 | $ | 260 | ||||||||||
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12
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 | ||||
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|
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| Reinvestment rate (Non-GAAP) |
31 | % | 32 | % | ||||
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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 | |||
|
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|
|||
| 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 | ) | ||
|
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|
|||
| Adjusted free cash flow (Non-GAAP) |
1,436 | |||
| Fixed quarterly dividend ($0.16/share) |
(109 | ) | ||
|
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|
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| Excess free cash flow (Non-GAAP) |
1,327 | |||
| ~50% Pay out (Board Discretion: Up to 50%) |
50 | % | ||
|
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|
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| ~50% of excess free cash flow |
663 | |||
| Contingent proceeds (Barnett and Wind River) |
69 | |||
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| Total variable dividend |
$ | 732 | ||
|
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13
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 | ||||||||||||
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| Total oil equivalent (MBoe/d) |
585 | 604 | 570 | 600 | ||||||||||||
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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 | ||||||||||||
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|
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| Total capital |
$ | 570 | $ | 640 | $ | 2,060 | $ | 2,440 | ||||||||
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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 | % | ||||
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| Total income tax rate |
22 | % | 22 | % | ||||
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| (1) | Assumes $95 WTI and $6 Henry Hub pricing for full-year 2022. |
14
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.
15
