February 16, 2016 - 4:15 PM EST
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Devon Energy Reports Fourth-Quarter and Full-Year 2015 Results; Provides 2016 Capital and Production Outlook

  • Delivered oil production growth of 26 percent from year-ago quarter
  • Reduced field-level costs by nearly $400 million in 2015
  • Maintained significant financial flexibility with nearly $4 billion of liquidity
  • Decreased 2016 E&P capital spending outlook by 75 percent
  • Reduced operating and G&A expense outlook by $800 million annually
  • Adjusted quarterly dividend to improve cash flow by $320 million annually

Devon Energy Corp. (NYSE: DVN) today announced core earnings of $319 million, or $0.77 per diluted share, for the fourth quarter of 2015. On a reported basis, due to non-cash, asset-impairment charges, the Company had a net loss of $4.5 billion, or $11.12 per diluted share, for the fourth quarter of 2015.

Devon’s operating cash flow totaled $1.1 billion in the quarter, a 12 percent increase compared to the fourth quarter of 2014. For the full-year 2015, operating cash flows reached $5.4 billion. Combined with the $761 million of cash received from the sale of EnLink units and asset divestitures, Devon’s total cash inflows reached $6.1 billion for 2015.

“With the challenging industry conditions, Devon continues to be highly focused on delivering meaningful cost reductions and efficiency gains across our asset portfolio,” said Dave Hager, president and CEO. “These efforts drove down field-level operating costs nearly $400 million in 2015. Additionally, our drilling programs consistently generated top-tier industry results that exceeded type-curve expectations through higher production rates and rapidly declining capital costs.”

“Last year was also pivotal for Devon’s portfolio as we continued to sharpen our focus on the very best resource plays in North America,” said Hager. “In December, we announced material additions to our STACK and Powder River Basin positions, two of the best emerging plays in the U.S., and we announced our intent to divest of $2 billion to $3 billion of non-core E&P properties, as well as our 50 percent interest in the Access pipeline. These strategic actions will further strengthen our financial position and provide Devon with a resource-rich asset base able to generate differentiating value for many years.”

“Devon’s top priority in 2016 is to protect the balance sheet,” said Hager. “We are tailoring activity to current market conditions and are prepared to adjust capital plans throughout the year to ensure we balance capital investment with cash inflows. Additionally, we anticipate further enhancing our financial strength by utilizing upstream asset divestiture proceeds to reduce debt, have plans in place to reduce our operating and G&A costs by around $800 million annually, have significant flexibility around our capital program, and we are reducing our dividend by 75 percent. All these efforts are targeted at strengthening Devon’s financial position to take advantage of our top-tier assets when prices recover.”

Quarterly Dividend Adjusted

Devon today announced that its board of directors declared a quarterly cash dividend of $0.06 per share on the Company’s common stock for the second quarter of 2016. This compares to the previous quarterly dividend of $0.24 per share. The adjusted dividend is payable on June 30, 2016, to stockholders of record at the close of business on June 15, 2016.

“We believe the decision to adjust the quarterly dividend is prudent given the current commodity price environment and the uncertain duration of this downturn,” commented Hager. “This action provides us additional flexibility to balance spending with cash flow, aligns with our priority of maintaining a strong balance sheet, and moves the dividend yield and payout ratios in line with historic norms. The adjusted dividend will improve Devon’s cash flow by approximately $320 million annually.”

Significant Financial Flexibility

Devon maintained its strong balance sheet and liquidity position during the fourth quarter. Pro forma for the closing of the Felix acquisition, which closed in early January, the Company had $3.9 billion of liquidity at year end, consisting of $1.5 billion of cash and $2.4 billion of capacity on its senior credit facility.

Devon exited 2015 with net debt, excluding non-recourse EnLink obligations, totaling $7.7 billion. The Company has managed its debt-maturity schedule to provide maximum flexibility with near-term liquidity and has no significant debt maturities until December 2018. The weighted-average cost of Devon’s outstanding debt is only 5 percent.

Core Assets Deliver Strong Production Results

Devon’s reported oil production averaged 278,000 barrels per day in the fourth quarter, a 16 percent increase compared to the fourth quarter of 2014. Of this amount, 247,000 barrels per day were from the Company’s core asset portfolio where investment will be focused going forward. Oil production from these core assets increased 26 percent year over year, driven by Delaware Basin and Rockies growth in the U.S. and the Jackfish 3 project in Canada.

Overall, net production from Devon’s core assets averaged 571,000 oil-equivalent barrels (Boe) per day during the fourth quarter, representing a 7 percent increase compared to the fourth quarter of 2014. With the strong growth in higher-margin production, oil is now the largest component of Devon’s product mix at 43 percent of total production.

Operations Report Highlights

For additional details on Devon’s E&P operations, please refer to the Company’s fourth-quarter 2015 operations report at www.devonenergy.com. Highlights from the report include:

  • Delaware Basin delivered strong production growth
  • Bone Spring drilling efficiencies drove lower well costs
  • STACK play generated record-setting well results
  • Meramec type curves continued to improve
  • Eagle Ford cost savings enhanced returns
  • Jackfish LOE declined nearly 60 percent from peak rates

Revenues Enhanced by Hedges and EnLink Profits

Revenue from oil, natural gas and natural gas liquids sales totaled $1.1 billion in the fourth quarter of 2015, with oil revenue accounting for nearly 70 percent of the total. Cash settlements related to oil and natural gas hedges increased revenue by more than $700 million, or approximately $12 per Boe, in the fourth quarter.

Devon’s midstream business generated operating profits of $210 million in the fourth quarter, bringing the full-year 2015 total to $840 million. The majority of this profitability was attributable to the Company’s investment in EnLink Midstream. For the full-year 2015, EnLink-related operating profits expanded by 8 percent compared to 2014.

Field-Level Costs Decline Nearly $400 Million; Further Savings Expected in 2016

Field-level operating costs, which include both lease operating expenses (LOE) and production taxes, declined 20 percent compared to the fourth quarter of 2014 to $8.82 per Boe. For the full-year 2015, field-level operating costs were nearly $400 million lower compared to 2014.

The most significant operating cost savings came from LOE, which is Devon’s largest field-level cost. LOE declined to $479 million, or $7.66 per Boe in the fourth quarter. This represents a per-unit decrease of 18 percent compared to the fourth quarter of 2014.

Devon will continue to drive field-level operating costs lower across all regions of its portfolio in 2016. Led by additional LOE savings, the Company expects field-level costs to decline an incremental $300 million to $400 million for the full-year 2016.

Additional G&A Cost Reduction Initiatives Underway

Devon also realized significant general and administrative (G&A) cost savings in the fourth quarter. G&A expenses totaled $194 million, or $3.10 per Boe. This result represents a 25 percent decline in G&A year over year, saving nearly $60 million during the fourth quarter. This decrease was driven by lower employee-related costs.

The Company will continue to deliver meaningful G&A reductions in 2016 by reducing its cost structure to meet the needs of the business in the current commodity price environment.

Devon’s workforce reduction program, which includes G&A as well as operating personnel, will decrease Devon’s employee count by approximately 20 percent in the first quarter of 2016, bringing the total workforce reduction to more than 25 percent over the past 12 months. These workforce and non-personnel related cost reductions are expected to decrease G&A costs by approximately $400 million to $500 million on an annual basis, exclusive of reorganization charges, and are designed to maintain capacity to respond appropriately to increased activity levels when the commodity price environment improves.

Reorganization charges are expected to approximate $225 million to $275 million, with the majority projected to be incurred in the first quarter of 2016. Roughly one-quarter of the estimated restructuring charges are non-cash.

Reserve Base Shifting Toward Higher-Margin Liquids

Devon’s estimated proved reserves of oil, natural gas, and natural gas liquids were 2.2 billion Boe at Dec. 31, 2015, with proved developed reserves accounting for 83 percent of the total. Of this total, 1.9 billion Boe was attributable to Devon’s core asset portfolio, with oil and liquids increasing to 55 percent of the total.

During the year, the Company’s drilling programs added 118 million Boe of reserves through drilling (extensions and discoveries). About 90 percent of these additions resulted from oil-focused drilling in the U.S., led by successful drilling in the Delaware Basin and STACK.

Revisions reduced reserves by 444 million Boe. These adjustments were primarily driven by price revisions due to the lower commodity price environment. The Company’s risked recoverable resource was unaffected by these adjustments.

Acquisitions Closed and Divestiture Programs Advance

In December, Devon announced the acquisition of 80,000 net acres in the Anadarko Basin STACK play through its purchase of privately held Felix Energy. The Company also agreed to acquire 253,000 net acres in the Powder River Basin. Both acquisitions are now complete, with the Powder River transaction closing on Dec. 17, 2015, and the STACK transaction closing on Jan. 7, 2016.

To further enhance the Company’s financial strength, Devon is monetizing midstream and select upstream assets with a target of $2 billion to $3 billion in divestiture proceeds in 2016.

The Company is negotiating a sale for its 50 percent interest in the Access Pipeline which services Devon’s thermal heavy oil operations in Canada. The Company expects to announce a sale of the pipeline in the first half of 2016.

Devon’s upstream divestitures will include up to 80,000 Boe per day of production from properties in the Midland Basin, East Texas and Mid-Continent region. Key assets within these regions include: 15,000 net undeveloped acres in Martin County, Texas, the southern Midland Wolfcamp, Carthage, Granite Wash and the Mississippi-Lime.

2016 Capital and Production Outlook

Detailed forward-looking guidance for the first quarter and full-year of 2016 is provided later in this release. With current industry conditions, Devon’s top priority is to protect its balance sheet and manage its capital program to be within cash flows.

In 2016, Devon’s E&P capital investment is estimated to range from $900 million to $1.1 billion, a decrease of 75 percent from 2015. Capitalized G&A and other non-E&P capital requirements are projected at approximately $300 million. Importantly, should commodity price volatility continue, the Company’s capital programs have significant flexibility because of minimal exposure to long-term service contracts, no long-cycle project commitments and negligible leasehold expiration issues.

Devon’s E&P investment in 2016 will be focused entirely on its core asset portfolio. This level of investment is expected to maintain relatively flat oil production from the Company’s core assets compared to the full-year 2015. Top-line production from core assets is expected to decline by 6 percent driven by lower gas volumes.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Core earnings and net debt are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided later in this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post an operations report to its website at www.devonenergy.com. The Company’s fourth-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Feb. 17, 2016, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words “expects,” “believes,” “will,” “would,” “could,” “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 the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices, including the currently depressed commodity price environment; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential and exploration target size. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The Company is the second-largest oil producer among North American onshore independents. For more information, please visit www.devonenergy.com.

                       
 
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
 
Quarter Ended Year Ended
PRODUCTION NET OF ROYALTIES December 31, December 31,
2015 2014 2015 2014
 
Oil and bitumen (MBbls/d)

U.S. - Core

126 103 127 83
Canada - Core 121 93 111 82
Core assets 247 196 238 165
Other 31 43 37 49
Total 278 239 275 214
Natural gas liquids (MBbls/d)

U.S. - Core

108 106 104 97
Other 31 35 32 42
Total 139 141 136 139
Gas (MMcf/d)

U.S. - Core

1,274 1,376 1,284 1,344
Canada - Core 24 23 22 23
Core assets 1,298 1,399 1,306 1,367
Other 285 311 304 553
Total 1,583 1,710 1,610 1,920
Oil equivalent (MBoe/d)

U.S. - Core

445 438 445 403
Canada - Core 126 97 115 86
Core assets 571 535 560 489
Other 110 130 120 184
Total 681 665 680 673

 

                 
KEY OPERATING STATISTICS BY REGION
Quarter Ended December 31, 2015
Avg. Production Gross Wells Operated Rigs at
(MBoe/d) Drilled December 31, 2015
Delaware Basin 66 40 5
STACK 70 58 5
Eagle Ford 111 59 -
Rockies 23 17 -
Heavy Oil 126 37 -
Barnett Shale 175 5 -
Core assets 571 216 10
Other 110 33 -
Total 681 249 10
 
 
Year Ended December 31, 2015
Avg. Production Gross Wells
(MBoe/d) Drilled
Delaware Basin 61 167
STACK 64 130
Eagle Ford 115 275
Rockies 23 65
Heavy Oil 115 79
Barnett Shale 182 5
Core assets 560 721
Other 120 129
Total 680 850

 

                             
PRODUCTION TREND 2014       2015
Quarter 4       Quarter 1       Quarter 2       Quarter 3       Quarter 4
 
Oil and bitumen (MBbls/d)
Delaware Basin 27 33 41 41 42
STACK 5 6 6 6 7
Eagle Ford 60 75 67 62 60
Rockies 9 12 16 16 16
Heavy Oil 93 104 98 121 121
Barnett Shale 2       1       1       1       1
Core assets 196 231 229 247 247
Other 43       41       41       35       31
Total 239       272       270       282       278
Natural gas liquids (MBbls/d)
Delaware Basin 8 8 10 8 11
STACK 26 22 16 22 23
Eagle Ford 18 23 24 26 27
Rockies 1 1 1 2 1
Barnett Shale 53       51       49       44       46
Core assets 106 105 100 102 108
Other 35       34       34       32       31
Total 141       139       134       134       139
Gas (MMcf/d)
Delaware Basin 66 66 75 70 82
STACK 262 230 221 216 235
Eagle Ford 127 143 146 154 151
Rockies 43 38 41 41 38
Heavy Oil 23 28 20 16 24
Barnett Shale 878       827       805       788       768
Core assets 1,399 1,332 1,308 1,285 1,298
Other 311       313       319       301       285
Total 1,710       1,645       1,627       1,586       1,583
Oil equivalent (MBoe/d)
Delaware Basin 46 52 64 61 66
STACK 76 65 59 64 70
Eagle Ford 99 122 114 113 111
Rockies 16 19 24 25 23
Heavy Oil 97 109 101 124 126
Barnett Shale 201       191       185       176       175
Core assets 535 558 547 563 571
Other 130       127       127       117       110
Total 665       685       674       680       681

 

                       
BENCHMARK PRICES
(average prices) Quarter 4 December YTD
2015 2014 2015 2014
Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 42.15 $ 73.05 $ 48.87 $ 93.01
Natural Gas ($/Mcf) - Henry Hub $ 2.27 $ 4.04 $ 2.67 $ 4.43
 
REALIZED PRICES Quarter Ended December 31, 2015
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 38.04 $ 8.80 $ 1.76 $ 17.90
Canada (1) $ 18.03

$

N/M

$ 0.84   $ 17.62
Realized price without hedges $ 29.31 $ 8.81 $ 1.75 $ 17.85
Cash settlements $ 24.36 $ - $ 0.70   $ 11.59
Realized price, including cash settlements $ 53.67 $ 8.81 $ 2.45   $ 29.44
 
Quarter Ended December 31, 2014
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 68.19 $ 17.79 $ 3.53 $ 32.45
Canada (1) $ 45.71 $ 54.32 $ 0.87   $ 44.01
Realized price without hedges $ 59.46 $ 17.75 $ 3.49 $ 34.14
Cash settlements $ 10.34 $ 0.04 $ 0.20   $ 4.23
Realized price, including cash settlements $ 69.80 $ 17.79 $ 3.69   $ 38.37
 
Year Ended December 31, 2015
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 44.01 $ 9.32 $ 2.17 $ 21.12
Canada (1) $ 25.14

$

N/M

$ 0.67   $ 24.46
Realized price without hedges $ 36.39 $ 9.32 $ 2.14 $ 21.68
Cash settlements $ 20.72 $ - $ 0.57   $ 9.74
Realized price, including cash settlements $ 57.11 $ 9.32 $ 2.71   $ 31.42
 
Year Ended December 31, 2014
Oil /Bitumen NGL Gas Total
(Per Bbl) (Per Bbl) (Per Mcf) (Per Boe)
United States $ 85.64 $ 24.46 $ 3.92 $ 37.96

Canada (1)

$ 60.05 $ 50.52 $ 3.64   $ 53.11
Realized price without hedges $ 75.55 $ 24.89 $ 3.90 $ 40.33
Cash settlements $ 1.16 $ 0.02 $ (0.05 ) $ 0.22
Realized price, including cash settlements $ 76.71 $ 24.91 $ 3.85   $ 40.55

(1) The reported Canadian gas volumes include volumes that are produced from certain of our leases and then transported to our Jackfish operations where the gas is used as fuel. However, the revenues and expenses related to this consumed gas are eliminated in our consolidated financials.

 

                       
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts) Quarter Ended Year Ended
December 31,   December 31,
2015 2014 2015 2014
Oil, gas and NGL sales $ 1,118 $ 2,086 $ 5,382 $ 9,910
Oil, gas and NGL derivatives 77 1,960 503 1,989
Marketing and midstream revenues   1,691     1,949     7,260     7,667  
Total operating revenues   2,886     5,995     13,145     19,566  
Lease operating expenses 479 568 2,104 2,332
Marketing and midstream operating expenses 1,481 1,723 6,420 6,815
General and administrative expenses 194 252 855 847
Production and property taxes 73 108 388 535
Depreciation, depletion and amortization 641 910 3,129 3,319
Asset impairments 5,341 1,953 20,820 1,953
Restructuring costs 78 2 78 46
Gains and losses on asset sales (2 ) - - (1,072 )
Other operating items   26     19     78     93  
Total operating expenses   8,311     5,535     33,872     14,868  
Operating income (loss) (5,425 ) 460 (20,727 ) 4,698
Net financing costs 139 167 517 526
Other nonoperating items   (22 )   2     24     113  
Earnings (loss) before income taxes (5,542 ) 291 (21,268 ) 4,059
Income tax expense (benefit)   (630 )   670     (6,065 )   2,368  
Net earnings (loss) (4,912 ) (379 ) (15,203 ) 1,691
Net earnings (loss) attributable to noncontrolling interests   (380 )   29     (749 )   84  
Net earnings (loss) attributable to Devon $ (4,532 ) $ (408 ) $ (14,454 ) $ 1,607  
 
Net earnings (loss) per share attributable to Devon:
Basic $ (11.12 ) $ (1.01 ) $ (35.55 ) $ 3.93
Diluted $ (11.12 ) $ (1.01 ) $ (35.55 ) $ 3.91
 
Weighted average common shares outstanding:
Basic 413 409 412 409
Diluted 413 409 412 411

 

                       
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Quarter Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Cash flows from operating activities:
Net earnings (loss) $ (4,912 ) $ (379 ) $ (15,203 ) $ 1,691
Adjustments to reconcile net earnings (loss)
to net cash from operating activities:
Depreciation, depletion and amortization 641 910 3,129 3,319
Asset impairments 5,341 1,953 20,820 1,953
Gains and losses on asset sales (2 ) - - (1,072 )
Deferred income tax expense (benefit) (480 ) 1,091 (5,828 ) 1,891
Derivatives and other financial instruments (132 ) (2,027 ) (738 ) (2,070 )
Cash settlements on derivatives and financial instruments 775 305 2,688 104
Other noncash charges 102 100 537 457
Net change in working capital (394 ) (716 ) (301 ) 50
Change in long-term other assets 74 (306 ) 285 (421 )
Change in long-term other liabilities   68     32     (6 )   79  
Net cash from operating activities   1,081     963     5,383     5,981  
 
Cash flows from investing activities:
Capital expenditures (1,079 ) (1,975 ) (5,308 ) (6,988 )
Acquisitions of property, equipment and businesses (577 ) (207 ) (1,107 ) (6,462 )
Divestitures of property and equipment 72 (82 ) 107 5,120
Redemptions of long-term investments - - - 57
Other   (8 )   2     (16 )   89  
Net cash from investing activities   (1,592 )   (2,262 )   (6,324 )   (8,184 )
 
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs 1,444 1,182 4,772 5,340
Repayments of long-term debt (861 ) (2,924 ) (2,634 ) (7,189 )
Net short-term debt borrowings (repayments) 625 933 (307 ) (385 )
Stock option exercises - 1 4 93
Sale of subsidiary units - - 654 -
Issuance of subsidiary units 12 338 25 410
Dividends paid on common stock (100 ) (99 ) (396 ) (386 )
Distributions to noncontrolling interests (68 ) (48 ) (254 ) (235 )
Other   (6 )   2     (16 )   (2 )
Net cash from financing activities   1,046     (615 )   1,848     (2,354 )
Effect of exchange rate changes on cash   (12 )   (14 )   (77 )   (29 )
Net change in cash and cash equivalents 523 (1,928 ) 830 (4,586 )
 
Cash and cash equivalents at beginning of period   1,787     3,408     1,480     6,066  
 
Cash and cash equivalents at end of period $ 2,310   $ 1,480   $ 2,310   $ 1,480  

 

           
CONSOLIDATED BALANCE SHEETS
(in millions)
December 31, December 31,
Current assets: 2015 2014
Cash and cash equivalents $ 2,310 $ 1,480
Accounts receivable 1,105 1,959
Derivatives, at fair value 43 1,993
Income taxes receivable 147 522
Other current assets   421     544  
Total current assets   4,026     6,498  
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization 78,190 75,738
Not subject to amortization   2,584     2,752  
Total oil and gas 80,774 78,490
Midstream and other   10,380     9,695  
Total property and equipment, at cost 91,154 88,185
Less accumulated depreciation, depletion and amortization   (72,086 )   (51,889 )
Property and equipment, net   19,068     36,296  
Goodwill 5,032 6,303
Other long-term assets   1,406     1,540  
Total assets $ 29,532   $ 50,637  
 
Current liabilities:
Accounts payable $ 906 $ 1,400
Revenues and royalties payable 763 1,193
Short-term debt 976 1,432
Deferred income taxes - 730
Other current liabilities   650     1,180  
Total current liabilities   3,295     5,935  
Long-term debt 12,137 9,830
Asset retirement obligations 1,370 1,339
Other long-term liabilities 853 948
Deferred income taxes 888 6,244
Stockholders' equity:
Common stock 42 41
Additional paid-in capital 4,996 4,088
Retained earnings 1,781 16,631
Accumulated other comprehensive earnings   230     779  
Total stockholders' equity attributable to Devon 7,049 21,539
Noncontrolling interests   3,940     4,802  
Total stockholders' equity   10,989     26,341  
Total liabilities and stockholders' equity $ 29,532   $ 50,637  
Common shares outstanding 418 409

 

                       
CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)
Quarter Ended December 31, 2015

Devon U.S.
& Canada

EnLink Eliminations Total
Oil, gas and NGL sales $ 1,118 $ - $ - $ 1,118
Oil, gas and NGL derivatives 77 - - 77
Marketing and midstream revenues   805     1,066     (180 )   1,691  
Total operating revenues   2,000     1,066     (180 )   2,886  
Lease operating expenses 479 - - 479
Marketing and midstream operating expenses 805 856 (180 ) 1,481
General and administrative expenses 162 32 - 194
Production and property taxes 63 10 - 73
Depreciation, depletion and amortization 543 98 - 641
Asset impairments 4,577 764 - 5,341
Restructuring costs 78 - - 78
Gains and losses on asset sales - (2 ) - (2 )
Other operating items   26     -     -     26  
Total operating expenses   6,733     1,758     (180 )   8,311  
Operating loss (4,733 ) (692 ) - (5,425 )
Net financing costs 108 31 - 139
Other nonoperating items   (16 )   (6 )   -     (22 )
Loss before income taxes (4,825 ) (717 ) - (5,542 )
Income tax expense (benefit)   (632 )   2     -     (630 )
Net loss (4,193 ) (719 ) - (4,912 )
Net loss attributable to noncontrolling interests   -     (380 )   -     (380 )
Net loss attributable to Devon $ (4,193 ) $ (339 ) $ -   $ (4,532 )
 
 

OTHER KEY STATISTICS

(in millions) Quarter Ended December 31, 2015

Devon U.S.
& Canada

EnLink Eliminations Total
Cash flow statement related items:
Operating cash flow $ 946 $ 135 $ - $ 1,081
Capital expenditures $ (956 ) $ (123 ) $ - $ (1,079 )
Acquisitions of property, equipment and businesses $ (384 ) $ (193 ) $ - $ (577 )
EnLink distributions received (paid) (1) $ 62 $ (130 ) $ - $ (68 )
 
Balance sheet statement items:
Net debt(2) $ 7,731 $ 3,072 $ - $ 10,803

(1) Includes $(4) million adjustment for the sale of the Victoria Express Pipeline.
(2) Net debt is a non-GAAP measure. For a reconciliation of the comparable GAAP measure, see "Non-GAAP Financial Measures" later in this release.

 

           
CAPITAL EXPENDITURES
(in millions)
Quarter Ended December 31, 2015 Year Ended December 31, 2015
Exploration and development capital $ 856 $ 3,899
Capitalized G&A and interest 99 426
Acquisitions 590 789
Midstream (1) 2 50
Corporate and other   25   91
Devon capital expenditures $ 1,572 $ 5,255

(1) Excludes $201 million and $978 million attributable to EnLink for the fourth quarter and year end of 2015, respectively.

 

           
COSTS INCURRED Total
(in millions) Year Ended December 31,
2015 2014
Property acquisition costs:
Proved properties $ 195 $ 5,210
Unproved properties 717 1,177
Exploration costs 587 322
Development costs   3,671   5,463
Costs Incurred $ 5,170 $ 12,172
 
 
United States
Year Ended December 31,
2015 2014
Property acquisition costs:
Proved properties $ 193 $ 5,210
Unproved properties 634 1,176
Exploration costs 478 270
Development costs   3,269   4,400
Costs Incurred $ 4,574 $ 11,056
 
 
Canada
Year Ended December 31,
2015 2014
Property acquisition costs:
Proved properties $ 2 $ -
Unproved properties 83 1
Exploration costs 109 52
Development costs   402   1,063
Costs Incurred $ 596 $ 1,116
                       
 
RESERVES RECONCILIATION
Total

Oil / Bitumen
(MMBbls)

      Gas
(Bcf)
      NGL
(MMBbls)
      Total
(MMBoe)
As of December 31, 2014:                          
Proved developed 415 6,984 486 2,065
Proved undeveloped 480         703         92         689  
Total Proved 895         7,687         578         2,754  
Revisions due to prices 54 (1,421 ) (119 ) (302 )
Revisions other than price (134 ) (9 ) (6 ) (142 )
Extensions and discoveries 65 171 24 118
Purchase of reserves 5 17 1 9
Production (101 ) (587 ) (50 ) (248 )
Sale of reserves - (37 ) - (7 )
As of December 31, 2015:                          
Proved developed 444 5,707 411 1,806
Proved undeveloped 340         114         17         376  
Total Proved 784         5,821         428         2,182  
 
United States

Oil / Bitumen
(MMBbls)

      Gas
(Bcf)
      NGL
(MMBbls)
      Total
(MMBoe)
As of December 31, 2014:                          
Proved developed 255 6,948 486 1,900
Proved undeveloped 96         703         92         305  
Total Proved 351         7,651         578         2,205  
Revisions due to prices (53 ) (1,412 ) (119 ) (408 )
Revisions other than price (52 ) (3 ) (6 ) (59 )
Extensions and discoveries 51 171 24 104
Purchase of reserves 5 17 1 9
Production (60 ) (579 ) (50 ) (206 )
Sale of reserves - (37 ) - (7 )
As of December 31, 2015:                          
Proved developed 203 5,694 411 1,563
Proved undeveloped 39         114         17         75  
Total Proved 242         5,808         428         1,638  
 
Canada

Oil / Bitumen
(MMBbls)

      Gas
(Bcf)
      NGL
(MMBbls)
      Total
(MMBoe)
As of December 31, 2014:                          
Proved developed 160 36 - 165
Proved undeveloped 384         -         -         384  
Total Proved 544         36         -         549  
Revisions due to prices 107 (9 ) - 106
Revisions other than price (82 ) (6 ) - (83 )
Extensions and discoveries 14 - - 14
Purchase of reserves - - - -
Production (41 ) (8 ) - (42 )
Sale of reserves - - - -
As of December 31, 2015:                          
Proved developed 241 13 - 243
Proved undeveloped 301         -         -         301  
Total Proved 542         13         -         544  
 
 

NON-GAAP FINANCIAL MEASURES

The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning non-GAAP financial measures (GAAP refers to generally accepted accounting principles). The Company must reconcile the non-GAAP financial measure to related GAAP information.

CORE EARNINGS
(in millions)

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 and core earnings per diluted share. 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 fourth-quarter and total-year 2015 earnings.

           
Quarter Ended December 31, 2015
Before-Tax After-Tax
 
Net loss attributable to Devon (GAAP) $ (4,532 )
Asset impairments 5,341 3,767
Deferred tax asset valuation allowance and repatriation tax 1,001
Fair value changes in financial instruments and foreign currency 633 434
Restructuring costs 78   52  
Core earnings before noncontrolling interest (non-GAAP) 722
Noncontrolling interest (1)   403  
Core earnings attributable to Devon (non-GAAP) $ 319  
Diluted share count 415
Core diluted earnings per share attributable to Devon (non-GAAP) $ 0.77  
 
(1) Noncontrolling interest adjustment relates to EnLink’s asset impairments.
 
Year Ended December 31, 2015
Before-Tax After-Tax
 
Net loss attributable to Devon (GAAP) $ (14,454 )
Asset impairments 20,820 13,923
Deferred tax asset valuation allowance and repatriation tax 1,001
Fair value changes in financial instruments and foreign currency 1,967 1,346
Restructuring costs 78   52  
Core earnings before noncontrolling interest (non-GAAP) 1,868
Noncontrolling interest (1)   824  
Core earnings attributable to Devon (non-GAAP) $ 1,044  
Diluted share count 414
Core diluted earnings per share attributable to Devon (non-GAAP) $ 2.52  
 
(1) Noncontrolling interest adjustment relates to EnLink’s asset impairments.
 
 

NET DEBT
(in millions)

Devon defines net debt as debt less cash and cash equivalents and net debt attributable to the consolidation of EnLink Midstream as presented in the following table. Devon believes that netting these sources of cash against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.

                 
December 31, 2015
Devon U.S. & Canada EnLink Devon Consolidated
 
Total debt (GAAP) $ 10,023 $ 3,090 $ 13,113
Less cash and cash equivalents   (2,292 )   (18 )   (2,310 )
Net debt (non-GAAP) $ 7,731   $ 3,072   $ 10,803  
                       
 
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
 
PRODUCTION GUIDANCE Quarter 1 Full Year
Low High Low High
 
Oil and bitumen (MBbls/d)

U.S. - core

125

130

105 110
Canada - core   120     125     122     127  
Core assets

245

255

227 237
Other   27     32     22     27  
Total  

272

   

287

    249     264  
Natural gas liquids (MBbls/d)

U.S. - core

104 109 95 100
Other   25     30     22     27  
Total   129     139     117     127  
Gas (MMcf/d)

U.S. - core

1,275

1,315

1,150

1,200

Canada - core   14     17     14     17  
Core assets

1,289

1,332

1,164

1,217

Other  

248

   

268

   

222

   

242

 
Total  

1,537

   

1,600

   

1,386

   

1,459

 
Oil equivalent (MBoe/d)

U.S. - core

442

458

392

410

Canada - core   122     128     124     130  
Core assets

564

586

516

540

Other  

93

   

107

    81     94  
Total  

657

   

693

   

597

   

634

 
 
 
 
PRICE REALIZATIONS GUIDANCE Quarter 1 Full Year
Low High Low High
 
Oil and bitumen - % of WTI

U.S.

83 % 93 % 85 % 95 %
Canada 17 % 27 % 29 % 39 %
NGL - realized price $ 4 $ 7 $ 5 $ 9
Natural gas - % of Henry Hub 76 % 86 % 76 % 86 %
                       
 
OTHER GUIDANCE ITEMS Quarter 1 Full Year
($ millions, except %) Low High Low High
 
Marketing & midstream operating profit $ 205

$

225

$ 900 $ 950
Lease operating expenses $ 450

$

480

$

1,800

$

1,900

General & administrative expenses $ 190

$

210

$

625

$

675

Production and property taxes $ 80

$

85

$

285

$

315

Depreciation, depletion and amortization $ 575

$

625

$ 2,200 $ 2,400
Other operating items $ 15

$

20

$ 50 $ 75
Net financing costs (1) $ 145

$

155

$ 650 $ 700
Current income tax rate 0 % 0 % 0 % 0 %
Deferred income tax rate   35 % 45 %   35 %   45 %
Total income tax rate   35 % 45 %   35 %   45 %
 
Net earnings attributable to noncontrolling interests $ 5

$

25

$ 75 $ 125

(1) Full year 2016 includes $50 million of non-cash installment purchase obligations related to EnLink.

                       
 
CAPITAL EXPENDITURES GUIDANCE Quarter 1 Full Year
(in millions) Low High Low High
 
Exploration and development $ 375 $ 425 $ 900 $ 1,100
Capitalized G&A 60 70 200 250
Capitalized interest 10 15 40 50
Midstream (2) 5 10
Corporate and other   5   10   30   35
Devon capital expenditures $ 450 $ 525 $ 1,170 $ 1,445

(2) Excludes capital expenditures related to EnLink.

       
 
COMMODITY HEDGES
 
Oil Call Options Sold
Period Volume (Bbls/d) Weighted Average Price ($/Bbl)
Q1-Q4 2016 18,500 $ 73.18
           
 
Oil Basis Swaps
Period Index Volume (Bbls/d)

Weighted Average Differential to
WTI ($/Bbl)

Q1-Q4 2016 Western Canadian Select 5,249 $ (13.67 )
 
 
Natural Gas Price Swaps
Period Volume (MMBtu/d) Weighted Average Price ($/MMBtu)
Q1-Q4 2016 54,650 $ 3.17
 
 
Natural Gas Call Options Sold
Period Volume (MMBtu/d) Weighted Average Price ($/MMBtu)
Q1-Q4 2016 400,000 $ 4.30
 

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index.

Devon Energy Corporation
Investor Contacts
Howard Thill, 405-552-3693
Scott Coody, 405-552-4735
Shea Snyder, 405-552-4782
Media Contact
John Porretto, 405-228-7506


Source: Business Wire (February 16, 2016 - 4:15 PM EST)

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