UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
DEVON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer identification No.) |
|
|
|
|
|
|
(Address of principal executive offices) |
|
(Zip code) |
Registrant’s telephone number, including area code: (
Former name, address and former fiscal year, if changed from last report: Not applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
|
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
☑ |
Accelerated filer |
|
☐ |
Non-accelerated filer |
|
☐ |
Smaller reporting company |
|
|
Emerging growth company |
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
On April 21, 2021,
DEVON ENERGY CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Part I. Financial Information |
|
||
Item 1. |
|
6 |
|
|
|
6 |
|
|
|
7 |
|
|
|
8 |
|
|
|
9 |
|
|
|
10 |
|
|
|
10 |
|
|
|
11 |
|
|
|
13 |
|
|
|
15 |
|
|
|
16 |
|
|
|
17 |
|
|
|
18 |
|
|
|
Note 8 – Net Earnings (Loss) Per Share From Continuing Operations |
19 |
|
|
19 |
|
|
|
Note 10 – Supplemental Information to Statements of Cash Flows |
20 |
|
|
20 |
|
|
|
20 |
|
|
|
21 |
|
|
|
22 |
|
|
|
22 |
|
|
|
23 |
|
|
|
23 |
|
|
|
24 |
|
|
|
25 |
|
|
|
26 |
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 |
Item 3. |
|
44 |
|
Item 4. |
|
44 |
|
|
|
|
|
Part II. Other Information |
|
||
Item 1. |
|
45 |
|
Item 1A. |
|
45 |
|
Item 2. |
|
45 |
|
Item 3. |
|
45 |
|
Item 4. |
|
45 |
|
Item 5. |
|
45 |
|
Item 6. |
|
46 |
|
|
|
|
|
|
|
47 |
2
DEFINITIONS
Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Devon,” the “Company” and “Registrant” refer to Devon Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:
“ASU” means Accounting Standards Update.
“Bbl” or “Bbls” means barrel or barrels.
“BKV” means Banpu Kalnin Ventures.
“Boe” means barrel of oil equivalent. Gas proved reserves and production are converted to Boe, at the pressure and temperature base standard of each respective state in which the gas is produced, at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of gas and oil. NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.
“Btu” means British thermal units, a measure of heating value.
“Canada” means the division of Devon encompassing oil and gas properties located in Canada. On June 27, 2019, all of Devon’s Canadian operating assets and operations were divested. All dollar amounts associated with Canada are in U.S. dollars, unless stated otherwise.
“Catalyst” means Catalyst Midstream Partners, LLC.
“CDM” means Cotton Draw Midstream, L.L.C.
“DD&A” means depreciation, depletion and amortization expenses.
“Devon Plan” means Devon Energy Corporation Incentive Savings Plan.
“Federal Funds Rate” means the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
“G&A” means general and administrative expenses.
“GAAP” means U.S. generally accepted accounting principles.
“HEP” means Howard Energy Partners.
“Inside FERC” refers to the publication Inside FERC’s Gas Market Report.
“LOE” means lease operating expenses.
“MBbls” means thousand barrels.
“MBoe” means thousand Boe.
“Mcf” means thousand cubic feet.
“Merger” means the merger of Merger Sub with and into WPX, with WPX continuing as the surviving corporation and a wholly-owned subsidiary of the Company, pursuant to the terms of the Merger Agreement.
“Merger Agreement” means that certain Agreement and Plan of Merger, dated September 26, 2020, by and among the Company, Merger Sub and WPX.
“Merger Sub” means East Merger Sub, Inc., a wholly-owned subsidiary of the Company.
3
“MMBoe” means million Boe.
“MMBtu” means million Btu.
“MMcf” means million cubic feet.
“N/M” means not meaningful.
“NGL” or “NGLs” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“OPEC” means Organization of the Petroleum Exporting Countries.
“QLCP” means QL Capital Partners, LP
“SEC” means United States Securities and Exchange Commission.
“Senior Credit Facility” means Devon’s syndicated unsecured revolving line of credit, effective as of October 5, 2018.
“TSR” means total shareholder return.
“U.S.” means United States of America.
“VIE” means variable interest entity.
“WPX” means WPX Energy, Inc.
“WTI” means West Texas Intermediate.
“/Bbl” means per barrel.
“/d” means per day.
“/MMBtu” means per MMBtu.
4
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This report includes “forward-looking statements” as defined by the SEC. 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 report 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 environmental matters; |
|
• |
risks related to regulatory, social and market efforts to address 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; |
|
• |
risks related to the Merger, including the risk that we may not realize the anticipated benefits of the Merger or successfully integrate the two legacy businesses; and |
|
• |
any of the other risks and uncertainties discussed in this report, our 2020 Annual Report on Form 10-K and our other filings 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 assume no duty to update or revise our forward-looking statements based on new information, future events or otherwise.
5
Part I. Financial Information
Item 1. Financial Statements
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
|
|
Three Months Ended March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(Unaudited) |
|
|||||
Oil, gas and NGL sales |
|
$ |
|
|
|
$ |
|
|
Oil, gas and NGL derivatives |
|
|
( |
) |
|
|
|
|
Marketing and midstream revenues |
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
Production expenses |
|
|
|
|
|
|
|
|
Exploration expenses |
|
|
|
|
|
|
|
|
Marketing and midstream expenses |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
Asset impairments |
|
|
— |
|
|
|
|
|
Asset dispositions |
|
|
( |
) |
|
|
— |
|
General and administrative expenses |
|
|
|
|
|
|
|
|
Financing costs, net |
|
|
|
|
|
|
|
|
Restructuring and transaction costs |
|
|
|
|
|
|
— |
|
Other, net |
|
|
( |
) |
|
|
( |
) |
Total expenses |
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
( |
) |
|
|
( |
) |
Net earnings (loss) from continuing operations |
|
|
|
|
|
|
( |
) |
Net loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
( |
) |
Net earnings (loss) |
|
|
|
|
|
|
( |
) |
Net earnings attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Devon |
|
$ |
|
|
|
$ |
( |
) |
Basic net earnings (loss) per share: |
|
|
|
|
|
|
|
|
Basic earnings (loss) from continuing operations per share |
|
$ |
|
|
|
$ |
( |
) |
Basic loss from discontinued operations per share |
|
|
— |
|
|
|
( |
) |
Basic net earnings (loss) per share |
|
$ |
|
|
|
$ |
( |
) |
Diluted net earnings (loss) per share: |
|
|
|
|
|
|
|
|
Diluted earnings (loss) from continuing operations per share |
|
$ |
|
|
|
$ |
( |
) |
Diluted loss from discontinued operations per share |
|
|
— |
|
|
|
( |
) |
Diluted net earnings (loss) per share |
|
$ |
|
|
|
$ |
( |
) |
Comprehensive earnings (loss): |
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
|
|
|
$ |
( |
) |
Other comprehensive earnings (loss), net of tax: |
|
|
|
|
|
|
|
|
Pension and postretirement plans |
|
|
|
|
|
|
|
|
Other comprehensive earnings, net of tax |
|
|
|
|
|
|
|
|
Comprehensive earnings (loss): |
|
$ |
|
|
|
$ |
( |
) |
Comprehensive earnings attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
Comprehensive earnings (loss) attributable to Devon |
|
$ |
|
|
|
$ |
( |
) |
See accompanying notes to consolidated financial statements
6
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Three Months Ended March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(Unaudited) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
|
|
|
$ |
( |
) |
Adjustments to reconcile net earnings (loss) to net cash from operating activities: |
|
|
|
|
|
|
|
|
Net loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
Asset impairments |
|
|
— |
|
|
|
|
|
Leasehold impairments |
|
|
|
|
|
|
|
|
(Amortization) accretion of liabilities |
|
|
( |
) |
|
|
|
|
Total (gains) losses on commodity derivatives |
|
|
|
|
|
|
( |
) |
Cash settlements on commodity derivatives |
|
|
( |
) |
|
|
|
|
Gains on asset dispositions |
|
|
( |
) |
|
|
— |
|
Deferred income tax benefit |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
Early retirement of debt |
|
|
|
|
|
|
— |
|
Changes in assets and liabilities, net |
|
|
( |
) |
|
|
( |
) |
Net cash from operating activities - continuing operations |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Acquisitions of property and equipment |
|
|
— |
|
|
|
( |
) |
Divestitures of property and equipment |
|
|
|
|
|
|
|
|
WPX acquired cash |
|
|
|
|
|
|
— |
|
Distributions from equity method investments |
|
|
|
|
|
|
— |
|
Net cash from investing activities - continuing operations |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Repayments of long-term debt |
|
|
( |
) |
|
|
— |
|
Early retirement of debt |
|
|
( |
) |
|
|
— |
|
Repurchases of common stock |
|
|
— |
|
|
|
( |
) |
Dividends paid on common stock |
|
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interests |
|
|
— |
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Acquisition of noncontrolling interests |
|
|
( |
) |
|
|
— |
|
Shares exchanged for tax withholdings |
|
|
( |
) |
|
|
( |
) |
Net cash from financing activities - continuing operations |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash - continuing operations |
|
|
|
|
|
|
— |
|
Net change in cash, cash equivalents and restricted cash of continuing operations |
|
|
( |
) |
|
|
|
|
Cash flows from discontinued operations: |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
( |
) |
Investing activities |
|
|
|
|
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
Net change in cash, cash equivalents and restricted cash of discontinued operations |
|
|
|
|
|
|
( |
) |
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
Restricted cash |
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements
7
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
|
(Unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
Income taxes receivable |
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
Oil and gas property and equipment, based on successful efforts accounting, net |
|
|
|
|
|
|
|
|
Other property and equipment, net ($ |
|
|
|
|
|
|
|
|
Total property and equipment, net |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
Right-of-use assets |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
Other long-term assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
Revenues and royalties payable |
|
|
|
|
|
|
|
|
Short-term debt |
|
|
|
|
|
|
— |
|
Other current liabilities |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity attributable to Devon |
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements
8
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Comprehensive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Common Stock |
|
|
Paid-In |
|
|
(Accumulated |
|
|
Earnings |
|
|
Treasury |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit) |
|
|
(Loss) |
|
|
Stock |
|
|
Interests |
|
|
Equity |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||||||||||||||
Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted stock grants, net of cancellations |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Share-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Three Months Ended March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Net earnings (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted stock grants, net of cancellations |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements
9
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
Summary of Significant Accounting Policies |
The accompanying unaudited interim financial statements and notes of Devon have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying unaudited interim financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s 2020 Annual Report on Form 10-K. The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month periods ended March 31, 2021 and 2020 and Devon’s financial position as of March 31, 2021.
Devon and WPX completed an all-stock merger of equals on
As further discussed in Note 18, Devon closed on the sale of its Barnett Shale assets in October 2020. Prior to December 31, 2020, activity relating to Devon’s Barnett Shale assets is classified as discontinued operations within Devon’s consolidated statements of comprehensive earnings and consolidated statements of cash flows.
As of March 31, 2021, Devon classified approximately $
Variable Interest Entity
Cotton Draw Midstream, L.L.C. (“CDM”) is a joint-venture entity formed by Devon and an affiliate of QL Capital Partners, LP (“QLCP”). CDM provides gathering, compression and dehydration services for natural gas production in the Cotton Draw area of the Delaware Basin. Devon holds a controlling interest in CDM and the portions of CDM’s net earnings and equity not attributable to Devon’s controlling interest are shown separately as noncontrolling interests in the accompanying consolidated statements of comprehensive earnings and consolidated balance sheets. CDM is considered a VIE to Devon. The assets of CDM cannot be used by Devon for general corporate purposes and are included in, and disclosed parenthetically, on Devon's consolidated balance sheets. The carrying amount of liabilities related to CDM for which the creditors do not have recourse to Devon's assets are also included in, and disclosed parenthetically, on Devon's consolidated balance sheets if material.
Investments
10
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Disaggregation of Revenue
The following table presents revenue from contracts with customers that are disaggregated based on the type of good or service.
|
|
Three Months Ended March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Oil |
|
$ |
|
|
|
$ |
|
|
Gas |
|
|
|
|
|
|
|
|
NGL |
|
|
|
|
|
|
|
|
Oil, gas and NGL sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
|
|
|
|
|
|
|
Gas |
|
|
|
|
|
|
|
|
NGL |
|
|
|
|
|
|
|
|
Marketing and midstream revenues |
|
|
|
|
|
|
|
|
Total revenues from contracts with customers |
|
$ |
|
|
|
$ |
|
|
2.Acquisitions and Divestitures
WPX Merger
On
Purchase Price Allocation
The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries have been recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Merger. Determining the fair value of the assets and liabilities of WPX requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of WPX’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy.
11
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table represents the preliminary allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.
|
|
Preliminary Purchase Price Allocation |
|
|
Consideration: |
|
|
|
|
WPX Common Stock outstanding |
|
|
|
|
Exchange Ratio |
|
|
|
|
Devon common stock issued |
|
|
|
|
Devon closing price on January 7, 2021 |
|
$ |
|
|
Total common equity consideration |
|
|
|
|
Share-based replacement awards |
|
|
|
|
Total consideration |
|
$ |
|
|
Assets acquired: |
|
|
|
|
Cash, cash equivalents and restricted cash |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Other current assets |
|
|
|
|
Right-of-use assets |
|
|
|
|
Proved oil and gas property and equipment |
|
|
|
|
Unproved and properties under development |
|
|
|
|
Other property and equipment |
|
|
|
|
Investments |
|
|
|
|
Other long-term assets |
|
|
|
|
Total assets acquired |
|
$ |
|
|
Liabilities assumed: |
|
|
|
|
Accounts payable |
|
$ |
|
|
Revenue and royalties payable |
|
|
|
|
Other current liabilities |
|
|
|
|
Debt |
|
|
|
|
Lease liabilities |
|
|
|
|
Asset retirement obligations |
|
|
|
|
Deferred income taxes |
|
|
|
|
Other long-term liabilities |
|
|
|
|
Total liabilities assumed |
|
|
|
|
Net assets acquired |
|
$ |
|
|
WPX Revenues and Earnings
The following table represents WPX’s revenues and earnings included in Devon’s consolidated comprehensive statements of earnings subsequent to the closing date of the Merger.
|
|
Three Months Ended March 31, |
|
|
|
|
2021 |
|
|
Total revenues |
|
$ |
|
|
Net earnings |
|
$ |
|
|
12
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Pro Forma Financial Information
Due to the Merger closing on January 7, 2021, all activity in the first quarter of 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive earnings. The following unaudited pro forma financial information for the three months ended March 31, 2020 is based on our historical consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2020. The information below reflects pro forma adjustments to conform WPX’s historical financial information to Devon’s financial statement presentation.
|
|
Three Months Ended March 31, |
|
|
Continuing operations: |
|
2020 |
|
|
Total revenues |
|
$ |
|
|
Net loss |
|
$ |
( |
) |
Basic net loss per share |
|
$ |