Devon Energy Reports Record Third-Quarter 2008 Net Earnings
OKLAHOMA CITY, Nov. 5 /PRNewswire-FirstCall/ -- Devon Energy Corporation
(NYSE: DVN) today reported net earnings for the quarter ended September 30,
2008, of $2.6 billion, or $5.92 per common share ($5.87 per diluted common
share). Third-quarter 2008 net earnings were 256 percent greater than Devon's
third-quarter 2007 net earnings of $735 million, or $1.65 per common share
($1.63 per diluted common share). This is the highest quarterly net earnings
in the company's history.
For the nine months ended September 30, 2008, Devon reported net earnings
of $4.7 billion, or $10.50 per common share ($10.40 per diluted common share).
For the nine months ended September 30, 2007, Devon reported net earnings of
$2.3 billion, or $5.13 per common share ($5.07 per diluted common share).
Earnings $3.09 per Share Excluding Items Not Estimated by Analysts
Devon's third-quarter 2008 reported net earnings of $2.6 billion were
affected by certain items securities analysts typically exclude from their
published estimates. Excluding these adjusting items, Devon earned
$1.4 billion, or $3.09 per diluted common share. The most significant of the
adjusting items was a non-cash, unrealized gain on oil and natural gas
derivative instruments of $1.8 billion pre-tax ($1.2 billion after tax). This
and other adjusting items are discussed in more detail later in this news
release.
Third-Quarter Oil and Gas Sales Increase 62 Percent; Production Trimmed by
Hurricanes
Sales of oil, natural gas and natural gas liquids from continuing
operations was $3.8 billion in the quarter ended September 30, 2008, compared
with $2.3 billion in the same period in 2007. This 62 percent increase in
sales was attributable to higher natural gas production combined with
increased oil, natural gas and natural gas liquids pricing.
Despite reduced production volumes resulting from weather and operational
down time, Devon's third-quarter production increased compared with 2007.
Combined oil, natural gas and natural gas liquids production from continuing
operations reached 58.6 million oil-equivalent barrels (Boe) in the third
quarter of 2008. This was a three percent increase compared with the same
quarter in 2007. Devon produced 637 thousand Boe per day in the third quarter
of 2008 compared with 618 thousand Boe per day in the third quarter of 2007.
Much of Devon's U.S. offshore oil and gas production and a portion of its
U.S. onshore oil and gas production was curtailed in the month of September as
a result of Hurricanes Gustav and Ike. The company estimates that the
hurricanes reduced third-quarter 2008 oil and gas production by approximately
1.5 million Boe.
Third-quarter oil production was also curtailed by approximately 400,000
barrels at the ACG field in Azerbaijan. Transportation interruptions and a
subsea natural gas leak required the operator to reduce production from the
offshore Azeri platforms.
Third-Quarter Operations Highlight U.S., Canada and Brazil
Devon drilled 636 wells in the third quarter of 2008, with an overall
success rate of 97 percent. Following are recent operating highlights:
-- Devon's net production from the Barnett Shale field in north Texas
averaged a record 1.1 billion cubic feet of natural gas equivalent per day in
the third quarter of 2008. The company expects to exit the year producing
approximately 1.2 billion cubic feet equivalent per day from about 3,800
Barnett Shale wells.
-- Devon has completed construction of its Northridge gas processing plant
in the Woodford Shale field in eastern Oklahoma. The plant, which commenced
operations in early October, can process up to 200 million cubic feet of
natural gas per day. Devon is rapidly growing its production from the Woodford
Shale and exited the third quarter producing about 50 million cubic feet of
natural gas per day from the field.
-- In the third quarter, Devon completed two high-volume natural gas wells
in the company's new Haynesville Lime drilling program in the Carthage area of
east Texas. The two 100-percent Devon-owned wells achieved initial production
rates of 26 million and 22 million cubic feet of natural gas per day.
-- In the Groesbeck area in east Texas, Devon initiated production on
three significant horizontal natural gas wells in the third quarter. Initial
daily production from the three wells averaged approximately 17 million cubic
feet of gas equivalent per well. Devon owns 100-percent working interests in
two of the wells and 96 percent in the third.
-- In Wyoming, Devon's net production from the Powder River Basin coalbed
natural gas field exceeded 100 million cubic feet of gas per day in the third
quarter. This was an all-time production record for Devon in the Powder River
Basin.
-- In Alberta, oil production from the first phase of Devon's wholly-owned
Jackfish Canadian oil sands project continued to ramp up toward an expected
peak rate of 35,000 barrels per day. Jackfish 2 received regulatory approval
in September. Combined production from both phases of the project is expected
to reach 70,000 barrels of oil per day in 2012.
-- In Brazil, Devon is evaluating the results of a pre-salt exploratory
well in the offshore Campos Basin. The well on the Wahoo prospect encountered
more than 150 feet of potential net oil pay. Devon has a 25 percent working
interest in the prospect.
$3 Billion in African Divestitures To Date
In September, Devon closed the sale of its operations in Cote d'Ivoire for
$205 million. The aggregate pre-tax value of the combined African divestitures
to date is approximately $3 billion.
In accordance with U.S. accounting standards, the company has classified
the assets, liabilities and results of its operations in Africa as
discontinued operations for all accounting periods presented in this release.
Included in this release is a table of revenues, expenses and production
categories and amounts reclassified as discontinued operations for each period
presented.
Marketing and Midstream Profit at $169 Million
Marketing and midstream operating profit in the third quarter of 2008
reached $169 million. This was a 28 percent increase compared with the third
quarter of 2007. The increase in operating profit reflects higher throughput
and higher natural gas and natural gas liquids prices.
Expenses Generally in Line with Expectations
Expenses in most categories were generally in line with expectations in
the third quarter of 2008. However, hurricane-related production curtailments
led to higher than anticipated unit lease operating expense (LOE).
Third-quarter LOE also included $14 million of costs associated with
post-hurricane inspections and repairs. On a unit basis, third-quarter LOE was
$10.09 per Boe compared with $8.04 per Boe in the third quarter of 2007.
Interest expense in the third quarter of 2008 decreased by 36 percent
compared with the third quarter of 2007. The decrease was attributable to
lower overall debt balances.
Cash Flow $2.6 Billion; Debt Repayment and Share Repurchases Total
$1.3 Billion
Cash flow before balance sheet changes increased 49 percent to
$2.6 billion in the third quarter of 2008. Devon funded $2.4 billion of
capital expenditures in the third quarter, leaving $265 million of free cash
flow. During the third quarter, the company used free cash flow and cash on
hand to redeem $983 million of exchangeable debentures.
Also in the third quarter of 2008, Devon repurchased approximately 3.6
million shares of its common stock for approximately $363 million. The company
repurchased a total of 6.5 million shares of its common stock in the first
nine months of 2008. The company held cash and short-term investments of
$1.2 billion at September 30, 2008.
Net debt as a percentage of adjusted capitalization was 13 percent at
September 30, 2008. Reconciliations of cash flow before balance sheet changes,
free cash flow, net debt and adjusted capitalization, which are non-GAAP
measures, are provided in this release.
Accounting for Derivative Instruments
Devon accounts for derivative instruments using mark-to-market accounting.
As a result, for each reporting period the company recognizes in earnings the
unrealized changes in the fair values of its derivative instruments. An
unrealized after-tax gain on oil and natural gas derivative instruments of
$1.2 billion resulted from decreases in oil and natural gas prices during the
third quarter of 2008. This third-quarter unrealized after-tax gain more than
offset unrealized after-tax losses on oil and natural gas derivative
instruments recorded in the first two quarters of 2008. The company will
record additional unrealized gains or losses on oil and natural gas derivative
instruments in the future depending upon the direction of commodity prices.
Items Excluded from Published Earnings Estimates
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. These items and their effects upon reported
earnings for the third quarter of 2008 were as follows:
Items affecting continuing operations --
-- A change in fair value of other financial instruments decreased
third-quarter net earnings by $46 million pre-tax ($29 million after tax).
-- An unrealized gain on oil and natural gas derivative financial
instruments increased third-quarter net earnings by $1.8 billion pre-tax
($1.2 billion after tax).
Item affecting discontinued operations --
-- Divestitures of assets in Africa resulted in a third-quarter 2008 gain
of $79 million pre-tax ($97 million after tax).
The following tables summarize the effects of these items on third-quarter
earnings and income taxes.
Summary of Items Typically Excluded by Securities Analysts (in millions)
Quarter Ended September 30, 2008
Continuing Cash Flow
Operations Pre-tax After tax Before
Earnings Income Tax Effect Earnings Balance Sheet
Effect Current Deferred Total Effect Changes Effect
Change in fair
value of other
financial
instruments $(46) - (17) (17) (29) -
Unrealized gain
on oil and gas
derivative
financial
instruments 1,832 - 659 659 1,173 -
Totals $1,786 - 642 642 1,144 -
Discontinued Cash Flow
Operations Pre-tax After tax Before
Earnings Income Tax Effect Earnings Balance Sheet
Effect Current Deferred Total Effect Changes Effect
Gain on
sale
of West
African
assets 79 - (18) (18) 97 -
Totals $79 - (18) (18) 97 -
In aggregate, these items increased third-quarter 2008 net earnings by
$1.2 billion, or $2.80 per common share ($2.78 per diluted share).
Conference Call to be Webcast Today
Devon will discuss its third-quarter 2008 financial and operating results
in a conference call webcast today. The webcast will begin at 10 a.m. Central
Time (11 a.m. Eastern Time). The webcast may be accessed from Devon's internet
home page at http://www.devonenergy.com.
This press release includes "forward-looking statements" as defined by the
Securities and Exchange Commission. Such statements are those concerning
strategic plans, expectations and objectives for future operations. 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 future drilling and production 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, inflation or lack of availability of goods and services,
environmental risks, drilling risks and regulatory changes. 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 United States Securities and Exchange Commission permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves
that a company has demonstrated by actual production or conclusive formation
tests to be economically and legally producible under existing economic and
operating conditions. This release may contain certain terms, such as resource
potential, reserve potential, probable reserves, possible reserves and
exploration target size. The SEC guidelines strictly prohibit us from
including these terms in filings with the SEC. U.S. investors are urged to
consider closely the disclosure in our Form 10-K, File No. 001-32318,
available from us at Devon Energy Corporation, Attn. Investor Relations, 20
North Broadway, Oklahoma City, OK 73102. You can also obtain this form from
the SEC by calling 1-800-SEC-0330.
Devon Energy Corporation is an Oklahoma City-based independent energy
company engaged in oil and gas exploration and production. Devon is the
largest U.S.-based independent oil and gas producer and is included in the S&P
500 Index. For more information about Devon, please visit our website at
http://www.devonenergy.com.
DEVON ENERGY CORPORATION
UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION (net of royalties) Quarter Ended Nine Months Ended
Excludes discontinued operations September 30, September 30,
2008 2007 2008 2007
Total Period Production
Natural Gas (Bcf)
U.S. Onshore 172.1 144.2 486.9 407.8
U.S. Offshore 12.5 19.9 45.0 57.3
Total U.S. 184.6 164.1 531.9 465.1
Canada 53.8 57.9 158.5 170.3
International 0.5 0.5 1.5 1.3
Total Natural Gas 238.9 222.5 691.9 636.7
Oil (MMBbls)
U.S. Onshore 2.6 2.8 8.3 8.4
U.S. Offshore 1.3 2.1 4.9 5.8
Total U.S. 3.9 4.9 13.2 14.2
Canada 5.5 4.2 15.4 11.7
International 2.7 4.3 10.8 15.2
Total Oil 12.1 13.4 39.4 41.1
Natural Gas Liquids (MMBbls)
U.S. Onshore 5.5 5.1 17.1 15.0
U.S. Offshore 0.1 0.2 0.5 0.6
Total U.S. 5.6 5.3 17.6 15.6
Canada 1.0 1.0 3.0 3.2
International - - - -
Total Natural Gas Liquids 6.6 6.3 20.6 18.8
Oil Equivalent (MMBoe)
U.S. Onshore 36.8 31.9 106.5 91.4
U.S. Offshore 3.5 5.7 12.9 16.0
Total U.S. 40.3 37.6 119.4 107.4
Canada 15.5 14.8 44.8 43.2
International 2.8 4.4 11.1 15.4
Total Oil Equivalent 58.6 56.8 175.3 166.0
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore 1,871.0 1,567.4 1,777.1 1,493.7
U.S. Offshore 135.9 215.8 164.3 210.0
Total U.S. 2,006.9 1,783.2 1,941.4 1,703.7
Canada 584.9 629.5 578.4 623.6
International 5.6 5.4 5.4 4.7
Total Natural Gas 2,597.4 2,418.1 2,525.2 2,332.0
Oil (MBbls)
U.S. Onshore 28.8 30.0 30.2 30.7
U.S. Offshore 13.8 23.3 17.9 21.5
Total U.S. 42.6 53.3 48.1 52.2
Canada 59.3 45.5 56.3 42.9
International 29.7 47.1 39.6 55.5
Total Oil 131.6 145.9 144.0 150.6
Natural Gas Liquids (MBbls)
U.S. Onshore 59.7 55.1 62.4 54.9
U.S. Offshore 1.1 2.9 1.7 2.2
Total U.S. 60.8 58.0 64.1 57.1
Canada 11.2 10.7 10.9 11.6
International - - - -
Total Natural Gas Liquids 72.0 68.7 75.0 68.7
Oil Equivalent (MBoe)
U.S. Onshore 400.4 346.4 388.8 334.6
U.S. Offshore 37.6 62.1 46.9 58.6
Total U.S. 438.0 408.5 435.7 393.2
Canada 168.0 161.2 163.6 158.4
International 30.6 48.0 40.5 56.3
Total Oil Equivalent 636.6 617.7 639.8 607.9
BENCHMARK PRICES Quarter Ended Nine Months Ended
(average prices) September 30, September 30,
2008 2007 2008 2007
Natural Gas ($/Mcf) - Henry Hub $10.25 $6.16 $9.74 $6.83
Oil ($/Bbl) - West Texas Intermediate
(Cushing) $118.52 $75.21 $113.49 $66.21
REALIZED PRICES
(Excludes the effects of
unrealized gains and
losses from hedging)
Quarter Ended September 30, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $116.26 $8.48 $51.24 $55.65
U.S. Offshore $123.78 $11.05 $65.35 $87.42
Total U.S. $118.70 $8.66 $51.50 $58.38
Canada $92.98 $9.36 $72.19 $70.24
International $117.97 $10.72 $- $116.35
Realized price without
hedges $106.95 $8.82 $54.72 $64.29
Cash settlements $(0.01) $(1.01) $- $(4.10)
Realized price, including
cash settlements $106.94 $7.81 $54.72 $60.19
Quarter Ended September 30, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $69.95 $5.07 $36.77 $34.85
U.S. Offshore $77.36 $6.43 $36.92 $53.04
Total U.S. $73.19 $5.23 $36.78 $37.62
Canada $53.40 $5.40 $46.77 $39.28
International $74.43 $6.61 $- $73.77
Realized price without hedges $67.41 $5.28 $38.34 $40.86
Cash settlements $- $0.06 $- $0.24
Realized price, including cash
settlements $67.41 $5.34 $38.34 $41.10
Nine Months Ended September 30, 2008 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
U.S. Onshore $110.07 $8.34 $48.81 $54.51
U.S. Offshore $115.12 $10.25 $54.80 $81.65
Total U.S. $111.94 $8.50 $48.96 $57.43
Canada $87.28 $8.90 $70.00 $66.16
International $108.73 $9.95 $- $107.63
Realized price without hedges $101.42 $8.60 $52.03 $62.84
Cash settlements $- $(0.80) $- $(3.15)
Realized price, including cash
settlements $101.42 $7.80 $52.03 $59.69
Nine Months Ended September 30, 2007 Oil Gas NGLs Total
(Per Bbl) (Per Mcf) (Per Bbl)(Per Boe)
U.S. Onshore $60.60 $5.69 $32.65 $36.35
U.S. Offshore $66.45 $7.14 $33.39 $51.12
Total U.S. $63.01 $5.87 $32.68 $38.55
Canada $48.01 $6.16 $42.36 $40.33
International $66.10 $5.73 $- $65.66
Realized price without hedges $59.88 $5.95 $34.31 $41.52
Cash settlements $- $0.05 $- $0.19
Realized price, including cash
settlements $59.88 $6.00 $34.31 $41.71
CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended Nine Months Ended
(in millions, except per share September 30, September 30,
amounts) 2008 2007 2008 2007
Revenues
Oil sales $1,296 $905 $4,001 $2,461
Gas sales 2,107 1,175 5,947 3,787
NGL sales 362 242 1,069 643
Net gain (loss) on oil and gas
derivative financial instruments 1,592 7 (411) 1
Marketing and midstream revenues 621 434 1,895 1,273
Total revenues 5,978 2,763 12,501 8,165
Expenses and other income, net
Lease operating expenses 591 457 1,634 1,326
Production taxes 152 85 462 255
Marketing and midstream operating
costs and expenses 452 301 1,349 912
Depreciation, depletion and
amortization of oil and gas
properties 781 705 2,280 1,937
Depreciation and amortization of
non-oil and gas properties 67 51 186 146
Accretion of asset retirement
obligation 22 19 66 55
General and administrative expenses 146 126 474 358
Interest expense 69 108 261 325
Change in fair value of other
financial instruments 46 (22) 22 (31)
Other income, net (83) (28) (121) (71)
Total expenses and other
income, net 2,243 1,802 6,613 5,212
Earnings from continuing operations
before income tax expense 3,735 961 5,888 2,953
Income tax expense
Current 226 96 743 459
Deferred 1,000 221 1,391 452
Total income tax expense 1,226 317 2,134 911
Earnings from continuing operations 2,509 644 3,754 2,042
Discontinued operations
Earnings from discontinued
operations before income tax expense 93 177 1,133 442
Income tax (benefit) expense (16) 86 219 194
Earnings from discontinued
operations 109 91 914 248
Net earnings 2,618 735 4,668 2,290
Preferred stock dividends - 2 5 7
Net earnings applicable to common
stockholders 2,618 $733 $4,663 $2,283
Basic net earnings per share
Earnings from continuing operations $5.67 $1.45 $8.44 $4.57
Earnings from discontinued
operations $0.25 $0.20 $2.06 $0.56
Net earnings $5.92 $1.65 $10.50 $5.13
Diluted net earnings per share
Earnings from continuing operations $5.63 $1.43 $8.36 $4.52
Earnings from discontinued
operations $0.24 $0.20 $2.04 $0.55
Net earnings $5.87 $1.63 $10.40 $5.07
Weighted average common shares
outstanding
Basic 442 445 444 445
Diluted 446 450 448 450
CONSOLIDATED BALANCE SHEETS
(in millions) September 30, December 31,
2008 2007
Assets (Audited)
Current assets
Cash and cash equivalents $1,193 $1,364
Short-term investments, at fair value 1 372
Accounts receivable 1,710 1,779
Current assets held for sale 88 120
Other current assets, including $142
million at fair value in 2008 427 279
Total current assets 3,419 3,914
Property and equipment, at cost, based on
the full cost method of accounting for oil
and gas properties ($4,073 and $3,417 excluded
from amortization in 2008 and 2007,
respectively) 53,750 48,473
Less accumulated depreciation, depletion and
amortization 22,300 20,394
Net property and equipment 31,450 28,079
Investment in Chevron Corporation common stock,
at fair value 1,170 1,324
Goodwill 5,966 6,172
Long-term assets held for sale 19 1,512
Other long-term assets, including $158 million
at fair value in 2008 631 455
Total Assets $42,655 $41,456
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $1,559 $1,360
Revenues and royalties due to others 775 578
Income taxes payable 188 97
Short-term debt - 1,004
Current portion of asset retirement obligation,
at fair value 115 82
Current liabilities associated with assets
held for sale 12 145
Accrued expenses and other current liabilities 410 391
Total current liabilities 3,059 3,657
Debentures exchangeable into shares of
Chevron Corporation common stock - 641
Other long-term debt 4,837 6,283
Derivative financial instruments, at fair value - 488
Asset retirement obligation, at fair value 1,456 1,236
Long-term liabilities associated with assets
held for sale 1 404
Other long-term liabilities 833 699
Deferred income taxes 7,179 6,042
Stockholders' equity
Preferred stock - 1
Common stock 44 44
Additional paid-in capital 6,219 6,743
Retained earnings 17,265 12,813
Accumulated other comprehensive income 1,762 2,405
Total Stockholders' Equity 25,290 22,006
Total Liabilities and Stockholders' Equity $42,655 $41,456
Common Shares Outstanding 441 444
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) Nine Months Ended September 30,
2008 2007
Cash Flows From Operating Activities
Net earnings $4,668 $2,290
Earnings from discontinued
operations, net of tax (914) (248)
Adjustments to reconcile earnings
from continuing operations to net
cash provided by operating activities:
Depreciation, depletion and
amortization 2,466 2,083
Deferred income tax expense 1,391 452
Net unrealized (gain) loss on
oil and gas derivative
financial instruments (140) 30
Other noncash charges 217 94
(Increase) decrease in assets:
Accounts receivable 32 (12)
Other current assets (85) (65)
Other long-term assets (63) (53)
Increase (decrease) in
liabilities:
Accounts payable 223 113
Revenues and royalties due to
others 278 (2)
Income taxes payable 36 139
Other current liabilities (124) (78)
Other long-term liabilities 94 (4)
Cash provided by operating
activities - continuing operations 8,079 4,739
Cash provided by operating
activities - discontinued
operations 102 370
Net cash provided by operating
activities 8,181 5,109
Cash Flows From Investing Activities
Proceeds from sales of property and
equipment 116 39
Capital expenditures (6,179) (4,477)
Purchases of short-term investments (50) (659)
Redemptions of short-term and long-
term investments 297 892
Cash used in investing activities -
continuing operations (5,816) (4,205)
Cash provided by (used in) investing
activities - discontinued
operations 1,854 (153)
Net cash used in investing activities (3,962) (4,358)
Cash Flows From Financing Activities
Credit facility repayments (3,191) -
Credit facility borrowings 1,741 400
Net commercial paper repayments (1,004) (129)
Principal payments on debt (1,031) (166)
Preferred stock redemption (150) -
Proceeds from stock option exercises 109 71
Repurchases of common stock (665) (133)
Dividends paid on common and
preferred stock (216) (193)
Excess tax benefits related to
share-based compensation 58 20
Net cash used in financing activities (4,349) (130)
Effect of exchange rate changes on
cash (47) 44
Net (decrease) increase in cash and
cash equivalents (177) 665
Cash and cash equivalents at
beginning of period (including
assets held for sale) 1,373 756
Cash and cash equivalents at end of
period (including assets held for
sale) $1,196 $1,421
Supplementary cash flow data:
Interest paid (net of capitalized
interest) $298 $226
Income taxes paid - continuing and
discontinued operations $1,162 $293
DRILLING ACTIVITY Quarter Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Exploration Wells Drilled
U.S. 4 5 21 32
Canada 18 19 76 83
International - - 7 1
Total 22 24 104 116
Exploration Wells Success Rate
U.S. 75% 60% 71% 78%
Canada 94% 100% 95% 96%
International - - 0% 0%
Total 91% 92% 84% 91%
Development Wells Drilled
U.S. 430 422 1,207 1,046
Canada 171 139 430 445
International 13 14 35 23
Total 614 575 1,672 1,514
Development Wells Success Rate
U.S. 98% 98% 98% 98%
Canada 98% 100% 99% 100%
International 92% 100% 91% 100%
Total 98% 98% 98% 98%
Total Wells Drilled
U.S. 434 427 1,228 1,078
Canada 189 158 506 528
International 13 14 42 24
Total 636 599 1,776 1,630
Total Wells Success Rate
U.S. 97% 97% 98% 97%
Canada 98% 100% 99% 99%
International 92% 100% 76% 96%
Total 97% 98% 97% 98%
September 30,
2008 2007
Number of Company Operated Rigs Running
U.S. 92 76
Canada 12 12
International 2 1
Total 106 89
CAPITAL EXPENDITURES (in millions)
Quarter Ended September 30, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $247 136 268 59 $710
Development 1,024 61 207 54 1,346
Exploration and
development
capital $1,271 197 475 113 $2,056
Capitalized G&A 99
Capitalized interest 28
Discontinued operations 7
Midstream capital 110
Other capital 64
Total Capital Expenditures $2,364
CAPITAL EXPENDITURES (in millions)
Nine Months Ended September 30, 2008
U.S. U.S.
Onshore Offshore Canada International Total
Capital Expenditures
Exploration $428 540 451 201 $1,620
Development 2,845 261 640 169 3,915
Exploration and
development
capital $3,273 801 1,091 370 $5,535
Capitalized G&A 298
Capitalized interest 70
Discontinued operations 30
Midstream capital 308
Other capital 110
Total Capital Expenditures $6,351
PRODUCTION FROM DISCONTINUED
OPERATIONS Quarter Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Production from Discontinued
Operations
Oil (MMBbls) 0.0 2.6 3.2 8.9
Natural Gas (Bcf) 0.4 1.2 2.6 3.8
Total Oil Equivalent (MMBoe) 0.1 2.9 3.6 9.6
STATEMENTS OF DISCONTINUED OPERATIONS Quarter Ended Nine Months Ended
(in millions) September 30, September 30,
2008 2007 2008 2007
Revenues
Oil sales $5 $196 $323 $571
Gas sales 2 4 11 12
Marketing and midstream revenues 10 6 15 13
Total revenues 17 206 349 596
Expenses and other income, net
Lease operating expenses 1 20 25 59
Marketing and midstream operating
costs and expenses 2 2 5 5
Depreciation, depletion and
amortization of oil and gas
properties - 2 - 20
Accretion of asset retirement
obligation - 1 1 3
Gain on sale of oil and gas
properties (79) - (815) -
Reduction of carrying value of
assets held for sale - 4 - 67
Total expenses and other income, net (76) 29 (784) 154
Earnings before income tax expense 93 177 1,133 442
Income tax expense (benefit)
Current 2 69 643 184
Deferred (18) 17 (424) 10
Total income tax expense (benefit) (16) 86 219 194
Earnings from discontinued operations $109 $91 $914 $248
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.
Cash flow before balance sheet changes and free cash flow are Non-GAAP
financial measures. Devon believes cash flow before balance sheet changes is
relevant because it is a measure of cash available to fund the company's
capital expenditures, dividends and to service its debt. Devon believes free
cash flow is relevant because it is a measure of cash available to pay
dividends, service debt, or buy back stock. Cash flow before balance sheet
changes and free cash flow are used by certain securities analysts as a
measure of Devon's financial results.
RECONCILIATION TO GAAP INFORMATION Quarter Ended Nine Months Ended
(in millions) September 30, September 30,
2008 2007 2008 2007
Net Cash Provided By Operating
Activities (GAAP) $2,995 $1,760 $8,181 $5,109
Changes in assets and liabilities -
continuing operations (393) 65 (391) (37)
Changes in assets and liabilities -
discontinued operations 27 (59) 88 (23)
Cash flow before balance sheet
changes (Non-GAAP) $2,629 $1,766 $7,878 $5,049
Less:
Capital expenditures 2,364 1,618 6,351 4,624
Free cash flow (Non-GAAP) $265 $148 $1,527 $425
Devon believes that using net debt for the calculation of "net debt to
adjusted capitalization" provides a better measure than using debt. Devon
defines net debt as debt less cash and short-term investments. Devon believes
that because cash and short-term investments can be used to repay
indebtedness, netting cash and short-term investments against debt provides a
clearer picture of the future demands on cash to repay debt.
RECONCILIATION TO GAAP INFORMATION
(in millions)
September 30,
2008 2007
Total debt (GAAP) $4,837 $7,949
Adjustments:
Cash and short-term investments 1,194 1,733
Net Debt (Non-GAAP) $3,643 $6,216
Total debt $4,837 $7,949
Stockholders' equity 25,290 20,832
Total Capitalization (GAAP) $30,127 $28,781
Net debt $3,643 $6,216
Stockholders' equity 25,290 20,832
Adjusted Capitalization (Non-GAAP) $28,933 $27,048
SOURCE Devon Energy Corporation
CONTACT: Investors, Zack Hager, +1-405-552-4526, or Media, Chip Minty,
+1-405-228-8647, both of Devon Energy