Devon Energy Earns $393 Million in First-Quarter 2012; Oil Production Increases 26 Percent
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Devon’s first-quarter 2012 financial results were impacted by certain
items securities analysts typically exclude from their published
estimates. Adjusting for these items, the company earned
Devon’s first-quarter 2012 earnings were significantly affected by unusually wide Canadian oil price differentials. Following the end of the quarter, Canadian oil differentials have begun to normalize.
Strong Oil Growth Drives Record Production
Total production of oil, natural gas and natural gas liquids averaged
694,000 oil-equivalent barrels (Boe) per day in the first quarter of
2012. This is the highest daily production rate in history from the
company’s North American onshore properties and represents a 10 percent
increase compared to the year-ago quarter. Record production from the
company’s cornerstone development properties, including the
Devon’s first quarter liquids production increased for the sixth consecutive quarter to 256,000 Boe per day. This growth was led by a 26 percent year-over-year increase in oil production.
Sales of oil, natural gas and natural gas liquids, before the impact of
hedges, increased 3 percent to
Marketing and midstream operating profit was
Permian Basin Activity and Production Growth Lead Operating Highlights
-
Devon continued to aggressively ramp-up activity in the
Permian Basin in the first quarter. Since year-end the company has added five operated rigs and now has 21 rigs running in the basin. -
Permian Basin oil production increased 32 percent over the first-quarter 2011. Liquids production accounted for 76 percent of the 56,000 Boe per day produced in thePermian Basin during the first quarter. -
Additionally, Devon recently enhanced its leasehold position in the
Permian Basin by assembling a 500,000 net acre position in theCline Shale light-oil play. The company is currently drilling its first horizontal well in the Cline and expects to drill 15 wells in 2012. - Also in the Permian, Devon completed 16 operated Bone Spring wells in the first quarter. Initial daily production averaged 580 Boe per day per well.
-
Net production from Devon’s Jackfish 1 and Jackfish 2 oil sands
projects in
Canada averaged a record 46,000 barrels per day in the first quarter, representing a 55 percent increase over the year-ago quarter. The company’s Jackfish 2 production is now at 21,000 barrels per day and will continue to ramp-up throughout 2012. - Construction of Devon’s third Jackfish oil sands project is now approximately 30 percent complete. Jackfish 3 is expected to produce 35,000 barrels per day before royalties for more than 20 years. Plant startup is targeted for late 2014.
-
The company’s
Cana-Woodford Shale production averaged a record 271 million cubic feet of natural gas equivalent per day in the first quarter of 2012. Liquids production averaged 13,000 barrels per day, an 80 percent year-over-year increase. -
Net liquids production from the
Barnett Shale increased more than 20 percent compared to the year-ago quarter to 52,500 barrels per day, accounting for 23 percent of total Barnett production. In aggregate, net production reached a record 1.37 billion cubic feet of natural gas equivalent per day in the first quarter. - Devon brought seven operated Granite Wash wells online in the first quarter. Initial production from these wells averaged 1,650 Boe per day. The company has an average working interest of 73 percent in these wells.
- In the first quarter, the company continued to capture acreage in new oil-focused opportunities. Devon has now contracted for or leased 250,000 net acres in an undisclosed position. The company is targeting 500,000 net acres in this play.
Cost Containment Efforts Partially Offset Rising Costs
First-quarter 2012 expenses increased compared to the year-ago quarter
due to rising oilfield service and supply costs. Compared to the first
quarter of 2011, the company’s total pre-tax cash costs increased 5
percent to
Lease operating expenses (LOE) were
Taxes other than income decreased 6 percent to
Interest expense for the first quarter totaled
First-quarter general and administrative expenses were
Compared with the first-quarter 2011, depreciation, depletion and
amortization expense (DD&A) increased 21 percent to
Balance Sheet and Liquidity Remain Strong
In the first quarter of 2012, Devon generated cash flow before balance
sheet changes of
Devon Adds Oil and Gas Hedges in 2012 and 2013
The strong oil price environment has provided Devon the opportunity to
add attractive oil hedges for 2013. The company has entered into various
swap and collar contracts to hedge 72,000 barrels per day of oil
production. Of this total, 31,000 barrels per day are swapped at a
weighted average price of
The company has also recently bolstered its natural gas hedging
position. For the remaining three quarters of 2012, Devon has
approximately 1 billion cubic feet per day protected at a weighted
average floor price of
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). Cash flow before balance sheet changes, net debt and adjusted capitalization are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided on page 11.
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. The following tables summarize the first-quarter 2012 effects of these items on earnings and cash flow.
Quarter Ended March 31, 2012 | |||||||||||||||
Before-Tax | After-Tax | ||||||||||||||
Net earnings (GAAP) | $ | 393 | |||||||||||||
Adjustments on asset sales - discontinued operations | 16 | 21 | |||||||||||||
Oil and gas derivatives | 13 | 8 | |||||||||||||
Interest rate and other financial instruments | 6 | 5 | |||||||||||||
Adjusted earnings (Non-GAAP) | $ | 427 | |||||||||||||
Diluted share count | 405 | ||||||||||||||
Adjusted diluted earnings per share (Non-GAAP) | $ | 1.05 | |||||||||||||
Cash flow before balance sheet changes (Non-GAAP) | $ | 1,356 | |||||||||||||
Adjustments on asset sales - discontinued operations | (7 | ) | |||||||||||||
Adjusted cash flow before balance sheet changes (Non-GAAP) | $ | 1,349 | |||||||||||||
Conference Call to be Webcast Today
Devon will discuss its first-quarter 2012 financial and operating
results in a conference call webcast today. The webcast will begin at
This press release includes "forward-looking statements" as defined
by the
DEVON ENERGY CORPORATION | ||||||||||
FINANCIAL AND OPERATIONAL INFORMATION | ||||||||||
PRODUCTION (net of royalties) | Quarter Ended | |||||||||
Excludes discontinued operations | March 31, | |||||||||
2012 | 2011 | |||||||||
Total Period Production | ||||||||||
Natural Gas (Bcf) | ||||||||||
United States | 188.5 | 176.8 | ||||||||
Canada | 50.7 | 51.2 | ||||||||
Total Natural Gas | 239.2 | 228.0 | ||||||||
Oil (MMBbls) | ||||||||||
|
United States | 5.0 | 3.6 | |||||||
|
Canada | 7.9 | 6.5 | |||||||
Total Oil | 12.9 | 10.1 | ||||||||
Natural Gas Liquids (MMBbls) | ||||||||||
|
United States | 9.3 | 7.6 | |||||||
|
Canada | 1.0 | 0.9 | |||||||
Total Natural Gas Liquids | 10.3 | 8.5 | ||||||||
Oil Equivalent (MMBoe) | ||||||||||
|
United States | 45.7 | 40.7 | |||||||
|
Canada | 17.4 | 15.9 | |||||||
Total Oil Equivalent | 63.1 | 56.6 | ||||||||
Average Daily Production | ||||||||||
Natural Gas (MMcf) | ||||||||||
U.S. | 2,071.8 | 1,964.1 | ||||||||
Canada | 556.4 | 568.9 | ||||||||
Total Natural Gas | 2,628.2 | 2,533.0 | ||||||||
Oil (MBbls) | ||||||||||
United States | 54.7 | 40.7 | ||||||||
Canada | 87.3 | 71.9 | ||||||||
Total Oil | 142.0 | 112.6 | ||||||||
Natural Gas Liquids (MBbls) | ||||||||||
United States | 102.1 | 84.1 | ||||||||
Canada | 11.4 | 9.9 | ||||||||
Total Natural Gas Liquids | 113.5 | 94.0 | ||||||||
Oil Equivalent (MBoe) | ||||||||||
United States | 502.2 | 452.2 | ||||||||
Canada | 191.4 | 176.6 | ||||||||
Total Oil Equivalent | 693.6 | 628.8 |
DEVON ENERGY CORPORATION | ||||||||||||
FINANCIAL AND OPERATIONAL INFORMATION | ||||||||||||
BENCHMARK PRICES | Quarter Ended | |||||||||||
(average prices) | March 31, | |||||||||||
2012 | 2011 | |||||||||||
Natural Gas ($/Mcf) – Henry Hub | $ | 2.72 | $ | 4.11 | ||||||||
Oil ($/Bbl) – West Texas Intermediate (Cushing) | $ | 102.87 | $ | 94.11 |
Quarter Ended March 31, 2012 | Oil | Gas | NGLs | Total | ||||||||||||||||||
(Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | |||||||||||||||||||
United States | $ | 99.35 | $ | 2.28 | $ | 33.37 | $ | 27.03 | ||||||||||||||
Canada | $ | 62.29 | $ | 2.54 | $ | 54.18 | $ | 39.00 | ||||||||||||||
Realized price without hedges | $ | 76.58 | $ | 2.34 | $ | 35.46 | $ | 30.33 | ||||||||||||||
Cash settlements | $ | (0.44 | ) | $ | 0.68 | $ | 0.03 | $ | 2.50 | |||||||||||||
Realized price, including cash settlements | $ | 76.14 | $ | 3.02 | $ | 35.49 | $ | 32.83 |
Quarter Ended March 31, 2011 | Oil | Gas | NGLs | Total | ||||||||||||||||||
(Per Bbl) | (Per Mcf) | (Per Bbl) | (Per Boe) | |||||||||||||||||||
United States | $ | 88.73 | $ | 3.50 | $ | 35.41 | $ | 29.77 | ||||||||||||||
Canada | $ | 60.86 | $ | 4.03 | $ | 54.18 | $ | 40.78 | ||||||||||||||
Realized price without hedges | $ | 70.95 | $ | 3.62 | $ | 37.39 | $ | 32.86 | ||||||||||||||
Cash settlements | $ | (0.48 | ) | $ | 0.39 | $ | 0.06 | $ | 1.52 | |||||||||||||
Realized price, including cash settlements | $ | 70.47 | $ | 4.01 | $ | 37.45 | $ | 34.38 |
CAPITAL EXPENDITURES (in millions) | |||||||||||||||
Quarter Ended March 31, 2012 | |||||||||||||||
United States | Canada | Total | |||||||||||||
Capital Expenditures | |||||||||||||||
Exploration | $ | 210 | 145 | $ | 355 | ||||||||||
Development | 939 | 318 | 1,257 | ||||||||||||
Exploration and development capital | $ | 1,149 | 463 | $ | 1,612 | ||||||||||
Capitalized G&A | 90 | ||||||||||||||
Capitalized interest | 10 | ||||||||||||||
Midstream capital | 111 | ||||||||||||||
Other capital | 124 | ||||||||||||||
Total Continuing Operations | $ | 1,947 | |||||||||||||
Discontinued operations | 12 | ||||||||||||||
Total Operations | $ | 1,959 |
DEVON ENERGY CORPORATION | |||||||||||||
FINANCIAL AND OPERATIONAL INFORMATION | |||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | Quarter Ended | ||||||||||||
(in millions, except per share amounts) | March 31, | ||||||||||||
2012 | 2011 | ||||||||||||
Revenues | |||||||||||||
Oil, gas, and NGL sales | $ | 1,915 | $ | 1,860 | |||||||||
Oil, gas, and NGL derivatives | 145 | (168 | ) | ||||||||||
Marketing and midstream revenues | 437 | 455 | |||||||||||
Total revenues | 2,497 | 2,147 | |||||||||||
Expenses and other, net | |||||||||||||
Lease operating expenses | 514 | 424 | |||||||||||
Marketing and midstream operating costs and expenses | 325 | 333 | |||||||||||
Depreciation, depletion and amortization | 680 | 506 | |||||||||||
General and administrative expenses | 168 | 130 | |||||||||||
Taxes other than income taxes | 102 | 108 | |||||||||||
Interest expense | 87 | 81 | |||||||||||
Restructuring costs | - | (5 | ) | ||||||||||
Other, net | 10 | (10 | ) | ||||||||||
Total expenses and other, net | 1,886 | 1,567 | |||||||||||
Earnings from continuing operations before income taxes | 611 | 580 | |||||||||||
Current income tax expense (benefit) | 18 | (89 | ) | ||||||||||
Deferred income tax expense | 179 | 280 | |||||||||||
Earnings from continuing operations | 414 | 389 | |||||||||||
Earnings (loss) from discontinued operations, net of income tax expense | (21 | ) | 27 | ||||||||||
Net earnings | $ | 393 | $ | 416 | |||||||||
Basic net earnings per share | |||||||||||||
Basic earnings from continuing operations per share | $ | 1.03 | $ | 0.91 | |||||||||
Basic earnings (loss) from discontinued operations per share | (0.06 | ) | 0.06 | ||||||||||
Basic net earnings per share | $ | 0.97 | $ | 0.97 | |||||||||
Diluted net earnings per share | |||||||||||||
Diluted earnings from continuing operations per share | $ | 1.03 | $ | 0.91 | |||||||||
Diluted earnings (loss) from discontinued operations per share | (0.06 | ) | 0.06 | ||||||||||
Diluted net earnings per share | $ | 0.97 | $ | 0.97 | |||||||||
Weighted average common shares outstanding | |||||||||||||
Basic | 404 | 428 | |||||||||||
Diluted | 405 | 430 |
DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION |
|||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(in millions) | Quarter Ended March 31, | ||||||||||||
2012 | 2011 | ||||||||||||
Cash Flows From Operating Activities | |||||||||||||
Net earnings | $ | 393 | $ | 416 | |||||||||
Earnings from discontinued operations, net of tax | 21 | (27 | ) | ||||||||||
Adjustments to reconcile earnings from continuing operations | |||||||||||||
to net cash provided by operating activities: | |||||||||||||
Depreciation, depletion and amortization | 680 | 506 | |||||||||||
Deferred income tax expense | 179 | 280 | |||||||||||
Unrealized change in fair value of financial instruments | 22 | 253 | |||||||||||
Other noncash charges | 54 | 36 | |||||||||||
Net cash from operating activities before balance sheet changes | 1,349 | 1,464 | |||||||||||
Net increase in working capital | (321 | ) | (171 | ) | |||||||||
Increase in long-term other assets | (12 | ) | (4 | ) | |||||||||
Decrease in long-term other liabilities | (16 | ) | (23 | ) | |||||||||
Cash from operating activities - continuing operations | 1,000 | 1,266 | |||||||||||
Cash from operating activities - discontinued operations | 26 | (6 | ) | ||||||||||
Net cash from operating activities | 1,026 | 1,260 | |||||||||||
Cash Flows From Investing Activities | |||||||||||||
Capital expenditures | (2,088 | ) | (1,827 | ) | |||||||||
Purchases of short-term investments | (827 | ) | (1,636 | ) | |||||||||
Redemptions of short-term investments | 1,048 | 145 | |||||||||||
Other | (1 | ) | (4 | ) | |||||||||
Cash from investing activities - continuing operations | (1,868 | ) | (3,322 | ) | |||||||||
Cash from investing activities - discontinued operations | 58 | (52 | ) | ||||||||||
Net cash from investing activities | (1,810 | ) | (3,374 | ) | |||||||||
Cash Flows From Financing Activities | |||||||||||||
Net commercial paper borrowings | 357 | 1,197 | |||||||||||
Credit facility borrowings | 750 | - | |||||||||||
Proceeds from stock option exercises | 20 | 88 | |||||||||||
Repurchases of common stock | - | (706 | ) | ||||||||||
Dividends paid on common stock | (80 | ) | (68 | ) | |||||||||
Excess tax benefits related to share-based compensation | 1 | 9 | |||||||||||
Net cash from financing activities | 1,048 | 520 | |||||||||||
Effect of exchange rate changes on cash | 9 | 20 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 273 | (1,574 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 5,555 | 3,290 | |||||||||||
Cash and cash equivalents at end of period | $ | 5,828 | $ | 1,716 |
DEVON ENERGY CORPORATION | ||||||||||||||
FINANCIAL AND OPERATIONAL INFORMATION | ||||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||||
(in millions) | March 31, | December 31, | ||||||||||||
2012 | 2011 | |||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 5,828 | $ | 5,555 | ||||||||||
Short-term investments | 1,282 | 1,503 | ||||||||||||
Accounts receivable | 1,107 | 1,379 | ||||||||||||
Other current assets | 861 | 868 | ||||||||||||
Total current assets | 9,078 | 9,305 | ||||||||||||
Property and equipment, at cost: | ||||||||||||||
Oil and gas, based on full cost accounting: | ||||||||||||||
Subject to amortization | 64,272 | 61,696 | ||||||||||||
Not subject to amortization | 3,896 | 3,982 | ||||||||||||
Total oil and gas | 68,168 | 65,678 | ||||||||||||
Other | 5,341 | 5,098 | ||||||||||||
Total property and equipment, at cost | 73,509 | 70,776 | ||||||||||||
Less accumulated depreciation, depletion and amortization | (46,948 | ) | (46,002 | ) | ||||||||||
Property and equipment, net | 26,561 | 24,774 | ||||||||||||
Goodwill | 6,067 | 6,013 | ||||||||||||
Other long-term assets | 899 | 1,025 | ||||||||||||
Total Assets | $ | 42,605 | $ | 41,117 | ||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 1,079 | $ | 1,471 | ||||||||||
Revenues and royalties payable | 513 | 678 | ||||||||||||
Short-term debt | 4,120 | 3,811 | ||||||||||||
Other current liabilities | 550 | 778 | ||||||||||||
Total current liabilities | 6,262 | 6,738 | ||||||||||||
Long-term debt | 6,719 | 5,969 | ||||||||||||
Asset retirement obligations | 1,944 | 1,496 | ||||||||||||
Other long-term liabilities | 752 | 721 | ||||||||||||
Deferred income taxes | 4,972 | 4,763 | ||||||||||||
Stockholders' equity: | ||||||||||||||
Common stock | 40 | 40 | ||||||||||||
Additional paid-in capital | 3,564 | 3,507 | ||||||||||||
Retained earnings | 16,621 | 16,308 | ||||||||||||
Accumulated other comprehensive earnings | 1,731 | 1,575 | ||||||||||||
Total Stockholders' Equity | 21,956 | 21,430 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 42,605 | $ | 41,117 | ||||||||||
Common Shares Outstanding | 404 | 404 |
DEVON ENERGY CORPORATION | |||||||||
FINANCIAL AND OPERATIONAL INFORMATION | |||||||||
COMPANY OPERATED RIGS | Quarter Ended | ||||||||
March 31, | |||||||||
2012 | 2011 | ||||||||
Number of Company Operated Rigs Running | |||||||||
United States |
67 |
70 | |||||||
Canada | 3 | 5 | |||||||
Total |
70 |
75 |
KEY OPERATING STATISTICS BY REGION | |||||||||||||
Quarter Ended March 31, 2012 | Avg. Production | Operated Rigs at | Gross Wells | ||||||||||
(MBOED) | March 31, 2012 | Drilled | |||||||||||
Barnett Shale | 229.1 | 12 | 95 | ||||||||||
Canadian Oilsands - Jackfish / Pike | 46.1 | 1 | 8 | ||||||||||
Cana-Woodford Shale | 45.1 | 16 | 44 | ||||||||||
Granite Wash | 18.6 | 3 | 16 | ||||||||||
Gulf Coast / East Texas | 65.7 |
6 |
11 | ||||||||||
Lloydminster | 38.8 | - | 49 | ||||||||||
Permian Basin | 56.3 | 20 | 63 | ||||||||||
Rocky Mountains | 62.6 | 4 | 7 | ||||||||||
Other | 131.3 |
8 |
44 | ||||||||||
Total | 693.6 |
70 |
337 | ||||||||||
FINANCIAL AND OPERATIONAL INFORMATION
NON-GAAP FINANCIAL MEASURES
RECONCILIATION TO GAAP INFORMATION | Quarter Ended | ||||||||||||
(in millions) | March 31, | ||||||||||||
2012 | 2011 | ||||||||||||
Net Cash Provided By Operating Activities (GAAP) | $ | 1,026 | $ | 1,260 | |||||||||
Changes in assets and liabilities - continuing operations | 349 | 198 | |||||||||||
Changes in assets and liabilities - discontinued operations | (19 | ) | 30 | ||||||||||
Cash flow before balance sheet changes (Non-GAAP) | $ | 1,356 | $ | 1,488 | |||||||||
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, cash equivalents and short-term investments. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt.
RECONCILIATION TO GAAP INFORMATION | |||||||||||
(in millions) | |||||||||||
March 31, | |||||||||||
2012 | 2011 | ||||||||||
Total debt (GAAP) | $ | 10,839 | $ | 6,803 | |||||||
Adjustments: | |||||||||||
Cash and short-term investments | 7,110 | 3,352 | |||||||||
Net debt (Non-GAAP) | $ | 3,729 | $ | 3,451 | |||||||
Total debt | $ | 10,839 | $ | 6,803 | |||||||
Stockholders' equity | 21,956 | 19,229 | |||||||||
Total capitalization (GAAP) | $ | 32,795 | $ | 26,032 | |||||||
Net debt | $ | 3,729 | $ | 3,451 | |||||||
Stockholders' equity | 21,956 | 19,229 | |||||||||
Adjusted capitalization (Non-GAAP) | $ | 25,685 | $ | 22,680 |
Source:
Devon Energy Corporation
Investor Contacts
Shea Snyder,
405-552-4782
or
Scott Coody, 405-552-4735
or
Media
Contact
Chip Minty, 405-228-8647