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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
 	x 	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
 	    	For the fiscal year ended December 31, 2012	
or
 
 	¨ 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
Commission File Number 001-32318
DEVON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	 	73-1567067	
(State of other jurisdiction of incorporation or organization)	 	(I.R.S. Employer identification No.)	
		
333 West Sheridan Avenue, Oklahoma City, Oklahoma	 	73102-5015	
(Address of principal executive offices)	 	(Zip code)	
Registrant’s telephone number, including area code:
(405) 235-3611
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	  	Name of each exchange on which registered	
		
Common stock, par value $0.10 per share	  	The New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   x     No   ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   x
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.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   x     No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x              Accelerated filer  ¨             Non-accelerated filer  ¨              Smaller reporting company  ¨
                            (Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 29, 2012, was approximately $23.3 billion, based upon the closing price of $57.99 per share as reported by the New York Stock Exchange on such date. On February 6, 2013, 406.0 million shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement for the 2013 annual meeting of stockholders — Part III

 

Table of Contents
 DEVON ENERGY CORPORATION
FORM 10-K
TABLE OF CONTENTS

PART I	  				
		
Items 1 and 2. Business and Properties	  	 	3	  	
Item 1A.  Risk Factors	  	 	15	  	
Item 1B.  Unresolved Staff Comments	  	 	19	  	
Item 3.     Legal Proceedings	  	 	19	  	
Item 4.     Mine Safety Disclosures	  	 	19	  	
		
PART II	  				
		
Item 5.      Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	  	 	20	  	
Item 6.     Selected Financial Data	  	 	22	  	
Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	23	  	
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk	  	 	44	  	
Item 8.     Financial Statements and Supplementary Data	  	 	46	  	
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	  	 	102	  	
Item 9A.  Controls and Procedures	  	 	102	  	
Item 9B.  Other Information	  	 	102	  	
		
PART III	  				
		
Item 10.   Directors, Executive Officers and Corporate Governance	  	 	103	  	
Item 11.   Executive Compensation	  	 	103	  	
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	  	 	103	  	
Item 13.   Certain Relationships and Related Transactions, and Director Independence	  	 	103	  	
Item 14.   Principal Accountant Fees and Services	  	 	103	  	
		
PART IV	  				
		
Item 15.        Exhibits and Financial Statement Schedules	  	 	104	  	
Signatures	  	 	109	  	
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements regarding our expectations and plans, as well as future events or conditions. Such forward-looking statements are based on our examination of historical operating trends, the information used to prepare our December 31, 2012 reserve reports and other data in our possession or available from third parties. 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 from our expectations due to a number of factors, such as changes in the supply of and demand for oil, natural gas and natural gas liquids (“NGLs”) and related products and services; exploration or drilling programs; political or regulatory events; general economic and financial market conditions; and other factors discussed in this report.
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.
 
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PART I
 Items 1 and 2. Business and Properties 
General
Devon Energy Corporation (“Devon”) is a leading independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Our operations are concentrated in various North American onshore areas in the U.S. and Canada. We also own natural gas pipelines, plants and treatment facilities in many of our producing areas, making us one of North America’s larger processors of natural gas.
Devon pioneered the commercial development of natural gas from shale and coalbed formations, and we are a proven leader in using steam to produce bitumen from the Canadian oil sands. A Delaware corporation formed in 1971, we have been publicly held since 1988, and our common stock is listed on the New York Stock Exchange. Our principal and administrative offices are located at 333 West Sheridan, Oklahoma City, OK 73102-5015 (telephone 405/235-3611). As of December 31, 2012, we had approximately 5,700 employees.
Devon files or furnishes annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as well as any amendments to these reports with the U.S. Securities and Exchange Commission (“SEC”). Through our website, http://www.devonenergy.com, we make available electronic copies of the documents we file or furnish to the SEC, the charters of the committees of our Board of Directors and other documents related to our corporate governance (including our Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer). Access to these electronic filings is available free of charge as soon as reasonably practicable after filing or furnishing them to the SEC. Printed copies of our committee charters or other governance documents and filings can be requested by writing to our corporate secretary at the address on the cover of this report.
In addition, the public may read and copy any materials Devon files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. The public may also obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Reports filed with the SEC are also made available on its website at www.sec.gov.
Strategy
We strive to maximize long-term value for our shareholders by delivering strong full-cycle margins on our assets and top-quartile per share returns. In pursuit of this objective, we focus on growing cash flow per share, adjusted for debt, which has the greatest long-term correlation to share price appreciation in our industry. We also focus on growth in earnings, production and reserves, all on a per debt-adjusted share basis. We do this by:
 
 	•	 	exercising capital allocation and investment discipline;	
 
 	•	 	focusing on high-return projects;	
 
 	•	 	maintaining a low cost structure;	
 
 	•	 	preserving financial strength and flexibility; and	
 
 	•	 	balancing our production and resource mix between oil, natural gas and NGLs.	
We hold 14 million net acres, of which roughly two-thirds are undeveloped, providing us with a platform for future growth. An important factor in determining the direction of our growth strategy, particularly our capital allocation, is the current and forecasted pricing applicable to our production. Our industry had been operating in an environment that had involved depressed North American gas prices contrasted with more robust prices for oil and NGLs. Consequently, with a production profile that is approximately 60% gas, we have focused our recent capital programs on higher-margin, liquids-based resource capture and development. With recent changes in market conditions that have led to challenged prices for NGLs and Canadian heavy oil, we are refining our capital allocations as needed and evaluating other investment opportunities to maximize and accelerate growth in cash flow per debt-adjusted share.
 
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Oil and Gas Properties
Property Profiles
The locations of our key properties are presented on the following map. These properties include those that currently have significant proved reserves and production, as well as properties that do not currently have significant levels of proved reserves or production but are expected to be the source of significant future growth in proved reserves and production.

 
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The following table outlines a summary of key data in each of our operating areas for 2012. Notes 21 and 22 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report contain additional information on our segments and geographical areas. In the following table and throughout this report, we convert our proved reserves and production to Boe. Gas proved reserves and production are converted to Boe at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of gas and oil. Bitumen and NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.

 	  	Proved Reserves	 	 	Production	 	 	 	 	  	 	 	
 	  	MMBoe	 	  	% of
Total	 	 	% Liquids	 	 	MBoe/d	 	  	% of
Total	 	 	%
Liquids	 	 	Total
Net Acres	 	  	Gross
Wells
Drilled	 	
 	  	 	 	  	 	 	 	 	 	 	 	 	  	 	 	 	(In thousands)	 	
U.S.	  				  				 				 				  				 				 				  				
Barnett Shale	  	 	1,058	  	  	 	35.7	% 	 	 	23.7	% 	 	 	227.5	  	  	 	33.3	% 	 	 	21.3	% 	 	 	620	  	  	 	322	  	
Cana-Woodford Shale	  	 	427	  	  	 	14.4	% 	 	 	41.4	% 	 	 	48.3	  	  	 	7.1	% 	 	 	30.0	% 	 	 	260	  	  	 	164	  	
Permian Basin	  	 	227	  	  	 	7.6	% 	 	 	79.6	% 	 	 	61.6	  	  	 	9.0	% 	 	 	77.1	% 	 	 	1,530	  	  	 	241	  	
Gulf Coast/East Texas	  	 	221	  	  	 	7.5	% 	 	 	25.0	% 	 	 	61.3	  	  	 	9.0	% 	 	 	23.7	% 	 	 	1,660	  	  	 	50	  	
Rocky Mountains	  	 	157	  	  	 	5.3	% 	 	 	37.1	% 	 	 	58.7	  	  	 	8.6	% 	 	 	28.1	% 	 	 	1,165	  	  	 	16	  	
Granite Wash	  	 	51	  	  	 	1.7	% 	 	 	41.0	% 	 	 	18.7	  	  	 	2.7	% 	 	 	45.5	% 	 	 	65	  	  	 	48	  	
Mississippian	  	 	6	  	  	 	0.2	% 	 	 	61.5	% 	 	 	1.0	  	  	 	0.2	% 	 	 	76.8	% 	 	 	545	  	  	 	35	  	
Other	  	 	89	  	  	 	3.1	% 	 	 	32.6	% 	 	 	22.5	  	  	 	3.3	% 	 	 	29.2	% 	 	 	1,155	  	  	 	71	  	
	  	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	
Total U.S.	  	 	2,236	  	  	 	75.5	% 	 	 	34.7	% 	 	 	499.7	  	  	 	73.2	% 	 	 	31.5	% 	 	 	7,000	  	  	 	947	  	
	  	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	
Canada	  				  				 				 				  				 				 				  				
Canadian Oil Sands	  	 	528	  	  	 	17.8	% 	 	 	100.0	% 	 	 	47.6	  	  	 	7.0	% 	 	 	100.0	% 	 	 	90	  	  	 	16	  	
Lloydminster	  	 	38	  	  	 	1.3	% 	 	 	86.9	% 	 	 	37.0	  	  	 	5.4	% 	 	 	82.5	% 	 	 	2,740	  	  	 	173	  	
Other	  	 	161	  	  	 	5.4	% 	 	 	32.4	% 	 	 	98.0	  	  	 	14.4	% 	 	 	20.2	% 	 	 	4,245	  	  	 	72	  	
	  	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	
Total Canada	  	 	727	  	  	 	24.5	% 	 	 	84.3	% 	 	 	182.6	  	  	 	26.8	% 	 	 	53.6	% 	 	 	7,075	  	  	 	261	  	
	  	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	
Devon	  	 	2,963	  	  	 	100.0	% 	 	 	46.9	% 	 	 	682.3	  	  	 	100.0	% 	 	 	37.4	% 	 	 	14,075	  	  	 	1,208	  	
	  	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	 				 	 	 	 	  	 	 	 	
U.S.
Barnett Shale  — This is our largest property both in terms of production and proved reserves. Our leases are located primarily in Denton, Johnson, Parker, Tarrant and Wise counties in north Texas. The Barnett Shale is a non-conventional reservoir, producing natural gas, NGLs and condensate.
We are the largest producer in the Barnett Shale. Since acquiring a substantial position in this field in 2002, we continue to introduce technology and new innovations to enhance production and have transformed this into one of the top producing gas fields in North America. We have drilled in excess of 5,000 wells in the Barnett Shale since 2002, yet we still have several thousand remaining drilling locations. In 2013, we plan to drill approximately 150 wells, focused in the areas with the highest liquids content.
In addition, we have a significant processing plant and gathering system in north Texas to service these properties. Our Bridgeport plant is one of the largest processing plants in the U.S., currently with 650 MMcf per day of total capacity, and an additional 140 MMcf expansion expected in 2013 to accommodate increasing demand from our liquids-rich drilling. These midstream assets also include an extensive pipeline system and a 15 MBbls per day NGL fractionator.
Cana-Woodford Shale  — Our acreage is located primarily in Oklahoma’s Canadian, Blaine, Caddo and Dewey counties. The Cana-Woodford Shale is a non-conventional reservoir and produces natural gas, NGLs and condensate.
 
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The Cana-Woodford Shale is a leading growth area for us and has rapidly emerged as one of the most economic shale plays in North America. We are the largest leaseholder and the largest producer in the Cana-Woodford Shale. During 2012, we increased our production by 45 percent. We have several thousand remaining drilling locations. In 2013, we plan to drill approximately 150 wells.
In addition, we have a significant processing plant and gathering system to service these properties. Our Cana plant currently has 200 MMcf per day of total capacity, and an additional 150 MMcf expansion expected in 2013 to accommodate increasing demand from our liquids-rich drilling.
Permian Basin  — Our acreage is located in various counties in west Texas and southeast New Mexico. These properties have been a legacy asset for us and continue to offer both exploration and low-risk development opportunities. We entered into a joint venture arrangement with Sumitomo in 2012, covering approximately 650,000 net acres in the Cline Shale and Midland-Wolfcamp Shale and further strengthening the capital efficiency of our exploration programs. In addition to the Cline and Wolfcamp Shale activity, our current drilling activity continues to target conventional and non-conventional oil and liquids-rich gas targets within the Conventional Delaware, Bone Spring, Midland-Wolfcamp, Wolfberry and Avalon Shale plays. In 2013, we plan to drill approximately 300 wells.
Gulf Coast/East Texas — Our acreage is located primarily in Harrison, Marion, Panola and Shelby counties in the Carthage/Groesbeck areas of east Texas. These wells produce natural gas and NGLs from conventional reservoirs. In 2013, we plan to drill approximately 10 wells, focused in the areas with the highest liquids content.
Rocky Mountains — These leases are primarily concentrated in the Washakie area in Wyoming’s Carbon and Sweetwater counties. The Washakie wells produce natural gas and NGLs from conventional reservoirs. Targeting the Almond and Lewis formations, we have been among the most active drillers in the Washakie area for many years. In 2013, we plan to drill approximately 25 wells, focused in the areas with the highest liquids content.
In recent years we also have acquired a significant acreage position in the DJ Basin. This acquired acreage, along with our legacy Powder River Basin acreage, primarily targets oil in the Niobrara formation. These acres are principally located in eastern Wyoming and are being explored using 3D seismic to identify appropriate drilling zones. Furthermore, in early 2012, we entered into a joint venture arrangement with Sinopec to explore and develop the Niobrara and other new venture properties.
Granite Wash  — Our acreage is concentrated in the Texas Panhandle and western Oklahoma. These properties produce liquids and natural gas from conventional reservoirs. Our legacy land position in the Granite Wash is held by production and provides some of the best economics in our portfolio. High initial production rates and strong liquids yields contribute to the superior full-cycle rates of return. In 2013, we plan to drill approximately 50 wells.
Mississippian — These properties represent some of our newest assets, with most of our position acquired since 2011. Located in northern Oklahoma and southern Kansas, these acres target oil in the Mississippian Lime and Woodford Shale and are being explored and developed under our joint venture arrangement with Sinopec and independently by us on the acreage outside of our area of mutual interest with Sinopec. In 2013, we plan to drill approximately 400 wells.
Canada
Canadian Oil Sands  — We are the first and only U.S.-based independent energy company to develop and operate a bitumen oil sands project in Canada. We currently have two main projects, Jackfish and Pike, located in Alberta, Canada.
Jackfish is our thermal heavy oil project in the non-conventional oil sands of east central Alberta. We are employing steam-assisted gravity drainage at Jackfish. The first phase of Jackfish is fully operational with a
 
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gross facility capacity of 35 MBbls per day. Jackfish production increased 37 percent in 2012 as the second phase of Jackfish, which came on-line in the second quarter of 2011, continued to increase production. Construction of a third phase began in 2012 with plant startup expected by year-end 2014. We expect each phase to maintain a flat production profile for greater than 20 years at an average net production rate of approximately 25-30 MBbls per day.
Our Pike oil sands acreage is situated directly to the south of our Jackfish acreage in east central Alberta and has similar reservoir characteristics to Jackfish. The Pike leasehold is currently undeveloped and has no proved reserves or production as of December 31, 2012. We filed a regulatory application in 2012 for the first phase of this project, with gross capacity of 105 MBbls per day, in which we hold a 50 percent interest.
To facilitate the delivery of our heavy oil production, we have a 50 percent interest in the Access Pipeline transportation system in Canada. This pipeline system allows us to blend our Jackfish, and eventually our Pike, heavy oil production with condensate or other blend-stock and transport the combined product to the Edmonton area for sale. The Access Pipeline system is currently undergoing a capacity expansion that we anticipate will be completed in late 2014. This expansion, in which we have a 50% interest, is expected to create adequate capacity to transport our anticipated Jackfish and Pike heavy oil production to the Edmonton market hub. Additionally, it will increase the transport capacity of condensate diluent available at our thermal oil facilities.
Lloydminster  — Our Lloydminster properties are located to the south and east of Jackfish in eastern Alberta and western Saskatchewan. Lloydminster produces heavy oil by conventional means, without the need for steam injection.
The region is well-developed with significant infrastructure and is primarily accessible year-round for drilling. Lloydminster is a low-risk, high margin oil development play. We have drilled approximately 2,500 wells in the area since 2003. In 2013, we plan to drill approximately 155 wells.
Proved Reserves
For estimates of our proved developed and proved undeveloped reserves and the discussion of the contribution by each key property, see Note 22 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report.
No estimates of our proved reserves have been filed with or included in reports to any federal or foreign governmental authority or agency since the beginning of 2012 except in filings with the SEC and the Department of Energy (“DOE”). Reserve estimates filed with the SEC correspond with the estimates of our reserves contained herein. Reserve estimates filed with the DOE are based upon the same underlying technical and economic assumptions as the estimates of our reserves included herein. However, the DOE requires reports to include the interests of all owners in wells that we operate and to exclude all interests in wells that we do not operate.
Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from known reservoirs under existing economic conditions, operating methods and government regulations. To be considered proved, oil and gas reserves must be economically producible before contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Also, the project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
The process of estimating oil, gas and NGL reserves is complex and requires significant judgment as discussed in “Item 1A. Risk Factors” of this report. As a result, we have developed internal policies for estimating and recording reserves. Such policies require proved reserves to be in compliance with the SEC
 
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definitions and guidance. Our policies assign responsibilities for compliance in reserves bookings to our Reserve Evaluation Group (the “Group”). These same policies also require that reserve estimates be made by professionally qualified reserves estimators (“Qualified Estimators”), as defined by the Society of Petroleum Engineers’ standards.
The Group, which is led by Devon’s Director of Reserves and Economics, is responsible for the internal review and certification of reserves estimates. We ensure the Group’s Director and key members of the Group have appropriate technical qualifications to oversee the preparation of reserves estimates, including any or all of the following:
 
 	•	 	an undergraduate degree in petroleum engineering from an accredited university, or equivalent;	
 
 	•	 	a petroleum engineering license, or similar certification;	
 
 	•	 	memberships in oil and gas industry or trade groups; and	
 
 	•	 	relevant experience estimating reserves.	
The current Director of the Group has all of the qualifications listed above. The current Director has been involved with reserves estimation in accordance with SEC definitions and guidance since 1987. He has experience in reserves estimation for projects in the U.S. (both onshore and offshore), as well as in Canada, Asia, the Middle East and South America. He has been employed by Devon for the past twelve years, including the past five in his current position. During his career, he has been responsible for reserves estimation as the primary reservoir engineer for projects including, but not limited to:
 
 	•	 	Hugoton Gas Field (Kansas),	
 
 	•	 	Sho-Vel-Tum CO 2 Flood (Oklahoma),	
 
 	•	 	West Loco Hills Unit Waterflood and CO 2 Flood (New Mexico),	
 
 	•	 	Dagger Draw Oil Field (New Mexico),	
 
 	•	 	Clarke Lake Gas Field (Alberta, Canada),	
 
 	•	 	Panyu 4-2 and 5-1 Joint Development (Offshore South China Sea), and	
 
 	•	 	ACG Unit (Caspian Sea).	
From 2003 to 2010, he served as the reservoir engineering representative on our internal peer review team. In this role, he reviewed reserves and resource estimates for projects including, but not limited to, the Mobile Bay Norphlet Discoveries (Gulf of Mexico Shelf), Cascade Lower Tertiary Development (Gulf of Mexico Deepwater) and Polvo Development (Campos Basin, Brazil).
The Group reports independently of any of our operating divisions. The Group’s Director reports to our Vice President of Budget and Reserves, who reports to our Chief Financial Officer. No portion of the Group’s compensation is directly dependent on the quantity of reserves booked.
Throughout the year, the Group performs internal audits of each operating division’s reserves. Selection criteria of reserves that are audited include major fields and major additions and revisions to reserves. In addition, the Group reviews reserve estimates with each of the third-party petroleum consultants discussed below. The Group also ensures our Qualified Estimators obtain continuing education related to the fundamentals of SEC proved reserves assignments.
The Group also oversees audits and reserves estimates performed by third-party consulting firms. During 2012, we engaged two such firms to audit 92 percent of our proved reserves. LaRoche Petroleum Consultants, Ltd. audited 91 percent of our 2012 U.S. reserves, and Deloitte audited 93 percent of our Canadian reserves.
 
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“Audited” reserves are those quantities of reserves that were estimated by our employees and audited by an independent petroleum consultant. The Society of Petroleum Engineers’ definition of an audit is an examination of a company’s proved oil and gas reserves and net cash flow by an independent petroleum consultant that is conducted for the purpose of expressing an opinion as to whether such estimates, in aggregate, are reasonable and have been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures.
In addition to conducting these internal and external reviews, we also have a Reserves Committee that consists of three independent members of our Board of Directors. This committee provides additional oversight of our reserves estimation and certification process. The Reserves Committee assists the Board of Directors with its duties and responsibilities in evaluating and reporting our proved reserves, much like our Audit Committee assists the Board of Directors in supervising our audit and financial reporting requirements. Besides being independent, the members of our Reserves Committee also have educational backgrounds in geology or petroleum engineering, as well as experience relevant to the reserves estimation process.
The Reserves Committee meets a minimum of twice a year to discuss reserves issues and policies, and meets separately with our senior reserves engineering personnel and our independent petroleum consultants at those meetings. The responsibilities of the Reserves Committee include the following:
 
 	•	 	approve the scope of and oversee an annual review and evaluation of our oil, gas and NGL reserves;	
 
 	•	 	oversee the integrity of our reserves evaluation and reporting system;	
 
 	•	 	oversee and evaluate our compliance with legal and regulatory requirements related to our reserves;	
 
 	•	 	review the qualifications and independence of our independent engineering consultants; and	
 
 	•	 	monitor the performance of our independent engineering consultants.	
Production, Production Prices and Production Costs
The following table presents production, price and cost information for each significant field, country and continent.

 	  	Production	 	
Year Ended December 31,	  	Oil (MMBbls)	 	  	Bitumen (MMBbls)	 	  	Gas (Bcf)	 	  	NGLs (MMBbls)	 	  	Total (MMBoe)	 	
2012	  				  				  				  				  				
Barnett Shale	  	 	1	  	  	 	—  	  	  	 	393	  	  	 	17	  	  	 	83	  	
Jackfish	  	 	—  	  	  	 	17	  	  	 	—  	  	  	 	—  	  	  	 	17	  	
U.S.	  	 	21	  	  	 	—  	  	  	 	752	  	  	 	36	  	  	 	183	  	
Canada	  	 	15	  	  	 	17	  	  	 	186	  	  	 	4	  	  	 	67	  	
Total North America	  	 	36	  	  	 	17	  	  	 	938	  	  	 	40	  	  	 	250	  	
2011	  				  				  				  				  				
Barnett Shale	  	 	1	  	  	 	—  	  	  	 	367	  	  	 	16	  	  	 	78	  	
Jackfish	  	 	—  	  	  	 	13	  	  	 	—  	  	  	 	—  	  	  	 	13	  	
U.S.	  	 	17	  	  	 	—  	  	  	 	740	  	  	 	33	  	  	 	173	  	
Canada	  	 	15	  	  	 	13	  	  	 	213	  	  	 	4	  	  	 	67	  	
Total North America	  	 	32	  	  	 	13	  	  	 	953	  	  	 	37	  	  	 	240	  	
2010	  				  				  				  				  				
Barnett Shale	  	 	1	  	  	 	—  	  	  	 	335	  	  	 	13	  	  	 	70	  	
Jackfish	  	 	—  	  	  	 	9	  	  	 	—  	  	  	 	—  	  	  	 	9	  	
U.S.	  	 	16	  	  	 	—  	  	  	 	716	  	  	 	28	  	  	 	163	  	
Canada	  	 	16	  	  	 	9	  	  	 	214	  	  	 	4	  	  	 	65	  	
Total North America	  	 	32	  	  	 	9	  	  	 	930	  	  	 	32	  	  	 	228	  	
 
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 	  	Average Sales Price	 	  	Production Cost
(Per Boe)	 	
Year Ended December 31,	  	Oil (Per Bbl)	 	  	Bitumen (Per Bbl)	 	  	Gas (Per Mcf)	 	  	NGLs (Per Bbl)	 	  			
2012	  				  				  				  				  				
Barnett Shale	  	$	91.45	  	  	$	—  	  	  	$	2.23	  	  	$	27.57	  	  	$	3.91	  	
Jackfish	  	$	—  	  	  	$	47.75	  	  	$	—  	  	  	$	—  	  	  	$	19.48	  	
U.S.	  	$	88.68	  	  	$	—  	  	  	$	2.32	  	  	$	28.49	  	  	$	5.79	  	
Canada	  	$	68.08	  	  	$	47.75	  	  	$	2.49	  	  	$	48.63	  	  	$	15.18	  	
Total North America	  	$	80.35	  	  	$	47.75	  	  	$	2.36	  	  	$	30.42	  	  	$	8.30	  	
2011	  				  				  				  				  				
Barnett Shale	  	$	94.23	  	  	$	—  	  	  	$	3.30	  	  	$	39.00	  	  	$	3.97	  	
Jackfish	  	$	—  	  	  	$	58.16	  	  	$	—  	  	  	$	—  	  	  	$	17.28	  	
U.S.	  	$	91.19	  	  	$	—  	  	  	$	3.50	  	  	$	39.47	  	  	$	5.35	  	
Canada	  	$	74.32	  	  	$	58.16	  	  	$	3.87	  	  	$	55.99	  	  	$	13.82	  	
Total North America	  	$	83.16	  	  	$	58.16	  	  	$	3.58	  	  	$	41.10	  	  	$	7.71	  	
2010	  				  				  				  				  				
Barnett Shale	  	$	77.40	  	  	$	—  	  	  	$	3.55	  	  	$	29.97	  	  	$	3.87	  	
Jackfish	  	$	—  	  	  	$	52.51	  	  	$	—  	  	  	$	—  	  	  	$	16.81	  	
U.S.	  	$	75.81	  	  	$	—  	  	  	$	3.76	  	  	$	30.86	  	  	$	5.47	  	
Canada	  	$	62.00	  	  	$	52.51	  	  	$	4.11	  	  	$	46.60	  	  	$	12.37	  	
Total North America	  	$	68.75	  	  	$	52.51	  	  	$	3.84	  	  	$	32.61	  	  	$	7.42	  	
Drilling Statistics
The following table summarizes our development and exploratory drilling results.

 	  	Development Wells   (1)	 	  	Exploratory Wells  (1)	 	  	Total Wells (1)	 	
Year Ended December 31,	  	Productive	 	  	Dry	 	  	Productive	 	  	Dry	 	  	Productive	 	  	Dry	 	  	Total	 	
2012	  				  				  				  				  				  				  				
U.S.	  	 	668.2	  	  	 	1.0	  	  	 	24.6	  	  	 	4.9	  	  	 	692.8	  	  	 	5.9	  	  	 	698.7	  	
Canada	  	 	209.3	  	  	 	4.0	  	  	 	27.3	  	  	 	1.0	  	  	 	236.6	  	  	 	5.0	  	  	 	241.6	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	877.5	  	  	 	5.0	  	  	 	51.9	  	  	 	5.9	  	  	 	929.4	  	  	 	10.9	  	  	 	940.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2011	  				  				  				  				  				  				  				
U.S.	  	 	721.2	  	  	 	5.5	  	  	 	18.8	  	  	 	4.0	  	  	 	740.0	  	  	 	9.5	  	  	 	749.5	  	
Canada	  	 	247.6	  	  	 	1.5	  	  	 	19.1	  	  	 	1.0	  	  	 	266.7	  	  	 	2.5	  	  	 	269.2	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	968.8	  	  	 	7.0	  	  	 	37.9	  	  	 	5.0	  	  	 	1,006.7	  	  	 	12.0	  	  	 	1,018.7	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2010	  				  				  				  				  				  				  				
U.S.	  	 	855.7	  	  	 	5.3	  	  	 	23.4	  	  	 	1.5	  	  	 	879.1	  	  	 	6.8	  	  	 	885.9	  	
Canada	  	 	267.8	  	  	 	—  	  	  	 	41.9	  	  	 	1.0	  	  	 	309.7	  	  	 	1.0	  	  	 	310.7	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	1,123.5	  	  	 	5.3	  	  	 	65.3	  	  	 	2.5	  	  	 	1,188.8	  	  	 	7.8	  	  	 	1,196.6	  	

(1)	These well counts represent net wells completed during each year. Net wells are gross wells multiplied by our fractional working interests on the well.	
 
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The following table presents the February 1, 2013, results of our wells that were in progress on December 31, 2012.

 	  	Productive	 	  	Dry	 	  	Still in Progress	 	  	Total	 	
 	  	Gross  (1)	 	  	Net  (2)	 	  	Gross  (1)	 	  	Net  (2)	 	  	Gross  (1)	 	  	Net  (2)	 	  	Gross  (1)	 	  	Net (2)	 	
U.S.	  	 	65.0	  	  	 	53.6	  	  	 	—  	  	  	 	—  	  	  	 	126.0	  	  	 	65.6	  	  	 	191.0	  	  	 	119.2	  	
Canada	  	 	8.0	  	  	 	7.6	  	  	 	—  	  	  	 	—  	  	  	 	1.0	  	  	 	0.7	  	  	 	9.0	  	  	 	8.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	73.0	  	  	 	61.2	  	  	 	—  	  	  	 	—  	  	  	 	127.0	  	  	 	66.3	  	  	 	200.0	  	  	 	127.5	  	

(1)	Gross wells are the sum of all wells in which we own an interest.	
(2)	Net wells are gross wells multiplied by our fractional working interests on the well.	
Productive Wells
The following table sets forth our producing wells as of December 31, 2012.

 	  	Oil Wells (1)	 	  	Natural Gas Wells	 	  	Total Wells	 	
 	  	Gross (2)	 	  	Net (3)	 	  	Gross (2)	 	  	Net (3)	 	  	Gross (2)	 	  	Net (3)	 	
U.S.	  	 	8,655	  	  	 	3,202	  	  	 	20,858	  	  	 	13,672	  	  	 	29,513	  	  	 	16,874	  	
Canada	  	 	5,316	  	  	 	4,119	  	  	 	5,578	  	  	 	3,320	  	  	 	10,894	  	  	 	7,439	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	13,971	  	  	 	7,321	  	  	 	26,436	  	  	 	16,992	  	  	 	40,407	  	  	 	24,313	  	

(1)	Includes bitumen wells.	
(2)	Gross wells are the sum of all wells in which we own an interest.	
(3)	Net wells are gross wells multiplied by our fractional working interests on the well.	
The day-to-day operations of oil and gas properties are the responsibility of an operator designated under pooling or operating agreements. The operator supervises production, maintains production records, employs field personnel and performs other functions. We are the operator of approximately 25,000 of our wells. As operator, we receive reimbursement for direct expenses incurred to perform our duties, as well as monthly per-well producing and drilling overhead reimbursement at rates customarily charged in the area. In presenting our financial data, we record the monthly overhead reimbursements as a reduction of general and administrative expense, which is a common industry practice.
Acreage Statistics
The following table sets forth our developed and undeveloped lease and mineral acreage as of December 31, 2012. The acreage in the table includes 1.4 million, 0.8 million and 1.6 million net acres subject to leases that are scheduled to expire during 2013, 2014 and 2015, respectively.

 	  	Developed	 	  	Undeveloped	 	  	Total	 	
 	  	Gross  (1)	 	  	Net (2)	 	  	Gross (1) 	 	  	Net  (2)	 	  	Gross (1)	 	  	Net (2)	 	
 	  	(In thousands)	 	
U.S.	  	 	3,195	  	  	 	2,210	  	  	 	7,830	  	  	 	4,790	  	  	 	11,025	  	  	 	7,000	  	
Canada	  	 	3,665	  	  	 	2,270	  	  	 	6,635	  	  	 	4,805	  	  	 	10,300	  	  	 	7,075	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	 	6,860	  	  	 	4,480	  	  	 	14,465	  	  	 	9,595	  	  	 	21,325	  	  	 	14,075	  	

(1)	Gross acres are the sum of all acres in which we own an interest.	
(2)	Net acres are gross acres multiplied by our fractional working interests on the acreage.	
 
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Title to Properties
Title to properties is subject to contractual arrangements customary in the oil and gas industry, liens for taxes not yet due and, in some instances, other encumbrances. We believe that such burdens do not materially detract from the value of properties or from the respective interests therein or materially interfere with their use in the operation of the business.
As is customary in the industry, other than a preliminary review of local records, little investigation of record title is made at the time of acquisitions of undeveloped properties. Investigations, which generally include a title opinion of outside counsel, are made prior to the consummation of an acquisition of producing properties and before commencement of drilling operations on undeveloped properties.
Marketing and Midstream Activities
Our marketing and midstream operations provide gathering, compression, treating, processing, fractionation and marketing services to us and other third-parties. We generate revenues from these operations by collecting service fees and selling processed gas and NGLs. The expenses associated with these operations primarily consist of the costs to operate our gathering systems, plants and related facilities, as well as purchases of gas and NGLs.
Oil, Gas and NGL Marketing
The spot markets for oil, gas and NGLs are subject to volatility as supply and demand factors fluctuate. As detailed below, we sell our production under both long-term (one year or more) and short-term (less than one year) agreements at prices negotiated with third parties. Regardless of the term of the contract, the vast majority of our production is sold at variable, or market-sensitive, prices.
Additionally, we may periodically enter into financial hedging arrangements or fixed-price contracts associated with a portion of our oil, gas and NGL production. These activities are intended to support targeted price levels and to manage our exposure to price fluctuations. See Note 2 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report for further information.
As of January 2013, our production was sold under the following contracts.

 	  	Short-Term	 	 	Long-Term	 	
 	  	Variable	 	 	Fixed	 	 	Variable	 	 	Fixed	 	
Oil and bitumen	  	 	76	% 	 	 	—  	  	 	 	24	% 	 	 	—  	  	
Natural gas	  	 	73	% 	 	 	—  	  	 	 	27	% 	 	 	—  	  	
NGLs	  	 	78	% 	 	 	14	% 	 	 	1	% 	 	 	7	% 	
Delivery Commitments
A portion of our production is sold under certain contractual arrangements that specify the delivery of a fixed and determinable quantity. As of December 31, 2012, we were committed to deliver the following fixed quantities of production.

 	  	Total	 	  	Less Than 1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5  Years	 	
Oil and bitumen (MMBbls)	  	 	124	  	  	 	14	  	  	 	30	  	  	 	31	  	  	 	49	  	
Natural gas (Bcf)	  	 	    1,175	  	  	 	        623	  	  	 	        374	  	  	 	        133	  	  	 	45	  	
NGLs (MMBbls)	  	 	10	  	  	 	5	  	  	 	3	  	  	 	2	  	  	 	        —  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total (MMBoe)	  	 	330	  	  	 	123	  	  	 	95	  	  	 	55	  	  	 	57	  	

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We expect to fulfill our delivery commitments over the next three years with production from our proved developed reserves. We expect to fulfill our longer-term delivery commitments beyond three years primarily with our proved developed reserves. In certain regions, we expect to fulfill these longer-term delivery commitments with our proved undeveloped reserves.
Our proved reserves have been sufficient to satisfy our delivery commitments during the three most recent years, and we expect such reserves will continue to satisfy our future commitments. However, should our proved reserves not be sufficient to satisfy our delivery commitments, we can and may use spot market purchases to fulfill the commitments.
Customers
During 2012, 2011 and 2010, no purchaser accounted for over 10 percent of our revenues.
Competition
See “Item 1A. Risk Factors.”
Public Policy and Government Regulation
The oil and natural gas industry is subject to regulation throughout the world. Laws, rules, regulations and other policy implementation actions affecting the oil and natural gas industry have been pervasive and are under constant review for amendment or expansion. Numerous government agencies have issued extensive laws and regulations which are binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. These laws and regulations increase the cost of doing business and consequently affect profitability. Because public policy changes are commonplace, and existing laws and regulations are frequently amended, we are unable to predict the future cost or impact of compliance. However, we do not expect that any of these laws and regulations will affect our operations differently than they would affect other oil and natural gas companies of similar size and financial strength. The following are significant areas of government control and regulation affecting our operations.
Exploration and Production Regulation
Our oil and gas operations are subject to federal, state, provincial, tribal and local laws and regulations. These laws and regulations relate to matters that include:
 
 	•	 	acquisition of seismic data;	
 
 	•	 	location, drilling and casing of wells;	
 
 	•	 	hydraulic fracturing;	
 
 	•	 	well production;	
 
 	•	 	spill prevention plans;	
 
 	•	 	emissions and discharge permitting;	
 
 	•	 	use, transportation, storage and disposal of fluids and materials incidental to oil and gas operations;	
 
 	•	 	surface usage and the restoration of properties upon which wells have been drilled;	
 
 	•	 	calculation and disbursement of royalty payments and production taxes;	
 
 	•	 	plugging and abandoning of wells; and	
 
 	•	 	transportation of production.	
Our operations also are subject to conservation regulations, including the regulation of the size of drilling and spacing units or proration units; the number of wells that may be drilled in a unit; the rate of production allowable
 
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from oil and gas wells; and the unitization or pooling of oil and gas properties. In the U.S., some states allow the forced pooling or integration of tracts to facilitate exploration, while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratable purchase of production. These regulations limit the amounts of oil and gas we can produce from our wells and the number of wells or the locations at which we can drill.
Certain of our U.S. natural gas and oil leases are granted by the federal government and administered by the Bureau of Land Management of the Department of the Interior. Such leases require compliance with detailed federal regulations and orders that regulate, among other matters, drilling and operations on lands covered by these leases, and calculation and disbursement of royalty payments to the federal government. The federal government has been particularly active in recent years in evaluating and, in some cases, promulgating new rules and regulations regarding competitive lease bidding and royalty payment obligations for production from federal lands.
Royalties and Incentives in Canada
The royalty system in Canada is a significant factor in the profitability of oil and gas production. Royalties payable on production from lands other than Crown lands are determined by negotiations between the parties. Crown royalties are determined by government regulation and are generally calculated as a percentage of the value of the gross production, with the royalty rate dependent in part upon prescribed reference prices, well productivity, geographical location and the type and quality of the petroleum product produced. Occasionally the federal and provincial governments of Canada also have established incentive programs, such as royalty rate reductions, royalty holidays, and tax credits, for the purpose of encouraging oil and gas exploration or enhanced recovery projects. These incentives generally increase our revenues, earnings and cash flow.
Marketing in Canada
Any oil or gas export that exceeds a certain duration or a certain quantity requires an exporter to obtain export authorizations from Canada’s National Energy Board (“NEB”). The governments of Alberta, British Columbia and Saskatchewan also regulate the volume of natural gas that may be removed from those provinces for consumption elsewhere.
Environmental and Occupational Regulations
We are subject to many federal, state, provincial, tribal and local laws and regulations concerning occupational safety and health as well as the discharge of materials into, and the protection of, the environment. Environmental laws and regulations relate to:
 
 	•	 	assessing the environmental impact of seismic acquisition, drilling or construction activities;	
 
 	•	 	the generation, storage, transportation and disposal of waste materials;	
 
 	•	 	the emission of certain gases into the atmosphere;	
 
 	•	 	the monitoring, abandonment, reclamation and remediation of well and other sites, including sites of former operations; and	
 
 	•	 	the development of emergency response and spill contingency plans.	
We consider the costs of environmental protection and safety and health compliance necessary yet manageable parts of our business. We have been able to plan for and comply with environmental, safety and health initiatives without materially altering our operating strategy or incurring significant unreimbursed expenditures. However, based on regulatory trends and increasingly stringent laws, our capital expenditures and operating expenses related to the protection of the environment and safety and health compliance have increased over the years and will likely continue to increase. We cannot predict with any reasonable degree of certainty our future exposure concerning such matters.
 
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 Item 1A. Risk Factors 
Our business activities, and the oil and gas industry in general, are subject to a variety of risks. If any of the following risk factors should occur, our profitability, financial condition or liquidity could be materially impacted. As a result, holders of our securities could lose part or all of their investment in Devon.
Oil, Gas and NGL Prices are Volatile
Our financial results are highly dependent on the general supply and demand for oil, gas and NGLs, which impact the prices we ultimately realize on our sales of these commodities. A significant downward movement of the prices for these commodities could have a material adverse effect on our revenues, operating cash flows and profitability. Such a downward price movement could also have a material adverse effect on our estimated proved reserves, the carrying value of our oil and gas properties, the level of planned drilling activities and future growth. Historically, market prices and our realized prices have been volatile and are likely to continue to be volatile in the future due to numerous factors beyond our control. These factors include, but are not limited to:
 
 	•	 	supply of and consumer demand for oil, gas and NGLs;	
 
 	•	 	conservation efforts;	
 
 	•	 	OPEC production levels;	
 
 	•	 	weather;	
 
 	•	 	regional pricing differentials;	
 
 	•	 	differing quality of oil produced (i.e., sweet crude versus heavy or sour crude);	
 
 	•	 	differing quality and NGL content of gas produced;	
 
 	•	 	the level of imports and exports of oil, gas and NGLs;	
 
 	•	 	the price and availability of alternative fuels;	
 
 	•	 	the overall economic environment; and	
 
 	•	 	governmental regulations and taxes.	
Estimates of Oil, Gas and NGL Reserves are Uncertain
The process of estimating oil, gas and NGL reserves is complex and requires significant judgment in the evaluation of available geological, engineering and economic data for each reservoir, particularly for new discoveries. Because of the high degree of judgment involved, different reserve engineers may develop different estimates of reserve quantities and related revenue based on the same data. In addition, the reserve estimates for a given reservoir may change substantially over time as a result of several factors including additional development activity, the viability of production under varying economic conditions and variations in production levels and associated costs. Consequently, material revisions to existing reserve estimates may occur as a result of changes in any of these factors. Such revisions to proved reserves could have a material adverse effect on our estimates of future net revenue, as well as our financial condition and profitability. Our policies and internal controls related to estimating and recording reserves are included in “Items 1 and 2. Business and Properties” of this report.
Discoveries or Acquisitions of Reserves are Needed to Avoid a Material Decline in Reserves and Production
The production rates from oil and gas properties generally decline as reserves are depleted, while related per unit production costs generally increase, due to decreasing reservoir pressures and other factors. Therefore, our estimated proved reserves and future oil, gas and NGL production will decline materially as reserves are
 
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produced unless we conduct successful exploration and development activities or, through engineering studies, identify additional producing zones in existing wells, secondary or tertiary recovery techniques, or acquire additional properties containing proved reserves. Consequently, our future oil, gas and NGL production and related per unit production costs are highly dependent upon our level of success in finding or acquiring additional reserves.
Future Exploration and Drilling Results are Uncertain and Involve Substantial Costs
Substantial costs are often required to locate and acquire properties and drill exploratory wells. Such activities are subject to numerous risks, including the risk that we will not encounter commercially productive oil or gas reservoirs. The costs of drilling and completing wells are often uncertain. In addition, oil and gas properties can become damaged or drilling operations may be curtailed, delayed or canceled as a result of a variety of factors including, but not limited to:
 
 	•	 	unexpected drilling conditions;	
 
 	•	 	pressure or irregularities in reservoir formations;	
 
 	•	 	equipment failures or accidents;	
 
 	•	 	fires, explosions, blowouts and surface cratering;	
 
 	•	 	adverse weather conditions;	
 
 	•	 	lack of access to pipelines or other transportation methods;	
 
 	•	 	environmental hazards or liabilities; and	
 
 	•	 	shortages or delays in the availability of services or delivery of equipment.	
A significant occurrence of one of these factors could result in a partial or total loss of our investment in a particular property. In addition, drilling activities may not be successful in establishing proved reserves. Such a failure could have an adverse effect on our future results of operations and financial condition. While both exploratory and developmental drilling activities involve these risks, exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons.
Competition for Leases, Materials, People and Capital Can Be Significant
Strong competition exists in all sectors of the oil and gas industry. We compete with major integrated and independent oil and gas companies for the acquisition of oil and gas leases and properties. We also compete for the equipment and personnel required to explore, develop and operate properties. Competition is also prevalent in the marketing of oil, gas and NGLs. Typically, during times of high or rising commodity prices, drilling and operating costs will also increase. Higher prices will also generally increase the cost to acquire properties. Certain of our competitors have financial and other resources substantially larger than ours. They also may have established strategic long-term positions and relationships in areas in which we may seek new entry. As a consequence, we may be at a competitive disadvantage in bidding for drilling rights. In addition, many of our larger competitors may have a competitive advantage when responding to factors that affect demand for oil and gas production, such as changing worldwide price and production levels, the cost and availability of alternative fuels, and the application of government regulations.
Midstream Capacity Constraints and Interruptions Impact Commodity Sales
We rely on midstream facilities and systems to process our natural gas production and to transport our production to downstream markets. Such midstream systems include the systems we operate, as well as systems operated by third parties. When possible, we gain access to midstream systems that provide the most advantageous downstream market prices available to us. Regardless of who operates the midstream systems we
 
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rely upon, a portion of our production in any region may be interrupted or shut in from time to time due to loss of access to plants, pipelines or gathering systems. Such access could be lost due to a number of factors, including, but not limited to, weather conditions, accidents, field labor issues or strikes. Additionally, we and third-parties may be subject to constraints that limit our ability to construct, maintain or repair midstream facilities needed to process and transport our production. Such interruptions or constraints could negatively impact our production and associated profitability.
Hedging Limits Participation in Commodity Price Increases and Increases Counterparty Credit Risk Exposure
We periodically enter into hedging activities with respect to a portion of our production to manage our exposure to oil, gas and NGL price volatility. To the extent that we engage in price risk management activities to protect ourselves from commodity price declines, we may be prevented from fully realizing the benefits of commodity price increases above the prices established by our hedging contracts. In addition, our hedging arrangements may expose us to the risk of financial loss in certain circumstances, including instances in which the contract counterparties fail to perform under the contracts.
Public Policy, Which Includes Laws, Rules and Regulations, Can Change
Our operations are generally subject to federal laws, rules and regulations in the U.S. and Canada. In addition, we are also subject to the laws and regulations of various states, provinces, tribal and local governments. Pursuant to public policy changes, numerous government departments and agencies have issued extensive rules and regulations binding on the oil and gas industry and its individual members, some of which require substantial compliance costs and carry substantial penalties for failure to comply. Changes in such public policy have affected, and at times in the future could affect, our operations. Political developments can restrict production levels, enact price controls, change environmental protection requirements, and increase taxes, royalties and other amounts payable to governments or governmental agencies. Existing laws and regulations can also require us to incur substantial costs to maintain regulatory compliance. Our operating and other compliance costs could increase further if existing laws and regulations are revised or reinterpreted or if new laws and regulations become applicable to our operations. Although we are unable to predict changes to existing laws and regulations, such changes could significantly impact our profitability, financial condition and liquidity, particularly changes related to hydraulic fracturing, income taxes and climate change as discussed below.
Hydraulic Fracturing – The U.S. Department of the Interior is considering the possibility of additional regulation of hydraulic fracturing on federal and Indian lands. Currently, regulation of hydraulic fracturing is conducted primarily at the state level through permitting and other compliance requirements. We lease federal and Indian lands and would be affected by the Interior Department proposal if it were to become law.
Income Taxes – We are subject to federal, state, provincial and local income taxes and our operating cash flow is sensitive to the amount of income taxes we must pay. In the jurisdictions in which we operate, income taxes are assessed on our earnings after consideration of all allowable deductions and credits. Changes in the types of earnings that are subject to income tax, the types of costs that are considered allowable deductions or the rates assessed on our taxable earnings would all impact our income taxes and resulting operating cash flow. Recently, the U.S. President and other policy makers have proposed provisions that would, if enacted, make significant changes to U.S. tax laws applicable to us. The most significant change to our business would eliminate the immediate deduction for intangible drilling and development costs. Such a change could have a material adverse effect on our profitability, financial condition and liquidity.
Climate Change – Policymakers in the U.S. and Canada are increasingly focusing on whether the emissions of greenhouse gases, such as carbon dioxide and methane, are contributing to harmful climatic changes. Policymakers at both the U.S. federal and state levels have introduced legislation and proposed new regulations that are designed to quantify and limit the emission of greenhouse gases through inventories, limitations and/or
 
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taxes on greenhouse gas emissions. Legislative initiatives and discussions to date have focused on the development of cap-and-trade and/or carbon tax programs. A cap-and-trade program generally would cap overall greenhouse gas emissions on an economy-wide basis and require major sources of greenhouse gas emissions or major fuel producers to acquire and surrender emission allowances. Cap-and-trade programs could be relevant to us and our operations in several ways. First, the equipment we use to explore for, develop, produce and process oil and natural gas emits greenhouse gases. We could therefore be subject to caps, and penalties if emissions exceeded the caps. Second, the combustion of carbon-based fuels, such as the oil, gas and NGLs we sell, emits carbon dioxide and other greenhouse gases. Therefore, demand for our products could be reduced by imposition of caps and penalties on our customers. Carbon taxes could likewise affect us by being based on emissions from our equipment and/or emissions resulting from use of our products by our customers. Of overriding significance would be the point of regulation or taxation. Application of caps or taxes on companies such as Devon, based on carbon content of produced oil and gas volumes rather than on consumer emissions, could lead to penalties, fees or tax assessments for which there are no mechanisms to pass them through the distribution and consumption chain where fuel use or conservation choices are made. Moreover, because oil and natural gas are used as chemical feedstocks and not solely as fossil fuel, applying a carbon tax to oil and gas at the production stage would be excessive with respect to actual carbon emissions from petroleum fuels.
Environmental Matters and Costs Can Be Significant
As an owner, lessee or operator of oil and gas properties, we are subject to various federal, state, provincial, tribal and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on us for the cost of pollution clean-up resulting from our operations in affected areas. Any future environmental costs of fulfilling our commitments to the environment are uncertain and will be governed by several factors, including future changes to regulatory requirements. There is no assurance that changes in or additions to public policy regarding the protection of the environment will not have a significant impact on our operations and profitability.
Insurance Does Not Cover All Risks
Our business is hazardous and is subject to all of the operating risks normally associated with the exploration, development, production, processing and transportation of oil, natural gas and NGLs. Such risks include potential blowouts, cratering, fires, loss of well control, mishandling of fluids and chemicals and possible underground migration of hydrocarbons and chemicals. The occurrence of any of these risks could result in environmental pollution, damage to or destruction of our property, equipment and natural resources, injury to people or loss of life. Additionally, for our non-operated properties, we generally depend on the operator for operational safety and regulatory compliance.
To mitigate financial losses resulting from these operational hazards, we maintain comprehensive general liability insurance, as well as insurance coverage against certain losses resulting from physical damages, loss of well control, business interruption and pollution events that are considered sudden and accidental. We also maintain worker’s compensation and employer’s liability insurance. However, our insurance coverage does not provide 100 percent reimbursement of potential losses resulting from these operational hazards. Additionally, insurance coverage is generally not available to us for pollution events that are considered gradual, and we have limited or no insurance coverage for certain risks such as political risk, war and terrorism. Our insurance does not cover penalties or fines assessed by governmental authorities. The occurrence of a significant event against which we are not fully insured could have a material adverse effect on our profitability, financial condition and liquidity.
Limited Control on Properties Operated by Others
Certain of the properties in which we have an interest are operated by other companies and involve third-party working interest owners. We have limited influence and control over the operation or future development
 
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of such properties, including compliance with environmental, health and safety regulations or the amount of required future capital expenditures. These limitations and our dependence on the operator and other working interest owners for these properties could result in unexpected future costs and adversely affect our financial condition and results of operations.
 Item 1B. Unresolved Staff Comments 
Not applicable.
 Item 3. Legal Proceedings 
We are involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this report, there were no material pending legal proceedings to which we are a party or to which any of our property is subject.
 Item 4. Mine Safety Disclosures 
Not applicable.
 
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PART II
 Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 
Our common stock is traded on the New York Stock Exchange (the “NYSE”). On February 6, 2013, there were 11,695 holders of record of our common stock. The following table sets forth the quarterly high and low sales prices for our common stock as reported by the NYSE during 2012 and 2011, as well as the quarterly dividends per share paid during 2012 and 2011. We began paying regular quarterly cash dividends on our common stock in the second quarter of 1993. We anticipate continuing to pay regular quarterly dividends in the foreseeable future.

 	 	Price Range of Common Stock	 	 	Dividends	 	
 	 	        High        	 	 	        Low        	 	 	    Per Share    	 	
2012:	 				 				 				
Quarter Ended December 31, 2012	 	$	63.00	  	 	$	50.89	  	 	$	0.20	  	
Quarter Ended September 30, 2012	 	$	63.95	  	 	$	54.56	  	 	$	0.20	  	
Quarter Ended June 30, 2012	 	$	73.14	  	 	$	54.01	  	 	$	0.20	  	
Quarter Ended March 31, 2012	 	$	76.34	  	 	$	62.13	  	 	$	0.20	  	
2011:	 				 				 				
Quarter Ended December 31, 2011	 	$	69.55	  	 	$	50.74	  	 	$	0.17	  	
Quarter Ended September 30, 2011	 	$	84.52	  	 	$	55.14	  	 	$	0.17	  	
Quarter Ended June 30, 2011	 	$	92.69	  	 	$	75.50	  	 	$	0.17	  	
Quarter Ended March 31, 2011	 	$	93.55	  	 	$	76.96	  	 	$	0.16	  	
 
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Performance Graph
The following performance graph compares the yearly percentage change in the cumulative total shareholder return on Devon’s common stock with the cumulative total returns of the Standard & Poor’s 500 index (“the S&P 500 Index”) and the group of companies included in the Crude Petroleum and Natural Gas Standard Industrial Classification code (“the SIC Code”). The graph was prepared assuming $100 was invested on December 31, 2007 in Devon’s common stock, the S&P 500 Index and the SIC Code and dividends have been reinvested subsequent to the initial investment.

The graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate such information by reference into such a filing. The graph and information is included for historical comparative purposes only and should not be considered indicative of future stock performance.
 
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Issuer Purchases of Equity Securities
The following table provides information regarding purchases of our common stock that were made by us during the fourth quarter of 2012. Such purchases represent shares received by us from employees and directors for the payment of personal income tax withholding on restricted stock vesting and stock option exercises.

Period	  	Total Number of
Shares Purchased	 	  	Average Price Paid
per Share	 	
October 1 - October 31	  	 	6,000	  	  	$	60.15	  	
November 1 - November 30	  	 	406,725	  	  	$	52.72	  	
December 1 - December 31	  	 	459,320	  	  	$	52.24	  	
	  	 	 	 	  				
Total	  	 	872,045	  	  	$	52.52	  	
	  	 	 	 	  				
Under the Devon Energy Corporation Incentive Savings Plan (the “Plan”), eligible employees may purchase shares of our common stock through an investment in the Devon Stock Fund (the “Stock Fund”), which is administered by an independent trustee. Eligible employees purchased approximately 57,000 shares of our common stock in 2012, at then-prevailing stock prices, that they held through their ownership in the Stock Fund. We acquired the shares of our common stock sold under the Plan through open-market purchases.
Similarly, under the Devon Canada Corporation Savings Plan (the “Canadian Plan”), eligible Canadian employees may purchase shares of our common stock through an investment in the Canadian Plan, which is administered by an independent trustee. Eligible Canadian employees purchased approximately 22,900 shares of our common stock in 2012, at then-prevailing stock prices, that they held through their ownership in the Canadian Plan. We acquired the shares sold under the Canadian Plan through open-market purchases. These shares and any interest in the Canadian Plan were offered and sold in reliance on the exemptions for offers and sales of securities made outside of the U.S., including under Regulation S for offers and sales of securities to employees pursuant to an employee benefit plan established and administered in accordance with the law of a country other than the U.S.
 Item 6. Selected Financial Data 
The financial information below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this report.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	  	2010	 	  	2009	 	 	2008	 	
 	  	(In millions, except per share amounts)	 	
Revenues	  	$	9,502	  	 	$	11,454	  	  	$	9,940	  	  	$	8,015	  	 	$	13,858	  	
Earnings (loss) from continuing operations (1)	  	$	(185	) 	 	$	2,134	  	  	$	2,333	  	  	$	(2,753	) 	 	$	(3,039	) 	
Earnings (loss) per share from continuing operations - Basic	  	$	(0.47	) 	 	$	5.12	  	  	$	5.31	  	  	$	(6.20	) 	 	$	(6.86	) 	
Earnings (loss) per share from continuing operations - Diluted	  	$	(0.47	) 	 	$	5.10	  	  	$	5.29	  	  	$	(6.20	) 	 	$	(6.86	) 	
Cash dividends per common share	  	$	0.80	  	 	$	0.67	  	  	$	0.64	  	  	$	0.64	  	 	$	0.64	  	
Weighted average common shares outstanding - Basic	  	 	405	  	 	 	417	  	  	 	440	  	  	 	444	  	 	 	444	  	
Weighted average common shares outstanding - Diluted	  	 	405	  	 	 	418	  	  	 	441	  	  	 	444	  	 	 	444	  	
Total assets (1)	  	$	43,326	  	 	$	41,117	  	  	$	32,927	  	  	$	29,686	  	 	$	31,908	  	
Long-term debt	  	$	8,455	  	 	$	5,969	  	  	$	3,819	  	  	$	5,847	  	 	$	5,661	  	
Stockholders’ equity	  	$	21,278	  	 	$	21,430	  	  	$	19,253	  	  	$	15,570	  	 	$	17,060	  	

(1)	During 2012, 2009 and 2008, we recorded noncash asset impairments totaling $2.0 billion ($1.3 billion after income taxes), $6.4 billion ($4.1 billion after income taxes) and $9.9 billion ($6.7 billion after income taxes), respectively.	
 
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 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
Introduction
The following discussion and analysis presents management’s perspective of our business, financial condition and overall performance. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future and should be read in conjunction with “Item 8. Financial Statements and Supplementary Data” of this report.
Overview of 2012 Results
As an enterprise, we strive to optimize value for our shareholders by growing cash flow, earnings, production and reserves, all on a per debt-adjusted share basis. We accomplish this by executing our strategy, which is outlined in “Items 1 and 2. Business and Properties” of this report.
2012 was a year of mixed results for Devon. We grew our production 4% and closed two significant joint venture transactions with a combined value of approximately $4.0 billion. Furthermore, with a focus on development of higher-margin oil and bitumen properties in our portfolio, we increased our oil and bitumen production 20% in 2012 and are positioned to deliver similar oil and bitumen growth in 2013. However, this growth was overshadowed by the effects of declining commodity prices, which negatively impacted a number of our 2012 financial performance measures, as well as our year-end proved reserves. Key measures of our 2012 performance are summarized below, which exclude amounts from our discontinued operations.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	Change	 	 	2011	 	  	Change	 	 	2010	 	
 	  	($ in millions, except per share amounts)	 	
Net earnings (loss)	  	$	(185	) 	 	 	-109	%	 	$	2,134	  	  	 	-9	%	 	$	2,333	  	
Adjusted earnings (1)	  	$	1,322	  	 	 	-48	%	 	$	2,536	  	  	 	+0	% 	 	$	2,536	  	
Earnings (loss) per share	  	$	(0.47	) 	 	 	-109	%	 	$	5.10	  	  	 	-4	%	 	$	5.29	  	
Adjusted earnings per share (1)	  	$	3.26	  	 	 	-46	%	 	$	6.07	  	  	 	+6	% 	 	$	5.75	  	
Production (MBoe/d)	  	 	682.3	  	 	 	+4	% 	 	 	657.7	  	  	 	+5	% 	 	 	623.6	  	
Realized price per Boe	  	$	28.65	  	 	 	-17	%	 	$	34.64	  	  	 	+9	% 	 	$	31.91	  	
Operating margin per Boe (2)	  	$	19.41	  	 	 	-23	%	 	$	25.15	  	  	 	+1	% 	 	$	24.89	  	
Operating cash flow	  	$	4,930	  	 	 	-21	%	 	$	6,246	  	  	 	+24	% 	 	$	5,022	  	
Adjusted operating cash flow (1)	  	$	4,892	  	 	 	-21	%	 	$	6,225	  	  	 	+7	% 	 	$	5,840	  	
Capitalized costs	  	$	8,474	  	 	 	+9	% 	 	$	7,795	  	  	 	+13	% 	 	$	6,920	  	
Shareholder distributions (3)	  	$	324	  	 	 	-88	%	 	$	2,610	  	  	 	+80	% 	 	$	1,449	  	
Reserves (MMBoe)	  	 	2,963	  	 	 	-1	%	 	 	3,005	  	  	 	+5	% 	 	 	2,873	  	

(1)	Adjusted earnings, adjusted earnings per share and adjusted operating cash flow are not financial measures prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). For a description of adjusted earnings, adjusted earnings per share and adjusted operating cash flow as well as reconciliations to the comparable GAAP measures, see “Non-GAAP Measures” in this Item 7.	
(2)	Computed as revenues from commodity sales, commodity derivatives settlements, and marketing and midstream operations, less expenses for lease operations, marketing and midstream operations, general and administration, taxes other than income taxes and interest, with the result divided by total production.	
(3)	Includes common stock dividends and share repurchases.	
Our 2012 net loss resulted from noncash asset impairments, which reduced our earnings by $2.0 billion ($1.3 billion after tax). Excluding the asset impairments and other items typically excluded by securities analysts, our adjusted earnings were $1.3 billion, or $3.26 per diluted share. This compares to adjusted earnings of $2.5 billion, or $6.07 per diluted share in 2011.
 
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In spite of growing our production, our 2012 adjusted earnings, adjusted cash flow, operating margin and proved reserves declined largely due to the effects of lower commodity prices. In virtually all our operating areas, we realized lower prices in 2012 due to either declines in benchmarks or widening price differentials. The most significant price declines were associated with our gas and NGL production, for which we experienced realized price decreases of 34% and 26%, respectively. With increasing focus on oil and bitumen production growth, which generally require a higher cost to produce per unit than our gas projects, we were also impacted by upward pressure on operating costs.
We replaced 152% of our 2012 production from proved reserve extensions, discoveries and revisions other than price. Yet, our proved reserves decreased 1% overall due to significant downward revisions resulting from lower gas and NGL prices.
Business and Industry Outlook
During 2012, natural gas traded at prices we have not experienced for a decade. These low prices are the result of a significant imbalance between supply and demand in North America. On the supply side, new technologies, particularly hydraulic fracturing and horizontal drilling, have enabled natural gas producers to bring on line meaningful new supplies of natural gas around North America. On the demand side, the past winter was one of the warmest on record, which reduced demand for natural gas. Consequently, North America has an unusually high amount of gas in storage that will continue to oversupply the market. However, there are some favorable trends. Utilities around the country are switching from coal to natural gas at a meaningful rate. New petro-chemical plants are being built and other industries are expanding in the U.S. Looking to 2013, increased demand should cause natural gas prices to stabilize or possibly to increase moderately from 2012 levels.
As a result of the low natural gas prices, we and other producers have been focused on growing oil, bitumen and liquids-rich gas production. Similar to natural gas, regional imbalances between supply and demand of these liquids have caused price declines. In 2012, the most negative impact to us from these imbalances related to our U.S. NGLs and our Canadian heavy oil. The NGL imbalances have largely resulted from increased liquids-rich gas production without corresponding increases in either NGL pipeline delivery systems or consumer demand. We expect NGL prices will remain challenged for 2013 and, perhaps longer, due to the long-lead time associated with the construction of new petrochemical capacity. Our Canadian heavy oil production has recently been impacted by pipeline outages and refinery downtime. With increasing industry heavy oil production and current pipeline capacity, the pipeline outages and refinery downtimes had greater impacts to producers’ realized prices during 2012. Like other producers, we are beginning to use rail to deliver a portion of our heavy oil to downstream markets. We are also optimistic the U.S. government will approve construction of the Keystone XL pipeline. Provided the pipeline outages are not recurring and industry’s planned refinery expansions occur during the first half of 2013, the downward pressures on Canadian heavy oil prices should be relatively temporary in nature.
While we are optimistic about the long-term future of prices, we expect benchmark prices will continue to be volatile and in some cases will be challenged in 2013. We are most optimistic about oil prices and believe our oil properties largely represent the highest-return assets in our portfolio. Therefore, our near-term focus will be on these properties. We also realize that we possess a great deal of financial strength, flexibility and liquidity. We will use these resources to develop our portfolio of properties and explore other opportunities to maximize shareholder value, including monetization of our existing assets or entering into new ventures or acquisitions.
Results of Operations
All amounts in this document related to our International operations are presented as discontinued. Therefore, the production, revenue and expense amounts presented in this “Results of Operations” section exclude amounts related to our International assets unless otherwise noted.
 
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Even though we divested our U.S. Offshore operations in 2010, these properties do not qualify as discontinued operations under accounting rules. As such, financial and operating data provided in this document that pertain to our continuing operations include amounts related to our U.S. Offshore operations. To facilitate comparisons of our ongoing operations subsequent to the planned divestitures, we have presented amounts related to our U.S. Offshore assets separate from those of our North American Onshore assets where appropriate.
Production, Prices and Revenues

 	  	Year Ended December 31,	 	
 	  	2012	 	  	Change	 	 	2011	 	  	Change	 	 	2010	 	
Oil (MBbls/d)	  				  				 				  				 				
U.S. Onshore	  	 	58.7	  	  	 	+28	% 	 	 	46.0	  	  	 	+24	% 	 	 	37.0	  	
Canada	  	 	39.8	  	  	 	-5	% 	 	 	41.7	  	  	 	-6	%	 	 	44.2	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
North America Onshore	  	 	98.5	  	  	 	+12	% 	 	 	87.7	  	  	 	+8	% 	 	 	81.2	  	
U.S. Offshore	  	 	—  	  	  	 	N/M	  	 	 	—  	  	  	 	-100	%	 	 	5.2	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	 	98.5	  	  	 	+12	% 	 	 	87.7	  	  	 	+1	% 	 	 	86.4	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Bitumen (MBbls/d)	  				  				 				  				 				
Canada	  	 	47.6	  	  	 	+37	% 	 	 	34.8	  	  	 	+41	% 	 	 	24.7	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Gas (MMcf/d)	  				  				 				  				 				
U.S. Onshore	  	 	2,054.5	  	  	 	+1	% 	 	 	2,026.6	  	  	 	+6	% 	 	 	1,913.8	  	
Canada	  	 	508.3	  	  	 	-13	%	 	 	583.1	  	  	 	-1	%	 	 	586.9	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
North America Onshore	  	 	2,562.8	  	  	 	-2	%	 	 	2,609.7	  	  	 	+4	% 	 	 	2,500.7	  	
U.S. Offshore	  	 	—  	  	  	 	N/M	  	 	 	—  	  	  	 	-100	%	 	 	46.0	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	 	2,562.8	  	  	 	-2	%	 	 	2,609.7	  	  	 	+2	% 	 	 	2,546.7	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
NGLs (MBbls/d)	  				  				 				  				 				
U.S. Onshore	  	 	98.6	  	  	 	+9	% 	 	 	90.4	  	  	 	+17	% 	 	 	77.3	  	
Canada	  	 	10.5	  	  	 	+6	% 	 	 	9.9	  	  	 	+2	% 	 	 	9.8	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
North America Onshore	  	 	109.1	  	  	 	+9	% 	 	 	100.3	  	  	 	+15	% 	 	 	87.1	  	
U.S. Offshore	  	 	—  	  	  	 	N/M	  	 	 	—  	  	  	 	-100	%	 	 	0.9	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	 	109.1	  	  	 	+9	% 	 	 	100.3	  	  	 	+14	% 	 	 	88.0	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Combined (MBoe/d)	  				  				 				  				 				
U.S. Onshore	  	 	499.7	  	  	 	+5	% 	 	 	474.1	  	  	 	+9	% 	 	 	433.3	  	
Canada	  	 	182.6	  	  	 	-1	%	 	 	183.6	  	  	 	+4	% 	 	 	176.5	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
North America Onshore	  	 	682.3	  	  	 	+4	% 	 	 	657.7	  	  	 	+8	% 	 	 	609.8	  	
U.S. Offshore	  	 	—  	  	  	 	N/M	  	 	 	—  	  	  	 	-100	%	 	 	13.8	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	 	682.3	  	  	 	+4	% 	 	 	657.7	  	  	 	+5	% 	 	 	623.6	  	

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 	  	Year Ended December 31,	 	
 	  	2012 (1)	 	  	Change	 	 	2011 (1)	 	  	Change	 	 	2010 (1)	 	
Oil (per Bbl)	  				  				 				  				 				
U.S. Onshore	  	$	88.68	  	  	 	-3	%	 	$	91.19	  	  	 	+21	% 	 	$	75.53	  	
Canada	  	$	68.08	  	  	 	-8	%	 	$	74.32	  	  	 	+20	% 	 	$	62.00	  	
North America Onshore	  	$	80.35	  	  	 	-3	%	 	$	83.16	  	  	 	+22	% 	 	$	68.17	  	
U.S. Offshore	  	$	—  	  	  	 	N/M	  	 	$	—  	  	  	 	-100	%	 	$	77.81	  	
Total	  	$	80.35	  	  	 	-3	%	 	$	83.16	  	  	 	+21	% 	 	$	68.75	  	
Bitumen (per Bbl)	  				  				 				  				 				
Canada	  	$	47.75	  	  	 	-18	%	 	$	58.16	  	  	 	+11	% 	 	$	52.51	  	
Gas (per Mcf)	  				  				 				  				 				
U.S. Onshore	  	$	2.32	  	  	 	-34	%	 	$	3.50	  	  	 	-6	%	 	$	3.73	  	
Canada	  	$	2.49	  	  	 	-36	%	 	$	3.87	  	  	 	-6	%	 	$	4.11	  	
North America Onshore	  	$	2.36	  	  	 	-34	%	 	$	3.58	  	  	 	-6	%	 	$	3.82	  	
U.S. Offshore	  	$	—  	  	  	 	N/M	  	 	$	—  	  	  	 	-100	%	 	$	5.12	  	
Total	  	$	2.36	  	  	 	-34	%	 	$	3.58	  	  	 	-7	%	 	$	3.84	  	
NGLs (per Bbl)	  				  				 				  				 				
U.S. Onshore	  	$	28.49	  	  	 	-28	%	 	$	39.47	  	  	 	+28	% 	 	$	30.78	  	
Canada	  	$	48.63	  	  	 	-13	%	 	$	55.99	  	  	 	+20	% 	 	$	46.60	  	
North America Onshore	  	$	30.42	  	  	 	-26	%	 	$	41.10	  	  	 	+26	% 	 	$	32.55	  	
U.S. Offshore	  	$	—  	  	  	 	N/M	  	 	$	—  	  	  	 	-100	%	 	$	38.22	  	
Total	  	$	30.42	  	  	 	-26	%	 	$	41.10	  	  	 	+26	% 	 	$	32.61	  	
Combined (per Boe)	  				  				 				  				 				
U.S. Onshore	  	$	25.59	  	  	 	-18	%	 	$	31.31	  	  	 	+10	% 	 	$	28.42	  	
Canada	  	$	37.01	  	  	 	-14	%	 	$	43.23	  	  	 	+11	% 	 	$	39.11	  	
North America Onshore	  	$	28.65	  	  	 	-17	%	 	$	34.64	  	  	 	+10	% 	 	$	31.52	  	
U.S. Offshore	  	$	—  	  	  	 	N/M	  	 	$	—  	  	  	 	-100	%	 	$	49.06	  	
Total	  	$	28.65	  	  	 	-17	%	 	$	34.64	  	  	 	+9	% 	 	$	31.91	  	

(1)	Prices presented exclude any effects due to oil, gas and NGL derivatives.	
Commodity Sales
The volume and price changes in the tables above caused the following changes to our oil, gas and NGL sales.

 	  	Oil	 	 	Bitumen	 	 	Gas	 	 	NGLs	 	 	Total	 	
 	  	(In millions)	 	
2010 sales	  	$	2,169	  	 	$	474	  	 	$	3,572	  	 	$	1,047	  	 	$	7,262	  	
Change due to volumes	  	 	30	  	 	 	193	  	 	 	88	  	 	 	147	  	 	 	458	  	
Change due to prices	  	 	461	  	 	 	72	  	 	 	(249	) 	 	 	311	  	 	 	595	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2011 sales	  	 	2,660	  	 	 	739	  	 	 	3,411	  	 	 	1,505	  	 	 	8,315	  	
Change due to volumes	  	 	337	  	 	 	273	  	 	 	(52	) 	 	 	137	  	 	 	695	  	
Change due to prices	  	 	(101	) 	 	 	(181	) 	 	 	(1,148	) 	 	 	(427	) 	 	 	(1,857	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2012 sales	  	$	2,896	  	 	$	831	  	 	$	2,211	  	 	$	1,215	  	 	$	7,153	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Volumes 2012 vs. 2011 – Upstream sales increased $695 million due to a 4 percent increase in production. Oil and bitumen production were the largest drivers of the increase, accounting for nearly 90 percent of the higher sales. As a result of continued development of our liquids-rich properties in the Permian Basin, our oil sales increased $337 million. Bitumen sales increased $273 million due to development of our Jackfish thermal heavy oil projects in Canada. Additionally, our NGL sales increased $137 million as a result of continued drilling in the liquids-rich gas portions of the Barnett Shale, Cana-Woodford Shale and Granite Wash. These increases were partially offset by a slight decrease in our 2012 gas production, resulting in a $52 million decline in sales.
 
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Volumes 2011 vs. 2010 – Upstream sales increased $458 million due to a 5 percent increase in production. Bitumen and NGL volume increases resulted in $340 million higher sales. Additional volumes for both of these products were primarily due to the same reasons discussed in our 2012 vs. 2011 comparison above. Additionally, we saw slight increases in our oil and gas volumes which resulted in $118 million higher sales.
Production information for our key properties is summarized below:
 
 	•	 	Permian Basin production increased 26 percent compared to the prior year and 44 percent since 2010. Oil production accounted for nearly 60 percent of our 62,000 Boe per day produced in the Permian Basin during 2012. The 2012 increase in total production was driven by a 30 percent increase in oil production.	
 
 	•	 	Barnett Shale production increased 7 percent compared to the prior year and 18 percent since 2010. Liquids production accounted for 21 percent of our 1.4 Bcfe per day produced in the Barnett Shale during 2012. The 2012 increase in total production was driven by a 7 percent increase in liquids production.	
 
 	•	 	Cana-Woodford Shale production increased 45 percent compared to the prior year and 168 percent since 2010. Liquids production accounted for 30 percent of our 290 MMcfe per day produced in Cana during 2012. The 2012 increase in total production was driven by a 67 percent increase in liquids production.	
 
 	•	 	Canadian Oil Sands production increased 37 percent compared to the prior year and 92 percent since 2010. Bitumen production accounted for all of our 48,000 Boe per day produced in 2012.	
 
 	•	 	Granite Wash production increased 14 percent compared to the prior year and 68 percent since 2010. Liquids production accounted for 46 percent of our 19,000 Boe per day produced in Granite Wash during 2012. The 2012 increase in production was driven by a 20 percent increase in liquids production.	
 
 	•	 	By the end of 2012, Mississippian production was up to almost 3,000 Boe per day. We drilled our first 35 wells in 2012. Oil production accounted for 63 percent of our total production in 2012.	
 
 	•	 	Gulf Coast/East Texas production decreased 14 percent in 2012. Although total production was down, oil production increased 8 percent in 2012. Liquids production accounted for nearly 25 percent of our 368 MMcfe per day produced in Gulf Coast/East Texas during 2012.	
 
 	•	 	Rocky Mountain production decreased 9 percent in 2012. Although total production was down, oil production increased 17 percent in 2012. Liquids production accounted for 28 percent of our 352 MMcfe per day produced in the Rocky Mountains during 2012.	
 
 	•	 	Lloydminster production decreased 6 percent in 2012. Oil production accounted for 82 percent of our 37,000 Boe per day produced at Lloydminster during 2012.	
Prices 2012 vs. 2011 – Upstream sales decreased $1.9 billion due to a 17 percent decrease in our realized price without hedges. Our gas sales were the most significantly impacted with a $1.1 billion decrease in sales. The change in our gas price was largely due to fluctuations of the North American regional index prices upon which our gas sales are based. We also experienced declines in our NGL, bitumen and oil sales due to our realized price. The largest contributors to the lower liquids prices were lower NGL prices at the Mont Belvieu, Texas hub and wider bitumen differentials to the NYMEX West Texas Intermediate index price.
Prices 2011 vs. 2010 – Upstream sales increased $595 million due to a 9 percent increase in our realized price without hedges. Our realized price for oil, bitumen and NGLs increased primarily due to an increase in the average index price for which each product is sold. Our realized price for gas decreased primarily due to fluctuations of the North American regional index prices upon which our gas sales are based.
 
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Oil, Gas and NGL Derivatives
The following tables provide financial information associated with our oil, gas and NGL hedges. The first table presents the cash settlements and unrealized gains and losses recognized as components of our revenues. The subsequent tables present our oil, gas and NGL prices with, and without, the effects of the cash settlements. The prices do not include the effects of unrealized gains and losses.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Cash settlements:	  				 				 				
Gas derivatives	  	$	610	  	 	$	416	  	 	$	888	  	
Oil derivatives	  	 	259	  	 	 	(26	) 	 	 	—  	  	
NGL derivatives	  	 	1	  	 	 	2	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total cash settlements	  	 	870	  	 	 	392	  	 	 	888	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) on fair value changes:	  				 				 				
Gas derivatives	  	 	(330	) 	 	 	305	  	 	 	12	  	
Oil derivatives	  	 	150	  	 	 	185	  	 	 	(91	) 	
NGL derivatives	  	 	3	  	 	 	(1	) 	 	 	2	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total unrealized gains (losses) on fair value changes	  	 	(177	) 	 	 	489	  	 	 	(77	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Oil, gas and NGL derivatives	  	$	693	  	 	$	881	  	 	$	811	  	

																					
 	  	Year Ended December 31, 2012	 	
 	  	Oil
(Per Bbl)	 	 	Bitumen
(Per Bbl)	 	  	Gas
(Per Mcf)	 	  	NGLs
(Per Bbl)	 	  	Boe
(Per Boe)	 	
Realized price without hedges	  	$	80.35	  	 	$	47.75	  	  	$	2.36	  	  	$	30.42	  	  	$	28.65	  	
Cash settlements of hedges	  	 	7.18	  	 	 	—  	  	  	 	0.65	  	  	 	0.04	  	  	 	3.48	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Realized price, including cash settlements	  	$	87.53	  	 	$	47.75	  	  	$	3.01	  	  	$	30.46	  	  	$	32.13	  	

 	  	Year Ended December 31, 2011	 	
 	  	Oil
(Per Bbl)	 	 	Bitumen
(Per Bbl)	 	  	Gas
(Per Mcf)	 	  	NGLs
(Per Bbl)	 	  	Boe
(Per Boe)	 	
Realized price without hedges	  	$	83.16	  	 	$	58.16	  	  	$	3.58	  	  	$	41.10	  	  	$	34.64	  	
Cash settlements of hedges	  	 	(0.81	) 	 	 	—  	  	  	 	0.44	  	  	 	0.07	  	  	 	1.63	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Realized price, including cash settlements	  	$	82.35	  	 	$	58.16	  	  	$	4.02	  	  	$	41.17	  	  	$	36.27	  	

 	  	Year Ended December 31, 2010	 	
 	  	Oil
(Per Bbl)	 	 	Bitumen
(Per Bbl)	 	  	Gas
(Per Mcf)	 	  	NGLs
(Per Bbl)	 	  	Boe
(Per Boe)	 	
Realized price without hedges	  	$	68.75	  	 	$	52.51	  	  	$	3.84	  	  	$	32.61	  	  	$	31.91	  	
Cash settlements of hedges	  	 	—  	  	 	 	—  	  	  	 	0.96	  	  	 	—  	  	  	 	3.90	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Realized price, including cash settlements	  	$	68.75	  	 	$	52.51	  	  	$	4.80	  	  	$	32.61	  	  	$	35.81	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Cash settlements as presented in the tables above represent realized gains or losses related to these various instruments. A summary of our open commodity derivative positions is included in Note 2 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report. Our oil, gas and NGL derivatives include price swaps, costless collars, basis swaps and call options. To facilitate a portion of our price swaps, we sold gas call options for 2012 and 2014 and oil call options for 2011 through 2014. The call options give counterparties the right to purchase production at a predetermined price.
 
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In addition to cash settlements, we also recognize unrealized changes in the fair values of our oil, gas and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationships between contract prices and the associated forward curves. Including the cash settlements discussed above, our oil, gas and NGL derivatives generated net gains of $693 million, $881 million and $811 million during 2012, 2011 and 2010, respectively.
Marketing and Midstream Revenues and Operating Costs and Expenses

 	  	Year Ended December 31,	 	
 	  	2012	 	  	Change	 	 	2011	 	  	Change	 	 	2010	 	
 	  	($ in millions)	 	
Revenues	  	$	1,656	  	  	 	-27	%	 	$	2,258	  	  	 	+21	% 	 	$	1,867	  	
Operating costs and expenses	  	 	1,246	  	  	 	-27	%	 	 	1,716	  	  	 	+26	% 	 	 	1,357	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Operating profit	  	$	410	  	  	 	-24	%	 	$	542	  	  	 	+6	% 	 	$	510	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
2012 vs. 2011 Marketing and midstream operating profit decreased $132 million primarily due to lower natural gas and NGL prices.
2011 vs. 2010 Marketing and midstream operating profit increased $32 million primarily due to higher natural gas throughput and higher NGL prices.
Lease Operating Expenses (“LOE”)

 	  	Year Ended December 31,	 	
 	  	2012	 	  	Change	 	 	2011	 	  	Change	 	 	2010	 	
LOE ($ in millions):	  				  				 				  				 				
U.S. Onshore	  	$	1,059	  	  	 	+14	% 	 	$	925	  	  	 	+11	% 	 	$	832	  	
Canada	  	 	1,015	  	  	 	+10	% 	 	 	926	  	  	 	+16	% 	 	 	797	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
North America Onshore	  	 	2,074	  	  	 	+12	% 	 	 	1,851	  	  	 	+14	% 	 	 	1,629	  	
U.S. Offshore	  	 	—  	  	  	 	N/M	  	 	 	—  	  	  	 	-100	%	 	 	60	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	$	2,074	  	  	 	+12	% 	 	$	1,851	  	  	 	+10	% 	 	$	1,689	  	

LOE per Boe:	  				  				 				  				 				
U.S. Onshore	  	$	5.79	  	  	 	+8	% 	 	$	5.35	  	  	 	+2	% 	 	$	5.26	  	
Canada	  	$	15.18	  	  	 	+10	% 	 	$	13.82	  	  	 	+12	% 	 	$	12.37	  	
North America Onshore	  	$	8.30	  	  	 	+8	% 	 	$	7.71	  	  	 	+5	% 	 	$	7.32	  	
U.S. Offshore	  	$	—  	  	  	 	N/M	  	 	$	—  	  	  	 	-100	%	 	$	12.00	  	
Total	  	$	8.30	  	  	 	+8	% 	 	$	7.71	  	  	 	+4	% 	 	$	7.42	  	
2012 vs. 2011 LOE increased $0.59 per Boe largely because of our oil production growth, particularly at our Jackfish thermal heavy oil projects in Canada and in the Permian Basin in the U.S. Such oil projects generally require a higher cost to produce per unit than our gas projects. We also experienced inflationary pressures on costs in certain operating areas, which increased LOE per Boe.
2011 vs. 2010 LOE increased $0.29 per Boe. LOE increased $0.39 per Boe, excluding the U.S. Offshore operations that were sold in the second quarter of 2010. The largest contributor to the higher North America Onshore unit cost is our oil production growth, particularly at our Jackfish thermal heavy oil projects in Canada. We also experienced inflationary pressures on costs in certain operating areas. Additionally, LOE per Boe increased $0.15 due to a $36 million increase from changes in the exchange rate between the U.S. and Canadian dollars.
 
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Depreciation, Depletion and Amortization (“DD&A”)

 	  	Year Ended December 31,	 	
 	  	2012	 	  	Change	 	 	2011	 	  	Change	 	 	2010	 	
DD&A ($ in millions):	  				  				 				  				 				
Oil & gas properties	  	$	2,526	  	  	 	+27	% 	 	$	1,987	  	  	 	+19	% 	 	$	1,675	  	
Other properties	  	 	285	  	  	 	+9	% 	 	 	261	  	  	 	+2	% 	 	 	255	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	$	2,811	  	  	 	+25	% 	 	$	2,248	  	  	 	+17	% 	 	$	1,930	  	

DD&A per Boe:	  				  				 				  				 				
Oil & gas properties	  	$	10.12	  	  	 	+22	% 	 	$	8.28	  	  	 	+13	% 	 	$	7.36	  	
Other properties	  	 	1.14	  	  	 	+5	% 	 	 	1.09	  	  	 	-3	%	 	 	1.12	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
Total	  	$	11.26	  	  	 	+20	% 	 	$	9.37	  	  	 	+10	% 	 	$	8.48	  	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	
A description of how DD&A of our oil and gas properties is calculated is included in Note 1 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report. Generally, when reserve volumes are revised up or down, then the DD&A rate per unit of production will change inversely. However, when the depletable base changes, then the DD&A rate moves in the same direction. The per unit DD&A rate is not affected by production volumes. Absolute or total DD&A, as opposed to the rate per unit of production, generally moves in the same direction as production volumes.
2012 vs. 2011 Oil and gas property DD&A increased $460 million due to a 22 percent increase in the DD&A rate and $79 million due to our 4 percent increase in production. The largest contributors to the higher rate were our 2012 drilling and development activities.
2011 vs. 2010 Oil and gas property DD&A increased $221 million due to a 13 percent increase in the DD&A rate and $91 million due to our 5 percent increase in production. The largest contributors to the higher rate were our 2011 drilling and development activities and changes in the exchange rate between the U.S. and Canadian dollars. These increases were partially offset by the divestiture of our U.S. Offshore properties in the second quarter of 2010.
General and Administrative Expenses (“G&A”)

 	  	Year Ended December 31,	 	
 	  	2012	 	 	Change	 	 	2011	 	 	Change	 	 	2010	 	
 	  	($ in millions)	 	
Gross G&A	  	$	1,171	  	 	 	+13	% 	 	$	1,036	  	 	 	+5	% 	 	$	987	  	
Capitalized G&A	  	 	(359	) 	 	 	+7	% 	 	 	(337	) 	 	 	+8	% 	 	 	(311	) 	
Reimbursed G&A	  	 	(120	) 	 	 	+5	% 	 	 	(114	) 	 	 	+1	% 	 	 	(113	) 	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
Net G&A	  	$	692	  	 	 	+18	% 	 	$	585	  	 	 	+4	% 	 	$	563	  	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
Net G&A per Boe	  	$	2.77	  	 	 	+14	% 	 	$	2.44	  	 	 	-1	%	 	$	2.47	  	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
2012 vs. 2011 Net G&A and net G&A per Boe increased largely due to higher employee compensation and benefits. Employee costs increased primarily from an expansion of our workforce as part of growing production operations at certain of our key areas, including Jackfish, the Permian Basin and the Cana-Woodford Shale.
2011 vs. 2010 Net G&A increased primarily due to higher employee compensation and benefits, while net G&A per Boe slightly declined as we grew production at a higher rate than G&A.
 
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Taxes Other Than Income Taxes

 	  	Year Ended December 31,	 	
 	  	2012	 	 	Change	 	 	2011	 	 	Change	 	 	2010	 	
 	  	($ in millions)	 	
Production	  	$	224	  	 	 	-10	%	 	$	248	  	 	 	+18	% 	 	$	210	  	
Ad valorem and other	  	 	190	  	 	 	+8	% 	 	 	176	  	 	 	+4	% 	 	 	170	  	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
Taxes other than income taxes	  	$	414	  	 	 	-3	%	 	$	424	  	 	 	+12	% 	 	$	380	  	

Percentage of oil, gas and NGL revenue:	  				 				 				 				 				
Production	  	 	3.13	% 	 	 	+5	% 	 	 	2.98	% 	 	 	+3	% 	 	 	2.90	% 	
Ad valorem and other	  	 	2.65	% 	 	 	+25	% 	 	 	2.12	% 	 	 	-9	%	 	 	2.34	% 	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
Total	  	 	5.78	% 	 	 	+13	% 	 	 	5.10	% 	 	 	-3	%	 	 	5.24	% 	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
2012 vs. 2011 Taxes other than income taxes decreased primarily due to a decrease in our U.S. Onshore revenues, on which the majority of our production taxes are assessed.
2011 vs. 2010 Taxes other than income taxes increased primarily due to an increase in our U.S. Onshore revenues, on which the majority of our production taxes are assessed.
Interest Expense

 	  	Year Ended December 31,	 	
 	  	2012	 	 	Change	 	 	2011	 	 	Change	 	 	2010	 	
 	  	($ in millions)	 	
Interest based on debt outstanding	  	$	440	  	 	 	+6	% 	 	$	414	  	 	 	+2	% 	 	$	408	  	
Capitalized interest	  	 	(48	) 	 	 	-33	%	 	 	(72	) 	 	 	-5	%	 	 	(76	) 	
Early retirement of debt	  	 	—	  	 	 	N/M	  	 	 	—  	  	 	 	-100	%	 	 	19	  	
Other	  	 	14	  	 	 	+33	% 	 	 	10	  	 	 	-17	%	 	 	12	  	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
Interest expense	  	$	406	  	 	 	+15	% 	 	$	352	  	 	 	-3	%	 	$	363	  	
	  	 	 	 	 				 	 	 	 	 				 	 	 	 	
2012 vs. 2011 Interest expense increased primarily due to additional debt borrowings and lower capitalized interest, partially offset by lower weighted average interest rates. Borrowings were primarily used to fund capital expenditures in excess of our operating cash flow and 2012 divestiture proceeds.
2011 vs. 2010 Interest expense decreased primarily due to costs associated with the early retirement of our $350 million notes in 2010. This was partially offset by higher interest resulting from increased debt balances in 2011.
Restructuring Costs

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Office consolidation:	  				 				 				
Employee severance and retention	  	$	77	  	 	$	—  	  	 	$	—  	  	
Lease obligations and other	  	 	3	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	80	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Offshore divestitures:	  				 				 				
Employee severance	  	 	(3	) 	 	 	8	  	 	 	(27	) 	
Lease obligations and other	  	 	(3	) 	 	 	(10	) 	 	 	84	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	(6	) 	 	 	(2	) 	 	 	57	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Restructuring costs (1)	  	$	74	  	 	$	(2	) 	 	$	57	  	

(1)	Restructuring costs related to our discontinued operations totaled $(2) million and $(4) million in 2011 and 2010, respectively. These costs primarily consist of employee severance and are not included in the table. There were no costs related to discontinued operations in 2012.	
 
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Office Consolidation
In October 2012, we announced plans to consolidate our U.S. personnel into a single operations group centrally located at our corporate headquarters in Oklahoma City. As a result, we are in the process of closing our office in Houston and transferring operational responsibilities for assets in South Texas, East Texas and Louisiana to Oklahoma City. This initiative is expected to be substantially complete by the end of the first quarter 2013.
Employee severance – In the fourth quarter of 2012, we recognized $77 million of estimated employee severance costs associated with the office consolidation. This amount was based on estimates of the number employees that would ultimately be impacted by the office consolidation and included amounts related to cash severance costs and accelerated vesting of share-based grants. 
Lease obligations and other – As of December 31, 2012, we incurred $3 million of restructuring costs related to certain office space that is subject to non-cancellable operating lease agreements and that we ceased using as a part of the office consolidation. In 2013 we expect to incur approximately $25 million of additional restructuring costs that represent the present value of our future obligations under the leases, net of anticipated sublease income. Our estimate of lease obligations was based upon certain key estimates that could change over the term of the leases. These estimates include the estimated sublease income that we may receive over the term of the leases, as well as the amount of variable operating costs that we will be required to pay under the leases.
Divestiture of Offshore Assets
In the fourth quarter of 2009, we announced plans to divest our offshore assets. As of December 31, 2012, we had divested all of our U.S. Offshore and International assets and incurred $196 million of restructuring costs associated with the divestitures.
Employee severance – This amount was originally based on estimates of the number of employees that would ultimately be impacted by the offshore divestitures and included amounts related to cash severance costs and accelerated vesting of share-based grants. As the divestiture program progressed, we decreased our overall estimate of employee severance costs. More offshore employees than previously estimated received comparable positions with either the purchaser of the properties or in our U.S. Onshore operations. 
Lease obligations and other – As a result of the divestitures, we ceased using certain office space that was subject to non-cancellable operating lease arrangements. Consequently, in 2010 we recognized $70 million of restructuring costs that represented the present value of our future obligations under the leases, net of anticipated sublease income. Our estimate of lease obligations was based upon certain key estimates that could change over the term of the leases. These estimates include the estimated sublease income that we may receive over the term of the leases, as well as the amount of variable operating costs that we will be required to pay under the leases. In addition, we recognized $13 million of asset impairment charges for leasehold improvements and furniture associated with the office space that we ceased using.
Asset Impairments

 	  	Year Ended December 31, 2012	 	
 	  	        Gross        	 	  	    Net of Taxes    	 	
 	  	(In millions)	 	
U.S. oil and gas assets	  	$	1,793	  	  	$	1,142	  	
Canada oil and gas assets	  	 	163	  	  	 	122	  	
Midstream assets	  	 	68	  	  	 	44	  	
	  	 	 	 	  	 	 	 	
Total asset impairments	  	$	2,024	  	  	$	1,308	  	

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Oil and Gas Impairments
Under the full-cost method of accounting, capitalized costs of oil and gas properties are subject to a quarterly full cost ceiling test, which is discussed in Note 1 to the financial statements under “Item 8. Consolidated Financial Statements” of this report.
The oil and gas impairments resulted primarily from declines in the U.S. and Canada full cost ceilings. The lower ceiling values resulted primarily from decreases in the 12-month average trailing prices for oil, natural gas and NGLs, which have reduced proved reserve values.
If pricing conditions do not improve, we may incur full cost ceiling impairments related to our oil and gas property and equipment in 2013.
Midstream Impairments
Due to declining natural gas production resulting from low natural gas and NGL prices, we determined that the carrying amounts of certain of our midstream facilities were not recoverable from estimated future cash flows. Consequently, the assets were written down to their estimated fair values, which were determined using discounted cash flow models.
Other, net

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Accretion of asset retirement obligations	  	$	110	  	 	$	92	  	 	$	92	  	
Interest rate derivatives	  	 	15	  	 	 	11	  	 	 	(14	) 	
Foreign currency derivatives	  	 	18	  	 	 	(16	) 	 	 	—  	  	
Foreign exchange loss (gain)	  	 	(15	) 	 	 	25	  	 	 	(7	) 	
Interest income	  	 	(36	) 	 	 	(21	) 	 	 	(13	) 	
Other	  	 	(14	) 	 	 	(101	) 	 	 	(25	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other, net	  	$	78	  	 	$	(10	) 	 	$	33	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
2012 vs. 2011 Other, net increased primarily due to $88 million of excess insurance recoveries received in 2011 related to certain weather and operational claims.
2011 vs. 2010 Other, net decreased primarily due to excess insurance recoveries received in 2011 as discussed above. The remainder of the variance primarily relates to the net effect of interest rate derivatives due to changes in the related interest rates upon which the instruments are based.
 
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Income Taxes
The following table presents our total income tax expense (benefit) and a reconciliation of our effective income tax rate to the U.S. statutory income tax rate.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
Total income tax expense (benefit) (in millions)	  	$	(132	) 	 	$	2,156	  	 	$	1,235	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
U.S. statutory income tax rate	  	 	(35	%) 	 	 	35	% 	 	 	35	% 	
State income taxes	  	 	6	% 	 	 	1	% 	 	 	1	% 	
Taxation on Canadian operations	  	 	(6	%) 	 	 	(2	%) 	 	 	(1	%) 	
Assumed repatriations	  	 	0	% 	 	 	17	% 	 	 	4	% 	
Other	  	 	(7	%) 	 	 	(1	%) 	 	 	(4	%) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Effective income tax rate	  	 	(42	%) 	 	 	50	% 	 	 	35	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	
In the table above, the “other” effect is primarily comprised of permanent tax differences for which the dollar amounts do not increase or decrease as our pre-tax earnings do. Generally, such items typically have an insignificant impact on our effective income tax rate. However, these items have a more noticeable impact to our rate for the year ended December 31, 2012 because of the relatively small pre-tax loss for that period.
During 2011 and 2010, pursuant to the completed and planned divestitures of our International assets located outside North America, a portion of our foreign earnings were no longer deemed to be indefinitely reinvested. Accordingly, we recognized deferred income tax expense of $725 million and $144 million during 2011 and 2010, respectively, related to assumed repatriations of earnings from our foreign subsidiaries.
Earnings (Loss) From Discontinued Operations

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	  	2010	 	
 	  	(In millions)	 	
Operating earnings	  	$	—  	  	 	$	38	  	  	$	567	  	
Gain (loss) on sale of oil and gas properties	  	 	(16	) 	 	 	2,552	  	  	 	1,818	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
Earnings (loss) before income taxes	  	 	(16	) 	 	 	2,590	  	  	 	2,385	  	
Income tax expense	  	 	5	  	 	 	20	  	  	 	168	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
Earnings (loss) from discontinued operations	  	$	(21	) 	 	$	2,570	  	  	$	2,217	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
The earnings (loss) in each period were primarily driven by gains (losses) on the sales of our oil and gas assets in each period. The following table presents gains and losses on our divestiture transactions by year.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	  	2010	 	
 	  	Gross	 	 	Net of Taxes	 	 	Gross	 	  	Net of Taxes	 	  	Gross	 	 	Net of Taxes	 	
 	  	(In millions)	 	
Angola	  	$	(16	) 	 	$	(21	) 	 	$	—  	  	  	$	—  	  	  	$	—  	  	 	$	—  	  	
Brazil	  	 	—  	  	 	 	—  	  	 	 	2,548	  	  	 	2,548	  	  	 	—  	  	 	 	—  	  	
Azerbaijan	  	 	—  	  	 	 	—  	  	 	 	—  	  	  	 	—  	  	  	 	1,543	  	 	 	1,524	  	
China - Panyu	  	 	—  	  	 	 	—  	  	 	 	—  	  	  	 	—  	  	  	 	308	  	 	 	235	  	
Other	  	 	—  	  	 	 	—  	  	 	 	4	  	  	 	4	  	  	 	(33	) 	 	 	(27	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total	  	$	(16	) 	 	$	(21	) 	 	$	2,552	  	  	$	2,552	  	  	$	1,818	  	 	$	1,732	  	

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Capital Resources, Uses and Liquidity
Sources and Uses of Cash
The following table presents the major source and use categories of our cash and cash equivalents.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Operating cash flow - continuing operations	  	$	4,930	  	 	$	6,246	  	 	$	5,022	  	
Debt activity, net	  	 	1,921	  	 	 	4,187	  	 	 	(1,782	) 	
Divestitures of property and equipment	  	 	1,539	  	 	 	3,380	  	 	 	7,002	  	
Capital expenditures	  	 	(8,225	) 	 	 	(7,534	) 	 	 	(6,476	) 	
Shareholder distributions	  	 	(324	) 	 	 	(2,610	) 	 	 	(1,449	) 	
Other	  	 	81	  	 	 	(46	) 	 	 	107	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in cash and short-term investments	  	$	(78	) 	 	$	3,623	  	 	$	2,424	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash and short-term investments at end of period	  	$	6,980	  	 	$	7,058	  	 	$	3,435	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Operating Cash Flow – Continuing Operations
Net cash provided by operating activities (“operating cash flow”) continued to be a significant source of capital and liquidity in 2012. Our operating cash flow decreased 21 percent during 2012 primarily due to lower commodity prices and higher expenses, partially offset by additional cash flow from our production growth and higher realized gains from our commodity derivatives.
During 2012 our operating cash flow funded approximately three-fourths of our cash payments for capital expenditures, net of divestitures proceeds. Leveraging our liquidity, we used debt to fund the remainder of our cash-based capital expenditures.
Debt Activity, Net
During 2012, we increased our debt borrowings by $1.9 billion as a result of issuing $2.5 billion of long-term debt and repaying approximately $0.6 billion of outstanding short-term debt. The additional borrowings were primarily used to fund capital expenditures in excess of our operating cash flow.
During 2011, we increased our commercial paper borrowings by $3.7 billion and received $0.5 billion from new debt issuances, net of debt maturities. Proceeds were primarily used to fund capital expenditures and common stock repurchases in excess of operating cash flow.
During 2010, we repaid $1.4 billion of commercial paper borrowings and redeemed our $350 million notes, primarily with proceeds received from our U.S. Offshore divestitures.
Divestitures of Property and Equipment
During 2012, we closed joint venture transactions with Sinopec and Sumitomo. Sinopec paid approximately $900 million in cash and received a 33.3 percent interest in five of our new ventures exploration plays in the U.S. Sinopec is also funding approximately $1.6 billion of our share of future exploration, development and drilling costs associated with these plays. Sumitomo paid approximately $400 million and received a 30 percent interest in the Cline and Midland-Wolfcamp Shale plays in Texas. Additionally, Sumitomo is funding approximately $1.0 billion of our share of future exploration, development and drilling costs associated with these plays. At December 31, 2012, Sinopec’s and Sumitomo’s remaining commitment to fund our share of future costs associated with these plays was approximately $2.3 billion.
Also in 2012, we sold our West Johnson County Plant and gathering system in north Texas for approximately $90 million and divested our Angola operations for approximately $71 million.
 
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In 2011 and 2010, our divestitures primarily related to the divestitures of our offshore assets.
Capital Expenditures
The amounts in the table below reflect cash payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.

 	  	Year Ended December 31,	 	
 	  	2012	 	  	2011	 	  	2010	 	
 	  	(In millions)	 	
U.S. Onshore	  	$	5,719	  	  	$	5,128	  	  	$	3,689	  	
Canada	  	 	1,606	  	  	 	1,571	  	  	 	1,826	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
North America Onshore	  	 	7,325	  	  	 	6,699	  	  	 	5,515	  	
U.S. Offshore	  	 	—  	  	  	 	—  	  	  	 	376	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total oil and gas	  	 	7,325	  	  	 	6,699	  	  	 	5,891	  	
Midstream	  	 	504	  	  	 	333	  	  	 	236	  	
Other	  	 	396	  	  	 	502	  	  	 	349	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total continuing operations	  	$	8,225	  	  	$	7,534	  	  	$	6,476	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Our capital expenditures consist of amounts related to our oil and gas exploration and development operations, our midstream operations and other corporate activities. The vast majority of our capital expenditures are for the acquisition, drilling and development of oil and gas properties, which totaled $7.3 billion, $6.7 billion and $5.9 billion in 2012, 2011 and 2010, respectively. The increases in exploration and development capital spending in 2012 and 2011 were primarily due to new venture acreage acquisitions and increased drilling and development. With rising oil prices and proceeds from our offshore divestitures, we have increased our onshore North American acreage positions and associated exploration and development activities to drive near-term growth of our liquids, particularly oil, production.
Capital expenditures for our midstream operations are primarily for the construction and expansion of natural gas processing plants, natural gas gathering systems and oil pipelines. Our midstream capital expenditures are largely impacted by oil and gas drilling activities. Therefore, the increase in development drilling also increased midstream capital activities.
Capital expenditures related to other activities decreased in 2012. This decrease is largely driven by the construction of our new headquarters in Oklahoma City being substantially complete in early 2012.
Shareholder Distributions
The following table summarizes our share repurchases and our common stock dividends (amounts and shares in millions).

 	  	2012	 	  	2011	 	  	2010	 	
 	  	Amount	 	  	Shares	 	  	Per Share	 	  	Amount	 	  	Shares	 	  	Per Share	 	  	Amount	 	  	Shares	 	  	Per Share	 	
Repurchases	  	 	N/A	  	  	 	N/A	  	  	 	N/A	  	  	$	2,332	  	  	 	31.3	  	  	$	74.54	  	  	$	1,168	  	  	 	17.9	  	  	$	65.28	  	
Dividends	  	$	324	  	  	 	N/A	  	  	$	0.80	  	  	$	278	  	  	 	N/A	  	  	$	0.67	  	  	$	281	  	  	 	N/A	  	  	$	0.64	  	
In connection with our offshore divestitures, we conducted a $3.5 billion share repurchase program that we completed in the fourth quarter of 2011. Under the program, we repurchased 49.2 million shares, representing 11 percent of our outstanding shares, at an average price of $71.18 per share.
Liquidity
Historically, our primary sources of capital and liquidity have been our operating cash flow, asset divestiture proceeds and cash on hand. Additionally, we maintain revolving lines of credit and a commercial paper program,
 
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which can be accessed as needed to supplement operating cash flow and cash balances. Other available sources of capital and liquidity include debt and equity securities that can be issued pursuant to our shelf registration statement filed with the SEC. We estimate the combination of these sources of capital will be adequate to fund future capital expenditures, debt repayments and other contractual commitments as discussed in this section.
Operating Cash Flow
Our operating cash flow is sensitive to many variables, the most volatile of which are the prices of the oil, gas and NGLs we produce. Due to lower commodity prices, our operating cash flow from continuing operations decreased 21 percent to $4.9 billion in 2012. We expect operating cash flow to continue to be our primary source of liquidity.
Commodity Prices – Prices are determined primarily by prevailing market conditions. Regional and worldwide economic activity, weather and other substantially variable factors influence market conditions for these products. These factors, which are difficult to predict, create volatility in prices and are beyond our control. We expect this volatility to continue throughout 2013.
To mitigate some of the risk inherent in prices, we have utilized various derivative financial instruments to set minimum prices on our future production. The key terms to our oil, gas and NGL derivative financial instruments as of December 31, 2012 are presented in Note 2 to the financial statements under “Item 8. Financial Statements and Supplementary Data” of this report.
Commodity prices can also affect our operating cash flow through an indirect effect on operating expenses. Significant commodity price increases can lead to an increase in drilling and development activities. As a result, the demand and cost for people, services, equipment and materials may also increase, causing a negative impact on our cash flow. However, the inverse is also generally true during periods of depressed commodity prices or reduced activity.
Interest Rates – Our operating cash flow can also be impacted by interest rate fluctuations. As of December 31, 2012, we had total debt of $11.6 billion with an overall weighted average borrowing rate of 4.0 percent. We have derivative financial instruments in place that reduce our weighted-average interest rate to 3.8 percent.
Credit Losses – Our operating cash flow is also exposed to credit risk in a variety of ways. We are exposed to the credit risk of the customers who purchase our oil, gas and NGL production. We are also exposed to credit risk related to the collection of receivables from our joint-interest partners for their proportionate share of expenditures made on projects we operate. Additionally, we are exposed to the credit risk of counterparties to our derivative financial contracts. We utilize a variety of mechanisms to limit our exposure to the credit risks of our customers, partners and counterparties. Such mechanisms include, under certain conditions, requiring letters of credit, prepayments or collateral postings.
As recent years indicate, we have a history of investing more than 100 percent of our operating cash flow into capital development activities to grow our company and maximize value for our shareholders. Therefore, negative movements in any of the variables discussed above would not only impact our operating cash flow, but also would likely impact the amount of capital investment we could or would make.
Credit Availability
We have a $3.0 billion syndicated, unsecured revolving line of credit (the “Senior Credit Facility”). The Senior Credit Facility has an initial maturity date of October 24, 2017. However, prior to the maturity date, we have the option to extend the maturity for up to two additional one-year periods, subject to the approval of the lenders.
 
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Amounts borrowed under the Senior Credit Facility may, at our election, bear interest at various fixed rate options for periods of up to twelve months. Such rates are generally less than the prime rate. However, we may elect to borrow at the prime rate. As of December 31, 2012, we had $2.9 billion of available capacity under our syndicated, unsecured Senior Credit Facility, net of letters of credit outstanding.
The Senior Credit Facility contains only one material financial covenant. This covenant requires us to maintain a ratio of total funded debt to total capitalization, as defined in the credit agreement, of no more than 65 percent. The credit agreement defines total funded debt as funds received through the issuance of debt securities such as debentures, bonds, notes payable, credit facility borrowings and short-term commercial paper borrowings. In addition, total funded debt includes all obligations with respect to payments received in consideration for oil, gas and NGL production yet to be acquired or produced at the time of payment. Funded debt excludes our outstanding letters of credit and trade payables. The credit agreement defines total capitalization as the sum of funded debt and stockholders’ equity adjusted for noncash financial write-downs, such as full cost ceiling impairments. As of December 31, 2012, we were in compliance with this covenant. Our debt-to-capitalization ratio at December 31, 2012, as calculated pursuant to the terms of the agreement, was 25.4 percent.
Our access to funds from the Senior Credit Facility is not restricted under any “material adverse effect” clauses. It is not uncommon for credit agreements to include such clauses. These clauses can remove the obligation of the banks to fund the credit line if any condition or event would reasonably be expected to have a material and adverse effect on the borrower’s financial condition, operations, properties or business considered as a whole, the borrower’s ability to make timely debt payments, or the enforceability of material terms of the credit agreement. While our credit facility includes covenants that require us to report a condition or event having a material adverse effect, the obligation of the banks to fund the credit facility is not conditioned on the absence of a material adverse effect.
We also have access to $5.0 billion of short-term credit under our commercial paper program. Commercial paper debt generally has a maturity of between 1 and 90 days, although it can have a maturity of up to 365 days, and bears interest at rates agreed to at the time of the borrowing. The interest rate is generally based on a standard index such as the Federal Funds Rate, LIBOR, or the money market rate as found in the commercial paper market. As of December 31, 2012, we had $3.2 billion of borrowings under our commercial paper program.
At the end of 2012, we held approximately $7.0 billion of cash and short-term investments. Included in this total was $6.5 billion of cash and short-term investments held by our foreign subsidiaries. We do not currently expect to repatriate the $6.5 billion to the U.S. This expectation is based on planned investments to develop and grow our Canadian business, our current forecasts for both our U.S. and Canadian operations, currently favorable borrowing conditions in the U.S., and existing U.S. income tax laws pertaining to repatriations of foreign earnings. Therefore, with limited cash and short-term investments in the U.S., we expect to continue funding our U.S. business with a combination of our U.S.-based operating cash flow and borrowings. We do not expect near-term borrowing increases will have a material negative effect on our overall liquidity or financial condition.
If we were to repatriate a portion or all of the cash and short-term investments held by our foreign subsidiaries, we would recognize and pay current income taxes in accordance with current U.S. tax law. The payment of such additional income tax would materially decrease the amount of cash and short-term investments ultimately available to fund our business.
Debt Ratings
We receive debt ratings from the major ratings agencies in the U.S. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels, cost structure, planned asset sales, near-term and long-term production growth opportunities and capital allocation challenges. Our current debt ratings are BBB+ with a stable outlook by both Fitch and Standard & Poor’s, and Baa1 with a stable outlook by Moody’s.
 
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There are no “rating triggers” in any of our contractual obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. Our cost of borrowing under our Senior Credit Facility is predicated on our corporate debt rating. Therefore, even though a ratings downgrade would not accelerate scheduled maturities, it would adversely impact the interest rate on any borrowings under our Senior Credit Facility. Under the terms of the Senior Credit Facility, a one-notch downgrade would increase the fully-drawn borrowing costs from LIBOR plus 112.5 basis points to a new rate of LIBOR plus 125 basis points. A ratings downgrade could also adversely impact our ability to economically access debt markets in the future. As of December 31, 2012, we were not aware of any potential ratings downgrades being contemplated by the rating agencies.
Capital Expenditures
Our 2013 capital expenditures are expected to range from $6.4 billion to $7.0 billion, including $5.3 billion to $5.8 billion for our oil and gas operations, which include capitalized G&A and interest. To a certain degree, the ultimate timing of these capital expenditures is within our control. Therefore, if commodity prices fluctuate from our current estimates, we could choose to defer a portion of these planned 2013 capital expenditures until later periods or accelerate capital expenditures planned for periods beyond 2013 to achieve the desired balance between sources and uses of liquidity. Based upon current price expectations for 2013, our existing commodity hedging contracts, available cash balances and credit availability, we anticipate having adequate capital resources to fund our 2013 capital expenditures.
Additionally, our financial and operational flexibility has been further enhanced by the joint venture transactions that we entered into in 2012 with Sinopec and Sumitomo. Pursuant to the joint venture agreements, Sinopec and Sumitomo are subject to drilling carries with remaining commitments that totaled $2.3 billion at the end of 2012. These drilling carries will fund 70 percent of our capital requirements related to joint venture properties, which results in our partners paying approximately 80 percent of the overall development costs during the carry period. This is allowing us to accelerate the de-risking and commercialization of the joint venture properties without diverting capital from our core development projects. We expect the remaining carries will be realized by the end of 2014.
Contractual Obligations
A summary of our contractual obligations as of December 31, 2012, is provided in the following table.

 	  	Payments Due by Period	 	
 	  	Total	 	  	Less Than
1 Year	 	  	  1-3 Years  	 	  	  3-5 Years  	 	  	More Than 5
Years	 	
 	  	(In millions)	 	
Debt (1)	  	$	11,664	  	  	$	3,189	  	  	$	500	  	  	$	1,250	  	  	$	6,725	  	
Interest expense (2)	  	 	7,662	  	  	 	456	  	  	 	870	  	  	 	837	  	  	 	5,499	  	
Purchase obligations (3)	  	 	6,995	  	  	 	826	  	  	 	1,723	  	  	 	1,705	  	  	 	2,741	  	
Operational agreements (4)	  	 	3,496	  	  	 	391	  	  	 	797	  	  	 	682	  	  	 	1,626	  	
Asset retirement obligations (5)	  	 	2,095	  	  	 	99	  	  	 	134	  	  	 	140	  	  	 	1,722	  	
Drilling and facility obligations (6)	  	 	950	  	  	 	777	  	  	 	173	  	  	 	—  	  	  	 	—  	  	
Lease obligations (7)	  	 	312	  	  	 	50	  	  	 	65	  	  	 	56	  	  	 	141	  	
Other (8)	  	 	339	  	  	 	122	  	  	 	149	  	  	 	53	  	  	 	15	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total North America	  	$	33,513	  	  	$	5,910	  	  	$	4,411	  	  	$	4,723	  	  	$	18,469	  	

(1)	Debt amounts represent scheduled maturities of our debt obligations at December 31, 2012, excluding $20 million of net discounts included in the carrying value of debt.	
(2)	Interest expense represents the scheduled cash payments on long-term, fixed-rate debt.	
 
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(3)	Purchase obligation amounts represent contractual commitments primarily to purchase condensate at market prices for use at our heavy oil projects in Canada. We have entered into these agreements because condensate is an integral part of the heavy oil production and transportation processes. Any disruption in our ability to obtain condensate could negatively affect our ability to produce and transport heavy oil at these locations. Our total obligation related to condensate purchases expires in 2021. The value of the obligation in the table above is based on the contractual volumes and our internal estimate of future condensate market prices.	
(4)	Operational agreements represent commitments to transport or process certain volumes of oil, gas and NGLs for a fixed fee. We have entered into these agreements to aid the movement of our production to downstream markets.	
(5)	Asset retirement obligations represent estimated discounted costs for future dismantlement, abandonment and rehabilitation costs. These obligations are recorded as liabilities on our December 31, 2012 balance sheet.	
(6)	Drilling and facility obligations represent contractual agreements with third-party service providers to procure drilling rigs and other related services for developmental and exploratory drilling and facilities construction.	
(7)	Lease obligations consist primarily of non-cancelable leases for office space and equipment used in our daily operations.	
(8)	These amounts include $216 million related to uncertain tax positions.	
Contingencies and Legal Matters
For a detailed discussion of contingencies and legal matters, see Note 18 to the financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. We consider the following to be our most critical accounting estimates that involve judgment and have reviewed these critical accounting estimates with the Audit Committee of our Board of Directors.
Full Cost Method of Accounting and Proved Reserves
Our estimates of proved reserves are a major component of the depletion and full cost ceiling calculations. Additionally, our proved reserves represent the element of these calculations that require the most subjective judgments. Estimates of reserves are forecasts based on engineering data, projected future rates of production and the timing of future expenditures. The process of estimating oil, gas and NGL reserves requires substantial judgment, resulting in imprecise determinations, particularly for new discoveries. Different reserve engineers may make different estimates of reserve quantities based on the same data. Our engineers prepare our reserve estimates. We then subject certain of our reserve estimates to audits performed by outside petroleum consultants. In 2012, 92 percent of our reserves were subjected to such audits.
The passage of time provides more qualitative information regarding estimates of reserves, when revisions are made to prior estimates to reflect updated information. In the past five years, annual performance revisions to our reserve estimates, which have been both increases and decreases in individual years, have averaged less than two percent of the previous year’s estimate. However, there can be no assurance that more significant revisions will not be necessary in the future. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions.
 
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While the quantities of proved reserves require substantial judgment, the associated prices of oil, gas and NGL reserves, and the applicable discount rate, that are used to calculate the discounted present value of the reserves do not require judgment. Applicable rules require future net revenues to be calculated using prices that represent the average of the first-day-of-the-month price for the 12-month period prior to the end of each quarterly period. Such rules also dictate that a 10 percent discount factor be used. Therefore, the discounted future net revenues associated with the estimated proved reserves are not based on our assessment of future prices or costs or our enterprise risk.
Because the ceiling calculation dictates the use of prices that are not representative of future prices and requires a 10 percent discount factor, the resulting value is not indicative of the true fair value of the reserves. Oil and gas prices have historically been cyclical and, for any particular 12-month period, can be either higher or lower than our long-term price forecast, which is a more appropriate input for estimating fair value. Therefore, oil and gas property write-downs that result from applying the full cost ceiling limitation, and that are caused by fluctuations in price as opposed to reductions to the underlying quantities of reserves, should not be viewed as absolute indicators of a reduction of the ultimate value of the related reserves.
Because of the volatile nature of oil and gas prices, it is not possible to predict the timing or magnitude of full cost write-downs. In addition, due to the inter-relationship of the various judgments made to estimate proved reserves, it is impractical to provide quantitative analyses of the effects of potential changes in these estimates. However, decreases in estimates of proved reserves would generally increase our depletion rate and, thus, our depletion expense. Decreases in our proved reserves may also increase the likelihood of recognizing a full cost ceiling write-down.
Derivative Financial Instruments
We periodically enter into derivative financial instruments with respect to a portion of our oil, gas and NGL production to hedge future prices received. Our commodity derivative financial instruments include financial price swaps, basis swaps, costless price collars and call options.
The estimates of the fair values of our derivative instruments require substantial judgment. We estimate the fair values of our commodity derivative financial instruments primarily by using internal discounted cash flow calculations. The most significant variable to our cash flow calculations is our estimate of future commodity prices. We base our estimate of future prices upon published forward commodity price curves such as the Inside FERC Henry Hub forward curve for gas instruments and the NYMEX West Texas Intermediate forward curve for oil instruments. Another key input to our cash flow calculations is our estimate of volatility for these forward curves, which we base primarily upon implied volatility. The resulting estimated future cash inflows or outflows over the lives of the contracts are discounted primarily using U.S. Treasury bill rates. These pricing and discounting variables are sensitive to the period of the contract and market volatility as well as changes in forward prices and regional price differentials.
We periodically enter into interest rate swaps to manage our exposure to interest rate volatility. Under the terms of our interest-rate swaps, we receive a fixed rate and pay a variable rate on a total notional amount.
We estimate the fair values of our interest rate swap financial instruments primarily by using internal discounted cash flow calculations based upon forward interest-rate yields. The most significant variable to our cash flow calculations is our estimate of future interest rate yields. We base our estimate of future yields upon our own internal model that utilizes forward curves such as the LIBOR or the Federal Funds Rate provided by third parties. The resulting estimated future cash inflows or outflows over the lives of the contracts are discounted using the LIBOR and money market futures rates. These yield and discounting variables are sensitive to the period of the contract and market volatility as well as changes in forward interest rate yields.
We periodically validate our valuation techniques by comparing our internally generated fair value estimates with those obtained from contract counterparties.
 
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Counterparty credit risk has not had a significant effect on our cash flow calculations and derivative valuations. This is primarily the result of two factors. First, we have mitigated our exposure to any single counterparty by contracting with numerous counterparties. Our commodity derivative contracts are held with fifteen separate counterparties, and our interest rate derivative contracts are held with four separate counterparties. Second, our derivative contracts generally require cash collateral to be posted if either our or the counterparty’s credit rating falls below certain credit rating levels. The mark-to-market exposure threshold for collateral posting decreases as the debt rating falls further below such credit levels.
Because we have chosen not to qualify our derivatives for hedge accounting treatment, changes in the fair values of derivatives can have a significant impact on our reported results of operations. Generally, changes in derivative fair values will not impact our liquidity or capital resources.
Settlements of derivative instruments, regardless of whether they qualify for hedge accounting, do have an impact on our liquidity and results of operations. Generally, if actual market prices are higher than the price of the derivative instruments, our net earnings and cash flow from operations will be lower relative to the results that would have occurred absent these instruments. The opposite is also true. Additional information regarding the effects that changes in market prices can have on our derivative financial instruments, net earnings and cash flow from operations is included in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of this report.
Goodwill
The annual impairment test, which we conduct as of October 31 each year, includes an assessment of qualitative factors and requires us to estimate the fair values of our own assets and liabilities. Because quoted market prices are not available for our reporting units, we must estimate the fair values to conduct the goodwill impairment test. The most significant judgments involved in estimating the fair values of our reporting units relate to the valuation of our property and equipment. We develop estimated fair values of our property and equipment by performing various quantitative analyses using information related to comparable companies, comparable transactions and premiums paid.
In our comparable companies analysis, we review the public stock market trading multiples for selected publicly traded independent exploration and production companies with financial and operating characteristics that are comparable to our respective reporting units. Such characteristics are market capitalization, location of proved reserves and the characterization of the operations. In our comparable transactions analysis, we review certain acquisition multiples for selected independent exploration and production company transactions and oil and gas asset packages announced recently. In our premiums paid analysis, we use a sample of selected transactions of all publicly traded companies announced recently. We then review the premiums paid to the price of the target one day and one month prior to the announcement of the transaction. We use this information to determine the median premiums paid.
We then use the comparable company multiples, comparable transaction multiples, transaction premiums and other data to develop valuation estimates of our property and equipment. We also use market and other data to develop valuation estimates of the other assets and liabilities included in our reporting units. At October 31, 2012, the date of our last impairment test, the fair values of our U.S. and Canadian reporting units exceeded their related carrying values.
A lower goodwill value decreases the likelihood of an impairment charge. However, unfavorable changes in reserves or in our price forecast could result in a goodwill impairment charge. A goodwill impairment charge would have no effect on liquidity or capital resources. However, it would adversely affect our results of operations in that period.
 
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Due to the inter-relationship of the various estimates involved in assessing goodwill for impairment, it is impractical to provide quantitative analyses of the effects of potential changes in these estimates, other than to note the historical average changes in our reserve estimates.
Income Taxes
The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. We also assess factors relative to whether our foreign earnings are considered permanently reinvested. Changes in any of these factors could require recognition of additional deferred, or even current, U.S. income tax expense. The accruals for deferred tax assets and liabilities are subject to a significant amount of judgment by management and are reviewed and adjusted routinely based on changes in facts and circumstances. Material changes to our tax accruals may occur in the future based on the progress of ongoing audits, changes in legislation or resolution of pending matters.
Non-GAAP Measures
We make reference to “adjusted earnings”, “adjusted earnings per share” and “adjusted cash flow” in “Overview of 2012 Results” in this Item 7 that are not required by or presented in accordance with GAAP. These non-GAAP measures should not be considered as alternatives to GAAP measures. Adjusted earnings represents net earnings excluding certain non-cash or non-recurring items that are typically excluded by securities analysts in their published estimates of our financial results. Adjusted cash flow represents cash flow from operating activities excluding certain balance sheet changes and non-recurring items that are typically excluded by securities analysts in their published estimates of our financial results. We believe these non-GAAP measures facilitate comparisons of our performance to earnings and cash flow estimates published by securities analysts. We also believe these non-GAAP measures can facilitate comparisons of our performance between periods and to the performance of our peers. The tables below exclude amounts related to our discontinued operations.
Adjusted Earnings and Adjusted Earnings Per Share
Below are reconciliations of our adjusted earnings and earnings per share to their comparable GAAP measures.

 	  	Year Ended December 31,	 	
 	  	    2012    	 	 	    2011    	 	 	    2010    	 	
 	  	(In millions, except per share amounts)	 	
Earnings (loss) (GAAP)	  	$	(185	) 	 	$	2,134	  	 	$	2,333	  	
Adjustments (net of taxes):	  				 				 				
Asset impairments	  	 	1,308	  	 	 	—  	  	 	 	—  	  	
Oil, gas and NGL derivatives	  	 	112	  	 	 	(310	) 	 	 	50	  	
Restructuring costs	  	 	49	  	 	 	(2	) 	 	 	36	  	
Interest rate and other financial instruments	  	 	21	  	 	 	72	  	 	 	19	  	
Income tax accrual adjustment	  	 	17	  	 	 	(42	) 	 	 	(58	) 	
U.S. income taxes on foreign earnings	  	 	—  	  	 	 	744	  	 	 	144	  	
Insurance proceeds	  	 	—  	  	 	 	(60	) 	 	 	—  	  	
Additional interest costs on debt retirement	  	 	—  	  	 	 	—  	  	 	 	12	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Adjusted earnings (Non-GAAP)	  	$	1,322	  	 	$	2,536	  	 	$	2,536	  	

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 	  	Year Ended December 31,	 	
 	  	    2012    	 	 	    2011    	 	 	    2010    	 	
 	  	(In millions, except per share amounts)	 	
				
Diluted earnings per share (GAAP)	  	$	(0.47	) 	 	$	5.10	  	 	$	5.29	  	
Adjustments (net of taxes):	  				 				 				
Asset impairments	  	 	3.23	  	 	 	—  	  	 	 	—  	  	
Oil, gas and NGL derivatives	  	 	0.28	  	 	 	(0.74	) 	 	 	0.11	  	
Restructuring costs	  	 	0.13	  	 	 	—  	  	 	 	0.08	  	
Interest rate and other financial instruments	  	 	0.05	  	 	 	0.17	  	 	 	0.04	  	
Income tax accrual adjustment	  	 	0.04	  	 	 	(0.10	) 	 	 	(0.13	) 	
U.S. income taxes on foreign earnings	  	 	—  	  	 	 	1.78	  	 	 	0.33	  	
Insurance proceeds	  	 	—  	  	 	 	(0.14	) 	 	 	—  	  	
Additional interest costs on debt retirement	  	 	—  	  	 	 	—  	  	 	 	0.03	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Adjusted earnings per share (Non-GAAP)	  	$	3.26	  	 	$	6.07	  	 	$	5.75	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Cash Flow
Below is a reconciliation of our adjusted cash flow to its comparable GAAP measure.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Cash flow from operating activities (GAAP)	  	$	4,930	  	 	$	6,246	  	 	$	5,022	  	
Adjustments (net of taxes):	  				 				 				
Changes in assets and liabilities	  	 	(19	) 	 	 	275	  	 	 	282	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash flow from operating activities before balance sheet changes (Non-GAAP)	  	 	4,911	  	 	 	6,521	  	 	 	5,304	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Income tax accrual adjustment	  	 	(44	) 	 	 	(244	) 	 	 	(329	) 	
Restructuring costs	  	 	25	  	 	 	(3	) 	 	 	64	  	
Insurance proceeds	  	 	—  	  	 	 	(67	) 	 	 	—  	  	
Current taxes on divestitures	  	 	—  	  	 	 	18	  	 	 	783	  	
Current taxes on debt retirement	  	 	—  	  	 	 	—  	  	 	 	18	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Adjusted cash flow (Non-GAAP)	  	$	4,892	  	 	$	6,225	  	 	$	5,840	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to our risk of loss arising from adverse changes in oil, gas and NGL prices, interest rates and foreign currency exchange rates. The following disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.
Commodity Price Risk
Our major market risk exposure is the pricing applicable to our oil, gas and NGL production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to our U.S. and Canadian gas and NGL production. Pricing for oil, gas and NGL production has been volatile and unpredictable for several years as discussed in “Item 1A. Risk Factors” of this report. Consequently, we periodically enter into financial hedging activities with respect to a portion of our production through various
 
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financial transactions that hedge future prices received. The key terms to all our oil, gas and NGL derivative financial instruments as of December 31, 2012 are presented in Note 2 to the financial statements under “Item 8. Financial Statements and Supplementary Data” of this report.
The fair values of our commodity derivatives are largely determined by estimates of the forward curves of the relevant price indices. At December 31, 2012, a 10 percent increase and 10 percent decrease in the forward curves associated with our commodity derivative instruments would have changed our net asset positions by the following amounts:

 	  	10% Increase	 	 	10% Decrease	 	
 	  	(In millions)	 	
Gain (loss):	  				 				
Gas derivatives	  	$	(162	) 	 	$	156	  	
Oil derivatives	  	$	(214	) 	 	$	229	  	
NGL derivatives	  	$	(2	) 	 	$	2	  	
Interest Rate Risk
At December 31, 2012, we had total debt of $11.6 billion. Our long-term debt of $8.4 billion bears fixed interest rates averaging 5.4 percent. The remaining $3.2 billion of commercial paper borrowings bears interest at fixed rates which averaged 0.37 percent. Our commercial paper borrowings typically have maturity rates between 1 and 90 days.
As of December 31, 2012, we had open interest rate swap positions that are presented in Note 2 to the financial statements under “Item 8. Financial Statements and Supplementary Data” of this report. The fair values of our interest rate swaps are largely determined by estimates of the forward curves of the Federal Funds rate. A 10 percent change in these forward curves would not have materially impacted our balance sheet at December 31, 2012.
Foreign Currency Risk
Our net assets, net earnings and cash flows from our Canadian subsidiaries are based on the U.S. dollar equivalent of such amounts measured in the Canadian dollar functional currency. Assets and liabilities of the Canadian subsidiaries are translated to U.S. dollars using the applicable exchange rate as of the end of a reporting period. Revenues, expenses and cash flow are translated using an average exchange rate during the reporting period. A 10 percent unfavorable change in the Canadian-to-U.S. dollar exchange rate would not materially impact our December 31, 2012 balance sheet.
Our non-Canadian foreign subsidiaries have a U.S. dollar functional currency. However, one of these foreign subsidiaries holds Canadian-dollar cash and engages in short-term intercompany loans with Canadian subsidiaries that are sometimes based in Canadian dollars. Additionally, at December 31, 2012, we held foreign currency exchange forward contracts to hedge exposures to fluctuations in exchange rates on the Canadian-dollar cash and intercompany loans. The increase or decrease in the value of the forward contracts is offset by the increase or decrease to the U.S. dollar equivalent of the Canadian-dollar cash. The value of the intercompany loans increases or decreases from the remeasurement of the loans into the U.S. dollar functional currency. Based on the amount of the intercompany loans as of December 31, 2012, a 10 percent change in the foreign currency exchange rates would not materially impact our balance sheet.
 
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 Item 8. Financial Statements and Supplementary Data 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

Report of Independent Registered Public Accounting Firm	 	47	
		
Consolidated Financial Statements	 		
Consolidated Comprehensive Statements of Earnings	 	48	
Consolidated Statements of Cash Flows	 	49	
Consolidated Balance Sheets	 	50	
Consolidated Statements of Stockholders’ Equity	 	51	
Notes to Consolidated Financial Statements	 	52	
All financial statement schedules are omitted as they are inapplicable or the required information has been included in the consolidated financial statements or notes thereto.
 
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 Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Devon Energy Corporation:
We have audited the accompanying consolidated balance sheets of Devon Energy Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated comprehensive statements of earnings, cash flows, and stockholders’ equity for each of the years in the three-year period ended December 31, 2012. We also have audited Devon Energy Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Devon Energy Corporation’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report contained in “Item 9A. Controls and Procedures” of Devon Energy Corporation’s Annual Report on Form 10-K. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Devon Energy Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Devon Energy Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ KPMG LLP
Oklahoma City, Oklahoma
February 21, 2013
 
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 DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED COMPREHENSIVE STATEMENTS OF EARNINGS

 	  	Year Ended December 31,	 	
 	  	    2012    	 	 	    2011    	 	 	    2010    	 	
 	  	(In millions, except per share amounts)	 	
Revenues:	  				 				 				
Oil, gas and NGL sales	  	$	7,153	 	 	$	8,315	 	 	$	7,262	 	
Oil, gas and NGL derivatives	  	 	693	 	 	 	881	 	 	 	811	 	
Marketing and midstream revenues	  	 	1,656	 	 	 	2,258	 	 	 	1,867	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	9,502	 	 	 	11,454	 	 	 	9,940	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other, net:	  				 				 				
Lease operating expenses	  	 	2,074	 	 	 	1,851	 	 	 	1,689	 	
Marketing and midstream operating costs and expenses	  	 	1,246	 	 	 	1,716	 	 	 	1,357	 	
Depreciation, depletion and amortization	  	 	2,811	 	 	 	2,248	 	 	 	1,930	 	
General and administrative expenses	  	 	692	 	 	 	585	 	 	 	563	 	
Taxes other than income taxes	  	 	414	 	 	 	424	 	 	 	380	 	
Interest expense	  	 	406	 	 	 	352	 	 	 	363	 	
Restructuring costs	  	 	74	 	 	 	(2	) 	 	 	57	 	
Asset impairments	  	 	2,024	 	 	 	—  	  	 	 	—  	  	
Other, net	  	 	78	 	 	 	(10	) 	 	 	33	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other, net	  	 	9,819	 	 	 	7,164	 	 	 	6,372	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before income taxes	  	 	(317	) 	 	 	4,290	 	 	 	3,568	 	
Current income tax expense (benefit)	  	 	52	 	 	 	(143	) 	 	 	516	 	
Deferred income tax expense (benefit)	  	 	(184	) 	 	 	2,299	 	 	 	719	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations	  	 	(185	) 	 	 	2,134	 	 	 	2,333	 	
Earnings (loss) from discontinued operations, net of tax	  	 	(21	) 	 	 	2,570	 	 	 	2,217	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	  	$	(206	) 	 	$	4,704	 	 	$	4,550	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Basic net earnings (loss) per share:	  				 				 				
Basic earnings (loss) from continuing operations per share	  	$	(0.47	) 	 	$	5.12	 	 	$	5.31	 	
Basic earnings (loss) from discontinued operations per share	  	 	(0.05	) 	 	 	6.17	 	 	 	5.04	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Basic net earnings (loss) per share	  	$	(0.52	) 	 	$	11.29	 	 	$	10.35	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Diluted net earnings (loss) per share:	  				 				 				
Diluted earnings (loss) from continuing operations per share	  	$	(0.47	) 	 	$	5.10	 	 	$	5.29	 	
Diluted earnings (loss) from discontinued operations per share	  	 	(0.05	) 	 	 	6.15	 	 	 	5.02	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Diluted net earnings (loss) per share	  	$	(0.52	) 	 	$	11.25	 	 	$	10.31	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive earnings (loss):	  				 				 				
Net earnings (loss)	  	$	(206	) 	 	$	4,704	 	 	$	4,550	 	
Other comprehensive earnings (loss), net of tax:	  				 				 				
Foreign currency translation	  	 	194	 	 	 	(191	) 	 	 	377	 	
Pension and postretirement plans	  	 	2	 	 	 	6	 	 	 	(2	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive earnings (loss), net of tax	  	 	196	 	 	 	(185	) 	 	 	375	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive earnings (loss)	  	$	(10	) 	 	$	4,519	 	 	$	4,925	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
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CONSOLIDATED STATEMENTS OF CASH FLOWS

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Cash flows from operating activities:	  				 				 				
Net earnings (loss)	  	$	(206	) 	 	$	4,704	 	 	$	4,550	 	
(Earnings) loss from discontinued operations, net of tax	  	 	21	 	 	 	(2,570	) 	 	 	(2,217	) 	
Adjustments to reconcile earnings from continuing operations to net cash from operating activities:	  				 				 				
Depreciation, depletion and amortization	  	 	2,811	 	 	 	2,248	 	 	 	1,930	 	
Asset impairments	  	 	2,024	 	 	 	—  	  	 	 	—  	  	
Deferred income tax expense (benefit)	  	 	(184	) 	 	 	2,299	 	 	 	719	 	
Unrealized change in fair value of financial instruments	  	 	205	 	 	 	(401	) 	 	 	107	 	
Other noncash charges	  	 	240	 	 	 	241	 	 	 	215	 	
Net decrease (increase) in working capital	  	 	(50	) 	 	 	185	 	 	 	(273	) 	
Decrease (increase) in long-term other assets	  	 	(36	) 	 	 	33	 	 	 	32	 	
Increase (decrease) in long-term other liabilities	  	 	105	 	 	 	(493	) 	 	 	(41	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash from operating activities - continuing operations	  	 	4,930	 	 	 	6,246	 	 	 	5,022	 	
Cash from operating activities - discontinued operations	  	 	26	 	 	 	(22	) 	 	 	456	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash from operating activities	  	 	4,956	 	 	 	6,224	 	 	 	5,478	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				 				
Capital expenditures	  	 	(8,225	) 	 	 	(7,534	) 	 	 	(6,476	) 	
Proceeds from property and equipment divestitures	  	 	1,468	 	 	 	129	 	 	 	4,310	 	
Purchases of short-term investments	  	 	(4,106	) 	 	 	(6,691	) 	 	 	(145	) 	
Redemptions of short-term investments	  	 	3,266	 	 	 	5,333	 	 	 	—  	  	
Other	  	 	14	 	 	 	(29	) 	 	 	2	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash from investing activities - continuing operations	  	 	(7,583	) 	 	 	(8,792	) 	 	 	(2,309	) 	
Cash from investing activities - discontinued operations	  	 	57	 	 	 	3,146	 	 	 	2,197	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash from investing activities	  	 	(7,526	) 	 	 	(5,646	) 	 	 	(112	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				 				
Proceeds from borrowings of long-term debt, net of issuance costs	  	 	2,458	 	 	 	2,221	 	 	 	—  	  	
Net short-term borrowings (repayments)	  	 	(537	) 	 	 	3,726	 	 	 	(1,432	) 	
Debt repayments	  	 	—  	  	 	 	(1,760	) 	 	 	(350	) 	
Credit facility borrowings	  	 	750	 	 	 	—  	  	 	 	—  	  	
Credit facility repayments	  	 	(750	) 	 	 	—  	  	 	 	—  	  	
Proceeds from stock option exercises	  	 	27	 	 	 	101	 	 	 	111	 	
Repurchases of common stock	  	 	—  	  	 	 	(2,332	) 	 	 	(1,168	) 	
Dividends paid on common stock	  	 	(324	) 	 	 	(278	) 	 	 	(281	) 	
Excess tax benefits related to share-based compensation	  	 	5	 	 	 	13	 	 	 	16	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash from financing activities	  	 	1,629	 	 	 	1,691	 	 	 	(3,104	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	  	 	23	 	 	 	(4	) 	 	 	17	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	  	 	(918	) 	 	 	2,265	 	 	 	2,279	 	
Cash and cash equivalents at beginning of period	  	 	5,555	 	 	 	3,290	 	 	 	1,011	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	  	$	4,637	 	 	$	5,555	 	 	$	3,290	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
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 DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 	  	December 31,	 	
 	  	    2012    	 	 	    2011    	 	
 	  	(In millions, except
share data)	 	
ASSETS	  				 				
Current assets:	  				 				
Cash and cash equivalents	  	$	4,637	 	 	$	5,555	 	
Short-term investments	  	 	2,343	 	 	 	1,503	 	
Accounts receivable	  	 	1,245	 	 	 	1,379	 	
Other current assets	  	 	746	 	 	 	868	 	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	8,971	 	 	 	9,305	 	
	  	 	 	 	 	 	 	 	
Property and equipment, at cost:	  				 				
Oil and gas, based on full cost accounting:	  				 				
Subject to amortization	  	 	69,410	 	 	 	61,696	 	
Not subject to amortization	  	 	3,308	 	 	 	3,982	 	
	  	 	 	 	 	 	 	 	
Total oil and gas	  	 	72,718	 	 	 	65,678	 	
Other	  	 	5,630	 	 	 	5,098	 	
	  	 	 	 	 	 	 	 	
Total property and equipment, at cost	  	 	78,348	 	 	 	70,776	 	
Less accumulated depreciation, depletion and amortization	  	 	(51,032	) 	 	 	(46,002	) 	
	  	 	 	 	 	 	 	 	
Property and equipment, net	  	 	27,316	 	 	 	24,774	 	
	  	 	 	 	 	 	 	 	
Goodwill	  	 	6,079	 	 	 	6,013	 	
Other long-term assets	  	 	960	 	 	 	1,025	 	
	  	 	 	 	 	 	 	 	
Total assets	  	$	43,326	 	 	$	41,117	 	
	  	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  				 				
Current liabilities:	  				 				
Accounts payable	  	$	1,451	 	 	$	1,471	 	
Revenues and royalties payable	  	 	750	 	 	 	678	 	
Short-term debt	  	 	3,189	 	 	 	3,811	 	
Other current liabilities	  	 	613	 	 	 	778	 	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	6,003	 	 	 	6,738	 	
	  	 	 	 	 	 	 	 	
Long-term debt	  	 	8,455	 	 	 	5,969	 	
Asset retirement obligations	  	 	1,996	 	 	 	1,496	 	
Other long-term liabilities	  	 	901	 	 	 	721	 	
Deferred income taxes	  	 	4,693	 	 	 	4,763	 	
Stockholders’ equity:	  				 				
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 406 million and 404 million shares in 2012 and 2011, respectively	  	 	41	 	 	 	40	 	
Additional paid-in capital	  	 	3,688	 	 	 	3,507	 	
Retained earnings	  	 	15,778	 	 	 	16,308	 	
Accumulated other comprehensive earnings	  	 	1,771	 	 	 	1,575	 	
	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	21,278	 	 	 	21,430	 	
	  	 	 	 	 	 	 	 	
Commitments and contingencies (Note 18)	  				 				
Total liabilities and stockholders’ equity	  	$	43,326	 	 	$	41,117	 	
	  	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 	 	Common Stock	 	 	Additional
Paid-In
Capital	 	 	Retained
Earnings	 	 	Accumulated
Other
Comprehensive
Earnings	 	 	Treasury
Stock	 	 	Total
Stockholders’
Equity	 	
 	 	Shares	 	 	Amount	 	 			 			 			 			 			
 	 	(In millions)	 	
Balance as of December 31, 2009	 	 	447	 	 	$	45	 	 	$	6,527	 	 	$	7,613	 	 	$	1,385	 	 	$	—  	  	 	$	15,570	 	
Net earnings	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	4,550	 	 	 	—  	  	 	 	—  	  	 	 	4,550	 	
Other comprehensive earnings, net of tax	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	375	 	 	 	—  	  	 	 	375	 	
Stock option exercises	 	 	2	 	 	 	—  	  	 	 	117	 	 	 	—  	  	 	 	—  	  	 	 	(6	) 	 	 	111	 	
Restricted stock grants, net of cancellations	 	 	2	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Common stock repurchased	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(1,246	) 	 	 	(1,246	) 	
Common stock retired	 	 	(19	) 	 	 	(2	) 	 	 	(1,217	) 	 	 	—  	  	 	 	—  	  	 	 	1,219	 	 	 	—  	  	
Common stock dividends	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(281	) 	 	 	—  	  	 	 	—  	  	 	 	(281	) 	
Share-based compensation	 	 	—  	  	 	 	—  	  	 	 	158	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	158	 	
Share-based compensation tax benefits	 	 	—  	  	 	 	—  	  	 	 	16	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	16	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2010	 	 	432	 	 	 	43	 	 	 	5,601	 	 	 	11,882	 	 	 	1,760	 	 	 	(33	) 	 	 	19,253	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	4,704	 	 	 	—  	  	 	 	—  	  	 	 	4,704	 	
Other comprehensive loss, net of tax	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(185	) 	 	 	—  	  	 	 	(185	) 	
Stock option exercises	 	 	2	 	 	 	—  	  	 	 	112	 	 	 	—  	  	 	 	—  	  	 	 	(11	) 	 	 	101	 	
Restricted stock grants, net of cancellations	 	 	1	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Common stock repurchased	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(2,337	) 	 	 	(2,337	) 	
Common stock retired	 	 	(31	) 	 	 	(3	) 	 	 	(2,378	) 	 	 	—  	  	 	 	—  	  	 	 	2,381	 	 	 	—  	  	
Common stock dividends	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(278	) 	 	 	—  	  	 	 	—  	  	 	 	(278	) 	
Share-based compensation	 	 	—  	  	 	 	—  	  	 	 	159	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	159	 	
Share-based compensation tax benefits	 	 	—  	  	 	 	—  	  	 	 	13	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	13	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2011	 	 	404	 	 	 	40	 	 	 	3,507	 	 	 	16,308	 	 	 	1,575	 	 	 	—  	  	 	 	21,430	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(206	) 	 	 	—  	  	 	 	—  	  	 	 	(206	) 	
Other comprehensive earnings, net of tax	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	196	 	 	 	—  	  	 	 	196	 	
Stock option exercises	 	 	1	 	 	 	1	 	 	 	49	 	 	 	—  	  	 	 	—  	  	 	 	(23	) 	 	 	27	 	
Restricted stock grants, net of cancellations	 	 	1	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Common stock repurchased	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(29	) 	 	 	(29	) 	
Common stock retired	 	 	—  	  	 	 	—  	  	 	 	(52	) 	 	 	—  	  	 	 	—  	  	 	 	52	 	 	 	—  	  	
Common stock dividends	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(324	) 	 	 	—  	  	 	 	—  	  	 	 	(324	) 	
Share-based compensation	 	 	—  	  	 	 	—  	  	 	 	179	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	179	 	
Share-based compensation tax benefits	 	 	—  	  	 	 	—  	  	 	 	5	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	5	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2012	 	 	406	 	 	$	41	 	 	$	3,688	 	 	$	15,778	 	 	$	1,771	 	 	$	—  	  	 	$	21,278	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.	Summary of Significant Accounting Policies	
Devon Energy Corporation (“Devon”) is a leading independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Devon’s operations are concentrated in various North American onshore areas in the U.S. and Canada. Devon also owns natural gas pipelines, plants and treatment facilities in many of its producing areas, making it one of North America’s larger processors of natural gas.
Accounting policies used by Devon and its subsidiaries conform to accounting principles generally accepted in the United States of America and reflect industry practices. The more significant of such policies are discussed below.
Principles of Consolidation
The accounts of Devon and its wholly owned and controlled subsidiaries are included in the accompanying financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the following:
 
 	•	 	proved reserves and related present value of future net revenues;	
 
 	•	 	the carrying value of oil and gas properties;	
 
 	•	 	derivative financial instruments;	
 
 	•	 	the fair value of reporting units and related assessment of goodwill for impairment;	
 
 	•	 	income taxes;	
 
 	•	 	asset retirement obligations;	
 
 	•	 	obligations related to employee pension and postretirement benefits; and	
 
 	•	 	legal and environmental risks and exposures.	
Revenue Recognition and Gas Balancing
Oil, gas and NGL sales are recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is probable. Delivery occurs and title is transferred when production has been delivered to a pipeline, railcar or truck. Cash received relating to future production is deferred and recognized when all revenue recognition criteria are met. Taxes assessed by governmental authorities on oil, gas and NGL sales are presented separately from such revenues in the accompanying comprehensive statements of earnings.
Devon follows the sales method of accounting for gas production imbalances. The volumes of gas sold may differ from the volumes to which Devon is entitled based on its interests in the properties. These differences create imbalances that are recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the underproduced owner to recoup its entitled share through production. The liability is
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
priced based on current market prices. No receivables are recorded for those wells where Devon has taken less than its share of production unless all revenue recognition criteria are met. If an imbalance exists at the time the wells’ reserves are depleted, settlements are made among the joint interest owners under a variety of arrangements.
Marketing and midstream revenues are recorded at the time products are sold or services are provided to third parties at a fixed or determinable price, delivery or performance has occurred, title has transferred and collectability of the revenue is probable. Revenues and expenses attributable to oil, gas and NGL purchases, transportation and processing contracts are reported on a gross basis when Devon takes title to the products and has risks and rewards of ownership.
During 2012, 2011 and 2010, no purchaser accounted for more than 10 percent of Devon’s revenues from continuing operations.
Derivative Financial Instruments
Devon is exposed to certain risks relating to its ongoing business operations, including risks related to commodity prices, interest rates and Canadian to U.S. dollar exchange rates. As discussed more fully below, Devon uses derivative instruments primarily to manage commodity price risk and interest rate risk. Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes.
Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. These instruments are used to manage the inherent uncertainty of future revenues due to commodity price volatility. Devon’s derivative financial instruments typically include financial price swaps, basis swaps, costless price collars and call options. Under the terms of the price swaps, Devon receives a fixed price for its production and pays a variable market price to the contract counterparty. For the basis swaps, Devon receives a fixed differential between two regional index prices and pays a variable differential on the same two index prices to the contract counterparty. The price collars set a floor and ceiling price for the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, Devon will cash-settle the difference with the counterparty to the collars. The call options give counterparties the right to purchase production at a predetermined price.
Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. Devon’s interest rate swaps include contracts in which Devon receives a fixed rate and pays a variable rate on a total notional amount. Devon periodically enters into foreign exchange forward contracts to manage its exposure to fluctuations in exchange rates.
All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the balance sheet. Changes in the fair value of these derivative financial instruments are recorded in earnings unless specific hedge accounting criteria are met. For derivative financial instruments held during the three-year period ended December 31, 2012, Devon chose not to meet the necessary criteria to qualify its derivative financial instruments for hedge accounting treatment. Cash settlements with counterparties on Devon’s derivative financial instruments are also recorded in earnings.
By using derivative financial instruments to hedge exposures to changes in commodity prices, interest rates and foreign currency rates, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally require cash collateral to be
 
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posted if either its or the counterparty’s credit rating falls below certain credit rating levels. The mark-to-market exposure threshold, above which collateral must be posted, decreases as the debt rating falls further below such credit levels. As of December 31, 2012, Devon held $63 million of cash collateral, which represented the estimated fair value of certain derivative positions in excess of Devon’s credit guidelines. The collateral is reported in other current liabilities in the accompanying balance sheet.
General and Administrative Expenses
General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by Devon and net of amounts capitalized pursuant to the full cost method of accounting.
Share Based Compensation
Devon grants stock options, restricted stock awards and other types of share-based awards to members of its Board of Directors and selected employees. All such awards are measured at fair value on the date of grant and are generally recognized as a component of general and administrative expenses in the accompanying comprehensive statements of earnings over the applicable requisite service periods. As a result of Devon’s strategic repositioning announced in 2009 and the consolidation of its U.S. operations announced in October 2012, certain share based awards were accelerated and recognized as a component of restructuring expense in the accompanying comprehensive statements of earnings.
Generally, Devon uses new shares from approved incentive programs to grant share-based awards and to issue shares upon stock option exercises. Shares repurchased under approved programs are available to be issued as part of Devon’s share based awards. However, Devon has historically cancelled these shares upon repurchase.
Income Taxes
Devon is subject to current income taxes assessed by the federal and various state jurisdictions in the U.S. and by other foreign jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. If the future utilization of some portion of carryforwards is determined to be unlikely, a valuation allowance is provided to reduce the recorded tax benefits from such assets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Devon does not recognize U.S. deferred income taxes on the unremitted earnings of its foreign subsidiaries that are deemed to be indefinitely reinvested. When such earnings are no longer deemed permanently reinvested, Devon recognizes the appropriate deferred, or even current, income tax liabilities.
Devon recognizes the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the tax position is expected to be
 
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settled within the upcoming year, in which case the liabilities are included in other current liabilities. Interest and penalties related to unrecognized tax benefits are included in current income tax expense.
Net Earnings (Loss) Per Common Share
Devon’s basic earnings per share amounts have been computed based on the average number of shares of common stock outstanding for the period. Basic earnings per share includes the effect of participating securities, which primarily consist of Devon’s outstanding restricted stock awards. Diluted earnings per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities. Such securities primarily consist of outstanding stock options.
Cash and Cash Equivalents
Devon considers all highly liquid investments with original contractual maturities of three months or less to be cash equivalents.
Investments
Devon periodically invests excess cash in U.S. and Canadian treasury securities and other marketable securities. During 2012 and 2011, Devon invested a portion of its joint venture proceeds and a portion of the International offshore divestiture proceeds into such securities, causing short-term investments to increase.
Devon considers securities with original contractual maturities in excess of three months, but less than one year to be short-term investments. Investments with contractual maturities in excess of one year are classified as long-term, unless such investments are classified as trading or available-for-sale.
Devon reports its investments and other marketable securities at fair value, except for debt securities in which management has the ability and intent to hold until maturity. Such debt securities totaled $64 million and $84 million at December 31, 2012 and 2011, respectively and are included in other long-term assets in the accompanying balance sheet. Devon has the ability to hold the securities until maturity and does not believe the values of its long-term securities are impaired.
Property and Equipment
Devon follows the full cost method of accounting for its oil and gas properties. Accordingly, all costs incidental to the acquisition, exploration and development of oil and gas properties, including costs of undeveloped leasehold, dry holes and leasehold equipment, are capitalized. Internal costs incurred that are directly identified with acquisition, exploration and development activities undertaken by Devon for its own account, and that are not related to production, general corporate overhead or similar activities, are also capitalized. Interest costs incurred and attributable to unproved oil and gas properties under current evaluation and major development projects of oil and gas properties are also capitalized. All costs related to production activities, including workover costs incurred solely to maintain or increase levels of production from an existing completion interval, are charged to expense as incurred.
Under the full-cost method of accounting, capitalized costs of oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the full cost “ceiling” at the end of each quarter. The ceiling is calculated separately for each country and is based on the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent per annum, net of related tax effects. The estimated future net revenues exclude future cash outflows associated with settling asset retirement obligations included in the net book value of oil and gas properties.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. Prices are held constant indefinitely and are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including derivative contracts in place that qualify for hedge accounting treatment. None of Devon’s derivative contracts held during the three-year period ended December 31, 2012, qualified for hedge accounting treatment.
Any excess of the net book value, less related deferred taxes, over the ceiling is written off as an expense. An expense recorded in one period may not be reversed in a subsequent period even though higher commodity prices may have increased the ceiling applicable to the subsequent period.
Capitalized costs are depleted by an equivalent unit-of-production method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing proved reserves, net of estimated salvage values.
Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. Devon assesses its unproved properties for impairment quarterly. Significant unproved properties are assessed individually. Costs of insignificant unproved properties are transferred into the depletion calculation over holding periods ranging from three to four years.
No gain or loss is recognized upon disposal of oil and gas properties unless such disposal significantly alters the relationship between capitalized costs and proved reserves in a particular country.
Depreciation of midstream pipelines are provided on a unit-of-production basis. Depreciation and amortization of other property and equipment, including corporate and other midstream assets and leasehold improvements, are provided using the straight-line method based on estimated useful lives ranging from three to 60 years. Interest costs incurred and attributable to major midstream and corporate construction projects are also capitalized.
Devon recognizes liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites and midstream pipelines and processing plants when there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. When the assumptions used to estimate a recorded asset retirement obligation change, a revision is recorded to both the asset retirement obligation and the asset retirement cost. Devon’s asset retirement obligations include estimated environmental remediation costs which arise from normal operations and are associated with the retirement of such long-lived assets. The asset retirement cost is depreciated using a systematic and rational method similar to that used for the associated property and equipment.
Goodwill
Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired and is tested for impairment at least annually. Such test includes an assessment of qualitative and quantitative factors. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. The fair value of each reporting unit is estimated and compared to the net book value of the reporting unit. If the estimated fair value of the reporting unit is less than the net book value, including goodwill, then the goodwill is written down to the implied fair value of the goodwill through a charge to expense.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Because quoted market prices are not available for Devon’s reporting units, the fair values of the reporting units are estimated based upon several valuation analyses, including comparable companies, comparable transactions and premiums paid.
Devon performed annual impairment tests of goodwill in the fourth quarters of 2012, 2011 and 2010. Based on these assessments, no impairment of goodwill was required.
The table below provides a summary of Devon’s goodwill, by assigned reporting unit. The increase in Devon’s goodwill from 2011 to 2012 was due to changes in the exchange rate between the U.S. dollar and the Canadian dollar.

 	  	December 31,	 	
 	  	    2012    	 	  	    2011    	 	
 	  	(In millions)	 	
U.S.	  	$	3,046	  	  	$	3,046	  	
Canada	  	 	3,033	  	  	 	2,967	  	
	  	 	 	 	  	 	 	 	
Total	  	$	6,079	  	  	$	6,013	  	
	  	 	 	 	  	 	 	 	
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Liabilities for environmental remediation or restoration claims resulting from improper operation of assets are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Expenditures related to such environmental matters are expensed or capitalized in accordance with Devon’s accounting policy for property and equipment.
Fair Value Measurements
Certain of Devon’s assets and liabilities are measured at fair value at each reporting date. Fair value represents the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants. This price is commonly referred to as the “exit price.” Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques. This hierarchy consists of three broad levels:
 
 	•	 	Level 1 – Inputs consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. When available, Devon measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value.	
 
 	•	 	Level 2 – Inputs consist of quoted prices that are generally observable for the asset or liability. Common examples of Level 2 inputs include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in markets not considered to be active.	
 
 	•	 	Level 3 – Inputs are not observable from objective sources and have the lowest priority. The most common Level 3 fair value measurement is an internally developed cash flow model.	
Discontinued Operations
As a result of the November 2009 plan to divest Devon’s offshore assets, all amounts related to Devon’s International operations are classified as discontinued operations. The Gulf of Mexico properties that were divested in 2010 do not qualify as discontinued operations under accounting rules. As such, amounts in these
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
notes and the accompanying financial statements that pertain to continuing operations include amounts related to Devon’s offshore Gulf of Mexico operations.
Foreign Currency Translation Adjustments
The U.S. dollar is the functional currency for Devon’s consolidated operations except its Canadian subsidiaries, which use the Canadian dollar as the functional currency. Assets and liabilities of the Canadian subsidiaries are translated to U.S. dollars using the applicable exchange rate as of the end of a reporting period. Revenues, expenses and cash flow are translated using an average exchange rate during the reporting period. Translation adjustments have no effect on net income and are included in accumulated other comprehensive earnings in stockholders’ equity.
 
2.	Derivative Financial Instruments	
Commodity Derivatives
As of December 31, 2012, Devon had the following open oil derivative positions. Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price.

 	  	Price Swaps	 	  	Price Collars	 	  	Call Options Sold	 	
Period	  	Volume
(Bbls/d)	 	  	Weighted
Average Price
($/Bbl)	 	  	Volume
(Bbls/d)	 	  	Weighted Average
Floor Price ($/Bbl)	 	  	Weighted Average
Ceiling Price ($/Bbl)	 	  	Volume
(Bbls/d)	 	  	Weighted
Average Price
($/Bbl)	 	
Q1-Q4 2013	  	 	31,000	  	  	$	104.13	  	  	 	45,753	  	  	$	91.19	  	  	$	115.97	  	  	 	10,000	  	  	$	120.00	  	
Q1-Q4 2014	  	 	4,000	  	  	$	100.49	  	  	 	2,000	  	  	$	90.00	  	  	$	111.13	  	  	 	10,000	  	  	$	120.00	  	

Basis Swaps	 	
Period	  	Index	  	Volume (Bbls/d)	 	  	Weighted Average
Differential to WTI
($/Bbl)	 	
Q1-Q2 2013	  	Western Canadian Select	  	 	3,000	  	  	$	(19.58	) 	
As of December 31, 2012, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas swaps and collars that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas swaps and collars that settle against the AECO index.

 	 	Price Swaps	 	 	Price Collars	 	 	Call Options Sold	 	
Period	 	Volume
(MMBtu/d)	 	 	Weighted
Average  Price
($/MMBtu)	 	 	Volume
(MMBtu/d)	 	 	Weighted Average
Floor Price
($/MMBtu)	 	 	Weighted Average
Ceiling Price
($/MMBtu)	 	 	Volume
(MMBtu/d)	 	 	Weighted
Average  Price
($/MMBtu)	 	
Q1-Q4 2013	 	 	560,000	  	 	$	4.18	  	 	 	461,370	  	 	$	3.53	  	 	$	4.33	  	 	 	—  	  	 	 	—  	  	
Q1-Q4 2014	 	 	250,000	  	 	$	4.09	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	250,000	  	 	$	5.00	  	
			
 	 	Price Swaps	 	 	 	 	
Period	 	Volume
(MMBtu/d)	 	 	Weighted Average
Price ($/MMBtu)	 	 			
Q1-Q4 2013	 	 	28,435	  	 	$	3.64	  	 			

Basis Swaps	 	
Period	  	Index	  	Volume
(MMBtu/d)	 	  	Weighted Average
Differential to Henry Hub
($/MMBtu)	 	
Q1-Q4 2013	  	El Paso Natural Gas	  	 	20,000	  	  	$	(0.12	) 	
Q1-Q4 2013	  	Panhandle Eastern Pipeline	  	 	20,000	  	  	$	(0.17	) 	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
As of December 31, 2012, Devon had the following open NGL derivative positions. Devon’s NGL swaps settle against the average of the prompt month OPIS Mont Belvieu, Texas hub.

 	  	Price Swaps	 	
Period	  	Product	  	Volume
(Bbls/d)	 	  	Weighted Average
Floor Price ($/Bbl)	 	
Q1-Q4 2013	  	Propane	  	 	822	  	  	$	41.12	  	
Q1-Q4 2013	  	Ethane	  	 	1,973	  	  	$	15.36	  	

Basis Swaps	 	
Period	  	Pay	  	Volume
(Bbls/d)	 	  	Weighted Average
Differential to WTI
($/Bbl)	 	
Q1-Q4 2013	  	Natural Gasoline	  	 	500	  	  	$	(6.80	) 	
Interest Rate Derivatives
As of December 31, 2012, Devon had the following open interest rate derivative positions:

Notional	  	Weighted Average Fixed
Rate Received	 	 	Variable Rate Paid	  	Expiration	
(In millions)	  	 	 	 	 	  	 	
$ 750	  	 	3.88	% 	 	Federal funds rate	  	July 2013	
Foreign Currency Derivatives
As of December 31, 2012, Devon had the following open foreign currency derivative positions:

Forward Contract	
Currency	  	Contract
Type	  	CAD
Notional	 	  	Weighted Average
Fixed Rate Received	 	  	Expiration	
 	  	 	  	(In millions)	 	  	(CAD-USD)	 	  	 	
Canadian Dollar	  	Sell	  	$	755	  	  	 	1.005	  	  	March 2013	
Financial Statement Presentation
The following table presents the cash settlements and unrealized gains and losses on fair value changes included in the accompanying comprehensive statements of earnings associated with derivative financial instruments.

 	  	Comprehensive Statement of Earnings Caption	  	2012	 	 	2011	 	 	2010	 	
 	  	 	  	(In millions)	 	
Cash settlements:	  		  				 				 				
Commodity derivatives	  	Oil, gas and NGL derivatives	  	$	870	  	 	$	392	  	 	$	888	  	
Interest rate derivatives	  	Other, net	  	 	14	  	 	 	77	  	 	 	44	  	
Foreign currency derivatives	  	Other, net	  	 	(19	) 	 	 	16	  	 	 	—  	  	
	  		  	 	 	 	 	 	 	 	 	 	 	 	
Total cash settlements	  		  	 	865	  	 	 	485	  	 	 	932	  	

Unrealized gains (losses):	  		  				 				 				
Commodity derivatives	  	Oil, gas and NGL derivatives	  	 	(177	) 	 	 	489	  	 	 	(77	) 	
Interest rate derivatives	  	Other, net	  	 	(29	) 	 	 	(88	) 	 	 	(30	) 	
Foreign currency derivatives	  	Other, net	  	 	1	  	 	 	—  	  	 	 	—  	  	
	  		  	 	 	 	 	 	 	 	 	 	 	 	
Total unrealized gains (losses)	  		  	 	(205	) 	 	 	401	  	 	 	(107	) 	
	  		  	 	 	 	 	 	 	 	 	 	 	 	
Net gain recognized on comprehensive statements of earnings	  	$	660	  	 	$	886	  	 	$	825	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
The following table presents the derivative fair values included in the accompanying balance sheets.

 	  	 	  	December 31,	 	
 	  	Balance Sheet Caption	  	    2012    	 	  	    2011    	 	
 	  	 	  	(In millions)	 	
Asset derivatives:	  		  				  				
Commodity derivatives	  	Other current assets	  	$	379	  	  	$	611	  	
Commodity derivatives	  	Other long-term assets	  	 	22	  	  	 	17	  	
Interest rate derivatives	  	Other current assets	  	 	23	  	  	 	30	  	
Interest rate derivatives	  	Other long-term assets	  	 	—  	  	  	 	22	  	
Foreign currency derivatives	  	Other current assets	  	 	1	  	  	 	—  	  	
	  		  	 	 	 	  	 	 	 	
Total asset derivatives	  	$	425	  	  	$	680	  	

Liability derivatives:	  		  				  				
Commodity derivatives	  	Other current liabilities	  	$	3	  	  	$	82	  	
Commodity derivatives	  	Other long-term liabilities	  	 	29	  	  	 	—  	  	
	  		  	 	 	 	  	 	 	 	
Total liability derivatives	  	$	32	  	  	$	82	  	

3.	Share-Based Compensation	
On June 3, 2009, Devon’s stockholders adopted the 2009 Long-Term Incentive Plan, which expires on June 2, 2019. This plan authorizes the Compensation Committee, which consists of independent non-management members of Devon’s Board of Directors, to grant nonqualified and incentive stock options, restricted stock awards, performance restricted stock awards, Canadian restricted stock units, performance share units, stock appreciation rights and cash-out rights to eligible employees. The plan also authorizes the grant of nonqualified stock options, restricted stock awards, restricted stock units and stock appreciation rights to directors.
In the second quarter of 2012, Devon’s stockholders adopted an amendment to the 2009 Long-Term Incentive Plan, which also expires June 2, 2019. This amendment increases the number of shares authorized for issuance from 21.5 million shares to 47.0 million shares. To calculate shares issued under the 2009 Long-Term Incentive Plan subsequent to this amendment, options and stock appreciation rights represent one share and other awards represent 2.38 shares.
Devon also has a stock option plan that was adopted in 2005 under which stock options were issued to certain employees. Options granted under this plan remain exercisable by the employees owning such options, but no new options or restricted stock awards will be granted under this plan. Devon also has stock options outstanding that were assumed as part of its 2003 acquisition of Ocean Energy.
The following table presents the effects of share-based compensation included in Devon’s accompanying comprehensive statements of earnings. The vesting for certain share-based awards was accelerated as part of Devon’s strategic repositioning announced in 2009 and the consolidation of its U.S. operations announced in October 2012. The associated expense for these accelerated awards is included in restructuring costs in the accompanying comprehensive statements of earnings. See Note 4 for further details.

 	  	2012	 	  	2011	 	  	2010	 	
 	  	(In millions)	 	
Gross general and administrative expense	  	$	179	  	  	$	181	  	  	$	188	  	
Share-based compensation expense capitalized pursuant to the full cost method of accounting for oil and gas properties	  	$	56	  	  	$	56	  	  	$	58	  	
Related income tax benefit	  	$	31	  	  	$	33	  	  	$	40	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Stock Options
In accordance with Devon’s incentive plans, the exercise price of stock options granted may not be less than the market value of the stock at the date of grant. In addition, options granted are exercisable during a period established for each grant, which may not exceed eight years from the date of grant. The recipient must pay the exercise price in cash or in common stock, or a combination thereof, at the time that the option is exercised. Generally, the service requirement for vesting ranges from zero to four years.
The fair value of stock options on the date of grant is expensed over the applicable vesting period. Devon estimates the fair values of stock options granted using a Black-Scholes option valuation model, which requires Devon to make several assumptions. The volatility of Devon’s common stock is based on the historical volatility of the market price of Devon’s common stock over a period of time equal to the expected term of the option and ending on the grant date. The dividend yield is based on Devon’s historical and current yield in effect at the date of grant. The risk-free interest rate is based on the zero-coupon U.S. Treasury yield for the expected term of the option at the date of grant. The expected term of the options is based on historical exercise and termination experience for various groups of employees and directors. Each group is determined based on the similarity of their historical exercise and termination behavior. The following table presents a summary of the grant-date fair values of stock options granted and the related assumptions. All such amounts represent the weighted-average amounts for each year.

 	  	2012	 	 	2011	 	 	2010	 	
Grant-date fair value	  	$	22.20	  	 	$	23.11	  	 	$	25.41	  	
Volatility factor	  	 	42.5	% 	 	 	46.0	% 	 	 	45.3	% 	
Dividend yield	  	 	1.2	% 	 	 	1.0	% 	 	 	1.0	% 	
Risk-free interest rate	  	 	1.1	% 	 	 	0.8	% 	 	 	1.1	% 	
Expected term (in years)	  	 	6.0	  	 	 	4.2	  	 	 	4.5	  	
The following table presents a summary of Devon’s outstanding stock options.

 	  	 	 	 	Weighted Average	 	  	 	 	
 	  	Options	 	 	Exercise
Price	 	  	Remaining
Term	 	  	Intrinsic
Value	 	
 	  	(In thousands)	 	 	 	 	  	(In years)	 	  	(In millions)	 	
Outstanding at December 31, 2011	  	 	10,543	  	 	$	66.35	  	  				  				
Granted	  	 	18	  	 	$	60.09	  	  				  				
Exercised	  	 	(1,390	) 	 	$	35.16	  	  				  				
Expired	  	 	(1,058	) 	 	$	85.98	  	  				  				
Forfeited	  	 	(285	) 	 	$	68.90	  	  				  				
	  	 	 	 	 				  				  				
Outstanding at December 31, 2012	  	 	7,828	  	 	$	69.12	  	  	 	4.24	  	  	$	0	  	
	  	 	 	 	 				  				  				
Vested and expected to vest at December 31, 2012	  	 	7,742	  	 	$	69.14	  	  	 	4.22	  	  	$	0	  	
	  	 	 	 	 				  				  				
Exercisable at December 31, 2012	  	 	5,695	  	 	$	69.35	  	  	 	3.47	  	  	$	0	  	
	  	 	 	 	 				  				  				
The aggregate intrinsic value of stock options that were exercised during 2012, 2011 and 2010 was $34 million, $81 million and $47 million, respectively. As of December 31, 2012, Devon’s unrecognized compensation cost related to unvested stock options was $39 million. Such cost is expected to be recognized over a weighted-average period of 2.4 years.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Restricted Stock Awards and Units
These awards and units are subject to the terms, conditions, restrictions and limitations, if any, that the Compensation Committee deems appropriate, including restrictions on continued employment. Generally, the service requirement for vesting ranges from zero to four years. During the vesting period, recipients of restricted stock awards receive dividends that are not subject to restrictions or other limitations. Devon estimates the fair values of restricted stock awards and units as the closing price of Devon’s common stock on the grant date of the award or unit, which is expensed over the applicable vesting period. The following table presents a summary of Devon’s unvested restricted stock awards and units.

 	  	Restricted
Stock Awards
& Units	 	 	Weighted
Average
Grant-Date
Fair Value	 	
 	  	(In thousands)	 	 	 	 	
Unvested at December 31, 2011	  	 	5,224	  	 	$	67.85	  	
Granted	  	 	2,870	  	 	$	53.22	  	
Vested	  	 	(2,101	) 	 	$	68.34	  	
Forfeited	  	 	(253	) 	 	$	67.32	  	
	  	 	 	 	 				
Unvested at December 31, 2012	  	 	5,740	  	 	$	61.75	  	
	  	 	 	 	 				
The aggregate fair value of restricted stock awards and units that vested during 2012, 2011 and 2010 was $112 million, $145 million and $184 million, respectively. As of December 31, 2012, Devon’s unrecognized compensation cost related to unvested restricted stock awards and units was $314 million. Such cost is expected to be recognized over a weighted-average period of 2.9 years.
Performance Based Restricted Stock Awards
In December 2012 and 2011, certain members of Devon’s senior management were granted performance based share awards. Vesting of the awards is dependent on Devon meeting certain internal performance targets and the recipient meeting certain service requirements. Generally, the service requirement for vesting ranges from zero to four years. If Devon meets or exceeds the performance target, the awards vest after the recipient meets the related requisite service period. If the performance target and service period requirement are not met, the award does not vest. Once vested, recipients are entitled to dividends on the awards. Devon estimates the fair values of the awards as the closing price of Devon’s common stock on the grant date of the award, which is expensed over the applicable vesting period. The following table presents a summary of Devon’s performance based restricted stock awards.

 	  	Performance
Restricted
Stock Awards	 	  	Weighted
Average
Grant-Date
Fair Value	 	
 	  	(In thousands)	 	  	 	 	
Unvested at December 31, 2011	  	 	184	  	  	$	65.10	  	
Granted	  	 	224	  	  	$	52.60	  	
	  	 	 	 	  				
Unvested at December 31, 2012	  	 	408	  	  	$	58.25	  	
	  	 	 	 	  				
As of December 31, 2012, Devon’s unrecognized compensation cost related to these awards was $8 million. Such cost is expected to be recognized over a weighted-average period of 2.3 years.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Performance Share Units
In December 2012 and 2011, certain members of Devon’s management were granted performance share units. Each unit that vests entitles the recipient to one share of Devon common stock. The vesting of these units is based on comparing Devon’s total shareholder return (“TSR”) to the TSR of a predetermined group of fourteen peer companies over the specified two- or three-year performance period. The vesting of units may be between zero and 200 percent of the units granted depending on Devon’s TSR as compared to the peer group on the vesting date.
At the end of the vesting period, recipients receive dividend equivalents with respect to the number of units vested. The fair value of each performance share unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a risk-free interest rate based on U.S. Treasury rates as of the grant date; (ii) a volatility assumption based on the historical realized price volatility of Devon and the designated peer group; and (iii) an estimated ranking of Devon among the designated peer group. The fair value of the unit on the date of grant is expensed over the applicable vesting period. The following table presents a summary of the grant-date fair values of performance share units granted and the related assumptions.

 	  	2012	  	2011	
Grant-date fair value	  	$61.27 - $63.48	  	$80.24 - $83.15	
Risk-free interest rate	  	0.26% - 0.36%	  	0.28% - 0.43%	
Volatility factor	  	30.3%	  	41.8%	
Contractual term (in years)	  	3.0	  	3.0	
The following table presents a summary of Devon’s performance share units.

 	  	Performance
Share Units	 	  	Weighted
Average
Grant-Date
Fair Value	 	
 	  	(In thousands)	 	  	 	 	
Unvested at December 31, 2011	  	 	171	  	  	$	81.70	  	
Granted	  	 	707	  	  	$	63.37	  	
	  	 	 	 	  				
Unvested at December 31, 2012 (1)	  	 	878	  	  	$	66.93	  	

(1)	A maximum of 1.8 million common shares could be awarded based upon Devon’s final TSR ranking.	
As of December 31, 2012, Devon’s unrecognized compensation cost related to unvested units was $40 million. Such cost is expected to be recognized over a weighted-average period of 2.5 years.
 
4.	Restructuring Costs	
Office Consolidation
In October 2012, Devon announced plans to consolidate its U.S. personnel into a single operations group centrally located at the company’s corporate headquarters in Oklahoma City. As a result, Devon is in the process of closing its office in Houston and transferring operational responsibilities for assets in South Texas, East Texas and Louisiana to Oklahoma City. This initiative is expected to be substantially complete by the end of the first quarter 2013.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Including the $80 million recognized in December of 2012, Devon estimates that it will incur approximately $135 million in restructuring costs in connection with this plan. This estimate includes approximately $85 million of employee severance and relocation costs, $35 million of contract termination and other costs and $15 million of employee retention costs. Approximately $25 million of employee costs relates to accelerated vesting of stock awards, which are non-cash charges. Devon expects to recognize the remainder of the restructuring costs during 2013.
Divestiture of Offshore Assets
In the fourth quarter of 2009, Devon announced plans to divest its offshore assets. As of December 31, 2012, Devon had divested all of its U.S. Offshore and International assets and incurred $196 million of restructuring costs associated with the divestitures.
Financial Statement Presentation
The schedule below summarizes restructuring costs presented in the accompanying comprehensive statements of earnings. Restructuring costs relating to Devon’s discontinued operations totaled $(2) million and $(4) million in 2011 and 2010, respectively. These costs primarily related to cash severance and share-based awards and are not included in the schedule below. There were no costs related to discontinued operations in 2012.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Office consolidation:	  				 				 				
Employee severance	  	$	77	  	 	$	—  	  	 	$	—  	  	
Lease obligations	  	 	3	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	80	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Offshore divestitures:	  				 				 				
Employee severance	  	 	(3	) 	 	 	8	  	 	 	(27	) 	
Lease obligations and other	  	 	(3	) 	 	 	(10	) 	 	 	84	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	(6	) 	 	 	(2	) 	 	 	57	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Restructuring costs	  	$	74	  	 	$	(2	) 	 	$	57	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Office Consolidation
Employee severance and retention - In the fourth quarter of 2012, Devon recognized $77 million of estimated employee severance costs associated with the office consolidation. This amount was based on estimates of the number employees that would ultimately be impacted by office consolidation and included amounts related to cash severance costs and accelerated vesting of share-based grants.
Lease obligations and other - As of December 31, 2012, Devon incurred $3 million of restructuring costs related to certain office space that is subject to non-cancellable operating lease agreements and that it ceased using as a part of the office consolidation. In 2013 Devon expects to incur approximately $25 million of additional restructuring costs that represent the present value of its future obligations under the leases, net of anticipated sublease income. Devon’s estimate of lease obligations was based upon certain key estimates that could change over the term of the leases. These estimates include the estimated sublease income that it may receive over the term of the leases, as well as the amount of variable operating costs that it will be required to pay under the leases.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Divestiture of Offshore Assets
Lease obligations and other - As a result of the divestitures, Devon ceased using certain office space that was subject to non-cancellable operating lease arrangements. Consequently, in 2010 Devon recognized $70 million of restructuring costs that represented the present value of its future obligations under the leases, net of anticipated sublease income. Devon’s estimate of lease obligations was based upon certain key estimates that could change over the term of the leases. These estimates include the estimated sublease income that Devon may receive over the term of the leases, as well as the amount of variable operating costs that Devon will be required to pay under the leases. In addition, Devon recognized $13 million of asset impairment charges for leasehold improvements and furniture associated with the office space that it ceased using.
The schedule below summarizes Devon’s restructuring liabilities. Devon’s restructuring liabilities for cash severance related to its discontinued operations totaled $16 million at December 31, 2010 and are not included in the schedule below. There was no liability related to discontinued operations at the end of 2012 or 2011.

 	  	Other
Current
Liabilities	 	 	Other
Long-Term
Liabilities	 	 	Total	 	
 	  	(In millions)	 	
Balance as of December 31, 2010	  	$	31	  	 	$	51	  	 	$	82	  	
Lease obligations - Offshore	  	 	2	  	 	 	(35	) 	 	 	(33	) 	
Employee severance - Offshore	  	 	(4	) 	 	 	—  	  	 	 	(4	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2011	  	 	29	  	 	 	16	  	 	 	45	  	
Employee severance – Office consolidation	  	 	49	  	 	 	—  	  	 	 	49	  	
Lease obligations - Offshore	  	 	(17	) 	 	 	(7	) 	 	 	(24	) 	
Employee severance - Offshore	  	 	(9	) 	 	 	—  	  	 	 	(9	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2012	  	$	52	  	 	$	9	  	 	$	61	  	

5.	Other, net	
The components of other, net in the accompanying comprehensive statement of earnings include the following:

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Accretion of asset retirement obligations	  	$	110	  	 	$	92	  	 	$	92	  	
Interest rate derivatives	  	 	15	  	 	 	11	  	 	 	(14	) 	
Foreign currency derivatives	  	 	18	  	 	 	(16	) 	 	 	—  	  	
Foreign exchange loss (gain)	  	 	(15	) 	 	 	25	  	 	 	(7	) 	
Interest income	  	 	(36	) 	 	 	(21	) 	 	 	(13	) 	
Other	  	 	(14	) 	 	 	(101	) 	 	 	(25	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other, net	  	$	78	  	 	$	(10	) 	 	$	33	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
During 2011, Devon received $88 million of excess insurance recoveries related to certain weather and operational claims.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
6.	Income Taxes	
Income Tax Expense (Benefit )
Devon’s income tax components are presented in the following table.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Current income tax expense (benefit):	  				 				 				
U.S. federal	  	$	60	  	 	$	(143	) 	 	$	244	  	
Various states	  	 	(3	) 	 	 	20	  	 	 	16	  	
Canada and various provinces	  	 	(5	) 	 	 	(20	) 	 	 	256	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total current tax expense (benefit)	  	 	52	  	 	 	(143	) 	 	 	516	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Deferred income tax expense (benefit):	  				 				 				
U.S. federal	  	 	(188	) 	 	 	1,986	  	 	 	781	  	
Various states	  	 	34	  	 	 	95	  	 	 	21	  	
Canada and various provinces	  	 	(30	) 	 	 	218	  	 	 	(83	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total deferred tax expense (benefit)	  	 	(184	) 	 	 	2,299	  	 	 	719	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit)	  	$	(132	) 	 	$	2,156	  	 	$	1,235	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate to earnings from continuing operations before income taxes as a result of the following:

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Expected income tax expense (benefit) based on U.S. statutory tax rate of 35%	  	$	(111	) 	 	$	1,502	  	 	$	1,249	  	
Assumed repatriations	  	 	—  	  	 	 	725	  	 	 	144	  	
State income taxes	  	 	20	  	 	 	70	  	 	 	31	  	
Taxation on Canadian operations	  	 	(19	) 	 	 	(91	) 	 	 	(60	) 	
Other	  	 	(22	) 	 	 	(50	) 	 	 	(129	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit)	  	$	(132	) 	 	$	2,156	  	 	$	1,235	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
During 2011 and 2010, pursuant to the completed and planned divestitures of Devon’s International assets located outside North America, a portion of Devon’s foreign earnings were no longer deemed to be indefinitely reinvested. Accordingly, Devon recognized deferred income tax expense of $725 million and $144 million during 2011 and 2010 respectively, related to assumed repatriations of earnings from its foreign subsidiaries.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Deferred Tax Assets and Liabilities
The tax effects of temporary differences that gave rise to Devon’s deferred tax assets and liabilities are presented below:

 	  	December 31,	 	
 	  	2012	 	 	2011	 	
 	  	(In millions)	 	
Deferred tax assets:	  				 				
Net operating loss carryforwards	  	$	427	  	 	$	222	  	
Asset retirement obligations	  	 	618	  	 	 	447	  	
Pension benefit obligations	  	 	129	  	 	 	130	  	
Alternative minimum tax credits	  	 	198	  	 	 	—  	  	
Other	  	 	134	  	 	 	117	  	
	  	 	 	 	 	 	 	 	
Total deferred tax assets	  	 	1,506	  	 	 	916	  	
	  	 	 	 	 	 	 	 	
Deferred tax liabilities:	  				 				
Property and equipment	  	 	(4,970	) 	 	 	(4,475	) 	
Fair value of financial instruments	  	 	(141	) 	 	 	(218	) 	
Long-term debt	  	 	(198	) 	 	 	(185	) 	
Taxes on unremitted foreign earnings	  	 	(936	) 	 	 	(936	) 	
Other	  	 	(76	) 	 	 	(27	) 	
	  	 	 	 	 	 	 	 	
Total deferred tax liabilities	  	 	(6,321	) 	 	 	(5,841	) 	
	  	 	 	 	 	 	 	 	
Net deferred tax liability	  	$	(4,815	) 	 	$	(4,925	) 	
	  	 	 	 	 	 	 	 	
Devon has recognized $427 million of deferred tax assets related to various carryforwards available to offset future income taxes. The carryforwards consist of $711 million of U.S. federal net operating loss carryforwards, which expire in 2031, $662 million of Canadian net operating loss carryforwards, which expire between 2029 and 2031, and $153 million of state net operating loss carryforwards, which expire primarily between 2013 and 2031. Devon expects the tax benefits from the U.S. federal net operating loss carryforwards to be utilized between 2013 and 2015. Devon expects the tax benefits from the Canadian and state net operating loss carryforwards to be utilized between 2013 and 2017. Such expectations are based upon current estimates of taxable income during these periods, considering limitations on the annual utilization of these benefits as set forth by tax regulations. Significant changes in such estimates caused by variables such as future oil, gas and NGL prices or capital expenditures could alter the timing of the eventual utilization of such carryforwards. There can be no assurance that Devon will generate any specific level of continuing taxable earnings. However, management believes that Devon’s future taxable income will more likely than not be sufficient to utilize its tax carryforwards prior to their expiration. Devon has also recognized a $198 million deferred tax asset related to alternative minimum tax credits which have no expiration date and will be available for use against tax on future taxable income.
As of December 31, 2012, Devon’s unremitted foreign earnings totaled approximately $8.0 billion. Of this amount, approximately $5.5 billion was deemed to be indefinitely reinvested into the development and growth of our Canadian business. Therefore, Devon has not recognized a deferred tax liability for U.S. income taxes associated with such earnings. If such earnings were to be repatriated to the U.S., Devon may be subject to U.S. income taxes and foreign withholding taxes. However, it is not practical to estimate the amount of such additional taxes that may be payable due to the inter-relationship of the various factors involved in making such an estimate.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Devon has deemed the remaining $2.5 billion of unremitted earnings not to be indefinitely reinvested. Consequently, Devon has recognized a $936 million deferred tax liability associated with such unremitted earnings as of December 31, 2012. Although Devon has recognized this deferred tax liability, Devon does not currently expect to repatriate its foreign earnings. This expectation is based on Devon’s current forecasts for both its U.S. and Canadian operations, currently favorable borrowing conditions in the U.S., and existing U.S. income tax laws pertaining to repatriations of foreign earnings.
Unrecognized Tax Benefits
The following table presents changes in Devon’s unrecognized tax benefits.

 	  	December 31,	 	
 	  	    2012    	 	 	    2011    	 	
 	  	(In millions)	 	
Balance at beginning of year	  	$	165	  	 	$	194	  	
Tax positions taken in prior periods	  	 	(46	) 	 	 	(3	) 	
Tax positions taken in current year	  	 	92	  	 	 	27	  	
Accrual of interest related to tax positions taken	  	 	7	  	 	 	(7	) 	
Lapse of statute of limitations	  	 	(3	) 	 	 	(41	) 	
Settlements	  	 	—  	  	 	 	(5	) 	
Foreign currency translation	  	 	1	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Balance at end of year	  	$	216	  	 	$	165	  	
	  	 	 	 	 	 	 	 	
Devon’s unrecognized tax benefit balance at December 31, 2012 and 2011, included $27 million and $20 million of interest and penalties, respectively. If recognized, $176 million of Devon’s unrecognized tax benefits as of December 31, 2012 would affect Devon’s effective income tax rate. Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities.

Jurisdiction	  	Tax Years Open	 	
U.S. federal	  	 	2008-2012	  	
Various U.S. states	  	 	2008-2012	  	
Canada federal	  	 	2004-2012	  	
Various Canadian provinces	  	 	2004-2012	  	
Certain statute of limitation expirations are scheduled to occur in the next twelve months. However, Devon is currently in various stages of the administrative review process for certain open tax years. In addition, Devon is currently subject to various income tax audits that have not reached the administrative review process. As a result, Devon cannot reasonably anticipate the extent that the liabilities for unrecognized tax benefits will increase or decrease within the next twelve months.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
7.	Earnings Per Share	
The following table reconciles earnings from continuing operations and common shares outstanding used in the calculations of basic and diluted earnings per share.

 	  	Earnings	 	 	Common
Shares	 	 	Earnings
per Share	 	
 	  	(In millions, except per share amounts)	 	
Year Ended December 31, 2012:	  				
Loss from continuing operations	  	$	(185	) 	 	 	404	  	 				
Attributable to participating securities	  	 	(3	) 	 	 	(4	) 	 				
	  	 	 	 	 	 	 	 	 				
Basic and diluted loss per share	  	$	(188	) 	 	 	400	  	 	$	(0.47	) 	
	  	 	 	 	 	 	 	 	 				
Year Ended December 31, 2011:	  				
Earnings from continuing operations	  	$	2,134	  	 	 	417	  	 				
Attributable to participating securities	  	 	(23	) 	 	 	(5	) 	 				
	  	 	 	 	 	 	 	 	 				
Basic earnings per share	  	 	2,111	  	 	 	412	  	 	$	5.12	  	
Dilutive effect of potential common shares issuable	  	 	—  	  	 	 	2	  	 				
	  	 	 	 	 	 	 	 	 				
Diluted earnings per share	  	$	2,111	  	 	 	414	  	 	$	5.10	  	
	  	 	 	 	 	 	 	 	 				
Year Ended December 31, 2010:	  				 				 				
Earnings from continuing operations	  	$	2,333	  	 	 	440	  	 				
Attributable to participating securities	  	 	(26	) 	 	 	(5	) 	 				
	  	 	 	 	 	 	 	 	 				
Basic earnings per share	  	 	2,307	  	 	 	435	  	 	$	5.31	  	
Dilutive effect of potential common shares issuable	  	 	—  	  	 	 	1	  	 				
	  	 	 	 	 	 	 	 	 				
Diluted earnings per share	  	$	2,307	  	 	 	436	  	 	$	5.29	  	
	  	 	 	 	 	 	 	 	 				
Certain options to purchase shares of Devon’s common stock were excluded from the dilution calculations because the options were antidilutive. These excluded options totaled 9 million, 3 million and 6 million in 2012, 2011 and 2010, respectively.
 
8.	Other Comprehensive Earnings	
Components of other comprehensive earnings consist of the following:

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Foreign currency translation:	  				
Beginning accumulated foreign currency translation	  	$	1,802	  	 	$	1,993	  	 	$	1,616	  	
Change in cumulative translation adjustment	  	 	203	  	 	 	(200	) 	 	 	397	  	
Income tax benefit (expense)	  	 	(9	) 	 	 	9	  	 	 	(20	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Ending accumulated foreign currency translation	  	 	1,996	  	 	 	1,802	  	 	 	1,993	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Pension and postretirement benefit plans:	  				 				 				
Beginning accumulated pension and postretirement benefits	  	 	(227	) 	 	 	(233	) 	 	 	(231	) 	
Net actuarial loss and prior service cost arising in current year	  	 	(47	) 	 	 	(21	) 	 	 	(33	) 	
Income tax benefit	  	 	16	  	 	 	8	  	 	 	11	  	
Recognition of net actuarial loss and prior service cost in net earnings	  	 	51	  	 	 	30	  	 	 	31	  	
Income tax expense	  	 	(18	) 	 	 	(11	) 	 	 	(11	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Ending accumulated pension and postretirement benefits	  	 	(225	) 	 	 	(227	) 	 	 	(233	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Accumulated other comprehensive earnings, net of tax	  	$	1,771	  	 	$	1,575	  	 	$	1,760	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
9.	Supplemental Information to Statements of Cash Flows	

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Net decrease (increase) in working capital:	  				
Change in accounts receivable	  	$	140	  	 	$	(185	) 	 	$	23	  	
Change in other current assets	  	 	(128	) 	 	 	125	  	 	 	21	  	
Change in accounts payable	  	 	(8	) 	 	 	64	  	 	 	37	  	
Change in revenues and royalties payable	  	 	19	  	 	 	144	  	 	 	48	  	
Change in other current liabilities	  	 	(73	) 	 	 	37	  	 	 	(402	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net decrease (increase) in working capital	  	$	(50	) 	 	$	185	  	 	$	(273	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Supplementary cash flow data – total operations:	  				 				 				
Interest paid (net of capitalized interest)	  	$	334	  	 	$	325	  	 	$	359	  	
Income taxes paid (received)	  	$	100	  	 	$	(383	) 	 	$	955	  	
 
10.	Short-Term Investments	
The components of short-term investments include the following:

 	  	December 31,	 	
 	  	2012	 	  	2011	 	
 	  	(In millions)	 	
Canadian treasury, agency and provincial securities	  	$	1,865	  	  	$	1,155	  	
U.S. treasuries	  	 	429	  	  	 	201	  	
Other	  	 	49	  	  	 	147	  	
	  	 	 	 	  	 	 	 	
Short-term investments	  	$	2,343	  	  	$	1,503	  	

11.	Accounts Receivable	
The components of accounts receivable include the following:

 	  	December 31,	 	
 	  	2012	 	 	2011	 	
 	  	(In millions)	 	
Oil, gas and NGL sales	  	$	752	  	 	$	928	  	
Joint interest billings	  	 	270	  	 	 	247	  	
Marketing and midstream revenues	  	 	161	  	 	 	174	  	
Other	  	 	72	  	 	 	39	  	
	  	 	 	 	 	 	 	 	
Gross accounts receivable	  	 	1,255	  	 	 	1,388	  	
Allowance for doubtful accounts	  	 	(10	) 	 	 	(9	) 	
	  	 	 	 	 	 	 	 	
Net accounts receivable	  	$	1,245	  	 	$	1,379	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
12.	Other Current Assets	
The components of other current assets include the following:

 	  	December 31,	 	
 	  	2012	 	  	2011	 	
 	  	(In millions)	 	
Derivative financial instruments	  	$	403	  	  	$	641	  	
Inventories	  	 	110	  	  	 	102	  	
Income tax receivable	  	 	119	  	  	 	35	  	
Current assets held for sale	  	 	3	  	  	 	21	  	
Other	  	 	111	  	  	 	69	  	
	  	 	 	 	  	 	 	 	
Other current assets	  	$	746	  	  	$	868	  	

13.	Property and Equipment	
See Note 22 for disclosure of Devon’s capitalized costs related to its oil and gas exploration and development activities.
Sinopec Transaction
In April 2012, Devon closed its joint venture transaction with Sinopec International Petroleum Exploration & Production Corporation. Pursuant to the agreement, Sinopec paid approximately $900 million in cash and received a 33.3 percent interest in five of Devon’s new ventures exploration plays in the U.S. at closing of the transaction. Additionally, Sinopec is required to fund approximately $1.6 billion of Devon’s share of future exploration, development and drilling costs associated with these plays. Devon recognized the cash proceeds received at closing as a reduction to U.S. oil and gas property and equipment. No gain or loss was recognized.
Sumitomo Transaction
In September 2012, Devon closed its joint venture transaction with Sumitomo Corporation. At closing, Sumitomo paid approximately $400 million in cash and received a 30 percent interest in the Cline and Midland-Wolfcamp Shale plays in Texas. Additionally, Sumitomo is required to fund approximately $1.0 billion of Devon’s share of future exploration, development and drilling costs associated with these plays. Devon recognized the cash proceeds received at closing as a reduction to U.S. oil and gas property and equipment. No gain or loss was recognized.
Asset Impairments
In the third and fourth quarters of 2012, Devon recognized asset impairments related to its oil and gas property and equipment and its U.S. midstream assets as presented below.

 	  	Q3 2012	 	  	Q4 2012	 	  	Year Ended December 31, 2012	 	
 	  	Gross	 	  	Net of Taxes	 	  	Gross	 	  	Net of Taxes	 	  	Gross	 	  	Net of Taxes	 	
 	  	(In millions)	 	
U.S. oil and gas assets	  	$	1,106	  	  	$	705	  	  	$	687	  	  	$	437	  	  	$	1,793	  	  	$	1,142	  	
Canada oil and gas assets	  	 	—	  	  	 	—	  	  	 	163	  	  	 	122	  	  	 	163	  	  	 	122	  	
Midstream assets	  	 	22	  	  	 	14	  	  	 	46	  	  	 	30	  	  	 	68	  	  	 	44	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total asset impairments	  	$	1,128	  	  	$	719	  	  	$	896	  	  	$	589	  	  	$	2,024	  	  	$	1,308	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Oil and Gas Impairments
Under the full-cost method of accounting, capitalized costs of oil and gas properties are subject to a quarterly full cost ceiling test, which is discussed in Note 1.
The oil and gas impairments resulted primarily from declines in the U.S. and Canada full cost ceilings. The lower ceiling values resulted primarily from decreases in the 12-month average trailing prices for oil, natural gas and NGLs, which have reduced proved reserve values.
If pricing conditions do not improve, Devon may incur full cost ceiling impairments related to its oil and gas property and equipment in 2013.
Midstream Impairments
Due to declining natural gas production resulting from low natural gas and NGL prices, Devon determined that the carrying amounts of certain of its midstream facilities were not recoverable from estimated future cash flows. Consequently, the assets were written down to their estimated fair values, which were determined using discounted cash flow models. The fair value of Devon’s midstream assets is considered a Level 3 fair value measurement.
Offshore Divestitures
In November 2009, Devon announced plans to divest its offshore assets. In 2012, Devon completed its planned divestiture program. In aggregate, Devon’s U.S. and International sales generated total proceeds of $10 billion. Assuming repatriation of a portion of the foreign proceeds under current U.S. tax law, the after-tax proceeds from these transactions were approximately $8 billion.
 
14.	Debt and Related Expenses	
A summary of Devon’s debt is as follows:

 	  	December 31,	 	
 	  	2012	 	 	2011	 	
 	  	(In millions)	 	
Commercial paper	  	$	3,189	  	 	$	3,726	  	
Other debentures and notes:	  				 				
5.625% due January 15, 2014	  	 	500	  	 	 	500	  	
Non-interest bearing promissory note due June 29, 2014	  	 	—  	  	 	 	85	  	
2.40% due July 15, 2016	  	 	500	  	 	 	500	  	
1.875% due May 15, 2017	  	 	750	  	 	 	—  	  	
8.25% due July 1, 2018	  	 	125	  	 	 	125	  	
6.30% due January 15, 2019	  	 	700	  	 	 	700	  	
4.00% due July 15, 2021	  	 	500	  	 	 	500	  	
3.25% due May 15, 2022	  	 	1,000	  	 	 	—  	  	
7.50% due September 15, 2027	  	 	150	  	 	 	150	  	
7.875% due September 30, 2031	  	 	1,250	  	 	 	1,250	  	
7.95% due April 15, 2032	  	 	1,000	  	 	 	1,000	  	
5.60% due July 15, 2041	  	 	1,250	  	 	 	1,250	  	
4.75% due May 15, 2042	  	 	750	  	 	 	—  	  	
Net discount on other debentures and notes	  	 	(20	) 	 	 	(6	) 	
	  	 	 	 	 	 	 	 	
Total debt	  	 	11,644	  	 	 	9,780	  	
Less amount classified as short-term debt	  	 	3,189	  	 	 	3,811	  	
	  	 	 	 	 	 	 	 	
Long-term debt	  	$	8,455	  	 	$	5,969	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Debt maturities as of December 31, 2012, excluding premiums and discounts, are as follows (in millions):

2013	  	$	3,189	  	
2014	  	 	500	  	
2015	  	 	—  	  	
2016	  	 	500	  	
2017	  	 	750	  	
2018 and thereafter	  	 	6,725	  	
	  	 	 	 	
Total	  	$	11,664	  	
	  	 	 	 	
Credit Lines
Devon has a $3.0 billion syndicated, unsecured revolving line of credit (the “Senior Credit Facility”). The Senior Credit Facility has an initial maturity date of October 24, 2017. However, prior to the maturity date, Devon has the option to extend the maturity for up to two additional one-year periods, subject to the approval of the lenders.
Amounts borrowed under the Senior Credit Facility may, at the election of Devon, bear interest at various fixed rate options for periods of up to twelve months. Such rates are generally less than the prime rate. However, Devon may elect to borrow at the prime rate. The Senior Credit Facility currently provides for an annual facility fee of $3.8 million that is payable quarterly in arrears. As of December 31, 2012, there were no borrowings under the Senior Credit Facility.
The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65 percent. The credit agreement contains definitions of total funded debt and total capitalization that include adjustments to the respective amounts reported in the accompanying financial statements. Also, total capitalization is adjusted to add back noncash financial write-downs such as full cost ceiling impairments or goodwill impairments. As of December 31, 2012, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 25.4 percent.
Commercial Paper
Devon has access to $5.0 billion of short-term credit under its commercial paper program. Commercial paper debt generally has a maturity of between 1 and 90 days, although it can have a maturity of up to 365 days, and bears interest at rates agreed to at the time of the borrowing. The interest rate is generally based on a standard index such as the Federal Funds Rate, LIBOR, or the money market rate as found in the commercial paper market. As of December 31, 2012, Devon’s weighted average borrowing rate on its commercial paper borrowings was 0.37 percent.
Other Debentures and Notes
Following are descriptions of the various other debentures and notes outstanding at December 31, 2012, as listed in the table presented at the beginning of this note.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
In 2012, 2011, 2009 and 2002 Devon issued senior notes that are unsecured and unsubordinated obligations of Devon. Devon used the net proceeds to repay outstanding commercial paper and credit facility borrowings. The schedule below summarizes the key terms of these notes ($ in millions).

 	  	May 2012	 	 	July 2011	 	 	January 2009	 	 	March 2002	 	
1.875% due May 15, 2017	  	$	750	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
3.25% due May 15, 2022	  	 	1,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
4.75% due May 15, 2042	  	 	750	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
2.40% due July 15, 2016	  	 	—  	  	 	 	500	  	 	 	—  	  	 	 	—  	  	
4.00% due July 15, 2021	  	 	—  	  	 	 	500	  	 	 	—  	  	 	 	—  	  	
5.60% due July 15, 2041	  	 	—  	  	 	 	1,250	  	 	 	—  	  	 	 	—  	  	
5.625% due January 15, 2014	  	 	—  	  	 	 	—  	  	 	 	500	  	 	 	—  	  	
6.30% due January 15, 2019	  	 	—  	  	 	 	—  	  	 	 	700	  	 	 	—  	  	
7.95% due April 15, 2032	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	1,000	  	
Discount and issuance costs	  	 	(35	) 	 	 	(29	) 	 	 	(13	) 	 	 	(14	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net proceeds	  	$	2,465	  	 	$	2,221	  	 	$	1,187	  	 	$	986	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ocean Debt
On April 25, 2003, Devon merged with Ocean Energy, Inc. and assumed certain debt instruments. The table below summarizes the debt assumed that remains outstanding as of December 31, 2012, including the fair value of the debt at April 25, 2003, and the effective interest rate of the debt after determining the fair values using April 25, 2003, market interest rates. The premiums resulting from fair values exceeding face values are being amortized using the effective interest method. Both notes are general unsecured obligations of Devon.

Debt Assumed	  	Fair Value of
Debt Assumed	 	  	Effective Rate of
Debt Assumed	 	
	  	(In millions)	 	  	 	 	
8.250% due July 2018 (principal of $125 million)	  	$	147	  	  	 	5.5	% 	
7.500% due September 2027 (principal of $150 million)	  	$	169	  	  	 	6.5	% 	
7.875% Debentures due September 30, 2031
In October 2001, Devon, through Devon Financing Corporation, U.L.C. (“Devon Financing”), a wholly owned finance subsidiary, sold debentures, which are unsecured and unsubordinated obligations of Devon Financing. Devon has fully and unconditionally guaranteed on an unsecured and unsubordinated basis the obligations of Devon Financing under the debt securities. The proceeds were used to fund a portion of the acquisition of Anderson Exploration.
Interest Expense
The following schedule includes the components of interest expense.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Interest based on debt outstanding	  	$	440	  	 	$	414	  	 	$	408	  	
Capitalized interest	  	 	(48	) 	 	 	(72	) 	 	 	(76	) 	
Early retirement of debt	  	 	—  	  	 	 	—  	  	 	 	19	  	
Other	  	 	14	  	 	 	10	  	 	 	12	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	  	$	406	  	 	$	352	  	 	$	363	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
15.	Asset Retirement Obligations	
The schedule below summarizes changes in Devon’s asset retirement obligations.

 	  	Year Ended December 31,	 	
 	  	    2012    	 	 	    2011    	 	
 	  	(In millions)	 	
Asset retirement obligations as of beginning of period	  	$	1,563	  	 	$	1,497	  	
Liabilities incurred	  	 	90	  	 	 	53	  	
Liabilities settled	  	 	(86	) 	 	 	(82	) 	
Revision of estimated obligation	  	 	420	  	 	 	25	  	
Liabilities assumed by others	  	 	(23	) 	 	 	—  	  	
Accretion expense on discounted obligation	  	 	110	  	 	 	92	  	
Foreign currency translation adjustment	  	 	21	  	 	 	(22	) 	
	  	 	 	 	 	 	 	 	
Asset retirement obligations as of end of period	  	 	2,095	  	 	 	1,563	  	
Less current portion	  	 	99	  	 	 	67	  	
	  	 	 	 	 	 	 	 	
Asset retirement obligations, long-term	  	$	1,996	  	 	$	1,496	  	
	  	 	 	 	 	 	 	 	
During 2012, Devon recognized revisions to its asset retirement obligations totaling $420 million. The primary factor contributing to this revision was an overall increase in abandonment cost estimates for certain of its production operations facilities.
 
16.	Retirement Plans	
Devon has various non-contributory defined benefit pension plans, including qualified plans and nonqualified plans. The qualified plans provide retirement benefits for certain U.S. and Canadian employees meeting certain age and service requirements. Benefits for the qualified plans are based on the employees’ years of service and compensation and are funded from assets held in the plans’ trusts.
The nonqualified plans provide retirement benefits for certain employees whose benefits under the qualified plans are limited by income tax regulations. The nonqualified plans’ benefits are based on the employees’ years of service and compensation. For certain nonqualified plans, Devon has established trusts to fund these plans’ benefit obligations. The total value of these trusts was $31 million and $32 million at December 31, 2012 and 2011, respectively, and is included in other long-term assets in the accompanying balance sheets. For the remaining nonqualified plans for which trusts have not been established, benefits are funded from Devon’s available cash and cash equivalents.
Devon also has defined benefit postretirement plans that provide benefits for substantially all U.S. employees. The plans provide medical and, in some cases, life insurance benefits and are either contributory or non-contributory, depending on the type of plan. Benefit obligations for such plans are estimated based on Devon’s future cost-sharing intentions. Devon’s funding policy for the plans is to fund the benefits as they become payable with available cash and cash equivalents.
Benefit Obligations and Funded Status
The following table presents the funded status of Devon’s qualified and nonqualified pension and postretirement benefit plans. The benefit obligation for pension plans represents the projected benefit obligation, while the benefit obligation for the postretirement benefit plans represents the accumulated benefit obligation. The accumulated benefit obligation differs from the projected benefit obligation in that the former includes no assumption about future compensation levels. The accumulated benefit obligation for pension plans was $1.2 billion at December 31, 2012 and
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
2011. Devon’s benefit obligations and plan assets are measured each year as of December 31. Devon’s 2012 plan settlements relate to a plan amendment which removed a dollar cap on lump sum payments and revised optional forms of payment to include a lump sum distribution feature. Devon’s 2011 pension plan contributions of $454 million presented in the table were primarily discretionary. After these contributions, the projected benefit obligation for Devon’s qualified plans was fully funded as of December 31, 2012 and 2011.

 	  	Pension Benefits	 	 	Postretirement Benefits	 	
 	  	2012	 	 	2011	 	 	2012	 	 	2011	 	
 	  	(In millions)	 	
Change in benefit obligation:	  				 				 				 				
Benefit obligation at beginning of year	  	$	1,303	  	 	$	1,124	  	 	$	37	  	 	$	43	  	
Service cost	  	 	43	  	 	 	37	  	 	 	1	  	 	 	1	  	
Interest cost	  	 	60	  	 	 	60	  	 	 	1	  	 	 	2	  	
Actuarial loss (gain)	  	 	95	  	 	 	123	  	 	 	(4	) 	 	 	(8	) 	
Plan amendments	  	 	14	  	 	 	—  	  	 	 	—  	  	 	 	5	  	
Plan curtailments	  	 	(20	) 	 	 	—  	  	 	 	1	  	 	 	—  	  	
Plan settlements	  	 	(93	) 	 	 	—  	  	 	 	—  	  	 	 	(4	) 	
Foreign exchange rate changes	  	 	1	  	 	 	(1	) 	 	 	—  	  	 	 	—  	  	
Participant contributions	  	 	—  	  	 	 	—  	  	 	 	3	  	 	 	3	  	
Benefits paid	  	 	(43	) 	 	 	(40	) 	 	 	(5	) 	 	 	(5	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Benefit obligation at end of year	  	 	1,360	  	 	 	1,303	  	 	 	34	  	 	 	37	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in plan assets:	  				 				 				 				
Fair value of plan assets at beginning of year	  	 	1,187	  	 	 	632	  	 	 	—  	  	 	 	—  	  	
Actual return on plan assets	  	 	102	  	 	 	141	  	 	 	—  	  	 	 	—  	  	
Employer contributions	  	 	11	  	 	 	454	  	 	 	2	  	 	 	7	  	
Participant contributions	  	 	—  	  	 	 	—  	  	 	 	3	  	 	 	3	  	
Plan settlements	  	 	(93	) 	 	 	—  	  	 	 	—  	  	 	 	(5	) 	
Benefits paid	  	 	(43	) 	 	 	(40	) 	 	 	(5	) 	 	 	(5	) 	
Foreign exchange rate changes	  	 	1	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value of plan assets at end of year	  	 	1,165	  	 	 	1,187	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funded status at end of year	  	$	(195	) 	 	$	(116	) 	 	$	(34	) 	 	$	(37	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts recognized in balance sheet:	  				 				 				 				
Noncurrent assets	  	$	62	  	 	$	116	  	 	$	—  	  	 	$	—  	  	
Current liabilities	  	 	(12	) 	 	 	(10	) 	 	 	(3	) 	 	 	(3	) 	
Noncurrent liabilities	  	 	(245	) 	 	 	(222	) 	 	 	(31	) 	 	 	(34	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net amount	  	$	(195	) 	 	$	(116	) 	 	$	(34	) 	 	$	(37	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts recognized in accumulated other comprehensive earnings:	  				 				 				 				
Net actuarial loss (gain)	  	$	340	  	 	$	348	  	 	$	(11	) 	 	$	(9	) 	
Prior service cost (credit)	  	 	25	  	 	 	18	  	 	 	(4	) 	 	 	(5	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	$	365	  	 	$	366	  	 	$	(15	) 	 	$	(14	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The plan assets for pension benefits in the table above exclude the assets held in trusts for the nonqualified plans. However, employer contributions for pension benefits in the table above include $10 million and $8 million for 2012 and 2011, respectively, which were transferred from the trusts established for the nonqualified plans.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Certain of Devon’s pension plans have a projected benefit obligation and accumulated benefit obligation in excess of plan assets at December 31, 2012 and 2011 as presented in the table below.

 	  	December 31,	 	
 	  	    2012    	 	  	    2011    	 	
 	  	(In millions)	 	
Projected benefit obligation	  	$	257	  	  	$	232	  	
Accumulated benefit obligation	  	$	216	  	  	$	189	  	
Fair value of plan assets	  	$	—  	  	  	$	—  	  	
Net Periodic Benefit Cost and Other Comprehensive Earnings
The following table presents the components of net periodic benefit cost and other comprehensive earnings.

 	  	Pension Benefits	 	 	Postretirement
Benefits	 	
 	  	2012	 	 	2011	 	 	2010	 	 	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Net periodic benefit cost:	  				 				 				 				 				 				
Service cost	  	$	43	  	 	$	37	  	 	$	33	  	 	$	1	  	 	$	1	  	 	$	1	  	
Interest cost	  	 	60	  	 	 	60	  	 	 	58	  	 	 	1	  	 	 	2	  	 	 	3	  	
Expected return on plan assets	  	 	(64	) 	 	 	(42	) 	 	 	(36	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Curtailment and settlement expense	  	 	26	  	 	 	—  	  	 	 	—  	  	 	 	1	  	 	 	(3	) 	 	 	—  	  	
Recognition of net actuarial loss (gain)	  	 	24	  	 	 	32	  	 	 	27	  	 	 	(1	) 	 	 	—  	  	 	 	—  	  	
Recognition of prior service cost	  	 	3	  	 	 	3	  	 	 	3	  	 	 	(1	) 	 	 	(2	) 	 	 	1	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net periodic benefit cost	  	 	92	  	 	 	90	  	 	 	85	  	 	 	1	  	 	 	(2	) 	 	 	5	  	
Other comprehensive loss (earnings):	  				 				 				 				 				 				
Actuarial loss (gain) arising in current year	  	 	37	  	 	 	23	  	 	 	50	  	 	 	(4	) 	 	 	(7	) 	 	 	1	  	
Prior service cost (credit) arising in current year	  	 	14	  	 	 	—  	  	 	 	4	  	 	 	—  	  	 	 	5	  	 	 	(22	) 	
Recognition of net actuarial loss, including settlement expense, in net periodic benefit cost	  	 	(45	) 	 	 	(32	) 	 	 	(27	) 	 	 	1	  	 	 	3	  	 	 	—  	  	
Recognition of prior service cost, including curtailment, in net periodic benefit cost	  	 	(8	) 	 	 	(3	) 	 	 	(3	) 	 	 	1	  	 	 	2	  	 	 	(1	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other comprehensive loss (earnings)	  	 	(2	) 	 	 	(12	) 	 	 	24	  	 	 	(2	) 	 	 	3	  	 	 	(22	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total recognized	  	$	90	  	 	$	78	  	 	$	109	  	 	$	(1	) 	 	$	1	  	 	$	(17	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table presents the estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive earnings into net periodic benefit cost during 2013.

 	  	Pension
Benefits	 	  	Postretirement
Benefits	 	
 	  	(In millions)	 	
Net actuarial loss (gain)	  	$	22	  	  	$	(1	) 	
Prior service cost (credit)	  	 	4	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	
Total	  	$	26	  	  	$	(1	) 	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Assumptions
The following table presents the weighted average actuarial assumptions used to determine obligations and periodic costs.

 	  	Pension Benefits	 	 	Postretirement Benefits	 	
 	  	2012	 	 	2011	 	 	2010	 	 	2012	 	 	2011	 	 	2010	 	
Assumptions to determine benefit obligations:	  				 				 				 				 				 				
Discount rate	  	 	3.85	% 	 	 	4.65	% 	 	 	5.50	% 	 	 	3.30	% 	 	 	4.25	% 	 	 	4.90	% 	
Rate of compensation increase	  	 	4.48	% 	 	 	4.97	% 	 	 	6.94	% 	 	 	N/A	  	 	 	N/A	  	 	 	N/A	  	
Assumptions to determine net periodic benefit cost:	  				 				 				 				 				 				
Discount rate	  	 	4.65	% 	 	 	5.50	% 	 	 	6.00	% 	 	 	4.25	% 	 	 	4.90	% 	 	 	5.70	% 	
Expected return on plan assets	  	 	5.48	% 	 	 	6.48	% 	 	 	6.94	% 	 	 	N/A	  	 	 	N/A	  	 	 	N/A	  	
Rate of compensation increase	  	 	4.97	% 	 	 	6.94	% 	 	 	6.95	% 	 	 	N/A	  	 	 	N/A	  	 	 	N/A	  	
Discount rate – Future pension and postretirement obligations are discounted at the end of each year based on the rate at which obligations could be effectively settled, considering the timing of estimated future cash flows related to the plans. This rate is based on high-quality bond yields, after allowing for call and default risk.
Rate of compensation increase – For measurement of the 2012 benefit obligation for the pension plans, a 4.48 percent compensation increase was assumed.
Expected return on plan assets – The expected rate of return on plan assets was determined by evaluating input from external consultants and economists, as well as long-term inflation assumptions. Devon expects the long-term asset allocation to approximate the targeted allocation. Therefore, the expected long-term rate of return on plan assets is based on the target allocation of investment types. See the pension plan assets section below for more information on Devon’s target allocations.
Other assumptions – For measurement of the 2012 benefit obligation for the other postretirement medical plans, an 8.2 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2013. The rate was assumed to decrease annually to an ultimate rate of 5 percent in the year 2029 and remain at that level thereafter. Assumed health care cost-trend rates affect the amounts reported for retiree health care costs. A one-percentage-point change in the assumed health care cost-trend rates would have changed the postretirement benefits obligation as of December 31, 2012, by $2 million and would change the 2013 service and interest cost components of net periodic benefit cost by less than $1 million.
Pension Plan Assets
Devon’s overall investment objective for its pension plans’ assets is to achieve stability of the plans’ funded status while providing long-term growth of invested capital and income to ensure benefit payments can be funded when required. To assist in achieving this objective, Devon has established certain investment strategies, including target allocation percentages and permitted and prohibited investments, designed to mitigate risks inherent with investing. Derivatives or other speculative investments considered high risk are generally prohibited. The following table presents Devon’s target allocation for its pension plan assets.

 	  	December 31,	 	
 	  	    2012    	 	 	    2011    	 	
Fixed income	  	 	70	% 	 	 	70	% 	
Equity	  	 	20	% 	 	 	20	% 	
Other	  	 	10	% 	 	 	10	% 	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
The fair values of Devon’s pension assets are presented by asset class in the following tables.

 	  	As of December 31, 2012	 	
 	  	 	 	 	 	 	  	Fair Value Measurements Using:	 	
 	  	Actual
Allocation	 	 	Total	 	  	Level 1
Inputs	 	  	Level 2
Inputs	 	  	Level 3
Inputs	 	
 	  	($ in millions)	 	
Fixed-income securities:	  				 				  				  				  				
U.S. Treasury obligations	  	 	39.4	% 	 	$	459	  	  	$	65	  	  	$	394	  	  	$	—  	  	
Corporate bonds	  	 	26.5	% 	 	 	308	  	  	 	256	  	  	 	52	  	  	 	—  	  	
Other bonds	  	 	2.4	% 	 	 	28	  	  	 	28	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total fixed-income securities	  	 	68.3	% 	 	 	795	  	  	 	349	  	  	 	446	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Equity securities:	  				 				  				  				  				
Global (large, mid, small cap)	  	 	20.5	% 	 	 	239	  	  	 	—  	  	  	 	239	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Other securities:	  				 				  				  				  				
Hedge fund & alternative investments	  	 	10.3	% 	 	 	120	  	  	 	17	  	  	 	—  	  	  	 	103	  	
Short-term investment funds	  	 	0.9	% 	 	 	11	  	  	 	—  	  	  	 	11	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total other securities	  	 	11.2	% 	 	 	131	  	  	 	17	  	  	 	11	  	  	 	103	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total investments	  	 	100.0	% 	 	$	1,165	  	  	$	366	  	  	$	696	  	  	$	103	  	

																					
 	  	As of December 31, 2011	 	
 	  	 	 	 	 	 	  	Fair Value Measurements Using:	 	
 	  	Actual
Allocation	 	 	Total	 	  	Level 1
Inputs	 	  	Level 2
Inputs	 	  	Level 3
Inputs	 	
 	  	($ in millions)	 	
Fixed-income securities:	  				 				  				  				  				
U.S. Treasury obligations	  	 	43.9	% 	 	$	522	  	  	$	27	  	  	$	495	  	  	$	—  	  	
Corporate bonds	  	 	24.8	% 	 	 	294	  	  	 	265	  	  	 	29	  	  	 	—  	  	
Other bonds	  	 	3.1	% 	 	 	36	  	  	 	36	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total fixed-income securities	  	 	71.8	% 	 	 	852	  	  	 	328	  	  	 	524	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Equity securities:	  				 				  				  				  				
Global (large, mid, small cap)	  	 	18.0	% 	 	 	214	  	  	 	—  	  	  	 	214	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Other securities:	  				 				  				  				  				
Hedge fund & alternative investments	  	 	8.9	% 	 	 	106	  	  	 	16	  	  	 	—  	  	  	 	90	  	
Short-term investment funds	  	 	1.3	% 	 	 	15	  	  	 	—  	  	  	 	15	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total other securities	  	 	10.2	% 	 	 	121	  	  	 	16	  	  	 	15	  	  	 	90	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total investments	  	 	100.0	% 	 	$	1,187	  	  	$	344	  	  	$	753	  	  	$	90	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The following methods and assumptions were used to estimate the fair values in the tables above.
Fixed-income securities – Devon’s fixed-income securities consist of U.S. Treasury obligations, bonds issued by investment-grade companies from diverse industries, and asset-backed securities. These fixed-income securities are actively traded securities that can be redeemed upon demand. The fair values of these Level 1 securities are based upon quoted market prices.
 
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Devon’s fixed income securities also include commingled funds that primarily invest in long-term bonds and U.S. Treasury securities. These fixed income securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by the investment managers.
Equity securities – Devon’s equity securities include a commingled global equity fund that invests in large, mid and small capitalization stocks across the world’s developed and emerging markets. These equity securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by the investment managers.
Other securities – Devon’s other securities include commingled, short-term investment funds. These securities can be redeemed on demand but are not actively traded. The fair values of these Level 2 securities are based upon the net asset values provided by investment managers.
Devon’s hedge fund and alternative investments include an investment in an actively traded global mutual fund that focuses on alternative investment strategies and a hedge fund of funds that invests both long and short using a variety of investment strategies. Devon’s hedge fund of funds is not actively traded and Devon is subject to redemption restrictions with regards to this investment. The fair value of this Level 3 investment represents the fair value as determined by the hedge fund manager.
Included below is a summary of the changes in Devon’s Level 3 plan assets (in millions).

December 31, 2010	  	$	58	  	
Purchases	  	 	33	  	
Investment returns	  	 	(1	) 	
	  	 	 	 	
December 31, 2011	  	 	90	  	
Purchases	  	 	6	  	
Investment returns	  	 	7	  	
	  	 	 	 	
December 31, 2012	  	$	103	  	
	  	 	 	 	
Expected Cash Flows
The following table presents expected cash flow information for Devon’s pension and postretirement benefit plans.

 	  	Pension
Benefits	 	  	Postretirement
Benefits	 	
 	  	(In millions)	 	
Devon’s 2013 contributions	  	$	11	  	  	$	3	  	
Benefit payments:	  				  				
2013	  	$	60	  	  	$	3	  	
2014	  	$	61	  	  	$	3	  	
2015	  	$	63	  	  	$	3	  	
2016	  	$	65	  	  	$	3	  	
2017	  	$	67	  	  	$	3	  	
2018 to 2022	  	$	386	  	  	$	14	  	
Expected contributions included in the table above include amounts related to Devon’s qualified plans, nonqualified plans and postretirement plans. Of the benefits expected to be paid in 2013, the $11 million of
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
pension benefits is expected to be funded from the trusts established for the nonqualified plans and the $3 million of postretirement benefits is expected to be funded from Devon’s available cash and cash equivalents. Expected employer contributions and benefit payments for other postretirement benefits are presented net of employee contributions.
Defined Contribution Plans
Devon maintains several defined contribution plans covering its employees in the U.S. and Canada. Such plans include Devon’s 401(k) plan, enhanced contribution plan and Canadian pension and savings plan. Contributions are primarily based upon percentages of annual compensation and years of service. In addition, each plan is subject to regulatory limitations by each respective government. The following table presents Devon’s expense related to these defined contribution plans.

 	  	Year Ended December 31,	 	
 	  	2012	 	  	2011	 	  	2010	 	
 	  	(In millions)	 	
401(k) and enhanced contribution plans	  	$	36	  	  	$	33	  	  	$	32	  	
Canadian pension and savings plans	  	 	23	  	  	 	21	  	  	 	17	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	59	  	  	$	54	  	  	$	49	  	

17.	Stockholders’ Equity	
The authorized capital stock of Devon consists of 1 billion shares of common stock, par value $0.10 per share, and 4.5 million shares of preferred stock, par value $1.00 per share. The preferred stock may be issued in one or more series, and the terms and rights of such stock will be determined by the Board of Directors.
Devon’s Board of Directors has designated 2.9 million shares of the preferred stock as Series A Junior Participating Preferred Stock (the “Series A Junior Preferred Stock”). At December 31, 2012, there were no shares of Series A Junior Preferred Stock issued or outstanding. The Series A Junior Preferred Stock is entitled to receive cumulative quarterly dividends per share equal to the greater of $1.00 or 100 times the aggregate per share amount of all dividends (other than stock dividends) declared on common stock since the immediately preceding quarterly dividend payment date or, with respect to the first payment date, since the first issuance of Series A Junior Preferred Stock. Holders of the Series A Junior Preferred Stock are entitled to 100 votes per share on all matters submitted to a vote of the stockholders. Devon, at its option, may redeem shares of the Series A Junior Participating Preferred Stock in whole at any time and in part from time to time, at a redemption price equal to 100 times the current per share market price of Devon’s common stock on the date of the mailing of the notice of redemption. The Series A Junior Preferred Stock ranks prior to the common stock but junior to all other classes of Preferred Stock.
Stock Repurchases
In fourth quarter of 2011, Devon completed its 2010 repurchase program. In total, Devon repurchased 49.2 million shares for $3.5 billion, or $71.18 per share.
Dividends
Devon paid common stock dividends of $324 million, $278 million and $281 million in 2012, 2011 and 2010 respectively. The quarterly cash dividend was $0.16 per share in 2010 and the first quarter of 2011. Devon increased the dividend rate to $0.17 per share in the second quarter of 2011 and further increased the dividend rate to $0.20 per share in the first quarter of 2012.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
18.	Commitments and Contingencies	
Devon is party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.
Royalty Matters
Numerous natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. The suits allege that the producers and related parties used below-market prices, made improper deductions, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with natural gas and NGLs produced and sold. Devon’s largest exposure for such matters relates to royalties in New Mexico. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.
Environmental Matters
Devon is subject to certain laws and regulations relating to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devon’s monetary exposure for environmental matters is not expected to be material.
Chief Redemption Matters
In 2006, Devon acquired Chief Holdings LLC (“Chief”) from the owners of Chief, including Trevor Rees-Jones, the majority owner of Chief. In 2008, a former owner of Chief filed a petition against Rees-Jones, as the former majority owner of Chief, and Devon, as Chief’s successor pursuant to the 2006 acquisition. The petition claimed, among other things, violations of the Texas Securities Act, fraud and breaches of Rees-Jones’ fiduciary responsibility to the former owner in connection with Chief’s 2004 redemption of the owner’s minority ownership stake in Chief.
On June 20, 2011, a court issued a judgment against Rees-Jones for $196 million, of which $133 million of the judgment was also issued against Devon. Devon does not have a legal right of set off with respect to the judgment. Therefore, it has recorded a $133 million long-term liability relating to the judgment with an offsetting $133 million long-term receivable relating to its right to be indemnified by Rees-Jones and certain other parties pursuant to the indemnification agreement. Both Rees-Jones and Devon appealed the judgment.
In December 2012, the plaintiffs and Rees-Jones reached an agreement in principle to settle all claims related to the 2004 redemption. Under the terms of the agreement, Rees-Jones and Devon will receive full releases for all of the plaintiffs’ claims related to the Chief redemption. All settlement payments will be funded entirely by Rees-Jones. The settlement is contingent upon the execution of a formal settlement agreement and release, which is currently being negotiated by the parties. Devon does not expect to have any net exposure as a result of this matter.
Other Matters
Devon is involved in other various routine legal proceedings incidental to its business. However, to Devon’s knowledge, there were no other material pending legal proceedings to which Devon is a party or to which any of its property is subject.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Commitments
The following is a schedule by year of Devon’s commitments that have initial or remaining noncancelable terms in excess of one year as of December 31, 2012.

Year Ending December 31,	  	Purchase
Obligations	 	  	Drilling
and
Facility
Obligations	 	  	Operational
Agreements	 	  	Office and
Equipment
Leases	 	
 	  	(In millions)	 	
2013	  	$	826	  	  	$	777	  	  	$	391	  	  	$	50	  	
2014	  	 	862	  	  	 	173	  	  	 	406	  	  	 	34	  	
2015	  	 	861	  	  	 	—  	  	  	 	391	  	  	 	31	  	
2016	  	 	861	  	  	 	—  	  	  	 	340	  	  	 	29	  	
2017	  	 	844	  	  	 	—  	  	  	 	342	  	  	 	27	  	
Thereafter	  	 	2,741	  	  	 	—  	  	  	 	1,626	  	  	 	141	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	6,995	  	  	$	950	  	  	$	3,496	  	  	$	312	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Purchase obligation amounts represent contractual commitments primarily to purchase condensate at market prices for use at Devon’s heavy oil projects in Canada. Devon has entered into these agreements because condensate is an integral part of the heavy oil production and transportation processes. Any disruption in Devon’s ability to obtain condensate could negatively affect its ability to produce and transport heavy oil at these locations. Devon’s total obligation related to condensate purchases expires in 2021. The value of the obligation in the table above is based on the contractual volumes and Devon’s internal estimate of future condensate market prices.
Devon has certain drilling and facility obligations under contractual agreements with third-party service providers to procure drilling rigs and other related services for developmental and exploratory drilling and facilities construction.
Devon has certain operational agreements whereby Devon has committed to transport or process certain volumes of oil, gas and NGLs for a fixed fee. Devon has entered into these agreements to aid the movement of its production to downstream markets.
Devon leases certain office space and equipment under operating lease arrangements. Total rental expense included in general and administrative expenses under operating leases, net of sub-lease income, was $42 million, $42 million and $57 million in 2012, 2011 and 2010, respectively.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
19.	Fair Value Measurements	
The following tables provide carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other payables and accrued expenses included in the accompanying balance sheets approximated fair value at December 31, 2012 and December 31, 2011. Therefore, such financial assets and liabilities are not presented in the following tables. Additionally, information regarding the fair values of Devon’s midstream and pension plan assets is provided in Note 13 and Note 16, respectively.

 	  	 	 	 	 	 	 	Fair Value Measurements Using:	 	
 	  	Carrying
Amount	 	 	Total Fair
Value	 	 	Level 1
Inputs	 	  	Level 2
Inputs	 	 	Level 3
Inputs	 	
 	  	(In millions)	 	
December 31, 2012 assets (liabilities):	  				 				 				  				 				
Cash equivalents	  	$	4,149	  	 	$	4,149	  	 	$	200	  	  	$	3,949	  	 	$	 —  	  	
Short-term investments	  	$	2,343	  	 	$	2,343	  	 	$	429	  	  	$	1,914	  	 	$	—  	  	
Long-term investments	  	$	64	  	 	$	64	  	 	$	 —  	  	  	$	—  	  	 	$	64	  	
Commodity derivatives	  	$	401	  	 	$	401	  	 	$	—  	  	  	$	401	  	 	$	—  	  	
Commodity derivatives	  	$	(32	) 	 	$	(32	) 	 	$	—  	  	  	$	(32	) 	 	$	—  	  	
Interest rate derivatives	  	$	23	  	 	$	23	  	 	$	—  	  	  	$	23	  	 	$	—  	  	
Foreign currency derivatives	  	$	1	  	 	$	1	  	 	$	—  	  	  	$	1	  	 	$	—  	  	
Debt	  	$	(11,644	) 	 	$	(13,435	) 	 	$	—  	  	  	$	(13,435	) 	 	$	—  	  	

 	  	 	 	 	 	 	 	Fair Value Measurements Using	 	
 	  	Carrying
Amount	 	 	Total Fair
Value	 	 	Level 1
Inputs	 	  	Level 2
Inputs	 	 	Level 3
Inputs	 	
 	  	(In millions)	 	
December 31, 2011 assets (liabilities):	  				 				 				  				 				
Cash equivalents	  	$	5,123	  	 	$	5,123	  	 	$	929	  	  	$	4,194	  	 	$	 —  	  	
Short-term investments	  	$	1,503	  	 	$	1,503	  	 	$	201	  	  	$	1,302	  	 	$	—  	  	
Long-term investments	  	$	84	  	 	$	84	  	 	$	 —  	  	  	$	—  	  	 	$	84	  	
Commodity derivatives	  	$	628	  	 	$	628	  	 	$	—  	  	  	$	628	  	 	$	—  	  	
Commodity derivatives	  	$	(82	) 	 	$	(82	) 	 	$	—  	  	  	$	(82	) 	 	$	—  	  	
Interest rate derivatives	  	$	52	  	 	$	52	  	 	$	—  	  	  	$	52	  	 	$	—  	  	
Debt	  	$	(9,780	) 	 	$	(11,380	) 	 	$	—  	  	  	$	(11,295	) 	 	$	(85	) 	
The following methods and assumptions were used to estimate the fair values in the tables above.
Level 1 Fair Value Measurements
Cash equivalents and short-term investments — Amounts consist primarily of U.S. and Canadian treasury securities and money market investments. The fair value approximates the carrying value.
Level 2 Fair Value Measurements
Cash equivalents and short-term investments — Amounts consist primarily of Canadian agency and provincial securities and commercial paper investments. The fair value is based upon quotes from independent third parties, which approximate the carrying value.
Commodity, interest rate and foreign currency derivatives — The fair values of commodity, interest rate and foreign currency derivatives are estimated using internal discounted cash flow calculations based upon
 
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forward curves and data obtained from independent third parties for contracts with similar terms or data obtained from counterparties to the agreements.
Debt — Devon’s debt instruments do not actively trade in an established market. The fair values of its fixed-rate debt are estimated based on rates available for debt with similar terms and maturity. The fair value of Devon’s variable-rate commercial paper and credit facility borrowings are the carrying values.
Level 3 Fair Value Measurements
Long-term investments — Devon’s long-term investments presented in the tables above consisted entirely of auction rate securities. Due to auction failures and the lack of an active market for Devon’s auction rate securities, quoted market prices for these securities were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs to estimate the fair values of its long-term auction rate securities. These inputs were based on continued receipts of principal at par, the collection of all accrued interest to date, the probability of full repayment of the securities considering the U.S. government guarantees substantially all of the underlying student loans, and the AAA credit rating of the securities. As a result of using these inputs, Devon concluded the estimated fair values of its long-term auction rate securities approximated the par values as of December 31, 2012 and December 31, 2011.
Debt — Devon’s Level 3 debt consisted of a non-interest bearing promissory note. Due to the lack of an active market, quoted marked prices for this note, or similar notes, were not available. Therefore, Devon used valuation techniques that relied on unobservable inputs to estimate the fair value of its promissory note. The fair value of this debt was estimated using internal discounted cash flow calculations based upon estimated future payment schedules and a 3.125 percent interest rate. As a result of using these inputs, Devon concluded the estimated fair value of its non-interest bearing promissory note approximated the carrying value as of December 31, 2011.
Included below is a summary of the changes in Devon’s Level 3 fair value measurements.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	
 	  	(In millions)	 	
Long-term investments balance at beginning of period	  	$	84	  	 	$	94	  	
Redemptions of principal	  	 	(20	) 	 	 	(10	) 	
	  	 	 	 	 	 	 	 	
Long-term investments balance at end of period	  	$	64	  	 	$	84	  	

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	
 	  	(In millions)	 	
Debt balance at beginning of period	  	$	(85	) 	 	$	(144	) 	
Foreign exchange translation adjustment	  	 	(1	) 	 	 	1	  	
Accretion of promissory note	  	 	3	  	 	 	(5	) 	
Redemptions of principal	  	 	83	  	 	 	63	  	
	  	 	 	 	 	 	 	 	
Debt balance at end of period	  	$	 —  	  	 	$	(85	) 	

20.	Discontinued Operations	
In March 2012, Devon received $71 million and recognized a loss of $16 million upon closing the divestiture of its operations in Angola, which completed Devon’s offshore divestiture program that was
 
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announced in November 2009. In aggregate, Devon’s U.S. and International offshore divestitures generated total proceeds of approximately $10 billion, or $8 billion after-tax, assuming repatriation of a substantial portion of the foreign proceeds under current U.S. tax law.
Revenues related to Devon’s discontinued operations totaled $43 million and $693 million during 2011 and 2010, respectively. Devon did not have revenues related to its discontinued operations during 2012. The following table presents the earnings (loss) from Devon’s discontinued operations.

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	  	2010	 	
 	  	(In millions)	 	
Operating earnings	  	$	—  	  	 	$	38	  	  	$	567	  	
Gain (loss) on sale of oil and gas properties	  	 	(16	) 	 	 	2,552	  	  	 	1,818	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
Earnings (loss) before income taxes	  	 	(16	) 	 	 	2,590	  	  	 	2,385	  	
Income tax expense	  	 	5	  	 	 	20	  	  	 	168	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
Earnings (loss) from discontinued operations	  	$	(21	) 	 	$	2,570	  	  	$	2,217	  	
	  	 	 	 	 	 	 	 	  	 	 	 	
The following table presents the main classes of assets and liabilities associated with Devon’s discontinued operations at December 31, 2011.

 	  	December 31, 2011	 	
 	  	(In millions)	 	
Other current assets	  	$	21	  	
Property and equipment, net	  	 	132	  	
	  	 	 	 	
Total assets	  	$	153	  	
	  	 	 	 	
Accounts payable	  	$	20	  	
Other current liabilities	  	 	28	  	
	  	 	 	 	
Total liabilities	  	$	48	  	

21.	Segment Information	
Devon manages its operations through distinct operating segments, which are defined primarily by geographic areas. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of the businesses. However, Devon’s Canadian operating segment is reported as a separate reporting segment primarily due to the significant differences between the U.S. and Canadian regulatory environments. Devon’s segments are all primarily engaged in oil and gas producing activities, and certain information regarding such activities for each segment is included in Note 22. Revenues are all from external customers.
 
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 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Year Ended December 31, 2012:	  				
Oil, gas and NGL sales	  	$	4,679	  	 	$	2,474	  	 	$	7,153	  	
Oil, gas and NGL derivatives	  	$	681	  	 	$	12	  	 	$	693	  	
Marketing and midstream revenues	  	$	1,542	  	 	$	114	  	 	$	1,656	  	
Depreciation, depletion and amortization	  	$	1,824	  	 	$	987	  	 	$	2,811	  	
Interest expense	  	$	343	  	 	$	63	  	 	$	406	  	
Asset impairments	  	$	1,861	  	 	$	163	  	 	$	2,024	  	
Loss from continuing operations before income taxes	  	$	(263	) 	 	$	(54	) 	 	$	(317	) 	
Income tax benefit	  	$	(97	) 	 	$	(35	) 	 	$	(132	) 	
Loss from continuing operations	  	$	(166	) 	 	$	(19	) 	 	$	(185	) 	
Property and equipment, net	  	$	18,361	  	 	$	8,955	  	 	$	27,316	  	
Total assets	  	$	24,256	  	 	$	19,070	  	 	$	43,326	  	
Capital expenditures	  	$	6,511	  	 	$	1,963	  	 	$	8,474	  	
				
Year Ended December 31, 2011:	  				 				 				
Oil, gas and NGL sales	  	$	5,418	  	 	$	2,897	  	 	$	8,315	  	
Oil, gas and NGL derivative	  	$	881	  	 	$	—  	  	 	$	881	  	
Marketing and midstream revenues	  	$	2,059	  	 	$	199	  	 	$	2,258	  	
Depreciation, depletion and amortization	  	$	1,439	  	 	$	809	  	 	$	2,248	  	
Interest expense	  	$	204	  	 	$	148	  	 	$	352	  	
Earnings from continuing operations before income taxes	  	$	3,477	  	 	$	813	  	 	$	4,290	  	
Income tax expense	  	$	1,958	  	 	$	198	  	 	$	2,156	  	
Earnings from continuing operations	  	$	1,519	  	 	$	615	  	 	$	2,134	  	
Property and equipment, net	  	$	16,989	  	 	$	7,785	  	 	$	24,774	  	
Total assets (1)	  	$	22,622	  	 	$	18,342	  	 	$	40,964	  	
Capital expenditures	  	$	6,101	  	 	$	1,694	  	 	$	7,795	  	
				
Year Ended December 31, 2010:	  				 				 				
Oil, gas and NGL sales	  	$	4,742	  	 	$	2,520	  	 	$	7,262	  	
Oil, gas and NGL derivatives	  	$	809	  	 	$	2	  	 	$	811	  	
Marketing and midstream revenues	  	$	1,742	  	 	$	125	  	 	$	1,867	  	
Depreciation, depletion and amortization	  	$	1,229	  	 	$	701	  	 	$	1,930	  	
Interest expense	  	$	159	  	 	$	204	  	 	$	363	  	
Earnings from continuing operations before income taxes	  	$	2,943	  	 	$	625	  	 	$	3,568	  	
Income tax expense	  	$	1,062	  	 	$	173	  	 	$	1,235	  	
Earnings from continuing operations	  	$	1,881	  	 	$	452	  	 	$	2,333	  	
Property and equipment, net	  	$	12,379	  	 	$	7,273	  	 	$	19,652	  	
Total assets (1)	  	$	18,320	  	 	$	13,185	  	 	$	31,505	  	
Capital expenditures	  	$	4,935	  	 	$	1,985	  	 	$	6,920	  	

(1)	Amounts in the table above do not include assets held for sale related to Devon’s discontinued operations, which totaled $153 million and $1.4 billion in 2011 and 2010, respectively.	
 
22.	Supplemental Information on Oil and Gas Operations (Unaudited)	
Supplemental unaudited information regarding Devon’s oil and gas activities is presented in this note. The information is provided separately by country and continent. Additionally, the costs incurred and reserves
 
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information for the U.S. is segregated between Devon’s onshore and offshore operations. Unless otherwise noted, this supplemental information excludes amounts for all periods presented related to Devon’s discontinued operations.
Costs Incurred
The following tables reflect the costs incurred in oil and gas property acquisition, exploration, and development activities.

 	  	Year Ended December 31, 2012	 	
 	  	U.S.
Onshore	 	  	U.S.
Offshore	 	  	Total
U.S.	 	  	Canada	 	  	Total	 	
 	  	(In millions)	 	
Property acquisition costs:	  				
Proved properties	  	$	2	  	  	$	—  	  	  	$	2	  	  	$	71	  	  	$	73	  	
Unproved properties	  	 	1,135	  	  	 	—  	  	  	 	1,135	  	  	 	43	  	  	 	1,178	  	
Exploration costs	  	 	351	  	  	 	—  	  	  	 	351	  	  	 	304	  	  	 	655	  	
Development costs	  	 	4,408	  	  	 	—  	  	  	 	4,408	  	  	 	1,691	  	  	 	6,099	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Costs incurred	  	$	5,896	  	  	$	 —  	  	  	$	5,896	  	  	$	2,109	  	  	$	8,005	  	

																					
 	  	Year Ended December 31, 2011	 	
 	  	U.S.
Onshore	 	  	U.S.
Offshore	 	  	Total
U.S.	 	  	Canada	 	  	Total	 	
 	  	(In millions)	 	
Property acquisition costs:	  				
Proved properties	  	$	34	  	  	$	 —  	  	  	$	34	  	  	$	14	  	  	$	48	  	
Unproved properties	  	 	851	  	  	 	—  	  	  	 	851	  	  	 	88	  	  	 	939	  	
Exploration costs	  	 	272	  	  	 	—  	  	  	 	272	  	  	 	266	  	  	 	538	  	
Development costs	  	 	4,130	  	  	 	—  	  	  	 	4,130	  	  	 	1,288	  	  	 	5,418	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Costs incurred	  	$	5,287	  	  	$	—  	  	  	$	5,287	  	  	$	1,656	  	  	$	6,943	  	

																					
 	  	Year Ended December 31, 2010	 	
 	  	U.S.
Onshore	 	  	U.S.
Offshore	 	  	Total
U.S.	 	  	Canada	 	  	Total	 	
 	  	(In millions)	 	
Property acquisition costs:	  				
Proved properties	  	$	29	  	  	$	 —  	  	  	$	29	  	  	$	4	  	  	$	33	  	
Unproved properties	  	 	592	  	  	 	2	  	  	 	594	  	  	 	590	  	  	 	1,184	  	
Exploration costs	  	 	339	  	  	 	89	  	  	 	428	  	  	 	260	  	  	 	688	  	
Development costs	  	 	3,126	  	  	 	297	  	  	 	3,423	  	  	 	1,216	  	  	 	4,639	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Costs incurred	  	$	4,086	  	  	$	388	  	  	$	4,474	  	  	$	2,070	  	  	$	6,544	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Costs incurred in the tables above include additions and revisions to Devon’s asset retirement obligations. The proceeds received from our joint venture transactions have not been netted against the costs incurred. At December 31, 2012 the remaining commitment to fund our future costs associated with these joint venture transactions was approximately $2.3 billion.
Pursuant to the full cost method of accounting, Devon capitalizes certain of its general and administrative expenses that are related to property acquisition, exploration and development activities. Such capitalized
 
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expenses, which are included in the costs shown in the preceding tables, were $359 million, $337 million and $311 million in the years 2012, 2011 and 2010, respectively. Also, Devon capitalizes interest costs incurred and attributable to unproved oil and gas properties and major development projects of oil and gas properties. Capitalized interest expenses, which are included in the costs shown in the preceding tables, were $36 million, $45 million and $37 million in the years 2012, 2011 and 2010, respectively.
Capitalized Costs
The following tables reflect the aggregate capitalized costs related to oil and gas activities.

 	  	December 31, 2012	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Proved properties	  	$	46,570	  	 	$	22,840	  	 	$	69,410	  	
Unproved properties	  	 	1,703	  	 	 	1,605	  	 	 	3,308	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total oil & gas properties	  	 	48,273	  	 	 	24,445	  	 	 	72,718	  	
Accumulated DD&A	  	 	(33,098	) 	 	 	(16,039	) 	 	 	(49,137	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net capitalized costs	  	$	15,175	  	 	$	8,406	  	 	$	23,581	  	

 	  	December 31, 2011	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Proved properties	  	$	41,397	  	 	$	20,299	  	 	$	61,696	  	
Unproved properties	  	 	2,347	  	 	 	1,635	  	 	 	3,982	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total oil & gas properties	  	 	43,744	  	 	 	21,934	  	 	 	65,678	  	
Accumulated DD&A	  	 	(29,742	) 	 	 	(14,585	) 	 	 	(44,327	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Net capitalized costs	  	$	14,002	  	 	$	7,349	  	 	$	21,351	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
The following is a summary of Devon’s oil and gas properties not subject to amortization as of December 31, 2012.

 	  	Costs Incurred In	 	
 	  	2012	 	  	2011	 	  	2010	 	  	Prior to
2010	 	  	Total	 	
 	  	(In millions)	 	
Acquisition costs	  	$	928	  	  	$	115	  	  	$	788	  	  	$	660	  	  	$	2,491	  	
Exploration costs	  	 	228	  	  	 	142	  	  	 	48	  	  	 	1	  	  	 	419	  	
Development costs	  	 	227	  	  	 	70	  	  	 	—  	  	  	 	10	  	  	 	307	  	
Capitalized interest	  	 	35	  	  	 	36	  	  	 	20	  	  	 	—  	  	  	 	91	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total oil and gas properties not subject to amortization	  	$	1,418	  	  	$	363	  	  	$	856	  	  	$	671	  	  	$	3,308	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Results of Operations
The following tables include revenues and expenses directly associated with Devon’s oil and gas producing activities, including general and administrative expenses directly related to such producing activities. They do not include any allocation of Devon’s interest costs or general corporate overhead and, therefore, are not necessarily indicative of the contribution to net earnings of Devon’s oil and gas operations. Income tax expense has been
 
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calculated by applying statutory income tax rates to oil, gas and NGL sales after deducting costs, including depreciation, depletion and amortization and after giving effect to permanent differences.

 	  	Year Ended December 31, 2012	 	
 	  	U.S	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Oil, gas and NGL sales	  	$	4,679	  	 	$	2,474	  	 	$	7,153	  	
Lease operating expenses	  	 	(1,059	) 	 	 	(1,015	) 	 	 	(2,074	) 	
Depreciation, depletion and amortization	  	 	(1,563	) 	 	 	(963	) 	 	 	(2,526	) 	
General and administrative expenses	  	 	(159	) 	 	 	(137	) 	 	 	(296	) 	
Taxes other than income taxes	  	 	(340	) 	 	 	(55	) 	 	 	(395	) 	
Asset impairments	  	 	(1,793	) 	 	 	(163	) 	 	 	(1,956	) 	
Accretion of asset retirement obligations	  	 	(40	) 	 	 	(69	) 	 	 	(109	) 	
Income tax (expense) benefit	  	 	99	  	 	 	(3	) 	 	 	96	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Results of operations	  	$	(176	) 	 	$	69	  	 	$	(107	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Depreciation, depletion and amortization per Boe	  	$	8.55	  	 	$	14.41	  	 	$	10.12	  	

 	  	Year Ended December 31, 2011	 	
 	  	U.S	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Oil, gas and NGL sales	  	$	5,418	  	 	$	2,897	  	 	$	8,315	  	
Lease operating expenses	  	 	(925	) 	 	 	(926	) 	 	 	(1,851	) 	
Depreciation, depletion and amortization	  	 	(1,201	) 	 	 	(786	) 	 	 	(1,987	) 	
General and administrative expenses	  	 	(132	) 	 	 	(119	) 	 	 	(251	) 	
Taxes other than income taxes	  	 	(357	) 	 	 	(45	) 	 	 	(402	) 	
Accretion of asset retirement obligations	  	 	(34	) 	 	 	(57	) 	 	 	(91	) 	
Income tax expense	  	 	(1,005	) 	 	 	(250	) 	 	 	(1,255	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Results of operations	  	$	1,764	  	 	$	714	  	 	$	2,478	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Depreciation, depletion and amortization per Boe	  	$	6.94	  	 	$	11.74	  	 	$	8.28	  	

 	  	Year Ended December 31, 2010	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Oil, gas and NGL sales	  	$	4,742	  	 	$	2,520	  	 	$	7,262	  	
Lease operating expenses	  	 	(892	) 	 	 	(797	) 	 	 	(1,689	) 	
Depreciation, depletion and amortization	  	 	(998	) 	 	 	(677	) 	 	 	(1,675	) 	
General and administrative expenses	  	 	(133	) 	 	 	(83	) 	 	 	(216	) 	
Taxes other than income taxes	  	 	(319	) 	 	 	(40	) 	 	 	(359	) 	
Accretion of asset retirement obligations	  	 	(42	) 	 	 	(50	) 	 	 	(92	) 	
Income tax expense	  	 	(849	) 	 	 	(246	) 	 	 	(1,095	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Results of operations	  	$	1,509	  	 	$	627	  	 	$	2,136	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Depreciation, depletion and amortization per Boe	  	$	6.11	  	 	$	10.51	  	 	$	7.36	  	

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Proved Reserves
The following tables present Devon’s estimated proved reserves by product for each significant country.

 	  	Oil (MMBbls)	 	
 	  	U.S.
Onshore	 	 	U.S.
Offshore	 	 	Total
U.S.	 	 	Canada	 	 	Total	 	
Proved developed and undeveloped reserves:	  				 				 				 				 				
December 31, 2009	  	 	    139	  	 	 	    33	  	 	 	    172	  	 	 	    111	  	 	 	    283	  	
Revisions due to prices	  	 	4	  	 	 	1	  	 	 	5	  	 	 	(3	) 	 	 	2	  	
Revisions other than price	  	 	2	  	 	 	2	  	 	 	4	  	 	 	(3	) 	 	 	1	  	
Extensions and discoveries	  	 	19	  	 	 	1	  	 	 	20	  	 	 	4	  	 	 	24	  	
Production	  	 	(14	) 	 	 	(2	) 	 	 	(16	) 	 	 	(16	) 	 	 	(32	) 	
Sale of reserves	  	 	(2	) 	 	 	(35	) 	 	 	(37	) 	 	 	—  	  	 	 	(37	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2010	  	 	148	  	 	 	—  	  	 	 	148	  	 	 	93	  	 	 	241	  	
Revisions due to prices	  	 	2	  	 	 	—  	  	 	 	2	  	 	 	1	  	 	 	3	  	
Revisions other than price	  	 	(1	) 	 	 	—  	  	 	 	(1	) 	 	 	(5	) 	 	 	(6	) 	
Extensions and discoveries	  	 	36	  	 	 	—  	  	 	 	36	  	 	 	6	  	 	 	42	  	
Production	  	 	(17	) 	 	 	—  	  	 	 	(17	) 	 	 	(15	) 	 	 	(32	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2011	  	 	168	  	 	 	—  	  	 	 	168	  	 	 	80	  	 	 	248	  	
Revisions due to prices	  	 	(1	) 	 	 	—  	  	 	 	(1	) 	 	 	(5	) 	 	 	(6	) 	
Revisions other than price	  	 	(6	) 	 	 	—  	  	 	 	(6	) 	 	 	(2	) 	 	 	(8	) 	
Extensions and discoveries	  	 	65	  	 	 	—  	  	 	 	65	  	 	 	7	  	 	 	72	  	
Production	  	 	(21	) 	 	 	—  	  	 	 	(21	) 	 	 	(15	) 	 	 	(36	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2012	  	 	205	  	 	 	—  	  	 	 	205	  	 	 	65	  	 	 	270	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proved developed reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	119	  	 	 	21	  	 	 	140	  	 	 	97	  	 	 	237	  	
December 31, 2010	  	 	131	  	 	 	—  	  	 	 	131	  	 	 	82	  	 	 	213	  	
December 31, 2011	  	 	146	  	 	 	—  	  	 	 	146	  	 	 	73	  	 	 	219	  	
December 31, 2012	  	 	166	  	 	 	—  	  	 	 	166	  	 	 	62	  	 	 	228	  	
Proved developed-producing reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	112	  	 	 	12	  	 	 	124	  	 	 	85	  	 	 	209	  	
December 31, 2010	  	 	123	  	 	 	—  	  	 	 	123	  	 	 	72	  	 	 	195	  	
December 31, 2011	  	 	139	  	 	 	—  	  	 	 	139	  	 	 	65	  	 	 	204	  	
December 31, 2012	  	 	155	  	 	 	—  	  	 	 	155	  	 	 	56	  	 	 	211	  	
Proved undeveloped reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	20	  	 	 	12	  	 	 	32	  	 	 	14	  	 	 	46	  	
December 31, 2010	  	 	17	  	 	 	—  	  	 	 	17	  	 	 	11	  	 	 	28	  	
December 31, 2011	  	 	22	  	 	 	—  	  	 	 	22	  	 	 	7	  	 	 	29	  	
December 31, 2012	  	 	39	  	 	 	—  	  	 	 	39	  	 	 	3	  	 	 	42	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 	  	Bitumen (MMBbls)	 	
 	  	U.S.
Onshore	 	  	U.S.
Offshore	 	  	Total
U.S.	 	  	Canada	 	 	Total	 	
Proved developed and undeveloped reserves:	  				  				  				  				 				
December 31, 2009	  	 	    —  	  	  	 	    —  	  	  	 	    —  	  	  	 	    403	  	 	 	    403	  	
Revisions due to prices	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(21	) 	 	 	(21	) 	
Revisions other than price	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	12	  	 	 	12	  	
Extensions and discoveries	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	55	  	 	 	55	  	
Production	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(9	) 	 	 	(9	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
December 31, 2010	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	440	  	 	 	440	  	
Revisions due to prices	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(16	) 	 	 	(16	) 	
Revisions other than price	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	16	  	 	 	16	  	
Extensions and discoveries	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	30	  	 	 	30	  	
Production	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(13	) 	 	 	(13	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
December 31, 2011	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	457	  	 	 	457	  	
Revisions due to prices	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	14	  	 	 	14	  	
Revisions other than price	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	7	  	 	 	7	  	
Extensions and discoveries	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	67	  	 	 	67	  	
Production	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(17	) 	 	 	(17	) 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
December 31, 2012	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	528	  	 	 	528	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Proved developed reserves as of:	  				  				  				  				 				
December 31, 2009	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	52	  	 	 	52	  	
December 31, 2010	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	44	  	 	 	44	  	
December 31, 2011	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	90	  	 	 	90	  	
December 31, 2012	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	99	  	 	 	99	  	
Proved developed-producing reserves as of:	  				  				  				  				 				
December 31, 2009	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	52	  	 	 	52	  	
December 31, 2010	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	44	  	 	 	44	  	
December 31, 2011	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	90	  	 	 	90	  	
December 31, 2012	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	99	  	 	 	99	  	
Proved undeveloped reserves as of:	  				  				  				  				 				
December 31, 2009	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	351	  	 	 	351	  	
December 31, 2010	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	396	  	 	 	396	  	
December 31, 2011	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	367	  	 	 	367	  	
December 31, 2012	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	429	  	 	 	429	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 	  	Gas (Bcf)	 	
 	  	U.S.
Onshore	 	 	U.S.
Offshore	 	 	Total
U.S.	 	 	Canada	 	 	Total	 	
Proved developed and undeveloped reserves:	  				 				 				 				 				
December 31, 2009	  	 	    8,127	  	 	 	    342	  	 	 	    8,469	  	 	 	    1,288	  	 	 	    9,757	  	
Revisions due to prices	  	 	449	  	 	 	2	  	 	 	451	  	 	 	21	  	 	 	472	  	
Revisions other than price	  	 	105	  	 	 	(26	) 	 	 	79	  	 	 	(17	) 	 	 	62	  	
Extensions and discoveries	  	 	1,088	  	 	 	7	  	 	 	1,095	  	 	 	131	  	 	 	1,226	  	
Purchase of reserves	  	 	12	  	 	 	—  	  	 	 	12	  	 	 	9	  	 	 	21	  	
Production	  	 	(699	) 	 	 	(17	) 	 	 	(716	) 	 	 	(214	) 	 	 	(930	) 	
Sale of reserves	  	 	(17	) 	 	 	(308	) 	 	 	(325	) 	 	 	—  	  	 	 	(325	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2010	  	 	9,065	  	 	 	—  	  	 	 	9,065	  	 	 	1,218	  	 	 	10,283	  	
Revisions due to prices	  	 	(1	) 	 	 	—  	  	 	 	(1	) 	 	 	(60	) 	 	 	(61	) 	
Revisions other than price	  	 	(243	) 	 	 	—  	  	 	 	(243	) 	 	 	(38	) 	 	 	(281	) 	
Extensions and discoveries	  	 	1,410	  	 	 	—  	  	 	 	1,410	  	 	 	58	  	 	 	1,468	  	
Purchase of reserves	  	 	16	  	 	 	—  	  	 	 	16	  	 	 	20	  	 	 	36	  	
Production	  	 	(740	) 	 	 	—  	  	 	 	(740	) 	 	 	(213	) 	 	 	(953	) 	
Sale of reserves	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(6	) 	 	 	(6	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2011	  	 	9,507	  	 	 	—  	  	 	 	9,507	  	 	 	979	  	 	 	10,486	  	
Revisions due to prices	  	 	(831	) 	 	 	—  	  	 	 	(831	) 	 	 	(99	) 	 	 	(930	) 	
Revisions other than price	  	 	(287	) 	 	 	—  	  	 	 	(287	) 	 	 	(33	) 	 	 	(320	) 	
Extensions and discoveries	  	 	1,124	  	 	 	—  	  	 	 	1,124	  	 	 	34	  	 	 	1,158	  	
Purchase of reserves	  	 	2	  	 	 	—  	  	 	 	2	  	 	 	—  	  	 	 	2	  	
Production	  	 	(752	) 	 	 	—  	  	 	 	(752	) 	 	 	(186	) 	 	 	(938	) 	
Sale of reserves	  	 	(1	) 	 	 	—  	  	 	 	(1	) 	 	 	(11	) 	 	 	(12	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2012	  	 	8,762	  	 	 	—  	  	 	 	8,762	  	 	 	684	  	 	 	9,446	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proved developed reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	6,447	  	 	 	185	  	 	 	6,632	  	 	 	1,213	  	 	 	7,845	  	
December 31, 2010	  	 	7,280	  	 	 	—  	  	 	 	7,280	  	 	 	1,144	  	 	 	8,424	  	
December 31, 2011	  	 	7,957	  	 	 	—  	  	 	 	7,957	  	 	 	951	  	 	 	8,908	  	
December 31, 2012	  	 	7,391	  	 	 	—  	  	 	 	7,391	  	 	 	679	  	 	 	8,070	  	
Proved developed-producing reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	5,860	  	 	 	137	  	 	 	5,997	  	 	 	1,075	  	 	 	7,072	  	
December 31, 2010	  	 	6,702	  	 	 	—  	  	 	 	6,702	  	 	 	1,031	  	 	 	7,733	  	
December 31, 2011	  	 	7,409	  	 	 	—  	  	 	 	7,409	  	 	 	862	  	 	 	8,271	  	
December 31, 2012	  	 	7,091	  	 	 	—  	  	 	 	7,091	  	 	 	624	  	 	 	7,715	  	
Proved undeveloped reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	1,680	  	 	 	157	  	 	 	1,837	  	 	 	75	  	 	 	1,912	  	
December 31, 2010	  	 	1,785	  	 	 	—  	  	 	 	1,785	  	 	 	74	  	 	 	1,859	  	
December 31, 2011	  	 	1,550	  	 	 	—  	  	 	 	1,550	  	 	 	28	  	 	 	1,578	  	
December 31, 2012	  	 	1,371	  	 	 	—  	  	 	 	1,371	  	 	 	5	  	 	 	1,376	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 	  	Natural Gas Liquids (MMBbls)	 	
 	  	U.S.
Onshore	 	 	U.S.
Offshore	 	 	Total
U.S.	 	 	Canada	 	 	Total	 	
Proved developed and undeveloped reserves:	  				 				 				 				 				
December 31, 2009	  	 	    385	  	 	 	2	  	 	 	    387	  	 	 	    34	  	 	 	    421	  	
Revisions due to prices	  	 	14	  	 	 	    —  	  	 	 	14	  	 	 	(1	) 	 	 	13	  	
Revisions other than price	  	 	13	  	 	 	3	  	 	 	16	  	 	 	(1	) 	 	 	15	  	
Extensions and discoveries	  	 	68	  	 	 	—  	  	 	 	68	  	 	 	2	  	 	 	70	  	
Production	  	 	(28	) 	 	 	—  	  	 	 	(28	) 	 	 	(4	) 	 	 	(32	) 	
Sale of reserves	  	 	(3	) 	 	 	(5	) 	 	 	(8	) 	 	 	—  	  	 	 	(8	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2010	  	 	449	  	 	 	—  	  	 	 	449	  	 	 	30	  	 	 	479	  	
Revisions due to prices	  	 	4	  	 	 	—  	  	 	 	4	  	 	 	(1	) 	 	 	3	  	
Revisions other than price	  	 	1	  	 	 	—  	  	 	 	1	  	 	 	—  	  	 	 	1	  	
Extensions and discoveries	  	 	102	  	 	 	—  	  	 	 	102	  	 	 	2	  	 	 	104	  	
Purchase of reserves	  	 	2	  	 	 	—  	  	 	 	2	  	 	 	—  	  	 	 	2	  	
Production	  	 	(33	) 	 	 	—  	  	 	 	(33	) 	 	 	(4	) 	 	 	(37	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2011	  	 	525	  	 	 	—  	  	 	 	525	  	 	 	27	  	 	 	552	  	
Revisions due to prices	  	 	(19	) 	 	 	—  	  	 	 	(19	) 	 	 	(5	) 	 	 	(24	) 	
Revisions other than price	  	 	(13	) 	 	 	—  	  	 	 	(13	) 	 	 	—  	  	 	 	(13	) 	
Extensions and discoveries	  	 	114	  	 	 	—  	  	 	 	114	  	 	 	2	  	 	 	116	  	
Production	  	 	(36	) 	 	 	—  	  	 	 	(36	) 	 	 	(4	) 	 	 	(40	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2012	  	 	571	  	 	 	—  	  	 	 	571	  	 	 	20	  	 	 	591	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proved developed reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	293	  	 	 	1	  	 	 	294	  	 	 	32	  	 	 	326	  	
December 31, 2010	  	 	353	  	 	 	—  	  	 	 	353	  	 	 	28	  	 	 	381	  	
December 31, 2011	  	 	402	  	 	 	—  	  	 	 	402	  	 	 	26	  	 	 	428	  	
December 31, 2012	  	 	431	  	 	 	—  	  	 	 	431	  	 	 	20	  	 	 	451	  	
Proved developed-producing reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	265	  	 	 	1	  	 	 	266	  	 	 	28	  	 	 	294	  	
December 31, 2010	  	 	318	  	 	 	—  	  	 	 	318	  	 	 	26	  	 	 	344	  	
December 31, 2011	  	 	372	  	 	 	—  	  	 	 	372	  	 	 	24	  	 	 	396	  	
December 31, 2012	  	 	406	  	 	 	—  	  	 	 	406	  	 	 	19	  	 	 	425	  	
Proved undeveloped reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	92	  	 	 	1	  	 	 	93	  	 	 	2	  	 	 	95	  	
December 31, 2010	  	 	96	  	 	 	—  	  	 	 	96	  	 	 	2	  	 	 	98	  	
December 31, 2011	  	 	123	  	 	 	—  	  	 	 	123	  	 	 	1	  	 	 	124	  	
December 31, 2012	  	 	140	  	 	 	—  	  	 	 	140	  	 	 	—  	  	 	 	140	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 	  	Total (MMBoe) (1)	 	
 	  	U.S.
Onshore	 	 	U.S.
Offshore	 	 	Total
U.S.	 	 	Canada	 	 	Total	 	
Proved developed and undeveloped reserves:	  				 				 				 				 				
December 31, 2009	  	 	    1,878	  	 	 	        92	  	 	 	    1,970	  	 	 	    763	  	 	 	    2,733	  	
Revisions due to prices	  	 	92	  	 	 	1	  	 	 	93	  	 	 	(21	) 	 	 	72	  	
Revisions other than price	  	 	32	  	 	 	1	  	 	 	33	  	 	 	5	  	 	 	38	  	
Extensions and discoveries	  	 	269	  	 	 	2	  	 	 	271	  	 	 	83	  	 	 	354	  	
Purchase of reserves	  	 	2	  	 	 	—  	  	 	 	2	  	 	 	2	  	 	 	4	  	
Production	  	 	(158	) 	 	 	(5	) 	 	 	(163	) 	 	 	(65	) 	 	 	(228	) 	
Sale of reserves	  	 	(8	) 	 	 	(91	) 	 	 	(99	) 	 	 	(1	) 	 	 	(100	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2010	  	 	2,107	  	 	 	—  	  	 	 	2,107	  	 	 	766	  	 	 	2,873	  	
Revisions due to prices	  	 	6	  	 	 	—  	  	 	 	6	  	 	 	(27	) 	 	 	(21	) 	
Revisions other than price	  	 	(41	) 	 	 	—  	  	 	 	(41	) 	 	 	6	  	 	 	(35	) 	
Extensions and discoveries	  	 	374	  	 	 	—  	  	 	 	374	  	 	 	47	  	 	 	421	  	
Purchase of reserves	  	 	5	  	 	 	—  	  	 	 	5	  	 	 	3	  	 	 	8	  	
Production	  	 	(173	) 	 	 	—  	  	 	 	(173	) 	 	 	(67	) 	 	 	(240	) 	
Sale of reserves	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(1	) 	 	 	(1	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2011	  	 	2,278	  	 	 	—  	  	 	 	2,278	  	 	 	727	  	 	 	3,005	  	
Revisions due to price	  	 	(159	) 	 	 	—  	  	 	 	(159	) 	 	 	(12	) 	 	 	(171	) 	
Revisions other than price	  	 	(67	) 	 	 	—  	  	 	 	(67	) 	 	 	(1	) 	 	 	(68	) 	
Extensions and discoveries	  	 	367	  	 	 	—  	  	 	 	367	  	 	 	82	  	 	 	449	  	
Production	  	 	(183	) 	 	 	—  	  	 	 	(183	) 	 	 	(67	) 	 	 	(250	) 	
Sale of reserves	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(2	) 	 	 	(2	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2012	  	 	2,236	  	 	 	—  	  	 	 	2,236	  	 	 	727	  	 	 	2,963	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proved developed reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	1,486	  	 	 	53	  	 	 	1,539	  	 	 	383	  	 	 	1,922	  	
December 31, 2010	  	 	1,696	  	 	 	—  	  	 	 	1,696	  	 	 	346	  	 	 	2,042	  	
December 31, 2011	  	 	1,875	  	 	 	—  	  	 	 	1,875	  	 	 	348	  	 	 	2,223	  	
December 31, 2012	  	 	1,829	  	 	 	—  	  	 	 	1,829	  	 	 	294	  	 	 	2,123	  	
Proved developed-producing reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	1,354	  	 	 	35	  	 	 	1,389	  	 	 	344	  	 	 	1,733	  	
December 31, 2010	  	 	1,557	  	 	 	—  	  	 	 	1,557	  	 	 	314	  	 	 	1,871	  	
December 31, 2011	  	 	1,746	  	 	 	—  	  	 	 	1,746	  	 	 	323	  	 	 	2,069	  	
December 31, 2012	  	 	1,743	  	 	 	—  	  	 	 	1,743	  	 	 	278	  	 	 	2,021	  	
Proved undeveloped reserves as of:	  				 				 				 				 				
December 31, 2009	  	 	392	  	 	 	39	  	 	 	431	  	 	 	380	  	 	 	811	  	
December 31, 2010	  	 	411	  	 	 	—  	  	 	 	411	  	 	 	420	  	 	 	831	  	
December 31, 2011	  	 	403	  	 	 	—  	  	 	 	403	  	 	 	379	  	 	 	782	  	
December 31, 2012	  	 	407	  	 	 	—  	  	 	 	407	  	 	 	433	  	 	 	840	  	

(1)	Gas reserves are converted to Boe at the rate of six Mcf per Bbl of oil, based upon the approximate relative energy content of gas and oil. This rate is not necessarily indicative of the relationship of natural gas and oil prices. Bitumen and natural gas liquids reserves are converted to Boe on a one-to-one basis with oil.	
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Proved Undeveloped Reserves
The following table presents the changes in Devon’s total proved undeveloped reserves during 2012 (in MMBoe).

 	  	U.S.	 	 	Canada	 	 	Total	 	
Proved undeveloped reserves as of December 31, 2011	  	 	403	  	 	 	379	  	 	 	782	  	
Extensions and discoveries	  	 	134	  	 	 	68	  	 	 	202	  	
Revisions due to prices	  	 	(47	) 	 	 	9	  	 	 	(38	) 	
Revisions other than price	  	 	(10	) 	 	 	(6	) 	 	 	(16	) 	
Conversion to proved developed reserves	  	 	(73	) 	 	 	(17	) 	 	 	(90	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Proved undeveloped reserves as of December 31, 2012	  	 	407	  	 	 	433	  	 	 	840	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
At December 31, 2012, Devon had 840 MMBoe of proved undeveloped reserves. This represents a 7 percent increase as compared to 2011 and represents 28 percent of its total proved reserves. Drilling and development activities increased Devon’s proved undeveloped reserves 203 MMBoe and resulted in the conversion of 90 MMBoe, or 12 percent, of the 2011 proved undeveloped reserves to proved developed reserves. Costs incurred related to the development and conversion of Devon’s proved undeveloped reserves were $1.3 billion for 2012. Additionally, revisions other than price decreased Devon’s proved undeveloped reserves 16 MMBoe primarily due to its evaluation of certain U.S. onshore dry-gas areas, which it does not expect to develop in the next five years. The largest revisions relate to the dry-gas areas at Carthage in east Texas and the Barnett Shale in north Texas.
A significant amount of Devon’s proved undeveloped reserves at the end of 2012 largely related to its Jackfish operations. At December 31, 2012 and 2011, Devon’s Jackfish proved undeveloped reserves were 429 MMBoe and 367 MMBoe, respectively. Development schedules for the Jackfish reserves are primarily controlled by the need to keep the processing plants at their 35,000 barrel daily facility capacity. Processing plant capacity is controlled by factors such as total steam processing capacity, steam-oil ratios and air quality discharge permits. As a result, these reserves are classified as proved undeveloped for more than five years. Currently, the development schedule for these reserves extends though the year 2031.
Price Revisions
2012 - Reserves decreased 171 MMBoe primarily due to lower gas prices. Of this decrease, 100 MMBoe related to the Barnett Shale and 25 MMBoe related to the Rocky Mountain area.
2011 - Reserves decreased 21 MMBoe due to lower gas prices and higher oil prices. The higher oil prices increased Devon’s Canadian royalty burden, which reduced Devon’s oil reserves.
2010 - Reserves increased 72 MMBoe due to higher gas prices, partially offset by the effect of higher oil prices. The higher oil prices increased Devon’s Canadian royalty burden, which reduced Devon’s oil reserves. Of the 72 MMBoe price revisions, 43 MMBoe related to the Barnett Shale and 22 MMBoe related to the Rocky Mountain area.
Revisions Other Than Price
Total revisions other than price for 2012 and 2011 primarily related to Devon’s evaluation of certain dry gas regions noted in the proved undeveloped reserves discussion above. Total revisions other than price for 2010 primarily related to Devon’s drilling and development in the Barnett Shale.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
Extensions and Discoveries
2012 – Of the 449 MMBoe of extensions and discoveries, 151 MMBoe related to the Cana-Woodford Shale, 95 MMBoe related to the Barnett Shale, 72 MMBoe related to the Permian Basin, 67 MMBoe related to Jackfish, 16 MMBoe related to the Rocky Mountain area and 18 MMBoe related to the Granite Wash area.
The 2012 extensions and discoveries included 229 MMBoe related to additions from Devon’s infill drilling activities, including 134 MMBoe at the Cana-Woodford Shale and 82 MMBoe at the Barnett Shale.
2011 – Of the 421 MMBoe of extensions and discoveries, 162 MMBoe related to the Cana-Woodford Shale, 115 MMBoe related to the Barnett Shale, 39 MMBoe related to the Permian Basin, 30 MMBoe related to Jackfish, 19 MMBoe related to the Rocky Mountain area and 17 MMBoe related to the Granite Wash area.
The 2011 extensions and discoveries included 168 MMBoe related to additions from Devon’s infill drilling activities, including 80 MMBoe at the Cana-Woodford Shale and 77 MMBoe at the Barnett Shale.
2010 – Of the 354 MMBoe of extensions and discoveries, 101 MMBoe related to the Cana-Woodford Shale, 87 MMBoe related to the Barnett Shale, 55 MMBoe related to Jackfish, 19 MMBoe related to the Permian Basin, 15 MMBoe related to the Rocky Mountain area and 14 MMBoe related to the Carthage area.
The 2010 extensions and discoveries included 107 MMBoe related to additions from Devon’s infill drilling activities, including 43 MMBoe at the Barnett Shale and 47 MMBoe at the Cana-Woodford Shale.
Sale of Reserves
The 2010 total primarily relates to the divestiture of Devon’s Gulf of Mexico properties.
Standardized Measure
The tables below reflect Devon’s standardized measure of discounted future net cash flows from its proved reserves.

 	  	Year Ended December 31, 2012	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Future cash inflows	  	$	55,297	  	 	$	33,570	  	 	$	88,867	  	
Future costs:	  				 				 				
Development	  	 	(6,556	) 	 	 	(6,211	) 	 	 	(12,767	) 	
Production	  	 	(24,265	) 	 	 	(16,611	) 	 	 	(40,876	) 	
Future income tax expense	  	 	(6,542	) 	 	 	(1,992	) 	 	 	(8,534	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Future net cash flows	  	 	17,934	  	 	 	8,756	  	 	 	26,690	  	
10% discount to reflect timing of cash flows	  	 	(9,036	) 	 	 	(4,433	) 	 	 	(13,469	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Standardized measure of discounted future net cash flows	  	$	8,898	  	 	$	4,323	  	 	$	13,221	  	

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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 	  	Year Ended December 31, 2011	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Future cash inflows	  	$	69,305	  	 	$	36,786	  	 	$	106,091	  	
Future costs:	  				 				 				
Development	  	 	(6,817	) 	 	 	(4,678	) 	 	 	(11,495	) 	
Production	  	 	(26,217	) 	 	 	(15,063	) 	 	 	(41,280	) 	
Future income tax expense	  	 	(11,432	) 	 	 	(3,763	) 	 	 	(15,195	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Future net cash flows	  	 	24,839	  	 	 	13,282	  	 	 	38,121	  	
10% discount to reflect timing of cash flows	  	 	(13,492	) 	 	 	(6,785	) 	 	 	(20,277	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Standardized measure of discounted future net cash flows	  	$	11,347	  	 	$	6,497	  	 	$	17,844	  	

													
 	  	Year Ended December 31, 2010	 	
 	  	U.S.	 	 	Canada	 	 	Total	 	
 	  	(In millions)	 	
Future cash inflows	  	$	58,093	  	 	$	35,948	  	 	$	94,041	  	
Future costs:	  				 				 				
Development	  	 	(6,220	) 	 	 	(4,526	) 	 	 	(10,746	) 	
Production	  	 	(24,223	) 	 	 	(12,249	) 	 	 	(36,472	) 	
Future income tax expense	  	 	(8,643	) 	 	 	(4,209	) 	 	 	(12,852	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Future net cash flows	  	 	19,007	  	 	 	14,964	  	 	 	33,971	  	
10% discount to reflect timing of cash flows	  	 	(10,164	) 	 	 	(7,455	) 	 	 	(17,619	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Standardized measure of discounted future net cash flows	  	$	8,843	  	 	$	7,509	  	 	$	16,352	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Future cash inflows, development costs and production costs were computed using the same assumptions for prices and costs that were used to estimate Devon’s proved oil and gas reserves at the end of each year. For 2012, the future realized prices averaged $86.57 per barrel of oil, $50.24 per barrel of bitumen, $2.28 per Mcf of gas and $29.19 per barrel of natural gas liquids. Of the $12.8 billion of future development costs as of the end of 2012, $2.3 billion, $1.9 billion and $0.8 billion are estimated to be spent in 2013, 2014 and 2015, respectively.
Future development costs include not only development costs, but also future asset retirement costs. Included as part of the $12.8 billion of future development costs are $2.6 billion of future asset retirement costs. Future production costs include general and administrative expenses directly related to oil and gas producing activities. The future income tax expenses have been computed using statutory tax rates, giving effect to allowable tax deductions and tax credits under current laws.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
The principal changes in Devon’s standardized measure of discounted future net cash flows are as follows:

 	  	Year Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
 	  	(In millions)	 	
Beginning balance	  	$	17,844	  	 	$	16,352	  	 	$	11,403	  	
Net changes in prices and production costs	  	 	(9,889	) 	 	 	1,875	  	 	 	7,423	  	
Oil, gas and NGL sales, net of production costs	  	 	(4,388	) 	 	 	(5,811	) 	 	 	(4,998	) 	
Changes in estimated future development costs	  	 	(1,094	) 	 	 	(440	) 	 	 	(292	) 	
Extensions and discoveries, net of future development costs	  	 	4,669	  	 	 	3,714	  	 	 	3,048	  	
Purchase of reserves	  	 	18	  	 	 	57	  	 	 	23	  	
Sales of reserves in place	  	 	(25	) 	 	 	(2	) 	 	 	(815	) 	
Revisions of quantity estimates	  	 	162	  	 	 	(228	) 	 	 	579	  	
Previously estimated development costs incurred during the period	  	 	1,321	  	 	 	1,302	  	 	 	1,559	  	
Accretion of discount	  	 	1,420	  	 	 	2,248	  	 	 	1,487	  	
Other, primarily changes in timing and foreign exchange rates	  	 	113	  	 	 	(294	) 	 	 	(402	) 	
Net change in income taxes	  	 	3,070	  	 	 	(929	) 	 	 	(2,663	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	  	$	13,221	  	 	$	17,844	  	 	$	16,352	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
The following table presents Devon’s estimated pretax cash flow information related to its proved reserves.

 	  	Year Ended December 31, 2012	 	
 	  	U.S.	 	  	Canada	 	  	Total	 	
 	  	(In millions)	 	
Pre-tax future net revenue (1)	  				  				  				
Proved developed reserves	  	$	19,982	  	  	$	2,717	  	  	$	22,699	  	
Proved undeveloped reserves	  	 	4,494	  	  	 	8,031	  	  	 	12,525	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total proved reserves	  	$	24,476	  	  	$	10,748	  	  	$	35,224	  	

Pre-tax 10% present value (1)	  				  				  				
Proved developed reserves	  	$	10,764	  	  	$	2,484	  	  	$	13,248	  	
Proved undeveloped reserves	  	 	1,143	  	  	 	2,823	  	  	 	3,966	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total proved reserves	  	$	11,907	  	  	$	5,307	  	  	$	17,214	  	

(1)	Estimated pre-tax future net revenue represents estimated future revenue to be generated from the production of proved reserves, net of estimated production and development costs and site restoration and abandonment charges. The amounts shown do not give effect to depreciation, depletion and amortization, asset impairments or non-property related expenses such as debt service and income tax expense.	
The present value of after-tax future net revenues discounted at 10 percent per annum (“standardized measure”) was $13.2 billion at the end of 2012. Included as part of standardized measure were discounted future income taxes of $4.0 billion. Excluding these taxes, the present value of Devon’s pre-tax future net revenue (“pre-tax 10 percent present value”) was $17.2 billion. Devon believes the pre-tax 10 percent present value is a useful measure in addition to the after-tax standardized measure. The pre-tax 10 percent present value assists in both the determination of future cash flows of the current reserves as well as in making relative value comparisons among peer companies. The after-tax standardized measure is dependent on the unique tax situation of each individual company, while the pre-tax 10 percent present value is based on prices and discount factors, which are more consistent from company to company.
 
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
23.	Supplemental Quarterly Financial Information (Unaudited)	
Following is a summary of Devon’s unaudited interim results of operations.

 	  	2012	 	
 	  	First
Quarter	 	 	Second
Quarter	 	  	Third
Quarter	 	 	Fourth
Quarter	 	 	Full
Year	 	
 	  	(In millions, except per share amounts)	 	
Revenues	  	$	2,497	  	 	$	2,559	  	  	$	1,865	  	 	$	2,581	  	 	$	9,502	  	
Earnings (loss) from continuing operations
before income taxes	  	$	611	  	 	$	734	  	  	$	(1,161	) 	 	$	(501	) 	 	$	(317	) 	
Earnings (loss) from continuing operations	  	$	414	  	 	$	477	  	  	$	(719	) 	 	$	(357	) 	 	$	(185	) 	
Loss from discontinued operations	  	 	(21	) 	 	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(21	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	  	$	393	  	 	$	477	  	  	$	(719	) 	 	$	(357	) 	 	$	(206	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Basic net earnings (loss) per common share:	  				 				  				 				 				
Earnings (loss) from continuing operations	  	$	1.03	  	 	$	1.18	  	  	$	(1.80	) 	 	$	(0.89	) 	 	$	(0.47	) 	
Earnings (loss) from discontinued operations	  	 	(0.06	) 	 	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(0.05	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	  	$	0.97	  	 	$	1.18	  	  	$	(1.80	) 	 	$	(0.89	) 	 	$	(0.52	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Diluted net earnings (loss) per common share:	  				 				  				 				 				
Earnings (loss) from continuing operations	  	$	1.03	  	 	$	1.18	  	  	$	(1.80	) 	 	$	(0.89	) 	 	$	(0.47	) 	
Earnings (loss) from discontinued operations	  	 	(0.06	) 	 	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(0.05	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	  	$	0.97	  	 	$	1.18	  	  	$	(1.80	) 	 	$	(0.89	) 	 	$	(0.52	) 	

 	  	2011	 	
 	  	First
Quarter	 	 	Second
Quarter	 	  	Third
Quarter	 	 	Fourth
Quarter	 	 	Full
Year	 	
 	  	(In millions, except per share amounts)	 	
Revenues	  	$	2,147	  	 	$	3,220	  	  	$	3,502	  	 	$	2,585	  	 	$	11,454	  	
Earnings from continuing operations before income taxes	  	$	580	  	 	$	1,378	  	  	$	1,538	  	 	$	794	  	 	$	4,290	  	
Earnings from continuing operations	  	$	389	  	 	$	184	  	  	$	1,040	  	 	$	521	  	 	$	2,134	  	
Earnings (loss) from discontinued operations	  	 	27	  	 	 	2,559	  	  	 	(2	) 	 	 	(14	) 	 	 	2,570	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	  	$	416	  	 	$	2,743	  	  	$	1,038	  	 	$	507	  	 	$	4,704	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Basic net earnings per common share:	  				 				  				 				 				
Earnings from continuing operations	  	$	0.91	  	 	$	0.44	  	  	$	2.51	  	 	$	1.29	  	 	$	5.12	  	
Earnings (loss) from discontinued operations	  	 	0.06	  	 	 	6.06	  	  	 	—  	  	 	 	(0.04	) 	 	 	6.17	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	  	$	0.97	  	 	$	6.50	  	  	$	2.51	  	 	$	1.25	  	 	$	11.29	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Diluted net earnings per common share:	  				 				  				 				 				
Earnings from continuing operations	  	$	0.91	  	 	$	0.43	  	  	$	2.50	  	 	$	1.29	  	 	$	5.10	  	
Earnings (loss) from discontinued operations	  	 	0.06	  	 	 	6.05	  	  	 	—  	  	 	 	(0.04	) 	 	 	6.15	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	  	$	0.97	  	 	$	6.48	  	  	$	2.50	  	 	$	1.25	  	 	$	11.25	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings (Loss) from Continuing Operations
The fourth quarter of 2012 includes U.S. and Canadian asset impairments totaling $0.9 billion ($0.6 billion after income taxes, or $1.46 per diluted share).
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
The third quarter of 2012 includes U.S. asset impairments totaling $1.1 billion ($0.7 billion after income taxes, or $1.78 per diluted share).
The second quarter of 2011 includes deferred income taxes of $0.7 billion (or $1.71 per diluted share) related to assumed repatriations of foreign earnings that were no longer deemed to be indefinitely reinvested in accordance with accounting principles generally accepted in the U.S.
Earnings (Loss) from Discontinued Operations
The second quarter of 2011 includes the divestiture of Devon’s Brazil operations and the related gain was $2.5 billion ($2.5 billion after income taxes, or $6.01 per diluted share).
 
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 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
Not Applicable.
 Item 9A. Controls and Procedures 
Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to Devon, including its consolidated subsidiaries, is made known to the officers who certify Devon’s financial reports and to other members of senior management and the Board of Directors.
Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of December 31, 2012 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for Devon, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of Devon’s management, including our principal executive and principal financial officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on this evaluation under the COSO Framework, which was completed on February 19, 2013, management concluded that its internal control over financial reporting was effective as of December 31, 2012.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by KPMG LLP, an independent registered public accounting firm who audited our consolidated financial statements as of and for the year ended December 31, 2012, as stated in their report, which is included under “Item 8. Financial Statements and Supplementary Data” in this report.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the fourth quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 Item 9B. Other Information 
Not Applicable.
 
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PART III
 Item 10. Directors, Executive Officers and Corporate Governance 
The information called for by this Item 10 is incorporated herein by reference to the definitive Proxy Statement to be filed by Devon pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 30, 2013.
 Item 11. Executive Compensation 
The information called for by this Item 11 is incorporated herein by reference to the definitive Proxy Statement to be filed by Devon pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 30, 2013.
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 
The information called for by this Item 12 is incorporated herein by reference to the definitive Proxy Statement to be filed by Devon pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 30, 2013.
 Item 13. Certain Relationships and Related Transactions, and Director Independence 
The information called for by this Item 13 is incorporated herein by reference to the definitive Proxy Statement to be filed by Devon pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 30, 2013.
 Item 14. Principal Accounting Fees and Services 
The information called for by this Item 14 is incorporated herein by reference to the definitive Proxy Statement to be filed by Devon pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 30, 2013.
 
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PART IV
 Item 15. Exhibits and Financial Statement Schedules 
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
Reference is made to the Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules appearing at “Item 8. Financial Statements and Supplementary Data” in this report.
2. Consolidated Financial Statement Schedules
All financial statement schedules are omitted as they are inapplicable, or the required information has been included in the consolidated financial statements or notes thereto.
3. Exhibits

Exhibit No.	  	Description	
		
2.1	  	Agreement and Plan of Merger, dated as of February 23, 2003, by and among Registrant, Devon NewCo Corporation, and Ocean Energy, Inc. (incorporated by reference to Registrant’s Amendment No. 1 to Form S-4 Registration No. 333-103679, filed March 20, 2003).	
		
2.2	  	Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Registrant, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. (incorporated by reference to Annex A to Registrant’s Joint Proxy Statement/Prospectus of Form S-4 Registration Statement No. 333-68694 as filed August 30, 2001).	
		
2.3	  	Offer to Purchase for Cash and Directors’ Circular dated September 6, 2001 (incorporated by reference to Registrant’s and Devon Acquisition Corporation’s Schedule 14D-1F filing, filed September 6, 2001).	
		
2.4	  	Pre-Acquisition Agreement, dated as of August 31, 2001, between Registrant and Anderson Exploration Ltd. (incorporated by reference to Exhibit 2.2 to Registrant’s Registration Statement on Form S-4, File No. 333-68694 as filed September 14, 2001).	
		
2.5	  	Amendment No. One, dated as of July 11, 2000, to Agreement and Plan of Merger by and among Registrant, Devon Merger Co. and Santa Fe Snyder Corporation dated as of May 25, 2000 (incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed on July 12, 2000).	
		
2.6	  	Amended and Restated Agreement and Plan of Merger among Registrant, Devon Energy Corporation (Oklahoma), Devon Oklahoma Corporation and PennzEnergy Company dated as of May 19, 1999 (incorporated by reference to Exhibit 2.1 to Registrant’s Form S-4, File No. 333-82903).	
		
3.1	  	Registrant’s Restated Certificate of Incorporation.	
		
3.2	  	Registrant’s Bylaws (incorporated by reference to Exhibit 3.2 of Registrant’s Form 8-K filed on June 8, 2012).	
		
4.1	  	Indenture, dated as of July 12, 2011, between Registrant and UMB Bank, National Association, as Trustee, relating to the 2.40% Senior Notes due 2016, the 4.00% Senior Notes due 2021 and the 5.60% Senior Notes due 2041 (incorporated by reference to Exhibit 4.1 to Registrant’s Form 8-K filed on July 12, 2011).	
 
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Exhibit No.	  	Description	
		
    4.2	  	Supplemental Indenture No. 1, dated as of July 12, 2011, to Indenture dated as of July 12, 2011, between Registrant and UMB Bank, National Association, as Trustee, relating to the 2.40% Senior Notes due 2016, the 4.00% Senior Notes due 2021 and the 5.60% Senior Notes due 2041 (incorporated by reference to Exhibit 4.2 to Registrant’s Form 8-K filed on July 12, 2011).	
		
    4.3	  	Supplemental Indenture No. 2, dated as of May 14, 2012, to Indenture dated as of July 12, 2011, between Registrant and UMB Bank, National Association, as Trustee, relating to the 1.875% Senior Notes due 2017, the 3.250% Senior Notes due 2022 and the 4.750% Senior Notes due 2042 (incorporated by reference to Exhibit 4.1 to Registrant’s Form 8-K filed on May 14, 2012).	
		
    4.4	  	Indenture, dated as of March 1, 2002, between Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to senior debt securities issuable by Registrant (the “Senior Indenture”) (incorporated by reference to Exhibit 4.1 of Registrant’s Form 8-K filed April 9, 2002).	
		
    4.5	  	Supplemental Indenture No. 1, dated as of March 25, 2002, to Indenture dated as of March 1, 2002, between Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 7.95% Senior Debentures due 2032 (incorporated by reference to Exhibit 4.2 to Registrant’s Form 8-K filed on April 9, 2002).	
		
    4.6	  	Supplemental Indenture No. 3, dated as of January 9, 2009, to Indenture dated as of March 1, 2002, between Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 5.625% Senior Notes due 2014 and the 6.30% Senior Notes due 2019 (incorporated by reference to Exhibit 4.1 to Registrant’s Form 8-K filed on January 9, 2009).	
		
    4.7	  	Indenture dated as of October 3, 2001, by and among Devon Financing Corporation, U.L.C. as Issuer, Registrant as Guarantor, and The Bank of New York Mellon Trust Company, N.A., originally The Chase Manhattan Bank, as Trustee, relating to the 7.875% Debentures due 2031 (incorporated by reference to Exhibit 4.7 to Registrant’s Registration Statement on Form S-4, File No. 333-68694 as filed October 31, 2001).	
		
    4.8	  	Indenture dated as of July 8, 1998 among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.), its Subsidiary Guarantors, and Wells Fargo Bank Minnesota, N.A., as Trustee, relating to the 8.25% Senior Notes due 2018 (incorporated by reference to Exhibit 10.24 to the Form 10-Q for the period ended June 30, 1998 of Ocean Energy, Inc. (Registration No. 0-25058)).	
		
    4.9	  	First Supplemental Indenture, dated March 30, 1999 to Indenture dated as of July 8, 1998 among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.), its Subsidiary Guarantors, and Wells Fargo Bank Minnesota, N.A., as Trustee, relating to the 8.25% Senior Notes due 2018 (incorporated by reference to Exhibit 4.5 to Ocean Energy, Inc.’s Form 10-Q for the period ended March 31, 1999).	
		
    4.10	  	Second Supplemental Indenture, dated as of May 9, 2001 to Indenture dated as of July 8, 1998 among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.), its Subsidiary Guarantors, and Wells Fargo Bank Minnesota, N.A., as Trustee, relating to the 8.25% Senior Notes due 2018 (incorporated by reference to Exhibit 99.2 to Ocean Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 14, 2001).	
		
    4.11	  	Third Supplemental Indenture, dated January 23, 2006 to Indenture dated as of July 8, 1998 among Devon OEI Operating, Inc. as Issuer, Devon Energy Production Company, L.P. as Successor Guarantor, and Wells Fargo Bank Minnesota, N.A., as Trustee, relating to the 8.25% Senior Notes due 2018 (incorporated by reference to Exhibit 4.23 of Registrant’s Form 10-K for the year ended December 31, 2005).	
 
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Exhibit No.	  	Description	
		
    4.12	  	Senior Indenture dated September 1, 1997, among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee, and Specimen of 7.50% Senior Notes (incorporated by reference to Exhibit 4.4 to Ocean Energy’s Annual Report on Form 10-K for the year ended December 31, 1997)).	
		
    4.13	  	First Supplemental Indenture, dated as of March 30, 1999 to Senior Indenture dated as of September 1, 1997, among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 7.50% Senior Notes Due 2027 (incorporated by reference to Exhibit 4.10 to Ocean Energy’s Form 10-Q for the period ended March 31, 1999).	
		
    4.14	  	Second Supplemental Indenture, dated as of May 9, 2001 to Senior Indenture dated as of September 1, 1997, among Devon OEI Operating, Inc. (as successor by merger to Ocean Energy, Inc.), its Subsidiary Guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 7.50% Senior Notes Due 2027 (incorporated by reference to Exhibit 99.4 to Ocean Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 14, 2001).	
		
    4.15	  	Third Supplemental Indenture, dated December 31, 2005 to Senior Indenture dated as of September 1, 1997, among Devon OEI Operating, Inc. as Issuer, Devon Energy Production Company, L.P. as Successor Guarantor, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 7.50% Senior Notes Due 2027 (incorporated by reference to Exhibit 4.27 of Registrant’s Form 10-K for the year ended December 31, 2005).	
		
  10.1	  	Amended and Restated Investor Rights Agreement, dated as of August 13, 2001, by and among Registrant, Devon Holdco Corporation, George P. Mitchell and Cynthia Woods Mitchell (incorporated by reference to Annex C to the Joint Proxy Statement/Prospectus of Form S-4 Registration Statement No. 333-68694 as filed August 30, 2001).	
		
  10.2	  	Credit Agreement dated October 24, 2012, among Registrant, as U.S. Borrower, Devon NEC Corporation and Devon Canada Corporation, as Canadian Borrowers, each lender from time to time party thereto, each L/C Issuer from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Canadian Swing Line Lender and U.S. Swing Line Lender with respect to a $3 billion five-year revolving credit facility (incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed October 29, 2012).	
		
  10.3	  	Devon Energy Corporation 2009 Long-Term Incentive Plan (as amended and restated effective June 6, 2012)(incorporated by reference to Registrant’s Form S-8 Registration No.333-182198, filed June 18, 2012).*	
		
  10.4	  	Devon Energy Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Registrant’s Form S-8 Registration No. 333-127630, filed August 17, 2005) .*	
		
  10.5	  	First Amendment to Devon Energy Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Appendix A to Registrant’s Proxy Statement for the 2006 Annual Meeting of Stockholders filed on April 28, 2006).*	
		
  10.6	  	Devon Energy Corporation Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K, filed June 8, 2012)*	
		
  10.7	  	Devon Energy Corporation Non-Qualified Deferred Compensation Plan (amended and restated effective November 11, 2008) (incorporated by reference to Exhibit 10.14 to Registrant’s Form 10-K, filed February 24, 2012).*	
		
  10.8	  	Devon Energy Corporation Benefit Restoration Plan (amended and restated effective January 1, 2012) (incorporated by reference to Exhibit 10.15 to Registrant’s Form 10-K, filed February 24, 2012).*	
 
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Exhibit No.	  	Description	
		
  10.9	  	Devon Energy Corporation Defined Contribution Restoration Plan (amended and restated effective January 1, 2012) (incorporated by reference to Exhibit 10.16 to Registrant’s Form 10-K, filed February 24, 2012).*	
		
  10.10	  	Devon Energy Corporation Supplemental Contribution Plan (amended and restated effective January 1, 2012) (incorporated by reference to Exhibit 10.17 to Registrant’s Form 10-K, filed February 24, 2012).*	
		
  10.11	  	Devon Energy Corporation Supplemental Executive Retirement Plan (amended and restated effective January 1, 2012) (incorporated by reference to Exhibit 10.18 to Registrant’s Form 10-K, filed February 24, 2012).*	
		
  10.12	  	Devon Energy Corporation Supplemental Retirement Income Plan (amended and restated effective January 1, 2012) (incorporated by reference to Exhibit 10.19 to Registrant’s Form 10-K, filed February 24, 2012).*	
		
  10.13	  	Devon Energy Corporation Incentive Savings Plan (incorporated by reference to Registrant’s Form S-8 Registration No. 333-179181, filed January 26, 2012).*	
		
  10.14	  	Form of Amendment No. 1 to the Amended and Restated Employment Agreement, incorporated by reference to Exhibit 10.19 to Registrant’s Form 10-K filed February 27, 2009, between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt dated April 19, 2011. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed April 25, 2011).*	
		
  10.15	  	Amended and Restated Form of Employment Agreement between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt dated December 15, 2008 (incorporated by reference to Exhibit 10.19 to Registrant’s Form 10-K filed February 27, 2009).*	
		
  10.16	  	Form of Notice of Grant of Performance Restricted Stock Award and Award Agreement under the 2009 Long-Term Incentive Plan (as amended and restated June 6, 2012) between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for performance based restricted stock awarded.*	
		
  10.17	  	Form of Notice of Grant of Performance Share Unit Award and Award Agreement under the 2009 Long-Term Incentive Plan (as amended and restated June 6, 2012) between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for performance based restricted share units awarded.*	
		
  10.18	  	Form of Incentive Stock Option Award Agreement under the 2009 Long-Term Incentive Plan between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for incentive stock options granted (incorporated by reference to Exhibit 10.15 to Registrant’s Form 10-K filed on February 25, 2011).*	
		
  10.19	  	Form of Employee Nonqualified Stock Option Award Agreement under the 2009 Long-Term Incentive Plan between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for nonqualified stock options granted (incorporated by reference to Exhibit 10.16 to Registrant’s Form 10-K filed on February 25, 2011).*	
 
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Exhibit No.	  	Description	
		
  10.20	  	Form of Non-Management Director Nonqualified Stock Option Award Agreement under the Devon Energy Corporation 2009 Long-Term Incentive Plan between Registrant and all Non-Management Directors for nonqualified stock options granted (incorporated by reference to Exhibit 10.20 to Registrant’s Form 10-K filed on February 25, 2010).*	
		
  10.21	  	Form of Restricted Stock Award Agreement under the 2009 Long-Term Incentive Plan between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for restricted stock awards (incorporated by reference to Exhibit 10.18 to Registrant’s Form 10-K filed on February 25, 2011).*	
		
  10.22	  	Form of Restricted Stock Award Agreement under the 2009 Long-Term Incentive Plan between Registrant and all Non-Management Directors for restricted stock awards (incorporated by reference to Exhibit 10.22 to Registrant’s Form 10-K filed on February 25, 2010).*	
		
  10.23	  	Form of Letter Agreement amending the restricted stock award agreements and nonqualified stock option agreements under the 2009 Long-Term Incentive Plan and the 2005 Long-Term Incentive Plan between Registrant and J. Larry Nichols, John Richels and Darryl G. Smette (incorporated by reference to Exhibit 10.22 to Registrant’s Form 10-K filed on February 25, 2011).*	
		
  10.24	  	Amendment to Incentive Stock Option Award Agreement between Registrant and J. Larry Nichols dated December 19, 2012, amending the Incentive Stock Option Agreements under the 2009 Long-Term Incentive Plan between Registrant and J. Larry Nichols. *	
		
  12	  	Statement of computations of ratios of earnings to fixed charges and to combined fixed charges and preferred stock dividends.	
		
  21	  	Registrant’s Significant Subsidiaries.	
		
  23.1	  	Consent of KPMG LLP.	
		
  23.2	  	Consent of LaRoche Petroleum Consultants.	
		
  23.3	  	Consent of Deloitte.	
		
  31.1	  	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
		
  31.2	  	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
		
  32.1	  	Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
		
  32.2	  	Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
		
  99.1	  	Report of LaRoche Petroleum Consultants.	
		
  99.2	  	Report of Deloitte.	
		
101.INS	  	XBRL Instance Document.	
		
101.SCH	  	XBRL Taxonomy Extension Schema Document.	
		
101.CAL	  	XBRL Taxonomy Extension Calculation Linkbase Document.	
		
101.LAB	  	XBRL Taxonomy Extension Labels Linkbase Document.	
		
101.PRE	  	XBRL Taxonomy Extension Presentation Linkbase Document.	
		
101.DEF	  	XBRL Taxonomy Extension Definition Linkbase Document.	

*	Compensatory plans or arrangements	
 
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Table of Contents
 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	 	DEVON ENERGY CORPORATION	 		
			
	 	By:    /s/ JOHN RICHELS                  	 		
	 	John Richels	 		
	 	President and Chief Executive Officer	 		
February 21, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	 	/s/ JOHN RICHELS	  	President, Chief Executive Officer and	  	February 21, 2013	
	 	John Richels	  	Director	  		
				
	 	/s/ J. LARRY NICHOLS	  	Executive Chairman of the Board and Director	  	February 21, 2013	
	 	J. Larry Nichols	  		  		
				
	 	/s/ JEFFREY A. AGOSTA	  	Executive Vice President	  	February 21, 2013	
	 	Jeffrey A. Agosta	  	and Chief Financial Officer	  		
				
	 	/s/ ROBERT H. HENRY	  	Director	  	February 21, 2013	
	 	Robert H. Henry	  		  		
				
	 	/s/ JOHN A. HILL	  	Director	  	February 21, 2013	
	 	John A. Hill	  		  		
				
	 	/s/ MICHAEL M. KANOVSKY	  	Director	  	February 21, 2013	
	 	Michael M. Kanovsky	  		  		
				
	 	/s/ ROBERT A. MOSBACHER, JR.	  	Director	  	February 21, 2013	
	 	Robert A. Mosbacher, Jr.	  		  		
				
	 	/s/ DUANE C. RADTKE	  	Director	  	February 21, 2013	
	 	Duane C. Radtke	  		  		
				
	 	/s/ MARY P. RICCIARDELLO	  	Director	  	February 21, 2013	
	 	Mary P. Ricciardello	  		  		
 
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INDEX TO EXHIBITS

Exhibit No.	  	Description	
		
    3.1	  	Registrant’s Restated Certificate of Incorporation.	
		
  10.16	  	Form of Notice of Grant of Performance Restricted Stock Award and Award Agreement under the 2009 Long-Term Incentive Plan (as amended and restated June 6, 2012) between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, J. Larry Nichols, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for performance based restricted stock awarded.*	
		
  10.17	  	Form of Notice of Grant of Performance Share Unit Award and Award Agreement under the 2009 Long-Term Incentive Plan (as amended and restated June 6, 2012) between Registrant and Jeffrey A. Agosta, David A. Hager, R. Alan Marcum, John Richels, Frank W. Rudolph, Darryl G. Smette, Lyndon C. Taylor and William F. Whitsitt for performance based restricted share units awarded.*	
		
  10.24	  	Amendment to Incentive Stock Option Award Agreement between Registrant and J. Larry Nichols dated December 19, 2012, amending the Incentive Stock Option Agreements under the 2009 Long-Term Incentive Plan between Registrant and J. Larry Nichols. *	
		
  12	  	Statement of computations of ratios of earnings to fixed charges and to combined fixed charges and preferred stock dividends.	
		
  21	  	Registrant’s Significant Subsidiaries.	
		
  23.1	  	Consent of KPMG LLP.	
		
  23.2	  	Consent of LaRoche Petroleum Consultants.	
		
  23.3	  	Consent of Deloitte.	
		
  31.1	  	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
		
  31.2	  	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
		
  32.1	  	Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
		
  32.2	  	Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
		
  99.1	  	Report of LaRoche Petroleum Consultants.	
		
  99.2	  	Report of Deloitte.	
		
101.INS	  	XBRL Instance Document.	
		
101.SCH	  	XBRL Taxonomy Extension Schema Document.	
		
101.CAL	  	XBRL Taxonomy Extension Calculation Linkbase Document.	
		
101.LAB	  	XBRL Taxonomy Extension Labels Linkbase Document.	
		
101.PRE	  	XBRL Taxonomy Extension Presentation Linkbase Document.	
		
101.DEF	  	XBRL Taxonomy Extension Definition Linkbase Document.	

*	Compensatory plans or arrangements	
 
110

Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
Devon Energy Corporation
(Originally incorporated under the name
“Devon Delaware Corporation” on May 18, 1999)
The undersigned, Carla D. Brockman, certifies that she is the Vice President Corporate Governance and Secretary of Devon Energy Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), and does hereby further certify as follows:
A. The name of the corporation is Devon Energy Corporation. The corporation was originally incorporated under the name Devon Delaware Corporation and the original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on May 18, 1999.
B. This Restated Certificate of Incorporation, which restates and integrates without further amendment the Corporation’s current certificate of incorporation (as previously amended and restated, the “Certificate of Incorporation”), was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware by the Board of Directors of the Corporation.
C. There is no discrepancy between the Certificate of Incorporation and this Restated Certificate of Incorporation of the Corporation, which shall read in its entirety as follows:
ARTICLE I
Name
The name of this corporation (the “Corporation”) is Devon Energy Corporation.
ARTICLE II
Registered Office
The address of the registered office of the Corporation in the State of Delaware is at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle 19801, and the name of its registered agent at that address is The Corporation Trust Company.
 
1

ARTICLE III
Business
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “General Corporation Law”).
ARTICLE IV
Authorized Capital Stock
A. The Corporation shall be authorized to issue a total of 1,004,500,000 shares of capital stock divided into two classes as follows:
(1) 1,000,000,000 shares of Common Stock, par value $0.10 per share (“Common Stock”), and
(2) 4,500,000 shares of Preferred Stock, par value $1.00 per share (“Preferred Stock”).
B. Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors of the Corporation (the “Board”), each of said series to be distinctly designated. The voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, if any, of each such series may differ from those of any and all other series of Preferred Stock at any time outstanding, and the Board is hereby expressly granted authority to fix or alter, by resolution or resolutions, the designation, number, voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, of each such series, including, but without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of Preferred Stock that shall constitute, such series, which number (except where otherwise provided by the Board in the resolution establishing such series) may be increased or decreased (but not below the number of shares of such series then outstanding) from time to time by action of the Board;
(2) The rights in respect of dividends, if any, of such series of Preferred Stock, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes or any other series of the same or other class or classes of capital stock of the Corporation, and whether or in what circumstances such dividends shall be cumulative;
(3) The right, if any, of the holders of such series of Preferred Stock to convert the same into, or exchange the same for, shares of any other class or classes or of any other series of the same or any other class or classes of capital stock or other securities of the Corporation or any other person, and the terms and conditions of such conversion or exchange;
 
2

(4) Whether or not shares of such series of Preferred Stock shall be subject to redemption, and, if so, the terms and conditions of such redemption (including whether such redemption shall be optional or mandatory), including the date or dates or event or events upon or after which they shall be redeemable, and the amount and type of consideration payable upon redemption, which may vary under different conditions and at different redemption dates;
(5) The rights, if any, of the holders of such series of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or in the event of any merger or consolidation of or sale of assets by the Corporation;
(6) The terms of any sinking fund or redemption or purchase account, if any, to be provided for shares of such series of the Preferred Stock;
(7) The voting powers, if any, of the holders of any series of Preferred Stock generally or with respect to any particular matter, which may be less than, equal to or greater than one vote per share, and which may, without limiting the generality of the foregoing, include the right, voting as a series by itself or together with the holders of any other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation generally or under such specific circumstances and on such conditions, as shall be provided in the resolution or resolutions of the Board adopted pursuant hereto, including, without limitation, in the event there shall have been a default in the payment of dividends on or redemption of any one or more series of Preferred Stock; and
(8) Any other powers, preferences and relative, participating, optional or other rights, and qualifications, limitations or restrictions of shares of such series of Preferred Stock.
C. (1) After the provisions with respect to preferential dividends on any series of Preferred Stock (fixed in accordance with the provisions of Paragraph B of this Article IV), if any, shall have been satisfied and after the Corporation shall have complied with all the requirements, if any, with respect to redemption of, or the setting aside of sums as sinking funds or redemption or purchase accounts with respect to, any series of Preferred Stock (fixed in accordance with the provisions of Paragraph B of this Article IV), and subject further to any other conditions that may be fixed in accordance with the provisions of Paragraph B of this Article IV, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board.
 
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(2) In the event of the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after distribution in full of the preferential amounts, if any (fixed in accordance with the provisions of Paragraph B of this Article IV), to be distributed to the holders of Preferred Stock by reason thereof, the holders of Common Stock shall, subject to the additional rights, if any (fixed in accordance with the provisions of Paragraph B of this Article IV), of the holders of any outstanding shares of Preferred Stock, be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law, and subject to the provisions of such resolution or resolutions as may be adopted by the Board pursuant to Paragraph B of this Article IV granting the holders of one or more series of Preferred Stock exclusive voting powers with respect to any matter, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders.
(4) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the combined voting power of the then-outstanding shares of Voting Stock, voting together as a single class.
D. No stockholder of the Corporation shall by reason of his holding shares of any class or series of stock of the Corporation have any preemptive or preferential right to purchase, acquire, subscribe for or otherwise receive any additional, unissued or treasury shares (whether now or hereafter acquired) of any class or series of stock of the Corporation now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying any right, option or warrant to purchase, acquire, subscribe for or otherwise receive shares of any class or series of stock of the Corporation now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities, would adversely affect the dividends or voting or other rights of such stockholder, and the Board may issue or authorize the issuance of shares of any class or series of stock of the Corporation, or any notes, debentures, bonds or other securities convertible into or carrying rights, options or warrants to purchase, acquire, subscribe for or otherwise receive shares of any class or series of stock of the Corporation, without offering any such shares of any such class, either in whole or in part, to the existing stockholders of any class.
E. Cumulative voting of shares of any class or series of capital stock of the Corporation having voting rights is not permitted.
 
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ARTICLE V
Election of Directors
A. The business and affairs of the Corporation shall be conducted and managed by, or under the direction of, the Board. The number of directors which shall constitute the entire Board shall not be less than three nor more than twenty, and shall be determined by resolution adopted by a majority of the entire Board. Except as otherwise provided pursuant to Article IV of this Certificate of Incorporation relating to additional directors elected by the holders of one or more series of Preferred Stock, no decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.
B. All directors of the Corporation shall be of one class and shall be elected annually. Each director shall serve for a term ending at the next following annual meeting of stockholders, and until such director’s successor shall have been duly elected and qualified, subject to his earlier death, disqualification, resignation or removal.
C. Except as otherwise provided for or fixed pursuant to the provisions of Article IV relating to the rights of the holders of any series of Preferred Stock to elect additional directors, and subject to the provisions hereof, newly created directorships resulting from any increase in the authorized number of directors, and any vacancies on the Board resulting from death, resignation, disqualification, removal, or other cause, may be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board. Any director elected in accordance with the preceding sentence shall hold office for a term ending at the next following annual meeting of stockholders, and until such director’s successor shall have been duly elected and qualified, subject to his earlier death, disqualification, resignation or removal.
D. During any period when the holders of any series of Preferred Stock have the right to elect additional directors as provided for or fixed pursuant to the provisions of Article IV, then upon commencement and for the duration of the period during which such right continues (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total and authorized number of directors of the Corporation shall be reduced accordingly.
 
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ARTICLE VI
Meeting of Stockholders
A. Meetings of stockholders of the Corporation may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. Except as otherwise provided for or fixed pursuant to the provisions of Article IV relating to the rights of the holders of any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only (i) pursuant to a resolution adopted by a majority of the then-authorized number of directors of the Corporation, (ii) if permitted by the Bylaws of the Corporation, by the Chairman of the Board or the President of the Corporation as and in the manner provided in the Bylaws of the Corporation, or (iii) by the Secretary of the Corporation upon receipt of the written request of one or more record holders owning, and having held continuously for a period of at least one year prior to the date such request is delivered, an aggregate of not less than 25% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote on the matter or matters to be brought before the proposed special meeting, provided that such written request is made in accordance with and subject to the applicable requirements and procedures of the Bylaws of the Corporation, including any limitations on the stockholders’ ability to request a special meeting set forth in the Bylaws of the Corporation. Special meetings of stockholders may not be called by any other person or persons or in any other manner. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
B. In addition to the powers conferred on the Board by this Certificate of Incorporation and by the General Corporation Law, and without limiting the generality thereof, the Board is specifically authorized from time to time, by resolution of the Board without additional authorization by the stockholders of the Corporation, to adopt, amend or repeal the Bylaws of the Corporation, in such form and with such terms as the Board may determine, including, without limiting the generality of the foregoing, Bylaws relating to (i) regulation of the procedure for submission by stockholders of nominations of persons to be elected to the Board, (ii) regulation of the attendance at annual or special meetings of the stockholders of persons other than holders of record or their proxies, (iii) regulation of the manner in which, and the circumstances under which, special meetings may be called by stockholders pursuant to Paragraph A of this Article VI and (iv) the regulation of the business that may properly be brought by a stockholder of the Corporation before an annual or special meeting of stockholders of the Corporation.
ARTICLE VII
Stockholder Consent
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation, and the ability of the stockholders of the Corporation to consent in writing to the taking of any action is hereby specifically denied.
 
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ARTICLE VIII
Limitation of Liability
A director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law as the same exists or may hereafter be amended. Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification.
ARTICLE IX
Executive Committee
The Board, pursuant to the Bylaws of the Corporation or by resolution passed by a majority of the then-authorized number of directors, may designate any of their number to constitute an Executive Committee, which Executive Committee, to the fullest extent permitted by law and provided for in said resolution or in the Bylaws of the Corporation, shall have and may exercise all of the powers of the Board in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers that may require it.
ARTICLE X
Indemnification
A. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation and with respect to any criminal action or proceeding had reasonable cause to believe that his conduct was unlawful.
 
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B. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney’s fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine, upon application, that despite the adjudication of liability, but in the view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
C. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized herein.
D. The Corporation may purchase (upon resolution duly adopted by the board of directors) and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability.
E. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to herein or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.
F. Every such person shall be entitled, without demand by him upon the Corporation or any action by the Corporation, to enforce his right to such indemnity in an action at law against the Corporation. The right of indemnification and advancement of expenses hereinabove provided shall not be deemed exclusive of any rights to which any such person may now or hereafter be otherwise entitled and specifically, without limiting the generality of the foregoing, shall not be deemed exclusive of any rights pursuant to statute or otherwise, of any such person in any such action, suit or proceeding to have assessed or allowed in his favor against the Corporation or otherwise, his costs and expenses incurred therein or in connection therewith or any part thereof.
 
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ARTICLE XI
Amendment Of Corporate Documents
A. Certificate of Incorporation
In addition to any affirmative vote required by applicable law and in addition to any vote of the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV, any alteration, amendment, repeal or rescission (a “Change”) of any provision of this Certificate of Incorporation must be approved by at least a majority of the then-authorized number of directors and by the affirmative vote of the holders of at least a majority of the combined voting power of the then-outstanding shares of Voting Stock, voting together as a single class. Subject to the provisions hereof, the Corporation reserves the right at any time, and from time to time, to amend, alter, repeal or rescind any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this article.
B. Bylaws
In addition to any affirmative vote required by law, any Change of the Bylaws of the Corporation may be adopted either (i) by the Board by the affirmative vote of a least a majority of the then-authorized number of directors or (ii) by the stockholders by the affirmative vote of the holders of at least a majority of the combined voting power of the then-outstanding shares of Voting Stock, voting together as a single class.
ARTICLE XII
Definitions
For the purposes of this Certificate of Incorporation:
A. A “person” shall mean any individual, firm, corporation, partnership, limited liability company, trust, unincorporated organization or other entity.
B. “Voting Stock” means all outstanding shares of capital stock of the Corporation that pursuant to or in accordance with this Certificate of Incorporation are entitled to vote generally in the election of directors of the Corporation, and each reference herein, where appropriate, to a percentage or portion of shares of Voting Stock shall refer to such percentage or portion of the voting power of such shares entitled to vote.
 
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IN WITNESS WHEREOF , this Restated Certificate of Incorporation has been duly executed by an authorized officer of the Corporation on the 12 th day of September, 2012.

Devon Energy Corporation	
		
By:	 	        /s/ Carla D. Brockman	
	 	Carla D. Brockman	
	 	Vice President Corporate Governance	
	 	And Secretary	
 
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Exhibit 10.16

 
 
NOTICE OF GRANT OF PERFORMANCE RESTRICTED STOCK AWARD
AND AWARD AGREEMENT

 
					
%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%	  	Award Number:                    	
%%OPTION_NUMBER%-%	  		  		
%%ADDRESS_LINE_1%-%	  	                             Plan:     %%EQUITY_PLAN%-%	
%%ADDRESS_LINE_2%-%	  	                             ID:     %%EMPLOYEE_IDENTIFIER%-%	
%%CITY%-%, %%STATE%-%, %%ZIPCODE%-%	  		

Effective «Grant_Date» , you have been granted a Performance Restricted Stock Award of %%TOTAL_SHARES_
GRANTED%-% shares of Devon Energy Corporation (the “Company”) Common Stock (the “Award”) under the Company’s 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012. None of the shares subject to this Award shall vest, and this Award shall terminate in its entirety, should the Company fail to attain the Performance Goal specified in attached Schedule A for the Performance Period. Except as otherwise provided in the Award Agreement, if such Performance Goal is attained and certified, then the Restricted Shares will vest in four (4) separate installments as follows: (a) twenty-five percent (25%) of the Restricted Shares will vest upon the completion of the Performance Period and the Committee’s certification of the attainment of the Performance Goal, and Vested Stock will be released as soon as practicable following the Committee’s certification of the Company’s attainment of the Performance Goal, and (b) the balance of the Restricted Shares will vest, and Vested Stock will be released, in a series of three (3) successive equal annual installments on the second, third and fourth anniversaries of the Date of Grant.

By accepting this agreement online, you and the Company agree that this award is granted under and governed by the terms and conditions of the Company’s 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012, and the Award Agreement, both of which are attached and made a part of this document.

DEVON ENERGY CORPORATION
2009 LONG-TERM INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT
THIS PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”) is entered into as of %%OPTION_DATE%-% (the “Date of Grant”), by and between Devon Energy Corporation (the “Company”) and %%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-% (the “Participant”);
W I T N E S S E T H:
WHEREAS, the Devon Energy Corporation 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012 (the “Plan”) permits the grant of Restricted Stock that vests based upon performance standards (referred to herein as a “Performance Restricted Stock”) to employees, officers and non-employee directors of the Company and its Subsidiaries and Affiliated Entities, in accordance with the terms and provisions of the Plan; and
WHEREAS, in connection with the Participant’s employment with the Company, the Company desires to award to the Participant %%TOTAL_SHARES_GRANTED%-% shares of the Company’s Common Stock under the Plan subject to the terms and conditions of this Award Agreement and the Plan; and
NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows:
1. The Plan . The Plan, a copy of which is attached hereto, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Award Agreement shall govern the rights of the Participant and the Company with respect to the Award.
2. Grant of Award . The Company hereby grants to the Participant an award (the “Award”) of %%TOTAL_SHARES_
GRANTED%-% shares of the Company’s Common subject to the restrictions placed thereon pursuant to the terms of this Award Agreement (“Performance Restricted Stock”), on the terms and conditions set forth herein and in the Plan.
3. Terms of Award .
(a) Escrow of Shares . A certificate or book-entry registration representing the Performance Restricted Stock shall be issued in the name of the Participant and shall be escrowed with the Secretary of the Company (the “Escrow Agent”) subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Award Agreement.
(b) Vesting . Except as provided in this Section 3, if the Participant’s Date of Termination has not occurred as of the vesting dates specified below (the “Vesting Dates”), then, the Participant shall be entitled, subject to the applicable provisions of the Plan and this Award Agreement having been satisfied, to receive on or within a reasonable time after the applicable Vesting Dates the number of shares of Common Stock as described in the following schedule. Once vested pursuant to the terms of this Award Agreement, the Performance Restricted Stock shall be deemed “Vested Stock.”

Vesting Schedule
If the Performance Goal (specified in attached Schedule A) for the Performance Period (specified in attached Schedule A) is attained and certified, then the Award will vest in four (4) separate installments as follows:
(i) twenty-five percent (25%) (or %%SHARES_Period1%-% ) of the Restricted Shares will vest upon the completion of the Performance Period and the Vested Stock will be released within a reasonable time following the Committee’s certification of the Company’s attainment of the Performance Goal;
(ii) 25% (or %%SHARES_Period2%-% ) of the Restricted Shares will vest, and the Vested Stock will be released, on %%Vest_DATE_PERIOD2%-% ;
(iii) 25% (or %%SHARES_Period3%-% ) of the Restricted Shares will vest, and the Vested Stock will be released, on %%Vest_DATE_PERIOD3%-% ; and
(iv) the remaining 25% (or %%SHARES_Period4%-% ) of the Restricted Shares will vest, and the Vested Stock will be released, on %%Vest_DATE_PERIOD4%-% .
Notwithstanding the foregoing, no fractional shares of Common Stock shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Award Agreement shall be aggregated, and any such aggregated shares will vest, and the Vested Stock will be released, at the time provided in (3)(b)(iv) above.
Except as otherwise provided in Section 3(c) below, none of the shares subject to this Award shall vest should the Company fail to attain the Performance Goal for the Performance Period. Except to the extent that an Award has previously vested pursuant to Section 3(c) below, this Award shall terminate in its entirety and shall not vest should the Company fail to attain the Performance Goal for the Performance Period.
(c) Change in Control Event or Death or Disability . Notwithstanding any provision to the contrary in this Award Agreement, a Participant shall become fully and immediately vested in the Award in the event of the Participant’s death or the occurrence of a Change in Control Event, without regard to attainment or certification of the Performance Goal. In the event of the Participant’s death or the occurrence of a Change in Control Event, the Vested Stock will be released within a reasonable time thereafter. If the Participant’s Date of Termination occurs by reason of disability, the Committee may, in its sole and absolute discretion, elect to vest all or a portion of the unvested Performance Restricted Stock upon the Participant’s Date of Termination and the Vested Stock will be released within a reasonable time thereafter.

(d) Termination of Employment . The Participant shall forfeit the unvested portion of the Award (including the underlying Performance Restricted Stock and Accrued Dividends) upon the occurrence of the Participant’s Date of Termination unless the Performance Goal is attained and certified and the Award becomes vested under the circumstances described below.
(i) If the Participant’s Date of Termination occurs under circumstances in which the Participant is entitled to a severance payment from the Company, a Subsidiary, or an Affiliated Entity under (1) the Participant’s employment agreement or severance agreement with the Company due to a termination of the Participant’s employment by the Company without “cause” or by the Participant for “good reason” in accordance with the Participant’s employment agreement or severance agreement or (2) the Devon Energy Corporation Severance Plan, and if the Participant signs and returns to the Company a release of claims against the Company in a form prepared by the Company (the “Release”) and such Release becomes effective, the Performance Restricted Stock shall be treated as vested as of the Participant’s Date of Termination, provided the Date of Termination occurs after the Performance Goal is attained and certified, and the Performance Restricted Stock shall be released within a reasonable time thereafter. If the Participant’s Date of Termination occurs before the Performance Goal is attained and certified, the Performance Restricted Stock shall be treated as vested as of the certification of attainment of the Performance Goal, and the Performance Restricted Stock, if vested, shall be released within a reasonable time thereafter. Notwithstanding the foregoing, if the Performance Goal is not attained and certified, or if Participant fails to sign and return the Release to the Company or revokes the Release prior to the date the Release becomes effective, then the unvested shares of Performance Restricted Stock subject to this Award Agreement shall not vest pursuant to this Section 3(d)(i) and shall be forfeited.
(ii) If a Participant’s Date of Termination occurs by reason of Normal Retirement Date, Early Retirement Date, or other special circumstances (as determined by the Committee), and the Committee determines, in its sole and absolute discretion, that the Performance Restricted Stock shall continue to vest following the Participant’s Date of Termination, the Performance Restricted Stock shall continue to vest after the Participant’s Date of Termination in accordance with the Vesting Schedule in Section 3(b) above and the Performance Restricted Stock shall be released within a reasonable time after the applicable Vesting Date; provided that, if the Participant is Retirement Eligible, the Participant shall, subject to the satisfaction of the conditions in Section 16, be eligible to vest in accordance with the Vesting Schedule above in Section 3(b), in the installments of Performance Restricted Stock that remain unvested on the Date of Termination as follows:

Age at Retirement	  	Percentage of each Unvested Installment of
Performance Restricted Stock Eligible to
be Earned by the Participant	
54 and earlier	  	 	 	0	%	
55	  	 	 	60	%	
56	  	 	 	65	%	
57	  	 	 	70	%	
58	  	 	 	75	%	
59	  	 	 	80	%	
60 and beyond	  	 	 	100	%	

(e) Voting Rights and Dividends . The Participant shall not have voting rights attributable to the shares of Performance Restricted Stock prior to the completion of the Performance Period and the Committee’s certification of the Company’s attainment of the Performance Goal. Any dividends declared and paid by the Company with respect to shares of Performance Restricted Stock prior to the Committee’s certification of the attainment of the Performance Goal (the “Accrued Dividends”) shall not be paid to the Participant until and unless the Committee certifies the attainment of the Performance Goal. Any such Accrued Dividends shall be forfeited if the Award is terminated because the Performance Goal is not attained. If the Performance Goal is attained and certified, the Accrued Dividends shall be paid to the Participant within a reasonable time thereafter and any dividends or other distributions (in cash or other property, but excluding extraordinary dividends) that are declared and/or paid with respect to the shares of Performance Restricted Stock shall be paid to the Participant on a current basis. Any extraordinary dividends ( i.e., special or nonrecurring dividends in excess of the regular dividends paid by the Company), in cash or property, on Performance Restricted Stock shall not be paid until and unless the Performance Restricted Stock becomes Vested Stock.
(f) Certification of Performance Goal . Except in the event of the occurrence of a Change in Control Event, the Committee shall, as soon as practicable following the last day of the Performance Period, determine and certify, based on the Company’s financial statements for the fiscal year coincident with the Performance Period, whether the Performance Goal for the Performance Period has been attained. Such certification shall be final, conclusive and binding on the Participant, and on all other persons, to the maximum extent permitted by law.
(g) Vested Stock—Removal of Restrictions . Upon Performance Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates or book-entry registrations and the Secretary of the Company shall deliver to the Participant certificates or a Direct Registration Statement for the book-entry registration representing such Vested Stock free and clear of all restrictions, except for any applicable securities laws restrictions, together with a check in the amount of all Accrued Dividends attributed to such Vested Stock without interest thereon.
4. Legends . The shares of Performance Restricted Stock which are the subject of this Award Agreement shall be subject to the following legend:
“THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE OR BOOK-ENTRY REGISTRATION ARE SUBJECT TO AND ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN AWARD AGREEMENT DATED
%%OPTION_DATE%-% FOR THE DEVON ENERGY CORPORATION 2009 LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED JUNE 6, 2012. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE OR BOOK-ENTRY REGISTRATION IN VIOLATION OF SUCH AWARD AGREEMENT SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE AWARD AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF DEVON ENERGY CORPORATION.”
5. Delivery of Forfeited Shares . The Participant authorizes the Secretary to deliver to the Company any and all shares of Performance Restricted Stock that are forfeited under the provisions of this Award Agreement. The Participant further authorizes the Company to hold as a general obligation of the Company any Accrued Dividends and to pay the Accrued Dividends to the Participant at the time the underlying Performance Restricted Stock becomes Vested Stock.

6. Certain Corporate Changes . If any change is made to the Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all the Performance Restricted Stock granted under this Award Agreement, the Committee shall adjust, in an equitable manner and as provided in the Plan, the number and class of shares underlying the Performance Restricted Stock, the maximum number of shares for which the Award may vest, and the share price or class of Common Stock as appropriate, to reflect the effect of such event or change in the Company’s capital structure in such a way as to preserve the value of the Award.
7. Employment. Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to continue in the employ of the Company or any of its Subsidiaries or Affiliated Entities, or interfere in any way with the right to terminate the Participant’s employment at any time.
8. Nontransferability of Award . The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any Performance Restricted Stock or any interest therein in any manner whatsoever.
9. Notices . All notices or other communications relating to the Plan and this Award Agreement as it relates to the Participant shall be in writing and shall be delivered electronically, personally or mailed (U.S. mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advise the Company in writing.
10. Binding Effect and Governing Law . This Award Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan, and (ii) governed and construed under the laws of the State of Delaware.
11. Company Policies . The Participant agrees that the Award will be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors or a duly authorized committee thereof, from time to time.
12. Withholding . The Company and the Participant shall comply with all federal and state laws and regulations respecting the required withholding, deposit and payment of any income, employment or other taxes relating to the Award (including Accrued Dividends). The Company shall withhold the employer’s minimum statutory withholding based upon minimum statutory withholding rates for federal and state purposes, including payroll taxes that are applicable to such supplemental taxable income. Any payment of required withholding taxes by the Participant in the form of Common Stock shall not be permitted if it would result in an accounting charge with respect to such shares used to pay such taxes unless otherwise approved by the Committee.

13. Award Subject to Claims of Creditors . The Participant shall not have any interest in any particular assets of the Company, its parent, if applicable, or any Subsidiary or Affiliated Entity by reason of the right to earn an Award (including Accrued Dividends) under the Plan and this Award Agreement, and the Participant or any other person shall have only the rights of a general unsecured creditor of the Company, its parent, if applicable, or a Subsidiary or Affiliated Entity with respect to any rights under the Plan or this Award Agreement.
14. Captions . The captions of specific provisions of this Award Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Award Agreement or the intent of any provision hereof.
15. Counterparts . This Award Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form one agreement.
16. Conditions to Post-Retirement Vesting .
(a) Notice of and Conditions to Post-Retirement Vesting . If the Participant is Retirement Eligible, the Company shall, within a reasonable period of time prior to the Participant’s Date of Termination, notify the Participant that the Participant has the right, pursuant to this Section 16(a), to continue to vest following the Date of Termination in any unvested installments of Performance Restricted Stock (each such unvested installment, an “Installment”). The Participant shall have the right to vest in such Installments of Performance Restricted Stock, provided that the Participant executes and delivers to the Company, with respect to each such Installment, the following documentation: (i) a non-disclosure letter agreement, in the form attached as Exhibit A, (a “Non-Disclosure Agreement”) on or before January 1 of the year in which such Installment vests pursuant to the Vesting Schedule (or, with respect to the calendar year in which the Date of Termination occurs, on or before the Date of Termination), and (ii) a compliance certificate, in the form attached as Exhibit B, (a “Compliance Certificate”) indicating the Participant’s full compliance with the Non-Disclosure Agreement on or before November 1 of the year in which such Installment vests pursuant to the Vesting Schedule.
(b) Consequences of Failure to Satisfy Vesting Conditions . In the event that, with respect to any given Installment, the Participant fails to deliver either the respective Non-Disclosure Agreement or Compliance Certificate for such Installment on or before the date required for the delivery of such document (such failure, a “Non-Compliance Event”), the Participant shall not be entitled to vest in any unvested Installments that would vest from and after the date of the Non-Compliance Event and the Company shall be authorized to take any and all such actions as are necessary to cause such unvested Performance Restricted Stock to not vest and to terminate. The only remedy of the Company for failure to deliver a Non-Disclosure Agreement or a Compliance Certificate shall be the failure to vest in, and cancellation of, any unvested Installments then held by the Participant.
17. Definitions . Words, terms or phrases used in this Award Agreement shall have the meaning set forth in this Section 17. Capitalized terms used in this Award Agreement but not defined herein shall have the meaning designated in the Plan.
(a) “ Accrued Dividends ” has the meaning set forth in Section 3(e).
(b) “ Award ” has the meaning set forth in Section 2.

(c) “ Award Agreement ” has the meaning set forth in the preamble.
(d) “ Company ” has the meaning set forth on the Cover Page.
(e) “ Compliance Certificate ” has the meaning set forth in Section 16(a).
(f) “ Date of Grant ” has the meaning set forth in the preamble.
(g) “ Date of Termination ” means the first day occurring on or after the Date of Grant on which the Participant is not employed by the Company, a Subsidiary, or an Affiliated Entity regardless of the reason for the termination of employment; provided, however, that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company, a Subsidiary, and an Affiliated Entity or between two Subsidiaries or two Affiliated Entities. The Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company, a Subsidiary, or an Affiliated Entity approved by the Participant’s employer pursuant to Company policies. If, as a result of a sale or other transaction, the Participant’s employer ceases to be either a Subsidiary or an Affiliated Entity, and the Participant is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a Subsidiary or Affiliated Entity, then the date of occurrence of such transaction shall be treated as the Participant’s Date of Termination.
(h) “ Early Retirement Date ” means, with respect to the Participant, the first day of a month that occurs on or after the date the Participant (i) attains age 55 and (ii) earns at least 10 Years of Service.
(i) “ Escrow Agent ” has the meaning set forth in Section 3(a).
(j) “ Installment ” has the meaning set forth in Section 16(a).
(k) “ Non-Compliance Event” has the meaning set forth in Section 16(b).
(l) “ Non-Disclosure Agreement ” has the meaning set forth in Section 16(a).
(m) “ Normal Retirement Date ” means, with respect to the Participant, the first day of a month that occurs on or after the date the Participant attains age 65.
(n) “ Participant ” has the meaning set forth in the preamble.
(o) “ Plan ” has the meaning set forth in the preamble.
(p) “ Performance Restricted Stock ” has the meaning set forth in the preamble and Section 2.
(q) “ Retirement Eligible ” means the Participant’s Date of Termination occurs (i) by reason of the Participant’s retirement and (ii) on or after the Participant’s Early Retirement Date.

(r) “ Vested Stock ” has the meaning set forth in Section 3(b).
(s) “ Vesting Date ” has the meaning set forth in Section 3(b).
(t) “ Year of Service ” means a calendar year in which the Participant is employed with the Company, a Subsidiary or Affiliated Entity for at least nine months of a calendar year. When calculating Years of Service hereunder, Participant’s first hire date with the Company, a Subsidiary or Affiliated Entity shall be used.

“COMPANY”	  	DEVON ENERGY CORPORATION	
	  	a Delaware corporation	
		
“PARTICIPANT”	  	%%FIRST_NAME%-% %%MIDDLE_NAME%-%	
	  	%%LAST_NAME%-%	
	  	%%ADDRESS_LINE1%-%	
	  	%%ADDRESS_LINE2%-%	
	  	%%CITY%-%, %%STATE%-%, %%ZIPECODE%-%	
	  	ID «ID»	

 

SCHEDULE A
PERFORMANCE PERIOD AND PERFORMANCE GOAL
1. Performance Period . The measurement period for the Performance Goal shall be the period beginning January 1, 2013 and ending December 31, 2013 (the “Performance Period”).
2. Performance Goal . The Performance Goal is based on the Company’s cash flow before balance sheet changes. Vesting will be based on the Company’s achievement of $3.5 billion in cash flow before balance sheet changes during the Performance Period and the Committee’s certification of the attainment of the Performance Goal.
3. Certification of Performance Goal . Except in the event of the occurrence of a Change in Control Event, the Committee shall, as soon as practicable following the last day of the Performance Period, determine and certify, based on the Company’s financial statements for the fiscal year coincident with the Performance Period, whether the Performance Goal for the Performance Period has been attained. Such certification shall be final, conclusive and binding on the Participant, and on all other persons, to the maximum extent permitted by law.
4. Maximum Award . The maximum number of shares of Performance Restricted Stock that may become earned and vested pursuant to this Award is %%TOTAL_SHARES_GRANTED%-% .

EXHIBIT A
Form of Non-Disclosure Agreement
[Insert Date]
Devon Energy Corporation
333 West Sheridan Avenue
Oklahoma City, OK 73102-5010
 
 	Re:	Non-Disclosure Agreement	
Ladies and Gentlemen:
This letter agreement is entered between Devon Energy Corporation (together with its subsidiaries and affiliates, the “Company”) and the undersigned (the “Participant”) in connection with that certain Performance Restricted Stock Award Agreement (the “Agreement”) dated                     , 20     between the Company and the Participant. All capitalized terms used in this letter agreement shall have the same meaning ascribed to them in the Agreement unless specifically denoted otherwise.
The Participant acknowledges that, during the course of and in connection with the employment relationship between the Participant and the Company, the Company provided and the Participant accepted access to the Company’s trade secrets and confidential and proprietary information, which included, without limitation, information pertaining to the Company’s finances, oil and gas properties and prospects, compensation structures, business and litigation strategies and future business plans and other information or material that is of special and unique value to the Company and that the Company maintains as confidential and does not disclose to the general public, whether through its annual report and/or filings with the Securities and Exchange Commission or otherwise (the “Confidential Information”).
The Participant acknowledges that his position with the Company was one of trust and confidence because of the access to the Confidential Information, requiring the Participant’s best efforts and utmost diligence to protect and maintain the confidentiality of the Confidential Information. Unless required by the Company or with the Company’s express written consent, the Participant will not, during the term of this letter agreement, directly or indirectly, disclose to others or use for his own benefit or the benefit of another any of the Confidential Information, whether or not the Confidential Information is acquired, learned, attained or developed by the Participant alone or in conjunction with others.
The Participant agrees that, due to his access to the Confidential Information, the Participant would inevitably use and/or disclose that Confidential Information in breach of his confidentiality and non-disclosure obligations if the Participant worked in certain capacities or engaged in certain activities for a period of time following his employment with the Company, specifically in a position that involves (i) responsibility and decision-making authority or input at the executive level regarding any subject or responsibility, (ii) decision-making responsibility or input at any management level in the Participant’s individual area of assignment with the Company, or (iii) responsibility and decision-making authority or input that otherwise allows the use of the Confidential Information (collectively referred to as the “Restricted Occupation”). Therefore, except with the prior written consent of the Company,

during the term of this letter agreement, the Participant agrees not to be employed by, consult for or otherwise act on behalf of any person or entity in any capacity in which he would be involved, directly or indirectly, in a Restricted Occupation. The Participant acknowledges that this commitment is intended to protect the Confidential Information and is not intended to be applied or interpreted as a covenant against competition.
The Participant further agrees that during the term of this letter agreement, the Participant will not, directly or indirectly on behalf of a person or entity or otherwise, (i) solicit any of the established customers of the Company or attempt to induce any of the established customers of the Company to cease doing business with the Company, or (ii) solicit any of the employees of the Company to cease employment with the Company.
This letter agreement shall become effective upon execution by the Participant and the Company and shall terminate on December 31, 20    . [Note: Insert date that is the end of the calendar year of the letter agreement.]
If you agree to the above terms and conditions, please execute a copy of this letter agreement below and return a copy to me.

“PARTICIPANT”	

[Name of Participant]	
THE UNDERSIGNED HEREBY ACCEPTS AND AGREES TO THE TERMS SET FORTH ABOVE AS OF THIS              DAY OF                     ,     .

“COMPANY”	
	
DEVON ENERGY CORPORATION	

By:	 	 	
			
Name:	 	 	
			
Title:	 	 	

EXHIBIT B
Form of Compliance Certificate
I hereby certify that I am in full compliance with the covenants contained in that certain letter agreement (the “Agreement”) dated as of                     ,          between Devon Energy Corporation and me and have been in full compliance with such covenants at all times during the period ending October 31,         .

[Name of Participant]	
Dated:                                         

Exhibit 10.17

 
 
NOTICE OF GRANT OF PERFORMANCE SHARE UNIT AWARD
AND AWARD AGREEMENT

 
			
%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%	    	Award Number:	
%%OPTION_NUMBER%-%	    		
%%ADDRESS_LINE_1%-%	    	Plan:     %%EQUITY_PLAN%-%	
%%ADDRESS_LINE_2%-%	    	ID:     %%EMPLOYEE_IDENTIFIER%-%	
%%CITY%-%, %%STATE%-%, %%ZIPCODE%-%	    		

Effective %%OPTION_DATE%-% , you have been granted a target award of %%TOTAL_SHARES_GRANTED%-% Performance Share Units (“Award”) under the Devon Energy Corporation 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012. Each Performance Share Unit that vests entitles you to one share of Devon Energy Corporation (the “Company”) Common Stock. The vesting of these Performance Share Units is determined pursuant to the following two-step process: (i) first, the maximum number of Performance Share Units in which you can vest shall be calculated based upon the Company’s Total Shareholder Return (“TSR”) over the three-year Performance Period that begins January 1, 2013 and ends December 31, 2015 (the “Performance Period”), (ii) then, if the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the aggregate number of Performance Share Units calculated under clause (i) exceeds the Payout Value Limit described on Schedule A, the number of Performance Share Units calculated under clause (i) shall be reduced so that the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the total number of vested Performance Share Units is equal to the Payout Value Limit. The maximum number of Performance Share Units that you can earn based on clause (i) during the Performance Period will be calculated as follows: %%TOTAL_SHARES_GRANTED%-% x 200%, with actual payout based on the performance level achieved by the Company with respect to the Performance Goal set forth on Schedule A.
This Award also entitles you to be paid Dividend Equivalents as set forth in the Award Agreement.

By accepting this agreement online, you and the Company agree that this award is granted under and governed by the terms and conditions of the Company’s 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012, and the Award Agreement, both of which are attached and made a part of this document.

DEVON ENERGY CORPORATION
2009 LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE UNIT AGREEMENT
THIS PERFORMANCE SHARE UNIT AWARD AGREEMENT (the “Award Agreement”) is entered into as of %%OPTION_DATE%-% (the “Date of Grant”), by and between Devon Energy Corporation, a Delaware corporation (the “Company”) and %%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-% (the “Participant”);
W I T N E S S E T H:
WHEREAS, the Devon Energy Corporation 2009 Long-Term Incentive Plan, as amended and restated June 6, 2012 (the “Plan”) permits the grant of Performance Units (hereinafter referred to as “Performance Share Units”) to employees, officers and non-employee directors of the Company and its Subsidiaries and Affiliated Entities, in accordance with the terms and provisions of the Plan; and
WHEREAS, in connection with the Participant’s employment with the Company, the Company desires to award to the Participant %%TOTAL_SHARES_GRANTED%-% Performance Share Units subject to the terms and conditions of this Award Agreement and the Plan; and
WHEREAS, the Performance Share Units granted pursuant to this Award Agreement shall vest based on the following two-step process: (i) first, the maximum number of Performance Share Units in which Participant can vest shall be calculated based on the attainment and certification of the Performance Goal described on Schedule A as of the end of a Performance Period, (ii) then, if the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the aggregate number of Performance Share Units calculated under clause (i) exceeds the Payout Value Limit described on Schedule A, the number of Performance Share Units calculated under clause (i) shall be reduced so that the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the total number of vested Performance Share Units is equal to the Payout Value Limit; and
NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows:
1. The Plan . The Plan, a copy of which is attached hereto, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Award Agreement shall govern the rights of the Participant and the Company with respect to the Award.
2. Grant of Award . The Company hereby grants to the Participant a target award (the “Award”) of %%TOTAL_
SHARES_GRANTED%-% Performance Share Units, on the terms and conditions set forth herein and in the Plan. Each Performance Share Unit that vests entitles the Participant to one share of Common Stock.

3. Terms of Award .
(a) Performance Share Unit Account . The Company shall establish a bookkeeping account on its records for the Participant and shall credit the Participant’s Performance Share Units to the bookkeeping account.
(b) General Vesting Terms . Except as provided in this Section 3, the number of Performance Share Units which actually vest under this Agreement shall be determined pursuant to the following two-step process: (i) first, the maximum number of Performance Share Units in which Participant can vest shall be calculated based on the attainment and certification of the Performance Goal described on Schedule A as of the end of a Performance Period, (ii) then, if the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the aggregate number of Performance Share Units calculated under clause (i) exceeds the Payout Value Limit described on Schedule A, the number of Units calculated under clause (i) shall be reduced so that the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the total number of vested Performance Share Units is equal to the Payout Value Limit. Any Performance Share Units that do not vest under the foregoing two-step process as of the end of a Performance Period shall be forfeited as of the end of the Performance Period. Except as specifically provided below in this Section 3, in the event of a termination of the Participant’s employment prior to the end of a Performance Period, all unvested Performance Share Units will be immediately forfeited.
(c) If a Participant’s Date of Termination occurs by reason of disability, Normal Retirement Date, Early Retirement Date, or other special circumstances (as determined by the Committee), and the Committee determines, in its sole and absolute discretion, that the Performance Share Units shall continue to vest following the Participant’s Date of Termination, the Participant shall vest in the maximum number of Performance Share Units in which the Participant could vest, based on the two-step process described in Section 3(b), as if the Participant remained in the employ of the Company through the end of the Performance Period, provided that, if the Participant is Retirement Eligible, such continued vesting shall be subject to the satisfaction of the conditions in Section 15 (except in the case of the Participant’s disability).
(d) Performance Share Units shall continue to vest and the Participant shall vest in the maximum number of Performance Share Units in which the Participant could vest, based on the two-step process described in Section 3(b), as if the Participant remained in the employ of the Company through the end of the Performance Period following the Participant’s Date of Termination that occurs under circumstances in which the Participant is entitled to a severance payment from the Company, a Subsidiary, or an Affiliated Entity under (A) the Participant’s employment agreement or severance agreement with the Company due to a termination of the Participant’s employment by the Company without “cause” or by the Participant for “good reason” in accordance with the Participant’s employment agreement or severance agreement or (B) the Devon Energy Corporation Severance Plan, provided that for a severance related termination, the Participant signs and returns to the Company a release of claims against the Company in a form prepared by the Company (the “Release”) and such Release becomes effective. If the Participant fails to sign and return the Release to the Company or revokes the Release prior to the date the Release becomes effective, the Performance Share Units (and Dividend Equivalents) subject to this Award Agreement shall be forfeited.

(e) A Participant shall become fully and immediately vested in the Award at the target level of performance for the Performance Period in the event of (1) the Participant’s death or (2) the occurrence of a Change in Control Event.
(f) Voting Rights and Dividend Equivalents . The Participant shall not have any voting rights with respect to the Performance Share Units. The Participant shall be credited with dividend equivalents (“Dividend Equivalents”) with respect to each outstanding Performance Share Unit to the extent that any dividends or other distributions (in cash or other property) are declared and/or paid with respect to the shares of Common Stock after the commencement of the Performance Period (other than distributions pursuant to a share split, for which an adjustment shall be made as described in Section 4 below). Dividend Equivalents shall be credited to the bookkeeping account established on the records of the Company for the Participant and will vest and be paid in cash to the Participant at the same time, and subject to the same conditions, as are applicable to the underlying Performance Share Units. Accordingly, Dividend Equivalents shall be forfeited to the extent that the Performance Share Units do not vest and are forfeited or cancelled. No interest shall be credited on Dividend Equivalents.
(g) Conversion of Performance Share Units; Delivery of Performance Share Units .
(i) Except in the event of the Participant’s death or the occurrence of a Change in Control Event, the Committee shall, within a reasonably practicable time following the last day of the Performance Period, certify the extent, if any, to which the Performance Goal has been achieved with respect to the Performance Period and the number of Performance Share Units, if any, earned upon attainment of the Performance Goal, as reduced by the Payout Value Limit, if applicable. Such certification shall be final, conclusive and binding on the Participant, and on all other persons, to the maximum extent permitted by law. Payment in respect of vested Performance Share Units and Dividend Equivalents shall be made promptly following the Committee’s certification of the attainment of the Performance Goal and the determination of the number of vested Performance Share Units, but in any event, no later than March 15 of the year following the year in which the Performance Period ends.
(ii) In the event of the Participant’s death or the occurrence of a Change in Control Event, payment in respect of earned and vested Performance Share Units shall be made as soon as reasonably practicable thereafter.
(iii) Notwithstanding any provision of this Award Agreement to the contrary, in no event shall the timing of the Participant’s execution of the Compliance Certificate, directly or indirectly, result in the Participant designating the calendar year of payment, and if a payment that is subject to execution of the Compliance Certificate could be made in more than one taxable year, payment shall be made in the later taxable year.
(iv) All payments in respect of earned and vested Performance Share Units shall be made in freely transferable shares of Common Stock. No fractional shares of Common Stock shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Award Agreement shall be rounded down to the next whole share.

4. Certain Corporate Changes . If any change is made to the Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all the Performance Share Units granted under this Award Agreement, the Committee shall adjust, in an equitable manner and as provided in the Plan, the number and class of shares underlying the Performance Share Units, the maximum number of shares for which the Performance Share Units may vest, and the share price or class of Common Stock for purposes of the Performance Goal, as appropriate, to reflect the effect of such event or change in the Company’s capital structure in such a way as to preserve the value of the Performance Share Units. Any adjustment that occurs under the terms of this Section 4 or the Plan will not change the timing or form of payment with respect to any Performance Share Units except as permitted in accordance with section 409A of the Code.
5. Employment . Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to continue in the employ of the Company or any of its Subsidiaries or Affiliated Entities, or interfere in any way with the right to terminate the Participant’s employment at any time.
6. Nontransferability of Award . The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any Performance Share Unit or any interest therein in any manner whatsoever.
7. Notices . All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing and shall be delivered personally or mailed (U.S. mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advise the Company in writing.
8. Binding Effect and Governing Law . This Award Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan, and (ii) governed and construed under the laws of the State of Delaware.
9. Company Policies . The Participant agrees that the Award will be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company’s Board of Directors or a duly authorized committee thereof, from time to time.
10. Withholding . The Company and the Participant shall comply with all federal and state laws and regulations respecting the required withholding, deposit and payment of any income, employment or other taxes relating to the Award (including Dividend Equivalents). The Company shall withhold the employer’s minimum statutory withholding based upon minimum statutory withholding rates for federal and state purposes, including payroll taxes, that are applicable to such supplemental taxable income. Any payment of required withholding taxes by the Participant in the form of Common Stock shall not be permitted if it would result in an accounting charge with respect to such shares used to pay such taxes unless otherwise approved by the Committee.

11. Award Subject to Claims of Creditors . The Participant shall not have any interest in any particular assets of the Company, its parent, if applicable, or any Subsidiary or Affiliated Entity by reason of the right to earn an Award (including Dividend Equivalents) under the Plan and this Award Agreement, and the Participant or any other person shall have only the rights of a general unsecured creditor of the Company, its parent, if applicable, or a Subsidiary or Affiliated Entity with respect to any rights under the Plan or this Award Agreement.
12. Compliance with Section 409A . This Award is intended to comply with the applicable requirements of section 409A of the Code and shall be administered in accordance with section 409A of the Code. Notwithstanding anything in this Award Agreement to the contrary, if the Performance Share Units constitute “deferred compensation” under section 409A of the Code and any Performance Share Units become payable pursuant to the Participant’s termination of employment, settlement of the Performance Share Units shall be delayed for a period of six months after the Participant’s termination of employment if the Participant is a “specified employee” as defined under section 409A of the Code and if required pursuant to section 409A of the Code. If settlement of the Performance Share Units is delayed, the Performance Share Units shall be settled within 30 days of the date that is the six-month anniversary of the Participant’s termination of employment. If the Participant dies during the six-month delay, the Performance Share Units shall be settled in accordance with the Participant’s will or under the applicable laws of descent and distribution. Notwithstanding any provision to the contrary herein, distributions made with respect to this Award may only be made in a manner and upon an event permitted by section 409A of the Code, and all payments to be made upon a termination of employment hereunder may only be made upon a “separation from service” as defined under section 409A of the Code. To the extent that any provision of the Award Agreement would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of the Performance Share Units to fail to satisfy the requirements of section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law. In no event shall a Participant, directly or indirectly, designate the calendar year of payment. This Award Agreement may be amended without the consent of the Participant in any respect deemed by the Board of Directors or its delegate to be necessary in order to preserve compliance with section 409A of the Code.
13. Captions . The captions of specific provisions of this Award Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Award Agreement or the intent of any provision hereof.
14. Counterparts . This Award Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form one agreement.
15. Conditions to Post-Retirement Vesting .
(a) Notice of and Conditions to Post-Retirement Vesting . If the Participant is Retirement Eligible, the Company shall, within a reasonable period of time prior to the Participant’s Date of Termination, notify the Participant that the Participant has the right, pursuant to this Section 15(a), to continue to vest following the Date of Termination in any unvested Performance Share Units provided that the Participant executes and delivers to the Company the following documentation: (i) a non-disclosure letter agreement, in the form attached as Exhibit A,(a “Non-Disclosure Agreement”), on or before the Date of Termination, and (ii) a compliance certificate, in the form attached as Exhibit B, (a “Compliance Certificate”), indicating the Participant’s full compliance with the Non-Disclosure Agreement, no later than the time(s) required by the Committee.

(b) Consequences of Failure to Satisfy Vesting Conditions . In the event that, the Participant fails to deliver either the respective Non-Disclosure Agreement or Compliance Certificate on or before the date required for the delivery of such document (such failure, a “Non-Compliance Event”), the Participant shall not be entitled to vest in any unvested Performance Share Units and the unvested Performance Share Units subject to this Award Agreement shall be forfeited. The only remedy of the Company for failure to deliver a Non-Disclosure Agreement or a Compliance Certificate shall be the Participant’s failure to vest in, and forfeiture of, any unvested Performance Share Units.
16. Definitions . Words, terms or phrases used in this Award Agreement shall have the meaning set forth in this Section 16. Capitalized terms used in this Award Agreement but not defined herein shall have the meaning designated in the Plan.
(a) “ Award ” has the meaning set forth in Section 2.
(b) “ Award Agreement ” has the meaning set forth in the preamble.
(c) “ Company ” has the meaning set forth on the Cover Page.
(d) “ Compliance Certificate ” has the meaning set forth in Section 15(a).
(e) “ Date of Grant ” has the meaning set forth in the preamble.
(f) “ Date of Termination ” means the first day occurring on or after the Date of Grant on which the Participant is not employed by the Company, a Subsidiary, or an Affiliated Entity, regardless of the reason for the termination of employment; provided, however, that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company, a Subsidiary, and an Affiliated Entity or between two Subsidiaries or two Affiliated Entities. The Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company, a Subsidiary, or an Affiliated Entity approved by the Participant’s employer pursuant to Company policies. If, as a result of a sale or other transaction, the Participant’s employer ceases to be either a Subsidiary or an Affiliated Entity, and the Participant is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a Subsidiary or Affiliated Entity, then the date of occurrence of such transaction shall be treated as the Participant’s Date of Termination.
(g) “ Dividend Equivalent ” has the meaning set forth in Section 3(f).
(h) “ Early Retirement Date ” means, with respect to the Participant, the first day of a month that occurs on or after the date the Participant (i) attains age 55 and (ii) earns at least 10 Years of Service.
(i) “ Non-Compliance Event ” has the meaning set forth in Section 15(b).

(j) “ Non-Disclosure Agreement ” has the meaning set forth in Section 15(a).
(k) “ Normal Retirement Date ” means, with respect to the Participant, the first day of a month that occurs on or after the date the Participant attains age 65.
(l) “ Participant ” has the meaning set forth in the preamble.
(m) “ Payout Value Limit ” has the meaning set forth in Section 4 of Schedule A.
(n) “ Performance Goal ” shall mean the performance goal specified on Schedule A which must be attained and certified in order to satisfy the first step of the 2-step process for vesting in the shares of Common Stock subject to this Award.
(o) “ Performance Period ” has the meaning set forth on the Cover Page and Schedule A over which the attainment of the Performance Goal is to be measured.
(p) “ Performance Share Unit ” the meaning set forth in the preamble.
(q) “ Plan ” has the meaning set forth in the preamble.
(r) “ Retirement Eligible ” means the Participant’s Date of Termination occurs on or after the Participant’s Early Retirement Date or Normal Retirement Date.
(s) “ Year of Service ” means a calendar year in which the Participant is employed with the Company, a Subsidiary or Affiliated Entity for at least nine months of a calendar year. When calculating Years of Service hereunder, Participant’s first hire date with the Company, a Subsidiary or Affiliated Entity shall be used.

“COMPANY”	  	DEVON ENERGY CORPORATION,	
	  	a Delaware corporation	
		
“PARTICIPANT”	  	%%FIRST_NAME%-% %%MIDDLE_NAME%-%	
	  	%%LAST_NAME%-%	
	  	%%ADDRESS_LINE_1%-%	
	  	%%ADDRESS_LINE_2%-%	
	  	%%CITY%-%, %%STATE%-%, %%ZIPCODE%-%	
	  	ID %%EMPLOYEE_IDENTIFIER%-%	

Exhibit 10.17
SCHEDULE A
PERFORMANCE GOAL, PERFORMANCE PERIOD AND PAYOUT VALUE LIMIT
1. Performance Period . The maximum number of Performance Share Units in which Participant can vest pursuant to the Award shall be calculated based on the Performance Goal over a three-year Performance Period that begins January 1, 2013 and ends December 31, 2015 (the “Performance Period”).
2. Performance Goal . The Performance Goal is based on total shareholder return (“TSR”). TSR shall mean the rate of return stockholders receive through stock price changes and the assumed reinvestment of dividends over the Performance Period. Vesting will be based on the Company’s TSR ranking relative to the TSR ranking of the Peer Companies (identified in Section 3(d) below). At the end of the Performance Period, the TSR for the Company, and for each Peer Company, shall be determined pursuant to the following formula:
TSR = (Closing Average Share Value – Opening Average Share Value) + Reinvested Dividends
Opening Average Share Value
The result shall be rounded to the nearest hundredth of one percent (.01%).
(a) The term “Closing Average Share Value” means the average value of the common stock for the 30 trading days ending on the last day of the Performance Period, which shall be calculated as follows: (i) determine the closing price of the common stock on each trading date during 30-day period and (ii) average the amounts so determined for the 30-day period.
(b) The term “Opening Average Share Value” means the average value of the common stock for the 30 trading days preceding the start of the Performance Period, which shall be calculated as follows: (i) determine the closing price of the common stock on each trading date during the 30-day period and (ii) average the amounts so determined for the 30-day period.
(c) “Reinvested Dividends” shall be calculated by multiplying (i) the aggregate number of shares (including fractional shares) that could have been purchased during the Performance Period had each cash dividend paid on a single share during that period been immediately reinvested in additional shares (or fractional shares) at the closing selling price per share on the applicable dividend payment date by (ii) the average daily closing price per share calculated for the duration of the Performance Period following the dividend payment date.
(d) Each of the foregoing amounts shall be equitably adjusted for stock splits, stock dividends, recapitalizations and other similar events affecting the shares in question without the issuer’s receipt of consideration.
3. Vesting Schedule . The Performance Share Units will vest pursuant to the Award, subject to application of the Payout Value Limit described in Section 4 below, based on the Company’s relative TSR ranking in respect of the Performance Period as compared to the TSR ranking of the Peer Companies, in accordance with the following schedule:

						
Devon Energy Corporation
Relative TSR Ranking	  	Vesting
(Percentage of Target  Award)	
1-3	  	200%	
4	  	180%	
5	  	160%	
6	  	140%	
7	  	120%	
8	  	100%	
9	  	85%  	
10	  	70%  	
11	  	60%  	
12	  	50%  	
13-15	  	0%    	
(a) The maximum number of Performance Share Units that can vest for each Performance Period may range from 0% to 200% of the target Award, with the actual percentage to be determined on the basis of the percentile level at which the Committee certifies that the Performance Goal has been attained in relation to the corresponding Performance Goal for Peer Companies for the Performance Period; provided however, that the maximum number of Performance Share Units that may become earned and vested during each Performance Period will be calculated as follows: %%TOTAL_SHARES_GRANTED%-% × 200%. The Committee retains sole discretion to reduce the vesting percentage (and thus the maximum number of Performance Share Units that may vest), including reduction to zero, without regard to the performance of the Company’s TSR relative to the TSR of the Peer Companies. In addition, vesting of Performance Share Units shall be subject to the Payout Value Limit described in Section 4 below.
(b) If the Company’s final TSR value is equal to the TSR value of a Peer Company, the Committee shall assign the Company the higher ranking.
(c) In addition to the Company, the Peer Companies are Anadarko Petroleum Corporation, Apache Corporation, Chesapeake Energy Corporation, Newfield Exploration Company, ConocoPhillips, EnCana Corporation, EOG Resources, Inc., Hess Corporation, Marathon Oil Corporation, Murphy Oil Corporation, Noble Energy, Inc., Occidental Petroleum Corporation, Pioneer Natural Resources Company, and Talisman Energy, Inc.
(d) The Peer Companies will be subject to change as follows:
(i) In the event of a merger, acquisition or business combination transaction of a Peer Company, in which the Peer Company is the surviving entity and remains publicly traded, the surviving entity shall remain a Peer Company. Any entity involved in the transaction that is not the surviving company shall no longer be a Peer Company.
(ii) If a Peer Company ceases to be a publicly traded company at any time during the Performance Period, for any reason, such company shall remain a Peer Company but shall be deemed to have a TSR of negative 100% (-100%).

4. Reduction . If the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the aggregate number of Performance Share Units that vest pursuant to the Award based on Sections 1-3 of this Schedule A exceeds the Payout Value Limit, then the maximum number of vested Performance Share Units calculated under Sections 1-3 of this Schedule A shall be reduced so that the value (based on the fair market value of a share of Common Stock on the last day of the Performance Period) of the total number of Performance Share Units that vest pursuant to the Award is equal to the Payout Value Limit. The “Payout Value Limit” shall be equal to the product of (a) the fair market value of a share of Common Stock on the first day of the Performance Period, times (b) the target number of Units subject to the Award, times (c) four.
5. General Vesting Terms . Any fractional Performance Share Unit resulting from the vesting of the Performance Share Units in accordance with the Award Agreement shall be rounded down to the nearest whole number. Any portion of the Performance Share Units that does not vest as of the end of the Performance Period shall be forfeited as of the end of the Performance Period.

Exhibit 10.17
EXHIBIT A
Form of Non-Disclosure Agreement
[Insert Date]
Devon Energy Corporation
333 West Sheridan Avenue
Oklahoma City, OK 73102-5010
 
 	Re:	Non-Disclosure Agreement	
Ladies and Gentlemen:
This letter agreement is entered between Devon Energy Corporation (together with its subsidiaries and affiliates, the “Company”) and the undersigned (the “Participant”) in connection with that certain Performance Share Unit Award Agreement (the “Agreement”) dated                 ,          between the Company and the Participant. All capitalized terms used in this letter agreement shall have the same meaning ascribed to them in the Agreement unless specifically denoted otherwise.
The Participant acknowledges that, during the course of and in connection with the employment relationship between the Participant and the Company, the Company provided and the Participant accepted access to the Company’s trade secrets and confidential and proprietary information, which included, without limitation, information pertaining to the Company’s finances, oil and gas properties and prospects, compensation structures, business and litigation strategies and future business plans and other information or material that is of special and unique value to the Company and that the Company maintains as confidential and does not disclose to the general public, whether through its annual report and/or filings with the Securities and Exchange Commission or otherwise (the “Confidential Information”).
The Participant acknowledges that his position with the Company was one of trust and confidence because of the access to the Confidential Information, requiring the Participant’s best efforts and utmost diligence to protect and maintain the confidentiality of the Confidential Information. Unless required by the Company or with the Company’s express written consent, the Participant will not, during the term of this letter agreement, directly or indirectly, disclose to others or use for his own benefit or the benefit of another any of the Confidential Information, whether or not the Confidential Information is acquired, learned, attained or developed by the Participant alone or in conjunction with others.
The Participant agrees that, due to his access to the Confidential Information, the Participant would inevitably use and/or disclose that Confidential Information in breach of his confidentiality and non-disclosure obligations if the Participant worked in certain capacities or engaged in certain activities for a period of time following his employment with the Company, specifically in a position that involves (i) responsibility and decision-making authority or input at the executive level regarding any subject or responsibility, (ii) decision-making responsibility or input at any management level in the Participant’s individual area of assignment with the Company, or (iii) responsibility and decision-making authority or input that otherwise allows the use of the Confidential Information (collectively referred to as the “Restricted Occupation”). Therefore, except with the prior written consent of the Company,

during the term of this letter agreement, the Participant agrees not to be employed by, consult for or otherwise act on behalf of any person or entity in any capacity in which he would be involved, directly or indirectly, in a Restricted Occupation. The Participant acknowledges that this commitment is intended to protect the Confidential Information and is not intended to be applied or interpreted as a covenant against competition.
The Participant further agrees that during the term of this letter agreement, the Participant will not, directly or indirectly on behalf of a person or entity or otherwise, (i) solicit any of the established customers of the Company or attempt to induce any of the established customers of the Company to cease doing business with the Company, or (ii) solicit any of the employees of the Company to cease employment with the Company.
This letter agreement shall become effective upon execution by the Participant and the Company and shall terminate on December 31, 20    . [Note: Insert date that is the end of the 2013-2015 Performance Period.]
If you agree to the above terms and conditions, please execute a copy of this letter agreement below and return a copy to me.

“PARTICIPANT”	

[Name of Participant]	
THE UNDERSIGNED HEREBY ACCEPTS AND AGREES TO THE TERMS SET FORTH ABOVE AS OF THIS              DAY OF                     ,     .

“COMPANY”	
	
DEVON ENERGY CORPORATION	

By:	 	 	
			
Name:	 	 	
			
Title:	 	 	

Exhibit 10.17
EXHIBIT B
Form of Compliance Certificate
I hereby certify that I am in full compliance with the covenants contained in that certain letter agreement (the “Agreement”) dated as of                     ,          between Devon Energy Corporation and me and have been in full compliance with such covenants at all times during the period ending                     ,          .

[Name of Participant]	
Dated:                                         

Exhibit 10.24
AMENDMENT TO INCENTIVE STOCK OPTION AWARD AGREEMENTS
UNDER THE
DEVON ENERGY CORPORATION 2009 LONG-TERM INCENTIVE PLAN
This Amendment to Incentive Stock Option Award Agreements (“Amendment”) is entered into as of the 19 th day of December, 2012 by and between Devon Energy Corporation, a Delaware corporation (the “Company”), and J. Larry Nichols (the “Participant”).
WHEREAS, the Company and the Participant have previously entered into certain Incentive Stock Option Award Agreements under the Devon Energy Corporation 2009 Long Term Incentive Plan listed on Exhibit A (the “Agreements”), which granted to the Participant incentive stock options to purchase shares of Common Stock of the Company (the “Incentive Stock Options”) in exchange for the Participant’s performance of future services for the Company pursuant to the terms of the Agreements; and
WHEREAS, the Company and the Participant desire to amend the Agreements with respect to the vesting and exercisability of the Incentive Stock Options following the date of retirement of the Participant under certain circumstances; and
WHEREAS, Section 12.6 of the Plan permits the Compensation Committee of the Company’s Board of Directors (the “Committee”) to amend the Agreements; and
WHEREAS, the Committee has approved the amendment of the Agreements as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree that the Agreements are hereby amended as follows:
1.     Section 2 is amended to read as follows:
2. Times of Exercise of Incentive Stock Option .
(a) The Incentive Stock Option shall become fully vested and exercisable on or after the vesting date for each installment of Covered Shares as described in the Notice of Grant of Incentive Stock Options delivered to Participant with the Award Agreement (the “Vesting Date”) (but only if the Participant’s Date of Termination has not occurred before the Vesting Date, except as otherwise provided in Section 2 of this Award Agreement):
(b) The Incentive Stock Option shall become fully vested and exercisable upon the occurrence of a Change of Control Event that occurs (i) prior to the Participant’s Date of Termination, or (ii) if the Participant has retired prior to such Change of Control Event and is Post-Retirement Eligible, following the Participant’s Date of Termination.
(c) If (i) the Participant’s Date of Termination occurs under circumstances in which the Participant is entitled to a severance payment from the Company, a Subsidiary, or an Affiliated Entity under (A) the Participant’s employment agreement or severance agreement with the Company due to a termination of the Participants employment by the Company without “cause”, or by the Participant for “good reason” in accordance with the Participant’s employment agreement or severance agreement, or (B) The Devon Energy Severance Plan, and (ii) the Participant signs and returns to the Company a release of claims against the Company in a form prepared by the Company (the “Release”) and the Participant does not revoke the Release prior to the date the Release becomes effective, then the Incentive Stock Option shall become fully vested and exercisable effective as of the Participant’s Date of Termination. If the Participant fails to sign and return the Release to the Company or revokes the Release prior to the date the Release becomes effective, then the unvested portion of the Incentive Stock Option shall be forfeited.

(d) The Incentive Stock Option shall become fully vested and exercisable upon the Participant’s Date of Termination if the Participant’s Date of Termination occurs by reason of the Participant’s death. The Committee may, in its sole and absolute discretion, elect to vest all or a position of the unvested portion of the Incentive Stock Option upon the Participant’s Date of Termination if the Participant’s Date of Termination occurs by reason of disability, Normal Retirement Date, or other special circumstances (as determined by the Committee).
(e) Notwithstanding any provision to the contrary in this Award Agreement, if the Participant is Post-Retirement Eligible, the Participant shall, subject to the satisfaction of the conditions in Section 12, be eligible to vest, in accordance with the Vesting Schedule above in this Section 2, in the installments of the Covered Shares of the Incentive Stock Option that remain unvested on the Date of Termination as follows:

Age at Retirement	  	Percentage of Unvested Installments of Covered Shares
of the Incentive Stock Option Eligible to be
Earned by the Participant	
54 and earlier	  	 	 	0	%	
55	  	 	 	60	%	
56	  	 	 	65	%	
57	  	 	 	70	%	
58	  	 	 	75	%	
59	  	 	 	80	%	
60 and beyond	  	 	 	100	%	
If (i) the Participant is Post-Retirement Eligible, (ii) the death of the Participant occurs following the Date of Termination, and (iii) no Non-Compliance Event has occurred prior to the date of the Participant’s death, then any percentages of installments of the Incentive Stock Option that remain unvested on the date of the Participants death but in which the Participant was eligible to vest pursuant to this Section 2(e) shall become fully vested upon the Participant’s death.
Nothing in this Award Agreement shall be construed to affect the application of Section 12.5 of the Plan (relating to Change of Control) to the extent such Section would otherwise be applicable.
2.     Section 3 is amended to read as follows:
3. Term of Incentive Stock Option . The Incentive Stock Option shall expire and cease to be exercisable on the earliest to occur of:
 
2

(a) The Expiration Date set forth on the Cover Page.
(b) If the Participant’s Date of Termination occurs by reason of death, the three-year anniversary of such Date of Termination.
(c) If the Participant’s Date of Termination occurs by reason of disability, and Section (e) below (relating to termination on or after Normal Retirement Date) does not apply, the one-year anniversary of such Date of Termination.
(d) If the Participant’s Date of Termination occurs by reason of the Participant’s retirement and the Participant is Post-Retirement Eligible, the Expiration Date of the Incentive Stock Option; provided, however, if a Non-Compliance Event (as defined in Section 12(b) occurs following such retirement, the Incentive Stock Option shall cease to be exercisable on the one-year anniversary of such Non-Compliance Event.
(e) If (i) the Participant’s Date of Termination occurs by reason of the Participant’s retirement, (ii) the Date of Termination occurs on or after the Participant’s Normal Retirement Date, and (iii) the Participant is not Post-Retirement Eligible, the three-year anniversary of such Date of Termination (or such later date as may be permitted by the Committee).
(f) If the Participant’s Date of Termination occurs under circumstances in which the Participant is entitled to a severance payment from the Company, a Subsidiary of the Company, or an Affiliated Entity under an employment agreement or severance agreement with the Company, the last day of the Severance Period. The “Severance Period” shall be the longer of:
(i) the period beginning on the Date of Termination and continuing through the end of the period during which such severance benefits are paid to the Participant; or
(ii) the period described in the following clause (B), if the amount of the Participant’s severance benefits is determined in whole or in part as being equal to the product of (A) the Participant’s salary rate, multiplied by (B) a period over which such benefit would be computed.
(g) If the Participant’s Date of Termination occurs and Sections (b), (c), (d), (e) and (f) are not applicable, the three-month anniversary of such Date of Termination.
The Participant should be aware that exercising the Incentive Stock Option more than three months after the Date of Termination (one year in the case of termination by reason of certain disabilities) will generally result in the option being treated as a nonqualified option rather than an incentive stock option for tax purposes. The Participant should also be aware that if his or her employment is transferred to a limited liability company that is an Affiliated Entity that does not satisfy the definition of “company” or “subsidiary” in
 
3

Section 424 of the Code, the transfer will be classified as a termination of employment for purposes of the incentive stock option rules regardless of whether it constitutes a Date of Termination under this Award Agreement. As a result, the option, if not exercised within three months of such transfer, will be treated as a nonqualified stock option rather than an incentive stock option for tax purposes. Regardless of classification of the option for tax purposes, this Award Agreement shall continue in full force and effect.”
3.     Section 11 is amended by adding a new definition as follows:
“Post-Retirement Eligible” means the Participant’s Date of Termination occurs (i) by reason of the Participant’s retirement and (ii) on or after the Participant’s Early Retirement Date.
4.     A new Section 12 shall be added that reads as follows:
12. Conditions to Post-Retirement Vesting .
(a) Notice of and Conditions to Post-Retirement Vesting. If the Participant is Post-Retirement Eligible, the Company shall, within a reasonable period of time prior to the Participant’s Date of Termination, notify the Participant that the Participant has the right to continue to vest following the Date of Termination in any unvested installments of Covered Shares of the Incentive Stock Option (each such unvested installment, an “Installment”), provided that the Participant executes and delivers to the Company, with respect to each such Installment, the following documentation: (i) a non-disclosure letter agreement, in the form attached as Exhibit B, (a “Non-Disclosure Agreement”) on or before January 1 of the year in which such Installment vests pursuant to the Vesting Schedule (or, with respect to the calendar year in which the Date of Termination occurs, on or before the Date of Termination), and (ii) a compliance certificate, in the form attached as Exhibit C, (a “Compliance Certificate”) indicating the Participant’s full compliance with the Non-Disclosure Agreement on or before November 1 of the year in which such Installment vests pursuant to the Vesting Schedule.
(b) Consequences of Failure to Satisfy Vesting Conditions. In the event that, with respect to any given Installment, the Participant fails to deliver either the respective Non-Disclosure Agreement or Compliance Certificate for such Installment on or before the date required for the delivery of such document (such failure, a “Non-Compliance Event”), the Participant shall not be entitled to vest in any unvested Installments that would vest from and after the date of the Non-Compliance Event and the Company shall be authorized to take any and all such actions as are necessary to cause such unvested Incentive Stock Options to not vest and to terminate. The only remedy of the Company for failure to deliver a Non-Disclosure Agreement or a Compliance Certificate shall be the failure to vest in, and cancellation of, any unvested Installments then held by the Participant.
5.     The Agreements are not amended in any respect except as herein provided. This Amendment is not intended and shall not be construed as increasing the aggregate number of shares of Common Stock subject to the Incentive Stock Options under the Agreements.
 
4

6.     All capitalized terms used in this Amendment shall have the same meaning ascribed to them in the Plan and the Agreements unless specifically denoted otherwise.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.

“Company”	    	Devon Energy Corporation, a Delaware corporation	
			
	    	By:	  	        /s/ Carla Brockman	
	    	Name:	  	        Carla Brockman	
	    	Title:	  	        VP Governance and Secretary	

“Participant”	 	        /s/ J. Larry Nichols	
	 	J. Larry Nichols	
 
5

EXHIBIT A
Incentive Stock Option Award Agreements Subject to Amendment
1.     Incentive Stock Option Award Agreement under the Devon Energy Corporation 2009 Long-Term Incentive Plan dated December 8, 2009.
2.     Incentive Stock Option Award Agreement under the Devon Energy Corporation 2009 Long-Term Incentive Plan dated December 2, 2010.
 
1

EXHIBIT B
Form of Non-Disclosure Agreement
[Insert Date]
Devon Energy Corporation
20 North Broadway
Oklahoma City, OK 73102
 
 	Re:	Non-Disclosure Agreement	
Ladies and Gentlemen:
This letter agreement is entered between Devon Energy Corporation (together with its subsidiaries and affiliates, the “Company”) and the undersigned (the “Participant”) in connection with that certain Amendment to Incentive Stock Option Award Agreements (the “Amendment”) dated December     , 2012 between the Company and the Participant. All capitalized terms used in this letter agreement shall have the same meaning ascribed to them in the Amendment unless specifically denoted otherwise.
The Participant acknowledges that, during the course of and in connection with the employment relationship between the Participant and the Company, the Company provided and the Participant accepted access to the Company’s trade secrets and confidential and proprietary information, which included, without limitation, information pertaining to the Company’s finances, oil and gas properties and prospects, compensation structures, business and litigation strategies and future business plans and other information or material that is of special and unique value to the Company and that the Company maintains as confidential and does not disclose to the general public, whether through its annual report and/or filings with the Securities and Exchange Commission or otherwise (the “Confidential Information”).
The Participant acknowledges that his position with the Company was one of trust and confidence because of the access to the Confidential Information, requiring the Participant’s best efforts and utmost diligence to protect and maintain the confidentiality of the Confidential Information. Unless required by the Company or with the Company’s express written consent, the Participant will not, during the term of this letter agreement, directly or indirectly, disclose to others or use for his own benefit or the benefit of another any of the Confidential Information, whether or not the Confidential Information is acquired, learned, attained or developed by the Participant alone or in conjunction with others.
The Participant agrees that, due to his access to the Confidential Information, the Participant would inevitably use and/or disclose that Confidential Information in breach of his confidentiality and non-disclosure obligations if the Participant worked in certain capacities or engaged in certain activities for a period of time following his employment with the Company, specifically in a position that involves
 
2

(i) responsibility and decision-making authority or input at the executive level regarding any subject or responsibility, (ii) decision-making responsibility or input at any management level in the Participant’s individual area of assignment with the Company, or (iii) responsibility and decision-making authority or input that otherwise allows the use of the Confidential Information (collectively referred to as the “Restricted Occupation”). Therefore, except with the prior written consent of the Company, during the term of this letter agreement, the Participant agrees not to be employed by, consult for or otherwise act on behalf of any person or entity in any capacity in which he would be involved, directly or indirectly, in a Restricted Occupation. The Participant acknowledges that this commitment is intended to protect the Confidential Information and is not intended to be applied or interpreted as a covenant against competition.
The Participant further agrees that, during the term of this letter agreement, the Participant will not, directly or indirectly on behalf of a person or entity or otherwise, (i) solicit any of the established customers of the Company or attempt to induce any of the established customers of the Company to cease doing business with the Company, or (ii) solicit any of the employees of the Company to cease employment with the Company.
This letter agreement shall become effective upon execution by the Participant and the Company and shall terminate on December 31, 20    . [NOTE: Insert date that is the end of the calendar year of the letter agreement.]
If you agree to the above terms and conditions, please execute a copy of this letter agreement below and return a copy to me.

“PARTICIPANT”	

[Name of Participant]	
THE UNDERSIGNED HEREBY ACCEPTS AND AGREES TO THE TERMS SET FORTH ABOVE AS OF THIS              DAY OF                     ,     .

“COMPANY”	
	
DEVON ENERGY CORPORATION	

By:	 	 	
			
Name:	 	 	
			
Title:	 	 	
 
3

EXHIBIT C
Form of Compliance Certificate
I hereby certify that I am in full compliance with the covenants contained in that certain letter agreement (the “Agreement”) dated as of                     ,          between Devon Energy Corporation and me and have been in full compliance with such covenants at all times during the period ending October 31,         .

[Name of Participant]	
Dated:                                         
 
4

Exhibit 12
RATIOS OF EARNINGS TO FIXED CHARGES AND TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
December 31, 2012

 	  	Years Ended December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	 	2009	 	 	2008	 	
Earnings (loss) from continuing operations before income taxes	  	$	(317	) 	 	$	4,290	  	 	$	3,568	  	 	$	(4,527	) 	 	$	(4,161	) 	
Capitalized interest, net of amortization	  	 	(2	) 	 	 	(26	) 	 	 	(20	) 	 	 	(47	) 	 	 	(47	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subtotal	  	 	(319	) 	 	 	4,264	  	 	 	3,548	  	 	 	(4,574	) 	 	 	(4,208	) 	
Fixed charges:	  				 				 				 				 				
Interest expensed and capitalized	  	 	454	  	 	 	424	  	 	 	439	  	 	 	444	  	 	 	440	  	
Estimate of interest within rental expense	  	 	14	  	 	 	14	  	 	 	21	  	 	 	23	  	 	 	19	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed charges, excluding preferred stock dividend requirements	  	 	468	  	 	 	438	  	 	 	460	  	 	 	467	  	 	 	459	  	
Preferred stock dividend requirements, pre-tax	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	9	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed charges	  	 	468	  	 	 	438	  	 	 	460	  	 	 	467	  	 	 	468	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) available for payment of fixed charges	  	$	149	  	 	$	4,702	  	 	$	4,008	  	 	$	(4,107	) 	 	$	(3,740	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges, excluding preferred stock dividend requirements	  	 	N/A	  	 	 	10.74	  	 	 	8.71	  	 	 	N/A	  	 	 	N/A	  	
Ratio of earnings to fixed charges	  	 	N/A	  	 	 	10.74	  	 	 	8.71	  	 	 	N/A	  	 	 	N/A	  	
Insufficient earnings to fixed charges, excluding preferred stock dividend requirements	  	$	319	  	 	 	N/A	  	 	 	N/A	  	 	$	4,574	  	 	$	4,199	  	
Insufficient earnings to fixed charges	  	$	319	  	 	 	N/A	  	 	 	N/A	  	 	$	4,574	  	 	$	4,208	  	
 
N/A     Not applicable.

Exhibit 21
DEVON ENERGY CORPORATION
Significant Subsidiaries
 
 	1.	Devon Energy Corporation (Oklahoma), an Oklahoma corporation	
 
 	2.	Devon OEI Holdings, L.L.C., a Delaware limited liability company	
 
 	3.	Devon OEI Operating, L.L.C., a Delaware limited liability company	
 
 	4.	Devon Energy Production Company, L.P., an Oklahoma limited partnership	
 
 	5.	Devon Energy International, Ltd., a Delaware corporation	
 
 	6.	Devon Operating Company Ltd., an Alberta corporation	
 
 	7.	Devon Canada Holdings LP, an Alberta limited partnership	
 
 	8.	Devon Canada Corporation, a Nova Scotia corporation	
 
 	9.	Devon AXL, a general partnership registered in Alberta	
 
 	10.	Devon NEC Corporation, a Nova Scotia corporation	
 
 	11.	Devon Canada, a general partnership registered in Alberta	

Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Devon Energy Corporation:
We consent to the incorporation by reference in the registration statements (File No. 333-68694, 333-47672, 333-44702, 333-104933, 333-104922, 333-103679, 333-159796, 333-127630, 333-179181 and 333-182198) on Form S-8 and the Registration Statement (File No. 333-178453) on Form S-3 of Devon Energy Corporation of our report dated February 21, 2013, with respect to the consolidated balance sheets of Devon Energy Corporation as of December 31, 2012 and 2011, and the related consolidated comprehensive statements of earnings, cash flows, and stockholders’ equity for each of the years in the three-year period ended December 31, 2012, and the effectiveness of internal control over financial reporting as of December 31, 2012, which report appears in the December 31, 2012 annual report on Form 10-K of Devon Energy Corporation.

/s/ KPMG LLP	
	
Oklahoma City, Oklahoma	
February 21, 2013	

Exhibit 23.2
ENGINEER’S CONSENT
We consent to incorporation by reference in the Registration Statements (File Nos. 333-68694, 333-47672, 333-44702, 333-104922, 333-104933, 333-103679, 333-127630, 333-159796, 333-179181 and 333-182198) on Form S-8, and the Registration Statement (File No. 333-178453) on Form S-3 of Devon Energy Corporation of the reference to our reports for Devon Energy Corporation, which appears in the December 31, 2012 annual report on Form 10-K of Devon Energy Corporation.

LaRoche Petroleum Consultants, Ltd.	
		
By:	 	/s/ William M. Kazmann	
	 	William M. Kazmann	
	 	Partner	
February 20, 2013

Exhibit 23.3
ENGINEER’S CONSENT
We consent to incorporation by reference in the Registration Statements (File Nos. 333-68694, 333-47672, 333-44702, 333-104922, 333-104933, 333-103679, 333-127630, 333-159796, 333-179181 and 333-182198) on Form S-8, and the Registration Statement (File No. 333-178453) on Form S-3 of Devon Energy Corporation of the reference to our reports for Devon Energy Corporation, which appears in the December 31, 2012 annual report on Form 10-K of Devon Energy Corporation.

Deloitte	
		
By: 	 	/s/ Barry R. Ashton	
	 	Barry R. Ashton, P. Eng.	
February 20, 2013

Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Richels, certify that:
1. I have reviewed this annual report on Form 10-K of Devon Energy Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	 	/s/ John Richels	 		
	 	John Richels	 		
	 	President and Chief Executive Officer	 		
Date: February 21, 2013

Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey A. Agosta, certify that:
1. I have reviewed this annual report on Form 10-K of Devon Energy Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	 	/s/ Jeffrey A. Agosta	 		
	 	Jeffrey A. Agosta	 		
	 	Executive Vice President and Chief Financial Officer	 		
Date: February 21, 2013

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Devon Energy Corporation (“Devon”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Richels, President and Chief Executive Officer of Devon, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
 	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Devon.	

/s/ John Richels	
John Richels	
President and Chief Executive Officer	
February 21, 2013	

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Devon Energy Corporation (“Devon”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey A. Agosta, Executive Vice President and Chief Financial Officer of Devon, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
 	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Devon.	

/s/ Jeffrey A. Agosta	
Jeffrey A. Agosta	
Executive Vice President and Chief Financial Officer	
February 21, 2013	

Exhibit 99.1

January 29, 2013
Mr. Bob Fant
Director Reserves and Economics
Devon Energy Corporation
20 North Broadway
Oklahoma City, OK 73102
Dear Mr. Fant:
At your request, LaRoche Petroleum Consultants, Ltd. (LPC) has audited the estimates of proved reserves and future net cash flow, as of December 31, 2012, to the Devon Energy Corporation (Devon) interest in certain properties located in the United States as prepared and completed by Devon on January 10, 2013. The reserve estimates were prepared by Devon for public disclosure according to the United States Security and Exchange Commission (SEC) guidelines, and our audit is to confirm the accuracy of those estimates and classifications within the applicable SEC rules, regulations, and guidelines. It should be understood that our audit described herein does not constitute a complete reserve study of the oil and gas properties of Devon. It is our understanding that the properties audited by LPC comprise approximately ninety-one percent (91%) of Devon’s aggregate reserves for Devon properties located in the United States as estimated and reported by Devon. We prepared our own estimates of proved reserves and net cash flow for all of the properties audited, and compared our estimates to those prepared by Devon to complete our audit of such properties. We believe the assumptions, data, methods, and procedures used are appropriate for the purpose of this audit. Estimates by Devon and LPC are based on constant prices and costs as set forth in this letter and conform to our understanding of the SEC guidelines, reserves definitions, and applicable accounting rules.
It is our understanding that the properties audited by LPC and reflected in this audit report comprise sixty-nine percent (69%) of Devon’s aggregate, corporate reserves as estimated and reported by Devon.
The Devon reserves presented above are for the Districts and Field Groups designated by Devon’s internal naming system. These areas include 1) North Texas District: Field Groups NEBS Core Lean, NEBS Core N Denton, Nebs Core N Wise, NEBS Core Rich Denton, NEBS Core Rich Wise, NEBS Noncore Denton, NEBS Noncore Lean, NEBS Noncore South, NEBS Noncore W Viola North, NEBS Noncore W Viola South, NEBS Noncore Western Extension, and NEBS Noncore Wise; 2) Anadarko Basin District: Field Groups Arkoma Other, Cana, Granite Wash, Kansas, Northridge Unconventional, Panhandle and Western Oklahoma Conventional; 3) Permian Basin District: Field Groups Ackerly Area, Anton Irish, Catclaw Draw Area, Corbin Area, Deep Delaware, Diamond Mound, El Dorado, Fullerton Area, Gaucho Area, Hackberry, Ingle Wells/Sand Dunes, Keystone/Kermit, McKnight, Mi Vida, Midland Basin, Odessa, Other PB New Mexico, Other PB Texas, Outland Area, Ozona Area, Potato Basin Area, Reeves, Silver City, Slaughter, Townsend Area, Waddell North, Waddell South, Wasson, Welch Area, and Wolfberry NW; 4) Rocky Mountain    
 
2435 N Central Expressway, Suite 1500   —   Dallas TX 75080   —   Phone (214) 363-3337   —   Fax (214) 363-1608

Mr. Bob Fant
January 29, 2013
Page 2
 
District: Project Areas Powder River Basin Conventional and Uinta; 5) Carthage District: Field Groups: Central (Haynesville Shale), North (Haynesville Shale), Southeast (Haynesville Shale), Carthage Central, Bethany, Carthage North Other, Shady Grove, Waskom, Carthage South, Stockman/Appleby; 6) Groesbeck-South Texas District: Nan-Su-Gail, Oaks, Personville, Agua Dulce Area, Montgomery County Area, Zapata Area; 7) Louisiana-Mississippi-AGF District: Ruston North.
The oil reserves include crude oil and condensate. Oil and natural gas liquid (NGL) reserves are expressed in barrels which are equivalent to 42 United States gallons. Gas volumes are expressed in thousands of standard cubic feet (Mcf) at the contract temperature and pressure bases.
The estimated reserves and future cash flow are for proved developed producing, proved developed non-producing, and proved undeveloped reserves. Devon’s estimates do not include any value for unproven reserves classified as probable or possible reserves that might exist for these properties, nor did it include any consideration that could be attributed to interests in undeveloped acreage beyond those tracts for which reserves have been estimated.
When compared on a field-by-field basis, some estimates determined by Devon are greater and some are lesser than the estimates determined by LPC. However, in our opinion, Devon’s estimates of proved oil and gas reserves and future cash flow, as audited by LPC, are in the aggregate reasonable, are within 10 percent of our numbers and have been prepared in accordance with generally accepted petroleum engineering and evaluation methods and procedures. These methods and procedures are set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information promulgated by the Society of Petroleum Engineers. We are satisfied with the methods and procedures used by Devon in preparing the December 31, 2012 reserve and future cash flow estimates. We saw nothing of an unusual nature that would cause us to take exception with the estimates, in the aggregate, as prepared by Devon.
The estimated reserves and future cash flow amounts in this audit of the Devon report are related to hydrocarbon prices. The price calculation methodology specified by the SEC regulations was used in the preparation of those estimates; however, actual future prices may vary significantly from the SEC-specified pricing. In addition, future changes in taxation affecting oil and gas producing companies and their products, and changes in environmental and administrative regulations may significantly affect the ability of Devon to operate and produce oil and gas at the projected levels. Therefore, volumes of reserves actually recovered and amounts of cash flow actually received may differ significantly from the estimated quantities presented in this audit.
Estimates of reserves for this audit were prepared using standard geological and engineering methods generally accepted by the petroleum industry. The reserves in this audit have been estimated using deterministic methods. The method or combination of methods utilized in the evaluation of each reservoir included consideration of the stage of development of the reservoir, quality and completeness of basic data, and production history. Recovery from various reservoirs
 
LaRoche Petroleum Consultants, Ltd.            

Mr. Bob Fant
January 29, 2013
Page 3
 
and leases was estimated after consideration of the type of energy inherent in the reservoirs, the structural positions of the properties, and reservoir and well performance. In some instances, comparisons were made to similar properties where more complete data were available. We have used all methods and procedures that we considered necessary under the circumstances to prepare this audit. We have excluded from our consideration all matters as to which the controlling interpretation may be legal or accounting rather than engineering or geosciences.
Benchmark prices used in this audit are based on the twelve-month unweighted arithmetic average of the first day of the month price for the period January through December 2012. Oil prices used by Devon are based on a Cushing West Texas Intermediate crude oil price of $94.71 per barrel, as published in Platts Oilgram, adjusted by lease for gravity, crude quality, transportation fees, and regional price differentials. Gas prices are based on a Henry Hub gas price of $2.757 per MMBTU, as published in Platts Gas Daily, adjusted by lease for energy content, transportation fees, and regional price differentials. NGL prices are based on a Mt. Belvieu composite product price of $37.04 per barrel, as published in the OPIS daily price bulletin, adjusted by area for composition, quality, transportation fees, and regional price differentials. Price differentials and adjustments to physical spot prices as of December 2012 were furnished by Devon and were accepted as presented. Oil and gas prices are held constant throughout the life of the properties. The weighted average prices over the life of the properties are $90.97 per barrel for oil, $2.29 per Mcf for gas, and $29.52 per barrel for NGL.
Lease and well operating expenses were furnished by Devon and were confirmed by LPC from a review of Devon accounting data on a Project Area or Field Group basis. As requested, expenses for the Devon-operated properties include only direct lease and field level costs. For properties operated by others, these expenses include the per-well overhead costs allowed under joint operating agreements along with direct lease and field level costs. Headquarters general and administrative overhead expenses of Devon are not included. Operating expenses are held constant throughout the life of the properties.
Capital costs and timing of all investments have been provided by Devon and are included as required for workovers, new development wells, and production equipment. Devon has represented to us that they have the ability and intent to implement their capital expenditure program as scheduled. Devon’s estimates of the cost to plug and abandon the wells net of salvage value are included and scheduled at the end of the economic life of individual properties. These costs are held constant.
LPC has made no investigation of possible gas volume and value imbalances that may have been the result of overdelivery or underdelivery to the Devon interest. Our projections are based on Devon receiving its net revenue interest share of estimated future gross oil, gas, and NGL production.
 
LaRoche Petroleum Consultants, Ltd.            

Mr. Bob Fant
January 29, 2013
Page 4
 
An on-site inspection of the properties has not been performed nor has the mechanical operation or condition of the wells and their related facilities been examined by LPC. The costs associated with the continued operation of uneconomic properties are not reflected in the cash flows.
The evaluation of potential environmental liability from the operation and abandonment of the properties is beyond the scope of this audit. In addition, no evaluation was made to determine the degree of operator compliance with current environmental rules, regulations, and reporting requirements. Therefore, no estimate of the potential economic liability, if any, from environmental concerns is included in our projections.
In our audit, we accepted without independent verification the accuracy and completeness of the information and data furnished by Devon with respect to ownership interest, oil and gas production, well test data, oil and gas prices, operating and development costs, and any agreements relating to current and future operations of the properties and sales of production. However, if in the course of our examination something came to our attention which brought into question the validity or sufficiency of any such information or data, we did not rely on such information or data until we had satisfactorily resolved our questions relating thereto or had independently verified such information or data.
The reserves estimated in our audit process and those presented by Devon are estimates only and should not be construed as exact quantities. They may or may not be recovered; if recovered, the revenues there from and the costs related thereto could be more or less than the estimated amounts. These estimates should be accepted with the understanding that future development, production history, changes in regulations, product prices, and operating expenses would probably cause us to make revisions in subsequent evaluations. A portion of these reserves are for behind-pipe zones, undeveloped locations, and producing wells that lack sufficient production history to utilize performance-related reserve estimates. Therefore, these reserves are based on estimates of reservoir volumes and recovery efficiencies along with analogies to similar production. These reserve estimates are subject to a greater degree of uncertainty than those based on substantial production and pressure data. It may be necessary to revise these estimates up or down in the future as additional performance data become available. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geological data; therefore, our conclusions represent informed professional judgments only, not statements of fact.
The results of our third party study were prepared in accordance with the disclosure requirements set forth in the SEC regulations and intended for public disclosure as an exhibit in filings made with the SEC by Devon Energy Corporation.
Devon Energy Corporation makes periodic filings on Form 10-K with the SEC under the 1934 Exchange Act. Furthermore, Devon Energy Corporation has certain registration statements filed with the SEC under the 1933 Securities Act into which any subsequently filed Form 10-K is incorporated by reference. We have consented to the incorporation by reference in the registration statements on Form S-3 and Form S-8 of Devon Energy Corporation of the references to our name together with references to our third party audit for Devon Energy Corporation, which appears in the
 
LaRoche Petroleum Consultants, Ltd.            

Mr. Bob Fant
January 29, 2013
Page 5
 
December 31, 2012 annual report on Form 10-K and/or 10-K/A of Devon Energy Corporation. Our written consent for such use is included as a separate exhibit to the filings made with the SEC by Devon Energy Corporation.
We have provided Devon Energy Corporation with a digital version of the original signed copy of this audit letter. In the event there are any differences between the digital version included in filings made by Devon Energy Corporation and the original signed audit letter, the original signed audit letter shall control and supersede the digital version.
LPC’s technical personnel responsible for preparing this audit meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information promulgated by the Society of Petroleum Engineers. The technical person primarily responsible for overseeing the preparation of the LPC audit is William M. Kazmann. Mr. Kazmann is a Professional Engineer licensed in the State of Texas who has thirty-eight years of engineering experience in the oil and gas industry. Mr. Kazmann earned Bachelor of Science and Master of Science degrees in Petroleum Engineering from the University of Texas at Austin and has prepared reserves estimates for his employers and his own companies throughout his career. He has prepared and overseen preparation of reports for public filings for LPC for the past sixteen years. We are independent petroleum engineers, geologists, and geophysicists and are not employed on a contingent basis. Data pertinent to the audit are maintained on file in our office.

Very truly yours,	
	
LaRoche Petroleum Consultants, Ltd.	
State of Texas Registration Number F-1360	
	
/s/ William M. Kazmann	
William M. Kazmann	
Licensed Professional Engineer	
State of Texas No. 45012	
	
/s/ Joe A. Young	
Joe A. Young	
Licensed Professional Engineer	
State of Texas No. 62866	
WMK:mk
12-400,700
 
cc:	Gary Cartwright	
 
LaRoche Petroleum Consultants, Ltd.            

Exhibit 99.2

 
							
	 		 		  	700, 850 – 2 nd  Street SW	
	 		 		  	Calgary AB T2P 0R8	
	 		 		  	Canada	
				
	 		 		  	Tel: 403-648-3200	
	 		 		  	Fax: 587-774-5398	
	 		 		  	www.deloitte.ca	
January 28, 2013
Devon Energy Corporation
20 North Broadway
Oklahoma City, Oklahoma
USA 73102
Attention: Mr. Bob Fant
 
Re:	Devon Canada Corporation	
December 31, 2012 reserve audit opinion
At your request and authorization, Deloitte LLP (“Deloitte”) has audited the reserves management processes and practices of Devon Canada Corporation (“Devon Canada”) as of December 31, 2012. Our audit was completed on December 15, 2012 and included such tests and procedures as we considered necessary under the circumstances to render our opinion.
During the course of our examination, we audited in excess of 93 percent of Devon Canada’s total proved reserves for certain properties within Western Canada. Deloitte’s estimate for the audited properties varied from Devon Canada’s estimates by less than 10 percent. When compared to Devon Canada’s parent corporation, Devon Energy Corporation, Deloitte audited 22 percent of the company’s total proved reserves.
The scope of the audit consisted of the independent preparation of our own estimates of the proved reserves and the comparison of our proved reserve results to the estimates prepared by the company. When compared on a field by field basis, some estimates prepared by Devon Canada are greater than and some are less than those prepared by Deloitte. However, in our opinion, the estimates prepared by Devon Canada are in aggregate reasonable, are within the established audit tolerance of plus or minus 10 percent and the estimates have been prepared in accordance with generally accepted petroleum engineering practices and procedures. These practices and procedures are detailed within the Canadian Oil and Gas Evaluation Handbook (“COGEH”), set out by the Society of Petroleum Evaluation Engineers (“SPEE”) as well as the Society of Petroleum Engineers’ (“SPE”) Standards Pertaining to the Estimation and Auditing of Oil and Gas Reserves. We believe that such assumptions, data, methods, and procedures are appropriate for the purpose served by the report. For the purpose of this audit only deterministic methods were used. The proved reserve estimates prepared by both Devon Canada and Deloitte conform to the reserve definitions as set forth in the SEC’s Regulation S-X Part 210.4-10(a) and as clarified in subsequent Commission Staff Accounting Bulletins. We believe that such assumptions, data, methods, and procedures are appropriate for the purpose served by the report.
Deloitte was provided with Devon Canada’s base hydrocarbon prices (oil, gas, condensate and natural gas liquids) as of December 31, 2012 in order to estimate the company’s net after royalty reserves. In accordance with SEC requirements all prices and costs (capital and operating) were held constant. The effects of derivative instruments designated as price hedges of oil and gas quantities if any, are not reflected in Deloitte’s individual property evaluations. An oil equivalent conversion factor of 6.0 Mcf per 1.0 barrel oil was used for sales gas.

Devon Energy Corporation
December 31, 2012 reserve audit opinion
Page 2
 
The extent and character of ownership and all factual data supplied by Devon Canada Corporation were accepted as presented. A field inspection and environmental/safety assessment of the properties was not made by Deloitte and the consultant makes no representations and accepts no responsibilities in this regard.
It should be understood that our audit does not constitute a complete reserves study of the oil and gas properties of your company. In the conduct of our examinations we have not independently verified the accuracy and completeness of all the information and data furnished by your company with respect to ownership interests, oil and gas production, historical costs of operations and development, product prices, and agreements relating to current and future operations and sales of production. We have, however, specifically identified to you the information and data upon which we relied so that you can subject it to procedures you consider necessary. Furthermore, if in the course of our examination something came to our attention that brought into question the validity or sufficiency of any of the information or data, we did not rely on that information or data until we had satisfactorily resolved our questions or independently verified it.
The accuracy of any reserve and production estimates is a function of the quality and quantity of available data and of engineering interpretation and judgment. While reserve and production estimates adhere to Regulation S-K, 229.1202 and Regulation S-X, 4-10(a) (as applicable), the estimates should be accepted with the understanding that reservoir performance subsequent to the date of the estimate may justify revision, either upward or downward. If government regulations change, the net after royalty recoverable reserve volumes may change materially.
We are independent with respect to the company as provided in the standards pertaining to the estimating and auditing of oil and gas reserves information included in COGEH and the Association of Professional Engineers and Geoscientists’ of Alberta (“APEGA”).
This audit is for the information of your company and for the information and assistance of its independent public accountants in connection with their review of, and report upon, the financial statements of your company. Supporting data documenting the audit, along with data provided by Devon Canada, are on file in our office. The results of our third party audit, presented in report form herein, were prepared in accordance with the disclosure requirements set forth in the SEC regulations and intended for public disclosure as an exhibit in filings made with the SEC by Devon Energy Corporation.
Devon Energy Corporation makes periodic filings on Form 10-K with the SEC under the 1934 Exchange Act. Furthermore, Devon Energy Corporation has certain registration statements filed with the SEC under the 1933 Securities Act into which any subsequently filed Form 10-K is incorporated by reference. We have consented to the incorporation by reference in the registration statements on Form S-X of Devon Energy Corporation to the references to our name as well as to the references to our audit for Devon Energy Corporation, which appears in the December 31, 2011 annual report on Form 10-K of Devon Energy Corporation. Our written consent for such use is included as a separate exhibit to the filings made with the SEC by Devon Energy Corporation.
Yours truly,
Original signed by: “Robin G. Bertram”
Robin G. Bertram, P. Eng.
Partner
Deloitte LLP
/ct

Audit procedure
Definitions and methodology
Effective as of December 2012

Table of Contents

Definitions	  				
		
•    Reserves audit methodology	  	 	3	  	
		
•    Reserve definitions	  	 	4	  	
		
Resource and reserve estimation	  	 	4	  	
		
Production forecasts	  	 	4	  	
		
Land schedules	  	 	5	  	
		
Geology	  	 	5	  	
		
Royalties and taxes	  	 	6	  	
		
Capital and operating considerations	  	 	7	  	
		
Pricing overview	  	 	8	  	
 
2

Reserves audit methodology
Deloitte has prepared its report in accordance with SEC Regulation S-K, 229.1202 and Regulation S-X, 210.4-10.
A “Reserves Audit” is the process carried out by a qualified reserves auditor that results in a reasonable assurance, in the form of an opinion, that the reserves information has in all material respects been determined and presented according to the principles and definitions adopted by the Society of Petroleum Evaluation Engineers (“SPEE”) (Calgary Chapter), and Association of Professional Engineers and Geoscientists of Alberta (“APEGA”) and are, therefore free of material misstatement.
The reserves evaluations prepared by the Corporation have been audited, not for the purpose of verifying exactness, but the reserves information, company policies, procedures, and methods used in estimating the reserves will be examined in sufficient detail so that Deloitte can express an opinion as to whether, in the aggregate, the reserves information presented by the Corporation are reasonable.
Deloitte may require its own independent evaluation of the reserves to test for reasonableness of the Corporation’s evaluations. The tests to be applied to the Corporation’s evaluations insofar as their methods and controls and the properties selected to be re-evaluated will be determined by Deloitte, in its sole judgment, to arrive at an opinion as to the reasonableness of the Corporation’s evaluations.
 
3

Reserve definitions and classification
Reserves are classified by Deloitte in accordance with the definitions that are described in the United States Securities and Exchange Commission Regulation S-X Part 210.4-10(a).
Resource and reserve estimation
Deloitte generally assigns reserves to properties via deterministic methods. Probabilistic estimation techniques are typically used where there is a low degree of certainty in the information available and is generally used in resource evaluations and when utilized will be stated within the detailed property reports. Both techniques comply as defined in Regulation S-X, 210.4-10(a).
Production forecasts
Production forecasts were based on historical trends or by comparison with other wells in the immediate area producing from similar reservoirs. Non-producing gas reserves were forecast to come on-stream within the first two years from the effective date under direct sales pricing and deliverability assumptions, if a tie-in point to an existing gathering system was in close proximity (approximately two miles). If the tie-in point was of a greater distance (and dependent on the reserve volume and risk) the reserves were forecast to come on-stream in years three or four from the effective date. These on-stream dates were used when the company could not provide specific on-stream date information.
For reserve volumes that meet all reserve category rules but are behind casing and waiting on depletion of the producing zone, these volumes are forecast to be brought on-stream following the end of the existing production.
 
4

Land schedule
The evaluated Corporation provided schedules of land ownership which included lessor and lessee royalty burdens. The land data was accepted as factual and no investigation of title by Deloitte was made to verify the records.
Geology
An initial review of each property is undertaken to establish the produced maturity of the reservoir being evaluated. Where extensive production history exists a geologic analysis is not conducted since the remaining hydrocarbons can be determined by productivity analysis.
For properties that are not of a mature production nature a geologic review is conducted. This work consists of:
 
 	•	 	developing a regional understanding of the play,	
 
 	•	 	assessing reservoir parameters from the nearest analogous production,	
 
 	•	 	analysis of all relevant well data including logs, cores, and tests to measure net formation thickness (pay), porosity, and initial water saturation,	
 
 	•	 	auditing of client mapping or developing maps to meet Deloitte’s need to establish volumetric hydrocarbons-in-place.	
 
5

Royalties and taxes
General
All royalties and taxes, including the lessor and overriding royalties, are based on government regulations, negotiated leases or farmout agreements, that were in effect as of the evaluation effective date. If regulations change, the net after royalty recoverable reserve volumes may differ materially.
Deloitte utilizes a variety of reserves and valuation products in determining the result sets.
 
6

Capital and operating considerations
Reserves estimated to meet the standards for constant prices and costs, are based on Regulation S-X 210.4-10(a).
Capital costs were provided by the Corporation and reviewed by Deloitte for reasonableness.
Operating costs were determined from historical data on the property as provided by the evaluated Corporation.
 
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Pricing overview
Devon provided Deloitte with hydrocarbon prices (oil, gas condensate, and natural gas liquids) appropriate for use in the preparation of a reserves report to be filed with the SEC with an effective date of December 31, 2012. These prices were calculated in accordance with the definition (22)(v) of Regulation S-X, 210.4-10(a) and were determined by taking the un-weighted average of the prices on the first day of the month for the preceding 12 months (January 1, 2012 through to December 1, 2012).
The effects of derivative instruments designated as price hedges of oil and gas quantities if any, are not reflected in Deloitte’s individual property evaluations.

 	  	Benchmark	  	Benchmark
price
($US)	 	  	Weighted
average
realized
report price
($US)	 	
Oil	  	NYMEX WTI @ Cushing	  	$	94.71/bbl	  	  	$	73.95/bbl	  	
Bitumen	  	Edmonton AWB	  	$	66.22/bbl	  	  	$	50.24/bbl	  	
Gas	  	NYMEX Henry Hub	  	$	2.76/MMbtu	  	  	$	2.10/Mcf	  	
NGL	  	Mt. Belvieu	  	$	37.04/bbl	  	  	$	40.69/bbl	  	
 
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Certificate of qualification
I, R. G. Bertram, a Professional Engineer, of 700, 850 – 2 nd Street S.W., Calgary, Alberta, Canada hereby certify that:
 
1.	I am a partner of Deloitte LLP, which did prepare an audit of certain oil and gas assets of the interests of Devon Canada Corporation. The effective date of this evaluation is December 31, 2012.	
 
2.	I do not have, nor do I expect to receive any direct or indirect interest in the properties evaluated in this report or in the securities of Devon Canada Corporation.	
 
3.	I attended the University of Alberta and graduated with a Bachelor of Science Degree in Petroleum Engineering in 1985; that I am a Registered Professional Engineer in the Province of Alberta; and I have in excess of twenty six years of engineering experience.	
 
4.	I am a Qualified Reserves Auditor as defined in the Canadian Oil and Gas Evaluation Handbook, Volume 1, Section 3.2.	
 
5.	A personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of information available from the files of the interest owners of the properties and the appropriate provincial regulatory authorities.	

Original signed by: “R. G. Bertram”	
R. G. Bertram, P. Eng.	

January 30, 2013	
Date