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1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements and notes of Devon Energy Corporation (“Devon”) have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”) have been omitted. The accompanying financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s 2014 Annual Report on Form 10-K.
The accompanying unaudited interim financial statements furnished in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month periods ended March 31, 2015 and 2014 and Devon’s financial position as of March 31, 2015.
Recently Issued Accounting Standards not yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The update provides guidance concerning the recognition and measurement of revenue from contracts with customers. Its objective is to increase the usefulness of information in the financial statements regarding the nature, timing and uncertainty of revenues. The standard permits the use of either the retrospective or cumulative effect transition method. Devon has not yet selected a transition method and is evaluating the impact this standard will have on its consolidated financial statements and related disclosures. The FASB recently proposed a one-year delay which will make the update effective for Devon beginning on January 1, 2018.
In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The update provides additional guidance to reporting entities in evaluating whether certain legal entities, such as limited partnerships, limited liability corporations and securitization structures, should be consolidated. The update is considered to be an improvement on current accounting requirements as it reduces the number of existing consolidation models. The update is effective for Devon beginning on January 1, 2016, and Devon is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (Topic 835). The update requires debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. The standard should be applied retrospectively and is effective for Devon beginning on January 1, 2016.
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2. Acquisitions and Divestitures
Acquisition of GeoSouthern and Formation of EnLink
On February 28, 2014, Devon completed its acquisition of interests in certain affiliates of GeoSouthern Energy Corporation (“GeoSouthern”). On March 7, 2014, Devon, Crosstex Energy, Inc. and Crosstex Energy, LP (together with Crosstex Energy, Inc., “Crosstex”) completed a business combination to combine substantially all of Devon’s U.S. midstream assets with Crosstex’s assets to form a new midstream business. The new business consists of EnLink Midstream, LLC (the “General Partner”) and EnLink Midstream Partners, LP (“EnLink”), which are both controlled by Devon and are publicly traded entities.
The following unaudited pro forma financial information was prepared assuming both the GeoSouthern acquisition and the EnLink formation occurred on January 1, 2014. The pro forma information has been included for comparative purposes only and is not intended to reflect the actual results of operations that would have occurred if the business combination and acquisition had been completed at the date indicated. In addition, it does not project Devon’s results of operations for any future period.
Three Months Ended |
|||
March 31, 2014 |
|||
(Millions) |
|||
Total operating revenues |
$ |
4,372 | |
Net earnings |
$ |
347 | |
Noncontrolling interests |
$ |
18 | |
Net earnings attributable to Devon |
$ |
329 | |
Net earnings per common share attributable to Devon |
$ |
0.81 |
EnLink Acquisitions and Dropdowns
The following table summarizes EnLink’s acquisition and dropdown activity for the first quarter of 2015:
Purchase Price |
Allocation |
|||||||||||||
Date |
Acquiree |
Cash |
EnLink Units |
PP&E |
Goodwill |
Intangibles |
Other |
|||||||
January 31 |
LPC Crude Oil Marketing LLC |
$100 |
- |
$29 |
$25 |
$49 |
$(3) |
|||||||
February 17 |
General Partner’s 25% interest in EnLink Midstream Holdings, LP (“EMH”) |
- |
$925 |
- |
- |
- |
- |
|||||||
March 16 |
Coronado Midstream Holdings LLC (“Coronado”) |
$242 |
$360 |
$306 |
- |
$294 |
$2 |
In addition, on April 1, 2015, EnLink acquired the Victoria Express Pipeline and related truck terminal and storage assets (“VEX”) from Devon for approximately $180 million in cash and equity, subject to certain adjustments. EnLink also assumed approximately $35 million in certain construction costs to expand the system to full capacity.
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3. Derivative Financial Instruments
Objectives and Strategies
Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon and EnLink periodically enter into derivative financial instruments with respect to a portion of their oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. Devon periodically enters into foreign exchange forward contracts to manage its exposure to fluctuations in exchange rates.
Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.
Counterparty Credit Risk
By using derivative financial instruments, 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 contain provisions that provide for collateral payments, depending on levels of exposure and the credit rating of the counterparty.
As of March 31, 2015 and December 31, 2014, Devon held $487 million and $524 million, respectively, of cash collateral which represented the estimated fair value of certain derivative positions in excess of Devon’s credit guidelines. The collateral is reported in other current liabilities in the accompanying consolidated balance sheets.
Commodity Derivatives
As of March 31, 2015, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX West Texas Intermediate (“WTI”) futures price. The second table presents Devon’s oil derivatives that settle against the Western Canadian Select, West Texas Sour and Midland Sweet indices.
Price Swaps |
Price Collars |
Call Options Sold |
||||||||||||||||
Period |
Volume (Bbls/d) |
Weighted Average Price ($/Bbl) |
Volume (Bbls/d) |
Weighted Average Floor Price ($/Bbl) |
Weighted Average Ceiling Price ($/Bbl) |
Volume (Bbls/d) |
Weighted Average Price ($/Bbl) |
|||||||||||
Q2-Q4 2015 |
106,442 |
$ |
91.07 |
31,500 |
$ |
89.67 |
$ |
97.84 |
28,000 |
$ |
116.43 |
|||||||
Q1-Q4 2016 |
- |
$ |
- |
- |
$ |
- |
$ |
- |
18,500 |
$ |
103.11 |
Oil Basis Swaps |
|||||||
Period |
Index |
Volume (Bbls/d) |
Weighted Average Differential to WTI ($/Bbl) |
||||
Q2-Q4 2015 |
Western Canadian Select |
36,320 |
$ |
(16.35) | |||
Q2-Q4 2015 |
West Texas Sour |
8,000 |
$ |
(3.68) | |||
Q2-Q4 2015 |
Midland Sweet |
16,331 |
$ |
(2.84) | |||
Q1-Q4 2016 |
West Texas Sour |
1,000 |
$ |
(1.50) |
As of March 31, 2015, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the Panhandle Eastern Pipe Line, El Paso Natural Gas and Houston Ship Channel indices.
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) |
|||||||||||
Q2-Q4 2015 |
250,000 |
$ |
4.32 |
391,964 |
$ |
3.74 |
$ |
4.04 |
550,000 |
$ |
5.09 |
|||||||
Q1-Q4 2016 |
- |
$ |
- |
- |
$ |
- |
$ |
- |
400,000 |
$ |
5.00 |
Natural Gas Basis Swaps |
|||||||
Period |
Index |
Volume (MMBtu/d) |
Weighted Average Differential to Henry Hub ($/MMBtu) |
||||
Q2-Q4 2015 |
Panhandle Eastern Pipe Line |
100,000 |
$ |
(0.28) |
|||
Q2-Q4 2015 |
El Paso Natural Gas |
70,000 |
$ |
(0.11) |
|||
Q2-Q4 2015 |
Houston Ship Channel |
200,000 |
$ |
0.01 |
|||
Q1-Q4 2016 |
Panhandle Eastern Pipe Line |
40,000 |
$ |
(0.33) |
|||
Q1-Q4 2016 |
El Paso Natural Gas |
15,000 |
$ |
(0.13) |
|||
Q1-Q4 2016 |
Houston Ship Channel |
30,000 |
$ |
0.11 |
As of March 31, 2015, the following were open derivative positions associated with gas processing and fractionation at EnLink. EnLink’s NGL positions settle by purity product against the average of the prompt month OPIS Mont Belvieu, Texas index.
Period |
Product |
Volume (Total) |
Weighted Average Price Paid |
Weighted Average Price Received |
|||||||
Q2 2015-Q4 2016 |
Ethane |
1,113 |
MBbls |
$ |
0.28/gal |
Index |
|||||
Q2 2015-Q4 2016 |
Propane |
1,170 |
MBbls |
Index |
$ |
0.95/gal |
|||||
Q2 2015-Q1 2016 |
Normal Butane |
117 |
MBbls |
Index |
$ |
0.78/gal |
|||||
Q2 2015-Q1 2016 |
Natural Gasoline |
101 |
MBbls |
Index |
$ |
1.32/gal |
Interest Rate Derivatives
As of March 31, 2015, Devon had the following open interest rate derivative positions:
Notional |
Rate Received |
Rate Paid |
Expiration |
||||
(Millions) |
|||||||
$ |
100 |
Three Month LIBOR |
0.92% |
December 2016 |
|||
$ |
100 |
1.76% |
Three Month LIBOR |
January 2019 |
Foreign Currency Derivatives
As of March 31, 2015, Devon had the following open foreign currency derivative position:
Forward Contract |
|||||||||
Currency |
Contract Type |
CAD Notional |
Weighted Average Fixed Rate Received |
Expiration |
|||||
(Millions) |
(CAD-USD) |
||||||||
Canadian Dollar |
Sell |
$ |
1,884 |
0.799 |
June 2015 |
Financial Statement Presentation
The following table presents the net gains and losses recognized in the accompanying consolidated comprehensive statements of earnings associated with derivative financial instruments.
Comprehensive Statements of |
Three Months Ended March 31, |
|||||||
Earnings Caption |
2015 |
2014 |
||||||
(Millions) |
||||||||
Oil, gas and NGL commodity derivatives |
Oil, gas and NGL derivatives |
$ |
294 |
$ |
(320) | |||
Midstream commodity derivatives |
Marketing and midstream revenues |
2 | (1) | |||||
Interest rate derivatives |
Other nonoperating items |
1 |
- |
|||||
Foreign currency derivatives |
Other nonoperating items |
133 | 14 | |||||
Net gains (losses) recognized in comprehensive statements of earnings |
$ |
430 |
$ |
(307) |
The following table presents the derivative fair values included in the accompanying consolidated balance sheets.
Balance Sheet Caption |
March 31, 2015 |
December 31, 2014 |
||||||
(Millions) |
||||||||
Asset derivatives: |
||||||||
Oil, gas and NGL commodity derivatives |
Derivatives, at fair value |
$ |
1,668 |
$ |
1,967 | |||
Oil, gas and NGL commodity derivatives |
Other long-term assets |
2 | 1 | |||||
Midstream commodity derivatives |
Derivatives, at fair value |
14 | 17 | |||||
Midstream commodity derivatives |
Other long-term assets |
8 | 10 | |||||
Interest rate derivatives |
Derivatives, at fair value |
2 | 1 | |||||
Interest rate derivatives |
Other long-term assets |
1 |
- |
|||||
Foreign currency derivatives |
Derivatives, at fair value |
22 | 8 | |||||
Total asset derivatives |
$ |
1,717 |
$ |
2,004 | ||||
Liability derivatives: |
||||||||
Oil, gas and NGL commodity derivatives |
Other current liabilities |
$ |
45 |
$ |
25 | |||
Oil, gas and NGL commodity derivatives |
Other long-term liabilities |
7 | 26 | |||||
Midstream commodity derivatives |
Other current liabilities |
3 | 3 | |||||
Midstream commodity derivatives |
Other long-term liabilities |
2 | 2 | |||||
Interest rate derivatives |
Other current liabilities |
1 | 1 | |||||
Total liability derivatives |
$ |
58 |
$ |
57 |
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5. Asset Impairments
In the first quarter of 2015, Devon recognized asset impairments as presented below.
Three Months Ended March 31, 2015 |
|||||||
Gross |
Net of Taxes |
||||||
(Millions) |
|||||||
U.S. oil and gas assets |
$ |
5,458 |
$ |
3,466 | |||
Other assets |
2 | 1 | |||||
Total asset impairments |
$ |
5,460 |
$ |
3,467 |
Oil and Gas Impairments
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% per annum, net of related tax effects. 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.
The oil and gas impairments resulted primarily from a decline in the U.S. full cost ceiling. The lower ceiling value resulted from decreases in the 12-month average trailing prices for oil, gas and NGLs, which reduced proved reserves and proved reserves values.
Other Impairments
Due to the significant decline in oil prices during the first quarter of 2015, Devon impaired its pipeline line fill inventory, as the carrying amount exceeded its estimated fair value, which was determined based on the WTI spot price.
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6. Income Taxes
The following table presents Devon’s total income tax expense (benefit) and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.
Three Months Ended March 31, |
|||||||
2015 |
2014 |
||||||
Total income tax expense (benefit) (millions) |
$ |
(2,035) |
$ |
231 | |||
U.S. statutory income tax rate |
(35)% |
35% | |||||
Taxation on Canadian operations |
0% |
(3)% |
|||||
State income taxes |
(1)% |
1% | |||||
Taxes on General Partner formation |
0% | 9% | |||||
Other |
0% |
(1)% |
|||||
Effective income tax rate |
(36)% |
41% |
In the first quarter of 2014, Devon recorded a $48 million deferred tax liability in conjunction with the formation of the General Partner, which impacted the effective tax rate as reflected in the table above.
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8. Other Comprehensive Earnings
Components of other comprehensive earnings consist of the following:
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Foreign currency translation: |
||||||
Beginning accumulated foreign currency translation |
$ |
983 |
$ |
1,448 | ||
Change in cumulative translation adjustment |
(337) | (313) | ||||
Income tax benefit |
35 | 15 | ||||
Ending accumulated foreign currency translation |
681 | 1,150 | ||||
Pension and postretirement benefit plans: |
||||||
Beginning accumulated pension and postretirement benefits |
(204) | (180) | ||||
Recognition of net actuarial loss and prior service cost in earnings (1) |
6 | 5 | ||||
Income tax expense |
(2) | (2) | ||||
Ending accumulated pension and postretirement benefits |
(200) | (177) | ||||
Accumulated other comprehensive earnings, net of tax |
$ |
481 |
$ |
973 |
__________________________
(1) These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of general and administrative expenses on the accompanying consolidated comprehensive statements of earnings. See Note 14 for additional details.
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9. Supplemental Information to Statements of Cash Flows
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Net change in working capital accounts: |
||||||
Accounts receivable |
$ |
404 |
$ |
(455) | ||
Income taxes receivable |
425 | 31 | ||||
Other current assets |
(93) | (58) | ||||
Accounts payable |
(15) | 20 | ||||
Revenues and royalties payable |
(236) | 391 | ||||
Other current liabilities |
(270) | (81) | ||||
Net change in working capital |
$ |
215 |
$ |
(152) | ||
Interest paid (net of capitalized interest) |
$ |
118 |
$ |
137 | ||
Income taxes paid (received) |
$ |
(414) |
$ |
38 |
On March 7, 2014, Devon completed a business combination to form EnLink. With the exception of a $100 million cash payment to noncontrolling interests, the business combination was a non-monetary transaction. Furthermore, EnLink’s noncash acquisition activity during the first quarter of 2015 included a portion of the Coronado transaction. See Note 2 for additional details.
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10. Accounts Receivable
The components of accounts receivable include the following:
March 31, 2015 |
December 31, 2014 |
|||||
(Millions) |
||||||
Oil, gas and NGL sales |
$ |
556 |
$ |
723 | ||
Joint interest billings |
451 | 475 | ||||
Marketing and midstream revenues |
620 | 706 | ||||
Other |
50 | 71 | ||||
Gross accounts receivable |
1,677 | 1,975 | ||||
Allowance for doubtful accounts |
(14) | (16) | ||||
Net accounts receivable |
$ |
1,663 |
$ |
1,959 |
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11. Goodwill and Other Intangible Assets
See Note 2 for discussion of changes in goodwill and other intangible assets resulting from acquisitions during the first quarter of 2015.
The following table presents other intangible assets reported in other long-term assets in the accompanying consolidated balance sheets.
March 31, 2015 |
December 31, 2014 |
|||||
(Millions) |
||||||
Customer relationships |
$ |
926 |
$ |
569 | ||
Accumulated amortization |
(48) | (36) | ||||
Net intangibles |
$ |
878 |
$ |
533 |
The weighted-average amortization period for intangible assets is 11.1 years. Amortization expense for intangibles was approximately $11.5 million and $1.9 million for the three months ended March 31, 2015 and 2014, respectively.
The following table summarizes the estimated aggregate amortization expense for the next five years.
Year |
Amortization Amount |
||
(Millions) |
|||
2015 |
$ |
52 | |
2016 |
$ |
67 | |
2017 |
$ |
67 | |
2018 |
$ |
67 | |
2019 |
$ |
66 |
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12. Debt
A summary of debt is as follows:
March 31, 2015 |
December 31, 2014 |
||||
(Millions) |
|||||
Devon debt |
|||||
Commercial paper |
$ |
948 |
$ |
932 | |
Floating rate due December 15, 2015 |
500 | 500 | |||
Floating rate due December 15, 2016 |
350 | 350 | |||
8.25% due July 1, 2018 |
125 | 125 | |||
2.25% due December 15, 2018 |
750 | 750 | |||
6.30% due January 15, 2019 |
700 | 700 | |||
4.00% due July 15, 2021 |
500 | 500 | |||
3.25% due May 15, 2022 |
1,000 | 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 | 750 | |||
Net discount on debentures and notes |
(18) | (18) | |||
Total Devon debt |
9,255 | 9,239 | |||
EnLink debt |
|||||
Credit facilities |
709 | 237 | |||
2.70% due April 1, 2019 |
400 | 400 | |||
7.125% due June 1, 2022 |
163 | 163 | |||
4.40% due April 1, 2024 |
550 | 550 | |||
5.60% due April 1, 2044 |
350 | 350 | |||
5.05% due April 1, 2045 |
300 | 300 | |||
Net premium on debentures and notes |
22 | 23 | |||
Total EnLink debt |
2,494 | 2,023 | |||
Total debt |
11,749 | 11,262 | |||
Less amount classified as short-term debt (1) |
1,448 | 1,432 | |||
Total long-term debt |
$ |
10,301 |
$ |
9,830 |
____________________________
(1) |
Short-term debt as of March 31, 2015 consists of $948 million of commercial paper and $500 million floating rate due on December 15, 2015. Short-term debt as of December 31, 2014 consists of $932 million of commercial paper and $500 million floating rate due on December 15, 2015. |
Commercial Paper
As of March 31, 2015, Devon had $948 million outstanding commercial paper borrowings at an average rate of 0.6%.
Credit Lines
Devon has a $3.0 billion syndicated, unsecured revolving line of credit (the “Senior Credit Facility”). As of March 31, 2015, 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%. As of March 31, 2015, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 21.6%.
EnLink Debt
All of EnLink’s and the General Partner’s debt is non-recourse to Devon.
On February 5, 2015, the commitments under EnLink’s $1.0 billion unsecured revolving credit facility were increased to $1.5 billion, and the maturity date was extended by a year to March 6, 2020. As of March 31, 2015, there were $2.9 million in outstanding letters of credit and $709 million outstanding borrowings at an average rate of 1.65% under the $1.5 billion credit facility, leaving approximately $788 million available for future borrowing.
The General Partner has a $250 million revolving credit facility. As of March 31, 2015, the General Partner had no outstanding borrowings under the $250 million credit facility. EnLink and the General Partner are in compliance with all financial covenants as of March 31, 2015.
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13. Asset Retirement Obligations
The schedule below summarizes changes in Devon’s asset retirement obligations.
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Asset retirement obligations as of beginning of period |
$ |
1,399 |
$ |
2,228 | ||
Liabilities incurred |
23 | 45 | ||||
Liabilities settled |
(13) | (14) | ||||
Revision of estimated obligation |
62 | 69 | ||||
Liabilities assumed by others |
(12) | (9) | ||||
Accretion expense on discounted obligation |
19 | 29 | ||||
Foreign currency translation adjustment |
(53) | (51) | ||||
Asset retirement obligations as of end of period |
1,425 | 2,297 | ||||
Less current portion |
52 | 79 | ||||
Asset retirement obligations, long-term |
$ |
1,373 |
$ |
2,218 |
The change in the asset retirement obligation from March 31, 2014 to March 31, 2015 is primarily the result of Devon’s Canadian and U.S. divestitures during 2014.
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14. Retirement Plans
The following table presents the components of net periodic benefit cost for Devon’s pension benefit plans. There was no net periodic benefit cost for postretirement benefit plans for all periods presented below.
Pension Benefits |
|||||||
Three Months Ended March 31, |
|||||||
2015 |
2014 |
||||||
(Millions) |
|||||||
Service cost |
$ |
8 |
$ |
7 | |||
Interest cost |
13 | 14 | |||||
Expected return on plan assets |
(15) | (13) | |||||
Amortization of prior service cost (1) |
1 | 1 | |||||
Net actuarial loss (1) |
5 | 4 | |||||
Net periodic benefit cost (2) |
$ |
12 |
$ |
13 |
__________________________
(1) These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period.
(2) Net periodic benefit cost is a component of general and administrative expenses on the accompanying consolidated comprehensive statements of earnings.
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15. Stockholders’ Equity
Dividends
Devon paid common stock dividends of $99 million and $90 million in the first three months of 2015 and 2014, respectively. The quarterly cash dividend was $0.22 per share in the first quarter of 2014. Devon increased the dividend rate to $0.24 per share in the second quarter of 2014.
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16. Noncontrolling Interests
Subsidiary Equity Transactions
In February 2015, EnLink acquired a 25% equity interest in EMH from the General Partner in exchange for units valued at approximately $925 million. In March 2015, EnLink acquired Coronado for $602 million, of which $360 million represented approximately 13.4 million EnLink units. Furthermore, in March 2015, Devon conducted an underwritten secondary public offering of 22.8 million common units representing limited partner interests in EnLink, raising net proceeds of approximately $569 million. As a result of these transactions, Devon’s ownership interest in EnLink decreased from 49% at December 31, 2014 to 34% at March 31, 2015. Any net gains or losses and related income taxes resulting from these transactions have been recorded as an adjustment to equity, and the change in ownership reflected as an adjustment to noncontrolling interests.
In April 2015, as part of the secondary public offering, underwriters fully exercised their option to purchase an additional 3.4 million EnLink common units from Devon, resulting in an incremental $85 million of net proceeds raised.
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17. 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 oil and 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 oil, natural gas and NGLs produced and sold. 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.
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.
|
18. 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 current payables and accrued expenses included in the accompanying consolidated balance sheets approximated fair value at March 31, 2015 and December 31, 2014. Therefore, such financial assets and liabilities are not presented in the following tables. Additionally, information regarding the fair values of oil and gas and midstream assets is provided in Note 5.
Fair Value Measurements Using: |
|||||||||||||||
Carrying |
Total Fair |
Level 1 |
Level 2 |
Level 3 |
|||||||||||
Amount |
Value |
Inputs |
Inputs |
Inputs |
|||||||||||
(Millions) |
|||||||||||||||
March 31, 2015 assets (liabilities): |
|||||||||||||||
Cash equivalents |
$ |
1,321 |
$ |
1,321 |
$ |
716 |
$ |
605 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
1,670 |
$ |
1,670 |
$ |
- |
$ |
1,670 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
(52) |
$ |
(52) |
$ |
- |
$ |
(52) |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
22 |
$ |
22 |
$ |
- |
$ |
22 |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
(5) |
$ |
(5) |
$ |
- |
$ |
(5) |
$ |
- |
|||||
Interest rate derivatives |
$ |
3 |
$ |
3 |
$ |
- |
$ |
3 |
$ |
- |
|||||
Interest rate derivatives |
$ |
(1) |
$ |
(1) |
$ |
- |
$ |
(1) |
$ |
- |
|||||
Foreign currency derivatives |
$ |
22 |
$ |
22 |
$ |
- |
$ |
22 |
$ |
- |
|||||
Debt |
$ |
(11,749) |
$ |
(13,217) |
$ |
- |
$ |
(13,217) |
$ |
- |
|||||
Capital lease obligations |
$ |
(19) |
$ |
(19) |
$ |
- |
$ |
(19) |
$ |
- |
|||||
December 31, 2014 assets (liabilities): |
|||||||||||||||
Cash equivalents |
$ |
950 |
$ |
950 |
$ |
340 |
$ |
610 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
1,968 |
$ |
1,968 |
$ |
- |
$ |
1,968 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
(51) |
$ |
(51) |
$ |
- |
$ |
(51) |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
27 |
$ |
27 |
$ |
- |
$ |
27 |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
(5) |
$ |
(5) |
$ |
- |
$ |
(5) |
$ |
- |
|||||
Interest rate derivatives |
$ |
1 |
$ |
1 |
$ |
- |
$ |
1 |
$ |
- |
|||||
Interest rate derivatives |
$ |
(1) |
$ |
(1) |
$ |
- |
$ |
(1) |
$ |
- |
|||||
Foreign currency derivatives |
$ |
8 |
$ |
8 |
$ |
- |
$ |
8 |
$ |
- |
|||||
Debt |
$ |
(11,262) |
$ |
(12,472) |
$ |
- |
$ |
(12,472) |
$ |
- |
|||||
Capital lease obligations |
$ |
(20) |
$ |
(20) |
$ |
- |
$ |
(20) |
$ |
- |
The following methods and assumptions were used to estimate the fair values in the tables above.
Level 1 Fair Value Measurements
Cash equivalents — 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 — Amounts consist primarily of Canadian agency and provincial securities and commercial paper investments. The fair value approximates 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 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 debt are estimated based on rates available for debt with similar terms and maturity. The fair values of commercial paper and credit facility balances are the carrying values.
Capital lease obligations — The fair value was calculated using inputs from third-party banks.
|
19. 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 U.S. and Canadian segments are both primarily engaged in oil and gas exploration and production activities.
EnLink, combined with the General Partner, is presented as a separate reporting segment. Devon considers EnLink’s operations distinct from the U.S. and Canadian operating segments. Additionally, EnLink has a management team that is primarily responsible for capital and resource allocation decisions.
U.S. |
Canada |
EnLink |
Eliminations |
Total |
|||||||||||
(Millions) |
|||||||||||||||
Three Months Ended March 31, 2015: |
|||||||||||||||
Revenues from external customers |
$ |
2,264 |
$ |
221 |
$ |
780 |
$ |
- |
$ |
3,265 | |||||
Intersegment revenues |
$ |
- |
$ |
- |
$ |
156 |
$ |
(156) |
$ |
- |
|||||
Depreciation, depletion and amortization |
$ |
713 |
$ |
127 |
$ |
90 |
$ |
- |
$ |
930 | |||||
Interest expense |
$ |
87 |
$ |
25 |
$ |
19 |
$ |
(12) |
$ |
119 | |||||
Asset impairments |
$ |
5,460 |
$ |
- |
$ |
- |
$ |
- |
$ |
5,460 | |||||
Earnings (loss) before income taxes |
$ |
(5,487) |
$ |
(172) |
$ |
35 |
$ |
- |
$ |
(5,624) | |||||
Income tax expense (benefit) |
$ |
(1,993) |
$ |
(53) |
$ |
11 |
$ |
- |
$ |
(2,035) | |||||
Net earnings (loss) |
$ |
(3,494) |
$ |
(119) |
$ |
24 |
$ |
- |
$ |
(3,589) | |||||
Net earnings attributable to noncontrolling interests |
$ |
- |
$ |
- |
$ |
10 |
$ |
- |
$ |
10 | |||||
Net earnings (loss) attributable to Devon |
$ |
(3,494) |
$ |
(119) |
$ |
14 |
$ |
- |
$ |
(3,599) | |||||
Property and equipment, net |
$ |
19,851 |
$ |
6,281 |
$ |
5,323 |
$ |
- |
$ |
31,455 | |||||
Total assets |
$ |
26,926 |
$ |
7,625 |
$ |
10,893 |
$ |
(102) |
$ |
45,342 | |||||
Capital expenditures |
$ |
1,369 |
$ |
224 |
$ |
489 |
$ |
- |
$ |
2,082 | |||||
Three Months Ended March 31, 2014: |
|||||||||||||||
Revenues from external customers |
$ |
2,616 |
$ |
684 |
$ |
425 |
$ |
- |
$ |
3,725 | |||||
Intersegment revenues |
$ |
- |
$ |
- |
$ |
298 |
$ |
(298) |
$ |
- |
|||||
Depreciation, depletion and amortization |
$ |
497 |
$ |
194 |
$ |
48 |
$ |
- |
$ |
739 | |||||
Interest expense |
$ |
100 |
$ |
19 |
$ |
5 |
$ |
(9) |
$ |
115 | |||||
Earnings before income taxes |
$ |
396 |
$ |
92 |
$ |
72 |
$ |
- |
$ |
560 | |||||
Income tax expense |
$ |
186 |
$ |
21 |
$ |
24 |
$ |
- |
$ |
231 | |||||
Net earnings |
$ |
210 |
$ |
71 |
$ |
48 |
$ |
- |
$ |
329 | |||||
Net earnings attributable to noncontrolling interests |
$ |
- |
$ |
- |
$ |
5 |
$ |
- |
$ |
5 | |||||
Net earnings attributable to Devon |
$ |
210 |
$ |
71 |
$ |
43 |
$ |
- |
$ |
324 | |||||
Property and equipment, net |
$ |
24,857 |
$ |
8,369 |
$ |
4,203 |
$ |
- |
$ |
37,429 | |||||
Total assets |
$ |
30,085 |
$ |
13,384 |
$ |
9,354 |
$ |
(58) |
$ |
52,765 | |||||
Capital expenditures |
$ |
7,089 |
$ |
442 |
$ |
82 |
$ |
- |
$ |
7,613 | |||||
Year Ended December 31, 2014: |
|||||||||||||||
Property and equipment, net |
$ |
24,572 |
$ |
6,790 |
$ |
4,934 |
$ |
- |
$ |
36,296 | |||||
Total assets |
$ |
32,147 |
$ |
8,517 |
$ |
10,097 |
$ |
(124) |
$ |
50,637 |
|
Recently Issued Accounting Standards not yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The update provides guidance concerning the recognition and measurement of revenue from contracts with customers. Its objective is to increase the usefulness of information in the financial statements regarding the nature, timing and uncertainty of revenues. The standard permits the use of either the retrospective or cumulative effect transition method. Devon has not yet selected a transition method and is evaluating the impact this standard will have on its consolidated financial statements and related disclosures. The FASB recently proposed a one-year delay which will make the update effective for Devon beginning on January 1, 2018.
In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The update provides additional guidance to reporting entities in evaluating whether certain legal entities, such as limited partnerships, limited liability corporations and securitization structures, should be consolidated. The update is considered to be an improvement on current accounting requirements as it reduces the number of existing consolidation models. The update is effective for Devon beginning on January 1, 2016, and Devon is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (Topic 835). The update requires debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. The standard should be applied retrospectively and is effective for Devon beginning on January 1, 2016.
|
Three Months Ended |
|||
March 31, 2014 |
|||
(Millions) |
|||
Total operating revenues |
$ |
4,372 | |
Net earnings |
$ |
347 | |
Noncontrolling interests |
$ |
18 | |
Net earnings attributable to Devon |
$ |
329 | |
Net earnings per common share attributable to Devon |
$ |
0.81 |
Purchase Price |
Allocation |
|||||||||||||
Date |
Acquiree |
Cash |
EnLink Units |
PP&E |
Goodwill |
Intangibles |
Other |
|||||||
January 31 |
LPC Crude Oil Marketing LLC |
$100 |
- |
$29 |
$25 |
$49 |
$(3) |
|||||||
February 17 |
General Partner’s 25% interest in EnLink Midstream Holdings, LP (“EMH”) |
- |
$925 |
- |
- |
- |
- |
|||||||
March 16 |
Coronado Midstream Holdings LLC (“Coronado”) |
$242 |
$360 |
$306 |
- |
$294 |
$2 |
|
Comprehensive Statements of |
Three Months Ended March 31, |
|||||||
Earnings Caption |
2015 |
2014 |
||||||
(Millions) |
||||||||
Oil, gas and NGL commodity derivatives |
Oil, gas and NGL derivatives |
$ |
294 |
$ |
(320) | |||
Midstream commodity derivatives |
Marketing and midstream revenues |
2 | (1) | |||||
Interest rate derivatives |
Other nonoperating items |
1 |
- |
|||||
Foreign currency derivatives |
Other nonoperating items |
133 | 14 | |||||
Net gains (losses) recognized in comprehensive statements of earnings |
$ |
430 |
$ |
(307) |
Balance Sheet Caption |
March 31, 2015 |
December 31, 2014 |
||||||
(Millions) |
||||||||
Asset derivatives: |
||||||||
Oil, gas and NGL commodity derivatives |
Derivatives, at fair value |
$ |
1,668 |
$ |
1,967 | |||
Oil, gas and NGL commodity derivatives |
Other long-term assets |
2 | 1 | |||||
Midstream commodity derivatives |
Derivatives, at fair value |
14 | 17 | |||||
Midstream commodity derivatives |
Other long-term assets |
8 | 10 | |||||
Interest rate derivatives |
Derivatives, at fair value |
2 | 1 | |||||
Interest rate derivatives |
Other long-term assets |
1 |
- |
|||||
Foreign currency derivatives |
Derivatives, at fair value |
22 | 8 | |||||
Total asset derivatives |
$ |
1,717 |
$ |
2,004 | ||||
Liability derivatives: |
||||||||
Oil, gas and NGL commodity derivatives |
Other current liabilities |
$ |
45 |
$ |
25 | |||
Oil, gas and NGL commodity derivatives |
Other long-term liabilities |
7 | 26 | |||||
Midstream commodity derivatives |
Other current liabilities |
3 | 3 | |||||
Midstream commodity derivatives |
Other long-term liabilities |
2 | 2 | |||||
Interest rate derivatives |
Other current liabilities |
1 | 1 | |||||
Total liability derivatives |
$ |
58 |
$ |
57 |
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) |
|||||||||||
Q2-Q4 2015 |
106,442 |
$ |
91.07 |
31,500 |
$ |
89.67 |
$ |
97.84 |
28,000 |
$ |
116.43 |
|||||||
Q1-Q4 2016 |
- |
$ |
- |
- |
$ |
- |
$ |
- |
18,500 |
$ |
103.11 |
Oil Basis Swaps |
|||||||
Period |
Index |
Volume (Bbls/d) |
Weighted Average Differential to WTI ($/Bbl) |
||||
Q2-Q4 2015 |
Western Canadian Select |
36,320 |
$ |
(16.35) | |||
Q2-Q4 2015 |
West Texas Sour |
8,000 |
$ |
(3.68) | |||
Q2-Q4 2015 |
Midland Sweet |
16,331 |
$ |
(2.84) | |||
Q1-Q4 2016 |
West Texas Sour |
1,000 |
$ |
(1.50) |
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) |
|||||||||||
Q2-Q4 2015 |
250,000 |
$ |
4.32 |
391,964 |
$ |
3.74 |
$ |
4.04 |
550,000 |
$ |
5.09 |
|||||||
Q1-Q4 2016 |
- |
$ |
- |
- |
$ |
- |
$ |
- |
400,000 |
$ |
5.00 |
Natural Gas Basis Swaps |
|||||||
Period |
Index |
Volume (MMBtu/d) |
Weighted Average Differential to Henry Hub ($/MMBtu) |
||||
Q2-Q4 2015 |
Panhandle Eastern Pipe Line |
100,000 |
$ |
(0.28) |
|||
Q2-Q4 2015 |
El Paso Natural Gas |
70,000 |
$ |
(0.11) |
|||
Q2-Q4 2015 |
Houston Ship Channel |
200,000 |
$ |
0.01 |
|||
Q1-Q4 2016 |
Panhandle Eastern Pipe Line |
40,000 |
$ |
(0.33) |
|||
Q1-Q4 2016 |
El Paso Natural Gas |
15,000 |
$ |
(0.13) |
|||
Q1-Q4 2016 |
Houston Ship Channel |
30,000 |
$ |
0.11 |
Period |
Product |
Volume (Total) |
Weighted Average Price Paid |
Weighted Average Price Received |
|||||||
Q2 2015-Q4 2016 |
Ethane |
1,113 |
MBbls |
$ |
0.28/gal |
Index |
|||||
Q2 2015-Q4 2016 |
Propane |
1,170 |
MBbls |
Index |
$ |
0.95/gal |
|||||
Q2 2015-Q1 2016 |
Normal Butane |
117 |
MBbls |
Index |
$ |
0.78/gal |
|||||
Q2 2015-Q1 2016 |
Natural Gasoline |
101 |
MBbls |
Index |
$ |
1.32/gal |
Notional |
Rate Received |
Rate Paid |
Expiration |
||||
(Millions) |
|||||||
$ |
100 |
Three Month LIBOR |
0.92% |
December 2016 |
|||
$ |
100 |
1.76% |
Three Month LIBOR |
January 2019 |
Forward Contract |
|||||||||
Currency |
Contract Type |
CAD Notional |
Weighted Average Fixed Rate Received |
Expiration |
|||||
(Millions) |
(CAD-USD) |
||||||||
Canadian Dollar |
Sell |
$ |
1,884 |
0.799 |
June 2015 |
|
Three Months Ended March 31, 2015 |
|||||||
Gross |
Net of Taxes |
||||||
(Millions) |
|||||||
U.S. oil and gas assets |
$ |
5,458 |
$ |
3,466 | |||
Other assets |
2 | 1 | |||||
Total asset impairments |
$ |
5,460 |
$ |
3,467 |
|
Three Months Ended March 31, |
|||||||
2015 |
2014 |
||||||
Total income tax expense (benefit) (millions) |
$ |
(2,035) |
$ |
231 | |||
U.S. statutory income tax rate |
(35)% |
35% | |||||
Taxation on Canadian operations |
0% |
(3)% |
|||||
State income taxes |
(1)% |
1% | |||||
Taxes on General Partner formation |
0% | 9% | |||||
Other |
0% |
(1)% |
|||||
Effective income tax rate |
(36)% |
41% |
|
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Foreign currency translation: |
||||||
Beginning accumulated foreign currency translation |
$ |
983 |
$ |
1,448 | ||
Change in cumulative translation adjustment |
(337) | (313) | ||||
Income tax benefit |
35 | 15 | ||||
Ending accumulated foreign currency translation |
681 | 1,150 | ||||
Pension and postretirement benefit plans: |
||||||
Beginning accumulated pension and postretirement benefits |
(204) | (180) | ||||
Recognition of net actuarial loss and prior service cost in earnings (1) |
6 | 5 | ||||
Income tax expense |
(2) | (2) | ||||
Ending accumulated pension and postretirement benefits |
(200) | (177) | ||||
Accumulated other comprehensive earnings, net of tax |
$ |
481 |
$ |
973 |
__________________________
(1) These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of general and administrative expenses on the accompanying consolidated comprehensive statements of earnings. See Note 14 for additional details
|
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Net change in working capital accounts: |
||||||
Accounts receivable |
$ |
404 |
$ |
(455) | ||
Income taxes receivable |
425 | 31 | ||||
Other current assets |
(93) | (58) | ||||
Accounts payable |
(15) | 20 | ||||
Revenues and royalties payable |
(236) | 391 | ||||
Other current liabilities |
(270) | (81) | ||||
Net change in working capital |
$ |
215 |
$ |
(152) | ||
Interest paid (net of capitalized interest) |
$ |
118 |
$ |
137 | ||
Income taxes paid (received) |
$ |
(414) |
$ |
38 |
|
March 31, 2015 |
December 31, 2014 |
|||||
(Millions) |
||||||
Oil, gas and NGL sales |
$ |
556 |
$ |
723 | ||
Joint interest billings |
451 | 475 | ||||
Marketing and midstream revenues |
620 | 706 | ||||
Other |
50 | 71 | ||||
Gross accounts receivable |
1,677 | 1,975 | ||||
Allowance for doubtful accounts |
(14) | (16) | ||||
Net accounts receivable |
$ |
1,663 |
$ |
1,959 |
|
March 31, 2015 |
December 31, 2014 |
|||||
(Millions) |
||||||
Customer relationships |
$ |
926 |
$ |
569 | ||
Accumulated amortization |
(48) | (36) | ||||
Net intangibles |
$ |
878 |
$ |
533 |
Year |
Amortization Amount |
||
(Millions) |
|||
2015 |
$ |
52 | |
2016 |
$ |
67 | |
2017 |
$ |
67 | |
2018 |
$ |
67 | |
2019 |
$ |
66 |
|
March 31, 2015 |
December 31, 2014 |
||||
(Millions) |
|||||
Devon debt |
|||||
Commercial paper |
$ |
948 |
$ |
932 | |
Floating rate due December 15, 2015 |
500 | 500 | |||
Floating rate due December 15, 2016 |
350 | 350 | |||
8.25% due July 1, 2018 |
125 | 125 | |||
2.25% due December 15, 2018 |
750 | 750 | |||
6.30% due January 15, 2019 |
700 | 700 | |||
4.00% due July 15, 2021 |
500 | 500 | |||
3.25% due May 15, 2022 |
1,000 | 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 | 750 | |||
Net discount on debentures and notes |
(18) | (18) | |||
Total Devon debt |
9,255 | 9,239 | |||
EnLink debt |
|||||
Credit facilities |
709 | 237 | |||
2.70% due April 1, 2019 |
400 | 400 | |||
7.125% due June 1, 2022 |
163 | 163 | |||
4.40% due April 1, 2024 |
550 | 550 | |||
5.60% due April 1, 2044 |
350 | 350 | |||
5.05% due April 1, 2045 |
300 | 300 | |||
Net premium on debentures and notes |
22 | 23 | |||
Total EnLink debt |
2,494 | 2,023 | |||
Total debt |
11,749 | 11,262 | |||
Less amount classified as short-term debt (1) |
1,448 | 1,432 | |||
Total long-term debt |
$ |
10,301 |
$ |
9,830 |
____________________________
(1) |
Short-term debt as of March 31, 2015 consists of $948 million of commercial paper and $500 million floating rate due on December 15, 2015. Short-term debt as of December 31, 2014 consists of $932 million of commercial paper and $500 million floating rate due on December 15, 2015. |
|
Three Months Ended March 31, |
||||||
2015 |
2014 |
|||||
(Millions) |
||||||
Asset retirement obligations as of beginning of period |
$ |
1,399 |
$ |
2,228 | ||
Liabilities incurred |
23 | 45 | ||||
Liabilities settled |
(13) | (14) | ||||
Revision of estimated obligation |
62 | 69 | ||||
Liabilities assumed by others |
(12) | (9) | ||||
Accretion expense on discounted obligation |
19 | 29 | ||||
Foreign currency translation adjustment |
(53) | (51) | ||||
Asset retirement obligations as of end of period |
1,425 | 2,297 | ||||
Less current portion |
52 | 79 | ||||
Asset retirement obligations, long-term |
$ |
1,373 |
$ |
2,218 |
|
Pension Benefits |
|||||||
Three Months Ended March 31, |
|||||||
2015 |
2014 |
||||||
(Millions) |
|||||||
Service cost |
$ |
8 |
$ |
7 | |||
Interest cost |
13 | 14 | |||||
Expected return on plan assets |
(15) | (13) | |||||
Amortization of prior service cost (1) |
1 | 1 | |||||
Net actuarial loss (1) |
5 | 4 | |||||
Net periodic benefit cost (2) |
$ |
12 |
$ |
13 |
__________________________
(1) These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period.
(2) Net periodic benefit cost is a component of general and administrative expenses on the accompanying consolidated comprehensive statements of earnings
|
Fair Value Measurements Using: |
|||||||||||||||
Carrying |
Total Fair |
Level 1 |
Level 2 |
Level 3 |
|||||||||||
Amount |
Value |
Inputs |
Inputs |
Inputs |
|||||||||||
(Millions) |
|||||||||||||||
March 31, 2015 assets (liabilities): |
|||||||||||||||
Cash equivalents |
$ |
1,321 |
$ |
1,321 |
$ |
716 |
$ |
605 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
1,670 |
$ |
1,670 |
$ |
- |
$ |
1,670 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
(52) |
$ |
(52) |
$ |
- |
$ |
(52) |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
22 |
$ |
22 |
$ |
- |
$ |
22 |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
(5) |
$ |
(5) |
$ |
- |
$ |
(5) |
$ |
- |
|||||
Interest rate derivatives |
$ |
3 |
$ |
3 |
$ |
- |
$ |
3 |
$ |
- |
|||||
Interest rate derivatives |
$ |
(1) |
$ |
(1) |
$ |
- |
$ |
(1) |
$ |
- |
|||||
Foreign currency derivatives |
$ |
22 |
$ |
22 |
$ |
- |
$ |
22 |
$ |
- |
|||||
Debt |
$ |
(11,749) |
$ |
(13,217) |
$ |
- |
$ |
(13,217) |
$ |
- |
|||||
Capital lease obligations |
$ |
(19) |
$ |
(19) |
$ |
- |
$ |
(19) |
$ |
- |
|||||
December 31, 2014 assets (liabilities): |
|||||||||||||||
Cash equivalents |
$ |
950 |
$ |
950 |
$ |
340 |
$ |
610 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
1,968 |
$ |
1,968 |
$ |
- |
$ |
1,968 |
$ |
- |
|||||
Oil, gas and NGL commodity derivatives |
$ |
(51) |
$ |
(51) |
$ |
- |
$ |
(51) |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
27 |
$ |
27 |
$ |
- |
$ |
27 |
$ |
- |
|||||
Midstream commodity derivatives |
$ |
(5) |
$ |
(5) |
$ |
- |
$ |
(5) |
$ |
- |
|||||
Interest rate derivatives |
$ |
1 |
$ |
1 |
$ |
- |
$ |
1 |
$ |
- |
|||||
Interest rate derivatives |
$ |
(1) |
$ |
(1) |
$ |
- |
$ |
(1) |
$ |
- |
|||||
Foreign currency derivatives |
$ |
8 |
$ |
8 |
$ |
- |
$ |
8 |
$ |
- |
|||||
Debt |
$ |
(11,262) |
$ |
(12,472) |
$ |
- |
$ |
(12,472) |
$ |
- |
|||||
Capital lease obligations |
$ |
(20) |
$ |
(20) |
$ |
- |
$ |
(20) |
$ |
- |
|
U.S. |
Canada |
EnLink |
Eliminations |
Total |
|||||||||||
(Millions) |
|||||||||||||||
Three Months Ended March 31, 2015: |
|||||||||||||||
Revenues from external customers |
$ |
2,264 |
$ |
221 |
$ |
780 |
$ |
- |
$ |
3,265 | |||||
Intersegment revenues |
$ |
- |
$ |
- |
$ |
156 |
$ |
(156) |
$ |
- |
|||||
Depreciation, depletion and amortization |
$ |
713 |
$ |
127 |
$ |
90 |
$ |
- |
$ |
930 | |||||
Interest expense |
$ |
87 |
$ |
25 |
$ |
19 |
$ |
(12) |
$ |
119 | |||||
Asset impairments |
$ |
5,460 |
$ |
- |
$ |
- |
$ |
- |
$ |
5,460 | |||||
Earnings (loss) before income taxes |
$ |
(5,487) |
$ |
(172) |
$ |
35 |
$ |
- |
$ |
(5,624) | |||||
Income tax expense (benefit) |
$ |
(1,993) |
$ |
(53) |
$ |
11 |
$ |
- |
$ |
(2,035) | |||||
Net earnings (loss) |
$ |
(3,494) |
$ |
(119) |
$ |
24 |
$ |
- |
$ |
(3,589) | |||||
Net earnings attributable to noncontrolling interests |
$ |
- |
$ |
- |
$ |
10 |
$ |
- |
$ |
10 | |||||
Net earnings (loss) attributable to Devon |
$ |
(3,494) |
$ |
(119) |
$ |
14 |
$ |
- |
$ |
(3,599) | |||||
Property and equipment, net |
$ |
19,851 |
$ |
6,281 |
$ |
5,323 |
$ |
- |
$ |
31,455 | |||||
Total assets |
$ |
26,926 |
$ |
7,625 |
$ |
10,893 |
$ |
(102) |
$ |
45,342 | |||||
Capital expenditures |
$ |
1,369 |
$ |
224 |
$ |
489 |
$ |
- |
$ |
2,082 | |||||
Three Months Ended March 31, 2014: |
|||||||||||||||
Revenues from external customers |
$ |
2,616 |
$ |
684 |
$ |
425 |
$ |
- |
$ |
3,725 | |||||
Intersegment revenues |
$ |
- |
$ |
- |
$ |
298 |
$ |
(298) |
$ |
- |
|||||
Depreciation, depletion and amortization |
$ |
497 |
$ |
194 |
$ |
48 |
$ |
- |
$ |
739 | |||||
Interest expense |
$ |
100 |
$ |
19 |
$ |
5 |
$ |
(9) |
$ |
115 | |||||
Earnings before income taxes |
$ |
396 |
$ |
92 |
$ |
72 |
$ |
- |
$ |
560 | |||||
Income tax expense |
$ |
186 |
$ |
21 |
$ |
24 |
$ |
- |
$ |
231 | |||||
Net earnings |
$ |
210 |
$ |
71 |
$ |
48 |
$ |
- |
$ |
329 | |||||
Net earnings attributable to noncontrolling interests |
$ |
- |
$ |
- |
$ |
5 |
$ |
- |
$ |
5 | |||||
Net earnings attributable to Devon |
$ |
210 |
$ |
71 |
$ |
43 |
$ |
- |
$ |
324 | |||||
Property and equipment, net |
$ |
24,857 |
$ |
8,369 |
$ |
4,203 |
$ |
- |
$ |
37,429 | |||||
Total assets |
$ |
30,085 |
$ |
13,384 |
$ |
9,354 |
$ |
(58) |
$ |
52,765 | |||||
Capital expenditures |
$ |
7,089 |
$ |
442 |
$ |
82 |
$ |
- |
$ |
7,613 | |||||
Year Ended December 31, 2014: |
|||||||||||||||
Property and equipment, net |
$ |
24,572 |
$ |
6,790 |
$ |
4,934 |
$ |
- |
$ |
36,296 | |||||
Total assets |
$ |
32,147 |
$ |
8,517 |
$ |
10,097 |
$ |
(124) |
$ |
50,637 |
|
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