DEVON ENERGY CORP/DE, 10-Q filed on 8/1/2012
Quarterly Report
Document And Entity Information
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Jul. 18, 2012
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2012 
 
Amendment Flag
false 
 
Entity Registrant Name
DEVON ENERGY CORP/DE 
 
Entity Central Index Key
0001090012 
 
Current Fiscal Year End Date
--12-31 
 
Document Fiscal Year Focus
2012 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Fiscal Period Focus
Q2 
 
Entity Common Stock, Shares Outstanding
 
404.5 
Consolidated Comprehensive Statements Of Earnings (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Revenues:
 
 
 
 
Oil, gas and NGL sales
$ 1,617 
$ 2,200 
$ 3,532 
$ 4,060 
Oil, gas and NGL derivatives
665 
416 
810 
248 
Marketing and midstream revenues
277 
604 
714 
1,059 
Total revenue
2,559 
3,220 
5,056 
5,367 
Expenses and other, net:
 
 
 
 
Lease operating expenses
513 
453 
1,027 
877 
Marketing and midstream operating costs and expenses
209 
456 
534 
789 
Depreciation, depletion and amortization
684 
550 
1,364 
1,056 
General and administrative expenses
176 
135 
344 
265 
Taxes other than income taxes
100 
120 
202 
228 
Interest expense
99 
85 
186 
166 
Restructuring costs
 
 
Other, net
44 
37 
54 
27 
Total expenses and other, net
1,825 
1,842 
3,711 
3,409 
Earnings from continuing operations before income taxes
734 
1,378 
1,345 
1,958 
Current income tax expense (benefit)
31 
36 
49 
(53)
Deferred income tax expense
226 
1,158 
405 
1,438 
Earnings from continuing operations
477 
184 
891 
573 
Earnings (loss) from discontinued operations, net of tax
 
2,559 
(21)
2,586 
Net earnings
477 
2,743 
870 
3,159 
Basic net earnings per share:
 
 
 
 
Basic earnings from continuing operations per share
$ 1.18 
$ 0.44 
$ 2.20 
$ 1.35 
Basic earnings (loss) from discontinued operations per share
 
$ 6.06 
$ (0.05)
$ 6.09 
Basic net earnings per share
$ 1.18 
$ 6.50 
$ 2.15 
$ 7.44 
Diluted net earnings per share:
 
 
 
 
Diluted earnings from continuing operations per share
$ 1.18 
$ 0.43 
$ 2.20 
$ 1.34 
Diluted earnings (loss) from discontinued operations per share
 
$ 6.05 
$ (0.05)
$ 6.07 
Diluted net earnings per share
$ 1.18 
$ 6.48 
$ 2.15 
$ 7.41 
Comprehensive earnings:
 
 
 
 
Net earnings
477 
2,743 
870 
3,159 
Other comprehensive earnings, net of tax:
 
 
 
 
Foreign currency translation
(171)
65 
(19)
250 
Pension and postretirement plans
11 
Other comprehensive earnings, net of tax
(166)
70 
(10)
261 
Comprehensive earnings
$ 311 
$ 2,813 
$ 860 
$ 3,420 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Cash flows from operating activities:
 
 
Net earnings
$ 870 
$ 3,159 
Loss (earnings) from discontinued operations, net of tax
21 
(2,586)
Adjustments to reconcile earnings from continuing operations to net cash from operating activities:
 
 
Depreciation, depletion and amortization
1,364 
1,056 
Deferred income tax expense
405 
1,438 
Unrealized change in fair value of financial instruments
(362)
(74)
Other noncash charges
114 
82 
Net decrease (increase) in working capital
22 
(89)
Decrease in long-term other assets
45 
Decrease in long-term other liabilities
(11)
(201)
Cash from operating activities - continuing operations
2,426 
2,830 
Cash from operating activities - discontinued operations
26 
(20)
Net cash from operating activities
2,452 
2,810 
Cash flows from investing activities:
 
 
Capital expenditures
(4,267)
(3,720)
Purchases of short-term investments
(1,471)
(4,520)
Redemptions of short-term investments
2,030 
1,298 
Proceeds from property and equipment divestitures
864 
Other
14 
(32)
Cash from investing activities - continuing operations
(2,830)
(6,969)
Cash from investing activities - discontinued operations
58 
3,170 
Net cash from investing activities
(2,772)
(3,799)
Cash flows from financing activities:
 
 
Proceeds from borrowings of long-term debt, net of issuance costs
2,465 
 
Net short-term (repayments) borrowings
(1,498)
2,340 
Credit facility borrowings
750 
 
Credit facility repayments
(750)
 
Proceeds from stock option exercises
22 
96 
Repurchases of common stock
 
(1,290)
Dividends paid on common stock
(162)
(140)
Excess tax benefits related to share-based compensation
12 
Net cash from financing activities
828 
1,018 
Effect of exchange rate changes on cash
38 
32 
Net increase in cash and cash equivalents
546 
61 
Cash and cash equivalents at beginning of period
5,555 
3,290 
Cash and cash equivalents at end of period
$ 6,101 
$ 3,351 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and cash equivalents
$ 6,101 
$ 5,555 
Short-term investments
944 
1,503 
Accounts receivable
1,005 
1,379 
Other current assets
1,167 
868 
Total current assets
9,217 
9,305 
Oil and gas, based on full cost accounting:
 
 
Subject to amortization
64,965 
61,696 
Not subject to amortization
4,062 
3,982 
Total oil and gas
69,027 
65,678 
Other
5,545 
5,098 
Total property and equipment, at cost
74,572 
70,776 
Less accumulated depreciation, depletion and amortization
(47,331)
(46,002)
Property and equipment, net
27,241 1
24,774 
Goodwill
6,007 
6,013 
Other long-term assets
1,005 
1,025 
Total assets
43,470 
41,117 
Current liabilities:
 
 
Accounts payable
1,510 
1,471 
Revenues and royalties payable
591 
678 
Short-term debt
2,148 
3,811 
Other current liabilities
712 
778 
Total current liabilities
4,961 
6,738 
Long-term debt
8,455 
5,969 
Asset retirement obligations
1,942 
1,496 
Other long-term liabilities
799 
721 
Deferred income taxes
5,088 
4,763 
Stockholders' equity:
 
 
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 404.5 million and 404.1 million shares in 2012 and 2011, respectively
40 
40 
Additional paid-in capital
3,604 
3,507 
Retained earnings
17,016 
16,308 
Accumulated other comprehensive earnings
1,565 
1,575 
Total stockholders' equity
22,225 
21,430 
Commitments and contingencies (Note 17)
   
   
Total liabilities and stockholders' equity
$ 43,470 
$ 41,117 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2012
Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
 
 
Common stock, par value (in dollars per share)
$ 0.10 
$ 0.10 
Common stock, shares authorized (in shares)
1,000,000,000 
1,000,000,000 
Common stock, shares issued (in shares)
404,500,000 
404,100,000 
Consolidated Statements Of Stockholders' Equity (USD $)
In Millions
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Earnings [Member]
Treasury Stock [Member]
Total
Balance, at Dec. 31, 2010
$ 43 
$ 5,601 
$ 11,882 
$ 1,760 
$ (33)
$ 19,253 
Balance, shares, at Dec. 31, 2010
432 
 
 
 
 
 
Net earnings
 
 
3,159 
 
 
3,159 
Other comprehensive earnings, net of tax
 
 
 
261 
 
261 
Stock option exercises
 
96 
 
 
 
96 
Stock option exercises, shares
 
 
 
 
 
Common stock repurchased
 
 
 
 
(1,285)
(1,285)
Common stock retired
(1)
(1,292)
 
 
1,293 
 
Common stock retired, shares
(16)
 
 
 
 
 
Common stock dividends
 
 
(140)
 
 
(140)
Share-based compensation
 
72 
 
 
 
72 
Share-based compensation tax benefits
 
12 
 
 
 
12 
Balance, at Jun. 30, 2011
42 
4,489 
14,901 
2,021 
(25)
21,428 
Balance, shares, at Jun. 30, 2011
418 
 
 
 
 
 
Balance, at Dec. 31, 2011
40 
3,507 
16,308 
1,575 
 
21,430 
Balance, shares, at Dec. 31, 2011
404 
 
 
 
 
 
Net earnings
 
 
870 
 
 
870 
Other comprehensive earnings, net of tax
 
 
 
(10)
 
(10)
Stock option exercises
 
22 
 
 
 
22 
Stock option exercises, shares
 
 
 
 
 
Common stock repurchased
 
 
 
 
(1)
(1)
Common stock retired
 
(1)
 
 
 
Common stock dividends
 
 
(162)
 
 
(162)
Share-based compensation
 
75 
 
 
 
75 
Share-based compensation tax benefits
 
 
 
 
Balance, at Jun. 30, 2012
$ 40 
$ 3,604 
$ 17,016 
$ 1,565 
 
$ 22,225 
Balance, shares, at Jun. 30, 2012
405 
 
 
 
 
 
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies

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 United States Securities and Exchange Commission. 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 have been omitted. The accompanying financial statements and notes should be read in conjunction with the accompanying financial statements and notes included in Devon's 2011 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 to a fair statement of Devon's financial position as of June 30, 2012 and Devon's results of operations and cash flows for the three-month and six-month periods ended June 30, 2012 and 2011.

 

Accounts Payable

 

Included in accounts payable at June 30, 2012, are liabilities of $99 million representing the amount by which checks issued, but not presented to Devon’s banks for collection, exceed balances in applicable bank accounts. Changes in these liabilities are reflected in cash flows from financing activities.

Derivative Financial Instruments
Derivative Financial Instruments

2.   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. These instruments are used to manage the inherent uncertainty of future revenues due to commodity price volatility and typically 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 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 June 30, 2012, Devon holds $107 million cash collateral. Such amount 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.

 

Commodity Derivatives

 

As of June 30, 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)

Q3-Q4 2012.

54,000

$105.90

74,000

$89.71

$123.09

19,500

$95.00

Q1-Q4 2013.

31,000

$104.13

45,000

$91.30

$116.23

6,000

$120.00

Q1-Q4 2014.

4,000

$100.49

2,000

$90.00

$111.13

6,000

$120.00

 

As of June 30, 2012, Devon had the following open natural gas derivative positions. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub 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)

Q3-Q4 2012.

573,370

$4.04

991,685

$3.71

$4.40

487,500

$6.00

Q1-Q4 2013.

150,000

$4.50

Q1-Q4 2014.

150,000

$5.00

 

Interest Rate Derivatives

 

As of June 30, 2012, Devon had the following open interest rate derivative positions:

 

 

 

 

 

 

Notional

Fixed Rate

Received

Variable

Rate Paid

 

Expiration

(In millions)

 

 

 

$           100

1.90%

Federal funds rate

August 2012

3.88%

Federal funds rate

July 2013

3.65%

 

 

 

Foreign Exchange Derivatives

 

As of June 30, 2012, Devon had the following open foreign exchange rate derivative position:

 

 

 

 

 

 

Forward Contract

 

Currency

Contract Type

CAD

Notional

Fixed Rate

Received

 

Expiration

 

 

(In millions)

(CAD-USD)

 

Canadian Dollar

Sell

$           755

0.9708

September 2012

 

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. Cash settlements and unrealized gains and losses on fair value changes associated with Devon’s commodity derivatives are presented in the “Oil, gas and NGL derivatives” caption in the accompanying comprehensive statements of earnings. Cash settlements and unrealized gains and losses on fair value changes associated with Devon’s interest rate and foreign currency derivatives are presented in the “Other, net” caption in the accompanying comprehensive statements of earnings.

 

 

 

 

 

 

 

Three Months

Ended June 30,

Six Months

Ended June 30,

 

2012

2011

2012

2011

 

(In millions)

Cash settlements:

 

 

 

 

Commodity derivatives.............................................................................

$      267

$         59

$      425

$      145

Interest rate derivatives.............................................................................

          (11)

             5

            (1)

           21

Foreign currency derivatives.....................................................................

           20

         

             9

         

Total cash settlements.............................................................................

         276

           64

         433

         166

Unrealized gains (losses):

 

 

 

 

Commodity derivatives.............................................................................

         398

         357

         385

         103

Interest rate derivatives.............................................................................

            (5)

          (30)

          (15)

          (29)

Foreign currency derivatives.....................................................................

            (9)

          

            (8)

          

Total unrealized gains.............................................................................

         384

         327

         362

           74

Net gain recognized on comprehensive statements of earnings...........

$      660

$      391

$      795

$      240

 

The following table presents the derivative fair values included in the accompanying balance sheets.

 

 

 

 

 

 

Balance Sheet Caption

June 30, 2012

December 31, 2011

 

 

(In millions)

Asset derivatives:

 

 

 

Commodity derivatives...........

Other current assets..................................

$                    759

$                    611

Commodity derivatives...........

Other long-term assets.............................

                       209

                         17

Interest rate derivatives............ .........................................................

Other current assets..................................

                         28

                         30

Interest rate derivatives............ .........................................................

Other long-term assets.............................

                         22

Total asset derivatives......................................................................................

$                 1,005

$                    680

Liability derivatives:

 

 

 

Commodity derivatives...........

Other current liabilities.............................

$                       10

$                       82

Commodity derivatives...........

Other long-term liabilities........................

                         27

                        

Foreign exchange derivatives..

Other current liabilities.............................

                           8

                        

 Total liability derivatives.................................................................................

$                       45

$                       82

Restructuring Costs
Restructuring Costs

3.   Restructuring Costs 

 

In the fourth quarter of 2009, Devon announced plans to divest its offshore assets. As of June 30, 2012, Devon had divested all of its U.S. Offshore and International assets. Since inception of the plan, Devon has incurred $202 million of restructuring costs associated with these divestitures.

 

The schedule below summarizes restructuring costs presented in the accompanying comprehensive statements of earnings. Restructuring costs related to Devon’s discontinued operations totaled $(8) million and $(2) million in the second quarter and first six months of June 30, 2011. 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 the six months ended June 30, 2012.

 

 

 

 

 

 

 

Three Months

Ended June 30,

Six Months

Ended June 30,

 

2012

2011

2012

2011

 

(In millions)

Lease obligations...........................................................................................

$        

$           2

$        

$          (2)

Asset impairments.........................................................................................

          

             2

          

             2

Other................................................................................................................

          

             2

          

             1

Restructuring costs.....................................................................................

$        

$           6

$        

$           1

 

The schedule below summarizes Devon’s restructuring liabilities. Devon’s restructuring liabilities for cash severance related to its discontinued operations totaled $10 million at June 30, 2011 and are not included in the schedule below.

 

 

 

 

 

 

 

Other Current Liabilities

Other

Long-Term Liabilities

Total

 

(In millions)

Balance as of December 31, 2011.............................................................

$           29

$          16

$            45

Lease obligations settled............................................................................

              (9)

              (1)

             (10)

Cash severance settled...............................................................................

              (5)

            

               (5)

Balance as of June 30, 2012.......................................................................

$           15

$          15

$            30

 

 

 

 

Balance as of December 31, 2010.............................................................

$           31

$          51

$            82

Lease obligations settled............................................................................

              (1)

              (7)

               (8)

Cash severance settled...............................................................................

            (16)

            

             (16)

Other..............................................................................................................

             

              (1)

               (1)

Balance as of June 30, 2011.......................................................................

$           14

$          43

$            57

Other, Net
Other, Net

4.   Other, net 

 

The components of other, net in the accompanying comprehensive statements of earnings include the following:

 

 

 

 

 

 

 

Three Months

Ended June 30,

Six Months

Ended June 30,

 

2012

2011

2012

2011

 

(In millions)

Accretion of asset retirement obligations..................................................

$         28

$         23

$         55

$         46

Interest rate swaps – cash settlements......................................................

           11

            (5)

             1

          (21)

Interest rate swaps – unrealized fair value changes...............................

             5

           30

           15

           29

Interest income..............................................................................................

            (9)

            (4)

          (16)

            (6)

Other................................................................................................................

             9

            (7)

            (1)

          (21)

Other, net......................................................................................................

$         44

$         37

$         54

$         27

Earnings Per Share
Earnings Per Share

5.   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)

Three Months Ended June 30, 2012:

                 

                

                

Earnings from continuing operations..............................................

$           477

             404

 

Attributable to participating securities............................................

 

Basic earnings per share....................................................................

             471

             400

$             1.18

Dilutive effect of potential common shares issuable...................

 

Diluted earnings per share.................................................................

$             1.18

 

 

 

 

Three Months Ended June 30, 2011:

                   

                   

                   

Earnings from continuing operations..............................................

$           184

             422

 

Attributable to participating securities............................................

 

Basic earnings per share....................................................................

             182

             417

$             0.44

Dilutive effect of potential common shares issuable...................

 

Diluted earnings per share.................................................................

$             0.43

 

 

 

 

Six Months Ended June 30, 2012:

                   

                   

                   

Earnings from continuing operations..............................................

$           891

             404

 

Attributable to participating securities............................................

 

Basic earnings per share....................................................................

             881

             400

$             2.20

Dilutive effect of potential common shares issuable...................

 

Diluted earnings per share.................................................................

$             2.20

 

 

 

 

Six Months Ended June 30, 2011:

                   

                   

                   

Earnings from continuing operations..............................................

$           573

             425

 

Attributable to participating securities............................................

 

Basic earnings per share....................................................................

             567

             420

$             1.35

Dilutive effect of potential common shares issuable...................

 

Diluted earnings per share.................................................................

$             1.34

 

Certain options to purchase shares of Devon's common stock are excluded from the dilution calculation because the options are antidilutive. During the three-month and six-month periods ended June 30, 2012, 8.9 million shares and 6.7 million shares, respectively, were excluded from the diluted earnings per share calculations. During the three-month and six-month periods ended June 30, 2011, 3.1 million shares were excluded from the diluted earnings per share calculations.

Other Comprehensive Earnings
Other Comprehensive Earnings

6.   Other Comprehensive Earnings

 

Components of other comprehensive earnings consist of the following:

 

 

 

 

 

 

 

Three Months

Ended June 30,

Six Months

Ended June 30,

 

2012

2011

2012

2011

 

(In millions)

Foreign currency translation:

 

 

 

 

Beginning accumulated foreign currency translation..........................

$   1,954

$   2,178

$   1,802

$   1,993

Change in cumulative translation adjustment......................................

       (179)

           67

          (20)

         262

Income tax expense...................................................................................

             8

            (2)

             1

          (12)

Ending accumulated foreign currency translation................................

     1,783

     2,243

     1,783

     2,243

Pension and postretirement benefit plans:

 

 

 

 

Beginning accumulated pension and postretirement benefits............

       (223)

       (227)

       (227)

       (233)

Recognition of net actuarial loss and prior service cost in earnings..

             7

             8

           13

           17

Income tax expense...................................................................................

            (2)

            (3)

            (4)

            (6)

Ending accumulated pension and postretirement benefits.................

       (218)

       (222)

       (218)

       (222)

Accumulated other comprehensive earnings, net of tax........................

$   1,565

$   2,021

$   1,565

$   2,021

Supplemental Information To Statements Of Cash Flows
Supplemental Information To Statements Of Cash Flows

7.   Supplemental Information to Statements of Cash Flows

 

 

 

 

 

Six Months Ended June 30,

 

2012

2011

 

(In millions)

Net change in working capital:

 

 

Decrease (increase) in accounts receivable..............................................

$                  384

$                 (100)

Increase in other current assets..................................................................

                   (191)

                      (41)

Increase in accounts payable.....................................................................

                       13

                         9

(Decrease) increase in revenues and royalties payable.........................

                   (139)

                     130

Decrease in other current liabilities............................................................

                      (45)

                      (87)

Net decrease (increase) in working capital..................................................

$                     22

 

 

 

Supplementary cash flow data – total operations:

 

 

Interest paid (net of capitalized interest)..................................................

$                  169

$                  160

Income taxes paid (received).....................................................................

$                     88

$                 (125)

Short-Term Investments
Short-Term Investments

8.   Short-Term Investments

 

The components of short-term investments include the following:

 

 

 

 

 

June 30, 2012

December 31, 2011

 

(In millions)

Canadian treasury, agency and provincial securities...............................

$                  644

$               1,155

U.S. treasuries...................................................................................................

                     300

                     201

Other..................................................................................................................

                      

                     147

Short-term investments...............................................................................

$                  944

$               1,503

Accounts Receivable
Accounts Receivable

9.   Accounts Receivable

 

The components of accounts receivable include the following:

 

 

 

 

 

June 30, 2012

December 31, 2011

 

(In millions)

Oil, gas and NGL sales....................................................................................

$                  668

$                  928

Joint interest billings........................................................................................

                     199

                     247

Marketing and midstream revenues............................................................

                     105

                     174

Other..................................................................................................................

                       47

                       39

Gross accounts receivable...........................................................................

                 1,019

                 1,388

Allowance for doubtful accounts.................................................................

                      (14)

                        (9)

Net accounts receivable..............................................................................

$               1,005

$               1,379

Other Current Assets
Other Current Assets

10. Other Current Assets 

 

The components of other current assets include the following: 

 

 

 

 

 

 

(In millions)

Derivative financial instruments..................................................................

$                  787

$                  641

Inventories........................................................................................................

                     220

                     102

Income taxes receivable................................................................................

                       40

                       35

Current assets held for sale............................................................................

                      

                       21

Other..................................................................................................................

                     120

                       69

Other current assets......................................................................................

$               1,167

$                  868

Property And Equipment
Property And Equipment

11. Property and Equipment

 

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% 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.
Other Current Liabilities
Other Current Liablities

12. Other Current Liabilities

 

The components of other current liabilities include the following: 

 

 

 

 

 

June 30, 2012

December 31, 2011

 

(In millions)

Deferred income taxes payable....................................................................

$                  253

$                  172

Accrued interest...............................................................................................

                     142

                     131

Other..................................................................................................................

                     317

                     475

Other current liabilities.................................................................................

$                  712

$                  778

Debt
Debt

13. Debt 

 

Long-Term Debt

 

In May 2012, Devon issued $2.5 billion of senior notes that are unsecured and unsubordinated obligations of Devon. Devon used the net proceeds to repay outstanding commercial paper and credit facility borrowings. The schedule below summarizes the key terms of these notes ($ in millions).

 

 

 

 

 

 

1.875% due May 15, 2017............................................................................

$                  750

3.25% due May 15, 2022..............................................................................

                 1,000

4.75% due May 15, 2042..............................................................................

                     750

Discount and issuance costs..........................................................................

                      (35)

Net proceeds..................................................................................................

$               2,465

 

Commercial Paper

 

As of June 30, 2012, Devon had $2.1 billion of outstanding commercial paper at an average rate of 0.40 percent.

 

Credit Lines

 

On April 7, 2012, $0.46 billion of Devon’s Senior Credit Facility matured and was not extended. After the maturity, Devon maintains a $2.19 billion syndicated, unsecured revolving line of credit (the "Senior Credit Facility"). As of June 30, 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 less than 65 percent. As of June 30, 2012, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 23.8 percent.
Asset Retirement Obligations
Asset Retirement Obligations

14. Asset Retirement Obligations

 

The schedule below summarizes changes in Devon’s asset retirement obligations.

 

 

 

 

 

Six Months Ended June 30,

 

2012

2011

 

(In millions)

Asset retirement obligations as of beginning of period.............................

$               1,563

$               1,497

Liabilities incurred........................................................................................

                       33

                       23

Liabilities settled...........................................................................................

                      (34)

                      (39)

Revision of estimated obligation...............................................................

                     399

                       16

Accretion expense on discounted obligation...........................................

                       55

                       46

Foreign currency translation adjustment.................................................

                      (10)

                       28

Asset retirement obligations as of end of period.......................................

                 2,006

                 1,571

Less current portion........................................................................................

                       64

                       72

Asset retirement obligations, long-term.......................................................

$               1,942

$               1,499

 

During the first quarter of 2012, Devon recognized revisions to its asset retirement obligations totaling $399 million. The primary factor contributing to this revision was an overall increase in abandonment cost estimates for certain of its production operations facilities.
Retirement Plans
Retirement Plans