DEVON ENERGY CORP/DE, 10-Q filed on 11/4/2010
Quarterly Report
Document and Entity Information
In Millions
9 Months Ended
Sep. 30, 2010
Oct. 28, 2010
Document and Entity Information
 
 
Document Type
10-Q 
 
Document Period End Date
2010-09-30 
 
Amendment Flag
FALSE 
 
Entity Registrant Name
DEVON ENERGY CORP/DE 
 
Entity Central Index Key
0001090012 
 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Current Fiscal Year End Date
12/31 
 
Document Fiscal Year Focus
2010 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Fiscal Period Focus
Q3 
 
Entity Common Stock, Shares Outstanding (in shares)
 
432 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions
9 Months Ended
Sep. 30, 2010
Year Ended
Dec. 31, 2009
Current assets:
 
 
Cash and cash equivalents
$ 3,608 
$ 646 
Accounts receivable
1,028 
1,208 
Current assets held for sale
576 
657 
Other current assets
738 
481 
Total current assets
5,950 
2,992 
Oil and gas, based on full cost accounting:
 
 
Subject to amortization
53,563 
52,352 
Not subject to amortization
3,605 
4,078 
Total oil and gas
57,168 
56,430 
Other
4,330 
4,045 
Total property and equipment, at cost
61,498 
60,475 
Less accumulated depreciation, depletion and amortization
(43,299)
(41,708)
Property and equipment, net
18,199 
18,767 
Goodwill
5,977 
5,930 
Long-term assets held for sale
875 
1,250 
Other long-term assets
862 
747 
Total assets
31,863 
29,686 
Current liabilities:
 
 
Accounts payable - trade
1,192 
1,137 
Revenues and royalties due to others
517 
486 
Short-term debt
1,808 
1,432 
Current liabilities associated with assets held for sale
377 
234 
Other current liabilities
556 
513 
Total current liabilities
4,450 
3,802 
Long-term debt
3,821 
5,847 
Asset retirement obligations
1,394 
1,418 
Liabilities associated with assets held for sale
69 
213 
Other long-term liabilities
1,072 
937 
Deferred income taxes
2,405 
1,899 
Stockholders' equity:
 
 
Common stock of $0.10 par value. Authorized 1.0 billion shares; issued 432.2 million and 446.7 million shares in 2010 and 2009, respectively
43 
45 
Additional paid-in capital
5,714 
6,527 
Retained earnings
11,390 
7,613 
Accumulated other comprehensive earnings
1,512 
1,385 
Treasury stock, at cost. 0.1 million shares in 2010
(7)
 
Total stockholders' equity
18,652 
15,570 
Commitments and contingencies (Note 11)
 
 
Total liabilities and stockholders' equity
$ 31,863 
$ 29,686 
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $)
In Millions, except Per Share data
Sep. 30, 2010
Dec. 31, 2009
Statement of Financial Position
 
 
Common stock, par value (in dollars per share)
$ 0.1 
$ 0.1 
Common stock, shares authorized (in shares)
1,000 
1,000 
Common stock, shares issued (in shares)
432 
447 
Treasury stock, shares
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2010
2009
2010
2009
Revenues:
 
 
 
 
Oil, gas and NGL sales
$ 1,683 
$ 1,481 
$ 5,535 
$ 4,306 
Oil, gas and NGL derivatives
209 
23 
874 
190 
Marketing and midstream revenues
461 
344 
1,396 
1,074 
Total revenues
2,353 
1,848 
7,805 
5,570 
Expenses and other, net:
 
 
 
 
Lease operating expenses
415 
416 
1,271 
1,266 
Taxes other than income taxes
95 
81 
288 
249 
Marketing and midstream operating costs and expenses
336 
241 
1,013 
695 
Depreciation, depletion and amortization of oil and gas properties
397 
424 
1,249 
1,414 
Depreciation and amortization of non-oil and gas properties
66 
64 
192 
208 
Accretion of asset retirement obligations
21 
22 
71 
68 
General and administrative expenses
131 
136 
399 
472 
Restructuring costs
63 
 
55 
 
Interest expense
83 
90 
280 
263 
Interest-rate and other financial instruments
55 
(5)
121 
(20)
Reduction of carrying value of oil and gas properties
 
 
 
6,408 
Other, net
(8)
(92)
(34)
(61)
Total expenses and other, net
1,654 
1,377 
4,905 
10,962 
Earnings (loss) from continuing operations before income taxes
699 
471 
2,900 
(5,392)
Income tax expense (benefit):
 
 
 
 
Current
(310)
85 
696 
135 
Deferred
580 
349 
(2,217)
Total income tax expense (benefit)
270 
89 
1,045 
(2,082)
Earnings (loss) from continuing operations
429 
382 
1,855 
(3,310)
Discontinued operations:
 
 
 
 
Earnings (loss) from discontinued operations before income taxes
1,710 
121 
2,320 
198 
Discontinued operations income tax expense
49 
187 
34 
Earnings (loss) from discontinued operations
1,661 
117 
2,133 
164 
Net earnings (loss)
2,090 
499 
3,988 
(3,146)
Basic earnings (loss) from continuing operations per share
0.99 
0.86 
4.2 
(7.46)
Basic earnings (loss) from discontinued operations per share
3.82 
0.27 
4.82 
0.37 
Basic net earnings (loss) per share
4.81 
1.13 
9.02 
(7.09)
Diluted earnings (loss) from continuing operations per share
0.98 
0.86 
4.18 
(7.46)
Diluted earnings (loss) from discontinued operations per share
3.81 
0.26 
4.81 
0.37 
Diluted net earnings (loss) per share
$ 4.79 
$ 1.12 
$ 8.99 
$ (7.09)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS) (USD $)
In Millions
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2010
2009
2010
2009
Consolidated Statements of Comprehensive Earnings (Loss)
 
 
 
 
Net earnings (loss)
$ 2,090 
$ 499 
$ 3,988 
$ (3,146)
Foreign currency translation:
 
 
 
 
Change in cumulative translation adjustment
223 
520 
119 
826 
Foreign currency translation income tax expense
(12)
(31)
(7)
(50)
Foreign currency translation total
211 
489 
112 
776 
Pension and postretirement benefit plans:
 
 
 
 
Recognition of net actuarial loss and prior service cost in earnings
12 
24 
36 
Pension and postretirement benefit plans income tax expense
(3)
(5)
(9)
(13)
Pension and postretirement benefit plans total
15 
23 
Other comprehensive earnings (loss), net of tax
216 
496 
127 
799 
Comprehensive earnings (loss)
$ 2,306 
$ 995 
$ 4,115 
$ (2,347)
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, 2008
44 
6,257 
10,376 
383 
 
17,060 
Balance, shares, at Dec. 31, 2008
444 
 
 
 
 
 
Net earnings (loss)
 
 
(3,146)
 
 
(3,146)
Other comprehensive earnings (loss), net of tax
 
 
 
799 
 
799 
Stock option exercises
 
19 
 
 
 
19 
Common stock repurchased
 
 
 
 
(12)
(12)
Common stock retired
 
(12)
 
 
12 
 
Common stock dividends
 
 
(213)
 
 
(213)
Share-based compensation
 
140 
 
 
 
140 
Share-based compensation tax benefits
 
 
 
 
Balance, at Sep. 30, 2009
44 
6,410 
7,017 
1,182 
 
14,653 
Balance, shares, at Sep. 30, 2009
444 
 
 
 
 
 
Balance, at Dec. 31, 2009
45 
6,527 
7,613 
1,385 
 
15,570 
Balance, shares, at Dec. 31, 2009
447 
 
 
 
 
 
Net earnings (loss)
 
 
3,988 
 
 
3,988 
Other comprehensive earnings (loss), net of tax
 
 
 
127 
 
127 
Stock option exercises
 
18 
 
 
 
18 
Common stock repurchased
 
 
 
 
(950)
(950)
Common stock retired
(2)
(941)
 
 
943 
 
Common stock retired, shares
(15)
 
 
 
 
 
Common stock dividends
 
 
(211)
 
 
(211)
Share-based compensation
 
103 
 
 
 
103 
Share-based compensation tax benefits
 
 
 
 
Balance, at Sep. 30, 2010
$ 43 
$ 5,714 
$ 11,390 
$ 1,512 
$ (7)
$ 18,652 
Balance, shares, at Sep. 30, 2010
432 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions
9 Months Ended
Sep. 30,
2010
2009
Cash flows from operating activities:
 
 
Earnings (loss) from continuing operations
$ 1,855 
$ (3,310)
Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by operating activities:
 
 
Depreciation, depletion and amortization
1,441 
1,622 
Deferred income tax expense (benefit)
349 
(2,217)
Reduction of carrying value of oil and gas properties
 
6,408 
Unrealized change in fair value of financial instruments
(136)
184 
Other noncash charges
154 
182 
Net decrease in working capital
164 
81 
Decrease in long-term other assets
28 
17 
Increase (decrease) in long-term other liabilities
57 
(32)
Cash from operating activities - continuing operations
3,912 
2,935 
Cash from operating activities - discontinued operations
324 
357 
Net cash from operating activities
4,236 
3,292 
Cash flows from investing activities:
 
 
Proceeds from property and equipment divestitures
4,131 
23 
Capital expenditures
(4,793)
(3,807)
Redemptions of long-term investments
20 
Other
(13)
 
Cash from investing activities - continuing operations
(655)
(3,778)
Cash from investing activities - discontinued operations
2,298 
(376)
Net cash from investing activities
1,643 
(4,154)
Cash flows from financing activities:
 
 
Proceeds from borrowings of long-term debt, net of issuance costs
 
1,187 
Net commercial paper (repayments) borrowings
(1,432)
363 
Debt repayments
(350)
(1)
Proceeds from stock option exercises
18 
19 
Repurchases of common stock
(929)
 
Dividends paid on common stock
(211)
(213)
Excess tax benefits related to share-based compensation
Net cash from financing activities
(2,897)
1,361 
Effect of exchange rate changes on cash
29 
Net increase in cash and cash equivalents
2,987 
528 
Cash and cash equivalents at beginning of period (including cash related to assets held for sale)
1,011 
384 
Cash and cash equivalents at end of period (including cash related to assets held for sale)
$ 3,998 
$ 912 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

1.     Summary of Significant Accounting Policies 

 

The accompanying unaudited consolidated 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 consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in Devon's 2009 Annual Report on Form 10-K. 

 

The unaudited interim consolidated 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 September 30, 2010 and Devon's results of operations and cash flows for the three-month and nine-month periods ended September 30, 2010 and 2009.

Accounts Receivable
Accounts Receivable

2.  Accounts Receivable

 

The components of accounts receivable include the following:  

 

 

September 30, 2010

December 31, 2009

 

(In millions)

Oil, gas and NGL sales

$                  612

$                  752

Marketing and midstream revenues

                     160

                     188

Joint interest billings

                     158

                     151

Production tax credits

                       85

                     110

Other

                       22

                       19

    Gross accounts receivable

                 1,037

                 1,220

Allowance for doubtful accounts

                        (9)

                      (12)

    Net accounts receivable

$               1,028

$               1,208

Derivative Financial Instruments
Derivative Financial Instruments

3.  Derivative Financial Instruments

 

Devon periodically enters into commodity and interest rate derivative financial instruments. These instruments are used to manage the inherent uncertainty of future revenues due to oil, gas and NGL price volatility and to manage Devon's exposure to interest rate volatility. Devon has elected not to designate any of its derivative instruments for hedge accounting treatment.

 

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

 

 

Balance Sheet Caption

September 30, 2010

December 31, 2009

 

 

(In millions)

Asset derivatives:

 

 

 

  Commodity derivatives

Other current assets

$                  493

$                  172

  Commodity derivatives

Other long-term assets

                      45

                     — 

  Interest rate derivatives

Other current assets

                     —

                      39

  Interest rate derivatives

Other long-term assets

                      48 

                    131

    Total asset derivatives

$                  586

$                  342

Liability derivatives:

 

 

 

  Commodity derivatives

Other current liabilities

$                   14

$                   38

  Commodity derivatives

Other long-term liabilities

                     96 

                     —

  Interest rate derivatives

Other current liabilities

                     38  

                     —

    Total liability derivatives

$                  148

$                   38

 

 

The following table presents the cash settlements and unrealized gains and losses on fair value changes included in the accompanying consolidated statements of operations associated with these 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 consolidated statements of operations. Cash settlements and unrealized gains and losses on fair value changes associated with Devon's interest rate derivatives are presented in the "Interest-rate and other financial instruments" caption in the accompanying consolidated statements of operations.

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2010

2009

2010

2009

 

(In millions)

Cash settlements:

 

 

 

 

    Commodity derivatives

$             232

$             127

$             580

$             359

    Interest rate derivatives

                  17

                  14

                  37

                  35

    Total cash settlements

               249

               141

               617

               394

 

 

 

 

 

Unrealized gains (losses):

 

 

 

 

    Commodity derivatives

                (23)

              (104)

               294

              (169)

    Interest rate derivatives

                (72)

                   (9)

              (158)

                (15)

    Total unrealized gains (losses)

                (95)

              (113)

               136

              (184)

Net gain (loss) recognized on statement of operations

$             154

$               28

$             753

$             210

Other Current Assets
Other Current Assets

4.     Other Current Assets

 

  The components of other current assets include the following:

 

September 30, 2010

December 31, 2009

 

(In millions)

Derivative financial instruments

$                  493

$                  211

Inventories

                     141

                     182

Other

                     104

                       88

    Other current assets

$                  738

$                  481

Property and Equipment
Property and Equipment

 

5.Property and Equipment

       

Offshore Divestitures

 

        In November 2009, Devon announced plans to reposition itself strategically as a North America onshore exploration and production company. As part of this strategic repositioning, Devon is bringing forward the value of its offshore assets by divesting them. 

 

Closed Transactions

 

The following table presents Devon's offshore divestiture transactions that closed in the first nine months of 2010. Gross proceeds represent contract prices based upon a January 1, 2010 effective date for the Gulf of Mexico and Azerbaijan divestitures, a May 1, 2010 effective date for the China-Panyu divestiture, and a September 1, 2010 effective date for the China-Exploration divestiture. After-tax proceeds represent gross proceeds adjusted for customary purchase price adjustments, selling costs and income taxes. The purchase price adjustments consist primarily of net cash flow subsequent to the effective date of the divestitures. Proved reserves in the following table are based upon estimated proved reserves as of the divestiture dates.


 

 

Gross Proceeds

After-Tax Proceeds

Proved Reserves

 

(In millions)

(MMBoe)

(Unaudited)

Gulf of Mexico (continuing operations)

    $           4,145

    $           3,222

                     91

Azerbaijan (discontinued operations)

                 2,000

                 1,924

                     56

China – Panyu (discontinued operations)

                     515

                     405

                     13

China – Exploration (discontinued operations)

                       77

                       59

                    —

     Total

    $           6,737

    $           5,610

                   160

 

        Proceeds from these divestitures are being used to retire debt and repurchase Devon common shares. Additionally, Devon is using divestiture proceeds to fund North America Onshore exploration and development opportunities, including a joint-venture investment in the Pike oil sands discussed below.

 

Under full cost accounting rules, sales or other dispositions of oil and gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of gain or loss. However, if not recognizing a gain or loss on the disposition would otherwise significantly alter the relationship between a cost center's capitalized costs and proved reserves, then a gain or loss must be recognized.

 

The Gulf of Mexico divestitures presented above did not significantly alter such relationship for Devon's United States cost center. Therefore, Devon did not recognize a gain in connection with the Gulf of Mexico divestitures. The Azerbaijan divestiture included all of Devon's properties in its Azerbaijan cost center. As a result, Devon recognized a $1.5 billion ($1.5 billion after-tax) gain during the third quarter of 2010 in connection with the Azerbaijan divestiture. Panyu was Devon's only producing property in its China cost center. As a result, Devon recognized a $308 million ($235 million after-tax) gain in connection with the Panyu divestiture in the second quarter of 2010. No gain was recognized upon the divestiture of Devon's exploratory assets in China in the third quarter of 2010. These gains are included in "earnings from discontinued operations" in the accompanying 2010 consolidated statements of operations.

 

Pending Transaction

 

Devon has entered into an agreement to sell its assets in Brazil for $3.2 billion. This  transaction continues to progress through the approval process of the Brazilian government and is on track to close around the end of 2010. Devon expects to record a gain upon the close of the transaction.

 

Deepwater Drilling Rigs

       

As part of its offshore operations, Devon was leasing three deepwater drilling rigs. The Seadrill West Sirius and Ocean Endeavor deepwater drilling rigs were used in Devon's Gulf of Mexico operations. The Transocean Deepwater Discovery is being used in Devon's operations in Brazil.

 

In conjunction with the deepwater Gulf of Mexico divestiture that closed in the second quarter of 2010, the buyer assumed Devon's lease and remaining commitments for the Seadrill West Sirius rig. Subsequent to closing all its Gulf of Mexico divestitures, Devon agreed to pay $31 million to the owner of the Ocean Endeavor rig to terminate the lease. The $31 million lease termination cost is included in oil and gas property and equipment in the accompanying September 30, 2010, consolidated balance sheet. The buyer of Devon's assets in Brazil will assume Devon's lease and remaining commitments for the Transocean Deepwater Discovery rig when the divestiture transaction closes.

 

Oil Sands Joint Venture

 

In conjunction with certain offshore divestitures in the second quarter of 2010, Devon formed a heavy oil joint venture to operate and develop the Pike oil sands leases in Alberta, Canada. As a result, Devon acquired a 50 percent interest in the Pike oil sands leases for $500 million. Devon will also fund $155 million of Canadian dollar capital costs on behalf of its joint-venture partner in the form of a non-interest bearing promissory note. The majority of the capital costs are expected to be paid during 2011 and 2012. See Note 7 for more information regarding the promissory note.

Goodwill
Goodwill

6.     Goodwill

 

During the first nine months of 2010, Devon's Canadian goodwill increased $47 million. This increase was entirely due to foreign currency translation.

 

Devon removed all its International goodwill in conjunction with the Azerbaijan divestiture that closed in the third quarter of 2010. Such goodwill totalled $68 million and was presented in long-term assets held for sale in the accompanying December 31, 2009 consolidated balance sheet.

Debt
Debt

7.     Debt

 

Commercial Paper

 

Devon repaid $1.4 billion of commercial paper borrowings during the first and second quarters of 2010 primarily with proceeds received from its Gulf of Mexico property divestitures.

 

In May 2010, Devon reduced the maximum allowed borrowings under its commercial paper program from $2.85 billion to approximately $2.2 billion. At September 30, 2010, Devon had no outstanding commercial paper borrowings.

 

$350 Million 7.25% Senior Notes Due October 1, 2011

 

On June 25, 2010, Devon redeemed $350 million of 7.25% senior notes prior to their scheduled maturity of October 1, 2011, primarily with proceeds received from its Gulf of Mexico divestitures. The notes were redeemed for $384 million, which represented 100 percent of the principal amount, a make-whole premium of $28 million and $6 million of accrued and unpaid interest. On the date of redemption, these notes also had an unamortized premium of $9 million. The $28 million make-whole premium and $9 million amortization of the remaining premium are included in interest expense in the accompanying 2010 consolidated statements of operations. 

 

Non-Interest Bearing Promissory Note

 

On June 29, 2010, Devon issued a four-year $155 million Canadian dollar non-interest bearing promissory note in connection with the formation of the Pike oil sands joint venture described in Note 5. The present value of the note was $139 million on the issue date based upon an effective interest rate of 3.125%. At September 30, 2010, the note had a carrying value of $143 million, of which $59 million is presented as short-term debt and the remainder is presented as long-term debt in the accompanying consolidated balance sheet.

 

Credit Lines

 

In the second quarter of 2010, Devon cancelled its $700 million Short-Term Facility prior to its November 2, 2010 maturity date. Devon incurred no cost to cancel the facility and will avoid paying the facility fee that pertains to the cancellation period.

 

Devon has a syndicated, unsecured revolving line of credit that can be accessed to provide liquidity as needed. The following schedule summarizes the capacity of Devon's Senior Credit Facility by maturity date, as well as its available capacity as of September 30, 2010 (in millions).

 

April 7, 2012 maturity

$          463

April 7, 2013 maturity

         2,187

  Total Senior Credit Facility

         2,650

Less:

 

  Outstanding Senior Credit Facility borrowings

               —

  Outstanding commercial paper borrowings

               —

  Outstanding letters of credit

               37

Total available capacity

$       2,613

 

The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon's ratio of total funded debt to total capitalization to be less than 65%. The credit agreement contains definitions of total funded debt and total capitalization that include adjustments to the respective amounts reported in the consolidated financial statements. Also, total capitalization is adjusted to add back noncash financial writedowns such as full cost ceiling impairments or goodwill impairments. As of September 30, 2010, Devon was in compliance with this covenant. Devon's debt-to-capitalization ratio at September 30, 2010, as calculated pursuant to the terms of the agreement, was 15.3%.

 

Interest Expense

 

The following schedule includes the components of interest expense.

 

 

Three Months

Ended September 30,

Nine Months

Ended September 30,

 

 

2010

2009

2010

2009

 

 

(In millions)

Interest based on debt outstanding

$          98

$       112

$       307

$       330

Capitalized interest

           (20)

           (22)

           (55)

           (71)

Early retirement of debt

            —

           —

            19

           —

Other

              5

           —

              9

              4

    Total

$          83

$          90

$       280

$       263

Asset Retirement Obligations
Asset Retirement Obligations

8.     Asset Retirement Obligations  

 

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

 

 

Nine Months

Ended September 30,

 

2010

2009

 

(In millions)

Asset retirement obligations as of beginning of period

$             1,513

$             1,387

  Liabilities incurred

                     36

                     50

  Liabilities settled

                   (94)

                   (75)

  Revision of estimated obligation

                  194

                     22

  Liabilities assumed by others

                 (256)

                   (17)

  Accretion expense on discounted obligation

                     71

                     68

  Foreign currency translation adjustment

                     10

                     82

Asset retirement obligations as of end of period

               1,474

               1,517

Less current portion

                     80

                  108

Asset retirement obligations, long-term

$             1,394

$             1,409

 

During the first nine months of 2010 and 2009, Devon recognized revisions to its asset retirement obligations totaling $194 million and $22 million, respectively. The primary factors causing the 2010 and 2009 increases were an overall increase in abandonment cost estimates and a decrease in the discount rate used to present value the obligations.

 

During the first nine months of 2010, Devon reduced its continuing operations asset retirement obligations by $256 million for those obligations that were assumed by purchasers of Devon's Gulf of Mexico oil and gas properties.

Retirement Plans
Retirement Plans

9.     Retirement Plans

 

The following table presents the components of net periodic benefit cost for Devon's pension and other post retirement benefit plans.

 

 

Pension Benefits

Other Postretirement Benefits

 

Three Months

Ended September 30,

Nine Months

Ended September 30,

Three Months

Ended September 30,

Nine Months

Ended September 30,

 

2010

2009

2010

2009

2010

2009

2010

2009

 

(In millions)

Service cost

$          9

$        11

$        25

$        33

$        —

$        —

$        —

$        —

Interest cost

          15

          14

          43

          42

            1

            1

            3

            3

Expected return on plan assets

         (10)

           (9)

         (28)

         (27)

          —

          —

          —

          —

Amortization of prior service cost..

          —

            1

            2

            3

            1

          —

            1

          —

Net actuarial loss

            7

          11

          21

          33

          —

          —

          —

          —

   Net periodic benefit cost

$        21

$        28

$        63

$        84

$          2

$          1

$          4

$          3

 

Stockholders' Equity
Stockholders' Equity

10.  Stockholders' Equity

 

Stock Repurchases

 

During the first nine months of 2010, Devon repurchased 14.7 million common shares under its $3.5 billion stock repurchase program for $936 million, or $63.61 per share. This program expires December 31, 2011.

 

Dividends

 

Devon paid common stock dividends of $211 million and $213 million (quarterly rates of $0.16 per share) in the first nine months of 2010 and 2009, respectively.

Commitments and Contingencies
Commitments and Contingencies

11.    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 that 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. However, actual amounts could differ materially from management's estimate.

 

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 statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured costs associated with remediation. Devon's monetary exposure for environmental matters is not expected to be material.

 

Royalty Matters

 

Numerous natural gas producers and related parties, including Devon, have been named in various lawsuits alleging violation of the federal False Claims Act. The suits allege that the producers and related parties used below-market prices, improper deductions, improper measurement techniques and transactions with affiliates, which resulted in underpayment of royalties in connection with natural gas and NGLs produced and sold from federal and Indian-owned or controlled lands. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.

 

Other Matters

 

Devon is involved in other various routine legal proceedings incidental to its business. However, to Devon's knowledge as of the date of this report, neither Devon nor its property is subject to any material pending legal proceedings.

 

Commitments

 

At the end of 2009, Devon's commitments included $0.9 billion that related to long-term lease contracts for two deepwater drilling rigs being used in the Gulf of Mexico. As discussed in Note 5, Devon no longer has lease commitments for these two rigs.

 

At the end of 2009, Devon's commitments also included $0.5 billion that related to a long-term lease contract for a deepwater drilling rig being used in Brazil. Devon's lease and remaining commitments for this rig will be assumed by the buyer of Devon's assets in Brazil when the associated divestiture transaction closes.

 

At the end of 2009, Devon's commitments also included $0.4 billion that related to leases of floating, production, storage and offloading facilities being used in the Gulf of Mexico, Brazil and China. Devon's commitments for the Gulf of Mexico and China leases were assumed by the purchasers in the first half of 2010. The Brazil lease will be assumed by the buyer when the associated divestiture transaction closes.

Fair Value Measurements
Fair Value Measurements

12.  Fair Value Measurements    

 

The following tables provide carrying value and fair value measurement information for Devon's financial assets and liabilities.

 

 

 

 

Fair Value Measurements Using:

 

Carrying Amount

Total Fair Value

Quoted Prices in Active Markets

(Level 1)

Significant Other Observable Inputs

(Level 2)

Significant Unobservable Inputs

(Level 3)

 

(In millions)

September 30, 2010 assets (liabilities):

 

 

 

 

 

  Commodity derivatives

$        428

$       428

$       —

$        428

$           —

  Interest rate derivatives

$           10

$         10

$       —

$          10

$           —

  Debt

$   (5,629)

$  (6,747)

$       —

$   (6,604)

$       (143)

  Long-term investments

$           95

$         95

$       —

$          —

$           95

December 31, 2009 assets (liabilities):

 

 

 

 

 

  Commodity derivatives

$        134

$       134

$       —

$        134

$           —

  Interest rate derivatives

$        170

$       170

$       —

$        170

$           —

  Debt

$   (7,279)

$  (8,214)

$ (1,432)

$  (6,782)

$           —

  Long-term investments

$        115

$       115

$       —

$          —

$        115

 

 

Devon's Level 3 fair value measurements included in the table above relate to a non-interest bearing promissory note and certain long-term investments. Included below is a summary of the changes in Devon's Level 3 fair value measurements during the first nine months of 2010 and 2009.  


 

 

 

 

Debt

Long-Term

Investments

 

(In millions)

December 31, 2009

$               —

$            115

Issuance of promissory note

             (139)

                 —

Foreign exchange translation adjustment

                  (4)

                 —

Accretion of promissory note

                  (1)

                 —

Redemptions of principal

                   1

                (20)

September 30, 2010

$           (143)

$               95

 

 

 

December 31, 2008

$               —

$            122

Redemptions of principal

                 —

                  (6)

September 30, 2009

$               —

$            116

 

Restructuring Costs
Restructuring Costs

13. Restructuring Costs 

 

Employee Severance

 

In the fourth quarter of 2009, Devon recognized $153 million of estimated employee severance costs associated with the planned divestiture of its offshore assets that was announced in November 2009. This amount was based on estimates of the number of employees that will ultimately be impacted by the divestitures and included amounts related to cash severance costs and accelerated vesting of share-based grants. Of the $153 million total, $105 million related to Devon's U.S. Offshore operations and the remainder related to its International discontinued operations.

 

As discussed in Note 5, Devon had divested all its U.S. Offshore assets by the end of the second quarter of 2010 and a significant part of its International assets by the end of the third quarter of 2010. As a result of these divestitures and associated employee terminations, Devon decreased its estimate of employee severance costs in the second and third quarters of 2010 by $14 million and $21 million, respectively. As a result, Devon now estimates it will incur approximately $118 million of employee severance costs. The lower estimate results primarily from more offshore employees than previously estimated receiving comparable positions with the purchaser of the properties or in Devon's U.S. Onshore operations. Of the $118 million total, $78 million relates to Devon's U.S. Offshore operations and the remainder relates to its International discontinued operations. Of the $35 million reduction recognized during 2010, $27 million relates to Devon's U.S. Offshore operations and the remainder relates to its International discontinued operations.

 

Lease Obligations

 

As a result of the divestitures discussed above, Devon ceased using certain office space that was subject to non-cancellable operating lease arrangements. Consequently, in the third quarter of 2010, Devon recognized $70 million of 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 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.

 

Asset Impairments

 

In the third quarter of 2010, Devon recognized $11 million of asset impairment charges for leasehold improvements and furniture associated with the office space it ceased using.

 

Financial Statement Presentation

 

Recognition and adjustments to cash severance, accelerated vesting of share-based grants, lease obligations and asset impairments are included in restructuring costs in the accompanying 2010 consolidated statements of operations. Amounts related to cash severance and lease obligations are accrued for in other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets, while amounts related to accelerated share-based awards are recorded as a reduction to Devon's additional paid-in capital in the accompanying consolidated balance sheets. Asset impairments are presented as a reduction to Devon's net property and equipment in the accompanying consolidated 2010 balance sheet.

 

The schedule below summarizes activity and balances associated with Devon's restructuring liabilities.    

 

 

Other Current Liabilities

Other Long-Term Liabilities

 

Continuing Operations

Discontinued Operations

 

Total

Continuing Operations

Discontinued Operations

 

Total

 

(In millions)

Balance as of December 31, 2009

$        61

$        23

$        84

$        —

$        —

$        —

  Lease obligations incurred

          17

          —

          17

          53

          —

          53

  Cash severance paid

         (17)

           (3)

         (20)

          —

          —

          —

  Cash severance revision

         (18)

           (5)

         (23)

          —

          —

          —

Balance as of September 30, 2010

$        43

$        15

$        58

$        53

$        —

$        53

 

The schedule below summarizes the components of restructuring costs in the accompanying consolidated statements of operations.

 

 

Three Months Ended

September 30, 2010

Nine Months Ended

September 30, 2010

 

Continuing Operations

Discontinued Operations

 

Total

Continuing Operations

Discontinued Operations

 

Total

 

(In millions)

Cash severance

$      (13)

$         (1)

$      (14)

$      (18)

$         (4)

$      (22)

Share-based awards

           (5)

           (2)

           (7)

           (9)

           (4)

         (13)

Lease obligations

          70

          —

          70

          70

          —

          70

Asset impairments

          11

          —

          11

          11

          —

          11

Other

          —

          —

          —

            1

          —

            1

   Restructuring costs

$        63

$         (3)

$        60

$        55

$         (8)

$        47

Reduction of Carrying Value of Oil and Gas Properties
Reduction of Carrying Value of Oil and Gas Properties

14.  Reduction of Carrying Value of Oil and Gas Properties

 

In the first quarter of 2009, Devon reduced the carrying value of its United States oil and gas properties $6,408 million, or $4,085 million after taxes, due to a full cost ceiling limitation. The reduction resulted from a significant decrease in the full cost ceiling compared to the immediately preceding quarter due to the effects of declining natural gas prices subsequent to December 31, 2008.

Income Taxes
Income Taxes

15. Income Taxes

 

The Gulf of Mexico divestitures discussed in Note 5 have taxable gains that increase Devon's current income tax expense of $858 million. However, the additional current income taxes are offset by a decrease in deferred income tax expense, resulting in no impact to Devon's total income tax expense.

 

Additionally,in conjunction with the filing of its 2009 income tax return in the third quarter of 2010, Devon recognized a $220 million decrease to current income tax expense that was offset by a like increase to deferred income tax expense. These amounts relate to a change in the timing of certain deductions which Devon elected to expense rather than capitalize for the 2009 tax year. Such deductions created a net operating loss for the 2009 tax year that Devon is using to reduce its 2010 current income taxes that would otherwise be due as a result of the taxable divestiture gains mentioned above.

 

In the third quarter of 2009, Devon recognized $59 million of income tax benefits in conjunction with the initial or amended filings of its 2005, 2006, 2007 and 2008 income tax returns. These tax benefits consist of deferred tax benefits of $50 million and current tax benefits of $9 million. Of the $59 million, $41 million relates to taxation on foreign operations. The remaining $18 million relates to taxation on U.S. federal and state operations.

Discontinued Operations
Discontinued Operations

16.  Discontinued Operations

 

Revenues related to Devon's discontinued operations totaled $139 million and $573 million in the third quarter and first nine months of 2010, respectively, and $250 million and $646 million in the third quarter and first nine months of 2009, respectively.

 

The following table presents the main classes of assets and liabilities associated with Devon's discontinued operations.

 

 

September 30,

December 31,

 

2010

2009

 

(In millions)

  Cash and cash equivalents

$                  390

$                  365

  Accounts receivable

                       49

                     165

  Other current assets

                     137

                     127

    Current assets

$                  576

$                  657

 

 

 

  Property and equipment, net

$                  816

$               1,099

  Goodwill

                       —  

                       68

  Other long-term assets

                       59

                       83

    Total long-term assets

$                  875

$               1,250

 

 

 

  Accounts payable

$                  324

$                  158

  Other current liabilities

                       53

                       76

    Current liabilities

$                  377

$                  234

 

 

 

  Asset retirement obligations

$                     29

$                  109

  Deferred income taxes

                       35

                     101

  Other liabilities

                         5

                         3

    Long-term liabilities

$                     69

$                  213

 

Reductions of Carrying Value of Oil and Gas Properties

 

In the first quarter of 2009, Devon reduced the carrying values of its Brazilian and other International oil and gas properties, which are now held for sale, $109 million due to full cost ceiling limitations. The Brazilian reduction of $103 million, which had no related tax benefit, resulted largely from an exploratory well drilled at the BM-BAR-3 block in the offshore Barreirinhas Basin. After drilling this well in the first quarter of 2009, Devon concluded that the well did not have adequate reserves for commercial viability. As a result, the seismic, leasehold and drilling costs associated with this well contributed to the reduction recognized in the first quarter of 2009.

 

Divestitures

 

See Note 5 for more information on the Azerbaijan and China divestitures.

 

Earnings (Loss) Per Share
Earnings (Loss) Per Share

17.          Earnings (Loss) Per Share  

 

The following table reconciles earnings (loss) from continuing operations and common shares outstanding used in the calculations of basic and diluted earnings (loss) per share for the three-month and nine-month periods ended September 30, 2010 and 2009. Because a net loss from continuing operations was generated during the nine-month period ended September 30, 2009, the dilutive shares produce an antidilutive net loss per share result. Therefore, the diluted loss per share amount from continuing operations in the nine months ended September 30, 2009 reported in the accompanying 2009 consolidated statement of operations is the same as the basic loss per share amount.

 

 

 

 

Earnings (Loss)

 

Common Shares

Earnings (Loss)

per Share

 

(In millions, except per share amounts)

Three Months Ended September 30, 2010:

 

 

 

  Earnings from continuing operations

$           429

             435

 

  Attributable to participating securities

                (4)

                (5)

 

  Basic earnings per share

             425

             430

$              0.99

  Dilutive effect of potential common shares issuable

     upon the exercise of outstanding stock options

 

                —

 

                  1

 

 

  Diluted earnings per share

$           425

             431

$              0.98

 

 

 

 

Three Months Ended September 30, 2009:

 

 

 

  Earnings from continuing operations

$           382

             444

 

  Attributable to participating securities

                (4)

                (5)

 

  Basic earnings per share

              378

              439

$              0.86

  Dilutive effect of potential common shares issuable

     upon the exercise of outstanding stock options

 

                —

 

                  2

 

 

  Diluted earnings per share

$           378

             441

$              0.86

 

 

 

 

Nine Months Ended September 30, 2010:

 

 

 

  Earnings from continuing operations

$       1,855

             442

 

  Attributable to participating securities

              (21)

                (5)

 

  Basic earnings per share

          1,834

             437

$              4.20

  Dilutive effect of potential common shares issuable

     upon the exercise of outstanding stock options

 

                —

 

                  2

 

 

  Diluted earnings per share

$       1,834

             439

$              4.18

 

 

 

 

Nine Months Ended September 30, 2009:

 

 

 

  Loss from continuing operations

$      (3,310)

             444

 

  Attributable to participating securities

               36

                (5)

 

  Basic and diluted loss per share

$      (3,274)

             439

$            (7.46)

 

Certain options to purchase shares of Devon's common stock are excluded from the dilution calculations because the options are antidilutive. During the three-month and nine-month periods ended September 30, 2010, 8.6 million shares and 7.9 million shares, respectively, were excluded from the diluted earnings per share calculations. During the three-month and nine-month periods ended September 30, 2009, 7.1 million shares and 8.9 million shares, respectively, were excluded from the diluted earnings per share calculations.

Segment Information
Segment Information

18.   Segment Information

 

Devon manages its operations through distinct operating segments, or divisions, which are defined primarily by geographic areas. For financial reporting purposes, Devon aggregates its United States divisions into one reporting segment due to the similar nature of the business. However, Devon's Canadian and International divisions are reported as separate reporting segments primarily due to significant differences in the respective regulatory environments.

 

Following is certain financial information regarding Devon's reporting segments. The revenues reported are all from external customers.

 

 

U.S.

Canada

International

Total

 

(In millions)

As of September 30, 2010:

 

 

 

 

Current assets

$      2,299

$      3,075 

$         576

$      5,950

Property and equipment, net

      11,509

        6,690

              —

      18,199

Goodwill

        3,046

        2,931

              —

        5,977

Other assets

            517

            345

            875

        1,737

     Total assets

$    17,371

$    13,041

$      1,451

$    31,863

 

 

 

 

 

Current liabilities

$      1,578

$      2,495

$         377

$      4,450

Long-term debt

        2,503

        1,318

              —

        3,821

Asset retirement obligations

            564

            830

              —

        1,394

Other liabilities

        1,025

              47

              69

        1,141

Deferred income taxes

        1,240

        1,165

              —

        2,405

Stockholders' equity

      10,461

        7,186

        1,005

      18,652

     Total liabilities and stockholders' equity

$    17,371

$    13,041

$      1,451

$    31,863

 

 


 

 

U.S.

Canada

Total

 

(In millions)

Three Months Ended September 30, 2010:

 

 

 

Revenues:

 

 

 

  Oil, gas and NGL sales

$     1,104

$         579

 $    1,683

  Oil, gas and NGL derivatives

           214

              (5)

           209

  Marketing and midstream revenues

           432

             29

           461

     Total revenues

        1,750

           603

        2,353

Expenses and other, net:

 

 

 

  Lease operating expenses

           208

           207

           415

  Taxes other than income taxes

             85

             10

             95

  Marketing and midstream operating costs and expenses

           314

             22

           336

  Depreciation, depletion and amortization of oil and gas

     Properties

 

           234

 

           163

 

           397

  Depreciation and amortization of non-oil and gas properties.

             60

                6

             66

  Accretion of asset retirement obligations

                8

             13

             21

  General and administrative expenses

             97

             34

           131

  Restructuring costs

             63

              —

             63

  Interest expense

             36

             47

             83

  Interest-rate and other financial instruments

             55

              —

             55

  Other, net

              (7)

              (1)

              (8)

     Total expenses and other, net

        1,153

           501

        1,654

Earnings from continuing operations before income taxes

           597

           102

           699

Income tax expense (benefit):

 

 

 

  Current

          (349)

             39

          (310)

  Deferred

           590

            (10)

           580

     Total income tax expense

           241

             29

           270

Earnings from continuing operations

$         356

$           73

$         429

 

 

 

 

Capital expenditures, continuing operations

$     1,358

$         308

$     1,666


 

 

U.S.

Canada

Total

 

(In millions)

Three Months Ended September 30, 2009:

 

 

 

Revenues:

 

 

 

  Oil, gas and NGL sales

$         961

$         520

 $    1,481

  Oil, gas and NGL derivatives

             23

              —

             23

  Marketing and midstream revenues

           333

             11

           344

     Total revenues

        1,317

           531

        1,848

Expenses and other, net:

 

 

 

  Lease operating expenses

           244

           172

           416

  Taxes other than income taxes

             72

                9

             81

  Marketing and midstream operating costs and expenses

           236

                5

           241

  Depreciation, depletion and amortization of oil and gas

     Properties

 

           270

 

           154

 

           424

  Depreciation and amortization of non-oil and gas properties.

             58

                6

             64

  Accretion of asset retirement obligations

             12

             10

             22

  General and administrative expenses

           108

             28

           136

  Interest expense

             34

             56

             90

  Interest-rate and other financial instruments

              (5)

              —

              (5)

  Other, net

            (99)

                7

            (92)

     Total expenses and other, net

           930

           447

        1,377

Earnings from continuing operations before income taxes

           387

             84

           471

Income tax expense (benefit):

 

 

 

  Current

             27

             58

             85

  Deferred

             30

            (26)

                4

     Total income tax expense

             57

             32

             89

Earnings from continuing operations

$         330

$           52

$         382

 

 

 

 

Capital expenditures, continuing operations

$         696

$         247

$         943

 


 

 

U.S.

Canada

Total

 

(In millions)

Nine Months Ended September 30, 2010:

 

 

 

Revenues:

 

 

 

  Oil, gas and NGL sales

$     3,618

$     1,917

 $    5,535

  Oil, gas and NGL derivatives

           871

                3

           874

  Marketing and midstream revenues

        1,300

             96

        1,396

     Total revenues

        5,789

        2,016

        7,805

Expenses and other, net:

 

 

 

  Lease operating expenses

           675

           596

        1,271

  Taxes other than income taxes

           258

             30

           288

  Marketing and midstream operating costs and expenses

           935

             78

        1,013

  Depreciation, depletion and amortization of oil and gas

     Properties

 

           743

 

           506

 

        1,249

  Depreciation and amortization of non-oil and gas properties.

           173

             19

           192

  Accretion of asset retirement obligations

             33

             38

             71

  General and administrative expenses

           303

             96

           399

  Restructuring costs

             55

              —

             55

  Interest expense

           121

           159

           280

  Interest-rate and other financial instruments

           121

              —

           121

  Other, net

            (36)

                2

            (34)

     Total expenses and other, net

        3,381

        1,524

        4,905

Earnings from continuing operations before income taxes

        2,408

           492

        2,900

Income tax expense (benefit):

 

 

 

  Current

           496

           200

           696

  Deferred

           404

            (55)

           349

     Total income tax expense

           900

           145

        1,045

Earnings from continuing operations

$     1,508

$         347

$     1,855

 

 

 

 

Capital expenditures, before revision of future asset retirement

     Obligations

 

$     3,547

 

$     1,452

 

$     4,999

Revision of future asset retirement obligations

             72

           122

           194

Capital expenditures, continuing operations

$     3,619

$     1,574

$     5,193

 


 

 

U.S.

Canada

Total

 

(In millions)

Nine Months Ended September 30, 2009:

 

 

 

Revenues:

 

 

 

  Oil, gas and NGL sales

$     2,806

$     1,500

 $    4,306

  Oil, gas and NGL derivatives

           190

              —

           190

  Marketing and midstream revenues

        1,048

             26

        1,074

     Total revenues

        4,044

        1,526

        5,570

Expenses and other, net:

 

 

 

  Lease operating expenses

           766

           500

        1,266

  Taxes other than income taxes

           223

             26

           249

  Marketing and midstream operating costs and expenses

           682

             13

           695

  Depreciation, depletion and amortization of oil and gas

     Properties

 

           984

 

           430

 

        1,414

  Depreciation and amortization of non-oil and gas properties.

           189

             19

           208

  Accretion of asset retirement obligations

             40

             28

             68

  General and administrative expenses

           384

             88

           472

  Interest expense

             95

           168

           263

  Interest-rate and other financial instruments

            (20)

              —

            (20)

  Reduction of carrying value of oil and gas properties

        6,408

              —

        6,408

  Other, net

            (84)

             23

            (61)

     Total expenses and other, net

        9,667

        1,295

     10,962

Earnings (loss) from continuing operations before income

     Taxes

 

      (5,623)

 

           231

 

      (5,392)

Income tax expense (benefit):

 

 

 

  Current

             31

           104

           135

  Deferred

      (2,194)

            (23)

      (2,217)

     Total income tax expense (benefit)

      (2,163)

             81

      (2,082)

Earnings (loss) from continuing operations

$    (3,460)

$         150

$    (3,310)

 

 

 

 

Capital expenditures, before revision of future asset retirement

     Obligations

 

$     2,598

 

$         733

 

$     3,331

Revision of future asset retirement obligations

             37

            (15)

             22

Capital expenditures, continuing operations

$     2,635

$         718

$     3,353

 

Supplemental Information to Statements of Cash Flows
Supplemental Information to Statements of Cash Flows

19.  Supplemental Information to Statements of Cash Flows

 

Information related to Devon's cash flows is presented below.

 

 

Nine Months

Ended September 30,

 

2010

2009

 

(In millions)

Net (increase) decrease in working capital:

 

 

  Decrease in accounts receivable

$       185

$       285

  Decrease in other current assets

           11

         171

  Increase (decrease) in accounts payable

           49

          (50)

  Increase (decrease) in revenues and royalties due to others

           29

        (124)

  Decrease in other current liabilities

        (110)

        (201)

     Net decrease in working capital

$       164

$         81

 

 

 

Supplementary cash flow data – continuing and discontinued operations:

 

 

  Interest paid – net of capitalized interest

$       338

$       273

  Income taxes paid (received)

$       745

$        (29)


Accounts Receivable (Tables)
Schedule of components of accounts receivable

 

September 30, 2010

December 31, 2009

 

(In millions)

Oil, gas and NGL sales

$                  612

$                  752

Marketing and midstream revenues

                     160

                     188

Joint interest billings

                     158

                     151

Production tax credits

                       85

                     110

Other

                       22

                       19

    Gross accounts receivable

                 1,037

                 1,220

Allowance for doubtful accounts

                        (9)

                      (12)

    Net accounts receivable

$               1,028

$               1,208

Derivative Financial Instruments (Tables)

 

Balance Sheet Caption

September 30, 2010

December 31, 2009

 

 

(In millions)

Asset derivatives:

 

 

 

  Commodity derivatives

Other current assets

$                  493

$                  172

  Commodity derivatives

Other long-term assets

                      45

                     — 

  Interest rate derivatives

Other current assets

                     —

                      39

  Interest rate derivatives

Other long-term assets

                      48 

                    131

    Total asset derivatives

$                  586

$                  342

Liability derivatives:

 

 

 

  Commodity derivatives

Other current liabilities

$                   14

$                   38

  Commodity derivatives

Other long-term liabilities

                     96 

                     —

  Interest rate derivatives

Other current liabilities

                     38  

                     —

    Total liability derivatives

$                  148

$                   38

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2010

2009

2010

2009

 

(In millions)

Cash settlements:

 

 

 

 

    Commodity derivatives

$             232

$             127

$             580

$             359

    Interest rate derivatives

                  17

                  14

                  37

                  35

    Total cash settlements

               249

               141

               617

               394

 

 

 

 

 

Unrealized gains (losses):

 

 

 

 

    Commodity derivatives

                (23)

              (104)

               294

              (169)

    Interest rate derivatives

                (72)

                   (9)

              (158)

                (15)

    Total unrealized gains (losses)

                (95)

              (113)

               136

              (184)

Net gain (loss) recognized on statement of operations

$             154

$               28

$             753

$             210

Other Current Assets (Tables)
Schedule of components of other current assets

 

September 30, 2010

December 31, 2009

 

(In millions)

Derivative financial instruments

$                  493

$                  211

Inventories

                     141

                     182

Other

                     104

                       88

    Other current assets

$                  738

$                  481

Property and Equipment (Tables)
Schedule of proceeds and reserves from offshore divestitures

 

Gross Proceeds

After-Tax Proceeds

Proved Reserves

 

(In millions)

(MMBoe)

(Unaudited)

Gulf of Mexico (continuing operations)

    $           4,145

    $           3,222

                     91

Azerbaijan (discontinued operations)

                 2,000

                 1,924

                     56

China – Panyu (discontinued operations)

                     515

                     405

                     13

China – Exploration (discontinued operations)

                       77

                       59

                    —

     Total

    $           6,737

    $           5,610

                   160

Debt (Tables)

April 7, 2012 maturity

$          463

April 7, 2013 maturity

         2,187

  Total Senior Credit Facility

         2,650

Less:

 

  Outstanding Senior Credit Facility borrowings

               —

  Outstanding commercial paper borrowings

               —

  Outstanding letters of credit

               37

Total available capacity

$       2,613

 

Three Months

Ended September 30,

Nine Months

Ended September 30,

 

 

2010

2009

2010

2009