DEVON ENERGY CORP/DE, 10-Q filed on 11/6/2013
Quarterly Report
Document And Entity Information
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Oct. 22, 2013
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2013 
 
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
2013 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Fiscal Period Focus
Q3 
 
Entity Common Stock, Shares Outstanding
 
406 
Consolidated Comprehensive Statements Of Earnings (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Revenues:
 
 
 
 
Oil, gas and NGL sales
$ 2,341 
$ 1,738 
$ 6,367 
$ 5,270 
Oil, gas and NGL derivatives
(141)
(295)
(95)
515 
Marketing and midstream revenues
520 
422 
1,511 
1,136 
Total revenues
2,720 
1,865 
7,783 
6,921 
Expenses and other, net:
 
 
 
 
Lease operating expenses
600 
513 
1,684 
1,540 
Marketing and midstream operating costs and expenses
383 
313 
1,128 
847 
Depreciation, depletion and amortization
691 
716 
2,069 
2,080 
General and administrative expenses
143 
150 
460 
494 
Taxes other than income taxes
115 
104 
353 
306 
Interest expense
104 
110 
322 
296 
Restructuring costs
 
50 
 
Asset impairments
1,128 
1,960 
1,128 
Other, net
34 
(8)
83 
46 
Total expenses and other, net
2,081 
3,026 
8,109 
6,737 
Earnings (loss) from continuing operations before income taxes
639 
(1,161)
(326)
184 
Current income tax expense (benefit)
(50)
(41)
82 
Deferred income tax expense (benefit)
260 
(401)
(181)
Earnings (loss) from continuing operations
429 
(719)
(227)
172 
Loss from discontinued operations, net of tax
 
 
 
(21)
Net earnings (loss)
429 
(719)
(227)
151 
Basic net earnings (loss) per share:
 
 
 
 
Basic earnings (loss) from continuing operations per share
$ 1.06 
$ (1.80)
$ (0.57)
$ 0.42 
Basic loss from discontinued operations per share
 
 
 
$ (0.05)
Basic net earnings (loss) per share
$ 1.06 
$ (1.80)
$ (0.57)
$ 0.37 
Diluted net earnings (loss) per share:
 
 
 
 
Diluted earnings (loss) from continuing operations per share
$ 1.05 
$ (1.80)
$ (0.57)
$ 0.42 
Diluted loss from discontinued operations per share
 
 
 
$ (0.05)
Diluted net earnings (loss) per share
$ 1.05 
$ (1.80)
$ (0.57)
$ 0.37 
Comprehensive earnings (loss):
 
 
 
 
Net earnings (loss)
429 
(719)
(227)
151 
Other comprehensive earnings (loss), net of tax:
 
 
 
 
Foreign currency translation
173 
311 
(281)
292 
Pension and postretirement plans
12 
12 
Other comprehensive earnings (loss), net of tax
176 
314 
(269)
304 
Comprehensive earnings (loss)
$ 605 
$ (405)
$ (496)
$ 455 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Cash flows from operating activities:
 
 
Net earnings (loss)
$ (227)
$ 151 
Loss from discontinued operations, net of tax
 
21 
Adjustments to reconcile earnings (loss) from continuing operations to net cash from operating activities:
 
 
Depreciation, depletion and amortization
2,069 
2,080 
Asset impairments
1,960 
1,128 
Deferred income tax expense (benefit)
(181)
Unrealized change in fair value of financial instruments
212 
173 
Other noncash charges
206 
136 
Net change in working capital
(104)
48 
Change in long-term other assets
(28)
(22)
Change in long-term other liabilities
92 
68 
Cash from operating activities - continuing operations
3,999 
3,787 
Cash from operating activities - discontinued operations
 
26 
Net cash from operating activities
3,999 
3,813 
Cash flows from investing activities:
 
 
Capital expenditures
(5,219)
(6,228)
Proceeds from property and equipment divestitures
316 
1,397 
Purchases of short-term investments
(1,076)
(2,969)
Redemptions of short-term investments
3,419 
2,308 
Other
83 
18 
Cash from investing activities - continuing operations
(2,477)
(5,474)
Cash from investing activities - discontinued operations
 
58 
Net cash from investing activities
(2,477)
(5,416)
Cash flows from financing activities:
 
 
Proceeds from borrowings of long-term debt, net of issuance costs
 
2,465 
Net short-term debt repayments
(1,577)
(898)
Credit facility borrowings
 
750 
Credit facility repayments
 
(750)
Proceeds from stock option exercises
25 
Dividends paid on common stock
(259)
(242)
Excess tax benefits related to share-based compensation
Net cash from financing activities
(1,830)
1,355 
Effect of exchange rate changes on cash
(9)
31 
Net change in cash and cash equivalents
(317)
(217)
Cash and cash equivalents at beginning of period
4,637 
5,555 
Cash and cash equivalents at end of period
$ 4,320 
$ 5,338 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 4,320 
$ 4,637 
Short-term investments
 
2,343 
Accounts receivable
1,520 
1,245 
Other current assets
475 
746 
Total current assets
6,315 
8,971 
Oil and gas, based on full cost accounting:
 
 
Subject to amortization
73,009 
69,410 
Not subject to amortization
3,319 
3,308 
Total oil and gas
76,328 
72,718 
Other
6,050 
5,630 
Total property and equipment, at cost
82,378 
78,348 
Less accumulated depreciation, depletion and amortization
(54,416)
(51,032)
Property and equipment, net
27,962 
27,316 
Goodwill
5,954 
6,079 
Other long-term assets
615 
960 
Total assets
40,846 
43,326 
Current liabilities:
 
 
Accounts payable
1,269 
1,451 
Revenues and royalties payable
807 
750 
Short-term debt
2,112 
3,189 
Other current liabilities
594 
613 
Total current liabilities
4,782 
6,003 
Long-term debt
7,956 
8,455 
Asset retirement obligations
2,161 
1,996 
Other long-term liabilities
830 
901 
Deferred income taxes
4,505 
4,693 
Stockholders' equity:
 
 
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 406 million shares in 2013 and 2012, respectively
41 
41 
Additional paid-in capital
3,777 
3,688 
Retained earnings
15,292 
15,778 
Accumulated other comprehensive earnings
1,502 
1,771 
Total stockholders' equity
20,612 
21,278 
Commitments and contingencies (Note 17)
   
   
Total liabilities and stockholders' equity
$ 40,846 
$ 43,326 
Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2013
Dec. 31, 2012
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)
406,000,000 
406,000,000 
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, 2011
$ 40 
$ 3,507 
$ 16,308 
$ 1,575 
 
$ 21,430 
Balance, shares, at Dec. 31, 2011
404 
 
 
 
 
 
Net earnings (loss)
 
 
151 
 
 
151 
Other comprehensive earnings (loss), net of tax
 
 
 
304 
 
304 
Stock option exercises
27 
 
 
(2)
26 
Stock option exercises, shares
 
 
 
 
 
Common stock repurchased
 
 
 
 
(4)
(4)
Common stock retired
 
(6)
 
 
 
Common stock dividends
 
 
(242)
 
 
(242)
Share-based compensation
 
111 
 
 
 
111 
Share-based compensation tax benefits
 
 
 
 
Balance, at Sep. 30, 2012
41 
3,644 
16,217 
1,879 
 
21,781 
Balance, shares, at Sep. 30, 2012
405 
 
 
 
 
 
Balance, at Dec. 31, 2012
41 
3,688 
15,778 
1,771 
 
21,278 
Balance, shares, at Dec. 31, 2012
406 
 
 
 
 
 
Net earnings (loss)
 
 
(227)
 
 
(227)
Other comprehensive earnings (loss), net of tax
 
 
 
(269)
 
(269)
Stock option exercises
 
 
 
 
Common stock repurchased
 
 
 
 
(9)
(9)
Common stock retired
 
(9)
 
 
 
Common stock dividends
 
 
(259)
 
 
(259)
Share-based compensation
 
92 
 
 
 
92 
Share-based compensation tax benefits
 
 
 
 
Balance, at Sep. 30, 2013
$ 41 
$ 3,777 
$ 15,292 
$ 1,502 
 
$ 20,612 
Balance, shares, at Sep. 30, 2013
406 
 
 
 
 
 
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 financial statements and notes included in Devon's 2012 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 results of operations and cash flows for the three-month and nine-month periods ended September 30, 2013 and 2012 and Devon's financial position as of September 30, 2013. 

 

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 intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment. 

 

Counterparty Credit Risk

 

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon's policy to enter into derivative contracts only with investment grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon's derivative contracts contain provisions that provide for collateral payments, depending on levels of exposure and the credit rating of the counterparty.

 

As of September 30, 2013, Devon held $43 million of 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 September  30, 2013, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX West Texas Intermediate futures price. The second table presents Devon’s oil derivatives that settle against the Western Canadian Select index.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

Q4 2013

 

70,000

 

$

100.26

 

72,000

 

$

90.60

 

$

111.14

 

10,000

 

$

120.00

Q1-Q4 2014 

 

49,000

 

$

94.77

 

43,969

 

$

89.01

 

$

102.48

 

42,000

 

$

116.43

Q1-Q4 2015

 

500

 

$

91.00

 

 

$

 

$

 

22,000

 

$

115.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis Swaps

Period

 

Index

 

Volume (Bbls/d)

 

Weighted Average Differential to WTI ($/Bbl)

Q4 2013

 

Western Canadian Select

 

40,000

 

$

(22.47)

 

As of September  30, 2013, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The next two tables present Devon’s natural gas derivatives that settle against the AECO index.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price Swaps

 

Price Collars

 

Call Options Sold

Period

 

Volume (MMBtu/d)

 

Weighted Average Price ($/MMBtu)

 

Volume (MMBtu/d)

 

Weighted Average Floor Price ($/MMBtu)

 

Weighted Average Ceiling Price ($/MMBtu)

 

Volume (MMBtu/d)

 

Weighted Average Price ($/MMBtu)

Q4 2013

 

987,500

 

$

4.09

 

650,000

 

$

3.61

 

$

4.28

 

 

$

Q1-Q4 2014 

 

800,000

 

$

4.42

 

210,000

 

$

4.01

 

$

4.71

 

500,000

 

$

5.00

Q1-Q4 2015

 

 

$

 

 

$

 

$

 

550,000

 

$

5.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price Swaps

Period

 

Volume (MMBtu/d)

 

Weighted Average Price ($/MMBtu)

Q4 2013 

 

28,435

 

$

3.54

 

 

 

 

 

 

 

 

 

 

 

 

Basis Swaps

Period

 

Index

 

Volume (MMBtu/d)

 

Weighted Average Differential to Henry Hub ($/MMBtu)

Q4 2013

 

AECO

 

62,843

 

$

(0.44)

Q1-Q4 2014

 

AECO

 

94,781

 

$

(0.52)

 

As of September  30, 2013, Devon had the following open NGL derivative positions. Devon’s NGL derivatives settle against the average of the prompt month OPIS Mont Belvieu, Texas index.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price Swaps

Period

 

Product

 

Volume (Bbls/d)

 

Weighted Average Price ($/Bbl)

Q4 2013

 

Ethane

 

1,957

 

$

15.36

Q4 2013

 

Propane

 

3,985

 

$

41.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis Swaps

Period

 

Pay

 

Volume (Bbls/d)

 

Weighted Average Differential to WTI ($/Bbl)

Q4 2013

 

Natural Gasoline

 

1,000

 

$

(9.58)

Q1-Q4 2014

 

Natural Gasoline

 

329

 

$

(10.85)

 

 

Foreign Currency Derivatives

 

As of September  30, 2013, Devon had the following open foreign currency derivative position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Contract

Currency

 

Contract Type

 

CAD Notional

 

Weighted Average Fixed Rate Received

 

Expiration

 

 

 

 

(In millions)

 

(CAD-USD)

 

 

Canadian Dollar

 

Sell

 

$

1,261 

 

0.969

 

December 2013

 

Financial Statement Presentation

 

The following table presents the cash settlements and unrealized gains and losses on fair value changes included in the accompanying comprehensive statements of earnings associated with derivative financial instruments. Cash settlements and unrealized gains and losses on fair value changes associated with Devon’s commodity derivatives are presented in oil, gas and NGL derivatives 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 other, net in the accompanying comprehensive statements of earnings.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Cash settlements:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

(7)

 

$

243 

 

$

93 

 

$

668 

Interest rate derivatives

 

 

10 

 

 

10 

 

 

24 

 

 

Foreign currency derivatives

 

 

(5)

 

 

(38)

 

 

30 

 

 

(29)

Total cash settlements

 

 

(2)

 

 

215 

 

 

147 

 

 

648 

Unrealized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

 

(134)

 

 

(538)

 

 

(188)

 

 

(153)

Interest rate derivatives

 

 

(9)

 

 

(9)

 

 

(23)

 

 

(24)

Foreign currency derivatives

 

 

(23)

 

 

12 

 

 

(1)

 

 

Total unrealized gains (losses)

 

 

(166)

 

 

(535)

 

 

(212)

 

 

(173)

Net gains (losses) recognized on comprehensive statements of earnings

 

$

(168)

 

$

(320)

 

$

(65)

 

$

475 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Caption

 

September 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Asset derivatives:

 

 

 

 

 

 

 

 

Commodity derivatives

 

Other current assets

 

$

224 

 

$

379 

Commodity derivatives

 

Other long-term assets

 

 

58 

 

 

22 

Interest rate derivatives

 

Other current assets

 

 

 —

 

 

23 

Foreign currency derivatives

 

Other current assets

 

 

 —

 

 

Total asset derivatives

 

 

 

$

282 

 

$

425 

Liability derivatives:

 

 

 

 

 

 

 

 

Commodity derivatives

 

Other current liabilities

 

$

50 

 

$

Commodity derivatives

 

Other long-term liabilities

 

 

51 

 

 

29 

Total liability derivatives

 

 

 

$

101 

 

$

32 

 

Restructuring Costs
Restructuring Costs

3.Restructuring Costs 

 

Office Consolidation

 

In October 2012, Devon announced plans to consolidate its U.S. personnel into a single operations group centrally located at the company’s headquarters in Oklahoma City. As of September 30, 2013, Devon had substantially completed this initiative and incurred $130 million of restructuring costs associated with the office consolidation. The $130 million includes $50 million incurred during the nine months ended September 30, 2013, which largely relates to office space that is subject to non-cancellable operating lease agreements that Devon ceased using.

 

Divestiture of Offshore Assets

 

In the fourth quarter of 2009, Devon announced plans to divest its offshore assets. Devon completed this divestiture program in 2012, having incurred $196 million of cumulative restructuring costs associated with the divestitures.

 

Financial Statement Presentation

 

The schedule below summarizes restructuring costs presented in the accompanying comprehensive statements of earnings related to the office consolidation. There were no costs related to the offshore divestitures in the nine-month periods ended September 30, 2013 and 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Nine Months

 

 

Ended September 30,

 

Ended September 30,

 

  

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

(In millions)

Lease obligations and other

  

$

  

$

 —

  

$

44 

  

$

 —

Asset impairments

  

 

 —

  

 

 —

  

 

  

 

 —

Restructuring costs

  

$

  

$

 —

  

$

50 

  

$

 —

 

 

The schedule below summarizes Devon’s restructuring liabilities. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Other

 

 

 

 

 

Current

 

Long-Term

 

 

 

 

 

Liabilities

 

Liabilities

 

Total

 

 

 

 

 

 

 

 

 

 

 

  

(In millions)

Balance as of December 31, 2012

  

$

52 

 

$

 

$

61 

Lease obligations and other - Office consolidation

 

 

18 

 

 

11 

 

 

29 

Employee severance – Office consolidation

  

 

(34)

 

 

 —

 

 

(34)

Lease obligations - Offshore

  

 

(2)

 

 

(1)

 

 

(3)

Balance as of September 30, 2013

  

$

34 

  

$

19 

  

$

53 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2011

  

$

29 

 

$

16 

 

$

45 

Lease obligations - Offshore

  

 

(9)

 

 

(3)

 

 

(12)

Employee severance - Offshore

  

 

(7)

 

 

 —

 

 

(7)

Balance as September 30, 2012

 

$

13 

 

$

13 

 

$

26 

 

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

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

  

2013

 

2012

  

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(In millions)

Accretion of asset retirement obligations

  

$

29 

  

$

27 

  

$

86 

  

$

82 

Interest rate derivatives

  

 

(1)

  

 

(1)

  

 

(1)

  

 

15 

Foreign currency derivatives

  

 

28 

 

 

26 

  

 

(29)

 

 

25 

Foreign exchange loss (gain)

  

 

(27)

 

 

(28)

  

 

34 

 

 

(26)

Interest income

  

 

(4)

 

 

(8)

  

 

(16)

 

 

(24)

Other

  

 

 

 

(24)

  

 

 

 

(26)

Other, net

  

$

34 

 

$

(8)

  

$

83 

 

$

46 

 

 

Income Taxes
Income Taxes

 

.

5.Income Taxes

 

In the second quarter of 2013, Devon repatriated to the United States $2.0 billion of cash from its foreign subsidiaries. In conjunction with the repatriation, Devon recognized approximately $100 million of current income tax expense. The current expense was entirely offset by the recognition of deferred income tax benefits, which included the reduction of the deferred tax liability previously recognized for unremitted foreign earnings deemed not to be indefinitely reinvested. 

 

As of September 30, 2013, Devon’s unremitted foreign earnings totaled approximately $6.0 billion. Of this amount, approximately $4.8 billion was deemed to be indefinitely reinvested into the development and growth of Devon’s Canadian business. Therefore, Devon has not recognized a deferred tax liability for U.S. income taxes associated with such earnings. If such earnings were to be repatriated to the U.S., Devon may be subject to U.S. income taxes and foreign withholding taxes. However, it is not practical to estimate the amount of such additional taxes that may be payable due to the inter-relationship of the various factors involved in making such an estimate.

 

Devon has deemed the remaining $1.2 billion of unremitted foreign earnings not to be indefinitely reinvested. Consequently, Devon has recognized a deferred tax liability of approximately $550 million associated with such unremitted earnings as of September 30, 2013.    

 

The following table presents our total income tax expense (benefit) and a reconciliation of our effective income tax rate to the U.S. statutory income tax rate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense (benefit) (in millions)

 

$

210 

 

$

(442)

 

$

(99)

 

$

12 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. statutory income tax rate

 

 

35% 

 

 

(35%)

 

 

(35%)

 

 

35% 

State income taxes

 

 

1% 

 

 

(1%)

 

 

(3%)

 

 

(1%)

Taxation on Canadian operations

 

 

(5%)

 

 

(1%)

 

 

9% 

 

 

(14%)

Other

 

 

2% 

 

 

(1%)

 

 

(1%)

 

 

(13%)

Effective income tax rate

 

 

33% 

 

 

(38%)

 

 

(30%)

 

 

7% 

 

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

6.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 per share.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Common

 

Earnings (loss)

 

 

Earnings (loss)

 

Shares

 

per  Share

 

 

 

 

 

 

 

 

 

 

 

  

(In millions, except per share amounts)

Three Months Ended September 30, 2013:

  

 

 

 

 

 

 

 

 

Earnings from continuing operations

  

$

429 

 

 

406 

 

 

 

Attributable to participating securities

  

 

(4)

 

 

(4)

 

 

 

Basic earnings per share

  

 

425 

 

 

402 

 

$

1.06 

Dilutive effect of potential common shares issuable

  

 

 -

 

 

 

 

 

Diluted earnings per share

  

$

425 

 

 

403 

 

$

1.05 

 

  

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2012:

  

 

 

 

 

 

 

 

 

Loss from continuing operations

  

$

(719)

 

 

405 

 

 

 

Attributable to participating securities

  

 

(1)

 

 

(5)

 

 

 

Basic earnings per share

  

 

(720)

 

 

400 

 

$

(1.80)

Dilutive effect of potential common shares issuable

  

 

 -

 

 

 -

 

 

 

Diluted earnings per share

  

$

(720)

 

 

400 

 

$

(1.80)

 

  

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2013:

  

 

 

 

 

 

 

 

 

Loss from continuing operations

  

$

(227)

 

 

406 

 

 

 

Attributable to participating securities

  

 

(2)

 

 

(4)

 

 

 

Basic earnings per share

  

 

(229)

 

 

402 

 

$

(0.57)

Dilutive effect of potential common shares issuable

  

 

 -

 

 

 -

 

 

 

Diluted earnings per share

  

$

(229)

 

 

402 

 

$

(0.57)

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2012:

  

 

 

 

 

 

 

 

 

Earnings from continuing operations

  

$

172 

 

 

404 

 

 

 

Attributable to participating securities

  

 

(2)

 

 

(4)

 

 

 

Basic earnings per share

  

 

170 

 

 

400 

 

$

0.42 

Dilutive effect of potential common shares issuable

  

 

 -

 

 

 

 

 

Diluted earnings per share

  

$

170 

 

 

401 

 

$

0.42 

 

  

 

 

 

 

 

 

 

 

 

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 nine-month periods ended September 30, 2013,  7.5 million shares and 7.6 million shares, respectively, were excluded from the diluted earnings per share calculations. During the three-month and nine-month periods ended September 30, 2012, 9.0 million shares and 8.9 million shares, respectively, were excluded from the diluted earnings per share calculations.

Other Comprehensive Earnings
Other Comprehensive Earnings

7.Other Comprehensive Earnings

 

Components of other comprehensive earnings consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Foreign currency translation:

 

 

 

 

 

 

 

 

 

 

 

Beginning accumulated foreign currency translation

$

1,542 

 

$

1,783 

 

$

1,996 

 

$

1,802 

Change in cumulative translation adjustment

 

182 

 

 

325 

 

 

(294)

 

 

305 

Income tax benefit (expense)

 

(9)

 

 

(14)

 

 

13 

 

 

(13)

Ending accumulated foreign currency translation

 

1,715 

 

 

2,094 

 

 

1,715 

 

 

2,094 

Pension and postretirement benefit plans:

 

 

 

 

 

 

 

 

 

 

 

Beginning accumulated pension and postretirement benefits

 

(216)

 

 

(218)

 

 

(225)

 

 

(227)

Recognition of net actuarial loss and prior service cost in earnings (1)

 

 

 

 

 

18 

 

 

19 

Income tax expense

 

(3)

 

 

(3)

 

 

(6)

 

 

(7)

Ending accumulated pension and postretirement benefits

 

(213)

 

 

(215)

 

 

(213)

 

 

(215)

Accumulated other comprehensive earnings, net of tax

$

1,502 

 

$

1,879 

 

$

1,502 

 

$

1,879 

__________________________

(1)  These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of general and administrative expenses on the accompanying comprehensive statements of earnings (see “Retirement Plans note for additional details). 

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

 

 

8.Supplemental Information to Statements of Cash Flows 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

(In millions)

Net change in working capital accounts:

 

 

 

 

 

 

Accounts receivable

 

$

(287)

 

$

275 

Other current assets

 

 

72 

 

 

(234)

Accounts payable

 

 

127 

 

 

77 

Revenues and royalties payable

 

 

56 

 

 

(34)

Other current liabilities

 

 

(72)

 

 

(36)

Net change in working capital

 

$

(104)

 

$

48 

 

 

 

 

 

 

 

Interest paid (net of capitalized interest)

 

$

342 

 

$

260 

Income taxes paid (received)

 

$

(2)

 

$

88 

 

Short-Term Investments
Short-Term Investments

9.Short-Term Investments

 

The components of short-term investments include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

 

 

(In millions)

Canadian treasury, agency and provincial securities

 

$

 —

 

$

1,865 

U.S. treasuries

 

 

 —

 

 

429 

Other

 

 

 —

 

 

49 

Short-term investments

 

$

 —

 

$

2,343 

 

Accounts Receivable
Accounts Receivable

10.  Accounts Receivable

 

The components of accounts receivable include the following: