DEVON ENERGY CORP/DE, 10-Q filed on 8/7/2013
Quarterly Report
Document And Entity Information
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jul. 18, 2013
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 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
Q2 
 
Entity Common Stock, Shares Outstanding
 
406 
Consolidated Comprehensive Statements Of Earnings (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Revenues:
 
 
 
 
Oil, gas and NGL sales
$ 2,222 
$ 1,617 
$ 4,026 
$ 3,532 
Oil, gas and NGL derivatives
366 
665 
46 
810 
Marketing and midstream revenues
503 
277 
991 
714 
Total revenues
3,091 
2,559 
5,063 
5,056 
Expenses and other, net:
 
 
 
 
Lease operating expenses
559 
513 
1,084 
1,027 
Marketing and midstream operating costs and expenses
382 
209 
745 
534 
Depreciation, depletion and amortization
674 
684 
1,378 
1,364 
General and administrative expenses
167 
176 
317 
344 
Taxes other than income taxes
125 
100 
238 
202 
Interest expense
108 
99 
218 
186 
Restructuring costs
 
46 
 
Asset impairments
40 
 
1,953 
 
Other, net
31 
44 
49 
54 
Total expenses and other, net
2,094 
1,825 
6,028 
3,711 
Earnings (loss) from continuing operations before income taxes
997 
734 
(965)
1,345 
Current income tax expense
132 
31 
132 
49 
Deferred income tax expense (benefit)
182 
226 
(441)
405 
Earnings (loss) from continuing operations
683 
477 
(656)
891 
Loss from discontinued operations, net of tax
 
 
 
(21)
Net earnings (loss)
683 
477 
(656)
870 
Basic net earnings (loss) per share:
 
 
 
 
Basic earnings (loss) from continuing operations per share
$ 1.69 
$ 1.18 
$ (1.63)
$ 2.20 
Basic loss from discontinued operations per share
 
 
 
$ (0.05)
Basic net earnings (loss) per share
$ 1.69 
$ 1.18 
$ (1.63)
$ 2.15 
Diluted net earnings (loss) per share:
 
 
 
 
Diluted earnings (loss) from continuing operations per share
$ 1.68 
$ 1.18 
$ (1.63)
$ 2.20 
Diluted loss from discontinued operations per share
 
 
 
$ (0.05)
Diluted net earnings (loss) per share
$ 1.68 
$ 1.18 
$ (1.63)
$ 2.15 
Comprehensive earnings (loss):
 
 
 
 
Net earnings (loss)
683 
477 
(656)
870 
Other comprehensive loss, net of tax:
 
 
 
 
Foreign currency translation
(271)
(171)
(454)
(19)
Pension and postretirement plans
Other comprehensive loss, net of tax
(266)
(166)
(445)
(10)
Comprehensive earnings (loss)
$ 417 
$ 311 
$ (1,101)
$ 860 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash flows from operating activities:
 
 
Net earnings (loss)
$ (656)
$ 870 
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
1,378 
1,364 
Asset impairments
1,953 
 
Deferred income tax expense (benefit)
(441)
405 
Unrealized change in fair value of financial instruments
46 
(362)
Other noncash charges
176 
114 
Net decrease (increase) in working capital
(128)
14 
Decrease in long-term other assets
22 
Increase (decrease) in long-term other liabilities
48 
(3)
Cash from operating activities - continuing operations
2,398 
2,426 
Cash from operating activities - discontinued operations
 
26 
Net cash from operating activities
2,398 
2,452 
Cash flows from investing activities:
 
 
Capital expenditures
(3,569)
(4,267)
Proceeds from property and equipment divestitures
34 
864 
Purchases of short-term investments
(1,076)
(1,471)
Redemptions of short-term investments
2,550 
2,030 
Other
82 
14 
Cash from investing activities - continuing operations
(1,979)
(2,830)
Cash from investing activities - discontinued operations
 
58 
Net cash from investing activities
(1,979)
(2,772)
Cash flows from financing activities:
 
 
Proceeds from borrowings of long-term debt, net of issuance costs
 
2,465 
Net short-term debt repayments
(1,495)
(1,498)
Credit facility borrowings
 
750 
Credit facility repayments
 
(750)
Proceeds from stock option exercises
22 
Dividends paid on common stock
(170)
(162)
Excess tax benefits related to share-based compensation
Net cash from financing activities
(1,659)
828 
Effect of exchange rate changes on cash
(34)
38 
Net change in cash and cash equivalents
(1,274)
546 
Cash and cash equivalents at beginning of period
4,637 
5,555 
Cash and cash equivalents at end of period
$ 3,363 
$ 6,101 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 3,363 
$ 4,637 
Short-term investments
869 
2,343 
Accounts receivable
1,538 
1,245 
Other current assets
587 
746 
Total current assets
6,357 
8,971 
Oil and gas, based on full cost accounting:
 
 
Subject to amortization
71,057 
69,410 
Not subject to amortization
3,382 
3,308 
Total oil and gas
74,439 
72,718 
Other
5,839 
5,630 
Total property and equipment, at cost
80,278 
78,348 
Less accumulated depreciation, depletion and amortization
(53,353)
(51,032)
Property and equipment, net
26,925 
27,316 
Goodwill
5,917 
6,079 
Other long-term assets
821 
960 
Total assets
40,020 
43,326 
Current liabilities:
 
 
Accounts payable
1,197 
1,451 
Revenues and royalties payable
830 
750 
Short-term debt
2,194 
3,189 
Other current liabilities
644 
613 
Total current liabilities
4,865 
6,003 
Long-term debt
7,956 
8,455 
Asset retirement obligations
2,121 
1,996 
Other long-term liabilities
816 
901 
Deferred income taxes
4,196 
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
3,747 
3,688 
Retained earnings
14,952 
15,778 
Accumulated other comprehensive earnings
1,326 
1,771 
Total stockholders' equity
20,066 
21,278 
Commitments and contingencies (Note 17)
   
   
Total liabilities and stockholders' equity
$ 40,020 
$ 43,326 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 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)
 
 
870 
 
 
870 
Other comprehensive loss, net of tax
 
 
 
(10)
 
(10)
Stock option exercises
 
22 
 
 
 
22 
Stock option exercises, shares
 
 
 
 
 
Common stock repurchased
 
 
 
 
(1)
(1)
Common stock retired
 
(1)
 
 
 
Common stock dividends
 
 
(162)
 
 
(162)
Share-based compensation
 
75 
 
 
 
75 
Share-based compensation tax benefits
 
 
 
 
Balance, at Jun. 30, 2012
40 
3,604 
17,016 
1,565 
 
22,225 
Balance, shares, at Jun. 30, 2012
405 
 
 
 
 
 
Balance, at Dec. 31, 2012
41 
3,688 
15,778 
1,771 
 
21,278 
Balance, shares, at Dec. 31, 2012
406 
 
 
 
 
 
Net earnings (loss)
 
 
(656)
 
 
(656)
Other comprehensive loss, net of tax
 
 
 
(445)
 
(445)
Stock option exercises
 
 
 
 
Common stock repurchased
 
 
 
 
(9)
(9)
Common stock retired
 
(9)
 
 
 
Common stock dividends
 
 
(170)
 
 
(170)
Share-based compensation
 
62 
 
 
 
62 
Share-based compensation tax benefits
 
 
 
 
Balance, at Jun. 30, 2013
$ 41 
$ 3,747 
$ 14,952 
$ 1,326 
 
$ 20,066 
Balance, shares, at Jun. 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 six-month periods ended June 30, 2013 and 2012 and Devon's financial position as of June 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 June 30, 2013, Devon held $39 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 June  30, 2013, Devon had the following open oil derivative positions. Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price Swaps

 

Price Collars

 

Call Options Sold

Period

 

Volume (Bbls/d)

 

Weighted Average Price ($/Bbl)

 

Volume (Bbls/d)

 

Weighted Average Floor Price ($/Bbl)

 

Weighted Average Ceiling Price ($/Bbl)

 

Volume (Bbls/d)

 

Weighted Average Price ($/Bbl)

Q3-Q4 2013

 

70,000

 

$

100.26

 

65,000

 

$

90.13

 

$

111.91

 

10,000

 

$

120.00

Q1-Q4 2014 

 

21,000

 

$

94.99

 

10,000

 

$

86.53

 

$

102.75

 

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)

Q3-Q4 2013

 

Western Canadian Select

 

40,000

 

$

 (22.30)

 

As of June  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 second table presents 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)

Q3-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)

Q3-Q4 2013 

 

28,435

 

$

3.46

 

 

As of June  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 hub.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price Swaps

Period

 

Product

 

Volume (Bbls/d)

 

Weighted Average Price ($/Bbl)

Q3-Q4 2013

 

Propane

 

1,141

 

$

41.24

Q3-Q4 2013

 

Ethane

 

1,957

 

$

15.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis Swaps

Period

 

Pay

 

Volume (Bbls/d)

 

Weighted Average Differential to WTI ($/Bbl)

Q3-Q4 2013

 

Natural Gasoline

 

500

 

$

(6.80)

 

Interest Rate Derivatives

 

As of June  30, 2013, Devon had the following open interest rate derivative position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

Weighted Average Fixed Rate Received

 

Variable Rate Paid

 

Expiration

(In millions)

 

 

 

 

 

 

$

750

 

3.88%

 

Federal funds rate

 

July 2013

Foreign Currency Derivatives

 

As of June  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 

 

0.967

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months
Ended June 30,

 

Six Months
Ended June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Cash settlements:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

14 

 

$

267 

 

$

100 

 

$

425 

Interest rate derivatives

 

 

 

 

(11)

 

 

14 

 

 

(1)

Foreign currency derivatives

 

 

16 

 

 

20 

 

 

35 

 

 

Total cash settlements

 

 

35 

 

 

276 

 

 

149 

 

 

433 

Unrealized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

 

352 

 

 

398 

 

 

(54)

 

 

385 

Interest rate derivatives

 

 

(5)

 

 

(5)

 

 

(14)

 

 

(15)

Foreign currency derivatives

 

 

26 

 

 

(9)

 

 

22 

 

 

(8)

Total unrealized gains (losses)

 

 

373 

 

 

384 

 

 

(46)

 

 

362 

Net gains recognized on comprehensive statements of earnings

 

$

408 

 

$

660 

 

$

103 

 

$

795 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Caption

 

June 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Asset derivatives:

 

 

 

 

 

 

 

 

Commodity derivatives

 

Other current assets

 

$

299 

 

$

379 

Commodity derivatives

 

Other long-term assets

 

 

109 

 

 

22 

Interest rate derivatives

 

Other current assets

 

 

 

 

23 

Foreign currency derivatives

 

Other current assets

 

 

23 

 

 

Total asset derivatives

 

 

 

$

440 

 

$

425 

Liability derivatives:

 

 

 

 

 

 

 

 

Commodity derivatives

 

Other current liabilities

 

$

24 

 

$

Commodity derivatives

 

Other long-term liabilities

 

 

69 

 

 

29 

Total liability derivatives

 

 

 

$

93 

 

$

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 June 30, 2013, Devon had substantially completed this initiative and incurred $126 million of restructuring costs associated with the office consolidation.

 

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 three-month and six-month periods ended June 30, 2013 and 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

Ended June 30,

 

  

2013

 

2012

 

 

 

 

 

 

 

 

  

(In millions)

Lease obligations and other

  

$

40 

  

$

 —

Asset impairments

  

 

  

 

 —

Restructuring costs

  

$

46 

  

$

 —

 

In the six months ended June 30, 2013, Devon incurred $25 million of restructuring costs related to office space that is subject to non-cancellable operating lease agreements that Devon ceased using as a part of the office consolidation. Devon also recognized $6 million of asset impairment charges for leasehold improvements and furniture associated with the office consolidation.

 

 

 

 

 

The schedule below summarizes Devon’s restructuring liabilities. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Other

 

 

 

 

 

Current

 

Long-Term

 

 

 

 

 

Liabilities

 

Liabilities

 

Total

 

 

 

 

 

 

 

 

 

 

 

  

(In millions)

Balance as of December 31, 2011

  

$

29 

 

$

16 

 

$

45 

Lease obligations - Offshore

  

 

(9)

 

 

(1)

 

 

(10)

Employee severance - Offshore

  

 

(5)

 

 

 —

 

 

(5)

Balance as June 30, 2012

 

$

15 

 

$

15 

 

$

30 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2012

  

$

52 

 

$

 

$

61 

Lease obligations and other - Office consolidation

 

 

14 

 

 

11 

 

 

25 

Employee severance - Office consolidation

  

 

(21)

 

 

 —

 

 

(21)

Lease obligations - Offshore

  

 

(1)

 

 

(1)

 

 

(2)

Balance as of June 30, 2013

  

$

44 

  

$

19 

  

$

63 

 

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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

  

2013

 

2012

  

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(In millions)

Accretion of asset retirement obligations

  

$

29 

  

$

28 

  

$

57 

  

$

55 

Interest rate derivatives

  

 

 —

  

 

16 

  

 

 —

  

 

16 

Foreign currency derivatives

  

 

(42)

 

 

(11)

  

 

(57)

 

 

(1)

Foreign exchange loss

  

 

44 

 

 

15 

  

 

61 

 

 

Interest income

  

 

(4)

 

 

(9)

  

 

(12)

 

 

(16)

Other

  

 

 

 

  

 

 —

 

 

(1)

Other, net

  

$

31 

 

$

44 

  

$

49 

 

$

54 

 

 

 

 

 

 

 

 

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 June 30, 2013, Devon’s unremitted foreign earnings totaled approximately $5.6 billion. Of this amount, approximately $4.4 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 June 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 June 30,

 

Six Months Ended June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense (benefit) (in millions)

$

314 

 

$

257 

 

$

(309)

 

$

454 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. statutory income tax rate

 

35% 

 

 

35% 

 

 

(35%)

 

 

35% 

 

State income taxes

 

1% 

 

 

1% 

 

 

(1%)

 

 

1% 

 

Taxation on Canadian operations

 

(2%)

 

 

(1%)

 

 

6% 

 

 

(2%)

 

Other

 

(2%)

 

 

-

 

 

(2%)

 

 

-

 

Effective income tax rate

 

32% 

 

 

35% 

 

 

(32%)

 

 

34% 

 

 

 

Earnings Per Share
Earnings 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 June 30, 2013:

  

 

 

 

 

 

 

 

 

Earnings from continuing operations

  

$

683 

 

 

406 

 

 

 

Attributable to participating securities

  

 

(5)

 

 

(4)

 

 

 

Basic earnings per share

  

 

678 

 

 

402 

 

$

1.69 

Dilutive effect of potential common shares issuable

  

 

 —

 

 

 

 

 

Diluted earnings per share

  

$

678 

 

 

403 

 

$

1.68 

 

  

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2012:

  

 

 

 

 

 

 

 

 

Earnings from continuing operations

  

$

477 

 

 

404 

 

 

 

Attributable to participating securities

  

 

(6)

 

 

(4)

 

 

 

Basic earnings per share

  

 

471 

 

 

400 

 

$

1.18 

Dilutive effect of potential common shares issuable

  

 

 —

 

 

 —

 

 

 

Diluted earnings per share

  

$

471 

 

 

400 

 

$

1.18 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2013:

  

 

 

 

 

 

 

 

 

Loss from continuing operations

  

$

(656)

 

 

406 

 

 

 

Attributable to participating securities

  

 

(1)

 

 

(4)

 

 

 

Basic earnings per share

  

 

(657)

 

 

402 

 

$

(1.63)

Dilutive effect of potential common shares issuable

  

 

 —

 

 

 —

 

 

 

Diluted loss per share

  

$

(657)

 

 

402 

 

$

(1.63)

 

  

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2012:

  

 

 

 

 

 

 

 

 

Earnings from continuing operations

  

$

891 

 

 

404 

 

 

 

Attributable to participating securities

  

 

(10)

 

 

(4)

 

 

 

Basic earnings per share

  

 

881 

 

 

400 

 

$

2.20 

Dilutive effect of potential common shares issuable

  

 

 —

 

 

 

 

 

Diluted earnings per share

  

$

881 

 

 

401 

 

$

2.20 

 

  

 

 

 

 

 

 

 

 

Certain options to purchase shares of Devon's common stock are excluded from the dilution calculation because the options are antidilutive. During the three-month and six-month periods ended June 30, 2013,  7.6 million shares were excluded from the diluted earnings per share calculations. During the three-month and six-month periods ended June 30, 2012, 8.9 million shares and 6.7 million shares, respectively, were excluded from the diluted earnings per share calculations.

Other Comprehensive Earnings
Other Comprehensive Earnings

7.Other Comprehensive Earnings

 

Components of other comprehensive earnings consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Foreign currency translation:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning accumulated foreign currency translation

 

$

1,813 

 

$

1,954 

 

$

1,996 

 

$

1,802 

Change in cumulative translation adjustment

 

 

(284)

 

 

(179)

 

 

(475)

 

 

(20)

Income tax benefit

 

 

13 

 

 

 

 

21 

 

 

Ending accumulated foreign currency translation

 

 

1,542 

 

 

1,783 

 

 

1,542 

 

 

1,783 

Pension and postretirement benefit plans:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning accumulated pension and postretirement benefits

 

 

(221)

 

 

(223)

 

 

(225)

 

 

(227)

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

 

 

 

 

 

 

12 

 

 

13 

Income tax expense

 

 

(1)

 

 

(2)

 

 

(3)

 

 

(4)

Ending accumulated pension and postretirement benefits

 

 

(216)

 

 

(218)

 

 

(216)

 

 

(218)

Accumulated other comprehensive earnings, net of tax

 

$

1,326 

 

$

1,565 

 

$

1,326 

 

$

1,565 

__________________________

(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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

(In millions)

Net change in working capital accounts:

 

 

 

 

 

 

Accounts receivable

 

$

(300)

 

$

384 

Other current assets

 

 

72 

 

 

(191)

Accounts payable

 

 

56 

 

 

13 

Revenues and royalties payable

 

 

82 

 

 

(139)

Other current liabilities

 

 

(38)

 

 

(53)

Net decrease (increase) in working capital

 

$

(128)

 

$

14 

 

 

 

 

 

 

 

Interest paid (net of capitalized interest)

 

$

208 

 

$

169 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

(In millions)

Canadian treasury, agency and provincial securities

$

759 

 

$

1,865 

U.S. treasuries

 

110 

 

 

429 

Other

 

 —

 

 

49 

Short-term investments

$

869 

 

$

2,343 

 

 

Accounts Receivable
Accounts Receivable

10.              Accounts Receivable

 

The components of accounts receivable include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

 

 

(In millions)

Oil, gas and NGL sales

 

$

915 

 

$

752 

Joint interest billings

 

 

432 

 

 

270 

Marketing and midstream revenues

 

 

160 

 

 

161 

Other

 

 

41 

 

 

72 

Gross accounts receivable

 

 

1,548 

 

 

1,255 

Allowance for doubtful accounts

 

 

(10)

 

 

(10)

Net accounts receivable

 

$

1,538 

 

$

1,245 

 

 

Property And Equipment
Property And Equipment

 

 

11.   Property and Equipment

 

Asset Impairments

 

In the first six months of 2013, Devon recognized asset impairments related to its oil and gas property and equipment as presented below.