| Debt
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements and notes of Devon Energy Corporation (“Devon”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying financial statements and notes should be read in conjunction with the accompanying financial statements and notes included in Devon's 2011 Annual Report on Form 10-K.
The accompanying unaudited interim financial statements furnished in this report reflect all adjustments that are, in the opinion of management, necessary to a fair statement of Devon's financial position as of June 30, 2012 and Devon's results of operations and cash flows for the three-month and six-month periods ended June 30, 2012 and 2011.
Accounts Payable
Included in accounts payable at June 30, 2012, are liabilities of $99 million representing the amount by which checks issued, but not presented to Devon’s banks for collection, exceed balances in applicable bank accounts. Changes in these liabilities are reflected in cash flows from financing activities.
|
2. Derivative Financial Instruments
Objectives and Strategies
Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production. These instruments are used to manage the inherent uncertainty of future revenues due to commodity price volatility and typically include financial price swaps, basis swaps, costless price collars and call options.
Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. Devon periodically enters into foreign exchange forward contracts to manage its exposure to fluctuations in exchange rates.
Devon does not hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.
Counterparty Credit Risk
By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon's policy to enter into derivative contracts only with investment grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon's derivative contracts contain provisions that provide for collateral payments, depending on levels of exposure and the credit rating of the counterparty.
As of June 30, 2012, Devon holds $107 million cash collateral. Such amount represented the estimated fair value of certain derivative positions in excess of Devon’s credit guidelines. The collateral is reported in other current liabilities in the accompanying balance sheet.
Commodity Derivatives
As of June 30, 2012, Devon had the following open oil derivative positions. Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price.
As of June 30, 2012, Devon had the following open natural gas derivative positions. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index.
Interest Rate Derivatives
As of June 30, 2012, Devon had the following open interest rate derivative positions:
|
|
|
|
Received |
Rate Paid |
Expiration |
|
(In millions) |
|
|
|
$ 100 |
1.90% |
Federal funds rate |
|
3.88% |
Federal funds rate |
||
3.65% |
|
|
Foreign Exchange Derivatives
As of June 30, 2012, Devon had the following open foreign exchange rate derivative position:
|
|
|
|
|
Forward Contract |
||||
Currency |
Contract Type |
CAD Notional |
Fixed Rate Received |
Expiration |
|
|
(In millions) |
(CAD-USD) |
|
Sell |
$ 755 |
0.9708 |
September 2012 |
Financial Statement Presentation
The following table presents the cash settlements and unrealized gains and losses on fair value changes included in the accompanying comprehensive statements of earnings associated with derivative financial instruments. Cash settlements and unrealized gains and losses on fair value changes associated with Devon’s commodity derivatives are presented in the “Oil, gas and NGL derivatives” caption in the accompanying comprehensive statements of earnings. Cash settlements and unrealized gains and losses on fair value changes associated with Devon’s interest rate and foreign currency derivatives are presented in the “Other, net” caption in the accompanying comprehensive statements of earnings.
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Cash settlements: |
|
|
|
|
Commodity derivatives............................................................................. |
$ 267 |
$ 59 |
$ 425 |
$ 145 |
(11) |
5 |
(1) |
21 |
|
Foreign currency derivatives..................................................................... |
20 |
— |
9 |
— |
Total cash settlements............................................................................. |
276 |
64 |
433 |
166 |
Unrealized gains (losses): |
|
|
|
|
Commodity derivatives............................................................................. |
398 |
357 |
385 |
103 |
(5) |
(30) |
(15) |
(29) |
|
Foreign currency derivatives..................................................................... |
(9) |
— |
(8) |
— |
Total unrealized gains............................................................................. |
384 |
327 |
362 |
74 |
Net gain recognized on comprehensive statements of earnings........... |
$ 660 |
$ 391 |
$ 795 |
$ 240 |
The following table presents the derivative fair values included in the accompanying balance sheets.
|
|
|
|
|
Balance Sheet Caption |
June 30, 2012 |
December 31, 2011 |
|
|
(In millions) |
|
|
|
|
|
Other current assets.................................. |
$ 759 |
$ 611 |
|
Other long-term assets............................. |
209 |
17 |
|
Interest rate derivatives............ ......................................................... |
Other current assets.................................. |
28 |
30 |
Interest rate derivatives............ ......................................................... |
Other long-term assets............................. |
22 |
|
$ 1,005 |
$ 680 |
||
Liability derivatives: |
|
|
|
Other current liabilities............................. |
$ 10 |
$ 82 |
|
Other long-term liabilities........................ |
27 |
— |
|
8 |
— |
||
$ 45 |
$ 82 |
|
In the fourth quarter of 2009, Devon announced plans to divest its offshore assets. As of June 30, 2012, Devon had divested all of its U.S. Offshore and International assets. Since inception of the plan, Devon has incurred $202 million of restructuring costs associated with these divestitures.
The schedule below summarizes restructuring costs presented in the accompanying comprehensive statements of earnings. Restructuring costs related to Devon’s discontinued operations totaled $(8) million and $(2) million in the second quarter and first six months of June 30, 2011. These costs primarily related to cash severance and share-based awards and are not included in the schedule below. There were no costs related to discontinued operations in the six months ended June 30, 2012.
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
$ — |
$ 2 |
$ — |
$ (2) |
|
— |
2 |
— |
2 |
|
— |
2 |
— |
1 |
|
$ — |
$ 6 |
$ — |
$ 1 |
The schedule below summarizes Devon’s restructuring liabilities. Devon’s restructuring liabilities for cash severance related to its discontinued operations totaled $10 million at June 30, 2011 and are not included in the schedule below.
|
|
|
|
|
Other Current Liabilities |
Other Long-Term Liabilities |
Total |
|
(In millions) |
||
Balance as of December 31, 2011............................................................. |
$ 29 |
$ 16 |
$ 45 |
(9) |
(1) |
(10) |
|
(5) |
— |
(5) |
|
Balance as of June 30, 2012....................................................................... |
$ 15 |
$ 15 |
$ 30 |
|
|
|
|
Balance as of December 31, 2010............................................................. |
$ 31 |
$ 51 |
$ 82 |
(1) |
(7) |
(8) |
|
(16) |
— |
(16) |
|
Other.............................................................................................................. |
— |
(1) |
(1) |
Balance as of June 30, 2011....................................................................... |
$ 14 |
$ 43 |
$ 57 |
|
The components of other, net in the accompanying comprehensive statements of earnings include the following:
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Accretion of asset retirement obligations.................................................. |
$ 28 |
$ 23 |
$ 55 |
$ 46 |
Interest rate swaps – cash settlements...................................................... |
11 |
(5) |
1 |
(21) |
Interest rate swaps – unrealized fair value changes............................... |
5 |
30 |
15 |
29 |
(9) |
(4) |
(16) |
(6) |
|
9 |
(7) |
(1) |
(21) |
|
$ 44 |
$ 37 |
$ 54 |
$ 27 |
|
6. Other Comprehensive Earnings
Components of other comprehensive earnings consist of the following:
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Foreign currency translation: |
|
|
|
|
Beginning accumulated foreign currency translation.......................... |
||||
Change in cumulative translation adjustment...................................... |
(179) |
67 |
(20) |
262 |
8 |
(2) |
1 |
(12) |
|
Ending accumulated foreign currency translation................................ |
1,783 |
2,243 |
1,783 |
2,243 |
Pension and postretirement benefit plans: |
|
|
|
|
Beginning accumulated pension and postretirement benefits............ |
||||
Recognition of net actuarial loss and prior service cost in earnings.. |
7 |
8 |
13 |
17 |
(2) |
(3) |
(4) |
(6) |
|
Ending accumulated pension and postretirement benefits................. |
(218) |
(222) |
(218) |
(222) |
Accumulated other comprehensive earnings, net of tax........................ |
$ 1,565 |
$ 2,021 |
$ 1,565 |
$ 2,021 |
|
7. Supplemental Information to Statements of Cash Flows
|
|
|
|
|
Six Months Ended June 30, |
||
|
2012 |
2011 |
|
|
(In millions) |
||
Net change in working capital: |
|
|
|
Decrease (increase) in accounts receivable.............................................. |
$ 384 |
$ (100) |
|
Increase in other current assets.................................................................. |
(191) |
(41) |
|
Increase in accounts payable..................................................................... |
13 |
9 |
|
(Decrease) increase in revenues and royalties payable......................... |
(139) |
130 |
|
Decrease in other current liabilities............................................................ |
(45) |
(87) |
|
Net decrease (increase) in working capital.................................................. |
$ 22 |
||
|
|
|
|
Supplementary cash flow data – total operations: |
|
|
|
Interest paid (net of capitalized interest).................................................. |
$ 169 |
$ 160 |
|
Income taxes paid (received)..................................................................... |
$ 88 |
$ (125) |
|
The components of short-term investments include the following:
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
Canadian treasury, agency and provincial securities............................... |
$ 644 |
$ 1,155 |
300 |
201 |
|
— |
147 |
|
Short-term investments............................................................................... |
$ 944 |
$ 1,503 |
|
The components of accounts receivable include the following:
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
$ 668 |
$ 928 |
|
199 |
247 |
|
Marketing and midstream revenues............................................................ |
105 |
174 |
47 |
39 |
|
Gross accounts receivable........................................................................... |
1,019 |
1,388 |
Allowance for doubtful accounts................................................................. |
(14) |
(9) |
$ 1,005 |
$ 1,379 |
|
The components of other current assets include the following:
|
|
|
|
||
|
(In millions) |
|
Derivative financial instruments.................................................................. |
$ 787 |
$ 641 |
220 |
102 |
|
40 |
35 |
|
— |
21 |
|
120 |
69 |
|
$ 1,167 |
$ 868 |
|
In April 2012, Devon closed its joint venture transaction with Sinopec International Petroleum Exploration & Production Corporation. Pursuant to the agreement, Sinopec paid approximately $900 million in cash and received a 33.3% interest in five of Devon’s new ventures exploration plays in the U.S. at closing of the transaction. Additionally, Sinopec is required to fund approximately $1.6 billion of Devon’s share of future exploration, development and drilling costs associated with these plays. Devon recognized the cash proceeds received at closing as a reduction to U.S. oil and gas property and equipment. No gain or loss was recognized.
|
The components of other current liabilities include the following:
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
Deferred income taxes payable.................................................................... |
$ 253 |
$ 172 |
142 |
131 |
|
317 |
475 |
|
$ 712 |
$ 778 |
|
Long-Term Debt
In May 2012, Devon issued $2.5 billion of senior notes that are unsecured and unsubordinated obligations of Devon. Devon used the net proceeds to repay outstanding commercial paper and credit facility borrowings. The schedule below summarizes the key terms of these notes ($ in millions).
|
|
|
|
|
|
1.875% due May 15, 2017............................................................................ |
$ 750 |
|
3.25% due May 15, 2022.............................................................................. |
1,000 |
|
4.75% due May 15, 2042.............................................................................. |
750 |
|
(35) |
||
$ 2,465 |
Commercial Paper
As of June 30, 2012, Devon had $2.1 billion of outstanding commercial paper at an average rate of 0.40 percent.
Credit Lines
On April 7, 2012, $0.46 billion of Devon’s Senior Credit Facility matured and was not extended. After the maturity, Devon maintains a $2.19 billion syndicated, unsecured revolving line of credit (the "Senior Credit Facility"). As of June 30, 2012, there were no borrowings under the Senior Credit Facility.
The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be less than 65 percent. As of June 30, 2012, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 23.8 percent.
|
14. Asset Retirement Obligations
The schedule below summarizes changes in Devon’s asset retirement obligations.
During the first quarter of 2012, Devon recognized revisions to its asset retirement obligations totaling $399 million. The primary factor contributing to this revision was an overall increase in abandonment cost estimates for certain of its production operations facilities.
|
The following table presents the components of net periodic benefit cost for Devon’s pension and postretirement benefit plans.
|
In the second quarter of 2012, Devon’s stockholders adopted the 2012 amendment to the 2009 Long-Term Incentive Plan (“2009 Plan Amendment”), which expires June 2, 2019. The 2009 Plan Amendment increases the number of shares authorized for issuance from 21.5 million shares to 47 million shares. To calculate shares issued under the 2009 Long-Term Incentive Plan subsequent to the 2009 Plan Amendment, options and stock appreciation rights represent one share and other awards represent 2.38 shares.
Dividends
Devon paid common stock dividends of $162 million and $140 million in the first six months of 2012 and 2011, respectively. The quarterly cash dividend was $0.16 per share in the first quarter of 2011. Devon increased the dividend rate to $0.17 per share in the second quarter of 2011 and further increased the dividend rate to $0.20 per share in the first quarter of 2012.
|
17. Commitments and Contingencies
Devon is party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon's estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to Devon's financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management's estimates.
Royalty Matters
Numerous natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. The suits allege that the producers and related parties used below-market prices, made improper deductions, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with natural gas and NGLs produced and sold. Devon’s largest exposure for such matters relates to royalties in the states of Oklahoma and New Mexico. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.
Environmental Matters
Devon is subject to certain laws and regulations relating to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devon's monetary exposure for environmental matters is not expected to be material.
Chief Redemption Matters
In 2006, Devon acquired Chief Holdings LLC (“Chief”) from the owners of Chief, including Trevor Rees-Jones, the majority owner of Chief. In 2008, a former owner of Chief filed a petition against Rees-Jones, as the former majority owner of Chief, and Devon, as Chief’s successor pursuant to the 2006 acquisition. The petition claimed, among other things, violations of the Texas Securities Act, fraud and breaches of Rees-Jones’ fiduciary responsibility to the former owner in connection with Chief’s 2004 redemption of the owner’s minority ownership stake in Chief.
On June 20, 2011, a court issued a judgment against Rees-Jones for $196 million, of which $133 million of the judgment was also issued against Devon. Both Rees-Jones and Devon are appealing the judgment. If the appeal is unsuccessful, Devon can and will seek full payment of the judgment and any related interest, costs and expenses from Rees-Jones pursuant to an existing indemnification agreement between Rees-Jones, certain other parties and Devon. Devon does not expect to have any net exposure as a result of the judgment. However, because Devon does not have a legal right of set off with respect to the judgment, Devon has recorded in the accompanying June 30, 2012 and December 31, 2011, balance sheets both a $133 million long-term liability relating to the judgment with an offsetting $133 million long-term receivable relating to its right to be indemnified by Rees-Jones and certain other parties pursuant to the indemnification agreement.
Other Matters
Devon is involved in other various routine legal proceedings incidental to its business. However, to Devon's knowledge, there were no other material pending legal proceedings to which Devon is a party or to which any of its property is subject.
|
The following tables provide carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other payables and accrued expenses included in the accompanying balance sheets approximated fair value at June 30, 2012 and December 31, 2011. Therefore, such financial assets and liabilities are not presented in the following tables.
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using: |
||
|
Carrying Amount |
Total Fair Value |
Level 1 Inputs |
Level 2 Inputs |
Level 3 Inputs |
|
(In millions) |
||||
June 30, 2012 assets (liabilities): |
|
|
|
|
|
$ 5,841 |
$ 5,841 |
$ 850 |
$ 4,991 |
$ — |
|
$ 944 |
$ 944 |
$ 300 |
$ 644 |
$ — |
|
$ 69 |
$ 69 |
$ — |
$ — |
$ 69 |
|
$ 968 |
$ 968 |
$ — |
$ 968 |
$ — |
|
$ (37) |
$ (37) |
$ — |
$ (37) |
$ — |
|
$ 37 |
$ 37 |
$ — |
$ 37 |
$ — |
|
$ (8) |
$ (8) |
$ — |
$ (8) |
$ — |
|
Debt........................................................... |
$ (10,603) |
$ (12,260) |
$ — |
$ (12,241) |
$ (19) |
|
|
|
|
|
|
December 31, 2011 assets (liabilities): |
|
|
|
|
|
$ 5,123 |
$ 5,123 |
$ 929 |
$ 4,194 |
$ — |
|
$ 1,503 |
$ 1,503 |
$ 201 |
$ 1,302 |
$ — |
|
$ 84 |
$ 84 |
$ — |
$ — |
$ 84 |
|
$ 628 |
$ 628 |
$ — |
$ 628 |
$ — |
|
$ (82) |
$ (82) |
$ — |
$ (82) |
$ — |
|
$ 52 |
$ 52 |
$ — |
$ 52 |
$ — |
|
Debt........................................................... |
$ (9,780) |
$ (11,380) |
$ — |
$ (11,295) |
$ (85) |
The following methods and assumptions were used to estimate the fair values in the tables above.
Level 1 Fair Value Measurements
Cash equivalents and short-term investments — Amounts consist primarily of U.S. and Canadian treasury securities and money market investments. The fair value approximates the carrying value.
Level 2 Fair Value Measurements
Cash equivalents and short-term investments — Amounts consist primarily of Canadian agency and provincial securities and commercial paper investments. The fair value is based upon quotes from brokers, which approximate the carrying value.
Commodity, interest rate and foreign exchange derivatives — The fair values of commodity and interest rate derivatives are estimated using internal discounted cash flow calculations based upon forward curves and quotes obtained from brokers for contracts with similar terms or quotes obtained from counterparties to the agreements.
Debt — Devon's debt instruments do not actively trade in an established market. The fair values of its fixed-rate debt are estimated based on rates available for debt with similar terms and maturity. The fair values of Devon’s variable-rate commercial paper and credit facility borrowings are the carrying values.
Level 3 Fair Value Measurements
Long-term investments — Devon’s long-term investments presented in the tables above consisted entirely of auction rate securities. Due to auction failures and the lack of an active market for Devon’s auction rate securities, quoted market prices for these securities were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs to estimate the fair values of its long-term auction rate securities. These inputs were based on the AAA credit rating of the securities, the probability of full repayment of the securities considering the U.S. government guarantees substantially all of the underlying student loans, the collection of all accrued interest to date and continued receipts of principal at par. As a result of using these inputs, Devon concluded the estimated fair values of its long-term auction rate securities approximated the par values as of June 30, 2012 and December 31, 2011.
Debt — Devon's Level 3 debt consisted of a non-interest bearing promissory note. Due to the lack of an active market, quoted marked prices for this note, or similar notes, were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs to estimate the fair value of its promissory note. The fair value of this debt is estimated using internal discounted cash flow calculations based upon estimated future payment schedules and a 3.125% interest rate.
Included below is a summary of the changes in Devon's Level 3 fair value measurements during the first six months of 2012 and 2011.
|
|
|
|
|
Six Months Ended June 30, |
||
|
2012 |
2011 |
|
|
(In millions) |
||
Long-term investments balance at beginning of period........................... |
|||
Redemptions of principal............................................................................ |
(15) |
(1) |
|
Long-term investments balance at end of period..................................... |
$ 69 |
$ 93 |
|
|
In March 2012, Devon received $71 million upon closing the divestiture of its operations in Angola, which completed Devon’s offshore divestiture program that was announced in November 2009. In aggregate, Devon’s U.S. and International offshore divestitures generated total proceeds of $10.1 billion, or approximately $8 billion after-tax, assuming repatriation of a substantial portion of the foreign proceeds under current U.S. tax law.
Revenues related to Devon’s discontinued operations totaled $43 million in the six months ended June 30, 2011. Devon did not have revenues related to its discontinued operations during the second quarter of 2011 or the first six months of 2012. Earnings (loss) from discontinued operations before income taxes totaled $(16) million in the six months ended June 30, 2012 and $2.6 billion for the second quarter and first six months of 2011, respectively. Devon did not have any earnings in the second quarter of 2012. Earnings (loss) from discontinued operations in 2012 and 2011 were primarily due to Devon’s International divestiture transactions.
The following table presents the main classes of assets and liabilities associated with Devon’s discontinued operations at December 31, 2011. Devon did not have assets or liabilities held for sale at June 30, 2012.
|
|
|
|
Balance Sheet Caption |
|
|
|
(In millions) |
Other current assets.................................. |
$ 21 |
|
Property and equipment, net... ......................................................... |
Other long-term assets............................. |
$ 132 |
|
|
|
Other current liabilities............................. |
$ 20 |
|
Other current liabilities............................. |
$ 28 |
|
Devon manages its operations through distinct operating segments, or divisions, which are defined primarily by geographic areas. For financial reporting purposes, Devon aggregates its U.S. divisions into one reporting segment due to the similar nature of the businesses. However, Devon's Canadian division is reported as a separate reporting segment primarily due to the significant differences between the U.S. and Canadian regulatory environments. Devon’s segments are all primarily engaged in oil and gas producing activities. Revenues are all from external customers.
|
|
|
|
|
U.S. |
Canada |
Total |
|
(In millions) |
||
Three Months Ended June 30, 2012: |
|
||
$ 1,014 |
$ 603 |
$ 1,617 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 665 |
$ — |
$ 665 |
Marketing and midstream revenues........................................................... |
$ 250 |
$ 27 |
$ 277 |
Depreciation, depletion and amortization................................................. |
$ 439 |
$ 245 |
$ 684 |
$ 84 |
$ 15 |
$ 99 |
|
Earnings from continuing operations before income taxes.................... |
$ 727 |
$ 7 |
$ 734 |
Income tax expense (benefit)...................................................................... |
$ 259 |
$ (2) |
$ 257 |
Earnings from continuing operations......................................................... |
$ 468 |
$ 9 |
$ 477 |
$ 1,985 |
$ 384 |
$ 2,369 |
|
|
|
|
Three Months Ended June 30, 2011: |
|
|
|
$ 1,438 |
$ 762 |
$ 2,200 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 416 |
$ — |
$ 416 |
Marketing and midstream revenues........................................................... |
$ 554 |
$ 50 |
$ 604 |
Depreciation, depletion and amortization................................................. |
$ 350 |
$ 200 |
$ 550 |
$ 40 |
$ 45 |
$ 85 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,148 |
$ 230 |
$ 1,378 |
$ 1,135 |
$ 59 |
$ 1,194 |
|
Earnings from continuing operations......................................................... |
$ 13 |
$ 171 |
$ 184 |
$ 1,499 |
$ 334 |
$ 1,833 |
|
|
|
|
Six Months Ended June 30, 2012: |
|
|
|
$ 2,250 |
$ 1,282 |
$ 3,532 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 810 |
$ — |
$ 810 |
Marketing and midstream revenues........................................................... |
$ 649 |
$ 65 |
$ 714 |
Depreciation, depletion and amortization................................................. |
$ 870 |
$ 494 |
$ 1,364 |
$ 155 |
$ 31 |
$ 186 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,260 |
$ 85 |
$ 1,345 |
$ 444 |
$ 10 |
$ 454 |
|
Earnings from continuing operations......................................................... |
$ 816 |
$ 75 |
$ 891 |
Property and equipment, net........................................................................ |
$ 18,818 |
$ 8,423 |
$ 27,241 |
$ 24,916 |
$ 18,554 |
$ 43,470 |
|
$ 3,531 |
$ 1,183 |
$ 4,714 |
|
|
|
|
Six Months Ended June 30, 2011: |
|
|
|
$ 2,650 |
$ 1,410 |
$ 4,060 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 248 |
$ — |
$ 248 |
Marketing and midstream revenues........................................................... |
$ 977 |
$ 82 |
$ 1,059 |
Depreciation, depletion and amortization................................................. |
$ 668 |
$ 388 |
$ 1,056 |
$ 77 |
$ 89 |
$ 166 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,586 |
$ 372 |
$ 1,958 |
$ 1,290 |
$ 95 |
$ 1,385 |
|
Earnings from continuing operations......................................................... |
$ 296 |
$ 277 |
$ 573 |
Property and equipment, net........................................................................ |
$ 14,472 |
$ 7,955 |
$ 22,427 |
$ 19,972 |
$ 18,435 |
$ 38,407 |
|
$ 2,751 |
$ 880 |
$ 3,631 |
____________________________
(1) Amounts in the table above do not include assets held for sale related to Devon’s discontinued operations, which totaled $130 million at June 30, 2011. There were no assets held for sale at June 30, 2012.
Capital expenditures for the first six months of 2012 presented above include the $399 million revision to Devon’s asset retirement obligations presented in Note 14. Of the $399 million, $110 million relates to the U.S. and $289 million relates to Canada.
|
In August 2012, Devon announced a transaction with Sumitomo Corporation that Devon expects to close in the third quarter of 2012. Under the agreement, Sumitomo will pay $1.365 billion, including $340 million at closing and $1.025 billion toward Devon’s share of future drilling costs, and will receive a 30% interest in the Cline and Midland-Wolfcamp shale plays.
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Cash settlements: |
|
|
|
|
Commodity derivatives............................................................................. |
$ 267 |
$ 59 |
$ 425 |
$ 145 |
(11) |
5 |
(1) |
21 |
|
Foreign currency derivatives..................................................................... |
20 |
— |
9 |
— |
Total cash settlements............................................................................. |
276 |
64 |
433 |
166 |
Unrealized gains (losses): |
|
|
|
|
Commodity derivatives............................................................................. |
398 |
357 |
385 |
103 |
(5) |
(30) |
(15) |
(29) |
|
Foreign currency derivatives..................................................................... |
(9) |
— |
(8) |
— |
Total unrealized gains............................................................................. |
384 |
327 |
362 |
74 |
Net gain recognized on comprehensive statements of earnings........... |
$ 660 |
$ 391 |
$ 795 |
$ 240 |
|
|
|
|
|
Balance Sheet Caption |
June 30, 2012 |
December 31, 2011 |
|
|
(In millions) |
|
|
|
|
|
Other current assets.................................. |
$ 759 |
$ 611 |
|
Other long-term assets............................. |
209 |
17 |
|
Interest rate derivatives............ ......................................................... |
Other current assets.................................. |
28 |
30 |
Interest rate derivatives............ ......................................................... |
Other long-term assets............................. |
22 |
|
$ 1,005 |
$ 680 |
||
Liability derivatives: |
|
|
|
Other current liabilities............................. |
$ 10 |
$ 82 |
|
Other long-term liabilities........................ |
27 |
— |
|
8 |
— |
||
$ 45 |
$ 82 |
|
|
|
|
|
|
Other Current Liabilities |
Other Long-Term Liabilities |
Total |
|
(In millions) |
||
Balance as of December 31, 2011............................................................. |
$ 29 |
$ 16 |
$ 45 |
(9) |
(1) |
(10) |
|
(5) |
— |
(5) |
|
Balance as of June 30, 2012....................................................................... |
$ 15 |
$ 15 |
$ 30 |
|
|
|
|
Balance as of December 31, 2010............................................................. |
$ 31 |
$ 51 |
$ 82 |
(1) |
(7) |
(8) |
|
(16) |
— |
(16) |
|
Other.............................................................................................................. |
— |
(1) |
(1) |
Balance as of June 30, 2011....................................................................... |
$ 14 |
$ 43 |
$ 57 |
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Accretion of asset retirement obligations.................................................. |
$ 28 |
$ 23 |
$ 55 |
$ 46 |
Interest rate swaps – cash settlements...................................................... |
11 |
(5) |
1 |
(21) |
Interest rate swaps – unrealized fair value changes............................... |
5 |
30 |
15 |
29 |
(9) |
(4) |
(16) |
(6) |
|
9 |
(7) |
(1) |
(21) |
|
$ 44 |
$ 37 |
$ 54 |
$ 27 |
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||
|
2012 |
2011 |
2012 |
2011 |
|
(In millions) |
|||
Foreign currency translation: |
|
|
|
|
Beginning accumulated foreign currency translation.......................... |
||||
Change in cumulative translation adjustment...................................... |
(179) |
67 |
(20) |
262 |
8 |
(2) |
1 |
(12) |
|
Ending accumulated foreign currency translation................................ |
1,783 |
2,243 |
1,783 |
2,243 |
Pension and postretirement benefit plans: |
|
|
|
|
Beginning accumulated pension and postretirement benefits............ |
||||
Recognition of net actuarial loss and prior service cost in earnings.. |
7 |
8 |
13 |
17 |
(2) |
(3) |
(4) |
(6) |
|
Ending accumulated pension and postretirement benefits................. |
(218) |
(222) |
(218) |
(222) |
Accumulated other comprehensive earnings, net of tax........................ |
$ 1,565 |
$ 2,021 |
$ 1,565 |
$ 2,021 |
|
|
|
|
|
|
Six Months Ended June 30, |
||
|
2012 |
2011 |
|
|
(In millions) |
||
Net change in working capital: |
|
|
|
Decrease (increase) in accounts receivable.............................................. |
$ 384 |
$ (100) |
|
Increase in other current assets.................................................................. |
(191) |
(41) |
|
Increase in accounts payable..................................................................... |
13 |
9 |
|
(Decrease) increase in revenues and royalties payable......................... |
(139) |
130 |
|
Decrease in other current liabilities............................................................ |
(45) |
(87) |
|
Net decrease (increase) in working capital.................................................. |
$ 22 |
||
|
|
|
|
Supplementary cash flow data – total operations: |
|
|
|
Interest paid (net of capitalized interest).................................................. |
$ 169 |
$ 160 |
|
Income taxes paid (received)..................................................................... |
$ 88 |
$ (125) |
|
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
Canadian treasury, agency and provincial securities............................... |
$ 644 |
$ 1,155 |
300 |
201 |
|
— |
147 |
|
Short-term investments............................................................................... |
$ 944 |
$ 1,503 |
|
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
$ 668 |
$ 928 |
|
199 |
247 |
|
Marketing and midstream revenues............................................................ |
105 |
174 |
47 |
39 |
|
Gross accounts receivable........................................................................... |
1,019 |
1,388 |
Allowance for doubtful accounts................................................................. |
(14) |
(9) |
$ 1,005 |
$ 1,379 |
|
|
|
|
|
||
|
(In millions) |
|
Derivative financial instruments.................................................................. |
$ 787 |
$ 641 |
220 |
102 |
|
40 |
35 |
|
— |
21 |
|
120 |
69 |
|
$ 1,167 |
$ 868 |
|
|
|
|
|
June 30, 2012 |
December 31, 2011 |
|
(In millions) |
|
Deferred income taxes payable.................................................................... |
$ 253 |
$ 172 |
142 |
131 |
|
317 |
475 |
|
$ 712 |
$ 778 |
|
|
|
|
|
|
|
1.875% due May 15, 2017............................................................................ |
$ 750 |
|
3.25% due May 15, 2022.............................................................................. |
1,000 |
|
4.75% due May 15, 2042.............................................................................. |
750 |
|
(35) |
||
$ 2,465 |
|
|
|
|
|
|
Fair Value Measurements Using: |
||
|
Carrying Amount |
Total Fair Value |
Level 1 Inputs |
Level 2 Inputs |
Level 3 Inputs |
|
(In millions) |
||||
June 30, 2012 assets (liabilities): |
|
|
|
|
|
$ 5,841 |
$ 5,841 |
$ 850 |
$ 4,991 |
$ — |
|
$ 944 |
$ 944 |
$ 300 |
$ 644 |
$ — |
|
$ 69 |
$ 69 |
$ — |
$ — |
$ 69 |
|
$ 968 |
$ 968 |
$ — |
$ 968 |
$ — |
|
$ (37) |
$ (37) |
$ — |
$ (37) |
$ — |
|
$ 37 |
$ 37 |
$ — |
$ 37 |
$ — |
|
$ (8) |
$ (8) |
$ — |
$ (8) |
$ — |
|
Debt........................................................... |
$ (10,603) |
$ (12,260) |
$ — |
$ (12,241) |
$ (19) |
|
|
|
|
|
|
December 31, 2011 assets (liabilities): |
|
|
|
|
|
$ 5,123 |
$ 5,123 |
$ 929 |
$ 4,194 |
$ — |
|
$ 1,503 |
$ 1,503 |
$ 201 |
$ 1,302 |
$ — |
|
$ 84 |
$ 84 |
$ — |
$ — |
$ 84 |
|
$ 628 |
$ 628 |
$ — |
$ 628 |
$ — |
|
$ (82) |
$ (82) |
$ — |
$ (82) |
$ — |
|
$ 52 |
$ 52 |
$ — |
$ 52 |
$ — |
|
Debt........................................................... |
$ (9,780) |
$ (11,380) |
$ — |
$ (11,295) |
$ (85) |
|
|
|
|
|
Six Months Ended June 30, |
||
|
2012 |
2011 |
|
|
(In millions) |
||
Long-term investments balance at beginning of period........................... |
|||
Redemptions of principal............................................................................ |
(15) |
(1) |
|
Long-term investments balance at end of period..................................... |
$ 69 |
$ 93 |
|
|
|
|
|
Balance Sheet Caption |
|
|
|
(In millions) |
Other current assets.................................. |
$ 21 |
|
Property and equipment, net... ......................................................... |
Other long-term assets............................. |
$ 132 |
|
|
|
Other current liabilities............................. |
$ 20 |
|
Other current liabilities............................. |
$ 28 |
|
|
|
|
|
|
U.S. |
Canada |
Total |
|
(In millions) |
||
Three Months Ended June 30, 2012: |
|
||
$ 1,014 |
$ 603 |
$ 1,617 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 665 |
$ — |
$ 665 |
Marketing and midstream revenues........................................................... |
$ 250 |
$ 27 |
$ 277 |
Depreciation, depletion and amortization................................................. |
$ 439 |
$ 245 |
$ 684 |
$ 84 |
$ 15 |
$ 99 |
|
Earnings from continuing operations before income taxes.................... |
$ 727 |
$ 7 |
$ 734 |
Income tax expense (benefit)...................................................................... |
$ 259 |
$ (2) |
$ 257 |
Earnings from continuing operations......................................................... |
$ 468 |
$ 9 |
$ 477 |
$ 1,985 |
$ 384 |
$ 2,369 |
|
|
|
|
Three Months Ended June 30, 2011: |
|
|
|
$ 1,438 |
$ 762 |
$ 2,200 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 416 |
$ — |
$ 416 |
Marketing and midstream revenues........................................................... |
$ 554 |
$ 50 |
$ 604 |
Depreciation, depletion and amortization................................................. |
$ 350 |
$ 200 |
$ 550 |
$ 40 |
$ 45 |
$ 85 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,148 |
$ 230 |
$ 1,378 |
$ 1,135 |
$ 59 |
$ 1,194 |
|
Earnings from continuing operations......................................................... |
$ 13 |
$ 171 |
$ 184 |
$ 1,499 |
$ 334 |
$ 1,833 |
|
|
|
|
Six Months Ended June 30, 2012: |
|
|
|
$ 2,250 |
$ 1,282 |
$ 3,532 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 810 |
$ — |
$ 810 |
Marketing and midstream revenues........................................................... |
$ 649 |
$ 65 |
$ 714 |
Depreciation, depletion and amortization................................................. |
$ 870 |
$ 494 |
$ 1,364 |
$ 155 |
$ 31 |
$ 186 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,260 |
$ 85 |
$ 1,345 |
$ 444 |
$ 10 |
$ 454 |
|
Earnings from continuing operations......................................................... |
$ 816 |
$ 75 |
$ 891 |
Property and equipment, net........................................................................ |
$ 18,818 |
$ 8,423 |
$ 27,241 |
$ 24,916 |
$ 18,554 |
$ 43,470 |
|
$ 3,531 |
$ 1,183 |
$ 4,714 |
|
|
|
|
Six Months Ended June 30, 2011: |
|
|
|
$ 2,650 |
$ 1,410 |
$ 4,060 |
|
Oil, gas and NGL derivatives........................................................................ |
$ 248 |
$ — |
$ 248 |
Marketing and midstream revenues........................................................... |
$ 977 |
$ 82 |
$ 1,059 |
Depreciation, depletion and amortization................................................. |
$ 668 |
$ 388 |
$ 1,056 |
$ 77 |
$ 89 |
$ 166 |
|
Earnings from continuing operations before income taxes.................... |
$ 1,586 |
$ 372 |
$ 1,958 |
$ 1,290 |
$ 95 |
$ 1,385 |
|
Earnings from continuing operations......................................................... |
$ 296 |
$ 277 |
$ 573 |
Property and equipment, net........................................................................ |
$ 14,472 |
$ 7,955 |
$ 22,427 |
$ 19,972 |
$ 18,435 |
$ 38,407 |
|
$ 2,751 |
$ 880 |
$ 3,631 |
____________________________
(1) Amounts in the table above do not include assets held for sale related to Devon’s discontinued operations, which totaled $130 million at June 30, 2011. There were no assets held for sale at June 30, 2012.
Capital expenditures for the first six months of 2012 presented above include the $399 million revision to Devon’s asset retirement obligations presented in Note 14. Of the $399 million, $110 million relates to the U.S. and $289 million relates to Canada.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|