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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 	 	 	
þ	 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the Quarterly Period Ended June 30, 2007
o r
 	 	 	
o	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
Commission File No. 001-32318
Devon Energy Corporation
(Exact Name of Registrant as Specified in its Charter)
 	 	 	
Delaware	 	73-1567067	
(State or Other Jurisdiction of	 	(I.R.S. Employer	
Incorporation or Organization)	 	Identification Number)	
 	 	 	
20 North Broadway	 	 	
Oklahoma City, Oklahoma	 	73102-8260	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s telephone number, including area code:
(405) 235-3611
Former name, former address and former fiscal year, if changed from last report.
Not applicable
          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ       No o
          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ       Accelerated filer o       Non-accelerated filer o
          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ
          The number of shares outstanding of Registrant’s common stock, par value $0.10, as of June 30, 2007, was 445,869,000.

   

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DEVON ENERGY CORPORATION
Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission
 	 	 	 	 	 	 	
 	 	 	 	Page	 	
 	 	 	 	No.	 	
 	 	Information Regarding Forward-Looking Statements	 	 	4	 	
 	 	 	 	 	 	 	
 	 	Definitions	 	 	5	 	
 	 	 	 	 	 	 	
 	 	Part I. Financial Information	 	 	 	 	
 	 	 	 	 	 	 	
Item 1.	 	Consolidated Financial Statements	 	 	 	 	
 	 	 	 	 	 	 	
 	 	Consolidated Balance Sheets, June 30, 2007 (Unaudited) and December 31, 2006	 	 	6	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended June 30, 2007 and 2006	 	 	7	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Six Months Ended June 30, 2007 and 2006	 	 	8	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statements of Stockholders’ Equity (Unaudited) for the Six Months Ended June 30, 2007 and 2006	 	 	9	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2007 and 2006	 	 	10	 	
 	 	 	 	 	 	 	
 	 	Notes to Consolidated Financial Statements (Unaudited)	 	 	11	 	
 	 	 	 	 	 	 	
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	28	 	
 	 	 	 	 	 	 	
Item 4.	 	Controls and Procedures	 	 	39	 	
 	 	 	 	 	 	 	
 	 	Part II. Other Information	 	 	 	 	
 	 	 	 	 	 	 	
Item 1A.	 	Risk Factors	 	 	40	 	
 	 	 	 	 	 	 	
Item 2.	 	Unregistered Sales of Equity Securities and Use of Proceeds	 	 	40	 	
 	 	 	 	 	 	 	
Item 4.	 	Submission of Matters to a Vote of Security Holders	 	 	41	 	
 	 	 	 	 	 	 	
Item 6.	 	Exhibits	 	 	42	 	
 	 	 	 	 	 	 	
SIGNATURES	 	 	42	 	
  Certification of Chief Executive Officer - 302	
  Certification of Vice President - Accounting and Chief Accounting Officer - 302	
  Certification of Chief Executive Officer - 906	
  Certification of Vice President - Accounting and Chief Accounting Officer - 906	
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
     This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information which was used to prepare the December 31, 2006 reserve reports and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” or “continue” or the negatives or variations of such terms or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:

 	•	 	energy markets;	
 		
 	•	 	production levels, including Canadian production subject to government royalties which fluctuate with prices and international production governed by payout agreements which affect reported production;	
 		
 	•	 	reserve levels;	
 		
 	•	 	competitive conditions;	
 		
 	•	 	technology;	
 		
 	•	 	the availability of capital resources;	
 		
 	•	 	capital expenditure and other contractual obligations;	
 		
 	•	 	the supply and demand for oil, natural gas, NGLs and other products or services;	
 		
 	•	 	the price of oil, natural gas, NGLs and other products or services;	
 		
 	•	 	currency exchange rates;	
 		
 	•	 	the weather;	
 		
 	•	 	inflation;	
 		
 	•	 	the availability of goods and services;	
 		
 	•	 	drilling risks;	
 		
 	•	 	future processing volumes and pipeline throughput;	
 		
 	•	 	general economic conditions, either internationally or nationally or in the jurisdictions in which we or our subsidiaries conduct business;	
 		
 	•	 	legislative or regulatory changes, including retroactive royalty or production tax regimes, changes in environmental regulation, environmental risks and liability under federal, state and foreign environmental laws and regulations;	
 		
 	•	 	terrorism;	
 		
 	•	 	occurrence of property acquisitions or divestitures;	
 		
 	•	 	the securities or capital markets; and	
 		
 	•	 	other factors disclosed in Devon’s 2006 Annual Report on Form 10-K under “Item 2. Properties — Proved Reserves and Estimated Future Net Revenue,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”.	
     All subsequent written and oral forward-looking statements attributable to Devon, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.
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DEFINITIONS
     As used in this document:
          “Bbl” or “Bbls” means barrel or barrels.
          “Bcf” means billion cubic feet.
          “Boe” means barrel of oil equivalent, determined by using the ratio of one Bbl of oil or NGLs to six Mcf of gas.
          “MMBbls” means million barrels.
          “MMBoe” means million Boe.
          “Mcf” means thousand cubic feet.
          “NGL” or “NGLs” means natural gas liquids.
          “Oil” includes crude oil and condensate.
          “SEC” means United States Securities and Exchange Commission.
          “Domestic” means the properties of Devon in the onshore continental United States and the offshore Gulf of Mexico.
          “United States Onshore” means the properties of Devon in the continental United States.
          “United States Offshore” means the properties of Devon in the Gulf of Mexico.
          “Canada” means the division of Devon encompassing oil and gas properties located in Canada.
          “International” means the division of Devon encompassing oil and gas properties that lie outside the United States and Canada.
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PART I. Financial Information
Item 1. Financial Statements
DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 	 	 	 	 	 	 	 	 	
 	 	June 30,	 	 	December 31,	 	
 	 	2007	 	 	2006	 	
 	 	(Unaudited)	 	 	 	 	 	
 	 	(In millions, except	 	
 	 	share data)	 	
ASSETS	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	1,042	 	 	 	692	 	
Short-term investments, at fair value	 	 	315	 	 	 	574	 	
Accounts receivable	 	 	1,375	 	 	 	1,324	 	
Current assets held for sale	 	 	175	 	 	 	232	 	
Other current assets	 	 	259	 	 	 	390	 	
 	 	 	 	 	 	 	
Total current assets	 	 	3,166	 	 	 	3,212	 	
 	 	 	 	 	 	 	
Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,282 and $3,293 excluded from amortization in 2007 and 2006, respectively)	 	 	43,992	 	 	 	39,585	 	
Less accumulated depreciation, depletion and amortization	 	 	18,338	 	 	 	16,429	 	
 	 	 	 	 	 	 	
 	 	 	25,654	 	 	 	23,156	 	
Investment in Chevron Corporation common stock, at fair value	 	 	1,195	 	 	 	1,043	 	
Goodwill	 	 	5,961	 	 	 	5,706	 	
Assets held for sale	 	 	1,675	 	 	 	1,619	 	
Other assets	 	 	380	 	 	 	327	 	
 	 	 	 	 	 	 	
Total assets	 	$	38,031	 	 	 	35,063	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable – trade	 	$	1,139	 	 	 	1,154	 	
Revenues and royalties due to others	 	 	509	 	 	 	522	 	
Income taxes payable	 	 	171	 	 	 	82	 	
Short-term debt	 	 	2,022	 	 	 	2,205	 	
Accrued interest payable	 	 	119	 	 	 	114	 	
Current portion of asset retirement obligation, at fair value	 	 	45	 	 	 	53	 	
Current liabilities associated with assets held for sale	 	 	138	 	 	 	173	 	
Accrued expenses and other current liabilities	 	 	273	 	 	 	342	 	
 	 	 	 	 	 	 	
Total current liabilities	 	 	4,416	 	 	 	4,645	 	
 	 	 	 	 	 	 	
Debentures exchangeable into shares of Chevron Corporation common stock	 	 	737	 	 	 	727	 	
Other long-term debt	 	 	4,837	 	 	 	4,841	 	
Financial instruments, at fair value	 	 	445	 	 	 	302	 	
Asset retirement obligation, at fair value	 	 	1,214	 	 	 	804	 	
Liabilities associated with assets held for sale	 	 	428	 	 	 	429	 	
Other liabilities	 	 	666	 	 	 	583	 	
Deferred income taxes	 	 	5,602	 	 	 	5,290	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock of $1.00 par value. Authorized 4,500,000 shares; issued 1,500,000 ($150 million aggregate liquidation value)	 	 	1	 	 	 	1	 	
Common stock of $0.10 par value. Authorized 800,000,000 shares; issued 445,869,000 in 2007 and 444,040,000 in 2006	 	 	45	 	 	 	44	 	
Additional paid-in capital	 	 	6,956	 	 	 	6,840	 	
Retained earnings	 	 	10,893	 	 	 	9,114	 	
Accumulated other comprehensive income	 	 	1,791	 	 	 	1,444	 	
Treasury stock, at cost: 11,000 shares in 2006	 	 	—	 	 	 	(1	)	
 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	19,686	 	 	 	17,442	 	
 	 	 	 	 	 	 	
Commitments and contingencies (Note 6)	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	38,031	 	 	 	35,063	 	
 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(Unaudited)	 	
 	 	(In millions, except per share amounts)	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil sales	 	$	865	 	 	 	602	 	 	 	1,556	 	 	 	1,110	 	
Gas sales	 	 	1,380	 	 	 	1,165	 	 	 	2,606	 	 	 	2,523	 	
NGL sales	 	 	224	 	 	 	193	 	 	 	401	 	 	 	369	 	
Marketing and midstream revenues	 	 	460	 	 	 	390	 	 	 	839	 	 	 	848	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	2,929	 	 	 	2,350	 	 	 	5,402	 	 	 	4,850	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	 	439	 	 	 	342	 	 	 	869	 	 	 	673	 	
Production taxes	 	 	90	 	 	 	86	 	 	 	170	 	 	 	169	 	
Marketing and midstream operating costs and expenses	 	 	341	 	 	 	285	 	 	 	611	 	 	 	623	 	
Depreciation, depletion and amortization of oil and gas properties	 	 	645	 	 	 	490	 	 	 	1,232	 	 	 	933	 	
Depreciation and amortization of non-oil and gas properties	 	 	49	 	 	 	43	 	 	 	95	 	 	 	84	 	
Accretion of asset retirement obligation	 	 	18	 	 	 	13	 	 	 	36	 	 	 	23	 	
General and administrative expenses	 	 	113	 	 	 	90	 	 	 	232	 	 	 	180	 	
Interest expense	 	 	107	 	 	 	102	 	 	 	217	 	 	 	203	 	
Change in fair value of financial instruments	 	 	(10	)	 	 	47	 	 	 	(9	)	 	 	59	 	
Reduction of carrying value of oil and gas properties	 	 	—	 	 	 	16	 	 	 	—	 	 	 	16	 	
Other income, net	 	 	(17	)	 	 	(29	)	 	 	(43	)	 	 	(58	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other income, net	 	 	1,775	 	 	 	1,485	 	 	 	3,410	 	 	 	2,905	 	
Earnings from continuing operations before income tax expense	 	 	1,154	 	 	 	865	 	 	 	1,992	 	 	 	1,945	 	
Income tax expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	174	 	 	 	100	 	 	 	363	 	 	 	324	 	
Deferred	 	 	156	 	 	 	2	 	 	 	231	 	 	 	142	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense	 	 	330	 	 	 	102	 	 	 	594	 	 	 	466	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	824	 	 	 	763	 	 	 	1,398	 	 	 	1,479	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations before income tax expense	 	 	128	 	 	 	178	 	 	 	265	 	 	 	225	 	
Income tax expense	 	 	48	 	 	 	82	 	 	 	108	 	 	 	145	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	 	80	 	 	 	96	 	 	 	157	 	 	 	80	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	904	 	 	 	859	 	 	 	1,555	 	 	 	1,559	 	
Preferred stock dividends	 	 	3	 	 	 	3	 	 	 	5	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings applicable to common stockholders	 	$	901	 	 	 	856	 	 	 	1,550	 	 	 	1,554	 	

Basic net earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	1.84	 	 	 	1.73	 	 	 	3.13	 	 	 	3.34	 	
Earnings from discontinued operations	 	 	0.18	 	 	 	0.21	 	 	 	0.35	 	 	 	0.18	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	2.02	 	 	 	1.94	 	 	 	3.48	 	 	 	3.52	 	

Diluted net earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	1.82	 	 	 	1.71	 	 	 	3.09	 	 	 	3.30	 	
Earnings from discontinued operations	 	 	0.18	 	 	 	0.21	 	 	 	0.35	 	 	 	0.17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	2.00	 	 	 	1.92	 	 	 	3.44	 	 	 	3.47	 	

Weighted average common shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	446	 	 	 	440	 	 	 	445	 	 	 	441	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	450	 	 	 	446	 	 	 	450	 	 	 	447	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(Unaudited)	 	
 	 	(In millions)	 	
Net earnings	 	$	904	 	 	 	859	 	 	 	1,555	 	 	 	1,559	 	
Foreign currency translation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in cumulative translation adjustment	 	 	649	 	 	 	313	 	 	 	732	 	 	 	304	 	
Income taxes	 	 	(35	)	 	 	6	 	 	 	(41	)	 	 	7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	614	 	 	 	319	 	 	 	691	 	 	 	311	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative financial instruments – reclassification adjustment for realized gains included in net earnings	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	(1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension and postretirement benefit plans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Recognition of net actuarial loss in net earnings	 	 	4	 	 	 	—	 	 	 	8	 	 	 	—	 	
Income taxes	 	 	(2	)	 	 	—	 	 	 	(3	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	2	 	 	 	—	 	 	 	5	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment in Chevron Corporation common stock (Note 1):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized holding gain	 	 	—	 	 	 	58	 	 	 	—	 	 	 	75	 	
Income taxes	 	 	—	 	 	 	(21	)	 	 	—	 	 	 	(27	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	—	 	 	 	37	 	 	 	—	 	 	 	48	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive income, net of tax	 	 	616	 	 	 	356	 	 	 	695	 	 	 	358	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	$	1,520	 	 	 	1,215	 	 	 	2,250	 	 	 	1,917	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Accumulated	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Additional	 	 	 	 	 	 	Other	 	 	 	 	 	 	Total	 	
 	 	Preferred	 	 	Common Stock	 	 	Paid-In	 	 	Retained	 	 	Comprehensive	 	 	Treasury	 	 	Stockholders’	 	
 	 	Stock	 	 	Shares	 	 	Amount	 	 	Capital	 	 	Earnings	 	 	Income	 	 	Stock	 	 	Equity	 	
 	 	(Unaudited)	 	
 	 	(In millions)	 	
Six Months Ended June 30, 2007	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2006	 	$	1	 	 	 	444	 	 	$	44	 	 	 	6,840	 	 	 	9,114	 	 	 	1,444	 	 	 	(1	)	 	 	17,442	 	
Adoption of FASB Statement No. 159 (Note 1)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	364	 	 	 	(364	)	 	 	—	 	 	 	—	 	
Adoption of FASB Interpretation No. 48 (Note 1)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(10	)	 	 	—	 	 	 	—	 	 	 	(10	)	
Adoption of FASB Statement No. 158 (Note 4)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	16	 	 	 	—	 	 	 	15	 	
Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,555	 	 	 	—	 	 	 	—	 	 	 	1,555	 	
Other comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	695	 	 	 	—	 	 	 	695	 	
Stock option exercises	 	 	—	 	 	 	2	 	 	 	1	 	 	 	59	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	60	 	
Common stock repurchased	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(16	)	 	 	(16	)	
Common stock retired	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17	)	 	 	—	 	 	 	—	 	 	 	17	 	 	 	—	 	
Common stock dividends	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(124	)	 	 	—	 	 	 	—	 	 	 	(124	)	
Preferred stock dividends	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5	)	 	 	—	 	 	 	—	 	 	 	(5	)	
Share-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	57	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	57	 	
Excess tax benefits on share-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	17	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of June 30, 2007	 	$	1	 	 	 	446	 	 	$	45	 	 	 	6,956	 	 	 	10,893	 	 	 	1,791	 	 	 	—	 	 	 	19,686	 	

Six Months Ended June 30, 2006	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2005	 	$	1	 	 	 	443	 	 	$	44	 	 	 	6,928	 	 	 	6,477	 	 	 	1,414	 	 	 	(2	)	 	 	14,862	 	
Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,559	 	 	 	—	 	 	 	—	 	 	 	1,559	 	
Other comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	358	 	 	 	—	 	 	 	358	 	
Stock option exercises	 	 	—	 	 	 	1	 	 	 	—	 	 	 	27	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	27	 	
Restricted stock grants, net of cancellations	 	 	—	 	 	 	1	 	 	 	—	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	—	 	
Common stock repurchased	 	 	—	 	 	 	(4	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(253	)	 	 	(253	)	
Common stock retired	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(238	)	 	 	—	 	 	 	—	 	 	 	238	 	 	 	—	 	
Common stock dividends	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(99	)	 	 	—	 	 	 	—	 	 	 	(99	)	
Preferred stock dividends	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5	)	 	 	—	 	 	 	—	 	 	 	(5	)	
Share-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	37	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	37	 	
Excess tax benefits on share-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of June 30, 2006	 	$	1	 	 	 	441	 	 	$	44	 	 	 	6,762	 	 	 	7,932	 	 	 	1,772	 	 	 	(18	)	 	 	16,493	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30,	 	
 	 	2007	 	 	2006	 	
 	 	(Unaudited)	 	
 	 	(In Millions)	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net earnings	 	$	1,555	 	 	 	1,559	 	
Earnings from discontinued operations, net of tax	 	 	(157	)	 	 	(80	)	
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation, depletion and amortization	 	 	1,327	 	 	 	1,017	 	
Deferred income tax expense	 	 	231	 	 	 	142	 	
Net gain on sales of non-oil and gas property and equipment	 	 	(1	)	 	 	(5	)	
Reduction of carrying value of oil and gas properties	 	 	—	 	 	 	16	 	
Other noncash charges	 	 	95	 	 	 	112	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	
(Increase) decrease in:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	32	 	 	 	247	 	
Other current assets	 	 	(27	)	 	 	(12	)	
Long-term other assets	 	 	(46	)	 	 	9	 	
Increase (decrease) in:	 	 	 	 	 	 	 	 	
Accounts payable	 	 	47	 	 	 	(166	)	
Income taxes payable	 	 	178	 	 	 	(123	)	
Other current liabilities	 	 	(96	)	 	 	(108	)	
Long-term other liabilities	 	 	14	 	 	 	(21	)	
 	 	 	 	 	 	 	
Cash provided by operating activities – continuing operations	 	 	3,152	 	 	 	2,587	 	
Cash provided by operating activities – discontinued operations	 	 	197	 	 	 	231	 	
 	 	 	 	 	 	 	
Net cash provided by operating activities	 	 	3,349	 	 	 	2,818	 	

Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Proceeds from sales of property and equipment	 	 	37	 	 	 	26	 	
Capital expenditures, including acquisitions of businesses	 	 	(2,990	)	 	 	(4,584	)	
Purchases of short-term investments	 	 	(589	)	 	 	(1,698	)	
Sales of short-term investments	 	 	848	 	 	 	2,046	 	
 	 	 	 	 	 	 	
Cash used in investing activities – continuing operations	 	 	(2,694	)	 	 	(4,210	)	
Cash used in investing activities – discontinued operations	 	 	(115	)	 	 	(131	)	
 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	(2,809	)	 	 	(4,341	)	

Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Net commercial paper (repayments) borrowings, net of issuance costs	 	 	(183	)	 	 	1,452	 	
Principal payments on debt, including current maturities	 	 	—	 	 	 	(208	)	
Proceeds from exercise of stock options	 	 	60	 	 	 	27	 	
Repurchases of common stock	 	 	(10	)	 	 	(253	)	
Excess tax benefits related to share-based compensation	 	 	17	 	 	 	7	 	
Dividends paid on common stock	 	 	(124	)	 	 	(99	)	
Dividends paid on preferred stock	 	 	(5	)	 	 	(5	)	
 	 	 	 	 	 	 	
Net cash (used in) provided by financing activities	 	 	(245	)	 	 	921	 	
 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	 	 	16	 	 	 	26	 	
 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	311	 	 	 	(576	)	
Cash and cash equivalents at beginning of period (including cash related to assets held for sale)	 	 	756	 	 	 	1,606	 	
 	 	 	 	 	 	 	
Cash and cash equivalents at end of period (including cash related to assets held for sale)	 	$	1,067	 	 	 	1,030	 	

Supplementary cash flow data:	 	 	 	 	 	 	 	 	
Interest paid (net of capitalized interest)	 	$	202	 	 	 	195	 	
Income taxes paid	 	$	159	 	 	 	499	 	
See accompanying notes to consolidated financial statements.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	 	Summary of Significant Accounting Policies	
     The accompanying consolidated financial statements and notes thereto of Devon Energy Corporation (“Devon”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in Devon’s 2006 Annual Report on Form 10-K.
     In the opinion of Devon’s management, all adjustments (all of which are normal and recurring) that have been made are necessary to fairly state the consolidated financial position of Devon and its subsidiaries as of June 30, 2007, and the results of their operations and their cash flows for the three-month and six-month periods ended June 30, 2007 and 2006.
Net Earnings Per Common Share
     The following table reconciles earnings from continuing operations and common shares outstanding used in the calculations of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	 	 	 	 	 	
 	 	Earnings	 	 	Weighted	 	 	 	 	
 	 	Applicable to	 	 	Average	 	 	Net	 	
 	 	Common	 	 	Common Shares	 	 	Earnings	 	
 	 	Stockholders	 	 	Outstanding	 	 	per Share	 	
 	 	(In millions, except per share amounts)	 	
Three Months Ended June 30, 2007:	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	824	 	 	 	 	 	 	 	 	 	
Less preferred stock dividends	 	 	(3	)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	821	 	 	 	446	 	 	$	1.84	 	
Dilutive effect of potential common shares issuable upon the exercise of outstanding stock options	 	 	—	 	 	 	4	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	$	821	 	 	 	450	 	 	$	1.82	 	

Three Months Ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	763	 	 	 	 	 	 	 	 	 	
Less preferred stock dividends	 	 	(3	)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	760	 	 	 	440	 	 	$	1.73	 	
Dilutive effect of potential common shares issuable upon the exercise of outstanding stock options	 	 	—	 	 	 	6	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	$	760	 	 	 	446	 	 	$	1.71	 	

Six Months Ended June 30, 2007:	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	1,398	 	 	 	 	 	 	 	 	 	
Less preferred stock dividends	 	 	(5	)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	1,393	 	 	 	445	 	 	$	3.13	 	
Dilutive effect of potential common shares issuable upon the exercise of outstanding stock options	 	 	—	 	 	 	5	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	$	1,393	 	 	 	450	 	 	$	3.09	 	

Six Months Ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	1,479	 	 	 	 	 	 	 	 	 	
Less preferred stock dividends	 	 	(5	)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	1,474	 	 	 	441	 	 	$	3.34	 	
Dilutive effect of potential common shares issuable upon the exercise of outstanding stock options	 	 	—	 	 	 	6	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	$	1,474	 	 	 	447	 	 	$	3.30	 	
 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     Certain options to purchase shares of Devon’s common stock are excluded from the dilution calculations because the options are antidilutive. During the three-month and six-month periods ended June 30, 2007, 4.0 million and 4.1 million shares were excluded from the diluted earnings per share calculations, respectively. During both the three-month and six-month periods ended June 30, 2006, 2.6 million shares were excluded from the diluted earnings per share calculations.
Short-term Investments and Other Marketable Securities – Change in Accounting Principle
     Devon owns approximately 14.2 million shares of Chevron Corporation (“Chevron”) common stock. These shares are held in connection with debt owed by Devon that contains an exchange option. This exchange option allows the debt holders, prior to the debt’s maturity, to exchange the debt for the shares of Chevron common stock owned by Devon.
     The shares of Chevron common stock and the exchange option embedded in the debt have always been recorded on Devon’s balance sheet at fair value. However, pursuant to accounting rules prior to January 1, 2007, only the change in fair value of the embedded option has historically been included in Devon’s results of operations. Conversely, the change in fair value of the Chevron common stock has not been included in Devon’s results of operations, but instead has been recorded directly to stockholders’ equity as part of “accumulated other comprehensive income.”
     Effective January 1, 2007, Devon adopted Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 . Statement No. 159 allows a company the option to value its financial assets and liabilities, on an instrument by instrument basis, at fair value, and include the change in fair value of such assets and liabilities in its results of operations. Devon chose to apply the provisions of Statement No. 159 to its shares of Chevron common stock. Accordingly, beginning with the first quarter of 2007, the change in fair value of the Chevron common stock owned by Devon, along with the change in fair value of the related exchange option, are both included in Devon’s results of operations.
     In the three-month and six-month periods ended June 30, 2007, the change in fair value of financial instruments caption on Devon’s statements of operations includes unrealized gains of $146 million and $152 million, respectively, related to the Chevron common stock, and unrealized losses of $136 million and $144 million, respectively, related to the embedded option. In the three-month and six-month periods ended June 30, 2006, prior to adopting Statement No. 159, unrealized losses of $47 million and $61 million, respectively, related to the change in fair value of the embedded option were included in the change in fair value of financial instruments caption on Devon’s statements of operations.
     As of December 31, 2006, $364 million of after-tax unrealized gains related to Devon’s investment in the Chevron common stock was included in accumulated other comprehensive income. This is the amount of unrealized gains that, prior to Devon’s adoption of Statement No. 159, had not been recorded in Devon’s historical results of operations. Upon the adoption of Statement No. 159 as of January 1, 2007, this $364 million of unrealized gains was reclassified on Devon’s balance sheet from accumulated other comprehensive income to retained earnings.
     In conjunction with the adoption of Statement No. 159, Devon also adopted on January 1, 2007 Statement of Financial Accounting Standards No. 157, Fair Value Measurements . Statement No. 157 provides a common definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements, but does not require any new fair value measurements. The adoption of Statement No. 157 had no impact on Devon’s financial statements, but it did result in additional required disclosures as set forth in Note 7.
Income Taxes – Change in Accounting Principle
     Devon and its subsidiaries are subject to current income taxes assessed by the federal and various state jurisdictions in the United States and by other foreign jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
     At June 30, 2007, undistributed earnings of foreign subsidiaries included in continuing operations were determined to be permanently reinvested. Therefore, no U.S. deferred income taxes were provided on such amounts at June 30, 2007. If it becomes apparent that some or all of the undistributed earnings will be distributed, Devon would then record taxes on those earnings.
     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. Interpretation No. 48 prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the tax position is expected to be settled within the upcoming year, in which case the liabilities are included in accrued expenses and other current liabilities. Interest and penalties related to unrecognized tax benefits are included in income tax expense.
     On January 1, 2007, Devon adopted Interpretation No. 48 and recorded a $10 million reduction to the January 1, 2007 balance of retained earnings related to unrecognized tax benefits. The $10 million includes $8 million for related interest and penalties. An additional $2 million of liabilities were recorded with a corresponding increase to goodwill.
     As a result of the adoption of Interpretation No. 48, certain liabilities included in income taxes payable and deferred income taxes were reclassified to other current and long-term liabilities in the accompanying balance sheet. The total $12 million increase in liabilities included a $15 million increase to long-term liabilities, partially offset by a $3 million reduction to current liabilities.
     As of January 1, 2007, Devon’s unrecognized tax benefits were $114 million. This amount included $82 million that, if recognized, would affect Devon’s effective income tax rate.
     Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities.
 	 	 	 	 	
                Jurisdiction	 	Tax Years Open	
U.S. federal	 	 	2002-2006	 	
Various U.S. states	 	 	2001-2006	 	
Canada federal	 	 	2000-2006	 	
Various Canadian provinces	 	 	2000-2006	 	
Various other foreign jurisdictions	 	 	1997-2006	 	
     Devon is currently in the final stages of the administrative review process for certain open tax years. In addition, certain statute of limitation expirations are scheduled to occur in the next twelve months. Due to these factors, Devon anticipates it is reasonably possible that liabilities for certain tax positions will decrease between $15 million and $25 million within the next twelve months.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2.	 	Property and Equipment and Asset Retirement Obligations (“ARO”)	
Divestitures
     On November 14, 2006, Devon announced that it intends to divest its operations in Egypt. Also, on January 23, 2007, Devon announced that it intends to divest its operations in West Africa. See Note 11 for more discussion regarding these planned divestitures.
Asset Retirement Obligations
     The following is a summary of the changes in Devon’s ARO for the first six months of 2007 and 2006.
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30,	 	
 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Asset retirement obligation as of beginning of period	 	$	857	 	 	 	636	 	
Liabilities incurred	 	 	32	 	 	 	25	 	
Liabilities settled	 	 	(24	)	 	 	(29	)	
Revision of estimated obligation	 	 	311	 	 	 	135	 	
Accretion expense on discounted obligation	 	 	36	 	 	 	23	 	
Foreign currency translation adjustment	 	 	47	 	 	 	13	 	
 	 	 	 	 	 	 	
Asset retirement obligation as of end of period	 	 	1,259	 	 	 	803	 	
Less current portion	 	 	45	 	 	 	73	 	
 	 	 	 	 	 	 	
Asset retirement obligation, long-term	 	$	1,214	 	 	 	730	 	
 	 	 	 	 	 	 	
     During the first half of 2007 and 2006, Devon recognized a $311 million and $135 million increase to its ARO, respectively. The primary factors causing the 2007 fair value increase were an overall increase in abandonment cost estimates and an increase in the assumed inflation rate. The effect of these factors was partially offset by the effect of an increase in the discount rate used to calculate the present value of the obligations. The primary factor causing the 2006 fair value increase was an overall increase in abandonment cost estimates.

3.	 	Debt	
Senior Credit Facility
     In April 2007, Devon extended the maturity of its existing $2.5 billion five-year, syndicated, unsecured revolving line of credit (the “Senior Credit Facility”) from April 7, 2011 to April 7, 2012.
     The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon to maintain a ratio of total funded debt to total capitalization, as defined in the credit agreement, of no more than 65%. As of June 30, 2007, Devon was in compliance with this covenant. Devon’s debt-to-capitalization ratio at June 30, 2007, as calculated pursuant to the terms of the agreement, was 24.6%.
     As of June 30, 2007, there were no borrowings under the Senior Credit Facility. The available capacity under the Senior Credit Facility as of June 30, 2007, net of $1.6 billion of outstanding commercial paper and $292 million of outstanding letters of credit, was approximately $583 million.
Short-Term Credit Facility
     On July 11, 2007, Devon received a commitment from certain lenders to establish a new $1 billion 364-day, syndicated, unsecured revolving senior credit facility (the “Short-Term Facility”). Subsequently, the amount of the commitment was increased to $1.5 billion. Devon expects to close the Short-Term Facility by August 10, 2007. This new facility will provide Devon with provisional interim liquidity until it receives the proceeds from divestitures of assets in Africa (see Note 11). The Short-Term Facility will be used to
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
support an increase in Devon’s commercial paper program from $2 billion to $3.5 billion.
     The Short-Term Facility will mature 364 days from the closing date. On the maturity date, all amounts outstanding will be due and payable at that time unless the maturity is extended. Prior to the maturity date, Devon has the option to convert any outstanding principal amount of loans under the Short-Term Facility to a term loan which will be repayable in a single payment 12 months from the maturity date.
     Amounts borrowed under the Short-Term Facility will bear interest at various fixed rate options for periods of up to 12 months. Such rates are generally less than the prime rate. Devon may also elect to borrow at the prime rate . The Short-Term Facility currently provides for an annual facility fee of approximately $1.0 million that is payable quarterly in arrears.
     The agreement governing the Short-Term Facility will contain substantially the same covenants and restrictions as Devon’s existing Senior Credit Facility, including a maximum allowed debt-to-capitalization ratio of 65% as defined in the agreement.

4.	 	Retirement Plans	
Net Periodic Benefit Cost and Other Comprehensive Income
     The following table presents the components of net periodic benefit cost and other comprehensive income for Devon’s pension and other post retirement benefit plans for the three-month and six-month periods ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Pension Benefits	 	 	Other Postretirement Benefits	 	
 	 	Three Months	 	 	Six Months	 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Net periodic benefit cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	7	 	 	 	6	 	 	 	15	 	 	 	12	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Interest cost	 	 	11	 	 	 	10	 	 	 	22	 	 	 	20	 	 	 	1	 	 	 	1	 	 	 	2	 	 	 	2	 	
Expected return on plan assets	 	 	(13	)	 	 	(11	)	 	 	(25	)	 	 	(22	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Net actuarial loss	 	 	4	 	 	 	3	 	 	 	8	 	 	 	6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net periodic benefit cost	 	 	9	 	 	 	8	 	 	 	20	 	 	 	16	 	 	 	1	 	 	 	1	 	 	 	2	 	 	 	2	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Recognition of net actuarial loss in net periodic benefit cost	 	 	(4	)	 	 	—	 	 	 	(8	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total recognized	 	$	5	 	 	 	8	 	 	 	12	 	 	 	16	 	 	 	1	 	 	 	1	 	 	 	2	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R) . Statement No. 158 requires the measurement of plan assets and benefit obligations as of the date of the employer’s fiscal year-end, beginning with fiscal years ending after December 15, 2008. Although not required until 2008, Devon adopted this measurement-date requirement in the second quarter of 2007 and is changing its measurement date from November 30 to December 31. As a result, Devon used data as of December 31, 2006 to remeasure its plans assets and benefit obligations previously measured using data as of November 30, 2006. As a result of the remeasurement, Devon recognized the following amounts in the second quarter of 2007.
 	 	 	 	 	
 	 	Increase (Decrease)	
 	 	(In millions)	
Other long-term liabilities	 	 	(26	)	
Deferred income tax liabilities	 	 	9	 	
Retained earnings	 	 	(1	)	
Accumulated other comprehensive income	 	 	16	 	
General and administrative expenses	 	 	2	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Revisions to Retirement Plans
     Devon has various noncontributory defined benefit pension plans, including qualified and nonqualified plans (“Defined Benefit Plans”), that provide defined levels of benefits to its domestic employees. Devon also has a 401(k) Incentive Savings Plan (“401(k) Plan”) that covers its domestic employees. Benefits under the 401(k) Plan consist of a discretionary match of a percentage of employees’ contributions to the 401(k) Plan.
     In the second quarter of 2007, Devon adopted an enhanced defined contribution structure related to the 401(k) Plan to be effective January 1, 2008. Participants in this enhanced defined contribution structure will continue to receive a discretionary match of a percentage of their contributions to the 401(k) Plan. These participants will also receive additional, nondiscretionary contributions by Devon calculated as a percentage of annual compensation. The percentage will vary based on the employee’s years of service.
     On or before November 15, 2007, existing eligible employees will elect to either continue to participate in the Defined Benefit Plan or participate in the enhanced defined contribution structure of the 401(k) Plan. Employees who continue to participate in the Defined Benefit Plans will continue to accrue benefits under the existing provisions of the Defined Benefit Plans. Employees who elect to participate in the enhanced defined contribution structure will receive enhanced contributions to the 401(k) Plan and will retain the benefits which they have accrued under the Defined Benefit Plan as of December 31, 2007. However, such employees will only be entitled to the benefits which have accrued in the Defined Benefit Plans as of December 31, 2007, after all applicable vesting requirements have been met. Employees hired on or after October 1, 2007 will not have an election and will only participate in the 401(k) Plan and the enhanced defined contribution structure.
     The effect the employee elections will have on Devon’s benefit obligations and related expenses will not be known until such elections are made with respect to the Defined Benefit Plans. However, based upon the most likely employee election scenarios, Devon expects that the effect, including any accelerated recognition of obligations of the Defined Benefit Plans, will be immaterial to its financial statements.

5.	 	Stockholders’ Equity	
Stock Repurchases
     In August 2005, Devon’s Board of Directors approved a stock repurchase program to repurchase up to 50 million shares of Devon’s common stock. This program was suspended in 2006 as a result of the $2.0 billion acquisition of oil and gas properties from Chief Holdings LLC (“Chief”). Prior to the suspension of the program and as of June 30, 2007, Devon had repurchased 6.5 million shares under this program for $387 million, or $59.80 per share. In conjunction with the sales of Egypt and West Africa (see Note 11), Devon expects to resume this repurchase program in the second half of 2007 by using a portion of the sale proceeds to repurchase common stock. Although this program expires at the end of 2007, it could be extended if necessary.
     On June 6, 2007, Devon’s Board of Directors approved an ongoing, annual stock repurchase program to offset dilution resulting from restricted stock issued to, and options exercised by, employees. The new repurchase program authorizes the repurchase of up to 4.5 million shares in 2007 and is in addition to the repurchase program described above. As of June 30, 2007, Devon had repurchased 0.2 million shares under the new program for $15.7 million, or $78.32 per share.
Dividends
     Dividends on Devon’s common stock were paid in 2007 and 2006 at quarterly per share rates of $0.14 and $0.1125, respectively.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6.	 	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 although actual amounts could differ materially from management’s estimate.
Environmental Matters
     Devon is subject to certain laws and regulations relating to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state statutes. In response to liabilities associated with these activities, accruals have been established when reasonable estimates are possible. Such accruals primarily include estimated costs associated with remediation. Devon has not used discounting in determining its accrued liabilities for environmental remediation, and no material claims for possible recovery from third party insurers or other parties related to environmental costs have been recognized in Devon’s consolidated financial statements. Devon adjusts the accruals when new remediation responsibilities are discovered and probable costs become estimable, or when current remediation estimates must be adjusted to reflect new information.
     Certain of Devon’s subsidiaries acquired in past mergers are involved in matters in which it has been alleged that such subsidiaries are potentially responsible parties (“PRPs”) under CERCLA or similar state legislation with respect to various waste disposal areas owned or operated by third parties. As of June 30, 2007, Devon’s consolidated balance sheet included $5 million of non-current accrued liabilities, reflected in “Other liabilities,” related to these and other environmental remediation liabilities. Devon does not currently believe there is a reasonable possibility of incurring additional material costs in excess of the current accruals recognized for such environmental remediation activities. With respect to the sites in which Devon subsidiaries are PRPs, Devon’s conclusion is based in large part on (i) Devon’s participation in consent decrees with both other PRPs and the Environmental Protection Agency, which provide for performing the scope of work required for remediation and contain covenants not to sue as protection to the PRPs, (ii) participation in groups as a de minimis PRP, and (iii) the availability of other defenses to liability. As a result, Devon’s monetary exposure is not expected to be material.
Royalty Matters
     Numerous gas producers and related parties, including Devon, have been named in various lawsuits alleging violation of the federal False Claims Act. The suits allege that the producers and related parties used below-market prices, improper deductions, improper measurement techniques and transactions with affiliates which resulted in underpayment of royalties in connection with natural gas and natural gas liquids produced and sold from federal and Indian owned or controlled lands. The principal suit in which Devon is a defendant is United States ex rel. Wright v. Chevron USA, Inc. et al. (the “Wright case”). The suit was originally filed in August 1996 in the United States District Court for the Eastern District of Texas, but was consolidated in October 2000 with the other suits for pre-trial proceedings in the United States District Court for the District of Wyoming. On July 10, 2003, the District of Wyoming remanded the Wright case back to the Eastern District of Texas to resume proceedings. On April 12, 2007, the court entered a trial plan and scheduling order in which the case will proceed in phases. A defendant other than Devon is set for trial in August 2008. The next phase trial is set for February 2009, but the defendants for this trial have not been determined at this time. Devon believes that it has acted reasonably, has legitimate and strong defenses to all allegations in the suit, and has paid royalties in good faith. Devon does not currently believe that it is subject to material exposure in association with this lawsuit and no liability has been recorded in connection therewith.
     In 1995, the United States Congress passed the Deep Water Royalty Relief Act. The intent of this legislation was to encourage deep water exploration in the Gulf of Mexico by providing relief from the obligation to pay royalties on certain federal leases. Deep water leases issued in certain years by the Minerals Management Service
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(the “MMS”) have contained price thresholds, such that if the market prices for oil or natural gas exceeded the thresholds for a given year, royalty relief would not be granted for that year. Deep water leases issued in 1998 and 1999 did not include price thresholds. The MMS in 2006 informed Devon and other oil and gas companies that the omission of price thresholds from these leases was an error on its part and was not its intention. Accordingly, the MMS invited Devon and the other affected oil and gas producers to renegotiate the terms and conditions of the 1998 and 1999 leases to add price threshold provisions to the lease agreements for periods after October 1, 2006. Devon has since had several discussions with MMS representatives on this issue, but has not yet entered into renegotiated leases.
     The U.S. House of Representatives in January 2007 and July 2007 passed legislation that would require companies to renegotiate the 1998 and 1999 leases as a condition of securing future federal leases. If this legislation were to become law, it would require price thresholds to be effective in the renegotiated 1998 and 1999 leases effective October 1, 2006. Although Devon has not yet signed renegotiated leases, it has accrued through June 30, 2007 approximately $17 million for royalties that would be due if price thresholds were added to its 1998 and 1999 leases effective October 1, 2006.
Equatorial Guinea Investigation
     The SEC has been conducting an inquiry into payments made to the government of Equatorial Guinea and to officials and persons affiliated with officials of the government of Equatorial Guinea. On August 9, 2005, Devon received a subpoena issued by the SEC pursuant to a formal order of investigation. Devon has cooperated fully with the SEC’s requests for information in this inquiry. After responding in 2005 to such requests for information, Devon has not been contacted by the SEC. In the event that Devon receives any further inquiries, Devon will work with the SEC in connection with its investigation.
Hurricane Contingencies
     Historically, Devon maintained a comprehensive insurance program that included coverage for physical damage to its offshore facilities caused by hurricanes. Devon’s historical insurance program also included substantial business interruption coverage which Devon is utilizing to recover costs associated with the suspended production related to hurricanes that struck the Gulf of Mexico in the third quarter of 2005. Under the terms of this insurance program, Devon was entitled to be reimbursed for the portion of production suspended longer than forty-five days, subject to upper limits to oil and natural gas prices. Also, the terms of the insurance include a standard, per-event deductible of $1 million for offshore losses as well as a $15 million aggregate annual deductible.
     Based on current estimates of physical damage and the anticipated length of time Devon will have production suspended, Devon expects its policy recoveries will exceed repair costs and deductible amounts. This expectation is based upon several variables, including the $467 million received in the third quarter of 2006 as a full settlement of the amount due from Devon’s primary insurers and $13 million received in the second quarter of 2007 as a full settlement of the amount due from certain of Devon’s secondary insurers. As of June 30, 2007, $218 million of these proceeds had been utilized as reimbursement of past repair costs and deductible amounts. The remaining proceeds of $262 million will be utilized as reimbursement of Devon’s anticipated future repair costs.
     Should Devon’s total policy recoveries, including settlements already received from Devon’s primary and secondary insurers, exceed all repair costs and deductible amounts, such excess will be recognized as other income in the statement of operations in the period in which such determination can be made.
     The policy underlying the insurance program terms described above expired on August 31, 2006. During the third quarter of 2006, Devon was able to re-establish a comprehensive insurance program that includes business interruption and physical damage coverage for its business. However, due to significant changes in the marketplace, Devon was only able to obtain a de minimis amount of coverage for any damage that may be caused by named windstorms in the Gulf of Mexico. Devon has not experienced any losses covered by this new insurance arrangement through June 30, 2007.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other Matters
     Devon is involved in other various routine legal proceedings incidental to its business. However, to Devon’s knowledge as of the date of this report, there were no other material pending legal proceedings to which Devon is a party or to which any of its property is subject.
7. Fair Value Measurements
     Certain of Devon’s assets and liabilities are reported at fair value in the accompanying balance sheets. The following table provides fair value measurement information for such assets and liabilities as of June 30, 2007.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value Measurements Using:	
  	 	 	 	 	 	Quoted	 	Significant	 	 	
 	 	 	 	 	 	Prices in	 	Other	 	Significant	
 	 	 	 	 	 	Active	 	Observable	 	Unobservable	
 	 	Total Fair	 	Markets	 	Inputs	 	Inputs	
 	 	Value	 	(Level 1)	 	(Level 2)	 	(Level 3)	
 	 	(In millions)	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Short-term investments	 	$	315	 	 	 	315	 	 	 	—	 	 	 	—	 	
Investment in Chevron common stock	 	$	1,195	 	 	 	1,195	 	 	 	—	 	 	 	—	 	
Financial instruments	 	$	15	 	 	 	—	 	 	 	15	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial instruments	 	$	448	 	 	 	—	 	 	 	448	 	 	 	—	 	
Asset retirement obligation (ARO)	 	$	1,259	 	 	 	—	 	 	 	—	 	 	 	1,259	 	
     Statement No. 157 (see Note 1) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the table above, this hierarchy consists of three broad levels. Level 1 inputs on the hierarchy consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. Level 3 inputs have the lowest priority.
     Devon uses appropriate valuation techniques based on the available inputs to measure the fair values of its assets and liabilities. When available, Devon measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Devon owes debt that has an embedded exchange option. Because the exchange option is not actively traded in an established market, its fair value is measured using Level 2 inputs. Devon also has certain commodity and interest-rate derivative financial instruments which are measured using Level 2 inputs, such as forward commodity price curves or interest-rate yield curves. Devon only uses Level 3 inputs to measure the fair value of its ARO. A reconciliation of the beginning and ending balances of Devon’s ARO, including a revision of the fair value in 2007, is presented in Note 2.
8. Change in Fair Value of Financial Instruments
     The components of change in fair value of financial instruments include the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Option embedded in exchangeable debentures	 	$	136	 	 	 	47	 	 	 	144	 	 	 	61	 	
Investment in Chevron common stock (Note 1)	 	 	(146	)	 	 	—	 	 	 	(152	)	 	 	—	 	
Interest rate swaps	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	(2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(10	)	 	 	47	 	 	 	(9	)	 	 	59	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Reduction of Carrying Value of Oil and Gas Properties
     During the second quarter of 2006, Devon drilled two unsuccessful exploratory wells in Brazil and determined that the capitalized costs related to these two wells should be impaired. Therefore, in the second quarter of 2006, Devon recognized a $16 million impairment of its investment in Brazil equal to the costs to drill the two dry holes and a proportionate share of block-related costs. There is no tax benefit related to this impairment. The two wells were unrelated to Devon’s Polvo development project in Brazil.
10. Other Income
     The components of other income include the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Interest and dividend income	 	$	18	 	 	 	28	 	 	 	39	 	 	 	56	 	
Net gain on sales of non-oil and gas property and equipment	 	 	1	 	 	 	—	 	 	 	1	 	 	 	5	 	
Other	 	 	(2	)	 	 	1	 	 	 	3	 	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	17	 	 	 	29	 	 	 	43	 	 	 	58	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
11. Discontinued Operations
Egypt and West Africa
     On November 14, 2006, Devon announced its plans to divest its operations in Egypt. On January 23, 2007, Devon announced its plans to divest its operations in West Africa. Pursuant to accounting rules for discontinued operations, Devon has classified all 2007 and prior period amounts related to its operations in Egypt and West Africa as discontinued operations.
     On April 18, 2007, Devon announced that it had agreed to sell its Egyptian operations for $375 million based on an effective date of January 1, 2007. Devon estimates that after-tax proceeds will be approximately $300 million. The transaction is expected to close in the third quarter of 2007. Had the transaction closed on January 1, 2007, Devon would have recognized a gain, after taxes, of approximately $60 million. The gain ultimately recorded when the transaction closes will depend on the carrying values of Devon’s Egyptian assets and liabilities at the closing date, as well as the effect of purchase price adjustments between the effective date of January 1, 2007 and the actual closing date.
     Devon is in the process of evaluating bids on the West African assets and expects these property sales to close in the fourth quarter of 2007.
     Revenues related to Devon’s operations in Egypt and West Africa totaled $215 million and $267 million in the three months ended June 30, 2007 and June 30, 2006 and $390 million and $484 million in the six months ended June 30, 2007 and June 30, 2006, respectively.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     The following table presents the main classes of assets and liabilities associated with Devon’s operations in Egypt and West Africa as of June 30, 2007 and December 31, 2006.
 	 	 	 	 	 	 	 	 	
 	 	June 30,	 	 	December 31,	 	
 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Assets:	 	 	 	 	 	 	 	 	
Cash	 	$	25	 	 	 	64	 	
Accounts receivable	 	 	80	 	 	 	101	 	
Other current assets	 	 	70	 	 	 	67	 	
 	 	 	 	 	 	 	
Current assets	 	$	175	 	 	 	232	 	

Long-term assets — property and equipment, net of accumulated depreciation, depletion and amortization	 	$	1,675	 	 	 	1,619	 	

Liabilities:	 	 	 	 	 	 	 	 	
Accounts payable — trade	 	$	35	 	 	 	48	 	
Income taxes payable	 	 	93	 	 	 	115	 	
Current portion of asset retirement obligation	 	 	8	 	 	 	8	 	
Accrued expenses and other current liabilities	 	 	2	 	 	 	2	 	
 	 	 	 	 	 	 	
Current liabilities	 	$	138	 	 	 	173	 	

Asset retirement obligation, long-term	 	$	44	 	 	 	38	 	
Deferred income taxes	 	 	368	 	 	 	375	 	
Other liabilities	 	 	16	 	 	 	16	 	
 	 	 	 	 	 	 	
Long-term liabilities	 	$	428	 	 	 	429	 	
 	 	 	 	 	 	 	
Reduction of Carrying Value
     Based on recent drilling activities in Nigeria, Devon reduced the carrying value of its Nigerian assets held for sale in the second quarter of 2007. As a result, earnings from discontinued operations in such quarter include a $13 million after-tax loss ($64 million pre-tax).
     Due to unsuccessful drilling activities in Nigeria, in the first quarter of 2006, Devon recognized an $85 million impairment of its investment in Nigeria equal to the costs to drill two dry holes and a proportionate share of block-related costs. There was no income tax benefit related to this impairment.
12. Income Taxes
     During the second quarter of 2007, the Canadian Federal government enacted a statutory rate reduction. As a result of this rate reduction, Devon recorded a $30 million deferred tax benefit in such quarter.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. Segment Information
     Following is certain financial information regarding Devon’s reporting segments. The revenues reported are all from external customers.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	 	Canada	 	 	International	 	 	Total	 	
 	 	(In millions)	 	
As of June 30, 2007:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	$	1,350	 	 	 	683	 	 	 	1,133	 	 	 	3,166	 	
Property and equipment, net of accumulated depreciation, depletion and amortization	 	 	16,601	 	 	 	8,016	 	 	 	1,037	 	 	 	25,654	 	
Goodwill	 	 	3,053	 	 	 	2,840	 	 	 	68	 	 	 	5,961	 	
Other assets	 	 	1,463	 	 	 	55	 	 	 	1,732	 	 	 	3,250	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	22,467	 	 	 	11,594	 	 	 	3,970	 	 	 	38,031	 	

Current liabilities	 	$	3,495	 	 	 	532	 	 	 	389	 	 	 	4,416	 	
Long-term debt	 	 	2,599	 	 	 	2,975	 	 	 	—	 	 	 	5,574	 	
Asset retirement obligation, long-term	 	 	618	 	 	 	525	 	 	 	71	 	 	 	1,214	 	
Other liabilities	 	 	1,055	 	 	 	52	 	 	 	432	 	 	 	1,539	 	
Deferred income taxes	 	 	3,517	 	 	 	2,022	 	 	 	63	 	 	 	5,602	 	
Stockholders’ equity	 	 	11,183	 	 	 	5,488	 	 	 	3,015	 	 	 	19,686	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	22,467	 	 	 	11,594	 	 	 	3,970	 	 	 	38,031	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	 	Canada	 	 	International	 	 	Total	 	
 	 	(In millions)	 	
Three Months Ended June 30, 2007:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil sales	 	$	305	 	 	 	185	 	 	 	375	 	 	 	865	 	
Gas sales	 	 	997	 	 	 	380	 	 	 	3	 	 	 	1,380	 	
NGL sales	 	 	177	 	 	 	47	 	 	 	—	 	 	 	224	 	
Marketing and midstream revenues	 	 	452	 	 	 	8	 	 	 	—	 	 	 	460	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	1,931	 	 	 	620	 	 	 	378	 	 	 	2,929	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	 	256	 	 	 	140	 	 	 	43	 	 	 	439	 	
Production taxes	 	 	59	 	 	 	1	 	 	 	30	 	 	 	90	 	
Marketing and midstream operating costs and expenses	 	 	338	 	 	 	3	 	 	 	—	 	 	 	341	 	
Depreciation, depletion and amortization of oil and gas properties	 	 	402	 	 	 	182	 	 	 	61	 	 	 	645	 	
Depreciation and amortization of non-oil and gas properties	 	 	44	 	 	 	5	 	 	 	—	 	 	 	49	 	
Accretion of asset retirement obligation	 	 	9	 	 	 	8	 	 	 	1	 	 	 	18	 	
General and administrative expenses	 	 	91	 	 	 	27	 	 	 	(5	)	 	 	113	 	
Interest expense	 	 	57	 	 	 	50	 	 	 	—	 	 	 	107	 	
Change in fair value of financial instruments	 	 	(10	)	 	 	—	 	 	 	—	 	 	 	(10	)	
Other income, net	 	 	(6	)	 	 	(2	)	 	 	(9	)	 	 	(17	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other income, net	 	 	1,240	 	 	 	414	 	 	 	121	 	 	 	1,775	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before income tax expense	 	 	691	 	 	 	206	 	 	 	257	 	 	 	1,154	 	
Income tax expense (benefit):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	55	 	 	 	43	 	 	 	76	 	 	 	174	 	
Deferred	 	 	166	 	 	 	(4	)	 	 	(6	)	 	 	156	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense	 	 	221	 	 	 	39	 	 	 	70	 	 	 	330	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	470	 	 	 	167	 	 	 	187	 	 	 	824	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations before income tax expense	 	 	—	 	 	 	—	 	 	 	128	 	 	 	128	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	48	 	 	 	48	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	 	—	 	 	 	—	 	 	 	80	 	 	 	80	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	470	 	 	 	167	 	 	 	267	 	 	 	904	 	
Preferred stock dividends	 	 	3	 	 	 	—	 	 	 	—	 	 	 	3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings applicable to common stockholders	 	$	467	 	 	 	167	 	 	 	267	 	 	 	901	 	

Capital expenditures, continuing operations	 	$	1,079	 	 	 	192	 	 	 	109	 	 	 	1,380	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	 	Canada	 	 	International	 	 	Total	 	
 	 	(In millions)	 	
Three Months Ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil sales	 	$	334	 	 	 	167	 	 	 	101	 	 	 	602	 	
Gas sales	 	 	802	 	 	 	358	 	 	 	5	 	 	 	1,165	 	
NGL sales	 	 	139	 	 	 	54	 	 	 	—	 	 	 	193	 	
Marketing and midstream revenues	 	 	382	 	 	 	8	 	 	 	—	 	 	 	390	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	1,657	 	 	 	587	 	 	 	106	 	 	 	2,350	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	 	198	 	 	 	134	 	 	 	10	 	 	 	342	 	
Production taxes	 	 	58	 	 	 	1	 	 	 	27	 	 	 	86	 	
Marketing and midstream operating costs and expenses	 	 	283	 	 	 	2	 	 	 	—	 	 	 	285	 	
Depreciation, depletion and amortization of oil and gas properties	 	 	304	 	 	 	170	 	 	 	16	 	 	 	490	 	
Depreciation and amortization of non-oil and gas properties	 	 	38	 	 	 	4	 	 	 	1	 	 	 	43	 	
Accretion of asset retirement obligation	 	 	6	 	 	 	6	 	 	 	1	 	 	 	13	 	
General and administrative expenses	 	 	71	 	 	 	21	 	 	 	(2	)	 	 	90	 	
Interest expense	 	 	46	 	 	 	56	 	 	 	—	 	 	 	102	 	
Change in fair value of financial instruments	 	 	47	 	 	 	—	 	 	 	—	 	 	 	47	 	
Reduction of carrying value of oil and gas properties	 	 	—	 	 	 	—	 	 	 	16	 	 	 	16	 	
Other income, net	 	 	(17	)	 	 	(5	)	 	 	(7	)	 	 	(29	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other income, net	 	 	1,034	 	 	 	389	 	 	 	62	 	 	 	1,485	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before income tax expense (benefit)	 	 	623	 	 	 	198	 	 	 	44	 	 	 	865	 	
Income tax expense (benefit):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	41	 	 	 	37	 	 	 	22	 	 	 	100	 	
Deferred	 	 	204	 	 	 	(196	)	 	 	(6	)	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit)	 	 	245	 	 	 	(159	)	 	 	16	 	 	 	102	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	378	 	 	 	357	 	 	 	28	 	 	 	763	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations before income tax expense	 	 	—	 	 	 	—	 	 	 	178	 	 	 	178	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	82	 	 	 	82	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	 	—	 	 	 	—	 	 	 	96	 	 	 	96	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	378	 	 	 	357	 	 	 	124	 	 	 	859	 	
Preferred stock dividends	 	 	3	 	 	 	—	 	 	 	—	 	 	 	3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings applicable to common stockholders	 	$	375	 	 	 	357	 	 	 	124	 	 	 	856	 	

Capital expenditures, before revision of future ARO	 	$	3,094	 	 	 	324	 	 	 	51	 	 	 	3,469	 	
Revision of future ARO	 	 	64	 	 	 	71	 	 	 	—	 	 	 	135	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures, continuing operations	 	$	3,158	 	 	 	395	 	 	 	51	 	 	 	3,604	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	 	Canada	 	 	International	 	 	Total	 	
 	 	 	 	 	 	(In millions)	 	 	 	 	 	
Six Months Ended June 30, 2007:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil sales	 	$	539	 	 	 	338	 	 	 	679	 	 	 	1,556	 	
Gas sales	 	 	1,866	 	 	 	736	 	 	 	4	 	 	 	2,606	 	
NGL sales	 	 	313	 	 	 	88	 	 	 	—	 	 	 	401	 	
Marketing and midstream revenues	 	 	823	 	 	 	16	 	 	 	—	 	 	 	839	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	3,541	 	 	 	1,178	 	 	 	683	 	 	 	5,402	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	 	504	 	 	 	283	 	 	 	82	 	 	 	869	 	
Production taxes	 	 	115	 	 	 	2	 	 	 	53	 	 	 	170	 	
Marketing and midstream operating costs and expenses	 	 	604	 	 	 	7	 	 	 	—	 	 	 	611	 	
Depreciation, depletion and amortization of oil and gas properties	 	 	773	 	 	 	342	 	 	 	117	 	 	 	1,232	 	
Depreciation and amortization of non-oil and gas properties	 	 	85	 	 	 	10	 	 	 	—	 	 	 	95	 	
Accretion of asset retirement obligation	 	 	19	 	 	 	15	 	 	 	2	 	 	 	36	 	
General and administrative expenses	 	 	183	 	 	 	52	 	 	 	(3	)	 	 	232	 	
Interest expense	 	 	116	 	 	 	101	 	 	 	—	 	 	 	217	 	
Change in fair value of financial instruments	 	 	(8	)	 	 	(1	)	 	 	—	 	 	 	(9	)	
Other income, net	 	 	(18	)	 	 	(5	)	 	 	(20	)	 	 	(43	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other income, net	 	 	2,373	 	 	 	806	 	 	 	231	 	 	 	3,410	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before income tax expense	 	 	1,168	 	 	 	372	 	 	 	452	 	 	 	1,992	 	
Income tax expense (benefit):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	122	 	 	 	105	 	 	 	136	 	 	 	363	 	
Deferred	 	 	252	 	 	 	(5	)	 	 	(16	)	 	 	231	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense	 	 	374	 	 	 	100	 	 	 	120	 	 	 	594	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	794	 	 	 	272	 	 	 	332	 	 	 	1,398	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations before income tax expense	 	 	—	 	 	 	—	 	 	 	265	 	 	 	265	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	108	 	 	 	108	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	 	—	 	 	 	—	 	 	 	157	 	 	 	157	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	794	 	 	 	272	 	 	 	489	 	 	 	1,555	 	
Preferred stock dividends	 	 	5	 	 	 	—	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings applicable to common stockholders	 	$	789	 	 	 	272	 	 	 	489	 	 	 	1,550	 	

Capital expenditures, before revision of future ARO	 	$	2,022	 	 	 	661	 	 	 	215	 	 	 	2,898	 	
Revision of future ARO	 	 	210	 	 	 	99	 	 	 	2	 	 	 	311	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures, continuing operations	 	$	2,232	 	 	 	760	 	 	 	217	 	 	 	3,209	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	 	Canada	 	 	International	 	 	Total	 	
 	 	(In millions)	 	
Six Months Ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil sales	 	$	628	 	 	 	289	 	 	 	193	 	 	 	1,110	 	
Gas sales	 	 	1,721	 	 	 	793	 	 	 	9	 	 	 	2,523	 	
NGL sales	 	 	263	 	 	 	106	 	 	 	—	 	 	 	369	 	
Marketing and midstream revenues	 	 	833	 	 	 	15	 	 	 	—	 	 	 	848	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	3,445	 	 	 	1,203	 	 	 	202	 	 	 	4,850	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses and other income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	 	394	 	 	 	258	 	 	 	21	 	 	 	673	 	
Production taxes	 	 	124	 	 	 	3	 	 	 	42	 	 	 	169	 	
Marketing and midstream operating costs and expenses	 	 	618	 	 	 	5	 	 	 	—	 	 	 	623	 	
Depreciation, depletion and amortization of oil and gas properties	 	 	585	 	 	 	320	 	 	 	28	 	 	 	933	 	
Depreciation and amortization of non-oil and gas properties	 	 	75	 	 	 	8	 	 	 	1	 	 	 	84	 	
Accretion of asset retirement obligation	 	 	12	 	 	 	10	 	 	 	1	 	 	 	23	 	
General and administrative expenses	 	 	141	 	 	 	42	 	 	 	(3	)	 	 	180	 	
Interest expense	 	 	88	 	 	 	115	 	 	 	—	 	 	 	203	 	
Change in fair value of financial instruments	 	 	61	 	 	 	(2	)	 	 	—	 	 	 	59	 	
Reduction of carrying value of oil and gas properties	 	 	—	 	 	 	—	 	 	 	16	 	 	 	16	 	
Other income, net	 	 	(33	)	 	 	(11	)	 	 	(14	)	 	 	(58	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses and other income, net	 	 	2,065	 	 	 	748	 	 	 	92	 	 	 	2,905	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before income tax expense (benefit)	 	 	1,380	 	 	 	455	 	 	 	110	 	 	 	1,945	 	
Income tax expense (benefit):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	195	 	 	 	88	 	 	 	41	 	 	 	324	 	
Deferred	 	 	305	 	 	 	(153	)	 	 	(10	)	 	 	142	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit)	 	 	500	 	 	 	(65	)	 	 	31	 	 	 	466	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	880	 	 	 	520	 	 	 	79	 	 	 	1,479	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations before income tax expense	 	 	—	 	 	 	—	 	 	 	225	 	 	 	225	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	145	 	 	 	145	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	 	—	 	 	 	—	 	 	 	80	 	 	 	80	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	880	 	 	 	520	 	 	 	159	 	 	 	1,559	 	
Preferred stock dividends	 	 	5	 	 	 	—	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings applicable to common stockholders	 	$	875	 	 	 	520	 	 	 	159	 	 	 	1,554	 	

Capital expenditures, before revision of future ARO	 	$	3,826	 	 	 	970	 	 	 	144	 	 	 	4,940	 	
Revision of future ARO	 	 	64	 	 	 	71	 	 	 	—	 	 	 	135	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures, continuing operations	 	$	3,890	 	 	 	1,041	 	 	 	144	 	 	 	5,075	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
14. Subsequent Event — Master Limited Partnership
     Devon announced on July 18, 2007 that its Board of Directors had approved a plan to form a new, publicly traded master limited partnership (“MLP”). The MLP will initially own a minority interest in Devon’s U.S. onshore marketing and midstream business. This business includes natural gas gathering and processing assets located in Texas, Oklahoma, Wyoming and Montana.
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DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     Devon expects to file with the SEC a registration statement for the planned MLP in the third quarter of 2007. An offering of partnership units in the MLP is planned following registration with the SEC.
     A Devon subsidiary will serve as the general partner of the MLP, and Devon expects to own a majority of the partnership units following completion of the initial public offering. Following the offering, Devon will continue to own a majority interest in its U.S. onshore marketing and midstream business.
     A significant portion of the proceeds from the sale of MLP units is expected to be utilized to retire a portion of Devon’s debt and to repurchase shares of Devon common stock. Any remaining proceeds would also be available to Devon for payment of dividends and other corporate purposes.
     This report on Form 10-Q shall not constitute an offer to sell or the solicitation of an offer to buy any securities. Any offers to sell, solicitations of offers to buy, or any sales of securities will only be made in accordance with the registration requirements of the Securities Act of 1933 or an exemption from such requirements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following discussion addresses material changes in our results of operations for the three-month and six-month periods ended June 30, 2007, compared to the three-month and six-month periods ended June 30, 2006, and in our financial condition since December 31, 2006. It is presumed that readers have read or have access to our 2006 Annual Report on Form 10-K which includes disclosures regarding critical accounting policies as part of Management’s Discussion and Analysis of Financial Condition and Results of Operations. Unless otherwise stated, all dollar amounts are expressed in U.S. dollars.
Overview
     The following summarizes our performance for the three months and six months ended June 30, 2007 compared to the three months and six months ended June 30, 2006:

 	•	 	Net earnings for the second quarter of 2007 increased 5% and were flat for the first half of 2007	
 		
 	•	 	Earnings per share for the second quarter of 2007 increased 4% and decreased 1% during the first half of 2007	
 		
 	•	 	Net cash provided by operating activities increased $531 million, or 19%, during the first half of 2007	
 		
 	•	 	Production increased 16% to 618 thousand barrels per day for the second quarter of 2007 and increased 14% to 603 thousand barrels per day for the first half of 2007	
 		
 	•	 	Combined realized price for oil, gas and NGLs for the second quarter increased 9% to $43.94 and remained flat for the first half of 2007	
 		
 	•	 	Marketing and midstream operating profit increased 13% during the second quarter of 2007 and 1% for the first half of 2007	
 		
 	•	 	Per unit operating costs increased 7% and 8% for the second quarter and first half of 2007, respectively	
 		
 	•	 	Capital expenditures for oil and gas exploration and development activities were $1.3 billion during the second quarter of 2007 and $2.7 billion during the first half of 2007	
     On November 14, 2006, we announced our plans to divest our operations in Egypt. On January 23, 2007, we announced our plans to divest our operations in West Africa. Pursuant to accounting rules for discontinued operations, we have classified all 2007 and prior period amounts related to our operations in Egypt and West Africa as discontinued operations.
     On April 18, 2007, we announced that we had agreed to sell our Egyptian operations for $375 million based on an effective date of January 1, 2007. We estimate that after-tax proceeds will be approximately $300 million. The transaction is expected to close in the third quarter of 2007. Had the transaction closed on January 1, 2007, Devon would have recognized a gain, after taxes, of approximately $60 million. The gain ultimately recorded when the transaction closes will depend on the carrying values of our Egyptian assets and liabilities at the closing date, as well as the effect of purchase price adjustments between the effective date of January 1, 2007 and the actual closing date.
     We are in the process of evaluating bids on the West African assets and expect these property sales to close in the fourth quarter of 2007.
     A more complete overview and discussion of full-year expectations can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2006 Annual Report on Form 10-K.
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Results of Operations
Revenues
     The three-month and six-month comparisons of production and price changes are shown in the following tables. The amounts for all periods presented exclude our Egyptian and West African operations. Unless otherwise stated, all dollar amounts are expressed in U.S. dollars.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2007	 	 	2006	 	 	Change (2)	 	 	2007	 	 	2006	 	 	Change (2)	 	
Production	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (MMBbls)	 	 	15	 	 	 	10	 	 	 	+49	%	 	 	28	 	 	 	20	 	 	 	+42	%	
Gas (Bcf)	 	 	212	 	 	 	199	 	 	 	+7	%	 	 	414	 	 	 	389	 	 	 	+7	%	
NGLs (MMBbls)	 	 	6	 	 	 	6	 	 	 	+12	%	 	 	12	 	 	 	12	 	 	 	+8	%	
Oil, Gas and NGLs (MMBoe) (1)	 	 	56	 	 	 	49	 	 	 	+16	%	 	 	109	 	 	 	96	 	 	 	+14	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Prices	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (Per Bbl)	 	$	60.01	 	 	 	62.38	 	 	 	-4	%	 	$	56.22	 	 	 	56.99	 	 	 	-1	%	
Gas (Per Mcf)	 	 	6.50	 	 	 	5.85	 	 	 	+11	%	 	 	6.29	 	 	 	6.49	 	 	 	-3	%	
NGLs (Per Bbl)	 	 	35.03	 	 	 	33.83	 	 	 	+4	%	 	 	32.26	 	 	 	31.98	 	 	 	+1	%	
Oil, Gas and NGLs (Per Boe) (1)	 	 	43.94	 	 	 	40.36	 	 	 	+9	%	 	 	41.81	 	 	 	41.76	 	 	 	0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues ($ in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil	 	$	865	 	 	 	602	 	 	 	+44	%	 	$	1,556	 	 	 	1,110	 	 	 	+40	%	
Gas	 	 	1,380	 	 	 	1,165	 	 	 	+19	%	 	 	2,606	 	 	 	2,523	 	 	 	+3	%	
NGLs	 	 	224	 	 	 	193	 	 	 	+16	%	 	 	401	 	 	 	369	 	 	 	+9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil, Gas and NGLs	 	$	2,469	 	 	 	1,960	 	 	 	+26	%	 	$	4,563	 	 	 	4,002	 	 	 	+14	%	

 	 	Domestic	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2007	 	 	2006	 	 	Change (2)	 	 	2007	 	 	2006	 	 	Change (2)	 	
Production	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (MMBbls)	 	 	5	 	 	 	5	 	 	 	-4	%	 	 	9	 	 	 	10	 	 	 	-7	%	
Gas (Bcf)	 	 	155	 	 	 	135	 	 	 	+14	%	 	 	301	 	 	 	266	 	 	 	+13	%	
NGLs (MMBbls)	 	 	5	 	 	 	5	 	 	 	+18	%	 	 	10	 	 	 	10	 	 	 	+12	%	
Oil, Gas and NGLs (MMBoe) (1)	 	 	36	 	 	 	32	 	 	 	+12	%	 	 	70	 	 	 	63	 	 	 	+10	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Prices	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (Per Bbl)	 	$	62.68	 	 	 	66.05	 	 	 	-5	%	 	$	57.67	 	 	 	62.39	 	 	 	-8	%	
Gas (Per Mcf)	 	 	6.44	 	 	 	5.91	 	 	 	+9	%	 	 	6.20	 	 	 	6.47	 	 	 	-4	%	
NGLs (Per Bbl)	 	 	33.26	 	 	 	30.88	 	 	 	+8	%	 	 	30.54	 	 	 	28.86	 	 	 	+6	%	
Oil, Gas and NGLs (Per Boe) (1)	 	 	41.11	 	 	 	39.61	 	 	 	+4	%	 	 	38.96	 	 	 	41.14	 	 	 	-5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues ($ in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil	 	$	305	 	 	 	334	 	 	 	-9	%	 	$	539	 	 	 	628	 	 	 	-14	%	
Gas	 	 	997	 	 	 	802	 	 	 	+24	%	 	 	1,866	 	 	 	1,721	 	 	 	+8	%	
NGLs	 	 	177	 	 	 	139	 	 	 	+27	%	 	 	313	 	 	 	263	 	 	 	+19	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil, Gas and NGLs	 	$	1,479	 	 	 	1,275	 	 	 	+16	%	 	$	2,718	 	 	 	2,612	 	 	 	+4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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 	 	Canada	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2007	 	 	2006	 	 	Change (2)	 	 	2007	 	 	2006	 	 	Change (2)	 	
Production	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (MMBbls)	 	 	4	 	 	 	3	 	 	 	+31	%	 	 	8	 	 	 	6	 	 	 	+20	%	
Gas (Bcf)	 	 	56	 	 	 	63	 	 	 	-9	%	 	 	112	 	 	 	122	 	 	 	-8	%	
NGLs (MMBbls)	 	 	1	 	 	 	1	 	 	 	-11	%	 	 	2	 	 	 	2	 	 	 	-10	%	
Oil, Gas and NGLs (MMBoe) (1)	 	 	14	 	 	 	15	 	 	 	-1	%	 	 	28	 	 	 	29	 	 	 	-2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Prices	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (Per Bbl)	 	$	46.32	 	 	 	54.52	 	 	 	-15	%	 	$	45.01	 	 	 	46.14	 	 	 	-2	%	
Gas (Per Mcf)	 	 	6.66	 	 	 	5.70	 	 	 	+17	%	 	 	6.55	 	 	 	6.51	 	 	 	+1	%	
NGLs (Per Bbl)	 	 	43.82	 	 	 	44.87	 	 	 	-2	%	 	 	40.37	 	 	 	43.70	 	 	 	-8	%	
Oil, Gas and NGLs (Per Boe) (1)	 	 	41.99	 	 	 	39.31	 	 	 	+7	%	 	 	40.88	 	 	 	40.99	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues ($ in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil	 	$	185	 	 	 	167	 	 	 	+11	%	 	$	338	 	 	 	289	 	 	 	+17	%	
Gas	 	 	380	 	 	 	358	 	 	 	+6	%	 	 	736	 	 	 	793	 	 	 	-7	%	
NGLs	 	 	47	 	 	 	54	 	 	 	-13	%	 	 	88	 	 	 	106	 	 	 	-17	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil, Gas and NGLs	 	$	612	 	 	 	579	 	 	 	+6	%	 	$	1,162	 	 	 	1,188	 	 	 	-2	%	

 	 	International	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2007	 	 	2006	 	 	Change (2)	 	 	2007	 	 	2006	 	 	Change (2)	 	
Production	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (MMBbls)	 	 	6	 	 	 	2	 	 	 	+260	%	 	 	11	 	 	 	4	 	 	 	+243	%	
Gas (Bcf)	 	 	1	 	 	 	1	 	 	 	-22	%	 	 	1	 	 	 	1	 	 	 	-39	%	
NGLs (MMBbls)	 	 	—	 	 	 	—	 	 	 	N/M	 	 	 	—	 	 	 	—	 	 	 	N/M	 	
Oil, Gas and NGLs (MMBoe) (1)	 	 	6	 	 	 	2	 	 	 	+241	%	 	 	11	 	 	 	4	 	 	 	+225	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Prices	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil (Per Bbl)	 	$	67.57	 	 	 	65.96	 	 	 	+2	%	 	$	62.76	 	 	 	61.34	 	 	 	+2	%	
Gas (Per Mcf)	 	 	6.19	 	 	 	7.13	 	 	 	-13	%	 	 	5.16	 	 	 	6.61	 	 	 	-22	%	
NGLs (Per Bbl)	 	 	—	 	 	 	—	 	 	 	N/M	 	 	 	—	 	 	 	—	 	 	 	N/M	 	
Oil, Gas and NGLs (Per Boe) (1)	 	 	67.11	 	 	 	64.45	 	 	 	+4	%	 	 	62.39	 	 	 	59.98	 	 	 	+4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues ($ in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil	 	$	375	 	 	 	101	 	 	 	+269	%	 	$	679	 	 	 	193	 	 	 	+251	%	
Gas	 	 	3	 	 	 	5	 	 	 	-32	%	 	 	4	 	 	 	9	 	 	 	-53	%	
NGLs	 	 	—	 	 	 	—	 	 	 	N/M	 	 	 	—	 	 	 	—	 	 	 	N/M	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil, Gas and NGLs	 	$	378	 	 	 	106	 	 	 	+256	%	 	$	683	 	 	 	202	 	 	 	+238	%	

			
(1)	 	Gas volumes are converted to Boe or MMBoe at the rate of six Mcf of gas per barrel of oil, based upon the approximate relative energy content of natural gas and oil, which rate is not necessarily indicative of the relationship of oil and gas prices. NGL volumes are converted to Boe on a one-to-one basis with oil.	
 		
(2)	 	All percentage changes included in this table are based on actual figures and are not calculated using the rounded figures included in this table.	
 		
N/M	 	Not meaningful.	
     The 2007 average sales prices per unit of production shown in the preceding tables include the effect of our financial hedging activities. There were no financial hedging activities in the first six months of 2006. Included below is a comparison of our average sales prices with and without the effect of hedges for the three months and six months ended June 30, 2007.
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 	 	Three Months	 	Six Months	
 	 	Ended June 30, 2007	 	Ended June 30, 2007	
 	 	With	 	Without	 	With	 	Without	
 	 	Hedges	 	Hedges	 	Hedges	 	Hedges	
Oil (per Bbl)	 	$	60.01	 	 	 	60.01	 	 	 	56.22	 	 	 	56.22	 	
Gas (per Mcf)	 	$	6.50	(1)	 	 	6.43	 	 	 	6.29	(1)	 	 	6.31	 	
NGLs (per Bbl)	 	$	35.03	 	 	 	35.03	 	 	 	32.26	 	 	 	32.26	 	
Oil, Gas and NGLs (per Boe)	 	$	43.94	 	 	 	43.68	 	 	 	41.81	 	 	 	41.87	 	

(1)	 	The average gas sales price with the effect of hedges includes both the effect due to unrealized losses and the effect due to cash settlements on our hedging contracts. Excluding an unrealized gain of $9 million for the three months ended June 30, 2007 and an unrealized loss of $23 million for the six months ended June 30, 2007, our average realized gas sales price would have been $6.39 and $6.36, respectively.	
     The following table details the effects of changes in volumes and prices on our oil, gas and NGL revenues in the three months ended June 30, 2007 and June 30, 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Oil	 	 	Gas	 	 	NGL	 	 	Total	 	
 	 	(In millions)	 	
2006 revenues	 	$	602	 	 	 	1,165	 	 	 	193	 	 	 	1,960	 	
Changes due to volumes	 	 	297	 	 	 	77	 	 	 	23	 	 	 	397	 	
Changes due to prices	 	 	(34	)	 	 	129	 	 	 	8	 	 	 	103	 	
Changes due to unrealized hedge gains	 	 	—	 	 	 	9	 	 	 	—	 	 	 	9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2007 revenues	 	$	865	 	 	 	1,380	 	 	 	224	 	 	 	2,469	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     The following table details the effects of changes in volumes and prices on our oil, gas and NGL revenues in the six months ended June 30, 2007 and June 30, 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Oil	 	 	Gas	 	 	NGL	 	 	Total	 	
 	 	(In millions)	 	
2006 revenues	 	$	1,110	 	 	 	2,523	 	 	 	369	 	 	 	4,002	 	
Changes due to volumes	 	 	468	 	 	 	164	 	 	 	28	 	 	 	660	 	
Changes due to prices	 	 	(22	)	 	 	(58	)	 	 	4	 	 	 	(76	)	
Changes due to unrealized hedge losses	 	 	—	 	 	 	(23	)	 	 	—	 	 	 	(23	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2007 revenues	 	$	1,556	 	 	 	2,606	 	 	 	401	 	 	 	4,563	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Oil Revenues
     Production increases of 49% and 42% in the second quarter of 2007 and first half of 2007 were the primary causes of our increased oil revenues in these periods. The increased 2007 production was primarily from our properties in Azerbaijan where we achieved payout of certain carried interests in the last half of 2006.
Gas Revenues
     A 13 Bcf increase in production caused gas revenues to increase by $77 million during the second quarter of 2007. Our drilling and development program in the Barnett Shale field in north Texas contributed 17 Bcf to the gas production increase. The June 2006 Chief acquisition also contributed six Bcf of increased production. These increases and the effect of new drilling and development in our other North American properties were partially offset by natural production declines.
     A 25 Bcf increase in production caused gas revenues to increase by $164 million during the first half of 2007. Our drilling and development program in the Barnett Shale field in north Texas contributed 30 Bcf to the gas production increase. The June 2006 Chief acquisition also contributed 12 Bcf of increased production. These increases and the effect of new drilling and development in our other North American properties were partially offset by natural production declines.
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Marketing and Midstream Revenues and Operating Costs and Expenses
     The following table details the changes in our marketing and midstream revenues and operating costs and expenses between the three months ended June 30, 2007 and June 30, 2006 and the six months ended June 30, 2007 and June 30, 2006. The changes due to prices in the table represent the effect on both revenues and expenses due to changes in the market prices for natural gas and NGLs.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30	 	 	Ended June 30	 	
 	 	Revenues	 	 	Expenses	 	 	Revenues	 	 	Expenses	 	
2006 marketing & midstream	 	$	390	 	 	 	285	 	 	 	848	 	 	 	623	 	
Changes due to volumes	 	 	12	 	 	 	9	 	 	 	(12	)	 	 	(10	)	
Changes due to prices	 	 	62	 	 	 	47	 	 	 	7	 	 	 	(1	)	
Other	 	 	(4	)	 	 	—	 	 	 	(4	)	 	 	(1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2007 marketing & midstream	 	$	460	 	 	 	341	 	 	 	839	 	 	 	611	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     The increase in revenues and expenses for the second quarter of 2007 was primarily due to higher prices for natural gas and NGLs.
Oil, Gas and NGL Production and Operating Expenses
     The three-month and six-month comparisons of oil, gas and NGL production and operating expenses are shown in the table below.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	Change (1)	 	 	2007	 	 	2006	 	 	Change (1)	 	
Production and operating expenses ($ in millions):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	$	439	 	 	 	342	 	 	 	+28	%	 	$	869	 	 	 	673	 	 	 	+29	%	
Production taxes	 	 	90	 	 	 	86	 	 	 	+4	%	 	 	170	 	 	 	169	 	 	 	+1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total production and operating expenses	 	$	529	 	 	 	428	 	 	 	+23	%	 	$	1,039	 	 	 	842	 	 	 	+23	%	

Production and operating expenses per Boe:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease operating expenses	 	$	7.81	 	 	 	7.05	 	 	 	+11	%	 	$	7.96	 	 	 	7.02	 	 	 	+13	%	
Production taxes	 	 	1.61	 	 	 	1.79	 	 	 	-10	%	 	 	1.57	 	 	 	1.77	 	 	 	-12	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total production and operating expenses per Boe	 	$	9.42	 	 	 	8.84	 	 	 	+7	%	 	$	9.53	 	 	 	8.79	 	 	 	+8	%	

			
(1)	 	All percentage changes included in this table are based on actual figures and are not calculated using the rounded figures included in this table.	
     Lease operating expenses increased $97 million and $196 million in the second quarter of 2007 and first half of 2007 largely due to the continued effects of higher commodity prices. Commodity price increases in 2005 and the first half of 2006 contributed to industry-wide inflationary pressures on materials and personnel costs. Although commodity prices have somewhat stabilized compared to the first half of 2006, demand for materials, equipment and personnel continued to increase subsequent to the first half of 2006. In addition, consideration of continued higher commodity prices contributed to our decision to perform more well workovers and maintenance projects in 2007 to maintain or improve production volumes. Lease operating expenses also increased $41 million in the second quarter of 2007 and $76 million in the first half of 2007 due to the June 2006 Chief acquisition and the payouts of our carried interests in Azerbaijan in the last half of 2006.
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     The following table details the changes in production taxes between the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30	 	 	Ended June 30	 	
 	 	(In millions)	 	
2006 production taxes	 	$	86	 	 	 	169	 	
Change due to revenues	 	 	22	 	 	 	24	 	
Change due to rate	 	 	(18	)	 	 	(23	)	
 	 	 	 	 	 	 	
2007 production taxes	 	$	90	 	 	 	170	 	
 	 	 	 	 	 	 	
     Our lower production tax rates in 2007 are primarily due to the increase in Azerbaijan revenues subsequent to the payouts of our carried interests in Azerbaijan in the last half of 2006. Our Azerbaijan revenues are not subject to production taxes, and therefore the increased revenues generated in Azerbaijan in 2007 caused our overall rate of production taxes to decrease.
Depreciation, Depletion and Amortization Expenses (“DD&A”)
     The following table details the changes in DD&A of oil and gas properties between the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30	 	 	Ended June 30	 	
 	 	(In millions)	 	
2006 DD&A	 	$	490	 	 	 	933	 	
Change due to volumes	 	 	77	 	 	 	130	 	
Change due to rate	 	 	78	 	 	 	169	 	
 	 	 	 	 	 	 	
2007 DD&A	 	$	645	 	 	 	1,232	 	
 	 	 	 	 	 	 	
     Oil and gas property related DD&A increased $78 million in the second quarter of 2007 due to an increase in the DD&A rate from $10.09 per Boe to $11.48 per Boe. Oil and gas property related DD&A increased $169 million in the first half of 2007 due to an increase in the DD&A rate from $9.74 per Boe to $11.29 per Boe. The largest contributor to the rate increases were inflationary pressure on both the costs incurred during 2006 and 2007 as well as the estimated development costs to be spent in future periods on proved undeveloped reserves. Rising estimates for future asset retirement obligations also caused the rate to increase. Other factors contributing to the rate increase include the June 2006 Chief acquisition and the transfer of previously unproved costs to the depletable base as a result of drilling activities subsequent to the first half of 2006.
General and Administrative Expenses (“G&A”)
     The following schedule includes the components of G&A expense for the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Gross G&A	 	$	222	 	 	 	169	 	 	 	434	 	 	 	336	 	
Capitalized G&A	 	 	(82	)	 	 	(53	)	 	 	(146	)	 	 	(103	)	
Reimbursed G&A	 	 	(27	)	 	 	(26	)	 	 	(56	)	 	 	(53	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net G&A	 	$	113	 	 	 	90	 	 	 	232	 	 	 	180	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Gross G&A increased $53 million and $98 million in the second quarter and first half of 2007, respectively, compared to the same periods of 2006. Higher employee compensation and benefits costs related to our growth and industry inflation caused gross G&A to increase $38 million and $72 million, respectively. The $29 million and $43 million increases in capitalized G&A during the second quarter and first half of 2007, respectively, are also primarily due to higher employee compensation and benefits costs.
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Interest Expense
     The following schedule includes the components of interest expense for the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Interest based on debt outstanding	 	$	125	 	 	 	118	 	 	 	253	 	 	 	233	 	
Capitalized interest	 	 	(24	)	 	 	(20	)	 	 	(47	)	 	 	(36	)	
Other	 	 	6	 	 	 	4	 	 	 	11	 	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	107	 	 	 	102	 	 	 	217	 	 	 	203	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Interest based on debt outstanding increased in the second quarter of 2007 and first half of 2007 primarily due to the effect of commercial paper borrowings related to the June 2006 acquisition of the Chief properties. This increase was partially offset by the effect of $680 million of debt maturities in the last half of 2006.
Change in Fair Value of Financial Instruments
     The following schedule includes the components of the change in fair value of financial instruments for the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Option embedded in exchangeable debentures	 	$	136	 	 	 	47	 	 	 	144	 	 	 	61	 	
Investment in Chevron common stock	 	 	(146	)	 	 	—	 	 	 	(152	)	 	 	—	 	
Interest rate swaps	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	(2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(10	)	 	 	47	 	 	 	(9	)	 	 	59	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     The change in the fair value of the embedded option relates to the debentures exchangeable into shares of Chevron common stock. These expenses were caused primarily by increases in the price of Chevron’s common stock.
     As discussed in Note 1 to our financial statements, effective January 1, 2007 as a result of our adoption of Statement No. 159, we began recognizing unrealized gains and losses on our investment in Chevron common stock in net earnings rather than as part of other comprehensive income. The change in the fair value of our investment in Chevron common stock resulted from increases in the price of Chevron’s common stock during the second quarter and first half of 2007.
Reduction of Carrying Value of Oil and Gas Properties
     During the second quarter of 2006, we drilled two unsuccessful exploratory wells in Brazil and determined that the capitalized costs related to these two wells should be impaired. Therefore, in the second quarter of 2006, we recognized a $16 million impairment of our investment in Brazil equal to the costs to drill the two dry holes and a proportionate share of block-related costs. There is no tax benefit related to this impairment. The two wells were unrelated to our Polvo development project in Brazil.
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Other Income, net
     The following schedule includes the components of other income for the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Interest and dividend income	 	$	18	 	 	 	28	 	 	 	39	 	 	 	56	 	
Net gain on sales of non-oil and gas property and equipment	 	 	1	 	 	 	—	 	 	 	1	 	 	 	5	 	
Other	 	 	(2	)	 	 	1	 	 	 	3	 	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	17	 	 	 	29	 	 	 	43	 	 	 	58	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     The decrease in interest and dividend income in the second quarter and first half of 2007 were primarily due to a decrease in interest-bearing cash and short-term investment balances subsequent to the June 2006 Chief acquisition.
Income Taxes
     The effective tax rate was 29% in the second quarter of 2007 and 12% in the second quarter of 2006. The effective tax rate was 30% in the first half of 2007 and 24% in the first half of 2006.
     The rates for the second quarter and first half of 2007 were lower than the statutory federal tax rate primarily due to the effects of certain U.S. and Canadian deductions. The 2007 rates were further lowered due to the increase in revenues generated in Azerbaijan, whose statutory rate is 25%, and the effect of a statutory rate reduction enacted by the Canadian Federal government in the second quarter of 2007. As a result of the 2007 Canadian rate reduction, we recorded a $30 million tax benefit in such quarter.
     The rates for the second quarter and first half of 2006 were lower than the statutory federal tax rate primarily due to the effects of tax law changes. During the second quarter of 2006, the Canadian Federal and Alberta provincial governments enacted statutory rate reductions. As a result, we recorded a $243 million tax benefit in such quarter. Also during the second quarter of 2006, the state of Texas enacted a new income-based tax that replaces a previous franchise tax. The new tax was effective January 1, 2007. As a result of the enactment of the tax in the second quarter of 2006, we recorded $39 million of tax expense in such quarter.
Earnings from Discontinued Operations
     On November 14, 2006, we announced our plans to divest our operations in Egypt. On January 23, 2007, we announced our plans to divest our operations in West Africa. Pursuant to accounting rules for discontinued operations, we have classified all 2007 and prior period amounts related to our operations in Egypt and West Africa as discontinued operations.
     Following are the components of earnings from discontinued operations for the three months ended June 30, 2007 and 2006 and the six months ended June 30, 2007 and 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	 	Six Months	 	
 	 	Ended June 30,	 	 	Ended June 30,	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Earnings from discontinued operations before income taxes	 	$	128	 	 	 	178	 	 	 	265	 	 	 	225	 	
Income tax expense	 	 	48	 	 	 	82	 	 	 	108	 	 	 	145	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from discontinued operations	 	$	80	 	 	 	96	 	 	 	157	 	 	 	80	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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     Based on recent drilling activities in Nigeria, we reduced the carrying value of our Nigerian assets held for sale in the second quarter of 2007. As a result, earnings from discontinued operations in the second quarter and first half of 2007 include a $13 million after-tax loss ($64 million pre-tax).
     Due to unsuccessful drilling activities in Nigeria, in the first quarter of 2006, we recognized an $85 million impairment of our investment in Nigeria equal to the costs to drill two dry holes and a proportionate share of block-related costs. There was no income tax benefit related to this impairment.
Capital Resources, Uses and Liquidity
     The following discussion of liquidity and capital resources should be read in conjunction with the consolidated statements of cash flows included in Part 1, Item 1.
Sources and Uses of Cash
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30,	 	
 	 	2007	 	 	2006	 	
 	 	(In millions)	 	
Sources of cash and cash equivalents:	 	 	 	 	 	 	 	 	
Operating cash flow — continuing operations	 	$	3,152	 	 	 	2,587	 	
Net commercial paper borrowings	 	 	—	 	 	 	1,452	 	
Sales of property and equipment	 	 	37	 	 	 	26	 	
Stock option exercises	 	 	60	 	 	 	27	 	
Net decrease in short-term investments	 	 	259	 	 	 	348	 	
Other	 	 	17	 	 	 	7	 	
 	 	 	 	 	 	 	
Total sources of cash and cash equivalents	 	 	3,525	 	 	 	4,447	 	

Uses of cash and cash equivalents:	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(2,990	)	 	 	(4,584	)	
Net commercial paper repayments	 	 	(183	)	 	 	—	 	
Debt repayments	 	 	—	 	 	 	(208	)	
Repurchases of common stock	 	 	(10	)	 	 	(253	)	
Dividends	 	 	(129	)	 	 	(104	)	
 	 	 	 	 	 	 	
Total uses of cash and cash equivalents	 	 	(3,312	)	 	 	(5,149	)	

Increase (decrease) from continuing operations	 	 	213	 	 	 	(702	)	
Increase from discontinued operations	 	 	82	 	 	 	100	 	
Effect of foreign exchange rates	 	 	16	 	 	 	26	 	
 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	$	311	 	 	 	(576	)	

Cash and cash equivalents at end of period	 	$	1,067	 	 	 	1,030	 	
 	 	 	 	 	 	 	
Short-term investments at end of period	 	$	315	 	 	 	574	 	
 	 	 	 	 	 	 	
Operating Cash Flow — Continuing Operations
     Net cash provided by operating activities (“operating cash flow”) continued to be the primary source of capital and liquidity in the first half of 2007. Changes in operating cash flow are largely due to the same factors that affect our net earnings, with the exception of those earnings changes due to such noncash expenses as DD&A, financial instrument fair value changes, property impairments and deferred income tax expense. As a result, our operating cash flow increased in 2007 primarily due to the increase in earnings as discussed in the “Results of Operations” section of this report.
Commercial Paper Activity
     During 2007, we utilized operating cash flow and reduced short-term investment balances to repay $0.2 billion of our outstanding commercial paper balances. The outstanding commercial paper relates primarily to the June 2006
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acquisition of Chief. This $2.0 billion acquisition was partially funded with $1.4 billion of commercial paper borrowings in 2006. Our commercial paper outstanding at June 30, 2007 totaled $1.6 billion and had an average interest rate of 5.45%.
Changes in Short-Term Investments
     To maximize our income on available cash balances, we invest in highly liquid, short-term investments. The purchase and sale of these short-term investments will cause cash and cash equivalents to decrease and increase, respectively. Short-term investment balances decreased $259 million in the first half of 2007 primarily to fund net commercial paper repayments. Short-term investment balances decreased $348 million during the first half of 2006 primarily to fund a portion of the Chief acquisition.
Capital Expenditures
     Our 2007 operating cash flow was primarily used to fund our capital expenditures. The majority of our expenditures are for the acquisition, drilling or development of oil and gas properties, which totaled $2.7 billion in the first half of 2007.
     Our 2006 cash used for capital expenditures totaled $4.6 billion. This total includes $4.3 billion for the acquisition, drilling or development of oil and gas properties, including $2.0 billion related to the acquisition of the Chief properties.
Repurchases of Common Stock
     On June 6, 2007, our Board of Directors approved an ongoing, annual stock repurchase program to offset dilution resulting from restricted stock issued to, and options exercised by, employees. The new repurchase program authorizes the repurchase of up to 4.5 million shares in 2007 and is in addition to our 50 million share repurchase program approved in August 2005.
     During the first half of 2007, we repurchased 0.2 million shares under the program authorized in June 2007. During the first half of 2006, we repurchased 4.2 million shares under the program authorized in August 2005.
Dividends
     Our common stock dividends were $124 million and $99 million in the first half of 2007 and 2006, respectively. We also paid $5 million of preferred stock dividends in 2007 and 2006. The 2007 increase in common stock dividends was primarily related to a 25% increase in the quarterly dividend rate in the first quarter of 2007.
Liquidity
     As discussed in our 2006 Annual Report on Form 10-K, our primary source of capital and liquidity has been our operating cash flow. Additionally, we maintain revolving lines of credit and a commercial paper program which can be accessed as needed to supplement operating cash flow. Other available sources of capital and liquidity include the issuance of equity securities and long-term debt. Another major source of near-term liquidity will be proceeds from the sales of our operations in Egypt and West Africa.
Operating Cash Flow
     We expect operating cash flow to continue to be our primary source of liquidity. Our operating cash flow is sensitive to many variables, the most volatile of which is pricing of the oil, natural gas and NGLs produced. To mitigate some of the risk inherent in prices, we have utilized price collars to set minimum and maximum prices on a portion of our production. We have also utilized various price swap contracts and fixed-price physical delivery contracts. Based on contracts currently in place, approximately 5% of our estimated 2007 natural gas production from continuing operations (3% of our total Boe production from continuing operations) is subject to either price collars, swaps or fixed-price contracts.
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Credit Lines
     In April 2007, we extended the maturity of our existing $2.5 billion five-year, syndicated, unsecured revolving line of credit (the “Senior Credit Facility”) from April 7, 2011 to April 7, 2012. As of June 30, 2007, there were no borrowings under the Senior Credit Facility. The available capacity under the Senior Credit Facility as of June 30, 2007, net of $1.6 billion of outstanding commercial paper and $292 million of outstanding letters of credit, was approximately $583 million.
     The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon to maintain a ratio of total funded debt to total capitalization of no more than 65%. As of June 30, 2007, our ratio as calculated pursuant to this covenant was 24.6%.
     On July 11, 2007, we received a commitment from certain lenders to establish a new $1 billion 364-day unsecured revolving senior credit facility (the “Short-Term Facility”). Subsequently, the amount of the commitment was increased to $1.5 billion. We expect to close the Short-Term Facility by August 10, 2007. This new facility will provide us with provisional interim liquidity until we receive the proceeds from divestitures of assets in Africa. The Short-Term Facility will be used to support an increase in Devon’s commercial paper program from $2 billion to $3.5 billion.
     The Short-Term Facility will mature 364 days from the closing date. On the maturity date, all amounts outstanding will be due and payable at that time unless the maturity is extended. Prior to the maturity date, we have the option to convert any outstanding principal amount of loans under the Short-Term Facility to a term loan which will be repayable in a single payment 12 months from the maturity date.
     Amounts borrowed under the Short-Term Facility will bear interest at various fixed rate options for periods of up to 12 months. Such rates are generally less than the prime rate. Devon may also elect to borrow at the prime rate. The Short-Term Facility currently provides for an annual facility fee of approximately $1.0 million that is payable quarterly in arrears.
     The agreement governing the Short-Term Facility will contain substantially the same covenants and restrictions as Devon’s existing Senior Credit Facility, including a maximum allowed debt-to-capitalization ratio of 65% as defined in the agreement.
Debt Ratings
     As of June 30, 2007, we are not aware of any potential ratings downgrades contemplated by the rating agencies.
Master Limited Partnership
     We announced on July 18, 2007 that our Board of Directors had approved a plan to form a new, publicly traded master limited partnership (“MLP”). The MLP will initially own a minority interest in our U.S. onshore marketing and midstream business. This business includes natural gas gathering and processing assets located in Texas, Oklahoma, Wyoming and Montana.
     We expect to file with the SEC a registration statement for the planned MLP in the third quarter of 2007. An offering of partnership units in the MLP is planned following registration with the SEC.
     A Devon subsidiary will serve as the general partner of the MLP, and we expect to own a majority of the partnership units following completion of the initial public offering. Following the offering, we will continue to own a majority interest in our U.S. onshore marketing and midstream business.
     A significant portion of the proceeds from the sale of MLP units is expected to be utilized to retire a portion of our debt and to repurchase shares of our common stock. Any remaining proceeds would also be available to us for payment of dividends and other corporate purposes.
     This report on Form 10-Q shall not constitute an offer to sell or the solicitation of an offer to buy any securities. Any offers to sell, solicitations of offers to buy, or any sales of securities will only be made in accordance with the registration requirements of the Securities Act of 1933 or an exemption from such requirements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     There have been no material changes to the information included in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our 2006 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
     We have established disclosure controls and procedures to ensure that material information relating to Devon, including its consolidated subsidiaries, is made known to the officers who certify Devon’s financial reports and to other members of senior management and the Board of Directors.
     Based on their evaluation, Devon’s principal executive and principal financial officers have concluded that Devon’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of June 30, 2007 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
Changes in Internal Control Over Financial Reporting
     There was no change in Devon’s internal control over financial reporting during the second quarter of 2007 that has materially affected, or is reasonably likely to materially affect, Devon’s internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
     There have been no material changes to the information included in Item 3. “Legal Proceedings” in our 2006 Annual Report on Form 10-K.
Item 1A. Risk Factors
     Except as stated below, there have been no material changes to the information included in Item 1A. “Risk Factors” in our 2006 Annual Report on Form 10-K.
Our Planned Master Limited Partnership May Not Be Formed or the Planned Structure May Change
     We announced on July 18, 2007 that our Board of Directors had approved a plan to form a new, publicly traded MLP. The MLP will initially own a minority interest in our U.S. onshore marketing and midstream business. Completion of this plan is subject to market conditions and numerous other risks beyond our control. Therefore, it is possible that the MLP will not be formed, will not complete an offering of securities, will not raise the planned amount of capital even if an offering of securities is completed, and will not be able to complete the planned actions on the timetable indicated. Furthermore, the structure, nature, purpose and proposed assets and liabilities of the MLP may change materially from those anticipated. In addition, the MLP, and our retained investment in the MLP, will be subject to the risks normally attendant to businesses in the marketing and midstream industry.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total	 	 	 	 	 	 	Total Number of	 	 	Maximum Number of	 	
 	 	Number of	 	 	Average Price	 	 	Shares Purchased as	 	 	Shares that May Yet	 	
 	 	Shares	 	 	Paid per	 	 	Part of Publicly Announced	 	 	Be Purchased Under the	 	
Period	 	Purchased	 	 	Share	 	 	Plans or Programs (1)	 	 	Plans or Programs (1)	 	
April	 	 	—	 	 	$	—	 	 	 	—	 	 	 	43,533,001	 	
May	 	 	—	 	 	$	—	 	 	 	—	 	 	 	43,533,001	 	
June	 	 	200,800	 	 	$	78.32	 	 	 	200,800	 	 	 	47,832,201	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	200,800	 	 	$	78.32	 	 	 	200,800	 	 	 	 	 	

			
(1)	 	In August 2005, Devon’s Board of Directors approved a stock repurchase program to repurchase up to 50 million shares of Devon’s common stock. This program was suspended in 2006 as a result of the Chief acquisition. As of June 30, 2007, there were still 43,533,001 shares available for purchase under this program. On June 6, 2007, Devon’s Board of Directors approved an ongoing, annual stock repurchase program to offset dilution resulting from restricted stock issued to, and options exercised by, employees. The new repurchase program authorizes the repurchase of up to 4.5 million shares in 2007 and is in addition to the 50 million share repurchase program that was authorized in August 2005. The shares purchased in June relate to the program authorized in June 2007.	
Item 3. Defaults Upon Senior Securities
     None
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Item 4. Submission of Matters to a Vote of Security Holders
     (a) Devon’s Annual Meeting of Stockholders was held in Oklahoma City, Oklahoma at 8:00 a.m., local time, on Wednesday, June 6, 2007.
     (b) Proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to the nominees for election as Directors as listed in the Proxy Statement for the June 6, 2007 meeting and all nominees were elected.
     (c) A total of 392,453,601 shares of Devon’s common stock outstanding and entitled to vote were present at the June 6, 2007 meeting in person or by proxy, representing approximately 88.2% of the total outstanding shares. The matters voted upon were as follows:
          1. The election of three Directors to serve on Devon’s Board of Directors until the 2010 Annual Meeting of Stockholders. A total
      of at least 97.52% of all voted shares were cast for approval of each nominee. The vote tabulation with respect to each nominee
      was as follows:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Authority	 	
Nominee	 	For	 	 	Withheld	 	
Thomas F. Ferguson	 	 	382,733,634	 	 	 	9,719,967	 	
David M. Gavrin	 	 	382,797,534	 	 	 	9,656,067	 	
John Richels	 	 	383,295,245	 	 	 	9,158,356	 	
          2.   Ratification of KPMG LLP as the Company’s Independent Auditors for 2007. A total of 97.55% of all voted shares were
      cast for ratification of KPMG LLP. The results of the votes were as follows:
 	 	 	 	 	
FOR:	 	 	382,840,946	 	
AGAINST:	 	 	7,257,147	 	
ABSTAIN:	 	 	2,355,604	 	
Item 5. Other Information
     None
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Item 6. Exhibits
     (a)  Exhibits required by Item 601 of Regulation S-K are as follows:
 	 	 	
Exhibit	 	 	
Number	 	Description	
31.1	 	Certification of J. Larry Nichols, Chief Executive Officer of Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31.2	 	Certification of Danny J. Heatly, Vice President — Accounting and Chief Accounting Officer of Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.1	 	Certification of J. Larry Nichols, Chief Executive Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.2	 	Certification of Danny J. Heatly, Vice President — Accounting and Chief Accounting Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 	 	 	 	 	
 	DEVON ENERGY CORPORATION
 	 	
Date: August 3, 2007 	/s/ Danny J. Heatly  	 	
 	Danny J. Heatly 	 	
 	Vice President — Accounting and
Chief Accounting Officer  	 	
 	
 42 

Table of Contents
INDEX TO EXHIBITS
 	 	 	
Exhibit	 	 	
Number	 	Description	
31.1	 	Certification of J. Larry Nichols, Chief Executive Officer of Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31.2	 	Certification of Danny J. Heatly, Vice President — Accounting and Chief Accounting Officer of Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.1	 	Certification of J. Larry Nichols, Chief Executive Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.2	 	Certification of Danny J. Heatly, Vice President — Accounting and Chief Accounting Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 43 

Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Larry Nichols, certify that:
     1. I have reviewed this quarterly report on Form 10-Q of Devon Energy Corporation;
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 1, 2007

 	/s/ J. Larry Nichols  	 	
 	J. Larry Nichols 	 	
 	Chief Executive Officer  	 	

 

Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Danny J. Heatly certify that:
     1. I have reviewed this quarterly report on Form 10-Q of Devon Energy Corporation;
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 1, 2007

 	/s/ Danny J. Heatly  	 	
 	Danny J. Heatly 	 	
 	Vice President — Accounting and Chief Accounting Officer  	 	

 

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of Devon Energy Corporation (“Devon”) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Larry Nichols, Chief Executive Officer of Devon, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 	(1)	 	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 		
 	(2)	 	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Devon.	
 	 	 	
/s/ J. Larry Nichols	 	 	
 
J. Larry Nichols	 	 	
Chief Executive Officer	 	 	
August 1, 2007	 	 	

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of Devon Energy Corporation (“Devon”) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Danny J. Heatly, Vice President — Accounting and Chief Accounting Officer (acting Chief Financial Officer) of Devon, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 	(1)	 	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 		
 	(2)	 	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Devon.	
 	 	 	
/s/ Danny J. Heatly	 	 	
 
Danny J. Heatly	 	 	
Vice President — Accounting and Chief Accounting Officer	
August 1, 2007