8-K
Devon Energy Corp/De (DVN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2023
Devon Energy Corporation
(Exact name of registrant as specified in its charter)
| DELAWARE | 001-32318 | 73-1567067 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
| 333 W. SHERIDAN AVE.,<br>OKLAHOMA CITY, OKLAHOMA | 73102-5015 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (405) 235-3611
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, par value $0.10 per share | DVN | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On May 8, 2023, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarterly period ended March 31, 2023. In connection with this announcement, the Company provided an earnings release and certain supplemental financial information (including guidance and hedging information). Copies of these documents are furnished as Exhibits 99.1 and 99.2, respectively, to this report and, along with certain other materials, will be available on the Company’s website at www.devonenergy.com.
The information contained in this report and the exhibits hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits
| Exhibit<br> <br>No. | Description of Exhibits |
|---|---|
| 99.1 | Earnings release, dated May 8, 2023. |
| 99.2 | Supplemental financial information (including guidance and hedging information). |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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 hereunto duly authorized.
| DEVON ENERGY CORPORATION | |
|---|---|
| By: | /s/ Jeffrey L. Ritenour |
| Jeffrey L. Ritenour | |
| Executive Vice President and Chief Financial Officer |
Date: May 8, 2023
EX-99.1
Exhibit 99.1
| Devon Energy Corporation<br> <br>333 West Sheridan<br>Avenue<br> <br>Oklahoma City, OK 73102-5015 |
|---|
Devon Energy Reports First-Quarter 2023 Results; Declares Quarterly Dividend and Expands Stock-Repurchase Program by 50Percent to $3 Billion
OKLAHOMA CITY – May 8, 2023 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the first-quarter 2023. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.
KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
| • | Oil production reached an all-time high of 320,000 barrels per day in the<br>first quarter |
|---|---|
| • | Capital activity headlined by Exotic Cat Raider project that achieved<br>per-well rates as high as 7,200 Boe per day |
| --- | --- |
| • | Operating cash flow totaled $1.7 billion and free cash flow reached $665 million in the first quarter<br> |
| --- | --- |
| • | Declared fixed-plus-variable dividend payout of $0.72 per share based on first quarter results<br> |
| --- | --- |
| • | Share buyback activity accelerated with $692 million of repurchases year-to-date |
| --- | --- |
| • | Board of directors increased share-repurchase authorization by 50 percent to $3.0 billion<br> |
| --- | --- |
CEO PERSPECTIVE
“Devon’s strong financial performance in the first quarter was fueled by record-setting oil production and effective cost management across the portfolio,” said Rick Muncrief, president and CEO.
“This solid operational execution, combined with low reinvestment rates, has allowed Devon to generate free cash flow for 11 consecutive quarters across a variety of market conditions. This success showcases the durability of our business model to consistently create value through the cycle.
“With this free cash flow generation, we have been able to return more than $1 billion of capital to shareholders in 2023 through our differentiated dividend policy and the acceleration of our share repurchase program.
“Furthermore, given the substantial progress we have made with our buyback program, I am pleased to announce the board has expanded our share-repurchase authorization by 50 percent to $3 billion. This upsized program provides us additional runway to further compound per-share growth as we continue to execute on the tenets of our disciplined strategy,” Muncrief commented.
FINANCIAL RESULTS
Devon reported net earnings of $995 million, or $1.53 per diluted share, in the first quarter of 2023. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $952 million, or $1.46 per diluted share.
Operating cash flow totaled $1.7 billion in the first quarter, which funded all the company’s capital requirements and resulted in $665 million of free cash flow for the quarter. In addition to this free cash flow, Devon received $69 million in divestiture contingency payments during the quarter.
At the end of the first quarter, the company had a cash balance of $887 million and an undrawn credit facility of $3 billion. Outstanding debt totaled $6.4 billion and the company’s net debt-to-EBITDAX ratio was 0.6 times.
RETURN OF CAPITAL
Based on the first-quarter financial performance, Devon declared a fixed-plus-variable dividend of $0.72 per share. The dividend is payable on June 30, 2023, to shareholders of record at the close of business on June 15, 2023. This payout includes a $0.11 per share benefit from divestiture contingency payments received in the quarter.
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The company also returned capital to shareholders through the execution of its share-repurchase program. Year-to-date, Devon has repurchased 12.9 million shares at a total cost of $692 million. Since program inception in late 2021, the company has repurchased 38.5 million shares, at a total cost of $2.0 billion.
As a result of this buyback activity, the company has increased its share-repurchase authorization by 50 percent to $3.0 billion, which is equivalent to 9 percent of Devon’s market capitalization. This expanded authorization extends through the end of 2024.
OPERATING RESULTS
Oil production averaged 320,000 barrels per day in the first quarter, exceeding midpoint guidance by 2,000 barrels per day. This record-setting oil volume performance was driven by better-than-forecasted results across the company’s diversified portfolio. Total production for the first quarter averaged 641,000 oil-equivalent barrels (Boe) per day.
Devon’s total capital spending, excluding acquisitions, was $988 million in the first quarter. This level of investment was in range with guidance expectations, reflecting improvements in service-cost price stability and availability.
Production costs averaged $12.02 per Boe, a 2 percent reduction compared to the previous quarter. The improved cost structure was driven by lower production taxes, resulting in field-level cash margins of $34.42 per Boe in the first quarter.
The company’s administrative and interest costs improved by 11 percent on a per-unit basis year-over-year. The reduction in per-unit overhead costs resulted from the impact of accretive acquisitions that captured efficiencies and reduced financing expense.
ASSET-LEVEL HIGHLIGHTS
Delaware Basin: Production increased 5 percent year over year to an average of 415,000 Boe per day (51 percent oil). During the quarter, Devon operated 16 rigs and 4 completion crews, resulting in 42 gross wells placed online across the company’s 400,000 net acres in the basin.
Capital activity from the quarter was headlined by the Exotic Cat Raider development within the company’s Todd area in Lea County, New Mexico. This 3-mile lateral project, consisting of 6 wells drilled in the Upper Wolfcamp formation, exceeded pre-drill expectations with 30-day rates reaching as high as 7,200 Boe per day. Per-well recoveries from this high-impact development are currently on track to surpass 2 million BOE.
Another key operational event in the quarter was the successful restart of the company’s Stateline compressor station 8. This compressor facility has resumed operations and downtime associated with this temporary outage has been confined to the first quarter. The company also recently commenced operations at its Stateline compressor station 10, providing even more flexibility in this area of the basin going forward.
Eagle Ford: Production averaged 68,000 Boe per day (59 percent oil), a 90 percent increase in production compared to the year-ago quarter. This volume growth was driven by the Validus acquisition and the commencement of 26 gross wells to first production. Over the remainder of 2023, Devon plans to place online an additional 65 infill wells and execute up to 10 refracs across its 82,000 net acre position.
Anadarko Basin: Production increased by 5 percent from the previous quarter to an average of 81,000 Boe per day (49 percent gas). In the first quarter, Devon placed 7 wells online and spud 19 new wells supported by a $100 million drilling carry with Dow. The top well result for the quarter was the Hornet 9 16-14N 2HX, targeting the Meramec formation, that achieved a 30-day rate of 4,000 Boe per day (57 percent liquids). In 2023, the company expects to spud up to 40 new wells in this basin.
Williston Basin: Production averaged 53,000 Boe per day (67 percent oil), a 10 percent increase year over year. First-quarter results were highlighted by the 4-well Palo Pinto project that achieved average 30-day rates of 2,900 Boe per day. This high-margin asset remains on track to bring online 40 development wells in 2023 and harvest approximately $700 million of cash flow for the year.
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Powder River Basin: Production increased 7 percent year-over-year to an average of 19,000 Boe per day (75 percent oil). This growth was primarily driven by successful Niobrara appraisal and Parkman development work over the past year. The company possesses 300,000 net acres in the oil fairway of this emerging resource opportunity.
2023 OUTLOOK
For the full-year 2023, Devon has not made any modifications to its previously announced plan to sustain production in the range of 643,000 to 663,000 Boe per day. Additionally, total capital investment for the year remains at an expected range of $3.6 billion to $3.8 billion. These capital requirements in 2023 are estimated to be self-funded at pricing levels as low as a $40 WTI oil price.
Additional details of Devon’s forward-looking guidance for the upcoming second quarter and full-year 2023 are available on the company’s website at www.devonenergy.com.
SUSTAINABILITY REPORT
Devon’s sustainability report highlights efforts to deliver industry-leading results while being a good neighbor, valued and effective community partner, responsible environmental steward, and supportive employer. This report also details the progress Devon has made toward achieving key environmental targets such as reducing Scope 1 & 2 GHG emissions intensity and includes enhanced disclosures on air emissions and water management practices. For more details, please refer to the sustainability report at www.devonenergy.com/sustainability.
CONFERENCE CALL WEBCAST AND SUPPLEMENTAL EARNINGS MATERIALS
Also provided with today’s release is the company’s detailed earnings presentation that is available on the company’s website at www.devonenergy.com. The company’s first-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Tuesday, May 9, 2023, and will serve primarily as a forum for analyst and investor questions and answers.
ABOUT DEVON ENERGY
Devon Energy is a leading oil and gas producer in the U.S. with a premier multi-basin portfolio headlined by a world-class acreage position in the Delaware Basin. Devon’s disciplined cash-return business model is designed to achieve strong returns, generate free cash flow and return capital to shareholders, while focusing on safe and sustainable operations. For more information, please visit www.devonenergy.com.
| Investor Contacts | Media Contact |
|---|---|
| Scott Coody, 405-552-4735 | Lisa Adams, 405-228-1732 |
| Chris Carr, 405-228-2496 |
NON-GAAP DISCLOSURES
This press release includes non-GAAP (generally accepted accounting principles) financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of results asreported under GAAP. Reconciliations of these non-GAAP measures and other disclosures are provided within the supplemental financial tables that are available on the company’s website and in the relatedForm 10-Q filed with the Securities and Exchange Commission (the “SEC”).
FORWARD LOOKINGSTATEMENTS
This press release includes “forward-looking statements” within the meaning of the federal securities laws. Such statementsinclude those concerning strategic plans, our expectations and objectives for future operations, as well as other future events or conditions, and are often identified by use of the words and phrases “expects,” “believes,”“will,” “would,” “could,” “continue,” “may,” “aims,” “likely to be,” “intends,” “forecasts,” “projections,” “estimates,” “plans,”“expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in thispress release that address activities, events or developments that Devon expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks anduncertainties, many of which are beyond our control. Consequently, actual future results could differ materially and adversely from our expectations due to a number of factors, including, but not limited to: the volatility of oil, gas and NGLprices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in our operations; risks related to ourhedging activities; our limited control over third parties who operate some of our oil and gas properties; midstream capacity constraints and potential interruptions in production, including from limits to the build out of midstream infrastructure;competition for assets, materials, people and capital; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to federal lands, environmental matters and seismicity; risks related toregulatory, social and market efforts to address climate change; governmental interventions in energy markets; risks relating to the COVID-19
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pandemic or other future pandemics; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; the extent to which insurance covers any losses we may experience; risksrelated to stockholder activism; our ability to successfully complete mergers, acquisitions and divestitures; our ability to pay dividends and make share repurchases; and any of the other risks and uncertainties discussed in Devon’s 2022 AnnualReport on Form 10-K (the “2022 Form 10-K”) or other filings with the SEC.
The forward-looking statements included in this press release speak only as of the date of this press release, represent management’s currentreasonable expectations as of the date of this press release and are subject to the risks and uncertainties identified above as well as those described elsewhere in the 2022 Form 10-K and in other documents wefile from time to time with the SEC. We cannot guarantee the accuracy of our forward-looking statements, and readers are urged to carefully review and consider the various disclosures made in the 2022 Form10-K and in other documents we file from time to time with the SEC. All subsequent written and oral forward-looking statements attributable to Devon, or persons acting on its behalf, are expressly qualified intheir entirety by the cautionary statements above. We do not undertake, and expressly disclaim, any duty to update or revise our forward-looking statements based on new information, future events or otherwise.
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EX-99.2
Exhibit 99.2
Devon Energy First-Quarter 2023
Supplemental Tables
| TABLE OF CONTENTS: | PAGE: | |
|---|---|---|
| Consolidated Statements of Earnings | 2 | |
| Supplemental Information for Consolidated Statements of Earnings | 3 | |
| Consolidated Balance Sheets | 4 | |
| Consolidated Statements of Cash Flows | 5 | |
| Production | 6 | |
| Capital Expenditures and Supplemental Information for Capital Expenditures | 7 | |
| Realized Pricing | 8 | |
| Asset Margins | 9 | |
| Core Earnings and EBITDAX | 10 | |
| Net Debt, Net Debt-to-EBITDAX, and Free Cash Flow | 11 | |
| Reinvestment Rate and Variable Dividend | 12 |
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CONSOLIDATED STATEMENTS OF EARNINGS
| (in millions, except per share amounts) | 2023 | 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||||||
| Oil, gas and NGL sales | $ | 2,679 | $ | 3,139 | $ | 3,668 | $ | 4,100 | $ | 3,175 | ||||
| Oil, gas and NGL derivatives ^(1)^ | 64 | (53 | ) | 248 | (170 | ) | (683 | ) | ||||||
| Marketing and midstream revenues | 1,080 | 1,213 | 1,516 | 1,696 | 1,320 | |||||||||
| Total revenues | 3,823 | 4,299 | 5,432 | 5,626 | 3,812 | |||||||||
| Production expenses ^(2)^ | 693 | 715 | 735 | 729 | 618 | |||||||||
| Exploration expenses | 3 | 13 | 4 | 10 | 2 | |||||||||
| Marketing and midstream expenses | 1,105 | 1,231 | 1,525 | 1,700 | 1,324 | |||||||||
| Depreciation, depletion and amortization | 615 | 625 | 581 | 528 | 489 | |||||||||
| Asset dispositions | — | (29 | ) | — | (14 | ) | (1 | ) | ||||||
| General and administrative expenses | 106 | 122 | 95 | 84 | 94 | |||||||||
| Financing costs, net ^(3)^ | 72 | 73 | 67 | 84 | 85 | |||||||||
| Other, net | 5 | (4 | ) | (40 | ) | 10 | (61 | ) | ||||||
| Total expenses | 2,599 | 2,746 | 2,967 | 3,131 | 2,550 | |||||||||
| Earnings before income taxes | 1,224 | 1,553 | 2,465 | 2,495 | 1,262 | |||||||||
| Income tax expense ^(4)^ | 221 | 349 | 565 | 557 | 267 | |||||||||
| Net earnings | 1,003 | 1,204 | 1,900 | 1,938 | 995 | |||||||||
| Net earnings attributable to noncontrolling interests | 8 | 3 | 7 | 6 | 6 | |||||||||
| Net earnings attributable to Devon | $ | 995 | $ | 1,201 | $ | 1,893 | $ | 1,932 | $ | 989 | ||||
| Net earnings per share: | ||||||||||||||
| Basic net earnings per share | $ | 1.53 | $ | 1.84 | $ | 2.89 | $ | 2.94 | $ | 1.48 | ||||
| Diluted net earnings per share | $ | 1.53 | $ | 1.83 | $ | 2.88 | $ | 2.93 | $ | 1.48 | ||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 651 | 653 | 655 | 658 | 663 | |||||||||
| Diluted | 653 | 655 | 656 | 660 | 665 |
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SUPPLEMENTAL INFORMATION FOR CONSOLIDATED STATEMENTS OF EARNINGS
| (1) OIL, GAS AND NGL DERIVATIVES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2023 | 2022 | |||||||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Derivative cash settlements | $ | 13 | $ | (177 | ) | $ | (363 | ) | $ | (472 | ) | $ | (344 | ) | |
| Derivative valuation changes | 51 | 124 | 611 | 302 | (339 | ) | |||||||||
| Oil, gas and NGL derivatives | $ | 64 | $ | (53 | ) | $ | 248 | $ | (170 | ) | $ | (683 | ) | ||
| (2) PRODUCTION EXPENSES | |||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Lease operating expense | $ | 327 | $ | 308 | $ | 284 | $ | 255 | $ | 224 | |||||
| Gathering, processing & transportation | 166 | 178 | 177 | 177 | 161 | ||||||||||
| Production taxes | 175 | 210 | 252 | 278 | 214 | ||||||||||
| Property taxes | 25 | 19 | 22 | 19 | 19 | ||||||||||
| Production expenses | $ | 693 | $ | 715 | $ | 735 | $ | 729 | $ | 618 | |||||
| (3) FINANCING COSTS, NET | |||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Interest based on outstanding debt | $ | 93 | $ | 93 | $ | 92 | $ | 93 | $ | 92 | |||||
| Interest income | (17 | ) | (16 | ) | (19 | ) | (2 | ) | (1 | ) | |||||
| Other | (4 | ) | (4 | ) | (6 | ) | (7 | ) | (6 | ) | |||||
| Financing costs, net | $ | 72 | $ | 73 | $ | 67 | $ | 84 | $ | 85 | |||||
| (4) INCOME TAX EXPENSE | |||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Current expense | $ | 141 | $ | 84 | $ | 120 | $ | 252 | $ | 103 | |||||
| Deferred expense | 80 | 265 | 445 | 305 | 164 | ||||||||||
| Income tax expense | $ | 221 | $ | 349 | $ | 565 | $ | 557 | $ | 267 |
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CONSOLIDATED BALANCE SHEETS
| (in millions) | March 31,2023 | December 31,2022 | ||||
|---|---|---|---|---|---|---|
| Current assets: | ||||||
| Cash, cash equivalents and restricted cash | $ | 887 | $ | 1,454 | ||
| Accounts receivable | 1,615 | 1,767 | ||||
| Inventory | 212 | 201 | ||||
| Other current assets | 475 | 469 | ||||
| Total current assets | 3,189 | 3,891 | ||||
| Oil and gas property and equipment, based on successful efforts accounting, net | 16,932 | 16,567 | ||||
| Other property and equipment, net | 1,583 | 1,539 | ||||
| Total property and equipment, net | 18,515 | 18,106 | ||||
| Goodwill | 753 | 753 | ||||
| Right-of-use<br>assets | 219 | 224 | ||||
| Investments | 469 | 440 | ||||
| Other long-term assets | 275 | 307 | ||||
| Total assets | $ | 23,420 | $ | 23,721 | ||
| Current liabilities: | ||||||
| Accounts payable | $ | 935 | $ | 859 | ||
| Revenues and royalties payable | 1,266 | 1,506 | ||||
| Short-term debt | 247 | 251 | ||||
| Other current liabilities | 483 | 489 | ||||
| Total current liabilities | 2,931 | 3,105 | ||||
| Long-term debt | 6,175 | 6,189 | ||||
| Lease liabilities | 256 | 257 | ||||
| Asset retirement obligations | 546 | 511 | ||||
| Other long-term liabilities | 866 | 900 | ||||
| Deferred income taxes | 1,543 | 1,463 | ||||
| Stockholders’ equity: | ||||||
| Common stock | 64 | 65 | ||||
| Additional paid-in capital | 6,344 | 6,921 | ||||
| Retained earnings | 4,712 | 4,297 | ||||
| Accumulated other comprehensive loss | (115 | ) | (116 | ) | ||
| Treasury stock | (28 | ) | — | |||
| Total stockholders’ equity attributable to Devon | 10,977 | 11,167 | ||||
| Noncontrolling interests | 126 | 129 | ||||
| Total equity | 11,103 | 11,296 | ||||
| Total liabilities and equity | $ | 23,420 | $ | 23,721 | ||
| Common shares outstanding | 645 | 653 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS
| (in millions) | 2023 | 2022 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net earnings | $ | 1,003 | $ | 1,204 | $ | 1,900 | $ | 1,938 | $ | 995 | |||||
| Adjustments to reconcile net earnings to net cash from operating activities: | |||||||||||||||
| Depreciation, depletion and amortization | 615 | 625 | 581 | 528 | 489 | ||||||||||
| Leasehold impairments | — | 2 | 2 | 7 | 1 | ||||||||||
| Amortization of liabilities | (7 | ) | (8 | ) | (8 | ) | (9 | ) | (6 | ) | |||||
| Total (gains) losses on commodity derivatives | (64 | ) | 53 | (248 | ) | 170 | 683 | ||||||||
| Cash settlements on commodity derivatives | 13 | (177 | ) | (363 | ) | (472 | ) | (344 | ) | ||||||
| Gains on asset dispositions | — | (29 | ) | — | (14 | ) | (1 | ) | |||||||
| Deferred income tax expense | 80 | 265 | 445 | 305 | 164 | ||||||||||
| Share-based compensation | 23 | 23 | 22 | 23 | 20 | ||||||||||
| Other | 2 | (1 | ) | 8 | 4 | (21 | ) | ||||||||
| Changes in assets and liabilities, net | 12 | (46 | ) | (235 | ) | 198 | (143 | ) | |||||||
| Net cash from operating activities | 1,677 | 1,911 | 2,104 | 2,678 | 1,837 | ||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Capital expenditures | (1,012 | ) | (804 | ) | (628 | ) | (573 | ) | (537 | ) | |||||
| Acquisitions of property and equipment | (13 | ) | (17 | ) | (2,465 | ) | (100 | ) | (1 | ) | |||||
| Divestitures of property and equipment | 21 | — | 4 | 9 | 26 | ||||||||||
| Distributions from investments | 8 | 9 | 7 | 15 | 8 | ||||||||||
| Contributions to investments | (37 | ) | (17 | ) | (16 | ) | (21 | ) | (22 | ) | |||||
| Net cash from investing activities | (1,033 | ) | (829 | ) | (3,098 | ) | (670 | ) | (526 | ) | |||||
| Cash flows from financing activities: | |||||||||||||||
| Repurchases of common stock | (517 | ) | (57 | ) | (126 | ) | (324 | ) | (211 | ) | |||||
| Dividends paid on common stock | (596 | ) | (875 | ) | (1,007 | ) | (830 | ) | (667 | ) | |||||
| Distributions to noncontrolling interests | (11 | ) | (8 | ) | (9 | ) | (5 | ) | (8 | ) | |||||
| Shares exchanged for tax withholdings and other | (87 | ) | — | (1 | ) | (12 | ) | (73 | ) | ||||||
| Net cash from financing activities | (1,211 | ) | (940 | ) | (1,143 | ) | (1,171 | ) | (959 | ) | |||||
| Effect of exchange rate changes on cash | — | 2 | (10 | ) | (5 | ) | 2 | ||||||||
| Net change in cash, cash equivalents and restricted cash | (567 | ) | 144 | (2,147 | ) | 832 | 354 | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 1,454 | 1,310 | 3,457 | 2,625 | 2,271 | ||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 887 | $ | 1,454 | $ | 1,310 | $ | 3,457 | $ | 2,625 | |||||
| Reconciliation of cash, cash equivalents and restricted cash: | |||||||||||||||
| Cash and cash equivalents | $ | 761 | $ | 1,314 | $ | 1,166 | $ | 3,300 | $ | 2,459 | |||||
| Restricted cash | 126 | 140 | 144 | 157 | 166 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 887 | $ | 1,454 | $ | 1,310 | $ | 3,457 | $ | 2,625 |
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PRODUCTION
| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Oil (MBbls/d) | ||||||||||
| Delaware Basin | 211 | 201 | 210 | 222 | 209 | |||||
| Eagle Ford | 40 | 42 | 19 | 19 | 17 | |||||
| Anadarko Basin | 15 | 15 | 13 | 14 | 14 | |||||
| Williston Basin | 36 | 37 | 35 | 27 | 32 | |||||
| Powder River Basin | 14 | 16 | 13 | 14 | 12 | |||||
| Other | 4 | 5 | 4 | 4 | 4 | |||||
| Total | 320 | 316 | 294 | 300 | 288 | |||||
| Natural gas liquids (MBbls/d) | ||||||||||
| Delaware Basin | 97 | 101 | 108 | 111 | 92 | |||||
| Eagle Ford | 15 | 12 | 9 | 9 | 9 | |||||
| Anadarko Basin | 26 | 23 | 27 | 25 | 25 | |||||
| Williston Basin | 8 | 9 | 8 | 9 | 8 | |||||
| Powder River Basin | 2 | 3 | 2 | 2 | 2 | |||||
| Other | 1 | — | — | — | — | |||||
| Total | 149 | 148 | 154 | 156 | 136 | |||||
| Gas (MMcf/d) | ||||||||||
| Delaware Basin | 640 | 626 | 623 | 618 | 561 | |||||
| Eagle Ford | 82 | 84 | 63 | 60 | 61 | |||||
| Anadarko Basin | 237 | 238 | 224 | 212 | 210 | |||||
| Williston Basin | 54 | 64 | 71 | 52 | 54 | |||||
| Powder River Basin | 16 | 21 | 18 | 18 | 19 | |||||
| Other | 1 | 1 | 1 | 1 | 1 | |||||
| Total | 1,030 | 1,034 | 1,000 | 961 | 906 | |||||
| Total oil equivalent (MBoe/d) | ||||||||||
| Delaware Basin | 415 | 407 | 421 | 436 | 394 | |||||
| Eagle Ford | 68 | 68 | 39 | 38 | 36 | |||||
| Anadarko Basin | 81 | 77 | 77 | 74 | 75 | |||||
| Williston Basin | 53 | 57 | 55 | 45 | 48 | |||||
| Powder River Basin | 19 | 22 | 18 | 19 | 18 | |||||
| Other | 5 | 5 | 4 | 4 | 4 | |||||
| Total | 641 | 636 | 614 | 616 | 575 |
6
CAPITAL EXPENDITURES
| (in millions) | 2023 | 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Delaware Basin | $ | 572 | $ | 518 | $ | 444 | $ | 374 | $ | 413 |
| Eagle Ford | 188 | 160 | 38 | 37 | 27 | |||||
| Anadarko Basin | 66 | 59 | 55 | 42 | 16 | |||||
| Williston Basin | 73 | 90 | 57 | 21 | 17 | |||||
| Powder River Basin | 32 | 46 | 44 | 37 | 27 | |||||
| Other | 2 | 1 | 1 | 2 | 1 | |||||
| Total upstream capital | $ | 933 | $ | 874 | $ | 639 | $ | 513 | $ | 501 |
| Carbon capital | 27 | 20 | 27 | 22 | 16 | |||||
| Midstream and Corporate | 28 | 28 | 22 | 32 | 46 | |||||
| Acquisitions ^(1)^ | 13 | 13 | 2,534 | 13 | 1 | |||||
| Total capital | $ | 1,001 | $ | 935 | $ | 3,222 | $ | 580 | $ | 564 |
| (1) | Q3 2022 includes $2,532 million related to Validus and RimRock acquisitions. | |||||||||
| --- | --- |
SUPPLEMENTAL INFORMATION FOR CAPITAL EXPENDITURES
| GROSS OPERATED SPUDS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Delaware Basin | 60 | 60 | 50 | 46 | 59 | |||||
| Eagle Ford | 23 | 31 | 7 | 4 | 11 | |||||
| Anadarko Basin | 19 | 8 | 13 | 14 | 13 | |||||
| Williston Basin | 6 | 9 | 10 | 5 | — | |||||
| Powder River Basin | 3 | 4 | 6 | 1 | — | |||||
| Total | 111 | 112 | 86 | 70 | 83 |
GROSS OPERATED WELLS TIED-IN
| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Delaware Basin | 42 | 55 | 59 | 52 | 52 | |||||
| Eagle Ford | 26 | 28 | 8 | 14 | 8 | |||||
| Anadarko Basin | 7 | 23 | 13 | 1 | — | |||||
| Williston Basin | 17 | 5 | 14 | — | — | |||||
| Powder River Basin | 5 | 3 | 9 | — | 4 | |||||
| Total | 97 | 114 | 103 | 67 | 64 |
AVERAGE LATERAL LENGTH
| (based on wells tied-in) | 2023 | 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Delaware Basin | 9,900’ | 9,600’ | 10,900’ | 9,100’ | 8,900’ | |||||
| Eagle Ford | 6,700’ | 6,500’ | 7,800’ | 5,800’ | 7,500’ | |||||
| Anadarko Basin | 9,300’ | 8,700’ | 9,500’ | 10,100’ | — | |||||
| Williston Basin | 11,500’ | 9,900’ | 10,500’ | — | — | |||||
| Powder River Basin | 10,700’ | 9,600’ | 11,800’ | — | 10,400’ | |||||
| Total | 9,300’ | 8,700’ | 10,500’ | 8,400’ | 8,800’ |
7
REALIZED PRICING
BENCHMARK PRICES
| (average prices) | 2023 | 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Oil ($/Bbl) - West Texas Intermediate (Cushing) | $ | 76.17 | $ | 82.53 | $ | 91.87 | $ | 108.70 | $ | 94.45 |
| Natural Gas ($/Mcf) - Henry Hub | $ | 3.44 | $ | 6.26 | $ | 8.20 | $ | 7.17 | $ | 4.96 |
| NGL ($/Bbl) - Mont Belvieu Blended | $ | 29.48 | $ | 30.46 | $ | 39.67 | $ | 46.44 | $ | 43.99 |
REALIZED PRICES
| 2023 | 2022 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Oil (Per Bbl) | |||||||||||||||
| Delaware Basin | $ | 74.43 | $ | 82.48 | $ | 93.60 | $ | 109.05 | $ | 93.12 | |||||
| Eagle Ford | 74.06 | 83.23 | 91.53 | 109.77 | 94.51 | ||||||||||
| Anadarko Basin | 74.14 | 82.57 | 91.42 | 108.15 | 92.70 | ||||||||||
| Williston Basin | 74.09 | 81.05 | 91.30 | 109.85 | 90.87 | ||||||||||
| Powder River Basin | 74.30 | 81.29 | 91.33 | 104.75 | 92.69 | ||||||||||
| Realized price without hedges | 74.32 | 82.31 | 92.98 | 108.93 | 92.94 | ||||||||||
| Cash settlements | (0.10 | ) | (4.87 | ) | (8.60 | ) | (13.13 | ) | (11.32 | ) | |||||
| Realized price, including cash settlements | $ | 74.22 | $ | 77.44 | $ | 84.38 | $ | 95.80 | $ | 81.62 | |||||
| Natural gas liquids (Per Bbl) | |||||||||||||||
| Delaware Basin | $ | 23.72 | $ | 23.68 | $ | 34.37 | $ | 40.75 | $ | 38.43 | |||||
| Eagle Ford | 26.18 | 29.06 | 35.55 | 41.98 | 39.68 | ||||||||||
| Anadarko Basin | 27.88 | 29.58 | 35.52 | 41.64 | 38.38 | ||||||||||
| Williston Basin | 8.97 | 7.97 | 25.41 | 23.88 | 20.71 | ||||||||||
| Powder River Basin | 35.72 | 34.91 | 44.85 | 55.62 | 52.49 | ||||||||||
| Realized price without hedges | 24.12 | 24.32 | 34.44 | 40.28 | 37.76 | ||||||||||
| Cash settlements | — | — | — | — | — | ||||||||||
| Realized price, including cash settlements | $ | 24.12 | $ | 24.32 | $ | 34.44 | $ | 40.28 | $ | 37.76 | |||||
| Gas (Per Mcf) | |||||||||||||||
| Delaware Basin | $ | 1.90 | $ | 4.30 | $ | 7.06 | $ | 6.41 | $ | 3.83 | |||||
| Eagle Ford | 2.99 | 5.02 | 7.53 | 7.10 | 4.91 | ||||||||||
| Anadarko Basin | 3.14 | 5.37 | 8.89 | 7.11 | 4.00 | ||||||||||
| Williston Basin | 1.57 | 0.44 | 3.23 | 1.56 | 0.74 | ||||||||||
| Powder River Basin | 4.25 | 5.57 | 8.23 | 7.93 | 4.24 | ||||||||||
| Realized price without hedges | 2.29 | 4.39 | 7.25 | 6.37 | 3.77 | ||||||||||
| Cash settlements | 0.18 | (0.38 | ) | (1.42 | ) | (1.31 | ) | (0.62 | ) | ||||||
| Realized price, including cash settlements | $ | 2.47 | $ | 4.01 | $ | 5.83 | $ | 5.06 | $ | 3.15 | |||||
| Total oil equivalent (Per Boe) | |||||||||||||||
| Delaware Basin | $ | 46.35 | $ | 53.34 | $ | 65.80 | $ | 75.02 | $ | 63.75 | |||||
| Eagle Ford | 52.81 | 62.92 | 65.49 | 75.07 | 62.74 | ||||||||||
| Anadarko Basin | 32.16 | 41.25 | 53.72 | 54.46 | 42.08 | ||||||||||
| Williston Basin | 52.94 | 54.51 | 66.65 | 73.15 | 63.31 | ||||||||||
| Powder River Basin | 63.01 | 67.59 | 78.58 | 89.84 | 75.75 | ||||||||||
| Realized price without hedges | 46.44 | 53.66 | 64.89 | 73.13 | 61.40 | ||||||||||
| Cash settlements | 0.22 | (3.04 | ) | (6.41 | ) | (8.43 | ) | (6.65 | ) | ||||||
| Realized price, including cash settlements | $ | 46.66 | $ | 50.62 | $ | 58.48 | $ | 64.70 | $ | 54.75 |
8
ASSET MARGINS
| BENCHMARK PRICES | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (average prices) | 2023 | 2022 | ||||||||
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | ||||||
| Oil ($/Bbl) - West Texas Intermediate (Cushing) | $ | 76.17 | $ | 82.53 | $ | 91.87 | $ | 108.70 | $ | 94.45 |
| Natural Gas ($/Mcf) - Henry Hub | $ | 3.44 | $ | 6.26 | $ | 8.20 | $ | 7.17 | $ | 4.96 |
| NGL ($/Bbl) - Mont Belvieu Blended | $ | 29.48 | $ | 30.46 | $ | 39.67 | $ | 46.44 | $ | 43.99 |
PER-UNIT CASH MARGIN BY ASSET (per Boe)
| 2023 | 2022 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter 1 | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | |||||||||||
| Delaware Basin | |||||||||||||||
| Realized price | $ | 46.35 | $ | 53.34 | $ | 65.80 | $ | 75.02 | $ | 63.75 | |||||
| Lease operating expenses | (4.58 | ) | (4.55 | ) | (4.39 | ) | (3.98 | ) | (3.79 | ) | |||||
| Gathering, processing & transportation | (2.63 | ) | (2.52 | ) | (2.40 | ) | (2.37 | ) | (2.32 | ) | |||||
| Production & property taxes | (3.43 | ) | (3.89 | ) | (4.81 | ) | (5.35 | ) | (4.65 | ) | |||||
| Field-level cash margin | $ | 35.71 | $ | 42.38 | $ | 54.20 | $ | 63.32 | $ | 52.99 | |||||
| Eagle Ford | |||||||||||||||
| Realized price | $ | 52.81 | $ | 62.92 | $ | 65.49 | $ | 75.07 | $ | 62.74 | |||||
| Lease operating expenses | (6.32 | ) | (5.63 | ) | (4.94 | ) | (4.98 | ) | (4.63 | ) | |||||
| Gathering, processing & transportation | (1.49 | ) | (3.08 | ) | (4.94 | ) | (6.39 | ) | (5.67 | ) | |||||
| Production & property taxes | (3.25 | ) | (2.97 | ) | (3.79 | ) | (3.99 | ) | (3.52 | ) | |||||
| Field-level cash margin | $ | 41.75 | $ | 51.24 | $ | 51.82 | $ | 59.71 | $ | 48.92 | |||||
| Anadarko Basin | |||||||||||||||
| Realized price | $ | 32.16 | $ | 41.25 | $ | 53.72 | $ | 54.46 | $ | 42.08 | |||||
| Lease operating expenses | (3.41 | ) | (3.59 | ) | (3.46 | ) | (3.49 | ) | (2.75 | ) | |||||
| Gathering, processing & transportation | (5.93 | ) | (6.84 | ) | (6.91 | ) | (6.65 | ) | (6.67 | ) | |||||
| Production & property taxes | (1.73 | ) | (2.29 | ) | (3.26 | ) | (3.17 | ) | (2.35 | ) | |||||
| Field-level cash margin | $ | 21.09 | $ | 28.53 | $ | 40.09 | $ | 41.15 | $ | 30.31 | |||||
| Williston Basin | |||||||||||||||
| Realized price | $ | 52.94 | $ | 54.51 | $ | 66.65 | $ | 73.15 | $ | 63.31 | |||||
| Lease operating expenses | (13.25 | ) | (9.93 | ) | (9.97 | ) | (9.40 | ) | (7.67 | ) | |||||
| Gathering, processing & transportation | (2.19 | ) | (1.92 | ) | (2.40 | ) | (2.44 | ) | (2.32 | ) | |||||
| Production & property taxes | (4.85 | ) | (5.64 | ) | (6.33 | ) | (6.75 | ) | (5.67 | ) | |||||
| Field-level cash margin | $ | 32.65 | $ | 37.02 | $ | 47.95 | $ | 54.56 | $ | 47.65 | |||||
| Powder River Basin | |||||||||||||||
| Realized price | $ | 63.01 | $ | 67.59 | $ | 78.58 | $ | 89.84 | $ | 75.75 | |||||
| Lease operating expenses | (11.07 | ) | (7.15 | ) | (7.03 | ) | (7.04 | ) | (9.01 | ) | |||||
| Gathering, processing & transportation | (2.73 | ) | (2.98 | ) | (3.24 | ) | (3.50 | ) | (3.19 | ) | |||||
| Production & property taxes | (7.78 | ) | (8.13 | ) | (9.50 | ) | (10.89 | ) | (9.23 | ) | |||||
| Field-level cash margin | $ | 41.43 | $ | 49.33 | $ | 58.81 | $ | 68.41 | $ | 54.32 | |||||
| Devon - Total | |||||||||||||||
| Realized price | $ | 46.44 | $ | 53.66 | $ | 64.89 | $ | 73.13 | $ | 61.40 | |||||
| Lease operating expenses | (5.67 | ) | (5.26 | ) | (5.02 | ) | (4.56 | ) | (4.33 | ) | |||||
| Gathering, processing & transportation | (2.88 | ) | (3.05 | ) | (3.13 | ) | (3.15 | ) | (3.11 | ) | |||||
| Production & property taxes | (3.47 | ) | (3.91 | ) | (4.84 | ) | (5.30 | ) | (4.51 | ) | |||||
| Field-level cash margin | $ | 34.42 | $ | 41.44 | $ | 51.90 | $ | 60.12 | $ | 49.45 |
9
NON-GAAP MEASURES
(all monetary values in millions, except per share amounts)
Devon’s earnings materials include non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in the earnings materials, including reconciliations to their most directly comparable GAAP measure.
The earnings materials may include forward-looking non-GAAP measures. The company is unable to provide reconciliations of these forward-looking non-GAAP measures, because components of the calculations are inherently unpredictable, such as changes to current assets and liabilities, the timing of changes in capital accruals, unknown future events and estimating certain future GAAP measures. The inability to reliably quantify certain components of the calculation would significantly affect the usefulness and accuracy of a reconciliation.
CORE EARNINGS
Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company’s financial results. Accordingly, the company also uses the measures of core earnings and core earnings per share attributable to Devon. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on first- quarter 2023 earnings.
| Quarter Ended March 31, 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Before-tax | After-tax | After NCI | Per DilutedShare | |||||||||
| Total | ||||||||||||
| Earnings (GAAP) | $ | 1,224 | $ | 1,003 | $ | 995 | $ | 1.53 | ||||
| Adjustments: | ||||||||||||
| Deferred tax asset valuation allowance | — | (3 | ) | (3 | ) | (0.01 | ) | |||||
| Fair value changes in financial instruments | (53 | ) | (40 | ) | (40 | ) | (0.06 | ) | ||||
| Core earnings (Non-GAAP) | $ | 1,171 | $ | 960 | $ | 952 | $ | 1.46 |
EBITDAX
Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings before financing costs, net; income tax expense; exploration expenses; depreciation, depletion and amortization; asset disposition gains and losses; non-cash share-based compensation; non-cash valuation changes for derivatives and financial instruments; accretion on discounted liabilities; and other items not related to normal operations. EBITDAX as defined by Devon may not be comparable to similarly titled measures used by other companies.
| Q1 ‘23 | Q4 ‘22 | Q3 ‘22 | Q2 ‘22 | TTM | Q1 ‘22 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net earnings (GAAP) | $ | 1,003 | $ | 1,204 | $ | 1,900 | $ | 1,938 | $ | 6,045 | $ | 995 | ||||||
| Financing costs, net | 72 | 73 | 67 | 84 | 296 | 85 | ||||||||||||
| Income tax expense | 221 | 349 | 565 | 557 | 1,692 | 267 | ||||||||||||
| Exploration expenses | 3 | 13 | 4 | 10 | 30 | 2 | ||||||||||||
| Depreciation, depletion and amortization | 615 | 625 | 581 | 528 | 2,349 | 489 | ||||||||||||
| Asset dispositions | — | (29 | ) | — | (14 | ) | (43 | ) | (1 | ) | ||||||||
| Share-based compensation | 23 | 23 | 22 | 22 | 90 | 20 | ||||||||||||
| Derivative & financial instrument non-cash val.<br>changes | (51 | ) | (122 | ) | (613 | ) | (302 | ) | (1,088 | ) | 339 | |||||||
| Accretion on discounted liabilities and other | 5 | (6 | ) | (38 | ) | 10 | (29 | ) | (61 | ) | ||||||||
| EBITDAX (Non-GAAP) | $ | 1,891 | $ | 2,130 | $ | 2,488 | $ | 2,833 | $ | 9,342 | $ | 2,135 |
10
NET DEBT
Devon defines net debt as debt (includes short-term and long-term debt) less cash, cash equivalents and cash restricted for discontinued operations. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash from Devon to repay debt.
| Mar. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total debt (GAAP) | $ | 6,422 | $ | 6,440 | $ | 6,451 | $ | 6,461 | $ | 6,471 | |||||
| Less: | |||||||||||||||
| Cash, cash equivalents and restricted cash | (887 | ) | (1,454 | ) | (1,310 | ) | (3,457 | ) | (2,625 | ) | |||||
| Net debt (Non-GAAP) | $ | 5,535 | $ | 4,986 | $ | 5,141 | $ | 3,004 | $ | 3,846 |
NET DEBT-TO-EBITDAX
Devon defines net debt-to-EBITDAX as net debt divided by an annualized EBITDAX measure. Devon believes this ratio provides information useful to investors in assessing the company’s credit position and debt leverage.
| Mar. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net debt (Non-GAAP) | $ | 5,535 | $ | 4,986 | $ | 5,141 | $ | 3,004 | $ | 3,846 |
| EBITDAX (Non-GAAP) ^(1)^ | $ | 9,342 | $ | 9,586 | $ | 9,267 | $ | 8,413 | $ | 6,781 |
| Net<br>debt-to-EBITDAX (Non-GAAP) | 0.6 | 0.5 | 0.6 | 0.4 | 0.6 | |||||
| (1) | EBITDAX is an annualized measure using a trailing twelve-month calculation. | |||||||||
| --- | --- |
FREE CASH FLOW
Devon defines free cash flow as total operating cash flow less capital expenditures. Devon believes free cash flow provides a useful measure of available cash generated by operating activities for other investing and financing activities.
| Quarter Ended<br>Mar. 31, 2023 | Quarter Ended<br>Dec. 31, 2022 | Quarter Ended<br>Sep. 30, 2022 | Quarter Ended<br>Jun. 30, 2022 | Quarter Ended<br>Mar. 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total operating cash flow (GAAP) | $ | 1,677 | $ | 1,911 | $ | 2,104 | $ | 2,678 | $ | 1,837 | |||||
| Less capital expenditures: | (1,012 | ) | (804 | ) | (628 | ) | (573 | ) | (537 | ) | |||||
| Free cash flow (Non-GAAP) | $ | 665 | $ | 1,107 | $ | 1,476 | $ | 2,105 | $ | 1,300 |
11
REINVESTMENT RATE
Devon defines reinvestment rate as accrued capital expenditures (excluding acquisitions) divided by operating cash flow. Devon believes this measure provides useful information to our investors as an indicator of the capital demands of our business relative to the cash flow generated from normal business operations.
| Quarter Ended<br>Mar. 31, 2023 | Year Ended<br>Dec. 31, 2022 | |||||
|---|---|---|---|---|---|---|
| Capital expenditures (excludes acquisitions) | $ | 988 | $ | 2,740 | ||
| Operating cash flow | $ | 1,677 | $ | 8,530 | ||
| Reinvestment rate (Non-GAAP) | 59 | % | 32 | % |
VARIABLE DIVIDEND
Devon may pay a variable dividend of up to 50 percent of its excess cash flow. Each quarter’s excess cash flow is computed as adjusted cash flow less capital expenditures and the fixed dividend.
| Quarter Ended<br>Mar. 31, 2023 | |||
|---|---|---|---|
| Operating cash flow (GAAP) | $ | 1,677 | |
| Changes in assets and liabilities, net | (12 | ) | |
| Adjusted cash flow (Non-GAAP) | 1,665 | ||
| Capital expenditures (Accrued) | (1,001 | ) | |
| Adjusted free cash flow (Non-GAAP) | 664 | ||
| Fixed quarterly dividend | (133 | ) | |
| Excess free cash flow (Non-GAAP) | $ | 531 | |
| ~50% Pay out (Board Discretion: Up to 50%) | 50 | % | |
| ~50% of excess free cash flow | 264 | ||
| Contingent proceeds (Barnett and Wind River) | 69 | ||
| Total variable dividend | $ | 333 |
12
| SECOND-QUARTER AND FULL-YEAR 2023 GUIDANCE |
|---|
PRODUCTIONGUIDANCE
| Quarter 2 | Full Year | |||||||
|---|---|---|---|---|---|---|---|---|
| Low | High | Low | High | |||||
| Oil (MBbls/d) | 316 | 324 | 320 | 326 | ||||
| Natural gas liquids (MBbls/d) | 159 | 165 | 156 | 162 | ||||
| Gas (MMcf/d) | 1,010 | 1,050 | 1,000 | 1,050 | ||||
| Total oil equivalent (MBoe/d) | 643 | 664 | 643 | 663 |
CAPITAL EXPENDITURES GUIDANCE
| Quarter 2 | Full Year | |||||||
|---|---|---|---|---|---|---|---|---|
| (in millions) | Low | High | Low | High | ||||
| Upstream capital | $ | 920 | $ | 980 | $ | 3,440 | $ | 3,560 |
| Carbon capital | 25 | 35 | 80 | 120 | ||||
| Midstream & other capital | 20 | 30 | 80 | 120 | ||||
| Total capital | $ | 965 | $ | 1,045 | $ | 3,600 | $ | 3,800 |
PRICE REALIZATIONS GUIDANCE
| Quarter 2 | Full Year | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Low | High | Low | High | |||||||||
| Oil - % of WTI | 95 | % | 100 | % | 95 | % | 100 | % | ||||
| NGL - % of WTI | 25 | % | 35 | % | 25 | % | 35 | % | ||||
| Natural gas - % of Henry Hub | 60 | % | 70 | % | 60 | % | 75 | % |
OTHER GUIDANCE ITEMS
| Quarter 2 | Full Year | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, except Boe and %) | Low | High | Low | High | ||||||||
| Marketing & midstream operating profit | $ | (15 | ) | $ | (5 | ) | $ | (60 | ) | $ | (50 | ) |
| LOE & GP&T per BOE | $ | 8.65 | $ | 8.95 | $ | 8.30 | $ | 8.80 | ||||
| Production & property taxes as % of upstream sales | 7.0 | % | 8.0 | % | 7.0 | % | 8.0 | % | ||||
| Exploration expenses | $ | — | $ | 5 | $ | 5 | $ | 15 | ||||
| Depreciation, depletion and amortization | $ | 620 | $ | 660 | $ | 2,500 | $ | 2,600 | ||||
| General & administrative expenses | $ | 95 | $ | 105 | $ | 390 | $ | 410 | ||||
| Net financing costs, net | $ | 75 | $ | 85 | $ | 290 | $ | 310 | ||||
| Other expenses | $ | — | $ | 5 | $ | — | $ | 20 |
INCOME TAX GUIDANCE
| (% of pre-tax earnings) | Quarter 2 | Full Year | ||||
|---|---|---|---|---|---|---|
| Current income tax rate | 15 | % | 15 | % | ||
| Deferred income tax rate | 7 | % | 7 | % | ||
| Total income tax rate | 22 | % | 22 | % |
1
| CONTINGENT PAYMENTS FOR BARNETT SHALE DIVESTITURE (2 more years through 2024) | |||||||
|---|---|---|---|---|---|---|---|
| WTI Threshold | WTI Annual Earnout Amount | Henry Hub Threshold | Henry Hub Annual Earnout<br>Amount | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| $ | 50.00 | $ | 10,000,000 | $ | 2.75 | $ | 20,000,000 |
| $ | 55.00 | $ | 12,500,000 | $ | 3.00 | $ | 25,000,000 |
| $ | 60.00 | $ | 15,000,000 | $ | 3.25 | $ | 35,000,000 |
| $ | 65.00 | $ | 20,000,000 | $ | 3.50 | $ | 45,000,000 |
2023 & 2024 HEDGING POSITIONS
Oil CommodityHedges
| Price Swaps | Price Collars | ||||||
|---|---|---|---|---|---|---|---|
| Period | Volume (Bbls/d) | WeightedAverage Price(/Bbl) | Volume<br>(Bbls/d) | WeightedAverage FloorPrice (/Bbl) | WeightedAverage CeilingPrice (/Bbl) | ||
| Q2 2023 | — | 84,500 | |||||
| Q3 2023 | — | 84,500 | |||||
| Q4 2023 | — | 81,000 | |||||
| Q1-Q4 2024 | — | 20,486 |
All values are in US Dollars.
Oil Basis Swaps
| Period | Index | Volume (Bbls/d) | Weighted AverageDifferential to WTI(/Bbl) | |
|---|---|---|---|---|
| Q2 2023 | Midland Sweet | 25,000 | ||
| Q3-Q4 2023 | Midland Sweet | 66,500 | ||
| Q1-Q4 2024 | Midland Sweet | 61,500 |
All values are in US Dollars.
Natural Gas Commodity Hedges - Henry Hub
| Price Swaps | Price Collars | ||||||
|---|---|---|---|---|---|---|---|
| Period | Volume (MMBtu/d) | WeightedAverage Price(/MMBtu) | Volume<br>(MMBtu/d) | WeightedAverage FloorPrice (/MMBtu) | WeightedAverage CeilingPrice(/MMBtu) | ||
| Q2 2023 | 64,000 | 220,000 | |||||
| Q3 2023 | 72,000 | 195,000 | |||||
| Q4 2023 | 72,000 | 147,000 | |||||
| Q1-Q4 2024 | 58,426 | 40,527 |
All values are in US Dollars.
Natural Gas Basis Swaps
| Period | Index | Volume (MMBtu/d) | Weighted AverageDifferential to HenryHub (/MMBtu) | ||
|---|---|---|---|---|---|
| Q2 2023 | El Paso Permian | 135,000 | ) | ||
| Q3 - Q4 2023 | El Paso Permian | 145,000 | ) | ||
| Q2 - Q4 2023 | Houston Ship Channel | 140,000 | ) | ||
| Q2 - Q4 2023 | WAHA | 70,000 | ) | ||
| Q1-Q4 2024 | El Paso Permian | 19,945 | ) | ||
| Q1-Q4 2024 | Houston Ship Channel | 30,000 | ) | ||
| Q1-Q4 2024 | WAHA | 44,973 | ) |
All values are in US Dollars.
Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC end of the month NYMEX index. Commodity hedge positions are shown as of April 28, 2023.
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