Devon Energy Corp 8-K, filed Feb 14, 2023
Devon Energy Corp (DVN)
About this 8-K
Devon Energy Corp filed this 8-K on February 14, 2023.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
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| Item 2.02 | Results of Operations and Financial Condition. |
On February 14, 2023, Devon Energy Corporation (the “Company”) announced its financial and operational results for the year and quarter ended December 31, 2022. 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 No. |
Description of Exhibits | |
| 99.1 | Earnings release, dated February 14, 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: February 14, 2023
Exhibit 99.1
|
Devon Energy Corporation 333 West Sheridan Avenue Oklahoma City, OK 73102-5015 |
Devon Energy Reports Fourth-Quarter and Full-Year 2022 Results; Declares Quarterly Dividend and Raises Fixed Dividend by 11 Percent in 2023
OKLAHOMA CITY – Feb. 14, 2023 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the fourth-quarter and full year 2022. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.
KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
| • | Operating cash flow increased 74 percent in 2022 and free cash flow reached highest level in Devon history |
| • | Fixed-plus-variable dividend payout more than doubled in 2022 to $5.17 per share |
| • | Board approved an 11 percent increase to the fixed quarterly dividend in 2023 |
| • | Share-repurchase program on track to decrease share count by 5 percent |
| • | Oil production reached all-time high of 316,000 barrels per day in the fourth quarter |
| • | Proved reserves increased 12 percent to 1.8 billion Boe at year-end 2022 |
CEO PERSPECTIVE
“2022 was another year of outstanding accomplishment for Devon that resulted in record-setting operating results and the best financial performance in our company’s prestigious 52-year history,” said Rick Muncrief, president and CEO.
“With our powerful suite of assets and financially driven strategy, our oil production reached a new all-time high, our streamlined cost structure captured the full benefit of rising commodity prices, and our disciplined reinvestment rates allowed us to generate a record-setting amount of free cash flow during the year.
“This free cash flow generation allowed us to reward shareholders by more than doubling our dividend payout and we expanded our share-repurchase program twice during the year to further compound per-share growth. We also deployed a portion of our excess cash towards strengthening our asset portfolio by closing on two highly accretive bolt-on acquisitions.
“As I look to 2023, there will be no change to our disciplined approach to the business,” Muncrief commented. “We have designed a capital program to efficiently sustain production, deliver high returns on capital employed and generate significant free cash flow that can once again be harvested for shareholders.”
FINANCIAL RESULTS
Devon reported net earnings of $1.2 billion, or $1.83 per diluted share, in the fourth quarter of 2022. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $1.1 billion, or $1.66 per diluted share.
Operating cash flow totaled $1.9 billion in the fourth quarter, an 18 percent increase versus the year-ago period. This level of cash flow funded all capital requirements and resulted in $1.1 billion of free cash flow for the quarter. For the full-year 2022, operating cash flow totaled $8.5 billion, a 74 percent increase versus 2021. Devon’s free cash flow reached $6.0 billion in the year, representing the highest amount in the company’s 52-year history.
The company’s investment-grade financial position continued to strengthen in the fourth quarter with cash balances increasing by $144 million to a total of $1.5 billion. Devon exited the quarter with an outstanding debt balance of $6.4 billion and a net debt-to-EBITDAX ratio of 0.5 times.
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RETURN OF CAPITAL
Based on the fourth-quarter financial performance, Devon declared a fixed-plus-variable dividend of $0.89 per share. The dividend is payable on March 31, 2023, to shareholders of record at the close of business on March 15, 2023. For the full-year 2022, the company’s dividend payout more than doubled compared to 2021 to a record high of $5.17 per share.
As part of the fourth-quarter dividend announcement, the board approved an increase in the fixed dividend of 11 percent, or $0.02 per share. After the fixed dividend is funded, up to 50 percent of the excess free cash flow each quarter will be distributed to shareholders through the variable dividend.
Devon also returned capital to shareholders through the ongoing execution of its $2.0 billion share-repurchase authorization. To date, the company has repurchased 26 million shares since the commencement of the program, at a total cost of $1.3 billion. With this repurchase program, Devon is on track to decrease its outstanding share count by 5 percent.
OPERATING RESULTS
Production averaged 636,000 oil-equivalent barrels (Boe) per day in the fourth quarter, with oil volumes reaching a record high of 316,000 barrels per day. The company’s production in the quarter was reduced by 2 percent due to the impact of severe winter weather across its portfolio.
Devon’s upstream program for the fourth quarter averaged 25 operated drilling rigs and 114 gross operated wells were placed online. Total upstream capital spending was $874 million in the fourth quarter. Midstream, environmental, and other capital totaled $61 million in the quarter.
Production costs declined 6 percent compared to the previous quarter averaging $12.22 per Boe. The improved cost structure was driven by lower production taxes, resulting in field-level cash margins of $41.44 per Boe in the fourth quarter.
The company’s general and administrative expenses for the full-year 2022 increased 1 percent year over year. The increase was driven by higher personnel costs incurred in the fourth quarter.
ASSET-LEVEL HIGHLIGHTS
Delaware Basin: Production averaged 407,000 Boe per day (50 percent oil) in the quarter, with volumes growing 11 percent in 2022 compared to the prior year. Devon exited the year operating 16 rigs and 3 completion crews, resulting in 55 gross wells placed online in the fourth quarter across the company’s 400,000 net acres in the basin.
A top highlight was the co-development of multiple intervals within the Upper Wolfcamp at the company’s Todd area. The 14-well project, targeting three intervals in the Upper Wolfcamp flow unit, achieved initial production rates as high as 4,200 Boe per day. These highly commercial results further validate Devon’s stacked-pay resource potential in this portion of the field.
In 2023, the Delaware Basin will be the top funded asset in the company’s portfolio, representing 60 percent of total companywide capital spending. Of the 200-plus new wells planned for the upcoming year, roughly two-thirds of the activity will be directed toward development opportunities in New Mexico, with the remaining investment allocated to high-return projects across the company’s acreage in Texas.
First-quarter production in the Delaware will be impacted by infrastructure downtime resulting from an outage at a compressor station in the Stateline area along with minor third-party midstream downtime across the basin. The company estimates these temporary outages will curtail first-quarter volumes by approximately 10,000 Boe per day and expects to resume normal operations by the end of the first quarter.
Eagle Ford: Production averaged 68,000 Boe per day (62 percent oil), a 75 percent increase compared to the previous quarter. This volume growth was driven by integration of the Validus bolt-on acquisition and the commencement of 28 gross wells to production. In 2023, Devon plans to run 3 rigs and expects to bring online nearly 90 wells across its 82,000 net acre position.
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Anadarko Basin: Production averaged 77,000 Boe per day (51 percent gas). In the fourth quarter, Devon placed 23 new wells online supported by a $100 million drilling carry with Dow. In 2023, the company expects to operate a 4-rig program and bring online more than 40 wells across its 300,000 net acre position in the basin.
Williston Basin: Production averaged 57,000 Boe per day (65 percent oil). Fourth-quarter production was limited by severe winter weather conditions that temporarily resulted in well shut-ins, facility downtime and delays in completion activity. Devon has restored the affected production and plans to bring online approximately 40 gross wells in 2023 across its 123,000 net acres.
Powder River Basin: Production averaged 22,000 Boe per day (71 percent oil), a 15 percent year-over-year increase in volumes. This growth was driven by the company’s Niobrara-focused drilling program that resulted in 16 wells placed online during the year. For 2023, Devon will continue to appraise this emerging oil resource, with plans to drill approximately 20 new wells across its 300,000 net acre position.
PROVED RESERVES
Devon’s estimated proved reserves increased 12 percent to 1.8 billion Boe at year-end 2022, of which 71 percent was oil and natural gas liquids. Proved undeveloped reserves accounted for 22 percent of the total.
Extensions and discoveries from the company’s drilling program added 278 million Boe of reserves in 2022, equating to a replacement rate of 125 percent of production. The capital costs incurred to deliver these extensions and discoveries totaled $2.6 billion, resulting in a finding and development cost of $9.37 per Boe. Acquisitions also contributed 153 million Boe of proved reserves at year-end 2022, at a total cost of $2.6 billion.
2023 OUTLOOK
For the full-year 2023, Devon expects to sustain production in the range of 643,000 to 663,000 Boe per day. Total capital investment for the year is expected to range from $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.
The company’s capital program in 2023 is weighted towards the first half of the year due to completion timing in the Delaware Basin and is expected to drive production higher throughout 2023.
First-quarter production is expected to approximate 635,000 Boe per day. Volumes in the quarter are temporarily impacted by infrastructure outages in the Delaware Basin, timing of wells placed online and ethane rejection.
Additional details of Devon’s forward-looking guidance for the first quarter and full-year 2023 are available on the company’s website at www.devonenergy.com.
SUSTAINABILITY UPDATE
Devon recently released its 2022 sustainability report highlighting 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 fourth-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, February 15, 2023, and will serve primarily as a forum for analyst and investor questions and answers.
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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 as reported 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 related Form 10-K filed with the Securities and Exchange Commission (the “SEC”).
FORWARD LOOKING STATEMENTS
This press release includes “forward-looking statements” within the meaning of the federal securities laws. Such statements include 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 this press 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 and uncertainties, 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 NGL prices; 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 our hedging 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 to regulatory, social and market efforts to address climate change; governmental interventions in energy markets; risks relating to the COVID-19 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; risks related 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 Annual Report 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 current reasonable 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 we file 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 Form 10-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 in their 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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Exhibit 99.2
Devon Energy Fourth-Quarter 2022
Supplemental Tables
| TABLE OF CONTENTS: | PAGE: | |||
| Consolidated Statements of Earnings |
2 | |||
| Supplemental Information for Consolidated Statements of Earnings |
3 | |||
| Consolidated Statements of Cash Flows |
4 | |||
| Consolidated Balance Sheets |
5 | |||
| Production |
6 | |||
| Capital Expenditures, Costs Incurred and Reserves Reconciliation |
7 | |||
| Supplemental Information for Capital Expenditures |
8 | |||
| Realized Pricing |
9 | |||
| Asset Margins |
10 | |||
| Core Earnings |
11 | |||
| Return on Capital Employed and EBITDAX |
12 | |||
| Net Debt, Net Debt-to-EBITDAX, Field-Level Cash Margin and Free Cash Flow |
13 | |||
| Reinvestment Rate and Variable Dividend |
14 | |||
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CONSOLIDATED STATEMENTS OF EARNINGS
| (in millions, except per share amounts) | 2022 | 2021 | ||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Oil, gas and NGL sales |
$ | 3,139 | $ | 3,668 | $ | 4,100 | $ | 3,175 | $ | 2,985 | ||||||||||
| Oil, gas and NGL derivatives (1) |
(53 | ) | 248 | (170 | ) | (683 | ) | 22 | ||||||||||||
| Marketing and midstream revenues |
1,213 | 1,516 | 1,696 | 1,320 | 1,266 | |||||||||||||||
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| Total revenues |
4,299 | 5,432 | 5,626 | 3,812 | 4,273 | |||||||||||||||
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| Production expenses (2) |
715 | 735 | 729 | 618 | 605 | |||||||||||||||
| Exploration expenses |
13 | 4 | 10 | 2 | 5 | |||||||||||||||
| Marketing and midstream expenses |
1,231 | 1,525 | 1,700 | 1,324 | 1,266 | |||||||||||||||
| Depreciation, depletion and amortization |
625 | 581 | 528 | 489 | 577 | |||||||||||||||
| Asset dispositions |
(29 | ) | — | (14 | ) | (1 | ) | (49 | ) | |||||||||||
| General and administrative expenses |
122 | 95 | 84 | 94 | 95 | |||||||||||||||
| Financing costs, net (3) |
73 | 67 | 84 | 85 | 86 | |||||||||||||||
| Restructuring and transaction costs |
— | — | — | — | 28 | |||||||||||||||
| Other, net |
(4 | ) | (40 | ) | 10 | (61 | ) | (2 | ) | |||||||||||
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| Total expenses |
2,746 | 2,967 | 3,131 | 2,550 | 2,611 | |||||||||||||||
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| Earnings before income taxes |
1,553 | 2,465 | 2,495 | 1,262 | 1,662 | |||||||||||||||
| Income tax expense (4) |
349 | 565 | 557 | 267 | 150 | |||||||||||||||
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| Net earnings |
1,204 | 1,900 | 1,938 | 995 | 1,512 | |||||||||||||||
| Net earnings attributable to noncontrolling interests |
3 | 7 | 6 | 6 | 6 | |||||||||||||||
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| Net earnings attributable to Devon |
$ | 1,201 | $ | 1,893 | $ | 1,932 | $ | 989 | $ | 1,506 | ||||||||||
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| Net earnings per share: |
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| Basic net earnings per share |
$ | 1.84 | $ | 2.89 | $ | 2.94 | $ | 1.48 | $ | 2.24 | ||||||||||
| Diluted net earnings per share |
$ | 1.83 | $ | 2.88 | $ | 2.93 | $ | 1.48 | $ | 2.23 | ||||||||||
| Weighted average common shares outstanding: |
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| Basic |
653 | 655 | 658 | 663 | 671 | |||||||||||||||
| Diluted |
655 | 656 | 660 | 665 | 673 | |||||||||||||||
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SUPPLEMENTAL INFORMATION FOR CONSOLIDATED STATEMENTS OF EARNINGS
(1) OIL, GAS AND NGL DERIVATIVES
| (in millions) | 2022 | 2021 | ||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Derivative cash settlements |
$ | (177 | ) | $ | (363 | ) | $ | (472 | ) | $ | (344 | ) | $ | (493 | ) | |||||
| Derivative valuation changes |
124 | 611 | 302 | (339 | ) | 515 | ||||||||||||||
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| Oil, gas and NGL derivatives |
$ | (53 | ) | $ | 248 | $ | (170 | ) | $ | (683 | ) | $ | 22 | |||||||
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(2) PRODUCTION EXPENSES
| (in millions) | 2022 | 2021 | ||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Lease operating expense |
$ | 308 | $ | 284 | $ | 255 | $ | 224 | $ | 235 | ||||||||||
| Gathering, processing & transportation |
178 | 177 | 177 | 161 | 173 | |||||||||||||||
| Production taxes |
210 | 252 | 278 | 214 | 197 | |||||||||||||||
| Property taxes |
19 | 22 | 19 | 19 | — | |||||||||||||||
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| Production expenses |
$ | 715 | $ | 735 | $ | 729 | $ | 618 | $ | 605 | ||||||||||
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(3) FINANCING COSTS, NET
| (in millions) | 2022 | 2021 | ||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Interest based on outstanding debt |
$ | 93 | $ | 92 | $ | 93 | $ | 92 | $ | 92 | ||||||||||
| Interest income |
(16 | ) | (19 | ) | (2 | ) | (1 | ) | — | |||||||||||
| Other |
(4 | ) | (6 | ) | (7 | ) | (6 | ) | (6 | ) | ||||||||||
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| Financing costs, net |
$ | 73 | $ | 67 | $ | 84 | $ | 85 | $ | 86 | ||||||||||
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(4) INCOME TAX EXPENSE
| (in millions) | 2022 | 2021 | ||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Current expense |
$ | 84 | $ | 120 | $ | 252 | $ | 103 | $ | 1 | ||||||||||
| Deferred expense |
265 | 445 | 305 | 164 | 149 | |||||||||||||||
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| Income tax expense |
$ | 349 | $ | 565 | $ | 557 | $ | 267 | $ | 150 | ||||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2022 | 2021 | |||||||||||||||||||
| (in millions) | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | |||||||||||||||
| Cash flows from operating activities: |
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| Net earnings |
$ | 1,204 | $ | 1,900 | $ | 1,938 | $ | 995 | $ | 1,512 | ||||||||||
| Adjustments to reconcile net earnings to net cash from operating activities: |
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| Depreciation, depletion and amortization |
625 | 581 | 528 | 489 | 577 | |||||||||||||||
| Leasehold impairments |
2 | 2 | 7 | 1 | 1 | |||||||||||||||
| Amortization of liabilities |
(8 | ) | (8 | ) | (9 | ) | (6 | ) | (6 | ) | ||||||||||
| Total (gains) losses on commodity derivatives |
53 | (248 | ) | 170 | 683 | (22 | ) | |||||||||||||
| Cash settlements on commodity derivatives |
(177 | ) | (363 | ) | (472 | ) | (344 | ) | (493 | ) | ||||||||||
| Gains on asset dispositions |
(29 | ) | — | (14 | ) | (1 | ) | (49 | ) | |||||||||||
| Deferred income tax expense |
265 | 445 | 305 | 164 | 149 | |||||||||||||||
| Share-based compensation |
23 | 22 | 23 | 20 | 19 | |||||||||||||||
| Other |
(1 | ) | 8 | 4 | (21 | ) | 2 | |||||||||||||
| Changes in assets and liabilities, net |
(46 | ) | (235 | ) | 198 | (143 | ) | (74 | ) | |||||||||||
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| Net cash from operating activities |
1,911 | 2,104 | 2,678 | 1,837 | 1,616 | |||||||||||||||
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| Cash flows from investing activities: |
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| Capital expenditures |
(804 | ) | (628 | ) | (573 | ) | (537 | ) | (512 | ) | ||||||||||
| Acquisitions of property and equipment |
(17 | ) | (2,465 | ) | (100 | ) | (1 | ) | (3 | ) | ||||||||||
| Divestitures of property and equipment |
— | 4 | 9 | 26 | 14 | |||||||||||||||
| Distributions from investments |
9 | 7 | 15 | 8 | 8 | |||||||||||||||
| Contributions to investments |
(17 | ) | (16 | ) | (21 | ) | (22 | ) | (25 | ) | ||||||||||
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| Net cash from investing activities |
(829 | ) | (3,098 | ) | (670 | ) | (526 | ) | (518 | ) | ||||||||||
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| Cash flows from financing activities: |
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| Repurchases of common stock |
(57 | ) | (126 | ) | (324 | ) | (211 | ) | (589 | ) | ||||||||||
| Dividends paid on common stock |
(875 | ) | (1,007 | ) | (830 | ) | (667 | ) | (554 | ) | ||||||||||
| Distributions to noncontrolling interests |
(8 | ) | (9 | ) | (5 | ) | (8 | ) | (6 | ) | ||||||||||
| Shares exchanged for tax withholdings and other |
— | (1 | ) | (12 | ) | (73 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net cash from financing activities |
(940 | ) | (1,143 | ) | (1,171 | ) | (959 | ) | (1,149 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Effect of exchange rate changes on cash |
2 | (10 | ) | (5 | ) | 2 | 1 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net change in cash, cash equivalents and restricted cash |
144 | (2,147 | ) | 832 | 354 | (50 | ) | |||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period |
1,310 | 3,457 | 2,625 | 2,271 | 2,321 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Cash, cash equivalents and restricted cash at end of period |
$ | 1,454 | $ | 1,310 | $ | 3,457 | $ | 2,625 | $ | 2,271 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Reconciliation of cash, cash equivalents and restricted cash: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 1,314 | $ | 1,166 | $ | 3,300 | $ | 2,459 | $ | 2,099 | ||||||||||
| Restricted cash |
140 | 144 | 157 | 166 | 172 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total cash, cash equivalents and restricted cash |
$ | 1,454 | $ | 1,310 | $ | 3,457 | $ | 2,625 | $ | 2,271 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
4
CONSOLIDATED BALANCE SHEETS
| (in millions) | December 31, 2022 |
December 31, 2021 |
||||||
| Current assets: |
||||||||
| Cash, cash equivalents and restricted cash |
$ | 1,454 | $ | 2,271 | ||||
| Accounts receivable |
1,767 | 1,543 | ||||||
| Inventory |
201 | 114 | ||||||
| Other current assets |
469 | 321 | ||||||
|
|
|
|
|
|||||
| Total current assets |
3,891 | 4,249 | ||||||
| Oil and gas property and equipment, based on successful efforts accounting, net |
16,567 | 13,536 | ||||||
| Other property and equipment, net |
1,539 | 1,472 | ||||||
|
|
|
|
|
|||||
| Total property and equipment, net |
18,106 | 15,008 | ||||||
| Goodwill |
753 | 753 | ||||||
| Right-of-use assets |
224 | 235 | ||||||
| Investments |
440 | 402 | ||||||
| Other long-term assets |
307 | 378 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 23,721 | $ | 21,025 | ||||
|
|
|
|
|
|||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 859 | $ | 500 | ||||
| Revenues and royalties payable |
1,506 | 1,456 | ||||||
| Short-term debt |
251 | — | ||||||
| Other current liabilities |
489 | 1,131 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,105 | 3,087 | ||||||
| Long-term debt |
6,189 | 6,482 | ||||||
| Lease liabilities |
257 | 252 | ||||||
| Asset retirement obligations |
511 | 468 | ||||||
| Other long-term liabilities |
900 | 1,050 | ||||||
| Deferred income taxes |
1,463 | 287 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
65 | 66 | ||||||
| Additional paid-in capital |
6,921 | 7,636 | ||||||
| Retained earnings |
4,297 | 1,692 | ||||||
| Accumulated other comprehensive loss |
(116 | ) | (132 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity attributable to Devon |
11,167 | 9,262 | ||||||
| Noncontrolling interests |
129 | 137 | ||||||
|
|
|
|
|
|||||
| Total equity |
11,296 | 9,399 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 23,721 | $ | 21,025 | ||||
|
|
|
|
|
|||||
| Common shares outstanding |
653 | 663 | ||||||
5
PRODUCTION
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Oil (MBbls/d) |
||||||||||||||||||||
| Delaware Basin |
201 | 210 | 222 | 209 | 213 | |||||||||||||||
| Anadarko Basin |
15 | 13 | 14 | 14 | 14 | |||||||||||||||
| Williston Basin |
37 | 35 | 27 | 32 | 36 | |||||||||||||||
| Eagle Ford |
42 | 19 | 19 | 17 | 19 | |||||||||||||||
| Powder River Basin |
16 | 13 | 14 | 12 | 14 | |||||||||||||||
| Other |
5 | 4 | 4 | 4 | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
316 | 294 | 300 | 288 | 300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Natural gas liquids (MBbls/d) |
||||||||||||||||||||
| Delaware Basin |
101 | 108 | 111 | 92 | 107 | |||||||||||||||
| Anadarko Basin |
23 | 27 | 25 | 25 | 27 | |||||||||||||||
| Williston Basin |
9 | 8 | 9 | 8 | 9 | |||||||||||||||
| Eagle Ford |
12 | 9 | 9 | 9 | 9 | |||||||||||||||
| Powder River Basin |
3 | 2 | 2 | 2 | 2 | |||||||||||||||
| Other |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
148 | 154 | 156 | 136 | 154 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Gas (MMcf/d) |
||||||||||||||||||||
| Delaware Basin |
626 | 623 | 618 | 561 | 577 | |||||||||||||||
| Anadarko Basin |
238 | 224 | 212 | 210 | 222 | |||||||||||||||
| Williston Basin |
64 | 71 | 52 | 54 | 64 | |||||||||||||||
| Eagle Ford |
84 | 63 | 60 | 61 | 60 | |||||||||||||||
| Powder River Basin |
21 | 18 | 18 | 19 | 19 | |||||||||||||||
| Other |
1 | 1 | 1 | 1 | 1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
1,034 | 1,000 | 961 | 906 | 943 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total oil equivalent (MBoe/d) |
||||||||||||||||||||
| Delaware Basin |
407 | 421 | 436 | 394 | 416 | |||||||||||||||
| Anadarko Basin |
77 | 77 | 74 | 75 | 78 | |||||||||||||||
| Williston Basin |
57 | 55 | 45 | 48 | 55 | |||||||||||||||
| Eagle Ford |
68 | 39 | 38 | 36 | 38 | |||||||||||||||
| Powder River Basin |
22 | 18 | 19 | 18 | 19 | |||||||||||||||
| Other |
5 | 4 | 4 | 4 | 5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
636 | 614 | 616 | 575 | 611 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
6
CAPITAL EXPENDITURES
| 2022 | 2021 | |||||||||||||||||||
| (in millions) | Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | |||||||||||||||
| Delaware Basin |
$ | 518 | $ | 444 | $ | 374 | $ | 413 | $ | 392 | ||||||||||
| Anadarko Basin |
59 | 55 | 42 | 16 | 19 | |||||||||||||||
| Williston Basin |
90 | 57 | 21 | 17 | 25 | |||||||||||||||
| Eagle Ford |
160 | 38 | 37 | 27 | 21 | |||||||||||||||
| Powder River Basin |
46 | 44 | 37 | 27 | 27 | |||||||||||||||
| Other |
1 | 1 | 2 | 1 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total upstream capital |
$ | 874 | $ | 639 | $ | 513 | $ | 501 | $ | 486 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Environmental (1) |
20 | 27 | 22 | 16 | — | |||||||||||||||
| Midstream and Corporate |
28 | 22 | 32 | 46 | 31 | |||||||||||||||
| Acquisitions (2) |
13 | 2,534 | 13 | 1 | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total capital |
$ | 935 | $ | 3,222 | $ | 580 | $ | 564 | $ | 521 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Devon began tracking environmental capital separately in 2022. |
| (2) | Q3 2022 includes $2,532 million related to Validus and RimRock acquisitions. |
COSTS INCURRED AND RESERVES RECONCILIATION
COSTS INCURRED
| Year Ended December 31, | ||||||||
| (in millions) | 2022 | 2021 | ||||||
| Property acquisition costs: |
||||||||
| Proved properties |
$ | 1,760 | $ | 7,017 | ||||
| Unproved properties |
803 | 2,381 | ||||||
| Exploration costs |
472 | 212 | ||||||
| Development costs |
2,132 | 1,643 | ||||||
|
|
|
|
|
|||||
| Costs incurred |
$ | 5,167 | $ | 11,253 | ||||
|
|
|
|
|
|||||
RESERVES RECONCILIATION
| Oil (MMBbls) |
Gas (Bcf) |
NGL (MMBbls) |
Total (MMBoe) |
|||||||||||||
| As of December 31, 2021: |
||||||||||||||||
| Proved developed |
544 | 2,361 | 348 | 1,285 | ||||||||||||
| Proved undeveloped |
165 | 517 | 89 | 340 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Proved |
709 | 2,878 | 437 | 1,625 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Revisions due to prices |
15 | 61 | 8 | 34 | ||||||||||||
| Revisions other than price |
(55 | ) | 13 | 3 | (49 | ) | ||||||||||
| Extensions and discoveries |
127 | 449 | 76 | 278 | ||||||||||||
| Purchase of reserves |
106 | 137 | 24 | 153 | ||||||||||||
| Production |
(109 | ) | (356 | ) | (54 | ) | (223 | ) | ||||||||
| Sale of reserves |
— | (7 | ) | (1 | ) | (3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As of December 31, 2022: |
||||||||||||||||
| Proved developed |
596 | 2,595 | 391 | 1,419 | ||||||||||||
| Proved undeveloped |
197 | 580 | 102 | 396 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Proved |
793 | 3,175 | 493 | 1,815 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
7
SUPPLEMENTAL INFORMATION FOR CAPITAL EXPENDITURES
GROSS OPERATED SPUDS
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Delaware Basin |
60 | 50 | 46 | 59 | 54 | |||||||||||||||
| Anadarko Basin |
8 | 13 | 14 | 13 | 6 | |||||||||||||||
| Williston Basin |
9 | 10 | 5 | — | 9 | |||||||||||||||
| Eagle Ford |
31 | 7 | 4 | 11 | 9 | |||||||||||||||
| Powder River Basin |
4 | 6 | 1 | — | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
112 | 86 | 70 | 83 | 82 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
GROSS OPERATED WELLS TIED-IN
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Delaware Basin |
55 | 59 | 52 | 52 | 65 | |||||||||||||||
| Anadarko Basin |
23 | 13 | 1 | — | 12 | |||||||||||||||
| Williston Basin |
5 | 14 | — | — | — | |||||||||||||||
| Eagle Ford |
28 | 8 | 14 | 8 | 7 | |||||||||||||||
| Powder River Basin |
3 | 9 | — | 4 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
114 | 103 | 67 | 64 | 86 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
AVERAGE LATERAL LENGTH
(based on wells tied-in)
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Delaware Basin |
9,600’ | 10,900’ | 9,100’ | 8,900’ | 10,100’ | |||||||||||||||
| Anadarko Basin |
8,700’ | 9,500’ | 10,100’ | — | 11,700’ | |||||||||||||||
| Williston Basin |
9,900’ | 10,500’ | — | — | — | |||||||||||||||
| Eagle Ford |
6,500’ | 7,800’ | 5,800’ | 7,500’ | 7,100’ | |||||||||||||||
| Powder River Basin |
9,600’ | 11,800’ | — | 10,400’ | 9,600’ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
8,700’ | 10,500’ | 8,400’ | 8,800’ | 10,100’ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
8
REALIZED PRICING
BENCHMARK PRICES
(average prices)
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Oil ($/Bbl)—West Texas Intermediate (Cushing) |
$ | 82.53 | $ | 91.87 | $ | 108.70 | $ | 94.45 | $ | 76.91 | ||||||||||
| Natural Gas ($/Mcf)—Henry Hub |
$ | 6.26 | $ | 8.20 | $ | 7.17 | $ | 4.96 | $ | 5.84 | ||||||||||
| NGL ($/Bbl)—Mont Belvieu Blended |
$ | 30.46 | $ | 39.67 | $ | 46.44 | $ | 43.99 | $ | 40.39 | ||||||||||
REALIZED PRICES
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Oil (Per Bbl) |
||||||||||||||||||||
| Delaware Basin |
$ | 82.48 | $ | 93.60 | $ | 109.05 | $ | 93.12 | $ | 75.67 | ||||||||||
| Anadarko Basin |
82.57 | 91.42 | 108.15 | 92.70 | 76.07 | |||||||||||||||
| Williston Basin |
81.05 | 91.30 | 109.85 | 90.87 | 74.02 | |||||||||||||||
| Eagle Ford |
83.23 | 91.53 | 109.77 | 94.51 | 75.35 | |||||||||||||||
| Powder River Basin |
81.29 | 91.33 | 104.75 | 92.69 | 72.86 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price without hedges |
82.31 | 92.98 | 108.93 | 92.94 | 75.36 | |||||||||||||||
| Cash settlements |
(4.87 | ) | (8.60 | ) | (13.13 | ) | (11.32 | ) | (13.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price, including cash settlements |
$ | 77.44 | $ | 84.38 | $ | 95.80 | $ | 81.62 | $ | 62.22 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Natural gas liquids (Per Bbl) |
||||||||||||||||||||
| Delaware Basin |
$ | 23.68 | $ | 34.37 | $ | 40.75 | $ | 38.43 | $ | 35.56 | ||||||||||
| Anadarko Basin |
29.58 | 35.52 | 41.64 | 38.38 | 35.66 | |||||||||||||||
| Williston Basin |
7.97 | 25.41 | 23.88 | 20.71 | 24.97 | |||||||||||||||
| Eagle Ford |
29.06 | 35.55 | 41.98 | 39.68 | 38.17 | |||||||||||||||
| Powder River Basin |
34.91 | 44.85 | 55.62 | 52.49 | 47.30 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price without hedges |
24.32 | 34.44 | 40.28 | 37.76 | 35.36 | |||||||||||||||
| Cash settlements |
— | — | — | — | (0.54 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price, including cash settlements |
$ | 24.32 | $ | 34.44 | $ | 40.28 | $ | 37.76 | $ | 34.82 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Gas (Per Mcf) |
||||||||||||||||||||
| Delaware Basin |
$ | 4.30 | $ | 7.06 | $ | 6.41 | $ | 3.83 | $ | 4.60 | ||||||||||
| Anadarko Basin |
5.37 | 8.89 | 7.11 | 4.00 | 5.37 | |||||||||||||||
| Williston Basin |
0.44 | 3.23 | 1.56 | 0.74 | 1.53 | |||||||||||||||
| Eagle Ford |
5.02 | 7.53 | 7.10 | 4.91 | 5.76 | |||||||||||||||
| Powder River Basin |
5.57 | 8.23 | 7.93 | 4.24 | 6.10 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price without hedges |
4.39 | 7.25 | 6.37 | 3.77 | 4.68 | |||||||||||||||
| Cash settlements |
(0.38 | ) | (1.42 | ) | (1.31 | ) | (0.62 | ) | (1.42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price, including cash settlements |
$ | 4.01 | $ | 5.83 | $ | 5.06 | $ | 3.15 | $ | 3.26 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total oil equivalent (Per Boe) |
||||||||||||||||||||
| Delaware Basin |
$ | 53.34 | $ | 65.80 | $ | 75.02 | $ | 63.75 | $ | 54.28 | ||||||||||
| Anadarko Basin |
41.25 | 53.72 | 54.46 | 42.08 | 41.39 | |||||||||||||||
| Williston Basin |
54.51 | 66.65 | 73.15 | 63.31 | 53.44 | |||||||||||||||
| Eagle Ford |
62.92 | 65.49 | 75.07 | 62.74 | 56.06 | |||||||||||||||
| Powder River Basin |
67.59 | 78.58 | 89.84 | 75.75 | 63.45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price without hedges |
53.66 | 64.89 | 73.13 | 61.40 | 53.12 | |||||||||||||||
| Cash settlements |
(3.04 | ) | (6.41 | ) | (8.43 | ) | (6.65 | ) | (8.78 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Realized price, including cash settlements |
$ | 50.62 | $ | 58.48 | $ | 64.70 | $ | 54.75 | $ | 44.34 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
9
ASSET MARGINS
BENCHMARK PRICES
(average prices)
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Oil ($/Bbl)—West Texas Intermediate (Cushing) |
$ | 82.53 | $ | 91.87 | $ | 108.70 | $ | 94.45 | $ | 76.91 | ||||||||||
| Natural Gas ($/Mcf)—Henry Hub |
$ | 6.26 | $ | 8.20 | $ | 7.17 | $ | 4.96 | $ | 5.84 | ||||||||||
| NGL ($/Bbl)—Mont Belvieu Blended |
$ | 30.46 | $ | 39.67 | $ | 46.44 | $ | 43.99 | $ | 40.39 | ||||||||||
PER-UNIT CASH MARGIN BY ASSET (per Boe)
| 2022 | 2021 | |||||||||||||||||||
| Quarter 4 | Quarter 3 | Quarter 2 | Quarter 1 | Quarter 4 | ||||||||||||||||
| Delaware Basin |
||||||||||||||||||||
| Realized price |
$ | 53.34 | $ | 65.80 | $ | 75.02 | $ | 63.75 | $ | 54.28 | ||||||||||
| Lease operating expenses |
(4.55 | ) | (4.39 | ) | (3.98 | ) | (3.79 | ) | (4.02 | ) | ||||||||||
| Gathering, processing & transportation |
(2.52 | ) | (2.40 | ) | (2.37 | ) | (2.32 | ) | (2.27 | ) | ||||||||||
| Production & property taxes |
(3.89 | ) | (4.81 | ) | (5.35 | ) | (4.65 | ) | (3.40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Field-level cash margin |
$ | 42.38 | $ | 54.20 | $ | 63.32 | $ | 52.99 | $ | 44.59 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Anadarko Basin |
||||||||||||||||||||
| Realized price |
$ | 41.25 | $ | 53.72 | $ | 54.46 | $ | 42.08 | $ | 41.39 | ||||||||||
| Lease operating expenses |
(3.59 | ) | (3.46 | ) | (3.49 | ) | (2.75 | ) | (2.70 | ) | ||||||||||
| Gathering, processing & transportation |
(6.84 | ) | (6.91 | ) | (6.65 | ) | (6.67 | ) | (6.60 | ) | ||||||||||
| Production & property taxes |
(2.29 | ) | (3.26 | ) | (3.17 | ) | (2.35 | ) | (2.44 | ) | ||||||||||
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| Field-level cash margin |
$ | 28.53 | $ | 40.09 | $ | 41.15 | $ | 30.31 | $ | 29.65 | ||||||||||
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| Williston Basin |
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| Realized price |
$ | 54.51 | $ | 66.65 | $ | 73.15 | $ | 63.31 | $ | 53.44 | ||||||||||
| Lease operating expenses |
(9.93 | ) | (9.97 | ) | (9.40 | ) | (7.67 | ) | (5.76 | ) | ||||||||||
| Gathering, processing & transportation |
(1.92 | ) | (2.40 | ) | (2.44 | ) | (2.32 | ) | (2.09 | ) | ||||||||||
| Production & property taxes |
(5.64 | ) | (6.33 | ) | (6.75 | ) | (5.67 | ) | (4.64 | ) | ||||||||||
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| Field-level cash margin |
$ | 37.02 | $ | 47.95 | $ | 54.56 | $ | 47.65 | $ | 40.95 | ||||||||||
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| Eagle Ford |
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| Realized price |
$ | 62.92 | $ | 65.49 | $ | 75.07 | $ | 62.74 | $ | 56.06 | ||||||||||
| Lease operating expenses |
(5.63 | ) | (4.94 | ) | (4.98 | ) | (4.63 | ) | (3.78 | ) | ||||||||||
| Gathering, processing & transportation |
(3.08 | ) | (4.94 | ) | (6.39 | ) | (5.67 | ) | (6.65 | ) | ||||||||||
| Production & property taxes |
(2.97 | ) | (3.79 | ) | (3.99 | ) | (3.52 | ) | (2.93 | ) | ||||||||||
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| Field-level cash margin |
$ | 51.24 | $ | 51.82 | $ | 59.71 | $ | 48.92 | $ | 42.70 | ||||||||||
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| Powder River Basin |
||||||||||||||||||||
| Realized price |
$ | 67.59 | $ | 78.58 | $ | 89.84 | $ | 75.75 | $ | 63.45 | ||||||||||
| Lease operating expenses |
(7.15 | ) | (7.03 | ) | (7.04 | ) | (9.01 | ) | (7.49 | ) | ||||||||||
| Gathering, processing & transportation |
(2.98 | ) | (3.24 | ) | (3.50 | ) | (3.19 | ) | (2.86 | ) | ||||||||||
| Production & property taxes |
(8.13 | ) | (9.50 | ) | (10.89 | ) | (9.23 | ) | (7.49 | ) | ||||||||||
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| Field-level cash margin |
$ | 49.33 | $ | 58.81 | $ | 68.41 | $ | 54.32 | $ | 45.61 | ||||||||||
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| Devon—Total |
||||||||||||||||||||
| Realized price |
$ | 53.66 | $ | 64.89 | $ | 73.13 | $ | 61.40 | $ | 53.12 | ||||||||||
| Lease operating expenses |
(5.26 | ) | (5.02 | ) | (4.56 | ) | (4.33 | ) | (4.18 | ) | ||||||||||
| Gathering, processing & transportation |
(3.05 | ) | (3.13 | ) | (3.15 | ) | (3.11 | ) | (3.08 | ) | ||||||||||
| Production & property taxes |
(3.91 | ) | (4.84 | ) | (5.30 | ) | (4.51 | ) | (3.49 | ) | ||||||||||
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| Field-level cash margin |
$ | 41.44 | $ | 51.90 | $ | 60.12 | $ | 49.45 | $ | 42.37 | ||||||||||
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10
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 full year and fourth-quarter 2022 earnings.
| Year Ended December 31, 2022 | Quarter Ended December 31, 2022 | |||||||||||||||||||||||||||||||
| Before- tax |
After- tax |
After NCI |
Per Diluted Share |
Before- tax |
After- tax |
After NCI |
Per Diluted Share |
|||||||||||||||||||||||||
| Total |
||||||||||||||||||||||||||||||||
| Earnings (GAAP) |
$ | 7,775 | $ | 6,037 | $ | 6,015 | $ | 9.12 | $ | 1,553 | $ | 1,204 | $ | 1,201 | $ | 1.83 | ||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||||||||||
| Asset dispositions |
(44 | ) | (34 | ) | (34 | ) | (0.05 | ) | (29 | ) | (22 | ) | (22 | ) | (0.02 | ) | ||||||||||||||||
| Asset and exploration impairments |
13 | 10 | 10 | 0.02 | 4 | 3 | 3 | — | ||||||||||||||||||||||||
| Deferred tax asset valuation allowance |
— | 17 | 17 | 0.03 | — | 2 | 2 | — | ||||||||||||||||||||||||
| Fair value changes in financial instruments |
(690 | ) | (532 | ) | (532 | ) | (0.81 | ) | (125 | ) | (99 | ) | (99 | ) | (0.15 | ) | ||||||||||||||||
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| Core earnings (Non-GAAP) |
$ | 7,054 | $ | 5,498 | $ | 5,476 | $ | 8.31 | $ | 1,403 | $ | 1,088 | $ | 1,085 | $ | 1.66 | ||||||||||||||||
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| * | The tax impact for the adjustments to core earnings in the tables above are all deferred. |
11
RETURN ON CAPITAL EMPLOYED
Devon defines return on capital employed as pre-interest core earnings divided by averaged capital employed. Devon believes return on capital employed provides a useful measure of how efficiently the company is using its capital to generate profits. Average capital employed is the average of the capital employed as of the beginning and ending of the relevant period, with capital employed calculated as debt plus stockholders’ equity attributable to Devon less cash and cash equivalents.
| Year Ended December 31, 2022 |
||||
| Earnings (GAAP) |
$ | 6,015 | ||
| Non-GAAP adjustments |
(539 | ) | ||
|
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| Core earnings (Non-GAAP) |
5,476 | |||
| Net financing costs (GAAP) |
309 | |||
| Less tax impact (22%) |
(69 | ) | ||
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| Pre-interest core earnings (Non-GAAP) |
$ | 5,716 | ||
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| Beginning balance: |
||||
| Gross debt |
$ | 6,482 | ||
| Stockholders’ equity |
9,262 | |||
| Less cash |
(2,271 | ) | ||
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| Beginning capital employed |
$ | 13,473 | ||
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| Ending balance: |
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| Gross debt |
$ | 6,440 | ||
| Stockholders’ equity |
11,167 | |||
| Less cash |
(1,454 | ) | ||
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| Ending capital employed |
$ | 16,153 | ||
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| Average capital employed |
$ | 14,813 | ||
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| ROCE |
39 | % | ||
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EBITDAX
Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings before income tax expense; financing costs, net; exploration expenses; depreciation, depletion and amortization; asset impairments; asset disposition gains and losses; non-cash share-based compensation; non-cash valuation changes for derivatives and financial instruments; restructuring and transaction costs; 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.
| FY ‘22 | Q4 ‘22 | Q3 ‘22 | Q2 ‘22 | Q1 ‘22 | Q4 ‘21 | Q3 ‘21 | Q2 ‘21 | Q1 ‘21 | ||||||||||||||||||||||||||||
| Net earnings (GAAP) |
$ | 6,037 | $ | 1,204 | $ | 1,900 | $ | 1,938 | $ | 995 | $ | 1,512 | $ | 844 | $ | 261 | $ | 216 | ||||||||||||||||||
| Financing costs, net |
309 | 73 | 67 | 84 | 85 | 86 | 86 | 80 | 77 | |||||||||||||||||||||||||||
| Income tax expense (benefit) |
1,738 | 349 | 565 | 557 | 267 | 150 | 120 | 43 | (248 | ) | ||||||||||||||||||||||||||
| Exploration expenses |
29 | 13 | 4 | 10 | 2 | 5 | 3 | 3 | 3 | |||||||||||||||||||||||||||
| Depreciation, depletion and amortization |
2,223 | 625 | 581 | 528 | 489 | 577 | 578 | 536 | 467 | |||||||||||||||||||||||||||
| Asset dispositions |
(44 | ) | (29 | ) | — | (14 | ) | (1 | ) | (49 | ) | — | (87 | ) | (32 | ) | ||||||||||||||||||||
| Share-based compensation |
87 | 22 | 22 | 22 | 20 | 19 | 18 | 20 | 20 | |||||||||||||||||||||||||||
| Derivative & financial instrument non-cash val. changes |
(698 | ) | (122 | ) | (613 | ) | (302 | ) | 339 | (515 | ) | (35 | ) | 336 | 296 | |||||||||||||||||||||
| Restructuring and transaction costs |
— | — | — | — | — | 28 | 18 | 23 | 189 | |||||||||||||||||||||||||||
| Accretion on discounted liabilities and other |
(95 | ) | (6 | ) | (38 | ) | 10 | (61 | ) | (2 | ) | 2 | (14 | ) | (29 | ) | ||||||||||||||||||||
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| EBITDAX (Non-GAAP) |
$ | 9,586 | $ | 2,130 | $ | 2,488 | $ | 2,833 | $ | 2,135 | $ | 1,811 | $ | 1,634 | $ | 1,201 | $ | 959 | ||||||||||||||||||
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12
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.
| Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | |||||||||||||||||||
| Total debt (GAAP) |
$ | 6,440 | $ | 6,451 | $ | 6,461 | $ | 6,471 | $ | 6,482 | $ | 6,492 | ||||||||||||
| Less: |
||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash |
(1,454 | ) | (1,310 | ) | (3,457 | ) | (2,625 | ) | (2,271 | ) | (2,321 | ) | ||||||||||||
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| Net debt (Non-GAAP) |
$ | 4,986 | $ | 5,141 | $ | 3,004 | $ | 3,846 | $ | 4,211 | $ | 4,171 | ||||||||||||
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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.
| Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | |||||||||||||||||||
| Net debt (Non-GAAP) |
$ | 4,986 | $ | 5,141 | $ | 3,004 | $ | 3,846 | $ | 4,211 | $ | 4,171 | ||||||||||||
| EBITDAX (Non-GAAP) (1) |
$ | 9,586 | $ | 9,267 | $ | 8,413 | $ | 6,781 | $ | 5,605 | $ | 5,059 | ||||||||||||
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| Net debt-to-EBITDAX (Non-GAAP) |
0.5 | 0.6 | 0.4 | 0.6 | 0.8 | 0.8 | ||||||||||||||||||
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| (1) | EBITDAX is an annualized measure using a trailing twelve-month calculation. Due to the merger with WPX closing in the first quarter of 2021, third quarter 2021 EBITDAX was calculated using annualized September YTD 2021 results. |
FIELD-LEVEL CASH MARGIN
Devon defines field-level cash margin as oil, gas and NGL revenues less production expenses. Devon believes field-level cash margin provides a useful measure of value generated for shareholders.
| Full Year 2022 |
Six Months Ended Dec. 31, 2021 |
Six Months Ended Jun. 30, 2021 |
Full Year 2020 |
|||||||||||||
| Realized price |
$ | 63.20 | $ | 50.10 | $ | 40.54 | $ | 22.10 | ||||||||
| Production expenses |
(12.55 | ) | (10.33 | ) | (10.06 | ) | (9.21 | ) | ||||||||
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| Field-level cash margin |
$ | 50.65 | $ | 39.77 | $ | 30.48 | $ | 12.89 | ||||||||
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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 Dec. 31, 2022 |
Quarter Ended Sep. 30, 2022 |
Quarter Ended Jun. 30, 2022 |
Quarter Ended Mar. 31, 2022 |
Quarter Ended Dec. 31, 2021 |
||||||||||||||||
| Total operating cash flow (GAAP) |
$ | 1,911 | $ | 2,104 | $ | 2,678 | $ | 1,837 | $ | 1,616 | ||||||||||
| Less capital expenditures: |
||||||||||||||||||||
| Capital expenditures |
(804 | ) | (628 | ) | (573 | ) | (537 | ) | (512 | ) | ||||||||||
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| Free cash flow (Non-GAAP) |
$ | 1,107 | $ | 1,476 | $ | 2,105 | $ | 1,300 | $ | 1,104 | ||||||||||
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| Full Year 2022 | Full Year 2021 | |||||||
| Total operating cash flow (GAAP) |
$ | 8,530 | $ | 4,899 | ||||
| Less capital expenditures: |
||||||||
| Capital expenditures |
(2,542 | ) | (1,989 | ) | ||||
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| Free cash flow (Non-GAAP) |
$ | 5,988 | $ | 2,910 | ||||
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13
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.
| Year Ended Dec. 31, 2022 |
Year Ended Dec. 31, 2021 |
|||||||
| Capital expenditures (excludes acquisitions) |
$ | 2,740 | $ | 1,998 | ||||
| Operating cash flow |
$ | 8,530 | $ | 4,899 | ||||
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| Reinvestment rate (Non-GAAP) |
32 | % | 41 | % | ||||
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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 December 31, 2022 |
||||
| Operating cash flow (GAAP) |
$ | 1,911 | ||
| Changes in assets and liabilities, net |
46 | |||
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| Adjusted cash flow (Non-GAAP) |
1,957 | |||
| Capital expenditures (Accrued) |
(935 | ) | ||
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| Adjusted free cash flow (Non-GAAP) |
1,022 | |||
| Fixed quarterly dividend |
(117 | ) | ||
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| Excess free cash flow (Non-GAAP) |
$ | 905 | ||
| ~50% Pay out (Board Discretion: Up to 50%) |
50 | % | ||
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| Total variable dividend |
$ | 449 | ||
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14
| FIRST-QUARTER AND FULL-YEAR 2023 GUIDANCE |
|
PRODUCTION GUIDANCE
| Quarter 1 (1) | Full Year | |||||||||||||||
| Low | High | Low | High | |||||||||||||
| Oil (MBbls/d) |
315 | 321 | 320 | 326 | ||||||||||||
| Natural gas liquids (MBbls/d) |
143 | 149 | 156 | 162 | ||||||||||||
| Gas (MMcf/d) |
1,000 | 1,050 | 1,000 | 1,050 | ||||||||||||
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| Total oil equivalent (MBoe/d) (1) |
625 | 645 | 643 | 663 | ||||||||||||
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| (1) | First-quarter volumes are temporarily impacted by: |
| • | Infrastructure outages in the Delaware Basin (~10,000 Boe per day) |
| • | Timing of wells placed online (90 wells in Q1; ~400 for full-year 2023) |
| • | Ethane rejection (~10,000 Boe per day) |
CAPITAL EXPENDITURES GUIDANCE
| Quarter 1 (2) | Full Year | |||||||||||||||
| (in millions) | Low | High | Low | High | ||||||||||||
| Upstream capital (2) |
$ | 900 | $ | 940 | $ | 3,440 | $ | 3,560 | ||||||||
| Environmental capital |
25 | 35 | 80 | 120 | ||||||||||||
| Midstream & other capital |
25 | 35 | 80 | 120 | ||||||||||||
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| Total capital |
$ | 950 | $ | 1,010 | $ | 3,600 | $ | 3,800 | ||||||||
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| (2) | Upstream capital is expected to be higher in the first half of 2023 due to a temporary fourth frac crew added in the Delaware Basin. Activity from this incremental frac crew is expected to be completed around mid-year, resulting in lower capital spending over the second half of 2023. |
PRICE REALIZATIONS GUIDANCE
| Quarter 1 | 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 1 | Full Year | |||||||||||||||
| ($ millions, except Boe and %) | Low | High | Low | High | ||||||||||||
| Marketing & midstream operating profit |
$ | (30 | ) | $ | (20 | ) | $ | (60 | ) | $ | (50 | ) | ||||
| LOE & GP&T per BOE |
$ | 8.60 | $ | 9.00 | $ | 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 |
$ | 600 | $ | 640 | $ | 2,500 | $ | 2,600 | ||||||||
| General & administrative expenses |
$ | 100 | $ | 110 | $ | 390 | $ | 410 | ||||||||
| Net financing costs, net |
$ | 70 | $ | 80 | $ | 290 | $ | 310 | ||||||||
| Other expenses |
$ | — | $ | 5 | $ | — | $ | 20 | ||||||||
INCOME TAX GUIDANCE
| (% of pre-tax earnings) | Quarter 1 | Full Year | ||||||
| Current income tax rate |
15 | % | 15 | % | ||||
| Deferred income tax rate |
7 | % | 7 | % | ||||
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| Total income tax rate |
22 | % | 22 | % | ||||
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1
| CONTINGENT PAYMENTS FOR BARNETT SHALE DIVESTITURE (4-year period beginning in 2021) |
|
| WTI Threshold | WTI Annual Earnout Amount | Henry Hub Threshold | Henry Hub Annual Earnout 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 Commodity Hedges
| Price Swaps | Price Collars | |||||||||||||||||||
| Period |
Volume (Bbls/d) | Weighted Average Price ($/Bbl) |
Volume (Bbls/d) |
Weighted Average Floor Price ($/Bbl) |
Weighted Average Ceiling Price ($/Bbl) |
|||||||||||||||
| Q1 2023 |
— | $ | — | 95,000 | $ | 67.82 | $ | 94.68 | ||||||||||||
| Q2 2023 |
— | $ | — | 84,500 | $ | 69.41 | $ | 94.84 | ||||||||||||
| Q3 2023 |
— | $ | — | 84,500 | $ | 69.41 | $ | 94.84 | ||||||||||||
| Q4 2023 |
— | $ | — | 81,000 | $ | 69.63 | $ | 94.29 | ||||||||||||
Oil Basis Swaps
| Period |
Index |
Volume (Bbls/d) | Weighted Average Differential to WTI ($/Bbl) |
|||||||
| Q1 2023 |
Midland Sweet | 6,311 | $ | 0.69 | ||||||
| Q2 2023 |
Midland Sweet | 25,000 | $ | 0.90 | ||||||
| Q3 2023 |
Midland Sweet | 45,000 | $ | 0.98 | ||||||
| Q4 2023 |
Midland Sweet | 45,000 | $ | 0.98 | ||||||
| Q1-Q4 2024 |
Midland Sweet | 29,500 | $ | 1.14 | ||||||
Natural Gas Commodity Hedges—Henry Hub
| Price Swaps | Price Collars | |||||||||||||||||||
| Period |
Volume (MMBtu/d) | Weighted Average Price ($/MMBtu) |
Volume (MMBtu/d) |
Weighted Average Floor Price ($/MMBtu) |
Weighted Average Ceiling Price ($/MMBtu) |
|||||||||||||||
| Q1 2023 | 35,000 | $ | 5.99 | 237,000 | $ | 4.16 | $ | 10.68 | ||||||||||||
| Q2 2023 | 20,000 | $ | 3.60 | 220,000 | $ | 3.60 | $ | 7.00 | ||||||||||||
| Q3 2023 | 10,000 | $ | 3.55 | 195,000 | $ | 3.61 | $ | 7.29 | ||||||||||||
| Q4 2023 | 10,000 | $ | 3.55 | 147,000 | $ | 3.67 | $ | 7.62 | ||||||||||||
| Q1-Q4 2024 | 7,486 | $ | 3.55 | 40,527 | $ | 3.78 | $ | 7.05 | ||||||||||||
Natural Gas Basis Swaps
| Period |
Index |
Volume (MMBtu/d) | Weighted Average Differential to Henry Hub ($/MMBtu) |
|||||||
| Q1 - Q2 2023 |
El Paso Permian | 135,000 | $ | (1.59 | ) | |||||
| Q3 - Q4 2023 |
El Paso Permian | 145,000 | $ | (1.58 | ) | |||||
| Q1 2023 |
Houston Ship Channel | 120,000 | $ | (0.17 | ) | |||||
| Q2 - Q4 2023 |
Houston Ship Channel | 130,000 | $ | (0.19 | ) | |||||
| Q1-Q4 2023 |
WAHA | 70,000 | $ | (0.51 | ) | |||||
| Q1-Q4 2024 |
El Paso Permian | 10,000 | $ | (1.00 | ) | |||||
| Q1-Q4 2024 |
Houston Ship Channel | 10,000 | $ | (0.37 | ) | |||||
| Q1-Q4 2024 | WAHA | 44,973 | $ | (0.58 | ) | |||||
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 February 8, 2023.
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