8-K
DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2021-08-03 2021-08-03

 

 

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): August 3, 2021

 

 

Devon Energy Corporation

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   001-32318   73-1567067

(State or other jurisdiction

of incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

 

333 W. SHERIDAN AVE.,

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

Symbol(s)

  

Name of each exchange

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 August 3, 2021, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarterly period ended June 30, 2021. 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 August 3, 2021.
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:    August 3, 2021

Exhibit 99.1

 

             LOGO

     

Devon Energy Corporation

     

333 West Sheridan Avenue

     

Oklahoma City, OK 73102-5015

Devon Energy Reports Second-Quarter 2021 Financial and Operational Results

OKLAHOMA CITY – Aug. 3, 2021 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the second-quarter 2021. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

  •  

Fixed-plus-variable dividend increased by 44 percent to $0.49 per share

 

  •  

Investment-grade financial strength enhanced with redemption of $1.2 billion of debt year-to-date

 

  •  

Operating cash flow increased 85 percent from the prior quarter to $1.1 billion

 

  •  

Free cash flow generation accelerated to $589 million, a 6-fold increase from the prior quarter

 

  •  

Oil production exceeded midpoint guidance, averaging 291,000 barrels per day in the second quarter

 

  •  

Delaware Basin efficiency gains drove capital expenditures 9 percent below guidance

 

  •  

Merger synergies improved corporate cost structure by 27 percent year over year

CEO PERSPECTIVE

“2021 is shaping up to be an excellent year for Devon that can best be defined as one of comprehensive execution across all elements of our strategy, resulting in expanded margins, growth in free cash flow and the return of significant value to our shareholders through higher dividends and the reduction of debt,” said Rick Muncrief, president and CEO.

“With our business building momentum and generating increasing amounts of free cash flow, a clear differentiator for Devon is the ability to accelerate cash returns through our fixed-plus-variable dividend framework,” said Muncrief. “The power of this uniquely designed dividend strategy was demonstrated by our announcement to increase the dividend by 44 percent this quarter.”

“As I look to the second half of the year, the investment proposition for Devon only continues to strengthen,” Muncrief added. “With our disciplined capital allocation framework, we are positioned to have the highest forward dividend yield in the entire S&P 500 index that is accompanied by a strong balance sheet projected to have a leverage ratio of less than 1-turn by year end.”

FINANCIAL SUMMARY

Devon reported net earnings of $256 million, or $0.38 per diluted share, in the second quarter of 2021. Adjusting for items analysts typically exclude from estimates, Devon’s core earnings were $408 million or $0.60 per diluted share.

The company’s operating cash flow totaled $1.1 billion in the second quarter, an 85 percent increase from the prior quarter. This level of cash flow funded all capital requirements and generated $589 million of free cash flow.

Based on the strong financial performance in the second quarter, Devon’s board declared a fixed-plus-variable dividend of $0.49 per share. This represents a 44 percent increase compared to the payout declared for the previous quarter. The dividend is payable on Sep. 30, 2021 to shareholders of record at the close of business on Sep. 13, 2021.

Devon’s investment-grade financial position also continued to strengthen with the redemption of $710 million of debt in the quarter. This action brings the total amount of debt reduced to $1.2 billion year to date and the company exited the quarter with excellent liquidity of $1.5 billion of cash on hand.

 

1

OPERATING RESULTS

Oil production averaged 291,000 barrels per day in the second quarter, exceeding midpoint guidance by 3,000 barrels per day. This better-than-forecasted volume performance was driven by strong well productivity from the company’s Delaware Basin operations.

Devon’s capital program in the second quarter averaged 15 operated drilling rigs and five completion crews. This level of activity resulted in a total capital spend of $509 million in the quarter, or 9 percent below guidance. This positive variance was attributable to efficiency gains and purchasing power synergies realized in the Delaware Basin.

With activity focused on developing higher-margin production opportunities, oil and liquids sales reached 91 percent of Devon’s oil, gas and NGL sales in the quarter. This exposure to higher-value production, coupled with lower lease operating expenses, expanded the company’s field-level cash margin to $31.79 per Boe. This represents a 10 percent increase quarter over quarter.

The capture of merger synergies improved Devon’s corporate cost structure by 27 percent year-over-year, on a pro forma basis. This performance was driven by lower personnel expenses and reduced financing costs from the company’s ongoing debt-reduction program. Devon expects its merger cost savings to drive $600 million in annual cash flow improvements by year-end 2021.

ASSET-LEVEL HIGHLIGHTS

Delaware Basin: Production averaged 358,000 Boe per day (53 percent oil). This result represents a 22 percent increase in oil production year over year, on a pro forma basis. The company’s strong oil growth was driven by 88 new wells that achieved first production in the quarter across the company’s 400,000 net acre position in New Mexico and Texas.

Capital activity for the quarter was headlined by several large development pads at the company’s Cotton Draw and Stateline leasehold. Initial 30-day rates from this subset of 33 wells averaged 3,300 Boe per day, with per well recoveries estimated to exceed 1.5 million oil-equivalent barrels. In addition to the strong well productivity, completed well costs in the Delaware Basin declined to $543 per lateral foot, a 12 percent reduction compared to the previous year.

Another key operational highlight was the significant improvement in field-level operating costs, which declined 7 percent year-over-year to $5.97 per Boe. This cost performance, combined with higher commodity pricing, expanded field-level margins to $33.79 per Boe in the quarter. This improvement represents more than a two-fold increase in per-unit margin compared to full-year 2020 results.

Anadarko Basin: Production averaged 80,000 Boe per day in the quarter, of which 54 percent was liquids. In the second quarter, Devon brought online 6 legacy Meramec wells from its uncompleted inventory that averaged 30-day rates of 1,800 Boe per day. Additionally, the company continued to progress its $100 million joint venture drilling carry with Dow by spudding 16 new wells in the first half of 2021. Overall, Devon plans to drill up to 30 wells with its Dow partnership this year, with first production from this carry-enhanced activity expected in the second half of the year.

Williston Basin: Production averaged 66,000 Boe per day (70 percent oil). Second-quarter results were highlighted by 13 high-rate development wells brought online, driving an 8 percent production increase quarter over quarter. The Patricia Kelly 2-1HA, a two-mile lateral, achieved the highest 30-day rate reaching 4,200 Boe per day (85 percent oil). With a capital program tailored to mitigate production declines and optimize margins, this asset is projected to generate nearly $700 million of free cash flow this year at current pricing.

Eagle Ford: Production averaged 37,000 Boe per day, a 21 percent increase from the prior quarter. The increase in production was attributable to 21 new wells that achieved peak rates in the second quarter. This low-risk development activity resulted in average 30-day production rates of 2,300 Boe per day. Completed well costs for these wells averaged $4.7 million per well. With operational continuity reestablished, the company plans to maintain production with a two-rig drilling program for the remainder of 2021.

Powder River Basin: Production averaged 22,000 Boe per day, with oil reaching 73 percent of the product mix. The company did not bring online any new wells in the second quarter. Devon’s operational focus for the remainder of 2021 is to advance its understanding of the emerging Niobrara oil resource opportunity and optimize base production.

 

2

2021 OUTLOOK

Devon remains on track to meet the strategic objectives underpinning its 2021 capital program. The company remains committed to its maintenance capital program and has not made any modifications to its capital budget or oil production outlook in 2021. Additional details of Devon’s forward-looking guidance for the third-quarter and full-year 2021 are available on the company’s website at www.devonenergy.com.

ENVIRONMENTAL PERFORMANCE TARGETS

Devon recently established new environmental performance targets focused on reducing the carbon intensity of its operations. Highlights from these targets include reducing GHG emissions 50 percent by 2030, achieving net zero emissions by 2050 and initiatives to constructively engage with upstream and downstream stakeholders to improve performance. For more information, please refer to the Sustainability portion of Devon’s website 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 second-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, Aug. 4, 2021, 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 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-Q filed with the SEC.

FORWARD LOOKING STATEMENTS

This communication 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 communication 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; risks relating to the COVID-19 pandemic or other future pandemics; 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, including as a result of employee misconduct; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks related to regulatory, social and market efforts to address climate change; risks related to our hedging activities; counterparty credit risks; risks relating to our indebtedness; cyberattack risks; our limited control over third parties who operate some of our oil and gas properties; midstream capacity constraints and potential interruptions in production; the extent to which insurance covers any losses we may experience; competition for assets, materials, people and capital; risks related to investors attempting to effect change; our ability to successfully complete mergers, acquisitions and divestitures; risks related to the recent merger with WPX, including the risk that we may not realize the anticipated benefits of the merger or successfully integrate the two legacy businesses; and any of the other risks and uncertainties discussed in Devon’s 2020 Annual Report on Form 10-K (the “2020 Form 10-K”) or other SEC filings.

 

3

The forward-looking statements included in this communication speak only as of the date of this communication, represent current reasonable management’s expectations as of the date of this communication and are subject to the risks and uncertainties identified above as well as those described in the 2020 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 2020 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.

 

4

Exhibit 99.2

 

LOGO

Devon Energy Second-Quarter 2021

Supplemental Tables

 

TABLE OF CONTENTS:    PAGE:  

Income Statement

      2  

Supplemental Information for Income Statement

      3  

Cash Flow Statement

      4  

Balance Sheet

      5  

Production by Asset

      6  

Capital and Well Activity by Asset

      7  

Realized Price by Asset

      8  

Per-Unit Cash Margin by Asset

      9  

Non-GAAP Core Earnings (Loss), Non-GAAP EBITDAX

      10  

Net Debt, Net Debt-to-EBITDAX, Free Cash Flow and Reinvestment Rate

      11  

Variable Dividend

      12  

 

1

LOGO

CONSOLIDATED STATEMENTS OF EARNINGS

 

 

(in millions, except per share amounts)    2021     2020  
   Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Oil, gas and NGL sales

    $ 2,154     $ 1,757     $ 786     $ 678     $ 424  

Oil, gas and NGL derivatives (1)

      (703 )      (528 )      (117 )      (87 )      (361 ) 

Marketing and midstream revenues

      966       821       611       476       331  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      2,417       2,050       1,280       1,067       394  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Production expenses (2)

      513       458       271       271       263  

Exploration expenses

      3       3       4       39       12  

Marketing and midstream expenses

      965       842       618       478       339  

Depreciation, depletion and amortization

      536       467       301       299       299  

Asset impairments

      —         —         27       —         —    

Asset dispositions

      (87 )      (32 )      (1 )      —         —    

General and administrative expenses

      94       107       82       75       79  

Financing costs, net (3)

      80       77       70       66       69  

Restructuring and transaction costs

      23       189       17       32       —    

Other, net

      (14 )      (29 )      1       —         13  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

      2,113       2,082       1,390       1,260       1,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings (loss) from continuing operations before income taxes

      304       (32 )      (110 )      (193 )      (680 ) 

Income tax expense (benefit)

      43       (248 )      (37 )      (90 )      (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings (loss) from continuing operations

      261       216       (73 )      (103 )      (677 ) 

Net earnings (loss) from discontinued operations, net of taxes

      —         —         (25 )      13       9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings (loss)

      261       216       (98 )      (90 )      (668 ) 

Net earnings attributable to noncontrolling interests

      5       3       4       2       2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings (loss) attributable to Devon

    $ 256     $ 213     $ (102 )    $ (92 )    $ (670 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Basic earnings (loss) per share:

           

Continuing operations

    $ 0.38     $ 0.33     $ (0.20 )    $ (0.29 )    $ (1.80 ) 

Discontinued operations

      —         —         (0.07 )      0.04       0.02  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Basic net earnings (loss) per share

    $ 0.38     $ 0.33     $ (0.27 )    $ (0.25 )    $ (1.78 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted earnings (loss) per share:

           

Continuing operations

    $ 0.38     $ 0.32     $ (0.20 )    $ (0.29 )    $ (1.80 ) 

Discontinued operations

      —         —         (0.07 )      0.04       0.02  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted net earnings (loss) per share

    $ 0.38     $ 0.32     $ (0.27 )    $ (0.25 )    $ (1.78 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average common shares outstanding:

           

Basic

      677       654       383       383       383  

Diluted

      679       656       383       383       383  

 

2

LOGO

SUPPLEMENTAL INFORMATION FOR CONSLIDATED STATEMENTS OF EARNINGS

 

 

(1) OIL, GAS AND NGL DERIVATIVES    2021     2020  
(in millions)    Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Derivative cash settlements

    $ (367 )    $ (232 )    $ (27 )    $ 10     $ 232  

Derivative valuation changes

      (336 )      (296 )      (90 )      (97 )      (593 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Oil, gas and NGL derivatives

    $ (703 )    $ (528 )    $ (117 )    $ (87 )    $ (361 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
(2) PRODUCTION EXPENSES    2021     2020  
(in millions)    Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Lease operating expense

    $ 210     $ 199     $ 91     $ 100     $ 108  

Gathering, processing & transportation

      147       129       130       125       123  

Production taxes

      143       117       47       42       25  

Property taxes

      13       13       3       4       7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Production expenses

    $ 513     $ 458     $ 271     $ 271     $ 263  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
(3) FINANCING COSTS, NET    2021     2020  
(in millions)    Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Interest on outstanding debt

    $ 98     $ 105     $ 65     $ 65     $ 65  

Gain on early retirement of debt

      (10 )      (20 )      —         —         —    

Interest income

      —         (1 )      —         (5 )      (2 ) 

Other

      (8 )      (7 )      5       6       6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Financing costs, net

    $ 80     $ 77     $ 70     $ 66     $ 69  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

3

LOGO

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

(in millions)    2021     2020  
   Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Cash flows from operating activities:

           

Net earnings (loss)

    $ 261     $ 216     $ (98 )    $ (90 )    $ (668 ) 

Adjustments to reconcile net loss to net cash from operating activities:

           

Net (earnings) loss from discontinued operations, net of income taxes

      —         —         25       (13 )      (9 ) 

Depreciation, depletion and amortization

      536       467       301       299       299  

Asset impairments

      —         —         27       —         —    

Leasehold impairments

      1       1       3       36       3  

(Amortization) accretion of liabilities

      (7 )      (7 )      8       8       8  

Total losses on commodity derivatives

      703       528       117       87       361  

Cash settlements on commodity derivatives

      (367 )      (232 )      (27 )      10       232  

Gains on asset dispositions

      (87 )      (32 )      (1 )      —         —    

Deferred income tax expense (benefit)

      24       (243 )      (17 )      —         —    

Share-based compensation

      20       41       18       31       19  

Early retirement of debt

      (10 )      (20 )      —         —         —    

Other

      2       —         —         1       4  

Changes in assets and liabilities, net

      17       (127 )      2       58       (99 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net cash from operating activities - continuing operations

      1,093       592       358       427       150  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash flows from investing activities:

           

Capital expenditures

      (504 )      (499 )      (217 )      (204 )      (307 ) 

Acquisitions of property and equipment

      (5 )      —         (3 )      —         (1 ) 

Divestitures of property and equipment

      49       15       5       1       3  

WPX acquired cash

      —         344       —         —         —    

Distributions from equity method investments

      8       10       —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net cash from investing activities - continuing operations

      (452 )      (130 )      (215 )      (203 )      (305 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash flows from financing activities:

           

Repayments of long-term debt

      (710 )      (533 )      —         —         —    

Early retirement of debt

      (32 )      (27 )      —         —         —    

Dividends paid on common stock

      (229 )      (203 )      (138 )      (43 )      (42 ) 

Contributions from noncontrolling interests

      3       —         9       1       6  

Distributions to noncontrolling interests

      (5 )      (4 )      (4 )      (4 )      (3 ) 

Acquisition of noncontrolling interests

      —         (24 )      —         —         —    

Shares exchanged for tax withholdings and other

      (9 )      (33 )      (1 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net cash from financing activities - continuing operations

      (982 )      (824 )      (134 )      (46 )      (39 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Effect of exchange rate changes on cash - continuing

      2       3       —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net change in cash, cash equivalents and restricted cash of continuing operations

      (339 )      (359 )      9       178       (194 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash flows from discontinued operations:

           

Operating activities

      —         —         19       45       (43 ) 

Investing activities

      —         —         310       1       171  

Effect of exchange rate changes on cash

      —         —         2       4       8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net change in cash, cash equivalents and restricted cash of discontinued operations

      —         —         331       50       136  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net change in cash, cash equivalents and restricted cash

      (339 )      (359 )      340       228       (58 ) 

Cash, cash equivalents and restricted cash at beginning of period

      1,878       2,237       1,897       1,669       1,727  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash, cash equivalents and restricted cash at end of period

    $ 1,539     $ 1,878     $ 2,237     $ 1,897     $ 1,669  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Reconciliation of cash, cash equivalents and restricted cash:

           

Cash and cash equivalents

    $ 1,348     $ 1,683     $ 2,047     $ 1,707     $ 1,474  

Restricted cash

      191       195       190       190       195  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total cash, cash equivalents and restricted cash

    $ 1,539     $ 1,878     $ 2,237     $ 1,897     $ 1,669  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

4

LOGO

CONSOLIDATED BALANCE SHEETS

 

 

(in millions)    June 30,     December 31,  
   2021     2020  

Current assets:

     

Cash, cash equivalents and restricted cash

    $ 1,539     $ 2,237  

Accounts receivable

      1,185       601  

Income tax receivable

      40       174  

Other current assets

      312       248  
  

 

 

    

 

 

  

Total current assets

      3,076       3,260  

Oil and gas property and equipment, based on successful efforts accounting, net

      13,727       4,436  

Other property and equipment, net

      1,462       957  
  

 

 

    

 

 

  

Total property and equipment, net

      15,189       5,393  

Goodwill

      753       753  

Right-of-use assets

      252       223  

Investments

      398       12  

Other long-term assets

      397       271  
  

 

 

    

 

 

  

Total assets

    $ 20,065     $ 9,912  
  

 

 

    

 

 

  

Current liabilities:

     

Accounts payable

    $ 487     $ 242  

Revenues and royalties payable

      1,030       662  

Other current liabilities

      1,555       536  
  

 

 

    

 

 

  

Total current liabilities

      3,072       1,440  

Long-term debt

      6,502       4,298  

Lease liabilities

      258       246  

Asset retirement obligations

      450       358  

Other long-term liabilities

      1,248       551  

Stockholders’ equity:

     

Common stock

      68       38  

Additional paid-in capital

      8,189       2,766  

Retained earnings

      243       208  

Accumulated other comprehensive loss

      (101 )      (127 ) 
  

 

 

    

 

 

  

Total stockholders’ equity attributable to Devon

      8,399       2,885  

Noncontrolling interests

      136       134  
  

 

 

    

 

 

  

Total equity

      8,535       3,019  
  

 

 

    

 

 

  

Total liabilities and equity

    $ 20,065     $ 9,912  
  

 

 

    

 

 

  

Common shares outstanding

      677       382  

 

5

LOGO

PRODUCTION TREND

 

 

     2021      2020  
     Quarter 2      Quarter 1      Quarter 4      Quarter 3      Quarter 2  

Oil (MBbls/d)

               

Delaware Basin

      191        172        99        77        79  

Anadarko Basin

      17        13        16        19        21  

Williston Basin

      46        44        —          —          —    

Eagle Ford

      18        16        18        22        27  

Powder River Basin

      16        17        16        21        18  

Other

      3        6        7        7        8  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      291        268        156        146        153  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Natural gas liquids (MBbls/d)

               

Delaware Basin

      82        60        43        38        29  

Anadarko Basin

      26        21        25        30        25  

Williston Basin

      9        8        —          —          —    

Eagle Ford

      9        6        9        11        12  

Powder River Basin

      3        3        3        3        2  

Other

      —          1        —          1        1  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      129        99        80        83        69  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Gas (MMcf/d)

               

Delaware Basin

      513        471        267        239        241  

Anadarko Basin

      225        200        233        242        262  

Williston Basin

      61        49        —          —          —    

Eagle Ford

      59        47        60        73        87  

Powder River Basin

      21        21        22        23        20  

Other

      2        3        2        3        4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      881        791        584        580        614  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total oil equivalent (MBoe/d)

               

Delaware Basin

      358        310        186        155        149  

Anadarko Basin

      80        68        81        89        90  

Williston Basin

      66        61        —          —          —    

Eagle Ford

      37        30        37        46        53  

Powder River Basin

      22        23        22        28        24  

Other

      4        7        7        8        9  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      567        499        333        326        325  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

6

LOGO

CAPITAL EXPENDITURES

 

 

(in millions)    2021      2020  
   Quarter 2      Quarter 1      Quarter 4      Quarter 3      Quarter 2  

Delaware Basin

    $ 394      $ 355      $ 153      $ 179      $ 148  

Anadarko Basin

      11        13        3        1        3  

Williston Basin

      19        20        —          —          —    

Eagle Ford

      36        29        2        1        10  

Powder River Basin

      5        27        22        11        39  

Other

      2        3        3        3        3  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total upstream capital

    $ 467      $ 447      $ 183      $ 195      $ 203  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Midstream

      22        24        3        7        8  

Other

      20        16        3        5        3  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total capital

    $ 509      $ 487      $ 189      $ 207      $ 214  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

SUPPLEMENTAL INFORMATION FOR UPSTREAM CAPITAL EXPENDITURES

  
GROSS OPERATED SPUDS    2021      2020  
   Quarter 2      Quarter 1      Quarter 4      Quarter 3      Quarter 2  

Delaware Basin

      55        60        21        35        27  

Anadarko Basin

      8        8        —          —          —    

Williston Basin

      —          7        —          —          —    

Eagle Ford

      11        14        —          —          —    

Powder River Basin

      1        —          2        —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      75        89        23        35        27  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
GROSS OPERATED WELLS TIED-IN    2021      2020  
   Quarter 2      Quarter 1      Quarter 4      Quarter 3      Quarter 2  

Delaware Basin

      88        52        23        32        22  

Anadarko Basin

      6        —          —          —          —    

Williston Basin

      13        —          —          —          —    

Eagle Ford

      9        12        —          —          13  

Powder River Basin

      —          10        2        9        4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      116        74        25        41        39  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
AVERAGE LATERAL LENGTH    2021      2020  
(based on wells tied-in)    Quarter 2      Quarter 1      Quarter 4      Quarter 3      Quarter 2  

Delaware Basin

      10,000’        10,000’        9,800’        9,900’        9,100’  

Anadarko Basin

      9,600’        —          —          —          —    

Williston Basin

      10,000’        —          —          —          —    

Eagle Ford

      5,600’        4,400’        —          —          5,900’  

Powder River Basin

      —          9,800’        13,600’        9,800’        8,100’  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      9,600’        9,100’        10,100’        9,900’        7,900’  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

7

LOGO

REALIZED PRICING

 

 

BENCHMARK PRICES    2021     2020  
(average prices)    Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Oil ($/Bbl) - West Texas Intermediate (Cushing)

    $ 66.04     $ 57.87     $ 42.65     $ 40.86     $ 28.42  

Natural Gas ($/Mcf) - Henry Hub

    $ 2.83     $ 2.71     $ 2.67     $ 1.98     $ 1.71  

NGL ($/Bbl) - Mont Belvieu Blended

    $ 28.54     $ 25.81     $ 20.01     $ 16.69     $ 12.57  

REALIZED PRICES

    2021     2020  
   Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Oil (Per Bbl)

           

Delaware Basin

    $ 63.93     $ 56.07     $ 40.67     $ 39.19     $ 22.70  

Anadarko Basin

      63.51       55.86       40.34       37.88       19.52  

Williston Basin

      62.00       52.74       —         —         —    

Eagle Ford

      64.04       54.90       37.83       33.68       15.30  

Powder River Basin

      62.36       53.77       36.42       35.39       24.03  

Other

      72.85       55.65       39.93       37.33       25.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price without hedges

      63.63       55.28       39.84       37.56       21.25  

Cash settlements

      (13.29 )      (9.13 )      (1.83 )      0.65       15.25  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price, including cash settlements

    $ 50.34     $ 46.15     $ 38.01     $ 38.21     $ 36.50  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Natural gas liquids (Per Bbl)

           

Delaware Basin

    $ 23.81     $ 26.25     $ 13.67     $ 11.49     $ 7.94  

Anadarko Basin

      25.55       23.14       15.65       12.68       9.31  

Williston Basin

      14.76       18.51       —         —         —    

Eagle Ford

      25.46       24.44       15.66       13.74       10.02  

Powder River Basin

      35.46       30.19       19.39       13.10       10.07  

Other

      41.19       31.86       24.24       21.74       10.19  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price without hedges

      23.89       25.01       14.77       12.36       8.89  

Cash settlements

      (0.25 )      (0.20 )      (0.01 )      (0.30 )      0.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price, including cash settlements

    $ 23.64     $ 24.81     $ 14.76     $ 12.06     $ 9.40  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gas (Per Mcf)

           

Delaware Basin

    $ 2.31     $ 3.19     $ 1.51     $ 1.11     $ 1.05  

Anadarko Basin

      3.15       2.49       2.29       1.66       1.31  

Williston Basin

      (1.60 )      (0.48 )      —         —         —    

Eagle Ford

      3.25       3.15       2.38       1.95       1.79  

Powder River Basin

      3.54       5.27       2.70       1.94       1.80  

Other

      2.74       2.57       2.87       1.52       1.32  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price without hedges

      2.35       2.84       1.96       1.48       1.29  

Cash settlements

      (0.15 )      (0.15 )      0.00       0.06       0.28  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price, including cash settlements

    $ 2.20     $ 2.69     $ 1.96     $ 1.54     $ 1.57  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total oil equivalent (Per Boe)

           

Delaware Basin

    $ 42.84     $ 40.95     $ 26.94     $ 24.00     $ 15.39  

Anadarko Basin

      30.34       25.35       19.79       16.81       10.98  

Williston Basin

      43.98       40.79       —         —         —    

Eagle Ford

      42.84       38.90       25.97       22.78       12.90  

Powder River Basin

      52.55       47.58       31.08       29.83       20.80  

Other

      65.37       50.58       37.67       34.15       22.95  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price without hedges

      41.75       39.14       25.63       22.60       14.37  

Cash settlements

      (7.11 )      (5.17 )      (0.86 )      0.33       7.83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized price, including cash settlements

    $ 34.64     $ 33.97     $ 24.77     $ 22.93     $ 22.20  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

8

LOGO

ASSET MARGINS

 

 

BENCHMARK PRICES    2021     2020  
(average prices)    Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Oil ($/Bbl) - West Texas Intermediate (Cushing)

    $ 66.04     $ 57.87     $ 42.65     $ 40.86     $ 28.42  

Natural Gas ($/Mcf) - Henry Hub

    $ 2.83     $ 2.71     $ 2.67     $ 1.98     $ 1.71  

NGL ($/Bbl) - Mont Belvieu Blended

    $ 28.54     $ 25.81     $ 20.01     $ 16.69     $ 12.57  
PER-UNIT CASH MARGIN BY ASSET (per Boe)    2021     2020  
   Quarter 2     Quarter 1     Quarter 4     Quarter 3     Quarter 2  

Delaware Basin

           

Realized price

    $ 42.84     $ 40.95     $ 26.94     $ 24.00     $ 15.39  

Lease operating expenses

      (3.91 )      (3.97 )      (2.38 )      (3.00 )      (3.56 ) 

Gathering, processing & transportation

      (2.06 )      (1.96 )      (2.40 )      (2.68 )      (2.88 ) 

Production & property taxes

      (3.08 )      (2.95 )      (2.08 )      (1.80 )      (1.14 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 33.79     $ 32.07     $ 20.08     $ 16.52     $ 7.81  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Anadarko Basin

           

Realized price

    $ 30.34     $ 25.35     $ 19.79     $ 16.81     $ 10.98  

Lease operating expenses

      (2.96 )      (3.82 )      (2.57 )      (2.16 )      (2.42 ) 

Gathering, processing & transportation

      (6.06 )      (6.31 )      (8.39 )      (7.39 )      (6.57 ) 

Production & property taxes

      (1.46 )      (1.21 )      (0.55 )      (0.54 )      (0.32 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 19.86     $ 14.01     $ 8.28     $ 6.72     $ 1.67  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Williston Basin

           

Realized price

    $ 43.98     $ 40.79     $ —       $ —       $ —    

Lease operating expenses

      (4.87 )      (5.13 )      —         —         —    

Gathering, processing & transportation

      (1.86 )      (2.14 )      —         —         —    

Production & property taxes

      (4.27 )      (3.82 )      —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 32.98     $ 29.70     $ —       $ —       $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Eagle Ford

           

Realized price

    $ 42.84     $ 38.90     $ 25.97     $ 22.78     $ 12.90  

Lease operating expenses

      (3.47 )      (3.89 )      (2.79 )      (2.47 )      (2.59 ) 

Gathering, processing & transportation

      (5.56 )      (6.73 )      (5.89 )      (4.73 )      (4.96 ) 

Production & property taxes

      (1.93 )      (1.71 )      (0.16 )      (0.92 )      (0.85 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 31.88     $ 26.57     $ 17.13     $ 14.66     $ 4.50  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Powder River Basin

           

Realized price

    $ 52.55     $ 47.58     $ 31.08     $ 29.83     $ 20.80  

Lease operating expenses

      (6.65 )      (7.45 )      (5.47 )      (5.41 )      (6.60 ) 

Gathering, processing & transportation

      (3.02 )      (2.66 )      (3.01 )      (2.30 )      (2.71 ) 

Production & property taxes

      (6.10 )      (5.48 )      (3.91 )      (3.49 )      (2.40 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 36.78     $ 31.99     $ 18.69     $ 18.63     $ 9.09  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Other

           

Realized price

    $ 65.37     $ 50.58     $ 37.67     $ 34.15     $ 22.95  

Lease operating expenses

      (16.69 )      (17.15 )      (15.35 )      (19.92 )      (17.40 ) 

Gathering, processing & transportation

      (0.58 )      (0.62 )      (0.59 )      (0.51 )      (0.34 ) 

Production & property taxes

      (5.25 )      (4.60 )      (3.38 )      (3.62 )      (5.11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 42.85     $ 28.21     $ 18.35     $ 10.10     $ 0.10  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Devon - Total

           

Realized price

    $ 41.75     $ 39.14     $ 25.63     $ 22.60     $ 14.37  

Lease operating expenses

      (4.06 )      (4.44 )      (2.97 )      (3.32 )      (3.69 ) 

Gathering, processing & transportation

      (2.85 )      (2.87 )      (4.23 )      (4.17 )      (4.16 ) 

Production & property taxes

      (3.05 )      (2.88 )      (1.66 )      (1.52 )      (1.07 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Field-level cash margin

    $ 31.79     $ 28.95     $ 16.77     $ 13.59     $ 5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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NON-GAAP MEASURES

 

(all monetary values in millions, except per share amounts)

This press release includes 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 this press release, including reconciliations to their most directly comparable GAAP measure.

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 (loss) and core earnings (loss) 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 second-quarter 2021 earnings.

 

     Quarter Ended June 30, 2021  
     Before-tax      After-tax      After
Noncontrolling
Interests		      Per Diluted
Share		  

Total

            

Earnings (GAAP)

    $ 304      $ 261      $ 256      $ 0.38  

Adjustments:

            

Asset dispositions

      (87 )       (67 )       (67 )       (0.10 ) 

Asset and exploration impairments

      1        1        1        0.00  

Deferred tax asset valuation allowance

      —          (115 )       (115 )       (0.17 ) 

Change in tax legislation

      —          62        62        0.09  

Fair value changes in financial instruments and foreign currency

      334        258        258        0.38  

Restructuring and transaction costs

      23        21        21        0.03  

Early retirement of debt

      (10 )       (8 )       (8 )       (0.01 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Core earnings (Non-GAAP)

    $ 565      $ 413      $ 408      $ 0.60  
  

 

 

     

 

 

     

 

 

     

 

 

  

EBITDAX

Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings from continuing operations 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 and should be considered in conjunction with net earnings from continuing operations.

 

     YTD ’21      Q2 ’21      Q1 ’21  

Net earnings (GAAP)

    $ 477      $ 261      $ 216  

Financing costs, net

      157        80        77  

Income tax expense (benefit)

      (205 )       43        (248 ) 

Exploration expenses

      6        3        3  

Depreciation, depletion and amortization

      1,003        536        467  

Asset dispositions

      (119 )       (87 )       (32 ) 

Share-based compensation

      40        20        20  

Derivative and financial instrument non-cash valuation changes

      632        336        296  

Restructuring and transaction costs

      212        23        189  

Accretion on discounted liabilities and other

      (43 )       (14 )       (29 ) 
  

 

 

     

 

 

     

 

 

  

EBITDAX (Non-GAAP)

    $ 2,160      $ 1,201      $ 959  
  

 

 

     

 

 

     

 

 

  

Annualized EBITDAX (Non-GAAP)

    $ 4,320        

 

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NET DEBT

Devon defines net debt as 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.

 

     Quarter Ended
June 30, 2021		  

Total debt (GAAP)

    $ 6,502  

Less:

   

Cash, cash equivalents and restricted cash

      (1,539 ) 
  

 

 

  

Net debt (Non-GAAP)

    $ 4,963  
  

 

 

  

NET DEBT-TO-EBITDAX

Devon defines net debt-to-EBITDAX as net debt divided by an annualized EBITDAX measure. Due to the merger with WPX closing in the first quarter of 2021, Devon has shown the first six months of 2021 EBITDAX annualized divided by net debt to show a more meaningful net debt-to-EBITDAX measure. Devon believes this ratio provides information useful to investors in assessing the company’s credit position and debt leverage.

 

     Quarter Ended
June 30, 2021		  

Net debt (Non-GAAP)

    $ 4,963  

EBITDAX (annualized 1H ’21) (Non-GAAP)

    $ 4,320  
  

 

 

  

Net debt-to-EBITDAX (Non-GAAP)

      1.1  
  

 

 

  

FREE CASH FLOW

Devon defines free cash flow as total operating cash flow less capital expenditures. Devon believes that free cash flow provides a useful measure of available cash generated by operating activities for other investing and financing activities.

 

     Quarter Ended
June 30, 2021		      Quarter Ended
March 31, 2021		  

Total operating cash flow (GAAP)

    $ 1,093      $ 592  

Less capital expenditures:

      

Capital expenditures

      (504 )       (499 ) 
  

 

 

     

 

 

  

Free cash flow (Non-GAAP)

    $ 589      $ 93  
  

 

 

     

 

 

  

REINVESTMENT RATE

Devon defines reinvestment rate as accrued capital expenditures 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
June 30, 2021		  

Capital expenditures (accrued)

    $ 509  

Operating cash flow

    $ 1,093  
  

 

 

  

Reinvestment rate (Non-GAAP)

      47 % 
  

 

 

  

 

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VARIABLE DIVIDEND CALCULATION

Devon may pay a variable dividend 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
June 30, 2021		  

Operating cash flow (GAAP)

    $ 1,093  

Changes in assets and liabilities, net

      (17 ) 
  

 

 

  

Cash from operations before balance sheet changes (Non-GAAP)

      1,076  

Cash restructuring and transaction costs (Non-GAAP)

      23  
  

 

 

  

Adjusted cash flow (Non-GAAP)

      1,099  

Capital expenditures (Accrued)

      (509 ) 
  

 

 

  

Adjusted free cash flow (Non-GAAP)

      590  

Fixed quarterly dividend ($0.11/share)

      (75 ) 
  

 

 

  

Excess free cash flow (Non-GAAP)

      515  

50% Pay out (Board Discretion: Up to 50%)

      50 % 
  

 

 

  

Total variable dividend ($0.38/share)

    $ 257  
  

 

 

  

 

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THIRD-QUARTER AND FULL-YEAR 2021 GUIDANCE

 

 

PRODUCTION GUIDANCE                         
     Quarter 3     Full Year  
     Low     High     Low     High  

Oil (MBbls/d)

      290       300       280       290  

Natural gas liquids (MBbls/d)

      130       140       120       130  

Gas (MMcf/d)

      875       925       835       895  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total oil equivalent (MBoe/d)

      566       594       539       569  
  

 

 

    

 

 

    

 

 

    

 

 

  
CAPITAL EXPENDITURES GUIDANCE                         
     Quarter 3     Full Year  
(in millions)    Low     High     Low     High  

Upstream capital

    $ 400     $ 450     $ 1,600     $ 1,800  

Midstream capital

      5       15       80       100  

Other capital

      15       25       40       80  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total capital

    $ 420     $ 490     $ 1,720     $ 1,980  
  

 

 

    

 

 

    

 

 

    

 

 

  
PRICE REALIZATIONS GUIDANCE                         
     Quarter 3     Full Year  
     Low     High     Low     High  

Oil - % of WTI

      90 %      100 %      92 %      100 % 

NGL - % of WTI

      35 %      45 %      35 %      45 % 

Natural gas - % of Henry Hub

      75 %      85 %      80 %      90 % 
OTHER GUIDANCE ITEMS                         
     Quarter 3     Full Year  
($ millions, except Boe and %)    Low     High     Low     High  

Marketing & midstream operating profit

    $ (5 )    $ 5     $ (30 )    $ (10 ) 

LOE & GP&T per BOE

    $ 6.75     $ 7.25     $ 7.00     $ 7.30  

Production & property taxes as % of upstream sales

      7.0 %      8.0 %      7.0 %      8.0 % 

Exploration expenses

    $ —       $ 5     $ 5     $ 15  

Depreciation, depletion and amortization

    $ 540     $ 590     $ 2,100     $ 2,150  

General & administrative expenses

    $ 90     $ 100     $ 380     $ 400  

Cash financing costs, net

    $ 90     $ 100     $ 395     $ 415  

Other expenses

    $ —       $ 10     $ (20 )    $ (40 ) 

Current income tax rate from continuing operations

      0 %      0 %      0 %      0 % 

Deferred income tax rate from continuing operations

      20 %      30 %      20 %      30 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total income tax rate from continuing operations

      20 %      30 %      20 %      30 % 

 

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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  

2021 & 2022 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)		  

Q3 2021

      67,460      $ 41.45        53,250      $ 39.74      $ 49.74  

Q4 2021

      66,460      $ 41.24        48,250      $ 38.82      $ 48.82  

Q1-Q4 2022

      26,112      $ 43.75        20,233      $ 46.41      $ 56.41  

 

     Price Swaptions      Price Call Options         

Period

    Volume (Bbls/d)      Weighted
Average
Price ($/Bbl)		      Volume (Bbls/d)      Weighted
Average Price
($/Bbl)		  

Q3 2021

      —        $ —          5,000      $          39.50  

Q4 2021

      —        $ —          5,000      $          39.50  

Q1-Q4 2022

      10,000      $ 46.67        —        $          —    

Oil Basis Swaps

 

Period

   

Index

    Volume (Bbls/d)      Weighted Average
Differential to WTI
($/Bbl)		  

Q3-Q4 2021

    Midland Sweet      23,000      $ 0.84  

Q3-Q4 2021

    BRENT/WTI Spread      1,000      $ (8.00 ) 

Q3-Q4 2021

    Guernsey Light Sweet      4,000      $ (1.49 ) 

Q3-Q4 2021

    NYMEX Roll      13,000      $ 0.39  

Q1-Q4 2022

    BRENT/WTI Spread      1,000      $ (7.75 ) 

Q1-Q4 2022

    NYMEX Roll      29,000      $ 0.45  

 

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)		  

Q3 2021

      279,000      $ 2.64        228,000      $ 2.43      $ 2.93  

Q4 2021

      254,000      $ 2.63        133,000      $ 2.55      $ 3.05  

Q1-Q4 2022

      3,452      $ 2.85        120,644      $ 2.59      $ 3.09  

 

2

2021 & 2022 HEDGING POSITIONS (continued)

    LOGO

 

 

 

     Price Swaptions      Price Call Options         

Period

    Volume (MMBtu/d)      Weighted
Average
Price
($/MMBtu)		      Volume (MMBtu/d)      Weighted
Average Price
($/MMBtu)		  

Q3 2021

      —        $ —          50,000      $          2.68  

Q4 2021

      —        $ —          50,000      $          2.68  

Q1-Q4 2022

      100,000      $ 2.70        —        $          —    

Natural Gas Basis Swaps

 

Period

   

Index

    Volume (MMBtu/d)      Weighted Average
Differential to Henry
Hub ($/MMBtu)		  

Q3-Q4 2021

    El Paso Natural Gas      35,000      $ (0.92 ) 

Q3-Q4 2021

    WAHA      80,000      $ (0.65 ) 

Q1-Q4 2022

    WAHA      70,000      $ (0.57 ) 

NGL Commodity Hedges

 

          Price Swaps  

Period

   

Product

    Volume (Bbls/d)      Weighted Average
Price ($/Bbl)		  

Q3-Q4 2021

    Natural Gasoline      1,000      $ 47.57  

Q3-Q4 2021

    Normal Butane      1,000      $ 31.40  

Q3-Q4 2021

    Propane      1,000      $ 27.88  

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 first of the month Henry Hub index. Devon’s NGL derivatives settle against the average of the prompt month OPIS Mont Belvieu, Texas index. Commodity hedge positions are shown as of July 29, 2021.

 

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