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1.Summary of Significant Accounting Policies
The accompanying unaudited interim financial statements and notes of Devon have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying unaudited interim financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s 2016 Annual Report on Form 10-K.
The accompanying unaudited interim financial statements furnished in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month and nine-month periods ended September 30, 2017 and 2016 and Devon’s financial position as of September 30, 2017.
Recently Adopted Accounting Standards
In January 2017, Devon adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Its objective is to simplify several aspects of the accounting for share-based payments, including income taxes when awards vest or are settled, statutory withholding and forfeitures. As the result of adoption, Devon made certain income tax presentation changes, most notably prospectively presenting excess tax benefits and deficiencies in the consolidated comprehensive statements of earnings and as operating cash flows in the consolidated statements of cash flows. Devon also retrospectively applied the new cash flow statement guidance dictating the presentation of shares exchanged for tax-withholding purposes as a financing activity. The adoption of the new guidance did not materially impact the consolidated financial statements for the nine months ended September 30, 2017 or previously reported financial information but could have a more material future impact.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill And Other (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In January 2017, Devon elected to early adopt ASU 2017-04, and the adoption had no impact on the consolidated financial statements. Devon will perform future goodwill impairment tests according to ASU 2017-04.
Issued Accounting Standards Not Yet Adopted
The FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition and industry-specific guidance in Subtopic 932-605, Extractive Activities – Oil and Gas – Revenue Recognition. This ASU provides guidance concerning the recognition and measurement of revenue from contracts with customers. Its objective is to increase the usefulness of information in the financial statements regarding the nature, timing and uncertainty of revenues. The effective date for ASU 2014-09 was delayed through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual and interim periods beginning in 2018, with early adoption permitted in 2017. Devon has not early adopted this ASU. The ASU is required to be adopted using either the retrospective transition method, which requires restating previously reported results or the cumulative effect (modified retrospective) transition method, which utilizes a cumulative-effect adjustment to retained earnings in the period of adoption to account for prior period effects rather than restating previously reported results. Devon intends to use the cumulative effect transition method and does not anticipate this ASU will have a material impact on its balance sheet or related consolidated statements of earnings, equity or cash flows. However, Devon continues to evaluate the “gross versus net” presentation of certain revenues and associated expenses in its consolidated statements of earnings. Any presentation changes would have no impact on operating income, earnings or cash flows. Devon does not expect significant changes to its annual disclosures; however, Devon’s quarterly disclosures will expand upon adoption of this ASU. Devon has implemented a process to gather and provide the quarterly disclosures required by the ASU.
The FASB issued ASU 2016-02, Leases (Topic 842). This ASU will supersede the lease requirements in Topic 840, Leases. Its objective is to increase transparency and comparability among organizations. This ASU provides guidance requiring lessees to recognize most leases on their balance sheet. Lessor accounting does not significantly change, except for some changes made to align with new revenue recognition requirements. This ASU is effective for Devon beginning January 1, 2019 and will be applied using a modified retrospective transition method, which requires applying the new guidance to leases that exist or are entered into after the beginning of the earliest period in the financial statements. Early adoption is permitted, but Devon does not plan to early adopt. Devon is in the process of evaluating contracts and gathering the necessary terms and data elements for purposes of determining the impact this ASU will have on its consolidated financial statements and related disclosures. Recently, the FASB issued Proposed Accounting Standards Update (ASU) No. 2017-290, Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842. This proposed ASU would permit an entity not to apply Topic 842 to land easements and rights-of-way that exist or expired before the effective date of Topic 842 and that were not previously assessed under Topic 840. An entity would continue to apply its current accounting policy for accounting for land easements that existed before the effective date of Topic 842. Once an entity adopts Topic 842, it would apply that Topic prospectively to all new (or modified) land easements and rights-of-way to determine whether the arrangement should be accounted for as a lease. For Devon, these contracts represent a relatively small percentage of the aggregate value of contracts being evaluated but represent a significant number of contracts.
Based on continuing research, Devon estimates a large number of contracts and data elements must be gathered and reviewed to ensure proper accounting of these contracts once this ASU is effective. Devon anticipates the adoption of this standard will significantly impact its consolidated financial statements, systems, processes and controls and is evaluating technology requirements and solutions needed to comply with the requirements of this ASU.
The FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU will require entities to present the service cost component of net periodic benefit cost in the same line item as other employee compensation costs and present the other components of net periodic benefit cost outside of operating income in the statement of earnings. Only the service cost component of net periodic benefit cost is eligible for capitalization. This ASU is effective for Devon beginning January 1, 2018, and presentation changes in the statement of earnings will be applied retrospectively, while service cost component capitalization will be applied prospectively. Upon adoption of this ASU, Devon will reclassify $7 million, $14 million and $16 million of non-service cost components of net periodic benefit costs for 2017, 2016 and 2015, respectively, as other nonoperating items. Such amounts are currently classified in Devon’s G&A. No other changes upon adopting this ASU are expected to be material.
|
2. |
Acquisitions and Divestitures |
Devon Acquisitions
In January 2016, Devon acquired approximately 80,000 net acres (unaudited) and assets in the STACK play for approximately $1.5 billion. Devon funded the acquisition with $849 million of cash, after adjustments, and $659 million of common equity shares. The purchase price allocation was approximately $1.3 billion to unproved properties and approximately $200 million to proved properties.
2017 Devon Asset Divestitures
In May 2017, Devon announced a program to divest approximately $1 billion of upstream assets. The non-core assets identified for monetization include select portions of the Barnett Shale focused primarily in and around Johnson County and other properties located principally within Devon’s U.S. resource base. Through September 30, 2017, Devon completed divestiture transactions totaling approximately $400 million, before purchase price adjustments. Estimated proved reserves associated with these assets were less than 1% of total U.S. proved reserves.
2016 Devon Asset Divestitures
In the second quarter of 2016, Devon divested non-core assets for approximately $200 million. Estimated proved reserves associated with these assets were less than 1% of total U.S. proved reserves.
In the third quarter of 2016, in several separate transactions with different purchasers, Devon divested non-core upstream assets located in east Texas, the Anadarko Basin and the Midland Basin for approximately $1.7 billion. Estimated proved reserves associated with these assets were approximately 146 MMBoe, or approximately 9% of total U.S. proved reserves.
Proceeds from the transactions were used primarily for debt repayment and to support capital investment in Devon’s core resource plays.
The divestiture transactions that closed in the third quarter of 2016 significantly altered the costs and reserves relationship of Devon’s U.S. cost center. Therefore, Devon recognized a $1.4 billion gain in the third quarter of 2016 associated with these divestitures. A summary of the gain computation follows.
|
|
Three Months Ended September 30, 2016 |
|
|
|
|
(Millions) |
|
|
Proceeds received, net of purchase price adjustments and selling costs |
|
$ |
1,653 |
|
Asset retirement obligation assumed by purchasers |
|
|
250 |
|
Total consideration received |
|
|
1,903 |
|
|
|
|
|
|
Allocated oil and gas property basis sold |
|
|
355 |
|
Allocated goodwill |
|
|
197 |
|
Total assets sold |
|
|
552 |
|
|
|
|
|
|
Gain on asset sales |
|
$ |
1,351 |
|
EnLink Acquisitions
In January 2016, EnLink acquired Anadarko Basin gathering and processing midstream assets, along with dedicated acreage service rights and service contracts, for approximately $1.4 billion. The purchase price allocation was $1.0 billion to intangible assets and approximately $400 million to property and equipment. EnLink funded the acquisition with approximately $215 million of General Partner common units and approximately $800 million of cash, primarily funded with the issuance of EnLink preferred units. The remaining $500 million of the purchase price was to be paid within one year with the option to defer $250 million of the final payment 24 months from the close date. The first installment payment of $250 million was paid in January 2017. The remaining $250 million payment is reported in other current liabilities in the accompanying consolidated balance sheets. The accretion of the discount is reported within net financing costs in the accompanying consolidated comprehensive statement of earnings.
In August 2016, EnLink formed a joint venture to operate and expand its midstream assets in the Delaware Basin. The joint venture is initially owned 50.1% by EnLink and 49.9% by the joint venture partner. EnLink contributed approximately $244 million of existing non-monetary assets to the joint venture and committed an additional $262 million in capital to fund potential future development projects and potential acquisitions. The joint venture partner committed an aggregate of approximately $400 million of capital, including initial cash contributions of approximately $138 million, and granted EnLink call rights beginning in 2021 to acquire increasing portions of the joint venture partner’s interest.
EnLink Asset Divestitures
During the first quarter of 2017, EnLink divested its ownership interest in Howard Energy Partners for approximately $190 million.
|
3. |
Derivative Financial Instruments |
Objectives and Strategies
Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon and EnLink periodically enter into derivative financial instruments with respect to a portion of their oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility and foreign exchange forward contracts to manage its exposure to fluctuations in the U.S. and Canadian dollar exchange rates. As of September 30, 2017, Devon did not have any open foreign exchange contracts.
Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.
Counterparty Credit Risk
By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels.
Commodity Derivatives
As of September 30, 2017, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.
|
|
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) |
|
|||||
Q4 2017 |
|
|
82,167 |
|
|
$ |
53.87 |
|
|
|
79,200 |
|
|
$ |
45.51 |
|
|
$ |
57.41 |
|
Q1-Q4 2018 |
|
|
22,792 |
|
|
$ |
51.13 |
|
|
|
34,121 |
|
|
$ |
45.71 |
|
|
$ |
55.71 |
|
Q1-Q4 2019 |
|
|
1,356 |
|
|
$ |
49.79 |
|
|
|
2,096 |
|
|
$ |
44.10 |
|
|
$ |
54.10 |
|
|
|
Oil Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (Bbls/d) |
|
|
Weighted Average Differential to WTI ($/Bbl) |
|
||
Q4 2017 |
|
Midland Sweet |
|
|
20,000 |
|
|
$ |
(0.41 |
) |
Q4 2017 |
|
Western Canadian Select |
|
|
87,304 |
|
|
$ |
(14.57 |
) |
Q1-Q4 2018 |
|
Midland Sweet |
|
|
23,000 |
|
|
$ |
(1.02 |
) |
Q1-Q4 2018 |
|
Western Canadian Select |
|
|
59,718 |
|
|
$ |
(14.85 |
) |
Q1-Q4 2019 |
|
Midland Sweet |
|
|
1,000 |
|
|
$ |
(0.80 |
) |
|
As of September 30, 2017, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.
|
|
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) |
|
|||||
Q4 2017 |
|
|
331,196 |
|
|
$ |
3.21 |
|
|
|
455,000 |
|
|
$ |
3.03 |
|
|
$ |
3.41 |
|
Q1-Q4 2018 |
|
|
261,888 |
|
|
$ |
3.09 |
|
|
|
149,982 |
|
|
$ |
2.99 |
|
|
$ |
3.30 |
|
Q1-Q4 2019 |
|
|
6,164 |
|
|
$ |
3.08 |
|
|
|
8,630 |
|
|
$ |
2.92 |
|
|
$ |
3.22 |
|
|
|
Natural Gas Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (MMBtu/d) |
|
|
Weighted Average Differential to Henry Hub ($/MMBtu) |
|
||
Q4 2017 |
|
Panhandle Eastern Pipe Line |
|
|
150,000 |
|
|
$ |
(0.34 |
) |
Q4 2017 |
|
El Paso Natural Gas |
|
|
80,000 |
|
|
$ |
(0.13 |
) |
Q4 2017 |
|
Houston Ship Channel |
|
|
35,000 |
|
|
$ |
0.06 |
|
Q4 2017 |
|
Transco Zone 4 |
|
|
205,000 |
|
|
$ |
0.03 |
|
Q1-Q4 2018 |
|
Panhandle Eastern Pipe Line |
|
|
50,000 |
|
|
$ |
(0.29 |
) |
As of September 30, 2017, Devon had the following open NGL derivative positions. Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.
|
|
|
|
Price Swaps |
|
|
Price Collars |
|
||||||||||||||
Period |
|
Product |
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Floor Price ($/Bbl) |
|
|
Weighted Average Ceiling Price ($/Bbl) |
|
|||||
Q4 2017 |
|
Propane |
|
|
2,663 |
|
|
$ |
31.98 |
|
|
|
1,000 |
|
|
$ |
28.35 |
|
|
$ |
30.45 |
|
As of September 30, 2017, EnLink had the following open derivative positions associated with gas processing and fractionation. EnLink’s NGL positions settle by purity product against the average of the prompt month OPIS Mont Belvieu, Texas index.
Period |
|
Product |
|
Volume (Total) |
|
Weighted Average Price Paid |
|
Weighted Average Price Received |
|||
Q4 2017-Q3 2018 |
|
Propane |
|
|
537 |
|
MBbls |
|
Index |
|
$0.66/gal |
Q4 2017-Q3 2018 |
|
Normal Butane |
|
|
344 |
|
MBbls |
|
Index |
|
$0.77/gal |
Interest Rate Derivatives
As of September 30, 2017, Devon had the following open interest rate derivative positions:
Notional |
|
|
Rate Received |
|
|
Rate Paid |
|
|
Expiration |
|||
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
750 |
|
|
Three Month LIBOR |
|
|
|
2.98% |
|
|
December 2048 (1) |
|
$ |
100 |
|
|
|
1.76% |
|
|
Three Month LIBOR |
|
|
January 2019 |
(1) |
Mandatory settlement in December 2018. |
Financial Statement Presentation
The following table presents the net gains and losses by derivative financial instrument type followed by the corresponding individual consolidated comprehensive statements of earnings caption.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, gas and NGL derivatives |
|
$ |
(144 |
) |
|
$ |
79 |
|
|
$ |
214 |
|
|
$ |
(30 |
) |
Marketing and midstream revenues |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
3 |
|
|
|
(7 |
) |
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
(4 |
) |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
(163 |
) |
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
Net gains (losses) recognized |
|
$ |
(153 |
) |
|
$ |
58 |
|
|
$ |
198 |
|
|
$ |
(359 |
) |
The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Commodity derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
$ |
39 |
|
|
$ |
9 |
|
Other long-term assets |
|
|
4 |
|
|
|
1 |
|
Interest rate derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
1 |
|
|
|
1 |
|
Total derivative assets |
|
$ |
44 |
|
|
$ |
11 |
|
Commodity derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
53 |
|
|
$ |
187 |
|
Other long-term liabilities |
|
|
7 |
|
|
|
16 |
|
Interest rate derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
1 |
|
|
|
— |
|
Other long-term liabilities |
|
|
61 |
|
|
|
41 |
|
Total derivative liabilities |
|
$ |
122 |
|
|
$ |
244 |
|
|
5. |
Asset Impairments |
The following table presents the components of asset impairments.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
U.S. oil and gas assets |
|
$ |
— |
|
|
$ |
317 |
|
|
$ |
— |
|
|
$ |
2,810 |
|
Canada oil and gas assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,166 |
|
EnLink goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
873 |
|
Other assets |
|
|
2 |
|
|
|
2 |
|
|
|
9 |
|
|
|
2 |
|
Total asset impairments |
|
$ |
2 |
|
|
$ |
319 |
|
|
$ |
9 |
|
|
$ |
4,851 |
|
Oil and Gas Impairments
Under the full cost method of accounting, capitalized costs of oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the full cost “ceiling” at the end of each quarter. The ceiling is calculated separately for each country and is based on the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10% per annum, net of related tax effects. Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months.
The oil and gas impairments in 2016 resulted from declines in the U.S. and Canada full cost ceilings. The lower ceiling values resulted primarily from significant decreases in the 12-month average trailing prices for oil, bitumen, gas and NGLs, which significantly reduced proved reserves values and, to a lesser degree, proved reserves.
EnLink Goodwill Impairments
In the first quarter of 2016, EnLink recognized goodwill impairments. See Note 12 for additional details.
|
6.Restructuring and Transaction Costs
The following table summarizes restructuring and transaction costs presented in the accompanying consolidated comprehensive statement of earnings.
|
|
September 30, 2016 |
|
|||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
|
(Millions) |
|
|||||
2016 reduction in workforce: |
|
|
|
|
|
|
|
|
Employee related costs |
|
$ |
(7 |
) |
|
$ |
229 |
|
Lease obligations |
|
|
— |
|
|
|
17 |
|
Asset impairments |
|
|
— |
|
|
|
3 |
|
Transaction costs |
|
|
2 |
|
|
|
17 |
|
Restructuring and transaction costs |
|
$ |
(5 |
) |
|
$ |
266 |
|
The following table summarizes Devon’s restructuring liabilities.
|
|
Other |
|
|
Other |
|
|
|
|
|
||
|
|
Current |
|
|
Long-term |
|
|
|
|
|
||
|
|
Liabilities |
|
|
Liabilities |
|
|
Total |
|
|||
|
|
(Millions) |
|
|||||||||
Balance as of December 31, 2016 |
|
$ |
48 |
|
|
$ |
62 |
|
|
$ |
110 |
|
Changes due to 2016 workforce reductions |
|
|
(25 |
) |
|
|
(2 |
) |
|
|
(27 |
) |
Changes related to prior years' restructurings |
|
|
(3 |
) |
|
|
(24 |
) |
|
|
(27 |
) |
Balance as of September 30, 2017 |
|
$ |
20 |
|
|
$ |
36 |
|
|
$ |
56 |
|
Balance as of December 31, 2015 |
|
$ |
13 |
|
|
$ |
63 |
|
|
$ |
76 |
|
Changes due to 2016 workforce reductions |
|
|
58 |
|
|
|
13 |
|
|
|
71 |
|
Changes related to prior years' restructurings |
|
|
5 |
|
|
|
(8 |
) |
|
|
(3 |
) |
Balance as of September 30, 2016 |
|
$ |
76 |
|
|
$ |
68 |
|
|
$ |
144 |
|
Reduction in Workforce
In the first nine months of 2016, Devon recognized $229 million in employee-related costs associated with a reduction in workforce. Of these employee-related costs, approximately $60 million resulted from accelerated vesting of share-based grants, which are noncash charges. Additionally, approximately $30 million resulted from estimated settlements of defined retirement benefits.
As a result of the reduction of workforce, Devon ceased using certain office space that was subject to non-cancellable operating lease arrangements. Devon recognized restructuring costs that represent the present value of its future obligations under the leases and impairment charges for leasehold improvements and furniture associated with the office space it ceased using.
Transaction Costs
In the first nine months of 2016, Devon and EnLink recognized transaction costs primarily associated with the closing of the acquisitions discussed in Note 2.
|
7. |
Income Taxes |
The following table presents Devon’s total income tax expense (benefit) and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Current income tax expense |
|
$ |
39 |
|
|
$ |
85 |
|
|
$ |
71 |
|
|
$ |
72 |
|
Deferred income tax expense (benefit) |
|
|
(14 |
) |
|
|
86 |
|
|
|
(20 |
) |
|
|
(300 |
) |
Total income tax expense (benefit) |
|
$ |
25 |
|
|
$ |
171 |
|
|
$ |
51 |
|
|
$ |
(228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Deferred tax asset valuation allowance |
|
|
(9 |
%) |
|
|
(35 |
%) |
|
|
(25 |
%) |
|
|
(20 |
%) |
Non-deductible goodwill impairments |
|
|
0 |
% |
|
|
6 |
% |
|
|
0 |
% |
|
|
(9 |
%) |
Change in unrecognized tax benefits |
|
|
3 |
% |
|
|
7 |
% |
|
|
1 |
% |
|
|
(2 |
%) |
Taxation on Canadian operations |
|
|
(1 |
%) |
|
|
0 |
% |
|
|
0 |
% |
|
|
(3 |
%) |
State income taxes |
|
|
0 |
% |
|
|
2 |
% |
|
|
0 |
% |
|
|
1 |
% |
Other |
|
|
(19 |
%) |
|
|
0 |
% |
|
|
(7 |
%) |
|
|
3 |
% |
Effective income tax rate |
|
|
9 |
% |
|
|
15 |
% |
|
|
4 |
% |
|
|
5 |
% |
Devon estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.
Throughout 2016 and through the first nine months of 2017, Devon continued to maintain a 100% valuation allowance against its U.S. deferred tax assets resulting from prior year cumulative financial losses largely due to full cost impairments. Furthermore, a partial allowance continues to be held against certain Canadian segment deferred tax assets.
Devon provided an additional $796 million to the U.S. segment valuation allowance in the first nine months of 2016 based on the financial loss recorded during the period. Also, during the third quarter of 2016, Devon’s Canadian segment recorded a $71 million partial valuation allowance. Devon reduced its U.S. segment valuation allowance by $348 million in the first nine months of 2017 based on the financial income recorded during the period.
Also in the table above, the “other” effect is primarily composed of permanent differences for which dollar amounts do not increase or decrease in relation to the change in pre-tax earnings. Generally, such items have an insignificant impact on our effective income tax rate. However, these items have a more noticeable impact to our rate in the third quarter of 2017 due to lower relative earnings during the period. During the third quarter of 2017, “other” is primarily related to the taxation of foreign earnings and other financing items.
In the first quarter of 2016, EnLink recorded goodwill impairments totaling $873 million. These impairments are not deductible for purposes of calculating income tax and, therefore, have an impact on the effective tax rate.
Devon is under audit in the U.S. and various foreign jurisdictions as part of its normal course of business. The timing of resolution of income tax examinations is uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. Devon believes that within the next 12 months it is reasonably possible that certain tax examinations will be resolved by settlement with the taxing authorities.
|
9. |
Other Comprehensive Earnings |
Components of other comprehensive earnings consist of the following:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Foreign currency translation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated foreign currency translation |
|
$ |
456 |
|
|
$ |
450 |
|
|
$ |
456 |
|
|
$ |
424 |
|
Change in cumulative translation adjustment |
|
|
17 |
|
|
|
(1 |
) |
|
|
31 |
|
|
|
52 |
|
Income tax benefit (expense) |
|
|
(16 |
) |
|
|
3 |
|
|
|
(30 |
) |
|
|
(24 |
) |
Ending accumulated foreign currency translation |
|
|
457 |
|
|
|
452 |
|
|
|
457 |
|
|
|
452 |
|
Pension and postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated pension and postretirement benefits |
|
|
(163 |
) |
|
|
(185 |
) |
|
|
(172 |
) |
|
|
(194 |
) |
Recognition of net actuarial loss and prior service cost in earnings (1) |
|
|
5 |
|
|
|
7 |
|
|
|
14 |
|
|
|
20 |
|
Income tax benefit |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
Ending accumulated pension and postretirement benefits |
|
|
(158 |
) |
|
|
(174 |
) |
|
|
(158 |
) |
|
|
(174 |
) |
Other |
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
Accumulated other comprehensive earnings, net of tax |
|
$ |
297 |
|
|
$ |
278 |
|
|
$ |
297 |
|
|
$ |
278 |
|
(1) |
These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of G&A on the accompanying consolidated comprehensive statements of earnings. See Note 16 for additional details. |
|
10. |
Supplemental Information to Statements of Cash Flows |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Net change in working capital accounts, net of assets and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
(215 |
) |
|
$ |
81 |
|
|
$ |
(85 |
) |
|
$ |
87 |
|
Income taxes receivable |
|
|
— |
|
|
|
6 |
|
|
|
8 |
|
|
|
107 |
|
Other current assets |
|
|
12 |
|
|
|
98 |
|
|
|
(43 |
) |
|
|
242 |
|
Accounts payable |
|
|
48 |
|
|
|
(34 |
) |
|
|
98 |
|
|
|
(185 |
) |
Revenues and royalties payable |
|
|
63 |
|
|
|
40 |
|
|
|
92 |
|
|
|
34 |
|
Other current liabilities |
|
|
99 |
|
|
|
(54 |
) |
|
|
24 |
|
|
|
(77 |
) |
Net change in working capital |
|
$ |
7 |
|
|
$ |
137 |
|
|
$ |
94 |
|
|
$ |
208 |
|
Interest paid (net of capitalized interest) |
|
$ |
49 |
|
|
$ |
113 |
|
|
$ |
285 |
|
|
$ |
402 |
|
Income taxes paid (received) |
|
$ |
— |
|
|
$ |
(7 |
) |
|
$ |
(1) |
|
|
$ |
(130 |
) |
Devon’s acquisition of certain STACK assets during the first three months of 2016 included the noncash issuance of Devon common stock. See Note 2 for additional details.
EnLink’s acquisition of Anadarko Basin gathering and processing midstream assets during the first quarter of 2016 included the noncash issuance of General Partner common units. Additionally, EnLink’s formation of a joint venture during the third quarter of 2016 included non-monetary asset contributions. See Note 2 for additional details.
|
11. |
Accounts Receivable |
Components of accounts receivable include the following:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Oil, gas and NGL sales |
|
$ |
528 |
|
|
$ |
487 |
|
Joint interest billings |
|
|
111 |
|
|
|
110 |
|
Marketing and midstream revenues |
|
|
792 |
|
|
|
708 |
|
Other |
|
|
44 |
|
|
|
69 |
|
Gross accounts receivable |
|
|
1,475 |
|
|
|
1,374 |
|
Allowance for doubtful accounts |
|
|
(13 |
) |
|
|
(18 |
) |
Net accounts receivable |
|
$ |
1,462 |
|
|
$ |
1,356 |
|
|
12. |
Goodwill and Other Intangible Assets |
Goodwill
Devon performs an annual impairment test of goodwill at October 31, or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit may not be recoverable. Sustained weakness in the overall energy sector driven by low commodity prices, together with a decline in EnLink’s unit price, caused a noncash goodwill impairment of $873 million in the first quarter of 2016. This consisted of a full impairment charge of $93 million related to EnLink’s Crude and Condensate reporting unit and partial impairments to EnLink’s Texas and General Partner reporting units of $473 million and $307 million, respectively.
Asset Divestitures
During the third quarter of 2016, Devon derecognized $197 million of goodwill in conjunction with the upstream oil and gas asset divestitures discussed in Note 2.
Other Intangible Assets
The following table presents other intangible assets reported in other long-term assets in the accompanying consolidated balance sheets.
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Customer relationships |
|
$ |
1,796 |
|
|
$ |
1,796 |
|
Accumulated amortization |
|
|
(202 |
) |
|
|
(172 |
) |
Net intangibles |
|
$ |
1,594 |
|
|
$ |
1,624 |
|
The weighted-average amortization period for other intangible assets is 15 years. Amortization expense for intangibles was $37 million and $29 million for the three months ended September 30, 2017 and 2016, respectively, and $96 million and $87 million for the nine months ended September 30, 2017 and 2016, respectively. The remaining amortization expense is estimated to be $123 million for each of the next five years.
|
13. |
Other Current Liabilities |
Components of other current liabilities include the following:
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
(Millions) |
|
|||||
Installment payment - see Note 2 |
$ |
243 |
|
|
$ |
249 |
|
Accrued interest payable |
|
204 |
|
|
|
130 |
|
Income taxes payable |
|
197 |
|
|
|
32 |
|
Derivative liabilities |
|
54 |
|
|
|
187 |
|
Restructuring liabilities |
|
20 |
|
|
|
48 |
|
Other |
|
285 |
|
|
|
420 |
|
Other current liabilities |
$ |
1,003 |
|
|
$ |
1,066 |
|
|
14. |
Debt and Related Expenses |
A summary of debt is as follows:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Devon debt: |
|
|
|
|
|
|
|
|
Debentures and notes |
|
$ |
6,933 |
|
|
$ |
6,933 |
|
Net discount on debentures and notes |
|
|
(30 |
) |
|
|
(30 |
) |
Debt issuance costs |
|
|
(41 |
) |
|
|
(44 |
) |
Total Devon debt |
|
|
6,862 |
|
|
|
6,859 |
|
EnLink debt: |
|
|
|
|
|
|
|
|
Credit facilities |
|
|
74 |
|
|
|
148 |
|
Debentures and notes |
|
|
3,500 |
|
|
|
3,163 |
|
Net premium (discount) on debentures and notes |
|
|
(6 |
) |
|
|
9 |
|
Debt issuance costs |
|
|
(27 |
) |
|
|
(25 |
) |
Total EnLink debt |
|
|
3,541 |
|
|
|
3,295 |
|
Total debt |
|
|
10,403 |
|
|
|
10,154 |
|
Less amount classified as short-term debt (1) |
|
|
20 |
|
|
|
— |
|
Total long-term debt |
|
$ |
10,383 |
|
|
$ |
10,154 |
|
(1) |
Short-term debt as of September 30, 2017 consists of $20 million of 8.25% senior notes due July 1, 2018. |
Credit Lines
Devon has a $3.0 billion Senior Credit Facility. As of September 30, 2017, Devon had $59 million in outstanding letters of credit under the Senior Credit Facility. There were no outstanding borrowings under the Senior Credit Facility at September 30, 2017. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back noncash financial write-downs such as full cost ceiling impairments or goodwill impairments. As of September 30, 2017, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 18.9%.
Retirement of Senior Notes
In the third quarter of 2016, Devon completed tender offers to repurchase $1.2 billion of debt securities, using proceeds from the asset divestitures discussed in Note 2. Devon recognized a loss on early retirement of debt, primarily consisting of $82 million in cash retirement costs and other fees. These costs, along with other minimal noncash charges associated with retiring the debt, are included in net financing costs in the consolidated comprehensive statements of earnings.
EnLink Debt
All of EnLink’s and the General Partner’s debt is non-recourse to Devon.
EnLink has a $1.5 billion unsecured revolving credit facility. As of September 30, 2017, there were $9 million in outstanding letters of credit and no outstanding borrowings under the $1.5 billion credit facility. The General Partner has a $250 million secured revolving credit facility. As of September 30, 2017, the General Partner had $74 million in outstanding borrowings at an average rate of 3.2%. EnLink and the General Partner were in compliance with all financial covenants in their respective credit facilities as of September 30, 2017.
In the second quarter of 2017, EnLink issued $500 million of 5.45% unsecured senior notes due in 2047. The proceeds were used to repay outstanding borrowings under its revolving credit facility and for general partnership purposes. Additionally, in the second quarter of 2017, EnLink redeemed its $163 million 7.125% senior unsecured notes due in 2022. EnLink redeemed the notes at 103.6% of the principal amount, plus accrued unpaid interest, for aggregate cash consideration of $174 million, which resulted in a gain on extinguishment of debt of $9 million during the second quarter of 2017. The gain is included in net financing costs in the consolidated comprehensive statement of earnings.
Net Financing Costs
The following schedule includes the components of net financing costs.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devon net financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest based on debt outstanding |
|
$ |
97 |
|
|
$ |
120 |
|
|
$ |
292 |
|
|
$ |
376 |
|
Early retirement of debt |
|
|
— |
|
|
|
84 |
|
|
|
— |
|
|
|
84 |
|
Capitalized interest |
|
|
(19 |
) |
|
|
(16 |
) |
|
|
(53 |
) |
|
|
(47 |
) |
Other |
|
|
(1 |
) |
|
|
7 |
|
|
|
(3 |
) |
|
|
18 |
|
Total Devon net financing costs |
|
|
77 |
|
|
|
195 |
|
|
|
236 |
|
|
|
431 |
|
EnLink net financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest based on debt outstanding |
|
|
43 |
|
|
|
37 |
|
|
|
125 |
|
|
|
105 |
|
Interest accretion on deferred installment payment |
|
|
7 |
|
|
|
13 |
|
|
|
20 |
|
|
|
39 |
|
Early retirement of debt |
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
Other |
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Total EnLink net financing costs |
|
|
50 |
|
|
|
48 |
|
|
|
134 |
|
|
|
139 |
|
Total net financing costs |
|
$ |
127 |
|
|
$ |
243 |
|
|
$ |
370 |
|
|
$ |
570 |
|
|
15. Asset Retirement Obligations
The following table presents the changes in Devon’s asset retirement obligations.
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
|
|
(Millions) |
|
|||||
Asset retirement obligations as of beginning of period |
|
$ |
1,272 |
|
|
$ |
1,414 |
|
Liabilities incurred and assumed through acquisitions |
|
|
30 |
|
|
|
18 |
|
Liabilities settled and divested |
|
|
(53 |
) |
|
|
(310 |
) |
Revision of estimated obligation |
|
|
(184 |
) |
|
|
70 |
|
Accretion expense on discounted obligation |
|
|
47 |
|
|
|
58 |
|
Foreign currency translation adjustment |
|
|
29 |
|
|
|
26 |
|
Asset retirement obligations as of end of period |
|
|
1,141 |
|
|
|
1,276 |
|
Less current portion |
|
|
41 |
|
|
|
46 |
|
Asset retirement obligations, long-term |
|
$ |
1,100 |
|
|
$ |
1,230 |
|
During the first quarter of 2017, Devon reduced its estimated asset retirement obligations by $184 million primarily due to changes in the assumed inflation rate and retirement dates for its oil and gas assets.
During the first nine months of 2016, Devon reduced its asset retirement obligation by $285 million for those obligations that were assumed by purchasers of certain upstream U.S. assets. See Note 2 for additional details.
|
16. |
Retirement Plans |
The following table presents the components of net periodic benefit cost for Devon’s pension and postretirement benefit plans.
|
|
Pension Benefits |
|
|
Postretirement Benefits |
|
||||||||||||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||||||
|
|
(Millions) |
|
|||||||||||||||||||||||||||||
Service cost |
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
12 |
|
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
11 |
|
|
|
9 |
|
|
|
32 |
|
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expected return on plan assets |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
(41 |
) |
|
|
(40 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of prior service cost (1) |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Net actuarial loss (1) |
|
|
5 |
|
|
|
6 |
|
|
|
14 |
|
|
|
19 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net periodic benefit cost (2) |
|
$ |
6 |
|
|
$ |
5 |
|
|
$ |
18 |
|
|
$ |
25 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
(1 |
) |
(1) |
These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period. |
(2) Net periodic benefit cost is a component of G&A in the accompanying consolidated comprehensive statements of earnings.
|
17. |
Stockholders’ Equity |
Common Stock Issued
In January 2016, Devon issued approximately 23 million shares of common stock in conjunction with the STACK asset acquisition discussed in Note 2.
In February 2016, Devon issued 79 million shares of common stock to the public, inclusive of 10 million shares sold as part of the underwriters’ option. Net proceeds from the offering were $1.5 billion.
Dividends
The table below summarizes the dividends Devon paid on its common stock.
|
Amounts |
|
|
Rate |
|
||
|
(Millions) |
|
|
(Per Share) |
|
||
Quarter Ended 2017: |
|
|
|
|
|
|
|
First quarter 2017 |
$ |
32 |
|
|
$ |
0.06 |
|
Second quarter 2017 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2017 |
|
30 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
95 |
|
|
|
|
|
Quarter Ended 2016: |
|
|
|
|
|
|
|
First quarter 2016 |
$ |
125 |
|
|
$ |
0.24 |
|
Second quarter 2016 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2016 |
|
32 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
190 |
|
|
|
|
|
In response to the depressed commodity price environment, Devon reduced its quarterly dividend to $0.06 per share in the second quarter of 2016.
|
18. |
Noncontrolling Interests |
Subsidiary Equity Transactions
EnLink has the ability to sell common units through its “at the market” equity offering programs. In the third quarter of 2017, EnLink entered into additional equity distribution agreements to sell up to $600 million in common units through its programs. Future common units that EnLink issues will be issued under the new equity distribution agreement. During the first nine months of 2017, EnLink issued and sold 5 million common units through its programs and generated $92 million in net proceeds.
In September 2017, EnLink issued 400,000 preferred units through an underwritten public offering for net proceeds of approximately $394 million.
During the first nine months of 2016, EnLink issued and sold 7 million common units for net proceeds of $110 million. In conjunction with its acquisition of Anadarko Basin gathering and processing midstream assets during the first quarter of 2016, EnLink issued preferred units as discussed in Note 2.
As of September 30, 2017, Devon’s ownership interest in EnLink was 23%, excluding the interest held by the General Partner. Devon’s controlling ownership interest in the General Partner as of September 30, 2017 was 64%. The net gains and losses and related income taxes resulting from these transactions have been recorded as an adjustment to equity, with the change in ownership reflected as an adjustment to noncontrolling interests.
Distributions to Noncontrolling Interests
EnLink and the General Partner distributed $247 million and $224 million to non-Devon unitholders during the first nine months of 2017 and 2016, respectively.
|
19. |
Commitments and Contingencies |
Devon is party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.
Royalty Matters
Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. The suits allege that the producers and related parties used below-market prices, made improper deductions, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with oil, natural gas and NGLs produced and sold. Devon is also involved in governmental agency proceedings and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.
Environmental Matters
Devon is subject to certain environmental, health and safety laws and regulations, including with respect to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devon’s monetary exposure for environmental matters is not expected to be material.
Other Matters
Devon is involved in other various legal proceedings incidental to its business. However, to Devon’s knowledge, there were no other material pending legal proceedings to which Devon is a party or to which any of its property is subject.
|
20. |
Fair Value Measurements |
The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. None of the items below are measured using Level 3 inputs. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other current payables and accrued expenses included in the accompanying consolidated balance sheets approximated fair value at September 30, 2017 and December 31, 2016. Therefore, such financial assets and liabilities are not presented in the following table. Additionally, the fair values of oil and gas assets, goodwill and other intangible assets and related impairments are measured as of the impairment date using Level 3 inputs. More information on these items is provided in Note 5 and Note 12, respectively.
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|||||
|
|
|
|
|
|
|
|
|
|
Measurements Using: |
|
|||||
|
|
Carrying |
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
||||
|
|
Amount |
|
|
Value |
|
|
Inputs |
|
|
Inputs |
|
||||
|
|
(Millions) |
|
|||||||||||||
September 30, 2017 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,510 |
|
|
$ |
1,510 |
|
|
$ |
1,431 |
|
|
$ |
79 |
|
Commodity derivatives |
|
$ |
43 |
|
|
$ |
43 |
|
|
$ |
— |
|
|
$ |
43 |
|
Commodity derivatives |
|
$ |
(60 |
) |
|
$ |
(60 |
) |
|
$ |
— |
|
|
$ |
(60 |
) |
Interest rate derivatives |
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1 |
|
Interest rate derivatives |
|
$ |
(62 |
) |
|
$ |
(62 |
) |
|
$ |
— |
|
|
$ |
(62 |
) |
Debt |
|
$ |
(10,403 |
) |
|
$ |
(11,480 |
) |
|
$ |
— |
|
|
$ |
(11,480 |
) |
Installment payment |
|
$ |
(243 |
) |
|
$ |
(244 |
) |
|
$ |
— |
|
|
$ |
(244 |
) |
Capital lease obligations |
|
$ |
(4 |
) |
|
$ |
(4 |
) |
|
$ |
— |
|
|
$ |
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,542 |
|
|
$ |
1,542 |
|
|
$ |
1,298 |
|
|
$ |
244 |
|
Commodity derivatives |
|
$ |
10 |
|
|
$ |
10 |
|
|
$ |
— |
|
|
$ |
10 |
|
Commodity derivatives |
|
$ |
(203 |
) |
|
$ |
(203 |
) |
|
$ |
— |
|
|
$ |
(203 |
) |
Interest rate derivatives |
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1 |
|
Interest rate derivatives |
|
$ |
(41 |
) |
|
$ |
(41 |
) |
|
$ |
— |
|
|
$ |
(41 |
) |
Debt |
|
$ |
(10,154 |
) |
|
$ |
(10,760 |
) |
|
$ |
— |
|
|
$ |
(10,760 |
) |
Installment payment |
|
$ |
(473 |
) |
|
$ |
(477 |
) |
|
$ |
— |
|
|
$ |
(477 |
) |
Capital lease obligations |
|
$ |
(7 |
) |
|
$ |
(6 |
) |
|
$ |
— |
|
|
$ |
(6 |
) |
The following methods and assumptions were used to estimate the fair values in the table above.
Level 1 Fair Value Measurements
Cash equivalents – Amounts consist primarily of money market investments and U.S. and Canadian treasury securities. The fair value approximates the carrying value.
Level 2 Fair Value Measurements
Cash equivalents – Amounts consist primarily of commercial paper and Canadian agency and provincial securities investments. The fair value approximates the carrying value.
Commodity and interest rate derivatives – The fair values of commodity and interest rate derivatives are estimated using internal discounted cash flow calculations based upon forward curves and data obtained from independent third parties for contracts with similar terms or data obtained from counterparties to the agreements.
Debt – Devon’s debt instruments do not actively trade in an established market. The fair values of its debt are estimated based on rates available for debt with similar terms and maturity. The fair value of the credit facility balance is the carrying value.
Installment payment – The fair value of the EnLink installment payment was based on Level 2 inputs from third-party market quotations.
Capital lease obligations – The fair value was calculated using inputs from third-party banks.
|
21. |
Segment Information |
Devon manages its operations through distinct operating segments, which are defined primarily by geographic areas. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of the businesses. However, Devon’s Canadian E&P operating segment is reported as a separate reporting segment primarily due to the significant differences between the U.S. and Canadian regulatory environments. Devon’s U.S. and Canadian segments are both primarily engaged in oil and gas E&P activities.
Devon considers EnLink, combined with the General Partner, to be an operating segment that is distinct from the U.S. and Canadian operating segments. EnLink’s operations consist of midstream assets and operations located across the U.S. Additionally, EnLink has a management team that is primarily responsible for capital and resource allocation decisions. Therefore, EnLink is presented as a separate reporting segment.
|
|
U.S. |
|
|
Canada |
|
|
EnLink |
|
|
Eliminations |
|
|
Total |
|
|||||
|
|
(Millions) |
|
|||||||||||||||||
Three Months Ended September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,575 |
|
|
$ |
358 |
|
|
$ |
1,223 |
|
|
$ |
— |
|
|
$ |
3,156 |
|
Asset dispositions and other |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
— |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
174 |
|
|
$ |
(174 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
195 |
|
|
$ |
63 |
|
|
$ |
142 |
|
|
$ |
— |
|
|
$ |
400 |
|
Interest expense |
|
$ |
82 |
|
|
$ |
17 |
|
|
$ |
49 |
|
|
$ |
(15 |
) |
|
$ |
133 |
|
Asset impairments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
Earnings before income taxes |
|
$ |
167 |
|
|
$ |
85 |
|
|
$ |
20 |
|
|
$ |
— |
|
|
$ |
272 |
|
Income tax expense |
|
$ |
(5 |
) |
|
$ |
28 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
25 |
|
Net earnings |
|
$ |
172 |
|
|
$ |
57 |
|
|
$ |
18 |
|
|
$ |
— |
|
|
$ |
247 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
19 |
|
Net earnings (loss) attributable to Devon |
|
$ |
172 |
|
|
$ |
57 |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
228 |
|
Capital expenditures, including acquisitions |
|
$ |
560 |
|
|
$ |
103 |
|
|
$ |
170 |
|
|
$ |
— |
|
|
$ |
833 |
|
Three Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,653 |
|
|
$ |
305 |
|
|
$ |
924 |
|
|
$ |
— |
|
|
$ |
2,882 |
|
Asset dispositions and other |
|
$ |
1,351 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,351 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
180 |
|
|
$ |
(180 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
196 |
|
|
$ |
72 |
|
|
$ |
126 |
|
|
$ |
— |
|
|
$ |
394 |
|
Interest expense |
|
$ |
185 |
|
|
$ |
34 |
|
|
$ |
49 |
|
|
$ |
(23 |
) |
|
$ |
245 |
|
Asset impairments |
|
$ |
317 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
319 |
|
Restructuring and transaction costs |
|
$ |
(10 |
) |
|
$ |
5 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(5 |
) |
Earnings before income taxes |
|
$ |
1,122 |
|
|
$ |
37 |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
1,178 |
|
Income tax expense |
|
$ |
5 |
|
|
$ |
159 |
|
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
171 |
|
Net earnings (loss) |
|
$ |
1,117 |
|
|
$ |
(122 |
) |
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
1,007 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
14 |
|
Net earnings (loss) attributable to Devon |
|
$ |
1,117 |
|
|
$ |
(122 |
) |
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
993 |
|
Capital expenditures, including acquisitions |
|
$ |
277 |
|
|
$ |
48 |
|
|
$ |
132 |
|
|
$ |
— |
|
|
$ |
457 |
|
Nine Months Ended September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
5,547 |
|
|
$ |
951 |
|
|
$ |
3,468 |
|
|
$ |
— |
|
|
$ |
9,966 |
|
Asset dispositions and other |
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
10 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
515 |
|
|
$ |
(515 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
556 |
|
|
$ |
199 |
|
|
$ |
407 |
|
|
$ |
— |
|
|
$ |
1,162 |
|
Interest expense |
|
$ |
243 |
|
|
$ |
48 |
|
|
$ |
133 |
|
|
$ |
(42 |
) |
|
$ |
382 |
|
Asset impairments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
9 |
|
Earnings before income taxes |
|
$ |
1,133 |
|
|
$ |
126 |
|
|
$ |
69 |
|
|
$ |
— |
|
|
$ |
1,328 |
|
Income tax expense |
|
$ |
— |
|
|
$ |
42 |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
51 |
|
Net earnings |
|
$ |
1,133 |
|
|
$ |
84 |
|
|
$ |
60 |
|
|
$ |
— |
|
|
$ |
1,277 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
59 |
|
|
$ |
— |
|
|
$ |
59 |
|
Net earnings attributable to Devon |
|
$ |
1,133 |
|
|
$ |
84 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1,218 |
|
Property and equipment, net |
|
$ |
7,726 |
|
|
$ |
2,787 |
|
|
$ |
6,569 |
|
|
$ |
— |
|
|
$ |
17,082 |
|
Total assets |
|
$ |
13,302 |
|
|
$ |
3,761 |
|
|
$ |
10,548 |
|
|
$ |
(52 |
) |
|
$ |
27,559 |
|
Capital expenditures, including acquisitions |
|
$ |
1,460 |
|
|
$ |
275 |
|
|
$ |
636 |
|
|
$ |
— |
|
|
$ |
2,371 |
|
Nine Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
4,320 |
|
|
$ |
688 |
|
|
$ |
2,488 |
|
|
$ |
— |
|
|
$ |
7,496 |
|
Asset dispositions and other |
|
$ |
1,351 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,351 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
539 |
|
|
$ |
(539 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
763 |
|
|
$ |
284 |
|
|
$ |
373 |
|
|
$ |
— |
|
|
$ |
1,420 |
|
Interest expense |
|
$ |
400 |
|
|
$ |
101 |
|
|
$ |
140 |
|
|
$ |
(66 |
) |
|
$ |
575 |
|
Asset impairments |
|
$ |
2,810 |
|
|
$ |
1,168 |
|
|
$ |
873 |
|
|
$ |
— |
|
|
$ |
4,851 |
|
Restructuring and transaction costs |
|
$ |
245 |
|
|
$ |
15 |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
266 |
|
Loss before income taxes |
|
$ |
(2,040 |
) |
|
$ |
(1,359 |
) |
|
$ |
(853 |
) |
|
$ |
— |
|
|
$ |
(4,252 |
) |
Income tax expense (benefit) |
|
$ |
(6 |
) |
|
$ |
(223 |
) |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(228 |
) |
Net loss |
|
$ |
(2,034 |
) |
|
$ |
(1,136 |
) |
|
$ |
(854 |
) |
|
$ |
— |
|
|
$ |
(4,024 |
) |
Net earnings (loss) attributable to noncontrolling interests |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(392 |
) |
|
$ |
— |
|
|
$ |
(391 |
) |
Net loss attributable to Devon |
|
$ |
(2,035 |
) |
|
$ |
(1,136 |
) |
|
$ |
(462 |
) |
|
$ |
— |
|
|
$ |
(3,633 |
) |
Property and equipment, net |
|
$ |
7,196 |
|
|
$ |
2,778 |
|
|
$ |
6,195 |
|
|
$ |
— |
|
|
$ |
16,169 |
|
Total assets |
|
$ |
12,317 |
|
|
$ |
4,355 |
|
|
$ |
10,197 |
|
|
$ |
(56 |
) |
|
$ |
26,813 |
|
Capital expenditures, including acquisitions |
|
$ |
2,454 |
|
|
$ |
158 |
|
|
$ |
816 |
|
|
$ |
— |
|
|
$ |
3,428 |
|
|
Recently Adopted Accounting Standards
In January 2017, Devon adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Its objective is to simplify several aspects of the accounting for share-based payments, including income taxes when awards vest or are settled, statutory withholding and forfeitures. As the result of adoption, Devon made certain income tax presentation changes, most notably prospectively presenting excess tax benefits and deficiencies in the consolidated comprehensive statements of earnings and as operating cash flows in the consolidated statements of cash flows. Devon also retrospectively applied the new cash flow statement guidance dictating the presentation of shares exchanged for tax-withholding purposes as a financing activity. The adoption of the new guidance did not materially impact the consolidated financial statements for the nine months ended September 30, 2017 or previously reported financial information but could have a more material future impact.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill And Other (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In January 2017, Devon elected to early adopt ASU 2017-04, and the adoption had no impact on the consolidated financial statements. Devon will perform future goodwill impairment tests according to ASU 2017-04.
Issued Accounting Standards Not Yet Adopted
The FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition and industry-specific guidance in Subtopic 932-605, Extractive Activities – Oil and Gas – Revenue Recognition. This ASU provides guidance concerning the recognition and measurement of revenue from contracts with customers. Its objective is to increase the usefulness of information in the financial statements regarding the nature, timing and uncertainty of revenues. The effective date for ASU 2014-09 was delayed through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual and interim periods beginning in 2018, with early adoption permitted in 2017. Devon has not early adopted this ASU. The ASU is required to be adopted using either the retrospective transition method, which requires restating previously reported results or the cumulative effect (modified retrospective) transition method, which utilizes a cumulative-effect adjustment to retained earnings in the period of adoption to account for prior period effects rather than restating previously reported results. Devon intends to use the cumulative effect transition method and does not anticipate this ASU will have a material impact on its balance sheet or related consolidated statements of earnings, equity or cash flows. However, Devon continues to evaluate the “gross versus net” presentation of certain revenues and associated expenses in its consolidated statements of earnings. Any presentation changes would have no impact on operating income, earnings or cash flows. Devon does not expect significant changes to its annual disclosures; however, Devon’s quarterly disclosures will expand upon adoption of this ASU. Devon has implemented a process to gather and provide the quarterly disclosures required by the ASU.
The FASB issued ASU 2016-02, Leases (Topic 842). This ASU will supersede the lease requirements in Topic 840, Leases. Its objective is to increase transparency and comparability among organizations. This ASU provides guidance requiring lessees to recognize most leases on their balance sheet. Lessor accounting does not significantly change, except for some changes made to align with new revenue recognition requirements. This ASU is effective for Devon beginning January 1, 2019 and will be applied using a modified retrospective transition method, which requires applying the new guidance to leases that exist or are entered into after the beginning of the earliest period in the financial statements. Early adoption is permitted, but Devon does not plan to early adopt. Devon is in the process of evaluating contracts and gathering the necessary terms and data elements for purposes of determining the impact this ASU will have on its consolidated financial statements and related disclosures. Recently, the FASB issued Proposed Accounting Standards Update (ASU) No. 2017-290, Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842. This proposed ASU would permit an entity not to apply Topic 842 to land easements and rights-of-way that exist or expired before the effective date of Topic 842 and that were not previously assessed under Topic 840. An entity would continue to apply its current accounting policy for accounting for land easements that existed before the effective date of Topic 842. Once an entity adopts Topic 842, it would apply that Topic prospectively to all new (or modified) land easements and rights-of-way to determine whether the arrangement should be accounted for as a lease. For Devon, these contracts represent a relatively small percentage of the aggregate value of contracts being evaluated but represent a significant number of contracts.
Based on continuing research, Devon estimates a large number of contracts and data elements must be gathered and reviewed to ensure proper accounting of these contracts once this ASU is effective. Devon anticipates the adoption of this standard will significantly impact its consolidated financial statements, systems, processes and controls and is evaluating technology requirements and solutions needed to comply with the requirements of this ASU.
The FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU will require entities to present the service cost component of net periodic benefit cost in the same line item as other employee compensation costs and present the other components of net periodic benefit cost outside of operating income in the statement of earnings. Only the service cost component of net periodic benefit cost is eligible for capitalization. This ASU is effective for Devon beginning January 1, 2018, and presentation changes in the statement of earnings will be applied retrospectively, while service cost component capitalization will be applied prospectively. Upon adoption of this ASU, Devon will reclassify $7 million, $14 million and $16 million of non-service cost components of net periodic benefit costs for 2017, 2016 and 2015, respectively, as other nonoperating items. Such amounts are currently classified in Devon’s G&A. No other changes upon adopting this ASU are expected to be material.
Devon is party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.
|
A summary of the gain computation follows.
|
|
Three Months Ended September 30, 2016 |
|
|
|
|
(Millions) |
|
|
Proceeds received, net of purchase price adjustments and selling costs |
|
$ |
1,653 |
|
Asset retirement obligation assumed by purchasers |
|
|
250 |
|
Total consideration received |
|
|
1,903 |
|
|
|
|
|
|
Allocated oil and gas property basis sold |
|
|
355 |
|
Allocated goodwill |
|
|
197 |
|
Total assets sold |
|
|
552 |
|
|
|
|
|
|
Gain on asset sales |
|
$ |
1,351 |
|
|
The following table presents the net gains and losses by derivative financial instrument type followed by the corresponding individual consolidated comprehensive statements of earnings caption.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, gas and NGL derivatives |
|
$ |
(144 |
) |
|
$ |
79 |
|
|
$ |
214 |
|
|
$ |
(30 |
) |
Marketing and midstream revenues |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
3 |
|
|
|
(7 |
) |
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
(4 |
) |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
(163 |
) |
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
Net gains (losses) recognized |
|
$ |
(153 |
) |
|
$ |
58 |
|
|
$ |
198 |
|
|
$ |
(359 |
) |
The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Commodity derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
$ |
39 |
|
|
$ |
9 |
|
Other long-term assets |
|
|
4 |
|
|
|
1 |
|
Interest rate derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
1 |
|
|
|
1 |
|
Total derivative assets |
|
$ |
44 |
|
|
$ |
11 |
|
Commodity derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
53 |
|
|
$ |
187 |
|
Other long-term liabilities |
|
|
7 |
|
|
|
16 |
|
Interest rate derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
1 |
|
|
|
— |
|
Other long-term liabilities |
|
|
61 |
|
|
|
41 |
|
Total derivative liabilities |
|
$ |
122 |
|
|
$ |
244 |
|
Notional |
|
|
Rate Received |
|
|
Rate Paid |
|
|
Expiration |
|||
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
750 |
|
|
Three Month LIBOR |
|
|
|
2.98% |
|
|
December 2048 (1) |
|
$ |
100 |
|
|
|
1.76% |
|
|
Three Month LIBOR |
|
|
January 2019 |
(1) |
Mandatory settlement in December 2018. |
|
|
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) |
|
|||||
Q4 2017 |
|
|
82,167 |
|
|
$ |
53.87 |
|
|
|
79,200 |
|
|
$ |
45.51 |
|
|
$ |
57.41 |
|
Q1-Q4 2018 |
|
|
22,792 |
|
|
$ |
51.13 |
|
|
|
34,121 |
|
|
$ |
45.71 |
|
|
$ |
55.71 |
|
Q1-Q4 2019 |
|
|
1,356 |
|
|
$ |
49.79 |
|
|
|
2,096 |
|
|
$ |
44.10 |
|
|
$ |
54.10 |
|
|
|
Oil Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (Bbls/d) |
|
|
Weighted Average Differential to WTI ($/Bbl) |
|
||
Q4 2017 |
|
Midland Sweet |
|
|
20,000 |
|
|
$ |
(0.41 |
) |
Q4 2017 |
|
Western Canadian Select |
|
|
87,304 |
|
|
$ |
(14.57 |
) |
Q1-Q4 2018 |
|
Midland Sweet |
|
|
23,000 |
|
|
$ |
(1.02 |
) |
Q1-Q4 2018 |
|
Western Canadian Select |
|
|
59,718 |
|
|
$ |
(14.85 |
) |
Q1-Q4 2019 |
|
Midland Sweet |
|
|
1,000 |
|
|
$ |
(0.80 |
) |
|
|
|
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) |
|
|||||
Q4 2017 |
|
|
331,196 |
|
|
$ |
3.21 |
|
|
|
455,000 |
|
|
$ |
3.03 |
|
|
$ |
3.41 |
|
Q1-Q4 2018 |
|
|
261,888 |
|
|
$ |
3.09 |
|
|
|
149,982 |
|
|
$ |
2.99 |
|
|
$ |
3.30 |
|
Q1-Q4 2019 |
|
|
6,164 |
|
|
$ |
3.08 |
|
|
|
8,630 |
|
|
$ |
2.92 |
|
|
$ |
3.22 |
|
|
|
Natural Gas Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (MMBtu/d) |
|
|
Weighted Average Differential to Henry Hub ($/MMBtu) |
|
||
Q4 2017 |
|
Panhandle Eastern Pipe Line |
|
|
150,000 |
|
|
$ |
(0.34 |
) |
Q4 2017 |
|
El Paso Natural Gas |
|
|
80,000 |
|
|
$ |
(0.13 |
) |
Q4 2017 |
|
Houston Ship Channel |
|
|
35,000 |
|
|
$ |
0.06 |
|
Q4 2017 |
|
Transco Zone 4 |
|
|
205,000 |
|
|
$ |
0.03 |
|
Q1-Q4 2018 |
|
Panhandle Eastern Pipe Line |
|
|
50,000 |
|
|
$ |
(0.29 |
) |
|
|
|
|
Price Swaps |
|
|
Price Collars |
|
||||||||||||||
Period |
|
Product |
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Floor Price ($/Bbl) |
|
|
Weighted Average Ceiling Price ($/Bbl) |
|
|||||
Q4 2017 |
|
Propane |
|
|
2,663 |
|
|
$ |
31.98 |
|
|
|
1,000 |
|
|
$ |
28.35 |
|
|
$ |
30.45 |
|
Period |
|
Product |
|
Volume (Total) |
|
Weighted Average Price Paid |
|
Weighted Average Price Received |
|||
Q4 2017-Q3 2018 |
|
Propane |
|
|
537 |
|
MBbls |
|
Index |
|
$0.66/gal |
Q4 2017-Q3 2018 |
|
Normal Butane |
|
|
344 |
|
MBbls |
|
Index |
|
$0.77/gal |
|
The following table presents the components of asset impairments.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
U.S. oil and gas assets |
|
$ |
— |
|
|
$ |
317 |
|
|
$ |
— |
|
|
$ |
2,810 |
|
Canada oil and gas assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,166 |
|
EnLink goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
873 |
|
Other assets |
|
|
2 |
|
|
|
2 |
|
|
|
9 |
|
|
|
2 |
|
Total asset impairments |
|
$ |
2 |
|
|
$ |
319 |
|
|
$ |
9 |
|
|
$ |
4,851 |
|
|
|
|
September 30, 2016 |
|
|||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
|
(Millions) |
|
|||||
2016 reduction in workforce: |
|
|
|
|
|
|
|
|
Employee related costs |
|
$ |
(7 |
) |
|
$ |
229 |
|
Lease obligations |
|
|
— |
|
|
|
17 |
|
Asset impairments |
|
|
— |
|
|
|
3 |
|
Transaction costs |
|
|
2 |
|
|
|
17 |
|
Restructuring and transaction costs |
|
$ |
(5 |
) |
|
$ |
266 |
|
|
|
Other |
|
|
Other |
|
|
|
|
|
||
|
|
Current |
|
|
Long-term |
|
|
|
|
|
||
|
|
Liabilities |
|
|
Liabilities |
|
|
Total |
|
|||
|
|
(Millions) |
|
|||||||||
Balance as of December 31, 2016 |
|
$ |
48 |
|
|
$ |
62 |
|
|
$ |
110 |
|
Changes due to 2016 workforce reductions |
|
|
(25 |
) |
|
|
(2 |
) |
|
|
(27 |
) |
Changes related to prior years' restructurings |
|
|
(3 |
) |
|
|
(24 |
) |
|
|
(27 |
) |
Balance as of September 30, 2017 |
|
$ |
20 |
|
|
$ |
36 |
|
|
$ |
56 |
|
Balance as of December 31, 2015 |
|
$ |
13 |
|
|
$ |
63 |
|
|
$ |
76 |
|
Changes due to 2016 workforce reductions |
|
|
58 |
|
|
|
13 |
|
|
|
71 |
|
Changes related to prior years' restructurings |
|
|
5 |
|
|
|
(8 |
) |
|
|
(3 |
) |
Balance as of September 30, 2016 |
|
$ |
76 |
|
|
$ |
68 |
|
|
$ |
144 |
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Current income tax expense |
|
$ |
39 |
|
|
$ |
85 |
|
|
$ |
71 |
|
|
$ |
72 |
|
Deferred income tax expense (benefit) |
|
|
(14 |
) |
|
|
86 |
|
|
|
(20 |
) |
|
|
(300 |
) |
Total income tax expense (benefit) |
|
$ |
25 |
|
|
$ |
171 |
|
|
$ |
51 |
|
|
$ |
(228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Deferred tax asset valuation allowance |
|
|
(9 |
%) |
|
|
(35 |
%) |
|
|
(25 |
%) |
|
|
(20 |
%) |
Non-deductible goodwill impairments |
|
|
0 |
% |
|
|
6 |
% |
|
|
0 |
% |
|
|
(9 |
%) |
Change in unrecognized tax benefits |
|
|
3 |
% |
|
|
7 |
% |
|
|
1 |
% |
|
|
(2 |
%) |
Taxation on Canadian operations |
|
|
(1 |
%) |
|
|
0 |
% |
|
|
0 |
% |
|
|
(3 |
%) |
State income taxes |
|
|
0 |
% |
|
|
2 |
% |
|
|
0 |
% |
|
|
1 |
% |
Other |
|
|
(19 |
%) |
|
|
0 |
% |
|
|
(7 |
%) |
|
|
3 |
% |
Effective income tax rate |
|
|
9 |
% |
|
|
15 |
% |
|
|
4 |
% |
|
|
5 |
% |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Foreign currency translation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated foreign currency translation |
|
$ |
456 |
|
|
$ |
450 |
|
|
$ |
456 |
|
|
$ |
424 |
|
Change in cumulative translation adjustment |
|
|
17 |
|
|
|
(1 |
) |
|
|
31 |
|
|
|
52 |
|
Income tax benefit (expense) |
|
|
(16 |
) |
|
|
3 |
|
|
|
(30 |
) |
|
|
(24 |
) |
Ending accumulated foreign currency translation |
|
|
457 |
|
|
|
452 |
|
|
|
457 |
|
|
|
452 |
|
Pension and postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated pension and postretirement benefits |
|
|
(163 |
) |
|
|
(185 |
) |
|
|
(172 |
) |
|
|
(194 |
) |
Recognition of net actuarial loss and prior service cost in earnings (1) |
|
|
5 |
|
|
|
7 |
|
|
|
14 |
|
|
|
20 |
|
Income tax benefit |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
Ending accumulated pension and postretirement benefits |
|
|
(158 |
) |
|
|
(174 |
) |
|
|
(158 |
) |
|
|
(174 |
) |
Other |
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
Accumulated other comprehensive earnings, net of tax |
|
$ |
297 |
|
|
$ |
278 |
|
|
$ |
297 |
|
|
$ |
278 |
|
(1) |
These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of G&A on the accompanying consolidated comprehensive statements of earnings. See Note 16 for additional details. |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Net change in working capital accounts, net of assets and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
(215 |
) |
|
$ |
81 |
|
|
$ |
(85 |
) |
|
$ |
87 |
|
Income taxes receivable |
|
|
— |
|
|
|
6 |
|
|
|
8 |
|
|
|
107 |
|
Other current assets |
|
|
12 |
|
|
|
98 |
|
|
|
(43 |
) |
|
|
242 |
|
Accounts payable |
|
|
48 |
|
|
|
(34 |
) |
|
|
98 |
|
|
|
(185 |
) |
Revenues and royalties payable |
|
|
63 |
|
|
|
40 |
|
|
|
92 |
|
|
|
34 |
|
Other current liabilities |
|
|
99 |
|
|
|
(54 |
) |
|
|
24 |
|
|
|
(77 |
) |
Net change in working capital |
|
$ |
7 |
|
|
$ |
137 |
|
|
$ |
94 |
|
|
$ |
208 |
|
Interest paid (net of capitalized interest) |
|
$ |
49 |
|
|
$ |
113 |
|
|
$ |
285 |
|
|
$ |
402 |
|
Income taxes paid (received) |
|
$ |
— |
|
|
$ |
(7 |
) |
|
$ |
(1) |
|
|
$ |
(130 |
) |
|
Components of accounts receivable include the following:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Oil, gas and NGL sales |
|
$ |
528 |
|
|
$ |
487 |
|
Joint interest billings |
|
|
111 |
|
|
|
110 |
|
Marketing and midstream revenues |
|
|
792 |
|
|
|
708 |
|
Other |
|
|
44 |
|
|
|
69 |
|
Gross accounts receivable |
|
|
1,475 |
|
|
|
1,374 |
|
Allowance for doubtful accounts |
|
|
(13 |
) |
|
|
(18 |
) |
Net accounts receivable |
|
$ |
1,462 |
|
|
$ |
1,356 |
|
|
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Customer relationships |
|
$ |
1,796 |
|
|
$ |
1,796 |
|
Accumulated amortization |
|
|
(202 |
) |
|
|
(172 |
) |
Net intangibles |
|
$ |
1,594 |
|
|
$ |
1,624 |
|
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
(Millions) |
|
|||||
Installment payment - see Note 2 |
$ |
243 |
|
|
$ |
249 |
|
Accrued interest payable |
|
204 |
|
|
|
130 |
|
Income taxes payable |
|
197 |
|
|
|
32 |
|
Derivative liabilities |
|
54 |
|
|
|
187 |
|
Restructuring liabilities |
|
20 |
|
|
|
48 |
|
Other |
|
285 |
|
|
|
420 |
|
Other current liabilities |
$ |
1,003 |
|
|
$ |
1,066 |
|
|
A summary of debt is as follows:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
(Millions) |
|
|||||
Devon debt: |
|
|
|
|
|
|
|
|
Debentures and notes |
|
$ |
6,933 |
|
|
$ |
6,933 |
|
Net discount on debentures and notes |
|
|
(30 |
) |
|
|
(30 |
) |
Debt issuance costs |
|
|
(41 |
) |
|
|
(44 |
) |
Total Devon debt |
|
|
6,862 |
|
|
|
6,859 |
|
EnLink debt: |
|
|
|
|
|
|
|
|
Credit facilities |
|
|
74 |
|
|
|
148 |
|
Debentures and notes |
|
|
3,500 |
|
|
|
3,163 |
|
Net premium (discount) on debentures and notes |
|
|
(6 |
) |
|
|
9 |
|
Debt issuance costs |
|
|
(27 |
) |
|
|
(25 |
) |
Total EnLink debt |
|
|
3,541 |
|
|
|
3,295 |
|
Total debt |
|
|
10,403 |
|
|
|
10,154 |
|
Less amount classified as short-term debt (1) |
|
|
20 |
|
|
|
— |
|
Total long-term debt |
|
$ |
10,383 |
|
|
$ |
10,154 |
|
(1) |
Short-term debt as of September 30, 2017 consists of $20 million of 8.25% senior notes due July 1, 2018. |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devon net financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest based on debt outstanding |
|
$ |
97 |
|
|
$ |
120 |
|
|
$ |
292 |
|
|
$ |
376 |
|
Early retirement of debt |
|
|
— |
|
|
|
84 |
|
|
|
— |
|
|
|
84 |
|
Capitalized interest |
|
|
(19 |
) |
|
|
(16 |
) |
|
|
(53 |
) |
|
|
(47 |
) |
Other |
|
|
(1 |
) |
|
|
7 |
|
|
|
(3 |
) |
|
|
18 |
|
Total Devon net financing costs |
|
|
77 |
|
|
|
195 |
|
|
|
236 |
|
|
|
431 |
|
EnLink net financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest based on debt outstanding |
|
|
43 |
|
|
|
37 |
|
|
|
125 |
|
|
|
105 |
|
Interest accretion on deferred installment payment |
|
|
7 |
|
|
|
13 |
|
|
|
20 |
|
|
|
39 |
|
Early retirement of debt |
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
Other |
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Total EnLink net financing costs |
|
|
50 |
|
|
|
48 |
|
|
|
134 |
|
|
|
139 |
|
Total net financing costs |
|
$ |
127 |
|
|
$ |
243 |
|
|
$ |
370 |
|
|
$ |
570 |
|
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
|
|
(Millions) |
|
|||||
Asset retirement obligations as of beginning of period |
|
$ |
1,272 |
|
|
$ |
1,414 |
|
Liabilities incurred and assumed through acquisitions |
|
|
30 |
|
|
|
18 |
|
Liabilities settled and divested |
|
|
(53 |
) |
|
|
(310 |
) |
Revision of estimated obligation |
|
|
(184 |
) |
|
|
70 |
|
Accretion expense on discounted obligation |
|
|
47 |
|
|
|
58 |
|
Foreign currency translation adjustment |
|
|
29 |
|
|
|
26 |
|
Asset retirement obligations as of end of period |
|
|
1,141 |
|
|
|
1,276 |
|
Less current portion |
|
|
41 |
|
|
|
46 |
|
Asset retirement obligations, long-term |
|
$ |
1,100 |
|
|
$ |
1,230 |
|
|
|
|
Pension Benefits |
|
|
Postretirement Benefits |
|
||||||||||||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||||||
|
|
(Millions) |
|
|||||||||||||||||||||||||||||
Service cost |
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
12 |
|
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
11 |
|
|
|
9 |
|
|
|
32 |
|
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expected return on plan assets |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
(41 |
) |
|
|
(40 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of prior service cost (1) |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Net actuarial loss (1) |
|
|
5 |
|
|
|
6 |
|
|
|
14 |
|
|
|
19 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net periodic benefit cost (2) |
|
$ |
6 |
|
|
$ |
5 |
|
|
$ |
18 |
|
|
$ |
25 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
(1 |
) |
(1) |
These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period. |
(2) Net periodic benefit cost is a component of G&A in the accompanying consolidated comprehensive statements of earnings.
|
|
Amounts |
|
|
Rate |
|
||
|
(Millions) |
|
|
(Per Share) |
|
||
Quarter Ended 2017: |
|
|
|
|
|
|
|
First quarter 2017 |
$ |
32 |
|
|
$ |
0.06 |
|
Second quarter 2017 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2017 |
|
30 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
95 |
|
|
|
|
|
Quarter Ended 2016: |
|
|
|
|
|
|
|
First quarter 2016 |
$ |
125 |
|
|
$ |
0.24 |
|
Second quarter 2016 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2016 |
|
32 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|||||
|
|
|
|
|
|
|
|
|
|
Measurements Using: |
|
|||||
|
|
Carrying |
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
||||
|
|
Amount |
|
|
Value |
|
|
Inputs |
|
|
Inputs |
|
||||
|
|
(Millions) |
|
|||||||||||||
September 30, 2017 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,510 |
|
|
$ |
1,510 |
|
|
$ |
1,431 |
|
|
$ |
79 |
|
Commodity derivatives |
|
$ |
43 |
|
|
$ |
43 |
|
|
$ |
— |
|
|
$ |
43 |
|
Commodity derivatives |
|
$ |
(60 |
) |
|
$ |
(60 |
) |
|
$ |
— |
|
|
$ |
(60 |
) |
Interest rate derivatives |
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1 |
|
Interest rate derivatives |
|
$ |
(62 |
) |
|
$ |
(62 |
) |
|
$ |
— |
|
|
$ |
(62 |
) |
Debt |
|
$ |
(10,403 |
) |
|
$ |
(11,480 |
) |
|
$ |
— |
|
|
$ |
(11,480 |
) |
Installment payment |
|
$ |
(243 |
) |
|
$ |
(244 |
) |
|
$ |
— |
|
|
$ |
(244 |
) |
Capital lease obligations |
|
$ |
(4 |
) |
|
$ |
(4 |
) |
|
$ |
— |
|
|
$ |
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,542 |
|
|
$ |
1,542 |
|
|
$ |
1,298 |
|
|
$ |
244 |
|
Commodity derivatives |
|
$ |
10 |
|
|
$ |
10 |
|
|
$ |
— |
|
|
$ |
10 |
|
Commodity derivatives |
|
$ |
(203 |
) |
|
$ |
(203 |
) |
|
$ |
— |
|
|
$ |
(203 |
) |
Interest rate derivatives |
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1 |
|
Interest rate derivatives |
|
$ |
(41 |
) |
|
$ |
(41 |
) |
|
$ |
— |
|
|
$ |
(41 |
) |
Debt |
|
$ |
(10,154 |
) |
|
$ |
(10,760 |
) |
|
$ |
— |
|
|
$ |
(10,760 |
) |
Installment payment |
|
$ |
(473 |
) |
|
$ |
(477 |
) |
|
$ |
— |
|
|
$ |
(477 |
) |
Capital lease obligations |
|
$ |
(7 |
) |
|
$ |
(6 |
) |
|
$ |
— |
|
|
$ |
(6 |
) |
|
|
|
U.S. |
|
|
Canada |
|
|
EnLink |
|
|
Eliminations |
|
|
Total |
|
|||||
|
|
(Millions) |
|
|||||||||||||||||
Three Months Ended September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,575 |
|
|
$ |
358 |
|
|
$ |
1,223 |
|
|
$ |
— |
|
|
$ |
3,156 |
|
Asset dispositions and other |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
— |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
174 |
|
|
$ |
(174 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
195 |
|
|
$ |
63 |
|
|
$ |
142 |
|
|
$ |
— |
|
|
$ |
400 |
|
Interest expense |
|
$ |
82 |
|
|
$ |
17 |
|
|
$ |
49 |
|
|
$ |
(15 |
) |
|
$ |
133 |
|
Asset impairments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
Earnings before income taxes |
|
$ |
167 |
|
|
$ |
85 |
|
|
$ |
20 |
|
|
$ |
— |
|
|
$ |
272 |
|
Income tax expense |
|
$ |
(5 |
) |
|
$ |
28 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
25 |
|
Net earnings |
|
$ |
172 |
|
|
$ |
57 |
|
|
$ |
18 |
|
|
$ |
— |
|
|
$ |
247 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
19 |
|
Net earnings (loss) attributable to Devon |
|
$ |
172 |
|
|
$ |
57 |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
228 |
|
Capital expenditures, including acquisitions |
|
$ |
560 |
|
|
$ |
103 |
|
|
$ |
170 |
|
|
$ |
— |
|
|
$ |
833 |
|
Three Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,653 |
|
|
$ |
305 |
|
|
$ |
924 |
|
|
$ |
— |
|
|
$ |
2,882 |
|
Asset dispositions and other |
|
$ |
1,351 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,351 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
180 |
|
|
$ |
(180 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
196 |
|
|
$ |
72 |
|
|
$ |
126 |
|
|
$ |
— |
|
|
$ |
394 |
|
Interest expense |
|
$ |
185 |
|
|
$ |
34 |
|
|
$ |
49 |
|
|
$ |
(23 |
) |
|
$ |
245 |
|
Asset impairments |
|
$ |
317 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
319 |
|
Restructuring and transaction costs |
|
$ |
(10 |
) |
|
$ |
5 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(5 |
) |
Earnings before income taxes |
|
$ |
1,122 |
|
|
$ |
37 |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
1,178 |
|
Income tax expense |
|
$ |
5 |
|
|
$ |
159 |
|
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
171 |
|
Net earnings (loss) |
|
$ |
1,117 |
|
|
$ |
(122 |
) |
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
1,007 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
14 |
|
Net earnings (loss) attributable to Devon |
|
$ |
1,117 |
|
|
$ |
(122 |
) |
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
993 |
|
Capital expenditures, including acquisitions |
|
$ |
277 |
|
|
$ |
48 |
|
|
$ |
132 |
|
|
$ |
— |
|
|
$ |
457 |
|
Nine Months Ended September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
5,547 |
|
|
$ |
951 |
|
|
$ |
3,468 |
|
|
$ |
— |
|
|
$ |
9,966 |
|
Asset dispositions and other |
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
10 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
515 |
|
|
$ |
(515 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
556 |
|
|
$ |
199 |
|
|
$ |
407 |
|
|
$ |
— |
|
|
$ |
1,162 |
|
Interest expense |
|
$ |
243 |
|
|
$ |
48 |
|
|
$ |
133 |
|
|
$ |
(42 |
) |
|
$ |
382 |
|
Asset impairments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
9 |
|
Earnings before income taxes |
|
$ |
1,133 |
|
|
$ |
126 |
|
|
$ |
69 |
|
|
$ |
— |
|
|
$ |
1,328 |
|
Income tax expense |
|
$ |
— |
|
|
$ |
42 |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
51 |
|
Net earnings |
|
$ |
1,133 |
|
|
$ |
84 |
|
|
$ |
60 |
|
|
$ |
— |
|
|
$ |
1,277 |
|
Net earnings attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
59 |
|
|
$ |
— |
|
|
$ |
59 |
|
Net earnings attributable to Devon |
|
$ |
1,133 |
|
|
$ |
84 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
1,218 |
|
Property and equipment, net |
|
$ |
7,726 |
|
|
$ |
2,787 |
|
|
$ |
6,569 |
|
|
$ |
— |
|
|
$ |
17,082 |
|
Total assets |
|
$ |
13,302 |
|
|
$ |
3,761 |
|
|
$ |
10,548 |
|
|
$ |
(52 |
) |
|
$ |
27,559 |
|
Capital expenditures, including acquisitions |
|
$ |
1,460 |
|
|
$ |
275 |
|
|
$ |
636 |
|
|
$ |
— |
|
|
$ |
2,371 |
|
Nine Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
4,320 |
|
|
$ |
688 |
|
|
$ |
2,488 |
|
|
$ |
— |
|
|
$ |
7,496 |
|
Asset dispositions and other |
|
$ |
1,351 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,351 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
539 |
|
|
$ |
(539 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
763 |
|
|
$ |
284 |
|
|
$ |
373 |
|
|
$ |
— |
|
|
$ |
1,420 |
|
Interest expense |
|
$ |
400 |
|
|
$ |
101 |
|
|
$ |
140 |
|
|
$ |
(66 |
) |
|
$ |
575 |
|
Asset impairments |
|
$ |
2,810 |
|
|
$ |
1,168 |
|
|
$ |
873 |
|
|
$ |
— |
|
|
$ |
4,851 |
|
Restructuring and transaction costs |
|
$ |
245 |
|
|
$ |
15 |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
266 |
|
Loss before income taxes |
|
$ |
(2,040 |
) |
|
$ |
(1,359 |
) |
|
$ |
(853 |
) |
|
$ |
— |
|
|
$ |
(4,252 |
) |
Income tax expense (benefit) |
|
$ |
(6 |
) |
|
$ |
(223 |
) |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(228 |
) |
Net loss |
|
$ |
(2,034 |
) |
|
$ |
(1,136 |
) |
|
$ |
(854 |
) |
|
$ |
— |
|
|
$ |
(4,024 |
) |
Net earnings (loss) attributable to noncontrolling interests |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(392 |
) |
|
$ |
— |
|
|
$ |
(391 |
) |
Net loss attributable to Devon |
|
$ |
(2,035 |
) |
|
$ |
(1,136 |
) |
|
$ |
(462 |
) |
|
$ |
— |
|
|
$ |
(3,633 |
) |
Property and equipment, net |
|
$ |
7,196 |
|
|
$ |
2,778 |
|
|
$ |
6,195 |
|
|
$ |
— |
|
|
$ |
16,169 |
|
Total assets |
|
$ |
12,317 |
|
|
$ |
4,355 |
|
|
$ |
10,197 |
|
|
$ |
(56 |
) |
|
$ |
26,813 |
|
Capital expenditures, including acquisitions |
|
$ |
2,454 |
|
|
$ |
158 |
|
|
$ |
816 |
|
|
$ |
— |
|
|
$ |
3,428 |
|
|
|
|
|
|
|
|
|
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|
|
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|
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