DEVON ENERGY CORP/DE, 10-Q filed on 11/6/2019
Quarterly Report
v3.19.3
Document And Entity Information - shares
shares in Millions
9 Months Ended
Sep. 30, 2019
Oct. 23, 2019
Cover [Abstract]    
Document Type 10-Q  
Document Period End Date Sep. 30, 2019  
Amendment Flag false  
Trading Symbol DVN  
Entity Registrant Name DEVON ENERGY CORP/DE  
Entity Central Index Key 0001090012  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Document Fiscal Period Focus Q3  
Entity Common Stock, Shares Outstanding   384.1
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-32318  
Entity Tax Identification Number 73-1567067  
Entity Address, Address Line One 333 West Sheridan Avenue  
Entity Address, City or Town Oklahoma City  
Entity Address, State or Province OK  
Entity Address, Postal Zip Code 73102-5015  
City Area Code 405  
Local Phone Number 235-3611  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, par value $0.10 per share  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
v3.19.3
Consolidated Comprehensive Statements Of Earnings - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Upstream revenues $ 1,147 $ 934 $ 2,801 $ 2,717
Revenues $ 700 $ 1,222 $ 2,195 $ 3,240
Type of Revenue [Extensible List] us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember
Total revenues $ 1,847 $ 2,156 $ 4,996 $ 5,957
Production expenses 368 417 1,104 1,218
Exploration expenses 18 22 29 105
Expenses $ 684 $ 1,201 $ 2,147 $ 3,216
Type of Cost, Good or Service [Extensible List] us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember
Depreciation, depletion and amortization $ 402 $ 342 $ 1,176 $ 989
Asset impairments   2   156
Asset dispositions (2) (6) (47) 5
General and administrative expenses 107 128 356 438
Financing costs, net 60 68 186 521
Restructuring and transaction costs 10 6 73 91
Other expenses 6 (9) (3) (73)
Total expenses 1,653 2,171 5,021 6,666
Earnings (loss) from continuing operations before income taxes 194 (15) (25) (709)
Income tax expense (benefit) 55 (171) 16 (161)
Net earnings (loss) from continuing operations 139 156 (41) (548)
Net earnings (loss) from discontinued operations, net of income taxes (30) 2,407 328 2,623
Net earnings 109 2,563 287 2,075
Net earnings attributable to noncontrolling interests   26   160
Net earnings attributable to Devon $ 109 $ 2,537 $ 287 $ 1,915
Basic net earnings (loss) per share:        
Basic earnings (loss) from continuing operations per share $ 0.35 $ 0.32 $ (0.10) $ (1.08)
Basic earnings (loss) from discontinued operations per share (0.08) 4.85 0.79 4.82
Basic net earnings per share 0.27 5.17 0.69 3.74
Diluted net earnings (loss) per share:        
Diluted earnings (loss) from continuing operations per share 0.35 0.32 (0.10) (1.08)
Diluted earnings (loss) from discontinued operations per share (0.08) 4.82 0.79 4.82
Diluted net earnings per share $ 0.27 $ 5.14 $ 0.69 $ 3.74
Comprehensive earnings (loss):        
Net earnings $ 109 $ 2,563 $ 287 $ 2,075
Other comprehensive earnings (loss), net of tax:        
Foreign currency translation, discontinued operations   35 78 (47)
Release of Canadian cumulative translation adjustment, discontinued operations [1]     (1,237)  
Pension and postretirement plans 1 36 16 43
Other comprehensive earnings (loss), net of tax 1 71 (1,143) (4)
Comprehensive earnings (loss): 110 2,634 (856) 2,071
Comprehensive earnings attributable to noncontrolling interests   26   160
Comprehensive earnings (loss) attributable to Devon $ 110 $ 2,608 $ (856) $ 1,911
[1] In conjunction with the sale of substantially all of its Canadian oil and gas assets and operations in Canada, Devon released the cumulative translation adjustment as part of its gain on the disposition of its Canadian business. See Note 18 for additional details.
v3.19.3
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Cash flows from operating activities:        
Net earnings $ 109 $ 2,563 $ 287 $ 2,075
Adjustments to reconcile net earnings to net cash from operating activities:        
Net (earnings) loss from discontinued operations, net of income taxes 30 (2,407) (328) (2,623)
Depreciation, depletion and amortization 402 342 1,176 989
Asset impairments   2   156
Leasehold impairments 13 14 15 75
Accretion on discounted liabilities 10 9 30 27
Total (gains) losses on commodity derivatives (127) 376 338 976
Cash settlements on commodity derivatives 71 (175) 125 (404)
(Gains) losses on asset dispositions (2) (6) (47) 5
Deferred income tax expense (benefit) 53 (145) 15 (149)
Share-based compensation 23 25 92 112
Early retirement of debt       312
Other 2 43 (10) (22)
Changes in assets and liabilities, net 13 (81) (130) (10)
Net cash from operating activities - continuing operations 597 560 1,563 1,519
Cash flows from investing activities:        
Capital expenditures (536) (548) (1,532) (1,653)
Acquisitions of property and equipment (5) (19) (28) (35)
Divestitures of property and equipment 7 89 346 696
Net cash from investing activities - continuing operations (534) (478) (1,214) (992)
Cash flows from financing activities:        
Repayments of long-term debt principal   (21) (162) (828)
Early retirement of debt       (304)
Repurchases of common stock (561) (1,698) (1,746) (2,197)
Dividends paid on common stock (35) (38) (106) (112)
Shares exchanged for tax withholdings (1) (3) (23) (38)
Net cash from financing activities - continuing operations (597) (1,760) (2,037) (3,479)
Net change in cash, cash equivalents and restricted cash of continuing operations (534) (1,678) (1,688) (2,952)
Cash flows from discontinued operations:        
Operating activities (96) 293 (63) 643
Investing activities 7 2,900 2,504 2,350
Financing activities (1,571) 71 (1,579) 174
Effect of exchange rate changes on cash (3) 10 36 222
Net change in cash, cash equivalents and restricted cash of discontinued operations (1,663) 3,274 898 3,389
Net change in cash, cash equivalents and restricted cash (2,197) 1,596 (790) 437
Cash, cash equivalents and restricted cash at beginning of period 3,853 1,525 2,446 2,684
Cash, cash equivalents and restricted cash at end of period 1,656 3,121 1,656 3,121
Reconciliation of cash, cash equivalents and restricted cash:        
Cash and cash equivalents 1,375 3,102 1,375 3,102
Cash restricted for discontinued operations 280   280  
Restricted cash included in other current assets 1 19 1 19
Cash, cash equivalents and restricted cash at end of period $ 1,656 $ 3,121 $ 1,656 $ 3,121
v3.19.3
Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2019
Dec. 31, 2018
ASSETS    
Cash and cash equivalents $ 1,375 $ 2,414
Cash restricted for discontinued operations 280  
Accounts receivable 787 855
Current assets associated with discontinued operations 21 283
Other current assets 383 885
Total current assets 2,846 4,437
Oil and gas property and equipment, based on successful efforts accounting, net 9,122 8,982
Other property and equipment, net 1,055 1,044
Total property and equipment, net 10,177 10,026
Goodwill 841 841
Right-of-use assets 219  
Other long-term assets 216 276
Long-term assets associated with discontinued operations 95 3,986
Total assets 14,394 19,566
LIABILITIES AND STOCKHOLDERS' EQUITY    
Accounts payable 513 563
Revenues and royalties payable 700 832
Short-term debt   162
Current liabilities associated with discontinued operations 172 338
Other current liabilities 273 331
Total current liabilities 1,658 2,226
Long-term debt [1] 4,295 4,292
Lease liabilities 244  
Asset retirement obligations 526 606
Other long-term liabilities 431 442
Long-term liabilities associated with discontinued operations 175 2,285
Deferred income taxes 523 529
Stockholders' equity:    
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 387 million and 450 million shares in 2019 and 2018, respectively 39 45
Additional paid-in capital 2,815 4,486
Retained earnings 3,812 3,650
Accumulated other comprehensive earnings (loss) (116) 1,027
Treasury stock, at cost, 0.3 million and 1.0 million shares in 2019 and 2018, respectively (8) (22)
Total stockholders’ equity 6,542 9,186
Total liabilities and stockholders' equity $ 14,394 $ 19,566
[1] The balance as of December 31, 2018 excludes the $1.5 billion of Senior Notes classified as liabilities held for sale that were retired early in July 2019 utilizing a portion of the proceeds from the sale of Devon’s Canadian business. See Note 18 for additional details
v3.19.3
Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.10 $ 0.10
Common stock, shares authorized (in shares) 1,000,000,000.0 1,000,000,000.0
Common stock, shares issued (in shares) 387,000,000 450,000,000
Treasury stock, shares 300,000 1,000,000.0
v3.19.3
Consolidated Statements Of Equity - USD ($)
shares in Millions, $ in Millions
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Earnings (Loss) [Member]
Treasury Stock [Member]
Noncontrolling Interests [Member]
Balance at Dec. 31, 2017 $ 14,104 $ 53 $ 7,333 $ 702 $ 1,166   $ 4,850
Balance, shares at Dec. 31, 2017   525          
Net earnings 2,075     1,915     160
Other comprehensive earnings (loss), net of tax (4)       (4)    
Restricted stock grants, net of cancellations, shares   3          
Common stock repurchased (2,271)         $ (2,271)  
Common stock retired   $ (6) (2,230)     2,236  
Common stock retired, shares   (55)          
Common stock dividends (112)     (112)      
Share-based compensation 114   114        
Share-based compensation, shares   1          
Divestment of subsidiary equity investment (4,861)       2   (4,863)
Subsidiary equity transactions 72           72
Distributions to noncontrolling interests (219)           (219)
Balance at Sep. 30, 2018 8,898 $ 47 5,217 2,505 1,164 (35)  
Balance, shares at Sep. 30, 2018   474          
Balance at Jun. 30, 2018 12,848 $ 51 6,888 6 1,091 (22) 4,834
Balance, shares at Jun. 30, 2018   515          
Net earnings 2,563     2,537     26
Other comprehensive earnings (loss), net of tax 71       71    
Common stock repurchased (1,715)         (1,715)  
Common stock retired   $ (4) (1,698)     1,702  
Common stock retired, shares   (41)          
Common stock dividends (38)     (38)      
Share-based compensation 25   25        
Divestment of subsidiary equity investment (4,861)       2   (4,863)
Subsidiary equity transactions 5   2       $ 3
Balance at Sep. 30, 2018 8,898 $ 47 5,217 2,505 1,164 (35)  
Balance, shares at Sep. 30, 2018   474          
Effect of adoption of lease accounting (19)     (19)      
Balance at Dec. 31, 2018 9,186 $ 45 4,486 3,650 1,027 (22)  
Balance, shares at Dec. 31, 2018   450          
Net earnings 287     287      
Other comprehensive earnings (loss), net of tax (1,143)       (1,143)    
Restricted stock grants, net of cancellations, shares   3          
Common stock repurchased (1,755)         (1,755)  
Common stock retired   $ (6) (1,763)     1,769  
Common stock retired, shares   (66)          
Common stock dividends (106)     (106)      
Share-based compensation 92   92        
Balance at Sep. 30, 2019 6,542 $ 39 2,815 3,812 (116) (8)  
Balance, shares at Sep. 30, 2019   387          
Balance at Jun. 30, 2019 6,994 $ 41 3,352 3,738 (117) (20)  
Balance, shares at Jun. 30, 2019   410          
Net earnings 109     109      
Other comprehensive earnings (loss), net of tax 1       1    
Common stock repurchased (549)         (549)  
Common stock retired   $ (2) (559)     561  
Common stock retired, shares   (23)          
Common stock dividends (35)     (35)      
Share-based compensation 22   22        
Balance at Sep. 30, 2019 $ 6,542 $ 39 $ 2,815 $ 3,812 $ (116) $ (8)  
Balance, shares at Sep. 30, 2019   387          
v3.19.3
Summary Of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary Of Significant Accounting Policies

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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 2018 Annual Report on Form 10-K.

The accompanying unaudited interim financial statements 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, 2019 and 2018 and Devon’s financial position as of September 30, 2019. As further discussed in Note 18, Devon sold its Canadian operations on June 27, 2019 and its ownership interests in EnLink and the General Partner on July 18, 2018. Activity relating to Devon’s Canadian operations and EnLink and the General Partner are classified as discontinued operations within Devon’s consolidated comprehensive statements of earnings and consolidated statements of cash flows. The associated assets and liabilities of Devon’s Canadian operations are presented as assets and liabilities associated with discontinued operations on the consolidated balance sheets.

 

Segment Information

 

Subsequent to the sale of Devon’s Canadian business in 2019 discussed in Note 18, Devon’s oil and gas exploration and production activities are solely focused in the U.S. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of its business. With the reclassification of Devon’s Canadian operations to discontinued operations and assets and liabilities associated with discontinued operations, Devon now has one reporting segment, which is reflected in the consolidated financial statements.

 

The following table presents revenue from contracts with customers that are disaggregated based on the type of good.

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Oil

 

$

754

 

 

$

794

 

 

$

2,168

 

 

$

2,279

 

Gas

 

 

144

 

 

 

210

 

 

 

524

 

 

 

672

 

NGL

 

 

122

 

 

 

306

 

 

 

447

 

 

 

742

 

Oil, gas and NGL revenues from

   contracts with customers

 

 

1,020

 

 

 

1,310

 

 

 

3,139

 

 

 

3,693

 

Oil, gas and NGL derivatives

 

 

127

 

 

 

(376

)

 

 

(338

)

 

 

(976

)

Upstream revenues

 

 

1,147

 

 

 

934

 

 

 

2,801

 

 

 

2,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

 

407

 

 

 

750

 

 

 

1,157

 

 

 

2,047

 

Gas

 

 

142

 

 

 

191

 

 

 

532

 

 

 

506

 

NGL

 

 

151

 

 

 

281

 

 

 

506

 

 

 

687

 

Total marketing revenues from

   contracts with customers

 

 

700

 

 

 

1,222

 

 

 

2,195

 

 

 

3,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,847

 

 

$

2,156

 

 

$

4,996

 

 

$

5,957

 

 

Recently Adopted Accounting Standards

 

In January 2019, Devon adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective method. See Note 14 for further discussion regarding Devon’s adoption of the leases standard.

The SEC released Final Rule No. 33-10532, Disclosure Update and Simplification, which amends various SEC disclosure requirements determined to be redundant, duplicative, overlapping, outdated or superseded as part of the SEC’s ongoing disclosure effectiveness initiative. The rule was effective November 5, 2018. The rule amended numerous SEC rules, items and forms covering a diverse group of topics. Devon has implemented these required changes which generally reduced or eliminated disclosures. Devon adopted the requirement of presenting current and comparative quarterly stockholders’ equity roll forwards in the first quarter of 2019.

The SEC released Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends Regulation S-K to modernize and simplify certain disclosure requirements in a manner that reduces costs and burdens on registrants while continuing to provide all material information to investors. The rule became effective May 2, 2019. The rule amended numerous SEC rules, items and forms covering a diverse group of topics, primarily focusing on reducing or eliminating disclosures. Other than presentation, this adoption did not have a material impact on Devon’s consolidated financial statements.

Issued Accounting Standards Not Yet Adopted

The FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement. This ASU will eliminate, add and modify certain disclosure requirements for fair value measurement. The ASU is effective for annual and interim periods beginning January 1, 2020, with early adoption permitted for either the entire standard or only the provisions that eliminate or modify requirements. The ASU requires the additional disclosure requirements to be adopted using a retrospective approach. Devon has evaluated the provisions of this ASU and does not expect any material impact on its disclosures in the notes to the consolidated financial statements.

 

The FASB issued ASU 2018-15, Intangibles, Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU will require a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. This ASU is effective for annual and interim periods beginning January 1, 2020, with early adoption permitted. Entities have the option to adopt the ASU using either a retrospective approach or a prospective approach applied to all implementation costs incurred after the date of the adoption. Devon has evaluated the provisions of this ASU and does not expect any material impact on its consolidated financial statements.

 

v3.19.3
Divestitures
9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Divestitures

2.Divestitures

 

In February 2019, Devon announced its intent to separate its Canadian business and Barnett Shale assets from the Company, based on authorizations provided by its Board of Directors. On June 27, 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada to Canadian Natural Resources Limited for proceeds, net of purchase price adjustments, of $2.6 billion ($3.4 billion Canadian dollars), and recognized a pre-tax gain of $223 million ($480 million, net of tax). Included within this gain is a $34 million ($20 million, net of tax) adjustment to the gain in the third quarter of 2019 related to an interim post closing settlement with Canadian Natural Resources Limited with final closing expected in the fourth quarter of 2019. As a part of the transaction, $436 million of asset retirement obligations were assumed by Canadian Natural Resources Limited. In aggregate, the total estimated proved reserves associated with these assets were approximately 400 MMBoe, or 21% of total proved reserves. In conjunction with the Canadian divestiture, Devon recognized approximately $280 million of restructuring and asset impairment related charges. These costs relate to personnel, office lease abandonment and a firm transportation agreement abandonment. Additional information on these discontinued operations can be found in Note 18.

 

Devon is evaluating multiple methods of separation for the Barnett Shale assets, including a potential sale, merger or spin-off. Estimated proved reserves associated with Devon’s Barnett Shale assets are approximately 46% of total U.S. proved reserves. As of September 30, 2019, Devon’s Barnett Shale assets were considered held for use and had a net carrying value of approximately $1.4 billion. Devon evaluated its Barnett Shale assets for impairment as of September 30, 2019, and concluded an impairment was not required. This conclusion was based on probability-weighted computations applied to fair value estimates of held for use and held for sale options under evaluation. Although an impairment was not required to be recognized at September 30, 2019, should Devon enter into a sale transaction at current market estimates for its Barnett Shale assets, Devon would recognize an impairment based on the estimated transaction value as compared to the carrying value. Devon anticipates reporting all information for its Barnett Shale assets as discontinued operations when all the requisite criteria are met for such financial statement presentation.

In the first quarter of 2019, Devon received proceeds of approximately $300 million and recognized a $44 million net gain on asset dispositions, primarily from sales of non-core assets in the Permian Basin. In aggregate, the total estimated proved reserves associated with these divested assets were approximately 25 MMBoe, or less than 2% of total U.S. proved reserves. As of December 31, 2018, assets and liabilities associated with these divested assets were classified as held for sale in the accompanying consolidated balance sheet.

During the second quarter of 2018, Devon sold a portion of its Barnett Shale assets, primarily located in Johnson County for $553 million. Estimated proved reserves associated with these assets were approximately 10% of total proved reserves. The transaction resulted in an adjustment to Devon’s capitalized costs with no gain recognized in the consolidated statement of earnings. In conjunction with the divestiture, Devon settled certain gas processing contracts and recognized an approximately $40 million settlement expense, which is included in asset dispositions within the consolidated statement of earnings.

During the third quarter of 2018, Devon completed the sale of its aggregate ownership interests in EnLink and the General Partner for $3.125 billion and recognized a gain of approximately $2.6 billion ($2.2 billion after-tax). The proceeds from the sale were utilized to increase Devon’s share repurchase program, which is discussed further in Note 17. Additional information on these discontinued operations can be found in Note 18.

v3.19.3
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

 

3.Derivative Financial Instruments

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its 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. As of September 30, 2019, Devon did not have any open interest rate swap 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, 2019, Devon had the following open oil derivative positions. The first two tables present Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The third 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 2019

 

 

35,600

 

 

$

61.21

 

 

 

79,500

 

 

$

54.06

 

 

$

64.13

 

Q1-Q4 2020

 

 

7,238

 

 

$

57.29

 

 

 

31,932

 

 

$

51.85

 

 

$

61.93

 

Q1-Q4 2021

 

 

493

 

 

$

52.75

 

 

 

1,479

 

 

$

48.48

 

 

$

58.48

 

 

 

 

Three-Way Price Collars

 

Period

 

Volume

(Bbls/d)

 

 

Weighted

Average Floor Sold

Price ($/Bbl)

 

 

Weighted

Average Floor Purchased

Price ($/Bbl)

 

 

Weighted

Average

Ceiling Price

($/Bbl)

 

Q4 2019

 

 

5,000

 

 

$

50.00

 

 

$

63.00

 

 

$

74.80

 

 

 

 

Oil Basis Swaps

 

Period

 

Index

 

Volume

(Bbls/d)

 

 

Weighted Average

Differential to WTI

($/Bbl)

 

Q4 2019

 

Midland Sweet

 

 

28,000

 

 

$

(0.46

)

Q4 2019

 

Argus LLS

 

 

7,500

 

 

$

5.18

 

Q4 2019

 

Argus MEH

 

 

26,000

 

 

$

3.33

 

Q4 2019

 

NYMEX Roll

 

 

38,000

 

 

$

0.45

 

Q1-Q4 2020

 

Argus MEH

 

 

9,000

 

 

$

3.44

 

Q1-Q4 2020

 

NYMEX Roll

 

 

44,000

 

 

$

0.34

 

 

As of September 30, 2019, 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 2019

 

 

243,300

 

 

$

2.80

 

 

 

195,000

 

 

$

2.64

 

 

$

3.03

 

Q1-Q4 2020

 

 

81,409

 

 

$

2.77

 

 

 

42,557

 

 

$

2.73

 

 

$

3.03

 

 

 

 

Natural Gas Basis Swaps

 

Period

 

Index

 

Volume

(MMBtu/d)

 

 

Weighted Average

Differential to

Henry Hub

($/MMBtu)

 

Q4 2019

 

Panhandle Eastern Pipe Line

 

 

20,000

 

 

$

(0.56

)

Q4 2019

 

El Paso Natural Gas

 

 

130,000

 

 

$

(1.46

)

Q4 2019

 

Houston Ship Channel

 

 

162,500

 

 

$

0.01

 

Q1-Q4 2020

 

Panhandle Eastern Pipe Line

 

 

30,000

 

 

$

(0.47

)

Q1-Q4 2020

 

El Paso Natural Gas

 

 

45,000

 

 

$

(0.70

)

Q1-Q4 2020

 

Houston Ship Channel

 

 

10,000

 

 

$

0.02

 

 

 

As of September 30, 2019, 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

 

Period

 

Product

 

Volume (Bbls/d)

 

 

Weighted Average Price ($/Bbl)

 

Q4 2019

 

Ethane

 

 

1,000

 

 

$

11.55

 

Q4 2019

 

Natural Gasoline

 

 

4,500

 

 

$

55.93

 

Q4 2019

 

Normal Butane

 

 

4,000

 

 

$

33.69

 

Q4 2019

 

Propane

 

 

8,500

 

 

$

30.01

 

Q1-Q4 2020

 

Natural Gasoline

 

 

1,000

 

 

$

44.84

 

Q1-Q4 2020

 

Normal Butane

 

 

1,000

 

 

$

23.52

 

Q1-Q4 2020

 

Propane

 

 

4,500

 

 

$

25.18

 

 

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,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Commodity derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upstream revenues

 

$

127

 

 

$

(376

)

 

$

(338

)

 

$

(976

)

 

Marketing revenues

 

 

 

 

 

 

 

 

1

 

 

 

(1

)

 

Interest rate derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

 

 

 

 

65

 

 

Net gains (losses) recognized

 

$

127

 

 

$

(376

)

 

$

(337

)

 

$

(912

)

 

 

The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.

 

 

September 30, 2019

 

 

December 31, 2018

 

Commodity derivative assets:

 

 

 

 

 

 

 

 

Other current assets

 

$

163

 

 

$

634

 

Other long-term assets

 

 

15

 

 

 

40

 

Total derivative assets

 

$

178

 

 

$

674

 

Commodity derivative liabilities:

 

 

 

 

 

 

 

 

Other current liabilities

 

$

2

 

 

$

32

 

Other long-term liabilities

 

 

 

 

 

1

 

Total derivative liabilities

 

$

2

 

 

$

33

 

 

v3.19.3
Share-Based Compensation
9 Months Ended
Sep. 30, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

4.Share-Based Compensation

 

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated comprehensive statements of earnings. The vesting for certain share-based awards was accelerated in conjunction with the reduction of workforce described in Note 6 and is included in restructuring and transaction costs in the accompanying consolidated comprehensive statements of earnings.

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

G&A

 

$

64

 

 

$

82

 

Exploration expenses

 

 

1

 

 

 

2

 

Restructuring and transaction costs

 

 

27

 

 

 

28

 

Total

 

$

92

 

 

$

112

 

Related income tax benefit

 

$

13

 

 

$

16

 

 

Under its approved long-term incentive plan, Devon granted share-based awards to certain employees in the first nine months of 2019. The following table presents a summary of Devon’s unvested restricted stock awards and units, performance-based restricted stock awards and performance share units granted under the plan.

 

 

 

Restricted Stock

 

 

Performance-Based

 

 

Performance

 

 

 

Awards and Units

 

 

Restricted Stock Awards

 

 

Share Units

 

 

 

Awards and

Units

 

 

Weighted

Average

Grant-Date

Fair Value

 

 

Awards

 

 

Weighted

Average

Grant-Date

Fair Value

 

 

Units

 

 

 

 

 

Weighted

Average

Grant-Date

Fair Value

 

 

 

(Thousands, except fair value data)

 

Unvested at 12/31/18

 

 

5,963

 

 

$

35.47

 

 

 

302

 

 

$

35.93

 

 

 

2,868

 

 

 

 

 

$

30.14

 

Granted

 

 

4,404

 

 

$

25.49

 

 

 

 

 

$

 

 

 

741

 

 

 

 

 

$

28.97

 

Vested

 

 

(4,402

)

 

$

33.62

 

 

 

(149

)

 

$

38.03

 

 

 

(145

)

 

 

 

 

$

37.23

 

Forfeited

 

 

(700

)

 

$

27.44

 

 

 

 

 

$

 

 

 

(1,301

)

 

 

 

 

$

11.80

 

Unvested at 9/30/19

 

 

5,265

 

 

$

29.73

 

 

 

153

 

 

$

33.88

 

 

 

2,163

 

 

(1

)

 

$

40.31

 

 

(1)

A maximum of 4.3 million common shares could be awarded based upon Devon’s final TSR ranking.

The following table presents the assumptions related to the performance share units granted in 2019, as indicated in the previous summary table.

 

 

 

2019

 

Grant-date fair value

 

$

28.43

 

 

 

$

29.53

 

Risk-free interest rate

 

2.48%

 

Volatility factor

 

39.1%

 

Contractual term (years)

 

2.89

 

 

The following table presents a summary of the unrecognized compensation cost and the related weighted average recognition period associated with unvested awards and units as of September 30, 2019.

 

 

 

 

 

 

 

Performance-Based

 

 

 

 

 

 

 

Restricted Stock

 

 

Restricted Stock

 

 

Performance

 

 

 

Awards and Units

 

 

Awards

 

 

Share Units

 

Unrecognized compensation cost

 

$

97

 

 

$

 

 

$

18

 

Weighted average period for recognition (years)

 

 

2.6

 

 

 

1.7

 

 

 

1.5

 

 

v3.19.3
Asset Impairments
9 Months Ended
Sep. 30, 2019
Asset Impairment Charges [Abstract]  
Asset Impairments

5.Asset Impairments

Asset Impairments

During the first nine months of 2018, Devon recognized $109 million of proved asset impairments relating to U.S. non-core assets no longer in its development plans and approximately $47 million of non-oil and gas asset impairments.

Unproved Impairments

During the first nine months of 2019 and 2018, Devon impaired certain non-core acreage in the U.S. that it no longer intends to pursue for exploration opportunities, resulting in unproved impairments of $15 million and $76 million, respectively. Unproved impairments are included in exploration expenses in the consolidated comprehensive statements of earnings.

v3.19.3
Restructuring and Transaction Costs
9 Months Ended
Sep. 30, 2019
Restructuring And Related Activities [Abstract]  
Restructuring and Transaction Costs

6.Restructuring and Transaction Costs

During the first quarter of 2019, Devon announced workforce reductions and other initiatives designed to enhance its operational focus and cost structure in conjunction with the portfolio transformation announcement further discussed in Note 2. As a result, Devon recognized $73 million of restructuring expenses during the first nine months of 2019. Of these expenses, $27 million resulted from

accelerated vesting of share-based grants, which are noncash charges. Additionally, $5 million resulted from settlements of defined retirement benefits.

During the first nine months of 2018, Devon recognized $91 million in personnel related restructuring expenses related to workforce reductions. Of these expenses, $28 million resulted from accelerated vesting of share-based grants, which are noncash charges. Additionally, $15 million resulted from estimated settlements of defined retirement benefits.

Devon anticipates recognizing additional restructuring charges in 2019, primarily when the separation of its Barnett Shale assets is completed.

The following table summarizes Devon’s restructuring liabilities.

 

 

Other

 

 

Other

 

 

 

 

 

 

 

Current

 

 

Long-term

 

 

 

 

 

 

 

Liabilities

 

 

Liabilities

 

 

Total

 

Balance as of December 31, 2018

 

$

39

 

 

$

3

 

 

$

42

 

Changes related to 2019 workforce reductions

 

 

22