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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 2015 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, 2016 and 2015 and Devon’s financial position as of September 30, 2016.
Recently Adopted Accounting Standards
In January 2016, Devon adopted ASU 2015-03, Interest – Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. As a result of the adoption, Devon reclassified unamortized debt issuance costs of $81 million as of December 31, 2015 from other long-term assets to a reduction of long-term debt on the consolidated balance sheets.
The FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. Its objective is to clarify guidance and eliminate diversity in practice of classification on certain cash receipts and payments in the statement of cash flows. This ASU is effective for Devon beginning January 1, 2018, with early adoption permitted. Devon early adopted this ASU as of September 30, 2016 using a retrospective transition method. As a result of the adoption, Devon has classified $82 million of debt retirement payments as cash flows from financing activities on the accompanying 2016 consolidated statements of cash flows. No other periods presented in the consolidated statements of cash flows were impacted by the adoption of this standard.
Recently Issued Accounting Standards
The FASB issued 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 accounting for income taxes when awards vest or are settled, statutory withholding and accounting for forfeitures. Classification of these aspects on the statement of cash flows is also addressed. This ASU is effective for Devon beginning January 1, 2017. Devon does not expect that this ASU will have a material impact on its consolidated financial statements and related disclosures.
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. 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 is continuing to evaluate the impact this ASU will have on its consolidated financial statements and related disclosures. Devon does not plan on early adopting.
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 from Topic 840, except for some changes made to align with Topic 606. 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. Devon is continuing to evaluate the impact this ASU will have on its consolidated financial statements and related disclosures and does not plan on early adopting.
|
2. |
Acquisitions and Divestitures |
Devon Acquisitions
On January 7, 2016, Devon acquired approximately 80,000 net acres and assets in the STACK play for approximately $1.5 billion. Devon funded the acquisition with $849 million of cash and $659 million of common equity shares. The allocation of the purchase price at September 30, 2016 was approximately $1.3 billion to unproved properties and approximately $200 million to proved properties.
EnLink Acquisitions
On January 7, 2016, EnLink acquired Anadarko Basin gathering and processing midstream assets, along with dedicated acreage service rights and service contracts, for approximately $1.5 billion, subject to certain adjustments. 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 is 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 $250 million of undiscounted future installment payment is reported in other current liabilities in the accompanying consolidated balance sheets with the remaining $250 million payment reported in other long-term liabilities. The accretion of the discount is reported within net financing costs in the accompanying consolidated comprehensive statement of earnings. A preliminary allocation of the purchase price at September 30, 2016 was $1.0 billion to intangible assets and approximately $400 million to property and equipment.
On August 1, 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. As of September 30, 2016, EnLink contributed approximately $244 million of existing non-monetary assets to the joint venture and had 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 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.
Devon Asset Divestitures
In the first nine months of 2016, Devon divested certain non-core upstream assets in the U.S., and subsequent to quarter-end, completed the divestiture of its 50% interest in the Access Pipeline in Canada.
Upstream Asset Sales
In the second quarter of 2016, Devon divested its non-core Mississippian assets for approximately $200 million. Estimated proved reserves associated with these assets were approximately 11 MMBoe, or less than 1% of total U.S. proved reserves.
During 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 have been utilized primarily for debt repayment and to support future capital investment in Devon’s core resource plays.
Under full cost accounting rules, sales or other dispositions of oil and gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of gain or loss. However, if not recognizing a gain or loss on the disposition would otherwise significantly alter the relationship between a cost center’s capitalized costs and proved reserves, then a gain or loss must be recognized. Absent gain recognition, the divestiture transactions that closed in the third quarter of 2016 would have significantly altered the costs and reserves relationship. 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 |
|
|
|
|
|
|
Gains on asset sales |
|
$ |
1,351 |
|
Access Pipeline Divestiture
As of September 30, 2016, the Access Pipeline assets and liabilities were classified as held for sale in the accompanying consolidated balance sheet.
In October 2016, Devon divested Access Pipeline for $1.1 billion ($1.4 billion Canadian dollars) and recognized a gain of approximately $540 million on the transaction. In conjunction with the divestiture, Devon entered into a transportation agreement whereby Devon’s Canadian thermal-oil acreage is dedicated to Access Pipeline for an initial term of 25 years. Devon will be charged a market-based toll on its thermal-oil production over this term. In addition, Devon will receive an incremental payment of approximately $120 million upon the sanctioning and development of a new thermal-oil project on Devon’s Pike lease in Alberta.
|
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, costless price collars and call options. 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, 2016, 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.
As of December 31, 2015, Devon’s other current assets in the accompanying consolidated balance sheet included $236 million of accrued settlements that it received in January 2016.
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.
As of December 31, 2015, Devon held $75 million of cash collateral which represented the estimated fair value of certain derivative positions in excess of Devon’s credit guidelines. The collateral is reported in other current liabilities in the accompanying consolidated balance sheets.
Commodity Derivatives
As of September 30, 2016, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.
|
|
Price Swaps |
|
|
Price Collars |
|
|
Call Options Sold |
|
|||||||||||||||||||
Period |
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Floor Price ($/Bbl) |
|
|
Weighted Average Ceiling Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|||||||
Q4 2016 |
|
|
40,848 |
|
|
$ |
49.00 |
|
|
|
20,000 |
|
|
$ |
40.85 |
|
|
$ |
50.85 |
|
|
|
18,500 |
|
|
$ |
55.00 |
|
Q1-Q4 2017 |
|
|
10,452 |
|
|
$ |
50.57 |
|
|
|
32,496 |
|
|
$ |
44.60 |
|
|
$ |
57.37 |
|
|
|
— |
|
|
$ |
— |
|
Q1-Q4 2018 |
|
|
616 |
|
|
$ |
50.61 |
|
|
|
1,726 |
|
|
$ |
45.51 |
|
|
$ |
55.51 |
|
|
|
— |
|
|
$ |
— |
|
|
|
Oil Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (Bbls/d) |
|
|
Weighted Average Differential to WTI ($/Bbl) |
|
||
Q4 2016 |
|
Western Canadian Select |
|
|
33,000 |
|
|
$ |
(13.40 |
) |
Q4 2016 |
|
West Texas Sour |
|
|
5,000 |
|
|
$ |
(0.53 |
) |
Q4 2016 |
|
Midland Sweet |
|
|
13,000 |
|
|
$ |
0.25 |
|
As of September 30, 2016, 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 |
|
|
Call Options Sold |
|
|||||||||||||||||||
Period |
|
Volume (MMBtu/d) |
|
|
Weighted Average Price ($/MMBtu) |
|
|
Volume (MMBtu/d) |
|
|
Weighted Average Floor Price ($/MMBtu) |
|
|
Weighted Average Ceiling Price ($/MMBtu) |
|
|
Volume (MMBtu/d) |
|
|
Weighted Average Price ($/MMBtu) |
|
|||||||
Q4 2016 |
|
|
155,000 |
|
|
$ |
2.83 |
|
|
|
385,000 |
|
|
$ |
2.74 |
|
|
$ |
2.97 |
|
|
|
400,000 |
|
|
$ |
2.80 |
|
Q1-Q4 2017 |
|
|
145,384 |
|
|
$ |
3.06 |
|
|
|
230,904 |
|
|
$ |
2.91 |
|
|
$ |
3.31 |
|
|
|
— |
|
|
$ |
— |
|
Q1-Q4 2018 |
|
|
8,630 |
|
|
$ |
3.30 |
|
|
|
8,630 |
|
|
$ |
3.18 |
|
|
$ |
3.48 |
|
|
|
— |
|
|
$ |
— |
|
|
|
Natural Gas Basis Swaps |
|
||||||||||
Period |
|
Index |
|
Volume (MMBtu/d) |
|
|
Weighted Average Differential to Henry Hub ($/MMBtu) |
|
|||||
Q4 2016 |
|
Panhandle Eastern Pipe Line |
|
|
175,000 |
|
|
$ |
(0.34 |
) |
|||
Q4 2016 |
|
El Paso Natural Gas |
|
|
125,000 |
|
|
$ |
(0.12 |
) |
|||
Q4 2016 |
|
Houston Ship Channel |
|
|
30,000 |
|
|
$ |
0.11 |
|
|||
Q4 2016 |
|
Transco Zone 4 |
|
|
70,000 |
|
|
$ |
0.01 |
|
|||
Q1-Q4 2017 |
|
Panhandle Eastern Pipe Line |
|
|
150,000 |
|
|
$ |
(0.34 |
) |
|||
Q1-Q4 2017 |
|
El Paso Natural Gas |
|
|
80,000 |
|
|
$ |
(0.13 |
) |
|||
Q1-Q4 2017 |
|
Houston Ship Channel |
|
|
35,000 |
|
|
$ |
0.06 |
|
|||
Q1-Q4 2017 |
|
Transco Zone 4 |
|
|
205,000 |
|
|
$ |
0.03 |
|
As of September 30, 2016, 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 2016 |
|
Ethane |
|
|
6,000 |
|
|
$ |
9.71 |
|
|
|
10,000 |
|
|
$ |
8.34 |
|
|
$ |
9.60 |
|
Q4 2016 |
|
Propane |
|
|
1,000 |
|
|
$ |
21.53 |
|
|
|
6,000 |
|
|
$ |
19.88 |
|
|
$ |
21.98 |
|
As of September 30, 2016, EnLink had the following open derivative positions associated with gas processing and fractionation. EnLink’s NGL derivative positions settle by purity product against the average of the prompt month OPIS Mont Belvieu, Texas index. EnLink’s natural gas derivatives settle against the Henry Hub Gas Daily index.
Period |
|
Product |
|
Volume (Total) |
|
Weighted Average Price Paid |
|
Weighted Average Price Received |
|||
Q4 2016 |
|
Ethane |
|
|
170 |
|
MBbls |
|
$0.28/gal |
|
Index |
Q4 2016-Q3 2017 |
|
Propane |
|
|
405 |
|
MBbls |
|
Index |
|
$0.65/gal |
Q4 2016-Q3 2017 |
|
Normal Butane |
|
|
109 |
|
MBbls |
|
Index |
|
$0.60/gal |
Q4 2016-Q3 2017 |
|
Natural Gasoline |
|
|
113 |
|
MBbls |
|
Index |
|
$0.98/gal |
Q4 2016-Q3 2017 |
|
Natural Gas |
|
|
17,438 |
|
MMBtu/d |
|
Index |
|
$2.94/MMbtu |
Q4 2016 |
|
Condensate |
|
|
50 |
|
MBbls |
|
Index |
|
$40.20/bbl |
Interest Rate Derivatives
As of September 30, 2016, Devon had the following open interest rate derivative positions:
Notional |
|
|
Rate Received |
|
|
Rate Paid |
|
|
Expiration |
|||
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
100 |
|
|
Three Month LIBOR |
|
|
|
0.92% |
|
|
December 2016 |
|
$ |
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, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Commodity derivatives: |
|
(Millions) |
|
|||||||||||||
Oil, gas and NGL derivatives |
|
$ |
79 |
|
|
$ |
414 |
|
|
$ |
(30 |
) |
|
$ |
426 |
|
Marketing and midstream revenues |
|
|
(1 |
) |
|
|
6 |
|
|
|
(7 |
) |
|
|
8 |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
(20 |
) |
|
|
(30 |
) |
|
|
(163 |
) |
|
|
(28 |
) |
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
— |
|
|
|
91 |
|
|
|
(159 |
) |
|
|
200 |
|
Net gains (losses) recognized |
|
$ |
58 |
|
|
$ |
481 |
|
|
$ |
(359 |
) |
|
$ |
606 |
|
The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Commodity derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
$ |
12 |
|
|
$ |
34 |
|
Other long-term assets |
|
|
1 |
|
|
|
1 |
|
Interest rate derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
1 |
|
|
|
1 |
|
Other long-term assets |
|
|
1 |
|
|
|
1 |
|
Foreign currency derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
— |
|
|
|
8 |
|
Total derivative assets |
|
$ |
15 |
|
|
$ |
45 |
|
|
|
|
|
|
|
|
|
|
Commodity derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
40 |
|
|
$ |
14 |
|
Other long-term liabilities |
|
|
6 |
|
|
|
4 |
|
Interest rate derivative liabilities: |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
185 |
|
|
|
22 |
|
Foreign currency derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
— |
|
|
|
8 |
|
Total derivative liabilities |
|
$ |
231 |
|
|
$ |
48 |
|
|
5. |
Asset Impairments |
The following table presents the components of asset impairments.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
U.S. oil and gas assets |
|
$ |
317 |
|
|
$ |
4,715 |
|
|
$ |
2,810 |
|
|
$ |
14,340 |
|
Canada oil and gas assets |
|
|
— |
|
|
|
336 |
|
|
|
1,166 |
|
|
|
336 |
|
EnLink goodwill |
|
|
— |
|
|
|
576 |
|
|
|
873 |
|
|
|
576 |
|
EnLink other intangible assets |
|
|
— |
|
|
|
223 |
|
|
|
— |
|
|
|
223 |
|
Other assets |
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
4 |
|
Total asset impairments |
|
$ |
319 |
|
|
$ |
5,851 |
|
|
$ |
4,851 |
|
|
$ |
15,479 |
|
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 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 and Other Intangible Assets Impairments
In the first quarter of 2016 and the third quarter of 2015, Devon recognized goodwill and other intangible assets impairments related to EnLink’s business. Additional information regarding the impairments is discussed in Note 12.
|
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, 2015 |
|
$ |
13 |
|
|
$ |
63 |
|
|
$ |
76 |
|
Changes due to 2016 workforce reductions |
|
|
58 |
|
|
|
13 |
|
|
|
71 |
|
Changes related to prior years' restructurings |
|
|
5 |
|
|
|
(8 |
) |
|
|
(3 |
) |
Balance as September 30, 2016 |
|
$ |
76 |
|
|
$ |
68 |
|
|
$ |
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014 |
|
$ |
13 |
|
|
$ |
7 |
|
|
$ |
20 |
|
Changes related to prior years' restructurings |
|
|
(5 |
) |
|
|
(2 |
) |
|
|
(7 |
) |
Balance as of September 30, 2015 |
|
$ |
8 |
|
|
$ |
5 |
|
|
$ |
13 |
|
Reduction in Workforce
In the first nine months of 2016, Devon recognized $229 million in employee-related costs associated with a reduction in workforce that was made in response to the depressed commodity price environment. 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 defined benefit settlements. These cash and noncash charges included estimates for employees released from service during the first nine months of 2016, as well as amounts based on the number of employees expected to be impacted by certain of its non-core asset divestitures.
As a result of the reduction in workforce and asset divestitures, Devon ceased using certain office space that was subject to non-cancellable operating lease arrangements. Consequently, Devon recognized $17 million of restructuring costs that represent the present value of its future obligations under the leases. Additionally, Devon recognized $3 million of asset 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, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Current income tax expense (benefit) |
|
$ |
85 |
|
|
$ |
(6 |
) |
|
$ |
72 |
|
|
$ |
(87 |
) |
Deferred income tax expense (benefit) |
|
|
86 |
|
|
|
(1,708 |
) |
|
|
(300 |
) |
|
|
(5,348 |
) |
Total income tax expense (benefit) |
|
$ |
171 |
|
|
$ |
(1,714 |
) |
|
$ |
(228 |
) |
|
$ |
(5,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Deferred tax asset valuation allowance |
|
|
(35 |
%) |
|
|
0 |
% |
|
|
(20 |
%) |
|
|
0 |
% |
Non-deductible goodwill and intangible impairment |
|
|
6 |
% |
|
|
(5 |
%) |
|
|
(9 |
%) |
|
|
(2 |
%) |
Change in unrecognized tax benefits |
|
|
7 |
% |
|
|
0 |
% |
|
|
(2 |
%) |
|
|
0 |
% |
Taxation on Canadian operations |
|
|
0 |
% |
|
|
0 |
% |
|
|
(3 |
%) |
|
|
(1 |
%) |
State income taxes |
|
|
2 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
2 |
% |
Other |
|
|
0 |
% |
|
|
(1 |
%) |
|
|
3 |
% |
|
|
1 |
% |
Effective income tax rate |
|
|
15 |
% |
|
|
30 |
% |
|
|
5 |
% |
|
|
35 |
% |
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.
At December 31, 2015, Devon recorded a 100%, or $967 million, valuation allowance against the U.S. deferred tax assets that largely resulted from the full cost impairments recognized during 2015. In the first and second quarters of 2016, Devon provided an additional $808 and $467 million, respectively, deferred tax valuation allowance to reflect its continued financial losses incurred largely by the additional full cost impairments. In the third quarter of 2016, Devon’s U.S. segment reduced its deferred tax valuation allowance by $479 million primarily due to the gain from the sale of assets recorded during the quarter. Also during the third quarter of 2016, Devon’s Canadian segment recorded a $71 million partial valuation allowance due to its continued financial losses.
In the first quarter of 2016 and the third quarter of 2015, EnLink recorded goodwill and intangibles impairments totaling $873 million and $799 million, respectively. 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. During the third quarter of 2016, Devon recognized $85 million of unrecognized tax benefits, including $34 million of interest, associated with such tax examinations.
|
9. |
Other Comprehensive Earnings |
Components of other comprehensive earnings consist of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Foreign currency translation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated foreign currency translation |
|
$ |
450 |
|
|
$ |
725 |
|
|
$ |
424 |
|
|
$ |
983 |
|
Change in cumulative translation adjustment |
|
|
(1 |
) |
|
|
(242 |
) |
|
|
52 |
|
|
|
(519 |
) |
Income tax benefit (expense) |
|
|
3 |
|
|
|
30 |
|
|
|
(24 |
) |
|
|
49 |
|
Ending accumulated foreign currency translation |
|
|
452 |
|
|
|
513 |
|
|
|
452 |
|
|
|
513 |
|
Pension and postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated pension and postretirement benefits |
|
|
(185 |
) |
|
|
(197 |
) |
|
|
(194 |
) |
|
|
(204 |
) |
Recognition of net actuarial loss and prior service cost in earnings (1) |
|
|
7 |
|
|
|
6 |
|
|
|
20 |
|
|
|
17 |
|
Income tax benefit (expense) |
|
|
4 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(5 |
) |
Ending accumulated pension and postretirement benefits |
|
|
(174 |
) |
|
|
(192 |
) |
|
|
(174 |
) |
|
|
(192 |
) |
Accumulated other comprehensive earnings, net of tax |
|
$ |
278 |
|
|
$ |
321 |
|
|
$ |
278 |
|
|
$ |
321 |
|
(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, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Net change in working capital accounts, net of assets and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
81 |
|
|
$ |
273 |
|
|
$ |
87 |
|
|
$ |
713 |
|
Income taxes receivable |
|
|
6 |
|
|
|
98 |
|
|
|
107 |
|
|
|
514 |
|
Other current assets |
|
|
98 |
|
|
|
(30 |
) |
|
|
242 |
|
|
|
(36 |
) |
Accounts payable |
|
|
(34 |
) |
|
|
(33 |
) |
|
|
(185 |
) |
|
|
(135 |
) |
Revenues and royalties payable |
|
|
40 |
|
|
|
(105 |
) |
|
|
34 |
|
|
|
(288 |
) |
Other current liabilities |
|
|
(55 |
) |
|
|
(136 |
) |
|
|
(104 |
) |
|
|
(675 |
) |
Net change in working capital |
|
$ |
136 |
|
|
$ |
67 |
|
|
$ |
181 |
|
|
$ |
93 |
|
Interest paid (net of capitalized interest) |
|
$ |
113 |
|
|
$ |
113 |
|
|
$ |
402 |
|
|
$ |
343 |
|
Income taxes received |
|
$ |
(7 |
) |
|
$ |
(9 |
) |
|
$ |
(130 |
) |
|
$ |
(339 |
) |
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 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. During the first nine months of 2015, EnLink’s acquisitions included $360 million of noncash equity issuance.
|
11. |
Accounts Receivable |
Components of accounts receivable include the following:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Oil, gas and NGL sales |
|
$ |
404 |
|
|
$ |
362 |
|
Joint interest billings |
|
|
75 |
|
|
|
211 |
|
Marketing and midstream revenues |
|
|
562 |
|
|
|
520 |
|
Other |
|
|
69 |
|
|
|
30 |
|
Gross accounts receivable |
|
|
1,110 |
|
|
|
1,123 |
|
Allowance for doubtful accounts |
|
|
(18 |
) |
|
|
(18 |
) |
Net accounts receivable |
|
$ |
1,092 |
|
|
$ |
1,105 |
|
|
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 change in circumstances warranting an interim impairment test of EnLink’s reporting units in the first quarter of 2016. Based on that test, EnLink recorded a noncash goodwill impairment of $873 million. This consisted of a full impairment charge of $93 million related to its Crude and Condensate reporting unit and partial impairment to its Texas and General Partner reporting units of $473 million and $307 million, respectively.
In the third quarter of 2015, EnLink recorded a noncash goodwill impairment of $576 million related to its Louisiana reporting unit as a result of an interim impairment test.
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. See Note 2 for discussion of changes in other intangible assets resulting from EnLink acquisitions during the first nine months of 2016.
In the third quarter of 2015, Devon recorded a noncash intangible assets impairment of $223 million related to EnLink’s Crude and Condensate reporting unit resulting from an assessment of EnLink’s customer relationships. Level 3 fair value measurements were utilized for the impairment analysis of definite-lived intangible assets, which included discounted cash flow estimates, consistent with those utilized in the goodwill impairment assessment.
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Customer relationships |
|
$ |
1,793 |
|
|
$ |
745 |
|
Accumulated amortization |
|
|
(142 |
) |
|
|
(55 |
) |
Net intangibles |
|
$ |
1,651 |
|
|
$ |
690 |
|
The weighted-average amortization period for other intangible assets is 14 years. Amortization expense for intangibles was approximately $29 million and $14 million for the three months ended September 30, 2016 and 2015, respectively, and $87 million and $44 million for the nine months ended September 30, 2016 and 2015, respectively. The remaining amortization expense is estimated to be $118 million for each of the next five years.
|
13. |
Other Current Liabilities |
Components of other current liabilities include the following:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Installment payment - see Note 2 |
|
$ |
243 |
|
|
$ |
— |
|
Accrued interest payable |
|
|
171 |
|
|
|
149 |
|
Restructuring liabilities |
|
|
76 |
|
|
|
13 |
|
Other |
|
|
420 |
|
|
|
488 |
|
Other current liabilities |
|
$ |
910 |
|
|
$ |
650 |
|
|
14. |
Debt and Related Expenses |
A summary of debt is as follows:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Devon debt: |
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
— |
|
|
$ |
626 |
|
Floating rate due December 15, 2016 |
|
|
350 |
|
|
|
350 |
|
8.25% due July 1, 2018 |
|
|
28 |
|
|
|
125 |
|
2.25% due December 15, 2018 |
|
|
110 |
|
|
|
750 |
|
6.30% due January 15, 2019 |
|
|
198 |
|
|
|
700 |
|
4.00% due July 15, 2021 |
|
|
500 |
|
|
|
500 |
|
3.25% due May 15, 2022 |
|
|
1,000 |
|
|
|
1,000 |
|
5.85% due December 15, 2025 |
|
|
850 |
|
|
|
850 |
|
7.50% due September 15, 2027 |
|
|
150 |
|
|
|
150 |
|
7.875% due September 30, 2031 |
|
|
1,250 |
|
|
|
1,250 |
|
7.95% due April 15, 2032 |
|
|
1,000 |
|
|
|
1,000 |
|
5.60% due July 15, 2041 |
|
|
1,250 |
|
|
|
1,250 |
|
4.75% due May 15, 2042 |
|
|
750 |
|
|
|
750 |
|
5.00% due June 15, 2045 |
|
|
750 |
|
|
|
750 |
|
Net discount on debentures and notes |
|
|
(28 |
) |
|
|
(28 |
) |
Debt issuance costs |
|
|
(49 |
) |
|
|
(57 |
) |
Total Devon debt |
|
|
8,109 |
|
|
|
9,966 |
|
EnLink debt: |
|
|
|
|
|
|
|
|
Credit facilities |
|
|
98 |
|
|
|
414 |
|
2.70% due April 1, 2019 |
|
|
400 |
|
|
|
400 |
|
7.125% due June 1, 2022 |
|
|
163 |
|
|
|
163 |
|
4.40% due April 1, 2024 |
|
|
550 |
|
|
|
550 |
|
4.15% due June 1, 2025 |
|
|
750 |
|
|
|
750 |
|
4.85% due July 15, 2026 |
|
|
500 |
|
|
|
— |
|
5.60% due April 1, 2044 |
|
|
350 |
|
|
|
350 |
|
5.05% due April 1, 2045 |
|
|
450 |
|
|
|
450 |
|
Net premium on debentures and notes |
|
|
10 |
|
|
|
13 |
|
Debt issuance costs |
|
|
(26 |
) |
|
|
(24 |
) |
Total EnLink debt |
|
|
3,245 |
|
|
|
3,066 |
|
Total debt |
|
|
11,354 |
|
|
|
13,032 |
|
Less amount classified as short-term debt (1) |
|
|
350 |
|
|
|
976 |
|
Total long-term debt |
|
$ |
11,004 |
|
|
$ |
12,056 |
|
(1) |
Short-term debt as of September 30, 2016 consists of $350 million of floating rate due on December 15, 2016. Short-term debt as of December 31, 2015 consists of $626 million of commercial paper and $350 million floating rate due on December 15, 2016. |
Commercial Paper
During the nine months ended September 30, 2016, Devon reduced commercial paper borrowings by $626 million. As of September 30, 2016, Devon had no outstanding commercial paper borrowings.
Retirement of Senior Notes
In August 2016, Devon completed tender offers to repurchase $1.2 billion of debt securities, using proceeds from the asset divestitures discussed in Note 2. The redemption includes $97 million of the $125 million 8.25% senior notes due July 2018, $640 million of the $750 million 2.25% senior notes due December 2018 and $502 million of the $700 million 6.3% senior notes due January 2019. 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.
Credit Lines
Devon has a $3.0 billion Senior Credit Facility. As of September 30, 2016, Devon had $125 million in outstanding letters of credit, including $58 million in outstanding letters of credit under the Senior Credit Facility. There were no outstanding borrowings under the Senior Credit Facility at September 30, 2016. 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, 2016, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 20.6%.
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, 2016, there were $11 million in outstanding letters of credit and $75 million in outstanding borrowings at an average rate of 2.15% under the $1.5 billion credit facility. The General Partner has a $250 million secured revolving credit facility. As of September 30, 2016, the General Partner had $23 million in outstanding borrowings at an average rate of 2.28%. EnLink and the General Partner were in compliance with all financial covenants in their respective credit facilities as of September 30, 2016.
In July 2016, EnLink issued $500 million of 4.85% unsecured senior notes due 2026. EnLink used the net proceeds to repay outstanding borrowings under its revolving credit facility and for general partnership purposes.
Net Financing Costs
The following schedule includes the components of net financing costs.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Interest based on debt outstanding |
|
$ |
157 |
|
|
$ |
147 |
|
|
$ |
481 |
|
|
$ |
413 |
|
Early retirement of debt |
|
|
84 |
|
|
|
— |
|
|
|
84 |
|
|
|
— |
|
Capitalized interest |
|
|
(18 |
) |
|
|
(17 |
) |
|
|
(53 |
) |
|
|
(46 |
) |
Interest accretion on deferred installment payment - see Note 2 |
|
|
13 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
|
Other fees and expenses |
|
|
9 |
|
|
|
8 |
|
|
|
24 |
|
|
|
16 |
|
Interest expense |
|
|
245 |
|
|
|
138 |
|
|
|
575 |
|
|
|
383 |
|
Interest income |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
Net financing costs |
|
$ |
243 |
|
|
$ |
136 |
|
|
$ |
570 |
|
|
$ |
378 |
|
|
15. |
Asset Retirement Obligations |
The following table presents the changes in Devon’s asset retirement obligations.
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Millions) |
|
|||||
Asset retirement obligations as of beginning of period |
|
$ |
1,414 |
|
|
$ |
1,399 |
|
Liabilities incurred and assumed through acquisitions |
|
|
18 |
|
|
|
46 |
|
Liabilities settled and divested |
|
|
(310 |
) |
|
|
(48 |
) |
Revision of estimated obligation |
|
|
70 |
|
|
|
62 |
|
Accretion expense on discounted obligation |
|
|
58 |
|
|
|
56 |
|
Foreign currency translation adjustment |
|
|
26 |
|
|
|
(80 |
) |
Asset retirement obligations as of end of period |
|
|
1,276 |
|
|
|
1,435 |
|
Less current portion |
|
|
46 |
|
|
|
58 |
|
Asset retirement obligations, long-term |
|
$ |
1,230 |
|
|
$ |
1,377 |
|
During the first nine months of 2016, Devon reduced its asset retirement obligation by $285 million for those obligations that were assumed by the purchasers of certain upstream U.S. assets.
|
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, |
|
||||||||||||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||||||
|
|
(Millions) |
|
|||||||||||||||||||||||||||||
Service cost |
|
$ |
3 |
|
|
$ |
9 |
|
|
$ |
12 |
|
|
$ |
25 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
9 |
|
|
|
13 |
|
|
|
32 |
|
|
|
39 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expected return on plan assets |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
(40 |
) |
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of prior service cost (1) |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Net actuarial loss (1) |
|
|
6 |
|
|
|
5 |
|
|
|
19 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net periodic benefit cost (2) |
|
$ |
5 |
|
|
$ |
14 |
|
|
$ |
25 |
|
|
$ |
38 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(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 2016: |
|
|
|
|
|
|
|
First quarter 2016 |
$ |
125 |
|
|
$ |
0.24 |
|
Second quarter 2016 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2016 |
|
32 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
190 |
|
|
|
|
|
Quarter Ended 2015: |
|
|
|
|
|
|
|
First quarter 2015 |
$ |
99 |
|
|
$ |
0.24 |
|
Second quarter 2015 |
|
98 |
|
|
$ |
0.24 |
|
Third quarter 2015 |
|
99 |
|
|
$ |
0.24 |
|
Total year-to-date |
$ |
296 |
|
|
|
|
|
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
During the first quarter of 2016, EnLink issued common units in conjunction with the acquisition discussed in Note 2. In addition, during the first nine months of 2016, EnLink issued approximately 7 million common units for net proceeds of $110 million. As a result of these transactions, Devon’s ownership interest in EnLink decreased from 28% at December 31, 2015 to 24% at September 30, 2016, excluding the interest held by the General Partner. Additionally, as a result of the transaction described in Note 2, Devon’s ownership in the General Partner decreased from 70% to 64% during the same time period. 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 $224 million and $186 million to non-Devon unitholders during the first nine months of 2016 and 2015, 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 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. 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, 2016 and December 31, 2015. 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.
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using: |
|
|||||||||
|
|
Carrying |
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
Amount |
|
|
Value |
|
|
Inputs |
|
|
Inputs |
|
|
Inputs |
|
|||||
|
(Millions) |
|
||||||||||||||||||
September 30, 2016 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,864 |
|
|
$ |
1,864 |
|
|
$ |
1,672 |
|
|
$ |
192 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
13 |
|
|
$ |
13 |
|
|
$ |
— |
|
|
$ |
13 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
(46 |
) |
|
$ |
(46 |
) |
|
$ |
— |
|
|
$ |
(46 |
) |
|
$ |
— |
|
Interest rate derivatives |
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
Interest rate derivatives |
|
$ |
(185 |
) |
|
$ |
(185 |
) |
|
$ |
— |
|
|
$ |
(185 |
) |
|
$ |
— |
|
Debt |
|
$ |
(11,354 |
) |
|
$ |
(11,984 |
) |
|
$ |
— |
|
|
$ |
(11,984 |
) |
|
$ |
— |
|
Installment payment |
|
$ |
(460 |
) |
|
$ |
(465 |
) |
|
$ |
— |
|
|
$ |
(465 |
) |
|
$ |
— |
|
Capital lease obligations |
|
$ |
(11 |
) |
|
$ |
(10 |
) |
|
$ |
— |
|
|
$ |
(10 |
) |
|
$ |
— |
|
December 31, 2015 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,871 |
|
|
$ |
1,871 |
|
|
$ |
1,471 |
|
|
$ |
400 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
35 |
|
|
$ |
35 |
|
|
$ |
— |
|
|
$ |
35 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
(18 |
) |
|
$ |
(18 |
) |
|
$ |
— |
|
|
$ |
(18 |
) |
|
$ |
— |
|
Interest rate derivatives |
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
Interest rate derivatives |
|
$ |
(22 |
) |
|
$ |
(22 |
) |
|
$ |
— |
|
|
$ |
(22 |
) |
|
$ |
— |
|
Foreign currency derivatives |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
8 |
|
|
$ |
— |
|
Foreign currency derivatives |
|
$ |
(8 |
) |
|
$ |
(8 |
) |
|
$ |
— |
|
|
$ |
(8 |
) |
|
$ |
— |
|
Debt |
|
$ |
(13,032 |
) |
|
$ |
(11,927 |
) |
|
$ |
— |
|
|
$ |
(11,927 |
) |
|
$ |
— |
|
Capital lease obligations |
|
$ |
(17 |
) |
|
$ |
(16 |
) |
|
$ |
— |
|
|
$ |
(16 |
) |
|
$ |
— |
|
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. 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, interest rate and foreign currency derivatives – The fair values of commodity, interest rate and foreign currency 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 values of commercial paper and credit facility balances are the carrying values.
Installment payment – The fair value of the EnLink installment payment as of September 30, 2016 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, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,653 |
|
|
$ |
305 |
|
|
$ |
924 |
|
|
$ |
— |
|
|
$ |
2,882 |
|
Gains on asset sales |
|
$ |
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 |
|
Three Months Ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
2,381 |
|
|
$ |
221 |
|
|
$ |
999 |
|
|
$ |
— |
|
|
$ |
3,601 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
172 |
|
|
$ |
(172 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
510 |
|
|
$ |
134 |
|
|
$ |
100 |
|
|
$ |
— |
|
|
$ |
744 |
|
Interest expense |
|
$ |
96 |
|
|
$ |
22 |
|
|
$ |
31 |
|
|
$ |
(11 |
) |
|
$ |
138 |
|
Asset impairments |
|
$ |
4,716 |
|
|
$ |
336 |
|
|
$ |
799 |
|
|
$ |
— |
|
|
$ |
5,851 |
|
Loss before income taxes |
|
$ |
(4,464 |
) |
|
$ |
(401 |
) |
|
$ |
(758 |
) |
|
$ |
— |
|
|
$ |
(5,623 |
) |
Income tax expense (benefit) |
|
$ |
(1,605 |
) |
|
$ |
(116 |
) |
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
(1,714 |
) |
Net loss |
|
$ |
(2,859 |
) |
|
$ |
(285 |
) |
|
$ |
(765 |
) |
|
$ |
— |
|
|
$ |
(3,909 |
) |
Net loss attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(402 |
) |
|
$ |
— |
|
|
$ |
(402 |
) |
Net loss attributable to Devon |
|
$ |
(2,859 |
) |
|
$ |
(285 |
) |
|
$ |
(363 |
) |
|
$ |
— |
|
|
$ |
(3,507 |
) |
Capital expenditures, including acquisitions |
|
$ |
974 |
|
|
$ |
108 |
|
|
$ |
105 |
|
|
$ |
— |
|
|
$ |
1,187 |
|
Nine Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
4,320 |
|
|
$ |
688 |
|
|
$ |
2,488 |
|
|
$ |
— |
|
|
$ |
7,496 |
|
Gains on asset sales |
|
$ |
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 |
|
Nine Months Ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
6,570 |
|
|
$ |
802 |
|
|
$ |
2,887 |
|
|
$ |
— |
|
|
$ |
10,259 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
499 |
|
|
$ |
(499 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
1,817 |
|
|
$ |
382 |
|
|
$ |
289 |
|
|
$ |
— |
|
|
$ |
2,488 |
|
Interest expense |
|
$ |
271 |
|
|
$ |
70 |
|
|
$ |
76 |
|
|
$ |
(34 |
) |
|
$ |
383 |
|
Asset impairments |
|
$ |
14,344 |
|
|
$ |
336 |
|
|
$ |
799 |
|
|
$ |
— |
|
|
$ |
15,479 |
|
Loss before income taxes |
|
$ |
(14,450 |
) |
|
$ |
(609 |
) |
|
$ |
(667 |
) |
|
$ |
— |
|
|
$ |
(15,726 |
) |
Income tax expense (benefit) |
|
$ |
(5,334 |
) |
|
$ |
(129 |
) |
|
$ |
28 |
|
|
$ |
— |
|
|
$ |
(5,435 |
) |
Net loss |
|
$ |
(9,116 |
) |
|
$ |
(480 |
) |
|
$ |
(695 |
) |
|
$ |
— |
|
|
$ |
(10,291 |
) |
Net earnings (loss) attributable to noncontrolling interests |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(370 |
) |
|
$ |
— |
|
|
$ |
(369 |
) |
Net loss attributable to Devon |
|
$ |
(9,117 |
) |
|
$ |
(480 |
) |
|
$ |
(325 |
) |
|
$ |
— |
|
|
$ |
(9,922 |
) |
Property and equipment, net |
|
$ |
11,586 |
|
|
$ |
5,623 |
|
|
$ |
5,566 |
|
|
$ |
— |
|
|
$ |
22,775 |
|
Total assets |
|
$ |
17,389 |
|
|
$ |
6,747 |
|
|
$ |
10,249 |
|
|
$ |
(113 |
) |
|
$ |
34,272 |
|
Capital expenditures, including acquisitions |
|
$ |
3,205 |
|
|
$ |
478 |
|
|
$ |
777 |
|
|
$ |
— |
|
|
$ |
4,460 |
|
|
Recently Adopted Accounting Standards
In January 2016, Devon adopted ASU 2015-03, Interest – Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. As a result of the adoption, Devon reclassified unamortized debt issuance costs of $81 million as of December 31, 2015 from other long-term assets to a reduction of long-term debt on the consolidated balance sheets.
The FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. Its objective is to clarify guidance and eliminate diversity in practice of classification on certain cash receipts and payments in the statement of cash flows. This ASU is effective for Devon beginning January 1, 2018, with early adoption permitted. Devon early adopted this ASU as of September 30, 2016 using a retrospective transition method. As a result of the adoption, Devon has classified $82 million of debt retirement payments as cash flows from financing activities on the accompanying 2016 consolidated statements of cash flows. No other periods presented in the consolidated statements of cash flows were impacted by the adoption of this standard.
Recently Issued Accounting Standards
The FASB issued 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 accounting for income taxes when awards vest or are settled, statutory withholding and accounting for forfeitures. Classification of these aspects on the statement of cash flows is also addressed. This ASU is effective for Devon beginning January 1, 2017. Devon does not expect that this ASU will have a material impact on its consolidated financial statements and related disclosures.
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. 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 is continuing to evaluate the impact this ASU will have on its consolidated financial statements and related disclosures. Devon does not plan on early adopting.
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 from Topic 840, except for some changes made to align with Topic 606. 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. Devon is continuing to evaluate the impact this ASU will have on its consolidated financial statements and related disclosures and does not plan on early adopting.
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 |
|
|
|
|
|
|
Gains 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, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Commodity derivatives: |
|
(Millions) |
|
|||||||||||||
Oil, gas and NGL derivatives |
|
$ |
79 |
|
|
$ |
414 |
|
|
$ |
(30 |
) |
|
$ |
426 |
|
Marketing and midstream revenues |
|
|
(1 |
) |
|
|
6 |
|
|
|
(7 |
) |
|
|
8 |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
(20 |
) |
|
|
(30 |
) |
|
|
(163 |
) |
|
|
(28 |
) |
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonoperating items |
|
|
— |
|
|
|
91 |
|
|
|
(159 |
) |
|
|
200 |
|
Net gains (losses) recognized |
|
$ |
58 |
|
|
$ |
481 |
|
|
$ |
(359 |
) |
|
$ |
606 |
|
The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheet caption.
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Commodity derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
$ |
12 |
|
|
$ |
34 |
|
Other long-term assets |
|
|
1 |
|
|
|
1 |
|
Interest rate derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
1 |
|
|
|
1 |
|
Other long-term assets |
|
|
1 |
|
|
|
1 |
|
Foreign currency derivative assets: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
— |
|
|
|
8 |
|
Total derivative assets |
|
$ |
15 |
|
|
$ |
45 |
|
|
|
|
|
|
|
|
|
|
Commodity derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
40 |
|
|
$ |
14 |
|
Other long-term liabilities |
|
|
6 |
|
|
|
4 |
|
Interest rate derivative liabilities: |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
185 |
|
|
|
22 |
|
Foreign currency derivative liabilities: |
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
— |
|
|
|
8 |
|
Total derivative liabilities |
|
$ |
231 |
|
|
$ |
48 |
|
Notional |
|
|
Rate Received |
|
|
Rate Paid |
|
|
Expiration |
|||
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
100 |
|
|
Three Month LIBOR |
|
|
|
0.92% |
|
|
December 2016 |
|
$ |
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 |
|
|
Call Options Sold |
|
|||||||||||||||||||
Period |
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Floor Price ($/Bbl) |
|
|
Weighted Average Ceiling Price ($/Bbl) |
|
|
Volume (Bbls/d) |
|
|
Weighted Average Price ($/Bbl) |
|
|||||||
Q4 2016 |
|
|
40,848 |
|
|
$ |
49.00 |
|
|
|
20,000 |
|
|
$ |
40.85 |
|
|
$ |
50.85 |
|
|
|
18,500 |
|
|
$ |
55.00 |
|
Q1-Q4 2017 |
|
|
10,452 |
|
|
$ |
50.57 |
|
|
|
32,496 |
|
|
$ |
44.60 |
|
|
$ |
57.37 |
|
|
|
— |
|
|
$ |
— |
|
Q1-Q4 2018 |
|
|
616 |
|
|
$ |
50.61 |
|
|
|
1,726 |
|
|
$ |
45.51 |
|
|
$ |
55.51 |
|
|
|
— |
|
|
$ |
— |
|
|
|
Oil Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume (Bbls/d) |
|
|
Weighted Average Differential to WTI ($/Bbl) |
|
||
Q4 2016 |
|
Western Canadian Select |
|
|
33,000 |
|
|
$ |
(13.40 |
) |
Q4 2016 |
|
West Texas Sour |
|
|
5,000 |
|
|
$ |
(0.53 |
) |
Q4 2016 |
|
Midland Sweet |
|
|
13,000 |
|
|
$ |
0.25 |
|
|
|
Price Swaps |
|
|
Price Collars |
|
|
Call Options Sold |
|
|||||||||||||||||||
Period |
|
Volume (MMBtu/d) |
|
|
Weighted Average Price ($/MMBtu) |
|
|
Volume (MMBtu/d) |
|
|
Weighted Average Floor Price ($/MMBtu) |
|
|
Weighted Average Ceiling Price ($/MMBtu) |
|
|
Volume (MMBtu/d) |
|
|
Weighted Average Price ($/MMBtu) |
|
|||||||
Q4 2016 |
|
|
155,000 |
|
|
$ |
2.83 |
|
|
|
385,000 |
|
|
$ |
2.74 |
|
|
$ |
2.97 |
|
|
|
400,000 |
|
|
$ |
2.80 |
|
Q1-Q4 2017 |
|
|
145,384 |
|
|
$ |
3.06 |
|
|
|
230,904 |
|
|
$ |
2.91 |
|
|
$ |
3.31 |
|
|
|
— |
|
|
$ |
— |
|
Q1-Q4 2018 |
|
|
8,630 |
|
|
$ |
3.30 |
|
|
|
8,630 |
|
|
$ |
3.18 |
|
|
$ |
3.48 |
|
|
|
— |
|
|
$ |
— |
|
|
|
Natural Gas Basis Swaps |
|
||||||||||
Period |
|
Index |
|
Volume (MMBtu/d) |
|
|
Weighted Average Differential to Henry Hub ($/MMBtu) |
|
|||||
Q4 2016 |
|
Panhandle Eastern Pipe Line |
|
|
175,000 |
|
|
$ |
(0.34 |
) |
|||
Q4 2016 |
|
El Paso Natural Gas |
|
|
125,000 |
|
|
$ |
(0.12 |
) |
|||
Q4 2016 |
|
Houston Ship Channel |
|
|
30,000 |
|
|
$ |
0.11 |
|
|||
Q4 2016 |
|
Transco Zone 4 |
|
|
70,000 |
|
|
$ |
0.01 |
|
|||
Q1-Q4 2017 |
|
Panhandle Eastern Pipe Line |
|
|
150,000 |
|
|
$ |
(0.34 |
) |
|||
Q1-Q4 2017 |
|
El Paso Natural Gas |
|
|
80,000 |
|
|
$ |
(0.13 |
) |
|||
Q1-Q4 2017 |
|
Houston Ship Channel |
|
|
35,000 |
|
|
$ |
0.06 |
|
|||
Q1-Q4 2017 |
|
Transco Zone 4 |
|
|
205,000 |
|
|
$ |
0.03 |
|
|
|
|
|
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 2016 |
|
Ethane |
|
|
6,000 |
|
|
$ |
9.71 |
|
|
|
10,000 |
|
|
$ |
8.34 |
|
|
$ |
9.60 |
|
Q4 2016 |
|
Propane |
|
|
1,000 |
|
|
$ |
21.53 |
|
|
|
6,000 |
|
|
$ |
19.88 |
|
|
$ |
21.98 |
|
Period |
|
Product |
|
Volume (Total) |
|
Weighted Average Price Paid |
|
Weighted Average Price Received |
|||
Q4 2016 |
|
Ethane |
|
|
170 |
|
MBbls |
|
$0.28/gal |
|
Index |
Q4 2016-Q3 2017 |
|
Propane |
|
|
405 |
|
MBbls |
|
Index |
|
$0.65/gal |
Q4 2016-Q3 2017 |
|
Normal Butane |
|
|
109 |
|
MBbls |
|
Index |
|
$0.60/gal |
Q4 2016-Q3 2017 |
|
Natural Gasoline |
|
|
113 |
|
MBbls |
|
Index |
|
$0.98/gal |
Q4 2016-Q3 2017 |
|
Natural Gas |
|
|
17,438 |
|
MMBtu/d |
|
Index |
|
$2.94/MMbtu |
Q4 2016 |
|
Condensate |
|
|
50 |
|
MBbls |
|
Index |
|
$40.20/bbl |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
U.S. oil and gas assets |
|
$ |
317 |
|
|
$ |
4,715 |
|
|
$ |
2,810 |
|
|
$ |
14,340 |
|
Canada oil and gas assets |
|
|
— |
|
|
|
336 |
|
|
|
1,166 |
|
|
|
336 |
|
EnLink goodwill |
|
|
— |
|
|
|
576 |
|
|
|
873 |
|
|
|
576 |
|
EnLink other intangible assets |
|
|
— |
|
|
|
223 |
|
|
|
— |
|
|
|
223 |
|
Other assets |
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
4 |
|
Total asset impairments |
|
$ |
319 |
|
|
$ |
5,851 |
|
|
$ |
4,851 |
|
|
$ |
15,479 |
|
|
|
|
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, 2015 |
|
$ |
13 |
|
|
$ |
63 |
|
|
$ |
76 |
|
Changes due to 2016 workforce reductions |
|
|
58 |
|
|
|
13 |
|
|
|
71 |
|
Changes related to prior years' restructurings |
|
|
5 |
|
|
|
(8 |
) |
|
|
(3 |
) |
Balance as September 30, 2016 |
|
$ |
76 |
|
|
$ |
68 |
|
|
$ |
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014 |
|
$ |
13 |
|
|
$ |
7 |
|
|
$ |
20 |
|
Changes related to prior years' restructurings |
|
|
(5 |
) |
|
|
(2 |
) |
|
|
(7 |
) |
Balance as of September 30, 2015 |
|
$ |
8 |
|
|
$ |
5 |
|
|
$ |
13 |
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Current income tax expense (benefit) |
|
$ |
85 |
|
|
$ |
(6 |
) |
|
$ |
72 |
|
|
$ |
(87 |
) |
Deferred income tax expense (benefit) |
|
|
86 |
|
|
|
(1,708 |
) |
|
|
(300 |
) |
|
|
(5,348 |
) |
Total income tax expense (benefit) |
|
$ |
171 |
|
|
$ |
(1,714 |
) |
|
$ |
(228 |
) |
|
$ |
(5,435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Deferred tax asset valuation allowance |
|
|
(35 |
%) |
|
|
0 |
% |
|
|
(20 |
%) |
|
|
0 |
% |
Non-deductible goodwill and intangible impairment |
|
|
6 |
% |
|
|
(5 |
%) |
|
|
(9 |
%) |
|
|
(2 |
%) |
Change in unrecognized tax benefits |
|
|
7 |
% |
|
|
0 |
% |
|
|
(2 |
%) |
|
|
0 |
% |
Taxation on Canadian operations |
|
|
0 |
% |
|
|
0 |
% |
|
|
(3 |
%) |
|
|
(1 |
%) |
State income taxes |
|
|
2 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
2 |
% |
Other |
|
|
0 |
% |
|
|
(1 |
%) |
|
|
3 |
% |
|
|
1 |
% |
Effective income tax rate |
|
|
15 |
% |
|
|
30 |
% |
|
|
5 |
% |
|
|
35 |
% |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Foreign currency translation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated foreign currency translation |
|
$ |
450 |
|
|
$ |
725 |
|
|
$ |
424 |
|
|
$ |
983 |
|
Change in cumulative translation adjustment |
|
|
(1 |
) |
|
|
(242 |
) |
|
|
52 |
|
|
|
(519 |
) |
Income tax benefit (expense) |
|
|
3 |
|
|
|
30 |
|
|
|
(24 |
) |
|
|
49 |
|
Ending accumulated foreign currency translation |
|
|
452 |
|
|
|
513 |
|
|
|
452 |
|
|
|
513 |
|
Pension and postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning accumulated pension and postretirement benefits |
|
|
(185 |
) |
|
|
(197 |
) |
|
|
(194 |
) |
|
|
(204 |
) |
Recognition of net actuarial loss and prior service cost in earnings (1) |
|
|
7 |
|
|
|
6 |
|
|
|
20 |
|
|
|
17 |
|
Income tax benefit (expense) |
|
|
4 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(5 |
) |
Ending accumulated pension and postretirement benefits |
|
|
(174 |
) |
|
|
(192 |
) |
|
|
(174 |
) |
|
|
(192 |
) |
Accumulated other comprehensive earnings, net of tax |
|
$ |
278 |
|
|
$ |
321 |
|
|
$ |
278 |
|
|
$ |
321 |
|
(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, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Net change in working capital accounts, net of assets and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
81 |
|
|
$ |
273 |
|
|
$ |
87 |
|
|
$ |
713 |
|
Income taxes receivable |
|
|
6 |
|
|
|
98 |
|
|
|
107 |
|
|
|
514 |
|
Other current assets |
|
|
98 |
|
|
|
(30 |
) |
|
|
242 |
|
|
|
(36 |
) |
Accounts payable |
|
|
(34 |
) |
|
|
(33 |
) |
|
|
(185 |
) |
|
|
(135 |
) |
Revenues and royalties payable |
|
|
40 |
|
|
|
(105 |
) |
|
|
34 |
|
|
|
(288 |
) |
Other current liabilities |
|
|
(55 |
) |
|
|
(136 |
) |
|
|
(104 |
) |
|
|
(675 |
) |
Net change in working capital |
|
$ |
136 |
|
|
$ |
67 |
|
|
$ |
181 |
|
|
$ |
93 |
|
Interest paid (net of capitalized interest) |
|
$ |
113 |
|
|
$ |
113 |
|
|
$ |
402 |
|
|
$ |
343 |
|
Income taxes received |
|
$ |
(7 |
) |
|
$ |
(9 |
) |
|
$ |
(130 |
) |
|
$ |
(339 |
) |
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Oil, gas and NGL sales |
|
$ |
404 |
|
|
$ |
362 |
|
Joint interest billings |
|
|
75 |
|
|
|
211 |
|
Marketing and midstream revenues |
|
|
562 |
|
|
|
520 |
|
Other |
|
|
69 |
|
|
|
30 |
|
Gross accounts receivable |
|
|
1,110 |
|
|
|
1,123 |
|
Allowance for doubtful accounts |
|
|
(18 |
) |
|
|
(18 |
) |
Net accounts receivable |
|
$ |
1,092 |
|
|
$ |
1,105 |
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Customer relationships |
|
$ |
1,793 |
|
|
$ |
745 |
|
Accumulated amortization |
|
|
(142 |
) |
|
|
(55 |
) |
Net intangibles |
|
$ |
1,651 |
|
|
$ |
690 |
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Installment payment - see Note 2 |
|
$ |
243 |
|
|
$ |
— |
|
Accrued interest payable |
|
|
171 |
|
|
|
149 |
|
Restructuring liabilities |
|
|
76 |
|
|
|
13 |
|
Other |
|
|
420 |
|
|
|
488 |
|
Other current liabilities |
|
$ |
910 |
|
|
$ |
650 |
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
|
|
(Millions) |
|
|||||
Devon debt: |
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
— |
|
|
$ |
626 |
|
Floating rate due December 15, 2016 |
|
|
350 |
|
|
|
350 |
|
8.25% due July 1, 2018 |
|
|
28 |
|
|
|
125 |
|
2.25% due December 15, 2018 |
|
|
110 |
|
|
|
750 |
|
6.30% due January 15, 2019 |
|
|
198 |
|
|
|
700 |
|
4.00% due July 15, 2021 |
|
|
500 |
|
|
|
500 |
|
3.25% due May 15, 2022 |
|
|
1,000 |
|
|
|
1,000 |
|
5.85% due December 15, 2025 |
|
|
850 |
|
|
|
850 |
|
7.50% due September 15, 2027 |
|
|
150 |
|
|
|
150 |
|
7.875% due September 30, 2031 |
|
|
1,250 |
|
|
|
1,250 |
|
7.95% due April 15, 2032 |
|
|
1,000 |
|
|
|
1,000 |
|
5.60% due July 15, 2041 |
|
|
1,250 |
|
|
|
1,250 |
|
4.75% due May 15, 2042 |
|
|
750 |
|
|
|
750 |
|
5.00% due June 15, 2045 |
|
|
750 |
|
|
|
750 |
|
Net discount on debentures and notes |
|
|
(28 |
) |
|
|
(28 |
) |
Debt issuance costs |
|
|
(49 |
) |
|
|
(57 |
) |
Total Devon debt |
|
|
8,109 |
|
|
|
9,966 |
|
EnLink debt: |
|
|
|
|
|
|
|
|
Credit facilities |
|
|
98 |
|
|
|
414 |
|
2.70% due April 1, 2019 |
|
|
400 |
|
|
|
400 |
|
7.125% due June 1, 2022 |
|
|
163 |
|
|
|
163 |
|
4.40% due April 1, 2024 |
|
|
550 |
|
|
|
550 |
|
4.15% due June 1, 2025 |
|
|
750 |
|
|
|
750 |
|
4.85% due July 15, 2026 |
|
|
500 |
|
|
|
— |
|
5.60% due April 1, 2044 |
|
|
350 |
|
|
|
350 |
|
5.05% due April 1, 2045 |
|
|
450 |
|
|
|
450 |
|
Net premium on debentures and notes |
|
|
10 |
|
|
|
13 |
|
Debt issuance costs |
|
|
(26 |
) |
|
|
(24 |
) |
Total EnLink debt |
|
|
3,245 |
|
|
|
3,066 |
|
Total debt |
|
|
11,354 |
|
|
|
13,032 |
|
Less amount classified as short-term debt (1) |
|
|
350 |
|
|
|
976 |
|
Total long-term debt |
|
$ |
11,004 |
|
|
$ |
12,056 |
|
(1) |
Short-term debt as of September 30, 2016 consists of $350 million of floating rate due on December 15, 2016. Short-term debt as of December 31, 2015 consists of $626 million of commercial paper and $350 million floating rate due on December 15, 2016. |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Millions) |
|
|||||||||||||
Interest based on debt outstanding |
|
$ |
157 |
|
|
$ |
147 |
|
|
$ |
481 |
|
|
$ |
413 |
|
Early retirement of debt |
|
|
84 |
|
|
|
— |
|
|
|
84 |
|
|
|
— |
|
Capitalized interest |
|
|
(18 |
) |
|
|
(17 |
) |
|
|
(53 |
) |
|
|
(46 |
) |
Interest accretion on deferred installment payment - see Note 2 |
|
|
13 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
|
Other fees and expenses |
|
|
9 |
|
|
|
8 |
|
|
|
24 |
|
|
|
16 |
|
Interest expense |
|
|
245 |
|
|
|
138 |
|
|
|
575 |
|
|
|
383 |
|
Interest income |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
Net financing costs |
|
$ |
243 |
|
|
$ |
136 |
|
|
$ |
570 |
|
|
$ |
378 |
|
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Millions) |
|
|||||
Asset retirement obligations as of beginning of period |
|
$ |
1,414 |
|
|
$ |
1,399 |
|
Liabilities incurred and assumed through acquisitions |
|
|
18 |
|
|
|
46 |
|
Liabilities settled and divested |
|
|
(310 |
) |
|
|
(48 |
) |
Revision of estimated obligation |
|
|
70 |
|
|
|
62 |
|
Accretion expense on discounted obligation |
|
|
58 |
|
|
|
56 |
|
Foreign currency translation adjustment |
|
|
26 |
|
|
|
(80 |
) |
Asset retirement obligations as of end of period |
|
|
1,276 |
|
|
|
1,435 |
|
Less current portion |
|
|
46 |
|
|
|
58 |
|
Asset retirement obligations, long-term |
|
$ |
1,230 |
|
|
$ |
1,377 |
|
|
|
|
Pension Benefits |
|
|
Postretirement Benefits |
|
||||||||||||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||||||
|
|
(Millions) |
|
|||||||||||||||||||||||||||||
Service cost |
|
$ |
3 |
|
|
$ |
9 |
|
|
$ |
12 |
|
|
$ |
25 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
9 |
|
|
|
13 |
|
|
|
32 |
|
|
|
39 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expected return on plan assets |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
(40 |
) |
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of prior service cost (1) |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Net actuarial loss (1) |
|
|
6 |
|
|
|
5 |
|
|
|
19 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net periodic benefit cost (2) |
|
$ |
5 |
|
|
$ |
14 |
|
|
$ |
25 |
|
|
$ |
38 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(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 2016: |
|
|
|
|
|
|
|
First quarter 2016 |
$ |
125 |
|
|
$ |
0.24 |
|
Second quarter 2016 |
|
33 |
|
|
$ |
0.06 |
|
Third quarter 2016 |
|
32 |
|
|
$ |
0.06 |
|
Total year-to-date |
$ |
190 |
|
|
|
|
|
Quarter Ended 2015: |
|
|
|
|
|
|
|
First quarter 2015 |
$ |
99 |
|
|
$ |
0.24 |
|
Second quarter 2015 |
|
98 |
|
|
$ |
0.24 |
|
Third quarter 2015 |
|
99 |
|
|
$ |
0.24 |
|
Total year-to-date |
$ |
296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using: |
|
|||||||||
|
|
Carrying |
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
Amount |
|
|
Value |
|
|
Inputs |
|
|
Inputs |
|
|
Inputs |
|
|||||
|
(Millions) |
|
||||||||||||||||||
September 30, 2016 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,864 |
|
|
$ |
1,864 |
|
|
$ |
1,672 |
|
|
$ |
192 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
13 |
|
|
$ |
13 |
|
|
$ |
— |
|
|
$ |
13 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
(46 |
) |
|
$ |
(46 |
) |
|
$ |
— |
|
|
$ |
(46 |
) |
|
$ |
— |
|
Interest rate derivatives |
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
Interest rate derivatives |
|
$ |
(185 |
) |
|
$ |
(185 |
) |
|
$ |
— |
|
|
$ |
(185 |
) |
|
$ |
— |
|
Debt |
|
$ |
(11,354 |
) |
|
$ |
(11,984 |
) |
|
$ |
— |
|
|
$ |
(11,984 |
) |
|
$ |
— |
|
Installment payment |
|
$ |
(460 |
) |
|
$ |
(465 |
) |
|
$ |
— |
|
|
$ |
(465 |
) |
|
$ |
— |
|
Capital lease obligations |
|
$ |
(11 |
) |
|
$ |
(10 |
) |
|
$ |
— |
|
|
$ |
(10 |
) |
|
$ |
— |
|
December 31, 2015 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,871 |
|
|
$ |
1,871 |
|
|
$ |
1,471 |
|
|
$ |
400 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
35 |
|
|
$ |
35 |
|
|
$ |
— |
|
|
$ |
35 |
|
|
$ |
— |
|
Commodity derivatives |
|
$ |
(18 |
) |
|
$ |
(18 |
) |
|
$ |
— |
|
|
$ |
(18 |
) |
|
$ |
— |
|
Interest rate derivatives |
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
Interest rate derivatives |
|
$ |
(22 |
) |
|
$ |
(22 |
) |
|
$ |
— |
|
|
$ |
(22 |
) |
|
$ |
— |
|
Foreign currency derivatives |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
8 |
|
|
$ |
— |
|
Foreign currency derivatives |
|
$ |
(8 |
) |
|
$ |
(8 |
) |
|
$ |
— |
|
|
$ |
(8 |
) |
|
$ |
— |
|
Debt |
|
$ |
(13,032 |
) |
|
$ |
(11,927 |
) |
|
$ |
— |
|
|
$ |
(11,927 |
) |
|
$ |
— |
|
Capital lease obligations |
|
$ |
(17 |
) |
|
$ |
(16 |
) |
|
$ |
— |
|
|
$ |
(16 |
) |
|
$ |
— |
|
|
|
|
U.S. |
|
|
Canada |
|
|
EnLink |
|
|
Eliminations |
|
|
Total |
|
|||||
|
|
(Millions) |
|
|||||||||||||||||
Three Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
1,653 |
|
|
$ |
305 |
|
|
$ |
924 |
|
|
$ |
— |
|
|
$ |
2,882 |
|
Gains on asset sales |
|
$ |
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 |
|
Three Months Ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
2,381 |
|
|
$ |
221 |
|
|
$ |
999 |
|
|
$ |
— |
|
|
$ |
3,601 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
172 |
|
|
$ |
(172 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
510 |
|
|
$ |
134 |
|
|
$ |
100 |
|
|
$ |
— |
|
|
$ |
744 |
|
Interest expense |
|
$ |
96 |
|
|
$ |
22 |
|
|
$ |
31 |
|
|
$ |
(11 |
) |
|
$ |
138 |
|
Asset impairments |
|
$ |
4,716 |
|
|
$ |
336 |
|
|
$ |
799 |
|
|
$ |
— |
|
|
$ |
5,851 |
|
Loss before income taxes |
|
$ |
(4,464 |
) |
|
$ |
(401 |
) |
|
$ |
(758 |
) |
|
$ |
— |
|
|
$ |
(5,623 |
) |
Income tax expense (benefit) |
|
$ |
(1,605 |
) |
|
$ |
(116 |
) |
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
(1,714 |
) |
Net loss |
|
$ |
(2,859 |
) |
|
$ |
(285 |
) |
|
$ |
(765 |
) |
|
$ |
— |
|
|
$ |
(3,909 |
) |
Net loss attributable to noncontrolling interests |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(402 |
) |
|
$ |
— |
|
|
$ |
(402 |
) |
Net loss attributable to Devon |
|
$ |
(2,859 |
) |
|
$ |
(285 |
) |
|
$ |
(363 |
) |
|
$ |
— |
|
|
$ |
(3,507 |
) |
Capital expenditures, including acquisitions |
|
$ |
974 |
|
|
$ |
108 |
|
|
$ |
105 |
|
|
$ |
— |
|
|
$ |
1,187 |
|
Nine Months Ended September 30, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
4,320 |
|
|
$ |
688 |
|
|
$ |
2,488 |
|
|
$ |
— |
|
|
$ |
7,496 |
|
Gains on asset sales |
|
$ |
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 |
|
Nine Months Ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
6,570 |
|
|
$ |
802 |
|
|
$ |
2,887 |
|
|
$ |
— |
|
|
$ |
10,259 |
|
Intersegment revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
499 |
|
|
$ |
(499 |
) |
|
$ |
— |
|
Depreciation, depletion and amortization |
|
$ |
1,817 |
|
|
$ |
382 |
|
|
$ |
289 |
|
|
$ |
— |
|
|
$ |
2,488 |
|
Interest expense |
|
$ |
271 |
|
|
$ |
70 |
|
|
$ |
76 |
|
|
$ |
(34 |
) |
|
$ |
383 |
|
Asset impairments |
|
$ |
14,344 |
|
|
$ |
336 |
|
|
$ |
799 |
|
|
$ |
— |
|
|
$ |
15,479 |
|
Loss before income taxes |
|
$ |
(14,450 |
) |
|
$ |
(609 |
) |
|
$ |
(667 |
) |
|
$ |
— |
|
|
$ |
(15,726 |
) |
Income tax expense (benefit) |
|
$ |
(5,334 |
) |
|
$ |
(129 |
) |
|
$ |
28 |
|
|
$ |
— |
|
|
$ |
(5,435 |
) |
Net loss |
|
$ |
(9,116 |
) |
|
$ |
(480 |
) |
|
$ |
(695 |
) |
|
$ |
— |
|
|
$ |
(10,291 |
) |
Net earnings (loss) attributable to noncontrolling interests |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
(370 |
) |
|
$ |
— |
|
|
$ |
(369 |
) |
Net loss attributable to Devon |
|
$ |
(9,117 |
) |
|
$ |
(480 |
) |
|
$ |
(325 |
) |
|
$ |
— |
|
|
$ |
(9,922 |
) |
Property and equipment, net |
|
$ |
11,586 |
|
|
$ |
5,623 |
|
|
$ |
5,566 |
|
|
$ |
— |
|
|
$ |
22,775 |
|
Total assets |
|
$ |
17,389 |
|
|
$ |
6,747 |
|
|
$ |
10,249 |
|
|
$ |
(113 |
) |
|
$ |
34,272 |
|
Capital expenditures, including acquisitions |
|
$ |
3,205 |
|
|
$ |
478 |
|
|
$ |
777 |
|
|
$ |
— |
|
|
$ |
4,460 |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|