DEVON ENERGY CORP/DE, 10-Q filed on 8/7/2019
Quarterly Report
v3.19.2
Document And Entity Information - shares
shares in Millions
6 Months Ended
Jun. 30, 2019
Jul. 24, 2019
Document And Entity Information [Abstract]    
Document Type 10-Q  
Document Period End Date Jun. 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 Q2  
Entity Common Stock, Shares Outstanding   404.2
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-32318  
Entity Tax Identification Number 731567067  
Entity Address, Address Line One 333 West Sheridan Avenue  
Entity Address, City or Town Oklahoma City  
Entity Address, State or Province Oklahoma  
Entity Address, Postal Zip Code 73102-5015  
City Area Code 405  
Local Phone Number 235-3611  
v3.19.2
Consolidated Comprehensive Statements Of Earnings - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Upstream revenues $ 1,191 $ 766 $ 1,654 $ 1,783
Revenues $ 730 $ 1,156 $ 1,495 $ 2,018
Type of Revenue [Extensible List] us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember
Total revenues $ 1,921 $ 1,922 $ 3,149 $ 3,801
Production expenses 371 406 736 801
Exploration expenses 7 62 11 83
Expenses $ 713 $ 1,149 $ 1,463 $ 2,015
Type of Cost, Good or Service [Extensible List] us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember
Depreciation, depletion and amortization $ 394 $ 342 $ 774 $ 647
Asset impairments   154   154
Asset dispositions (1) 23 (45) 11
General and administrative expenses 114 135 249 310
Financing costs, net 66 64 126 453
Restructuring and transaction costs 12 85 63 85
Other expenses 8 (15) (9) (64)
Total expenses 1,684 2,405 3,368 4,495
Earnings (loss) from continuing operations before income taxes 237 (483) (219) (694)
Income tax expense (benefit) 71 13 (39) 10
Net earnings (loss) from continuing operations 166 (496) (180) (704)
Net earnings from discontinued operations, net of income tax expense 329 161 358 216
Net earnings (loss) 495 (335) 178 (488)
Net earnings attributable to noncontrolling interests   90   134
Net earnings (loss) attributable to Devon $ 495 $ (425) $ 178 $ (622)
Basic net earnings (loss) per share:        
Basic earnings (loss) from continuing operations per share $ 0.40 $ (0.97) $ (0.43) $ (1.36)
Basic earnings from discontinued operations per share 0.80 0.14 0.85 0.16
Basic net earnings (loss) per share 1.20 (0.83) 0.42 (1.20)
Diluted net earnings (loss) per share:        
Diluted earnings (loss) from continuing operations per share 0.40 (0.97) (0.43) (1.36)
Diluted earnings from discontinued operations per share 0.79 0.14 0.85 0.16
Diluted net earnings (loss) per share $ 1.19 $ (0.83) $ 0.42 $ (1.20)
Comprehensive loss:        
Net earnings (loss) $ 495 $ (335) $ 178 $ (488)
Other comprehensive earnings (loss), net of tax:        
Foreign currency translation, discontinued operations 43 (34) 78 (82)
Release of Canadian cumulative translation adjustment, discontinued operations [1] (1,237)   (1,237)  
Pension and postretirement plans 13 3 15 7
Other comprehensive loss, net of tax (1,181) (31) (1,144) (75)
Comprehensive loss (686) (366) (966) (563)
Comprehensive earnings attributable to noncontrolling interests   90   134
Comprehensive loss attributable to Devon $ (686) $ (456) $ (966) $ (697)
[1] In conjunction with the sale of all of its Canadian operating assets, Devon released the cumulative translation adjustment as part of its gain on the disposition of its Canadian business. See Note 18 for additional details.
v3.19.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities:        
Net earnings (loss) $ 495 $ (335) $ 178 $ (488)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:        
Net earnings from discontinued operations, net of income tax expense (329) (161) (358) (216)
Depreciation, depletion and amortization 394 342 774 647
Asset impairments   154   154
Leasehold impairments 1 53 2 61
Accretion on discounted liabilities 10 9 20 18
Total (gains) losses on commodity derivatives (140) 487 465 600
Cash settlements on commodity derivatives 23 (144) 54 (229)
(Gains) losses on asset dispositions (1) 23 (45) 11
Deferred income tax expense (benefit) 69   (38) (4)
Share-based compensation 23 53 69 87
Early retirement of debt       312
Other 2 (20) (12) (65)
Changes in assets and liabilities, net (59) 65 (143) 71
Net cash from operating activities - continuing operations 488 526 966 959
Cash flows from investing activities:        
Capital expenditures (494) (543) (996) (1,105)
Acquisitions of property and equipment (13) (10) (23) (16)
Divestitures of property and equipment 28 560 339 607
Net cash from investing activities - continuing operations (479) 7 (680) (514)
Cash flows from financing activities:        
Repayments of long-term debt principal     (162) (807)
Early retirement of debt       (304)
Repurchases of common stock (187) (428) (1,185) (499)
Dividends paid on common stock (37) (42) (71) (74)
Shares exchanged for tax withholdings (3) (6) (22) (35)
Net cash from financing activities - continuing operations (227) (476) (1,440) (1,719)
Net change in cash, cash equivalents and restricted cash of continuing operations (218) 57 (1,154) (1,274)
Cash flows from discontinued operations:        
Operating activities 135 (21) 33 350
Investing activities 2,544 (281) 2,497 (550)
Financing activities 0 73 (8) 103
Effect of exchange rate changes on cash 37 227 39 212
Net change in cash, cash equivalents and restricted cash of discontinued operations 2,716 (2) 2,561 115
Net change in cash, cash equivalents and restricted cash 2,498 55 1,407 (1,159)
Cash, cash equivalents and restricted cash at beginning of period 1,355 1,470 2,446 2,684
Cash, cash equivalents and restricted cash at end of period 3,853 1,525 3,853 1,525
Reconciliation of cash, cash equivalents and restricted cash:        
Cash and cash equivalents 3,470 1,460 3,470 1,460
Cash restricted for discontinued operations 370   370  
Restricted cash included in other current assets 13 28 13 28
Cash and cash equivalents included in current assets associated with discontinued operations   37   37
Cash, cash equivalents and restricted cash at end of period $ 3,853 $ 1,525 $ 3,853 $ 1,525
v3.19.2
Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
ASSETS    
Cash and cash equivalents $ 3,470 $ 2,414
Cash restricted for discontinued operations 370  
Accounts receivable 842 855
Current assets associated with discontinued operations 131 283
Other current assets 354 885
Total current assets 5,167 4,437
Oil and gas property and equipment, based on successful efforts accounting, net 8,987 8,982
Other property and equipment, net 1,050 1,044
Total property and equipment, net 10,037 10,026
Goodwill 841 841
Right-of-use assets 273  
Other long-term assets 232 276
Long-term assets associated with discontinued operations 99 3,986
Total assets 16,649 19,566
LIABILITIES AND STOCKHOLDERS' EQUITY    
Accounts payable 522 563
Revenues and royalties payable 772 832
Short-term debt   162
Current liabilities associated with discontinued operations 1,894 338
Other current liabilities 279 331
Total current liabilities 3,467 2,226
Long-term debt 4,294 4,292
Lease liabilities 263  
Asset retirement obligations 528 606
Other long-term liabilities 431 442
Long-term liabilities associated with discontinued operations 189 2,285
Deferred income taxes 483 529
Stockholders' equity:    
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 410 million and 450 million shares in 2019 and 2018, respectively 41 45
Additional paid-in capital 3,352 4,486
Retained earnings 3,738 3,650
Accumulated other comprehensive earnings (loss) (117) 1,027
Treasury stock, at cost, 0.7 million and 1.0 million shares in 2019 and 2018, respectively (20) (22)
Total stockholders’ equity 6,994 9,186
Total liabilities and stockholders' equity $ 16,649 $ 19,566
v3.19.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 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) 410,000,000 450,000,000
Treasury stock, shares 700,000 1,000,000.0
v3.19.2
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 (loss) (488)     (622)     134
Other comprehensive loss, net of tax (75)       (75)    
Restricted stock grants, net of cancellations, shares   3          
Common stock repurchased (556) $ (1)       $ (555)  
Common stock retired   $ (1) (532)     533  
Common stock retired, shares   (14)          
Common stock dividends (74)     (74)      
Share-based compensation 89   89        
Share-based compensation, shares   1          
Subsidiary equity transactions 67   (2)       69
Distributions to noncontrolling interests (219)           (219)
Balance at Jun. 30, 2018 12,848 $ 51 6,888 6 1,091 (22) 4,834
Balance, shares at Jun. 30, 2018   515          
Balance at Mar. 31, 2018 13,725 $ 53 7,269 473 1,122 (12) 4,820
Balance, shares at Mar. 31, 2018   526          
Net earnings (loss) (335)     (425)     90
Other comprehensive loss, net of tax (31)       (31)    
Common stock repurchased (445) $ (1)       (444)  
Common stock retired   $ (1) (433)     434  
Common stock retired, shares   (11)          
Common stock dividends (42)     (42)      
Share-based compensation 53   53        
Subsidiary equity transactions 40   (1)       41
Distributions to noncontrolling interests (117)           (117)
Balance at Jun. 30, 2018 12,848 $ 51 6,888 6 1,091 (22) $ 4,834
Balance, shares at Jun. 30, 2018   515          
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 (loss) 178     178      
Other comprehensive loss, net of tax (1,144)       (1,144)    
Restricted stock grants, net of cancellations, shares   3          
Common stock repurchased (1,206)         (1,206)  
Common stock retired   $ (4) (1,204)     1,208  
Common stock retired, shares   (43)          
Common stock dividends (71)     (71)      
Share-based compensation 70   70        
Balance at Jun. 30, 2019 6,994 $ 41 3,352 3,738 (117) (20)  
Balance, shares at Jun. 30, 2019   410          
Balance at Mar. 31, 2019 7,857 $ 42 3,518 3,280 1,064 (47)  
Balance, shares at Mar. 31, 2019   417          
Net earnings (loss) 495     495      
Other comprehensive loss, net of tax (1,181)       (1,181)    
Common stock repurchased (164)         (164)  
Common stock retired   $ (1) (190)     191  
Common stock retired, shares   (7)          
Common stock dividends (37)     (37)      
Share-based compensation 24   24        
Balance at Jun. 30, 2019 $ 6,994 $ 41 $ 3,352 $ 3,738 $ (117) $ (20)  
Balance, shares at Jun. 30, 2019   410          
v3.19.2
Summary Of Significant Accounting Policies
6 Months Ended
Jun. 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 six-month periods ended June 30, 2019 and 2018 and Devon’s financial position as of June 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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Oil

 

$

753

 

 

$

808

 

 

$

1,414

 

 

$

1,485

 

Gas

 

 

147

 

 

 

207

 

 

 

380

 

 

 

462

 

NGL

 

 

151

 

 

 

238

 

 

 

325

 

 

 

436

 

Oil, gas and NGL revenues from

   contracts with customers

 

 

1,051

 

 

 

1,253

 

 

 

2,119

 

 

 

2,383

 

Oil, gas and NGL derivatives

 

 

140

 

 

 

(487

)

 

 

(465

)

 

 

(600

)

Upstream revenues

 

 

1,191

 

 

 

766

 

 

 

1,654

 

 

 

1,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

 

394

 

 

 

766

 

 

 

750

 

 

 

1,297

 

Gas

 

 

172

 

 

 

160

 

 

 

390

 

 

 

315

 

NGL

 

 

164

 

 

 

230

 

 

 

355

 

 

 

406

 

Total marketing revenues from

   contracts with customers

 

 

730

 

 

 

1,156

 

 

 

1,495

 

 

 

2,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,921

 

 

$

1,922

 

 

$

3,149

 

 

$

3,801

 

 

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 is currently evaluating the provisions of this ASU and assessing the impact it may have 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 is currently evaluating the provisions of this ASU and assessing the impact it may have on its consolidated financial statements.

 

v3.19.2
Divestitures
6 Months Ended
Jun. 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 all of its operating 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 $189 million ($460 million, net of tax). 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 $273 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, potential mergers or spin-off. As of June 30, 2019, Devon does not currently have any indications that it would recognize an impairment upon separating its Barnett Shale assets as they are long-lived assets that are held for use. This conclusion is based on probability-weighted computations applied to the separation methods currently under evaluation. As of June 30, 2019, Devon’s carrying value of its Barnett Shale net assets (property and equipment, asset retirement obligations and estimated allocated goodwill) was approximately $1.4 billion. Should Devon enter into a transaction that causes Devon to cease having control, such as a cash sale or exchange for a noncontrolling interest in another entity or combination thereof, Devon would recognize a gain or loss based on the value of the proceeds and/or equity interests as compared to the carrying value. Devon anticipates reporting all information for its Barnett Shale assets as discontinued operations in 2019 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.

v3.19.2
Derivative Financial Instruments
6 Months Ended
Jun. 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 June 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 June 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)

 

Q3-Q4 2019

 

 

41,100

 

 

$

60.76

 

 

 

79,750

 

 

$

54.89

 

 

$

64.92

 

Q1-Q4 2020

 

 

3,238

 

 

$

60.13

 

 

 

22,432

 

 

$

52.92

 

 

$

63.03

 

 

 

 

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)

 

Q3-Q4 2019

 

 

5,000

 

 

$

50.00

 

 

$

63.00

 

 

$

74.80

 

 

 

 

Oil Basis Swaps

 

Period

 

Index

 

Volume

(Bbls/d)

 

 

Weighted Average

Differential to WTI

($/Bbl)

 

Q3-Q4 2019

 

Midland Sweet

 

 

28,000

 

 

$

(0.46

)

Q3-Q4 2019

 

Argus LLS

 

 

7,500

 

 

$

5.18

 

Q3-Q4 2019

 

Argus MEH

 

 

26,000

 

 

$

3.33

 

Q3-Q4 2019

 

NYMEX Roll

 

 

38,000

 

 

$

0.45

 

Q1-Q4 2020

 

Argus MEH

 

 

9,000

 

 

$

3.44

 

Q1-Q4 2020

 

NYMEX Roll

 

 

42,000

 

 

$

0.32

 

 

As of June 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)

 

Q3-Q4 2019

 

 

257,800

 

 

$

2.80

 

 

 

200,500

 

 

$

2.63

 

 

$

3.02

 

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)

 

Q3-Q4 2019

 

Panhandle Eastern Pipe Line

 

 

20,000

 

 

$

(0.56

)

Q3-Q4 2019

 

El Paso Natural Gas

 

 

130,000

 

 

$

(1.46

)

Q3-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

 

 

40,000

 

 

$

(0.67

)

Q1-Q4 2020

 

Houston Ship Channel

 

 

10,000

 

 

$

0.02

 

 

 

As of June 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)

 

Q3-Q4 2019

 

Ethane

 

 

1,000

 

 

$

11.55

 

Q3-Q4 2019

 

Natural Gasoline

 

 

4,500

 

 

$

55.93

 

Q3-Q4 2019

 

Normal Butane

 

 

4,000

 

 

$

33.69

 

Q3-Q4 2019

 

Propane

 

 

8,500

 

 

$

30.01

 

Q1-Q4 2020

 

Propane

 

 

2,500

 

 

$

27.29

 

 

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 June 30,

 

 

Six Months

Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Commodity derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upstream revenues

 

$

140

 

 

$

(487

)

 

$

(465

)

 

$

(600

)

Marketing revenues

 

 

 

 

 

(1

)

 

 

1

 

 

 

(1

)

Interest rate derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

19

 

 

 

 

 

 

65

 

Net gains (losses) recognized

 

$

140

 

 

$

(469

)

 

$

(464

)

 

$

(536

)

 

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

 

 

June 30, 2019

 

 

December 31, 2018

 

Commodity derivative assets:

 

 

 

 

 

 

 

 

Other current assets

 

$

117

 

 

$

634

 

Other long-term assets

 

 

10

 

 

 

40

 

Total derivative assets

 

$

127

 

 

$

674

 

Commodity derivative liabilities:

 

 

 

 

 

 

 

 

Other current liabilities

 

$

7

 

 

$

32

 

Other long-term liabilities

 

 

 

 

 

1

 

Total derivative liabilities

 

$

7

 

 

$

33

 

 

v3.19.2
Share-Based Compensation
6 Months Ended
Jun. 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.

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

G&A

 

$

44

 

 

$

59

 

Exploration expenses

 

 

1

 

 

 

2

 

Restructuring and transaction costs

 

 

24

 

 

 

26

 

Total

 

$

69

 

 

$

87

 

Related income tax benefit

 

$

10

 

 

$

 

 

Under its approved long-term incentive plan, Devon granted share-based awards to certain employees in the first six 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

 

 

4,383

 

 

$

25.49

 

 

 

 

 

$

 

 

 

741

 

 

 

 

 

$

28.97

 

Vested

 

 

(4,295

)

 

$

33.60

 

 

 

(141

)

 

$

37.48

 

 

 

(145

)

 

 

 

 

$

37.23

 

Forfeited

 

 

(557

)

 

$

27.16

 

 

 

 

 

$

 

 

 

(1,276

)

 

 

 

 

$

11.34

 

Unvested at 6/30/19

 

 

5,494

 

 

$

29.80

 

 

 

161

 

 

$

34.56

 

 

 

2,188

 

 

(1

)

 

$

40.25

 

 

(1)

A maximum of 4.4 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 June 30, 2019.

 

 

 

 

 

 

 

Performance-Based

 

 

 

 

 

 

 

Restricted Stock

 

 

Restricted Stock

 

 

Performance

 

 

 

Awards and Units

 

 

Awards

 

 

Share Units

 

Unrecognized compensation cost

 

$

116

 

 

$

 

 

$

25

 

Weighted average period for recognition (years)

 

 

2.8

 

 

 

1.9

 

 

 

1.7

 

 

v3.19.2
Asset Impairments
6 Months Ended
Jun. 30, 2019
Asset Impairment Charges [Abstract]  
Asset Impairments

5.Asset Impairments

Unproved Impairments

During the first six months of 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 $61 million. Unproved impairments are included in exploration expenses in the consolidated comprehensive statements of earnings.

Asset Impairments

During the second quarter 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 $45 million of non-oil and gas asset impairments.

v3.19.2
Restructuring and Transaction Costs
6 Months Ended
Jun. 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 $63 million of restructuring expenses during the first six months of 2019. Of these expenses, $24 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 second quarter of 2018, Devon recognized $85 million in personnel related restructuring expenses related to workforce reductions. Of these expenses, $26 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

 

 

23

 

 

 

 

 

 

23

 

Changes related to prior years' restructurings

 

 

(23

)

 

 

(2

)

 

 

(25

)

Balance as of June 30, 2019

 

$

39

 

 

$

1

 

 

$

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

$

17

 

 

$

17

 

 

$

34

 

Changes related to prior years' restructurings

 

 

42

 

 

 

(7

)

 

 

35

 

Balance as of June 30, 2018

 

$

59

 

 

$

10

 

 

$

69