DEVON ENERGY CORP/DE, 10-K filed on 2/21/2018
Annual Report
Document And Entity Information (USD $)
In Billions, except Share data in Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Feb. 7, 2018
Jun. 30, 2017
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Amendment Flag
false 
 
 
Trading Symbol
DVN 
 
 
Entity Registrant Name
DEVON ENERGY CORP/DE 
 
 
Entity Central Index Key
0001090012 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Document Fiscal Year Focus
2017 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Public Float
 
 
$ 16.7 
Entity Common Stock, Shares Outstanding
 
526.1 
 
Consolidated Comprehensive Statements Of Earnings (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]
 
 
 
Upstream revenues
$ 5,307 
$ 3,981 1
$ 5,885 1
Marketing and midstream revenues
8,642 
6,323 1
7,260 1
Total revenues
13,949 
10,304 1
13,145 1
Production expenses
1,823 
1,803 1
2,439 1
Exploration expenses
380 
215 1
451 1
Marketing and midstream expenses
7,730 
5,533 1
6,461 1
Depreciation, depletion and amortization
2,074 
2,096 1
4,022 1
Asset impairments
17 
1,310 1
17,647 1
Asset dispositions
(217)
(1,483)1
1
General and administrative expenses
872 
865 1
1,193 1
Financing costs, net
498 
907 1
519 1
Other expenses
(124)
375 1
264 1
Total expenses
13,053 
11,621 1
33,003 1
Earnings (loss) before income taxes
896 
(1,317)1
(19,858)1
Income tax expense (benefit)
(182)
141 1
(6,213)1
Net earnings (loss)
1,078 
(1,458)1
(13,645)1
Net earnings (loss) attributable to noncontrolling interests
180 
(402)1
(749)1
Net earnings (loss) attributable to Devon
898 
(1,056)1
(12,896)1
Net earnings (loss) per share attributable to Devon:
 
 
 
Basic
$ 1.71 
$ (2.09)1
$ (31.72)1
Diluted
$ 1.70 
$ (2.09)1
$ (31.72)1
Comprehensive earnings (loss):
 
 
 
Net earnings (loss)
1,078 
(1,458)1
(13,645)1
Other comprehensive earnings, net of tax:
 
 
 
Foreign currency translation and other
83 
11 1
(443)1
Pension and postretirement plans
29 
22 1
10 1
Other comprehensive earnings, net of tax
112 
33 1
(433)1
Comprehensive earnings (loss)
1,190 
(1,425)1
(14,078)1
Comprehensive earnings (loss) attributable to noncontrolling interests
180 
(402)1
(749)1
Comprehensive earnings (loss) attributable to Devon
$ 1,010 
$ (1,023)1
$ (13,329)1
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities:
 
 
 
Net earnings (loss)
$ 1,078 
$ (1,458)1
$ (13,645)1
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
 
 
 
Depreciation, depletion and amortization
2,074 
2,096 1
4,022 1
Exploratory dry hole expense and unproved leasehold impairments
219 
113 1
248 1
Asset impairments
17 
1,310 1
17,647 1
Gains and losses on asset sales
(217)
(1,483)1
1
Deferred income tax expense (benefit)
(294)
41 1
(5,976)1
Commodity derivatives
(157)
201 1
(503)1
Cash settlements on commodity derivatives
53 
1
2,416 1
Other derivatives and financial instruments
23 
185 1
(235)1
Cash settlements on other derivatives and financial instruments
(6)
(143)1
272 1
Asset retirement obligation accretion
62 
75 1
75 1
Share-based compensation
198 
233 1
244 1
Other
(122)
270 1
312 1
Net change in working capital
21 
24 1
(265)1
Change in long-term other assets
(46)
36 1
285 1
Change in long-term other liabilities
(1)1
(6)1
Net cash from operating activities
2,909 
1,500 1
4,898 1
Cash flows from investing activities:
 
 
 
Capital expenditures
(2,759)
(2,047)1
(4,787)1
Acquisitions of property, equipment and businesses
(46)
(1,641)1
(1,107)1
Divestitures of property and equipment
417 
3,113 1
107 1
Proceeds from sale of investment
190 
 
 
Other
(12)
(19)1
(16)1
Net cash from investing activities
(2,210)
(594)1
(5,803)1
Cash flows from financing activities:
 
 
 
Borrowings of long-term debt, net of issuance costs
2,376 
2,145 1
4,772 1
Repayments of long-term debt
(2,118)
(4,409)1
(2,634)1
Payment of installment payable
(250)
 
 
Net short-term debt repayments
 
(626)1
(307)1
Early retirement of debt
(6)
(265)1
 
Issuance of common stock
 
1,469 1
 
Sale of subsidiary units
 
 
654 1
Issuance of subsidiary units
501 
892 1
25 1
Dividends paid on common stock
(127)
(221)1
(396)1
Contributions from noncontrolling interests
57 
168 1
16 1
Distributions to noncontrolling interests
(354)
(304)1
(254)1
Shares exchanged for tax withholdings
(68)
(35)1
(51)1
Other
(2)
(10)1
(13)1
Net cash from financing activities
(1,196)1
1,812 1
Effect of exchange rate changes on cash
(61)1
(77)1
Net change in cash and cash equivalents
714 
(351)1
830 1
Cash and cash equivalents at beginning of period
1,959 1
2,310 1
1,480 1
Cash and cash equivalents at end of period
$ 2,673 
$ 1,959 1
$ 2,310 1
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 2,673 
$ 1,959 1
Accounts receivable
1,670 
1,356 1
Assets held for sale
 
193 1
Other current assets
448 
264 1
Total current assets
4,791 
3,772 1
Oil and gas property and equipment, based on successful efforts accounting, net
13,318 
12,998 1
Midstream and other property and equipment, net
7,853 
7,535 1
Total property and equipment, net
21,171 
20,533 1
Goodwill
2,383 
2,383 1
Other long-term assets
1,896 
1,987 1
Total assets
30,241 
28,675 1
Current liabilities:
 
 
Accounts payable
819 
642 1
Revenues and royalties payable
1,180 
908 1
Short-term debt
115 2
 
Other current liabilities
1,201 
1,066 1
Total current liabilities
3,315 
2,616 1
Long-term debt
10,291 
10,154 1
Asset retirement obligations
1,113 
1,226 1
Other long-term liabilities
583 
894 1
Deferred income taxes
835 
1,063 1
Equity:
 
 
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 525 million and 523 million shares in 2017 and 2016, respectively
53 
52 1
Additional paid-in capital
7,333 
7,237 1
Retained earnings (accumulated deficit)
702 
(69)1
Accumulated other comprehensive earnings
1,166 
1,054 1
Total stockholders’ equity attributable to Devon
9,254 
8,274 1
Noncontrolling interests
4,850 
4,448 1
Total equity
14,104 
12,722 1
Total liabilities and equity
$ 30,241 
$ 28,675 1
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2017
Dec. 31, 2016
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 
1,000,000,000 
Common stock, shares issued (in shares)
525,000,000 
523,000,000 
Consolidated Statements Of Equity (USD $)
In Millions
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings (Accumulated Deficit) [Member]
Accumulated Other Comprehensive Earnings [Member]
Treasury Stock [Member]
Noncontrolling Interests [Member]
Balance at Dec. 31, 2014 (Scenario, Previously Reported)
$ 26,341 
$ 41 
$ 4,088 
$ 16,631 
$ 779 
 
$ 4,802 
Balance at Dec. 31, 20141
24,789 
41 
4,088 
14,404 
1,454 
 
4,802 
Balance, shares at Dec. 31, 2014 (Scenario, Previously Reported)
 
409 
 
 
 
 
 
Balance, shares at Dec. 31, 20141
 
409 
 
 
 
 
 
Net earnings (loss)
(13,645)1
 
 
(12,896)
 
 
(749)
Other comprehensive earnings (loss), net of tax
(433)1
 
 
 
(433)
 
 
Stock option exercises
 
 
 
 
 
Restricted stock grants, net of cancellations, shares
 
 
 
 
 
 
Common stock repurchased
(35)
 
 
 
 
(35)
 
Common stock retired
 
 
(35)
 
 
35 
 
Common stock dividends
(396)
 
 
(396)
 
 
 
Common stock issued
199 
198 
 
 
 
 
Common stock issued, shares
 
 
 
 
 
 
Share-based compensation
165 
 
165 
 
 
 
 
Share-based compensation tax expense
(9)
 
(9)
 
 
 
 
Subsidiary equity transactions
726 
 
585 
 
 
 
141 
Distributions to noncontrolling interests
(254)
 
 
 
 
 
(254)
Balance at Dec. 31, 20151
11,111 
42 
4,996 
1,112 
1,021 
 
3,940 
Balance, shares at Dec. 31, 20151
 
418 
 
 
 
 
 
Net earnings (loss)
(1,458)1
 
 
(1,056)
 
 
(402)
Other comprehensive earnings (loss), net of tax
33 1
 
 
 
33 
 
 
Restricted stock grants, net of cancellations, shares
 
 
 
 
 
 
Common stock repurchased
(28)
 
 
 
 
(28)
 
Common stock retired
 
 
(28)
 
 
28 
 
Common stock dividends
(221)
 
(96)
(125)
 
 
 
Common stock issued
2,127 
10 
2,117 
 
 
 
 
Common stock issued, shares
 
103 
 
 
 
 
 
Share-based compensation
168 
 
168 
 
 
 
 
Subsidiary equity transactions
1,294 
 
80 
 
 
 
1,214 
Distributions to noncontrolling interests
(304)
 
 
 
 
 
(304)
Balance at Dec. 31, 20161
12,722 
52 
7,237 
(69)
1,054 
 
4,448 
Balance, shares at Dec. 31, 20161
 
523 
 
 
 
 
 
Net earnings (loss)
1,078 
 
 
898 
 
 
180 
Other comprehensive earnings (loss), net of tax
112 
 
 
 
112 
 
 
Restricted stock grants, net of cancellations, value
 
 
 
 
 
Restricted stock grants, net of cancellations, shares
 
 
 
 
 
 
Common stock repurchased
(44)
 
 
 
 
(44)
 
Common stock retired
 
 
(44)
 
 
44 
 
Common stock dividends
(127)
 
 
(127)
 
 
 
Share-based compensation
126 
 
126 
 
 
 
 
Share-based compensation, shares
 
 
 
 
 
 
Subsidiary equity transactions
590 
 
14 
 
 
 
576 
Distributions to noncontrolling interests
(354)
 
 
 
 
 
(354)
Balance at Dec. 31, 2017
$ 14,104 
$ 53 
$ 7,333 
$ 702 
$ 1,166 
 
$ 4,850 
Balance, shares at Dec. 31, 2017
 
525 
 
 
 
 
 
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies

1.

Summary of Significant Accounting Policies

Devon is a leading independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Devon’s operations are concentrated in various North American onshore areas in the U.S. and Canada. Devon also owns natural gas pipelines, plants and treatment facilities through its ownership in EnLink and the General Partner.

Accounting policies used by Devon and its subsidiaries conform to accounting principles generally accepted in the U.S. and reflect industry practices. The more significant of such policies are discussed below.

Change in Accounting Principle and Presentation Changes

In the fourth quarter of 2017, Devon changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method. In accordance with FASB ASC 250 “Accounting Changes and Error Corrections,” financial information for prior periods has been recast to reflect retrospective application of the successful efforts method, as prescribed by the FASB ASC 932 “Extractive Activities—Oil and Gas.” Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the preferred method and is more widely used in the industry and will improve comparison to Devon’s peer group. Devon believes the successful efforts method provides a more transparent representation of its results of operations. The successful efforts method also provides our investments in oil and gas properties to be assessed for impairment as of the balance sheet date in accordance with FASB ASC 360 “Property, Plant and Equipment” rather than valuations based on 12-month historical prices and costs prescribed under the full cost method. For more detailed information regarding the effects of the change in accounting principle to the successful efforts method, see Note 2.

As Devon recast its financial statements to the successful efforts method, the financial statements and disclosures were examined through the lens of simplicity and transparency. From this assessment, certain changes were made to the financial statement presentation not specifically required by the successful efforts method of accounting. In general, Devon sought to simplify the presentation of its consolidated comprehensive statements of earnings and provide expanded and improved disclosures of key components in its operating results. These presentation judgments improve the clarity and utility of the financial operating results for investors and other stakeholders. As a result, certain prior period amounts have been reclassified to align to this new approach. To ensure financial statement users clearly understand the changes, a description of each enhancement is provided below.

 

Operating income – Devon previously segregated expenses between operating and nonoperating on the statement of operations. The only material nonoperating expense was generally financing costs. Devon streamlined the overall comprehensive statements of earnings by eliminating the operating income distinction.

 

Upstream revenues – On the statement of operations, Devon is combining sales of oil, gas and NGL volumes, as well as oil, gas and NGL derivative activity, into this new line item. With the streamlined presentation of upstream revenues, MD&A and other disclosures of these items were expanded.

 

Production expenses – Similar to streamlining the presentation of upstream revenues, Devon is simplifying the presentation of cash-based expenses associated with upstream production. Previously these expenses were reported separately as lease operations and production and property taxes in the comprehensive statements of earnings. These items are now combined in this new line item. Devon has expanded the MD&A and other disclosures of expenses for lease operations, gathering and transportation, production taxes and property taxes.

 

Asset impairments – Except for unproved oil and gas property impairments, this line item will capture all impairments of Devon’s assets. After research of peers, Devon decided to report unproved impairments as part of exploration expenses. Because asset impairments are non-routine adjustments to the cost basis of assets, this item was placed adjacent to DD&A, the routine adjustment of the cost basis of assets, on the comprehensive statements of earnings.

 

Asset dispositions – This line item will capture gains and losses from dispositions of assets. As a full cost company, Devon rarely had material gains and losses on asset dispositions. However, when it did, such amounts were reported as part of revenues. Devon has more gains and losses under the successful efforts method of accounting. Since recognizing gains and losses on asset dispositions are largely affected by previously recognized DD&A and asset impairments, this item was placed adjacent to those items on the comprehensive statements of earnings.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Devon and entities in which it holds a controlling interest. All intercompany transactions have been eliminated. Undivided interests in oil and natural gas exploration and production joint ventures are consolidated on a proportionate basis. Investments in non-controlled entities, over which Devon has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. In applying the equity method of accounting, the investments are initially recognized at cost and subsequently adjusted for Devon’s proportionate share of earnings, losses, contributions and distributions. Investments accounted for using the equity method and cost method are reported as a component of other long-term assets.

Devon completed a business combination in 2014 whereby Devon controls both EnLink and the General Partner. Devon controls both the General Partner’s and EnLink’s operations; therefore, the General Partner’s and EnLink’s accounts are included in Devon’s accompanying consolidated financial statements subsequent to the completion of the transaction. The portions of the General Partner’s and EnLink’s net earnings and equity not attributable to Devon’s controlling interest are shown separately as noncontrolling interests in the accompanying consolidated comprehensive statements of earnings and consolidated balance sheets.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the following:

 

proved reserves and related present value of future net revenues;

 

evaluation of suspended well costs;

 

the carrying and fair values of oil and gas properties, midstream assets and product and equipment inventories;

 

derivative financial instruments;

 

the fair value of reporting units and related assessment of goodwill for impairment;

 

the fair value of intangible assets other than goodwill;

 

income taxes;

 

asset retirement obligations;

 

obligations related to employee pension and postretirement benefits;

 

legal and environmental risks and exposures; and

 

general credit risk associated with receivables and other assets.

Revenue Recognition

Oil, gas and NGL sales are recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is probable. Delivery occurs and title typically is transferred when production has been delivered to a pipeline, railcar or truck. Cash received relating to future production is deferred and recognized when all revenue recognition criteria are met. Taxes assessed by governmental authorities on oil, gas and NGL sales are presented separately from such revenues in the accompanying consolidated comprehensive statements of earnings.

Marketing and midstream revenues are recorded at the time products are sold or services are provided to third parties at a fixed or determinable price, delivery or performance has occurred, title has transferred and collectability of the revenue is probable. Revenues and expenses attributable to oil, gas and NGL purchases, transportation and processing contracts are reported on a gross basis when Devon takes title to the products and has risks and rewards of ownership.

During 2017, 2016 and 2015, no purchaser accounted for more than 10% of Devon’s consolidated sales revenue.

Derivative Financial Instruments

Devon is exposed to certain risks relating to its ongoing business operations, including risks related to commodity prices, interest rates and Canadian to U.S. dollar exchange rates. As discussed more fully below, Devon uses derivative instruments primarily to manage commodity price risk, interest rate risk and foreign exchange risk. Devon does not intend to issue or hold derivative financial instruments for speculative trading purposes.

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 and EnLink periodically enter into derivative financial instruments with respect to a portion of their oil, gas and NGL marketing activities. These instruments are used to manage the inherent uncertainty of future revenues resulting from commodity price volatility. Devon’s derivative financial instruments typically include financial price swaps, basis swaps, costless price collars and call options. Under the terms of the price swaps, Devon receives a fixed price for its production and pays a variable market price to the contract counterparty. For the basis swaps, Devon receives a fixed differential between two regional index prices and pays a variable differential on the same two index prices to the contract counterparty. The price collars set a floor and ceiling price for the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, Devon will cash-settle the difference with the counterparty to the collars. The call options give counterparties the right to purchase production at a predetermined price.

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 December 31, 2017, Devon did not have any open foreign exchange contracts.

All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the balance sheet. Changes in the fair value of these derivative financial instruments are recorded in earnings unless specific hedge accounting criteria are met. For derivative financial instruments held during the three-year period ended December 31, 2017, Devon chose not to meet the necessary criteria to qualify its derivative financial instruments for hedge accounting treatment. Cash settlements with counterparties on Devon’s derivative financial instruments are also recorded in earnings. Cash settlements that Devon is entitled to are accrued for in other current assets in the accompanying consolidated balance sheets.

By using derivative financial instruments to hedge exposures to changes in commodity prices, interest rates and foreign currency rates, 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 require cash collateral to be posted if either its or the counterparty’s credit rating falls below certain credit rating levels. As of December 31, 2017, Devon held no cash collateral of its counterparties nor posted collateral to its counterparties.

General and Administrative Expenses

G&A is reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by Devon.

Share-Based Compensation

Independent of EnLink, Devon grants share-based awards to members of its Board of Directors and select employees. EnLink and the General Partner also grant share-based awards to members of its Board of Directors and select employees. All such awards are measured at fair value on the date of grant and are generally recognized as a component of G&A in the accompanying consolidated comprehensive statements of earnings over the applicable requisite service periods. As a result of Devon’s restructuring activity discussed in Note 7, certain share-based awards were accelerated and recognized as a component of restructuring costs in the accompanying 2016 consolidated comprehensive statements of earnings.

Generally, Devon uses new shares from approved incentive programs to grant share-based awards and to issue shares upon stock option exercises. Shares repurchased under approved programs are generally available to be issued as part of Devon’s share-based awards. However, Devon has historically canceled these shares upon repurchase.

Income Taxes

Devon is subject to current income taxes assessed by the federal and various state jurisdictions in the U.S. and by other foreign jurisdictions. In addition, Devon accounts for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. If the future utilization of some portion of the deferred tax assets is determined to be unlikely, a valuation allowance is provided to reduce the recorded tax benefits from such assets. Devon periodically weighs the positive and negative evidence to determine if it is more likely than not that some or all of the deferred tax assets will be realized. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence, such as cumulative losses in recent years. See Note 8 for further discussion.

Devon recognizes the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Liabilities for unrecognized tax benefits related to such tax positions are included in other long-term liabilities unless the tax position is expected to be settled within the upcoming year, in which case the liabilities are included in other current liabilities. Interest and penalties related to unrecognized tax benefits are included in current income tax expense.

Devon estimates its annual effective income tax rate in recording its 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 period in which they occur.

Net Earnings (Loss) Per Share Attributable to Devon

Devon’s basic earnings per share amounts have been computed based on the average number of shares of common stock outstanding for the period. Basic earnings per share includes the effect of participating securities, which primarily consist of Devon’s outstanding restricted stock awards, as well as performance-based restricted stock awards that have met the requisite performance targets. Diluted earnings per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities. Such securities primarily consist of unvested performance share units.

Cash and Cash Equivalents

Devon considers all highly liquid investments with original contractual maturities of three months or less to be cash equivalents.

Accounts Receivable

Devon’s accounts receivable balance primarily consists of oil and gas sales receivables, marketing and midstream revenue receivables and joint interest receivables for which Devon does not require collateral security. Devon has established an allowance for bad debts equal to the estimable portions of accounts receivable for which failure to collect is considered probable. When a portion of the receivable is deemed uncollectible, the write-off is made against the allowance.

Property and Equipment

Oil and Gas Property and Equipment

Devon follows the successful efforts method of accounting for its oil and gas properties. Under this method exploration costs, such as exploratory geological and geophysical costs, and costs associated with nonproductive exploratory wells, delay rentals and exploration overhead are charged against earnings as incurred. Costs of drilling successful exploratory wells along with acquisition costs and the costs of drilling development wells, including those that are unsuccessful, are capitalized. Devon groups its oil and gas properties with a common geological structure or stratigraphic condition (“common operating field”) in accordance with ASC 932 “Extractive Activities – Oil and Gas” for purposes of computing DD&A, assessing proved property impairments and accounting for asset dispositions.

Exploratory drilling costs and exploratory-type stratigraphic test wells are initially capitalized, or suspended, pending the determination of proved reserves. If proved reserves are found, drilling costs remain capitalized as proved properties. Costs of unsuccessful wells are charged to exploration expense. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory well costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed. In some instances, this determination may take longer than one year. Devon reviews the status of all suspended exploratory drilling costs quarterly.

 

Capitalized costs of proved oil and gas properties are depleted by an equivalent unit-of-production method, converting gas to oil at the ratio of six Mcf of gas to one Bbl of oil. Proved leasehold acquisition costs, less accumulated amortization, are depleted over total proved reserves, which includes proved undeveloped reserves. Capitalized costs of wells and related equipment and facilities, including estimated asset retirement costs, net of estimated salvage values and less accumulated amortization are depreciated over proved developed reserves associated with those capitalized costs. Depletion is calculated by applying the DD&A rate (amortizable base divided by beginning of period proved reserves) to current period production.

Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. Devon assesses its unproved properties for impairment annually, or more frequently if events or changes in circumstances dictate that the carrying value of those assets may not be recoverable. Significant unproved properties are assessed individually. Costs of insignificant unproved properties are amortized to exploration expense on a group basis using estimated lease surrender rates over average lease terms.

Proved properties are assessed for impairment annually, or more frequently if events or changes in circumstances dictate that the carrying value of those assets may not be recoverable. Individual assets are grouped for impairment purposes based on a common operating field. If there is an indication the carrying amount of an asset may not be recovered, the asset is assessed for potential impairment by management through an established process. If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset, the carrying value is written down to estimated fair value. Because there is usually a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants or by comparable transactions. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review.

Gains or losses are recorded for sales or dispositions of oil and gas properties which constitute an entire common operating field or which result in a significant alteration of the common operating field’s DD&A rate. These gains and losses are classified as asset dispositions in the accompanying consolidated statements of earnings. Partial common operating field sales or dispositions deemed not to significantly alter the DD&A rates are generally accounted for as adjustments to capitalized costs with no gain or loss recognized.

Devon capitalizes interest costs incurred and attributable to material unproved oil and gas properties and major development projects of oil and gas properties.

Midstream and Other Property and Equipment

Costs for midstream assets that are in use are depreciated over the assets’ estimated useful lives, using the straight-line method. Depreciation and amortization of other property and equipment, including corporate and leasehold improvements, are provided using the straight-line method based on estimated useful lives ranging from three to 60 years. Interest costs incurred and attributable to major midstream and corporate construction projects are also capitalized.

 

 

Asset Retirement Obligations

Devon recognizes liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites and midstream pipelines and processing plants when there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. When the assumptions used to estimate a recorded asset retirement obligation change, a revision is recorded to both the asset retirement obligation and the asset retirement cost. Devon’s asset retirement obligations also include estimated environmental remediation costs which arise from normal operations and are associated with the retirement of such long-lived assets. The asset retirement cost is depreciated using a systematic and rational method similar to that used for the associated property and equipment.

Goodwill

Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired and is tested for impairment annually, or more frequently if events or changes in circumstances dictate that the carrying value of goodwill may not be recoverable. Such test includes an assessment of qualitative and quantitative factors. The impairment test requires the fair value of each reporting unit be compared to the carrying value of the reporting unit. If the fair value of the reporting unit is less than the carrying value, then goodwill is written down to the fair value of the goodwill through a charge to expense. Because quoted market prices are not available for Devon’s reporting units, the fair values of the reporting units are estimated based upon several valuation analyses, including comparable companies, comparable transactions and premiums paid.

Devon and EnLink performed annual impairment tests of goodwill in the fourth quarters of 2017, 2016 and 2015. No impairment was required as a result of the annual tests in 2017 or 2016; however, sustained weakness in the overall energy sector driven by lower commodity prices, together with a decline in the EnLink unit price, caused a change in circumstances warranting an interim impairment test and write-down for certain of EnLink’s reporting units in the first quarter of 2016. Write-downs were also required in 2015 for certain EnLink reporting units. See Note 14 for further discussion.

Intangible Assets

Unamortized capitalized intangible assets, consisting of EnLink customer relationships, are presented in other long-term assets in the accompanying consolidated balance sheets. These assets are amortized on a straight-line basis over the expected periods of benefits, which range from 10 to 20 years. During 2017, 2016 and 2015, EnLink’s customer relationships were also evaluated for impairment, and in 2015, a portion of these intangible assets was considered impaired. See Note 14 for further discussion.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Liabilities for environmental remediation or restoration claims resulting from allegations of improper operation of assets are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Expenditures related to such environmental matters are expensed or capitalized in accordance with Devon’s accounting policy for property and equipment.

Fair Value Measurements

Certain of Devon’s assets and liabilities are measured at fair value at each reporting date. Fair value represents the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants. This price is commonly referred to as the “exit price.” Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques. This hierarchy consists of three broad levels:

 

Level 1 – Inputs consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. When available, Devon measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value.

 

Level 2 – Inputs consist of quoted prices that are generally observable for the asset or liability. Common examples of Level 2 inputs include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in markets not considered to be active.

 

Level 3 – Inputs are not observable from objective sources and have the lowest priority. The most common Level 3 fair value measurement is an internally developed cash flow model.

Foreign Currency Translation Adjustments

The U.S. dollar is the functional currency for Devon’s consolidated operations except its Canadian subsidiaries, which use the Canadian dollar as the functional currency. Assets and liabilities of the Canadian subsidiaries are translated to U.S. dollars using the applicable exchange rate as of the end of a reporting period. Revenues, expenses and cash flow are translated using an average exchange rate during the reporting period. Translation adjustments have no effect on net income and are included in accumulated other comprehensive earnings in stockholders’ equity.

Noncontrolling Interests

Noncontrolling interests represent third-party ownership in the net assets of Devon’s consolidated subsidiaries and are presented as a component of equity. Changes in Devon’s ownership interests in subsidiaries that do not result in deconsolidation are recognized in equity.

Recently Adopted Accounting Standards

In January 2017, Devon adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Its objective is to simplify several aspects of the accounting for share-based payments, including income taxes when awards vest or are settled, statutory withholding and forfeitures. As the result of adoption, Devon made certain income tax presentation changes, most notably prospectively presenting excess tax benefits and deficiencies in the consolidated comprehensive statements of earnings and as operating cash flows in the consolidated statements of cash flows. Devon also retrospectively applied the new cash flow statement guidance dictating the presentation of shares exchanged for tax-withholding purposes as a financing activity. The adoption of the new guidance did not materially impact the consolidated financial statements for the year ended December 31, 2017 or previously reported financial information but could have a more material future impact.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill And Other (Topic 350), Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In January 2017, Devon elected to early adopt ASU 2017-04. The adoption had no impact on the consolidated financial statements.

Issued Accounting Standards Not Yet Adopted

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which established ASC Topic 606, Revenue from Contracts with Customers (ASC 606). ASC 606 will replace existing revenue recognition requirements in GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which they expect to be entitled in exchange for transferring goods or services to a customer. ASC 606 will also require significantly expanded disclosures containing qualitative and quantitative information regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (ASU 2016-12), which updated ASU 2014-09. ASU 2016-12 clarifies certain core recognition principles, including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition and disclosures no longer required if the full retrospective transition method is adopted. ASU 2014-09 and ASU 2016-12 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, and are to be applied using the modified retrospective or full retrospective transition methods, with early application permitted for annual reporting periods beginning after December 15, 2016. Devon will adopt ASC 606 using the modified retrospective method for annual and interim reporting periods beginning January 1, 2018.  

 

Devon has aggregated and reviewed its contracts that are within the scope of ASC 606. Based on its evaluation, Devon does not anticipate the adoption of ASC 606 will have a material impact on its balance sheet or related consolidated statements of earnings, equity or cash flows. Accordingly, Devon will continue to recognize revenue at the time commodities are delivered. However, ASC 606 will affect how certain transactions are presented in its financial statements. Under this guidance, an entity generally shall record revenue on a gross basis if it controls a promised good or service before transferring it to a customer, whereas an entity shall record revenue on a net basis if its role is to arrange for another entity to provide the goods or services to a customer. Devon will change its presentation of certain processing arrangements from a net presentation to a gross presentation. This change will impact Devon’s upstream revenues and production expenses by approximately $250 million for 2016 and 2017, and will impact 2018 by a similar amount. EnLink will change the presentation of certain marketing and midstream revenues to marketing and midstream operating expenses or from marketing and midstream operating expenses to marketing and midstream revenues. Devon estimates this reclassification will result in a net decrease in EnLink’s marketing and midstream revenues of approximately 6-10%. These estimates are based on historical information and could change based on future volumes and commodity prices. These presentation changes will have no impact on net earnings or cash flows.

Based on the disclosure requirements of ASC 606, upon adoption, Devon expects to provide expanded disclosures relating to its revenue recognition policies and how these relate to its revenue-generating contractual performance obligations. In addition, Devon expects to present revenues disaggregated based on the type of good or service in order to more fully depict the nature of its revenues.  

The FASB issued ASU 2016-02, Leases (Topic 842). This ASU will supersede the lease requirements in Topic 840, Leases. Its objective is to increase transparency and comparability among organizations. This ASU provides guidance requiring lessees to recognize most leases on their balance sheet. Lessor accounting does not significantly change, except for some changes made to align with new revenue recognition requirements. This ASU is effective for Devon beginning January 1, 2019. Early adoption is permitted, but Devon does not plan to early adopt. Currently the guidance would 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. However, the FASB recently issued Proposed ASU No. 2018-200, Leases (Topic 842), Targeted Improvements which would allow entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The proposed ASU will allow entities to continue to apply the legacy guidance in Topic 840, including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. Devon is in the process of evaluating contracts and gathering the necessary terms and data elements for purposes of determining the impact this ASU will have on its consolidated financial statements and related disclosures. Recently, the FASB issued ASU No. 2018-01, Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842. This ASU would permit an entity not to apply Topic 842 to land easements and rights-of-way that exist or expired before the effective date of Topic 842 and that were not previously assessed under Topic 840. An entity would continue to apply its current accounting policy for accounting for land easements that existed before the effective date of Topic 842. Once an entity adopts Topic 842, it would apply that Topic prospectively to all new (or modified) land easements and rights-of-way to determine whether the arrangement should be accounted for as a lease. For Devon, these contracts represent a relatively small percentage of the aggregate value of contracts being evaluated but represent a significant number of contracts.

Based on continuing research, Devon estimates a large number of contracts and data elements must be gathered and reviewed to ensure proper accounting of these contracts once this ASU is effective. Devon has preliminarily determined its portfolio of leased assets and is reviewing all related contracts to determine the impact the adoption will have on its consolidated financial statements. Devon anticipates the adoption of this standard will significantly impact its consolidated financial statements, systems, processes and controls and is evaluating technology requirements and solutions needed to comply with the requirements of this ASU. While we cannot currently estimate the quantitative effect that ASU 2016-02 will have on our consolidated financial statements, the adoption will increase our asset and liability balances on the consolidated balance sheets due to the required recognition of right-of-use assets and corresponding lease liabilities.

 

The FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU will require entities to present the service cost component of net periodic benefit cost in the same line item as other employee compensation costs. Only the service cost component of net periodic benefit cost is eligible for capitalization. This ASU is effective for Devon beginning January 1, 2018, and income statement presentation changes will be applied retrospectively, while service cost component capitalization will be applied prospectively. Upon adoption of this ASU, Devon will reclassify $7 million, $14 million and $16 million of non-service cost components of net periodic benefit costs for 2017, 2016 and 2015, respectively, as other expenses. Such amounts are currently classified in Devon’s G&A. No other changes upon adopting this ASU are expected to be material.

 

The FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires an entity to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents on the statement of cash flows and to provide a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet when the cash, cash equivalents, restricted cash, and restricted cash equivalents are presented in more than one line item on the balance sheet. This reconciliation can be presented either on the face of the consolidated statement of cash flows or in the notes to the financial statements. This ASU is effective for Devon beginning January 1, 2018, and will be applied retrospectively. Currently, Devon does not expect the adoption to have a material impact on its consolidated statement of cash flows.

 

The FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business to assist entities with evaluating whether a set of transferred assets and activities should be accounted for as an acquisition or disposals of assets or as a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired, or disposed of, are concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities would not represent a business. The guidance also requires that a set of assets must include an input and a substantive process that together significantly contribute to the ability to create an output to be considered a business. This ASU is effective for Devon beginning January 1, 2018, and will be applied prospectively. Devon does not expect the adoption to have a material impact on its consolidated financial statements; however these amendments could result in the recording of fewer business combinations in future periods.

 

The FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU will expand hedge accounting for nonfinancial and financial risk components and amend measurement methodologies to more closely align hedge accounting with a company's risk management activities. The guidance also eliminates the requirement to separately measure and report hedge ineffectiveness. This ASU only applies to entities that elect hedge accounting, which Devon has not for derivative financial instruments during the three year period ended December 31, 2017. This ASU is effective for annual and interim periods beginning January 1, 2019, with early adoption permitted in 2018. The ASU is required to be adopted using a 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 is currently evaluating the provisions of this ASU and assessing the impact it may have on its consolidated financial statements if hedge accounting were elected by Devon in the future. 

Changes in Accounting Principle
Changes in Accounting Principle

2.Change in Accounting Principle

In the fourth quarter of 2017, Devon changed its method of accounting for oil and gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration costs such as exploratory dry holes, exploratory geological and geophysical costs, delay rentals, unproved impairments, and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. In addition, gains or losses, if applicable, are recognized more frequently on the dispositions of oil and gas property and equipment under the successful efforts method. Devon has recast certain historical information for all periods presented, including the Consolidated Comprehensive Statements of Earnings, Consolidated Statements of Cash Flows, Consolidated Balance Sheets, Consolidated Statements of Equity and related information in Notes 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 13, 14, 16, 22, 23, 24 and 25.

The following tables present the effects of the change to the successful efforts method in the consolidated financial statements.

 

 

 

Changes to the Consolidated Comprehensive

 

 

 

Statement of Earnings

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2017

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Exploration expenses

 

$

 

 

$

380

 

 

$

380

 

Depreciation, depletion and amortization

 

 

1,579

 

 

 

495

 

 

 

2,074

 

Asset dispositions

 

 

(5

)

 

 

(212

)

 

 

(217

)

General and administrative expenses

 

 

682

 

 

 

190

 

 

 

872

 

Financing costs, net

 

 

494

 

 

 

4

 

 

 

498

 

Other expenses

 

 

(102

)

 

 

(22

)

 

 

(124

)

Earnings before income taxes

 

 

1,731

 

 

 

(835

)

 

 

896

 

Income tax benefit

 

 

(140

)

 

 

(42

)

 

 

(182

)

Net earnings

 

 

1,871

 

 

 

(793

)

 

 

1,078

 

Net earnings attributable to Devon

 

 

1,691

 

 

 

(793

)

 

 

898

 

Net earnings per share attributable to Devon:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3.22

 

 

 

(1.51

)

 

 

1.71

 

Diluted

 

 

3.20

 

 

 

(1.50

)

 

 

1.70

 

Comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

1,871

 

 

 

(793

)

 

 

1,078

 

Foreign currency translation and other

 

 

4

 

 

 

79

 

 

 

83

 

Comprehensive earnings

 

 

1,904

 

 

 

(714

)

 

 

1,190

 

Comprehensive earnings attributable to Devon

 

 

1,724

 

 

 

(714

)

 

 

1,010

 

 

 

 

Changes to the Consolidated Comprehensive

 

 

 

Statement of Earnings

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2016

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Exploration expenses

 

$

 

 

$

215

 

 

$

215

 

Depreciation, depletion and amortization

 

 

1,792

 

 

 

304

 

 

 

2,096

 

Asset impairments

 

 

4,975

 

 

 

(3,665

)

 

 

1,310

 

Asset dispositions

 

 

(1,887

)

 

 

404

 

 

 

(1,483

)

General and administrative expenses

 

 

658

 

 

 

207

 

 

 

865

 

Financing costs, net

 

 

904

 

 

 

3

 

 

 

907

 

Other expenses

 

 

403

 

 

 

(28

)

 

 

375

 

Loss before income taxes

 

 

(3,877

)

 

 

2,560

 

 

 

(1,317

)

Income tax expense (benefit)

 

 

(173

)

 

 

314

 

 

 

141

 

Net loss

 

 

(3,704

)

 

 

2,246

 

 

 

(1,458

)

Net loss attributable to Devon

 

 

(3,302

)

 

 

2,246

 

 

 

(1,056

)

Net loss per share attributable to Devon:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

(6.52

)

 

 

4.43

 

 

 

(2.09

)

Diluted

 

 

(6.52

)

 

 

4.43

 

 

 

(2.09

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(3,704

)

 

 

2,246

 

 

 

(1,458

)

Foreign currency translation and other

 

 

32

 

 

 

(21

)

 

 

11

 

Comprehensive loss

 

 

(3,650

)

 

 

2,225

 

 

 

(1,425

)

Comprehensive loss attributable to Devon

 

 

(3,248

)

 

 

2,225

 

 

 

(1,023

)

 

 

 

Changes to the Consolidated Comprehensive

 

 

 

Statement of Earnings

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2015

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Exploration expenses

 

$

 

 

$

451

 

 

$

451

 

Depreciation, depletion and amortization

 

 

3,129

 

 

 

893

 

 

 

4,022

 

Asset impairments

 

 

20,820

 

 

 

(3,173

)

 

 

17,647

 

Asset dispositions

 

 

 

 

 

7

 

 

 

7

 

General and administrative expenses

 

 

868

 

 

 

325

 

 

 

1,193

 

Financing costs, net

 

 

517

 

 

 

2

 

 

 

519

 

Other expenses

 

 

179

 

 

 

85

 

 

 

264

 

Loss before income taxes

 

 

(21,268

)

 

 

1,410

 

 

 

(19,858

)

Income tax benefit

 

 

(6,065

)

 

 

(148

)

 

 

(6,213

)

Net loss

 

 

(15,203

)

 

 

1,558

 

 

 

(13,645

)

Net loss attributable to Devon

 

 

(14,454

)

 

 

1,558

 

 

 

(12,896

)

Net loss per share attributable to Devon:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

(35.55

)

 

 

3.83

 

 

 

(31.72

)

Diluted

 

 

(35.55

)

 

 

3.83

 

 

 

(31.72

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(15,203

)

 

 

1,558

 

 

 

(13,645

)

Foreign currency translation and other

 

 

(559

)

 

 

116

 

 

 

(443

)

Comprehensive loss

 

 

(15,752

)

 

 

1,674

 

 

 

(14,078

)

Comprehensive loss attributable to Devon

 

 

(15,003

)

 

 

1,674

 

 

 

(13,329

)

 

 

 

Changes to the Consolidated

 

 

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2017

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Net earnings

 

$

1,871

 

 

$

(793

)

 

$

1,078

 

Depreciation, depletion and amortization

 

 

1,579

 

 

 

495

 

 

 

2,074

 

Exploratory dry hole expense and unproved

   leasehold impairments

 

 

 

 

 

219

 

 

 

219

 

Gains and losses on asset sales

 

 

(5

)

 

 

(212

)

 

 

(217

)

Deferred income tax benefit

 

 

(252

)

 

 

(42

)

 

 

(294

)

Share-based compensation

 

 

158

 

 

 

40

 

 

 

198

 

Other

 

 

(108

)

 

 

(14

)

 

 

(122

)

Net cash from operating activities

 

 

3,216

 

 

 

(307

)

 

 

2,909

 

Capital expenditures

 

 

(3,074

)

 

 

315

 

 

 

(2,759

)

Divestitures of property and equipment

 

 

425

 

 

 

(8

)

 

 

417

 

Net cash from investing activities

 

 

(2,517

)

 

 

307

 

 

 

(2,210

)

 

 

 

Changes to the Consolidated

 

 

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2016

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Net loss

 

$

(3,704

)

 

$

2,246

 

 

$

(1,458

)

Depreciation, depletion and amortization

 

 

1,792

 

 

 

304

 

 

 

2,096

 

Exploratory dry hole expense and unproved

   leasehold impairments

 

 

 

 

 

113

 

 

 

113

 

Asset impairments

 

 

4,975

 

 

 

(3,665

)

 

 

1,310

 

Gains and losses on asset sales

 

 

(1,887

)

 

 

404

 

 

 

(1,483

)

Deferred income tax expense (benefit)

 

 

(273

)

 

 

314

 

 

 

41

 

Share-based compensation

 

 

194

 

 

 

39

 

 

 

233

 

Other

 

 

303

 

 

 

(33

)

 

 

270

 

Net cash from operating activities

 

 

1,778

 

 

 

(278

)

 

 

1,500

 

Capital expenditures

 

 

(2,330

)

 

 

283

 

 

 

(2,047

)

Divestitures of property and equipment

 

 

3,118

 

 

 

(5

)

 

 

3,113

 

Net cash from investing activities

 

 

(872

)

 

 

278

 

 

 

(594

)

 

 

 

Changes to the Consolidated

 

 

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2015

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Net loss

 

$

(15,203

)

 

$

1,558

 

 

$

(13,645

)

Depreciation, depletion and amortization

 

 

3,129

 

 

 

893

 

 

 

4,022

 

Exploratory dry hole expense and unproved

   leasehold impairments

 

 

 

 

 

248

 

 

 

248

 

Asset impairments

 

 

20,820

 

 

 

(3,173

)

 

 

17,647

 

Gains and losses on asset sales

 

 

 

 

 

7

 

 

 

7

 

Deferred income tax benefit

 

 

(5,828

)

 

 

(148

)

 

 

(5,976

)

Share-based compensation

 

 

181

 

 

 

63

 

 

 

244

 

Other

 

 

281

 

 

 

31

 

 

 

312

 

Net cash from operating activities

 

 

5,419

 

 

 

(521

)

 

 

4,898

 

Capital expenditures

 

 

(5,308

)

 

 

521

 

 

 

(4,787

)

Net cash from investing activities

 

 

(6,324

)

 

 

521

 

 

 

(5,803

)

 

 

 

Changes to the Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2017

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Oil and gas property and equipment, net

 

$

9,702

 

 

 

3,616

 

 

$

13,318

 

Total property and equipment, net

 

 

17,555

 

 

 

3,616

 

 

 

21,171

 

Goodwill

 

 

3,964

 

 

 

(1,581

)

 

 

2,383

 

Total assets

 

 

28,206

 

 

 

2,035

 

 

 

30,241

 

Deferred income taxes

 

 

434

 

 

 

401

 

 

 

835

 

Additional paid-in capital

 

 

7,206

 

 

 

127

 

 

 

7,333

 

Retained earnings

 

 

44

 

 

 

658

 

 

 

702

 

Accumulated other comprehensive earnings

 

 

317

 

 

 

849

 

 

 

1,166

 

Total stockholders’ equity attributable to Devon

 

 

7,620

 

 

 

1,634

 

 

 

9,254

 

Total equity

 

 

12,470

 

 

 

1,634

 

 

 

14,104

 

Total liabilities and equity

 

 

28,206

 

 

 

2,035

 

 

 

30,241

 

 

 

 

Changes to the Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

As Reported Under

 

For the Year Ended December 31, 2016

 

Under Full Cost

 

 

Changes

 

 

Successful Efforts

 

Oil and gas property and equipment, net

 

$

8,655

 

 

$

4,343

 

 

$

12,998

 

Total property and equipment, net

 

 

16,190

 

 

 

4,343

 

 

 

20,533

 

Goodwill

 

 

3,964

 

 

 

(1,581

)

 

 

2,383

 

Total assets

 

 

25,913

 

 

 

2,762

 

 

 

28,675

 

Deferred income taxes

 

 

648

 

 

 

415

 

 

 

1,063

 

Accumulated deficit

 

 

(1,646

)

 

 

1,577

 

 

 

(69

)

Accumulated other comprehensive earnings

 

 

284

 

 

 

770

 

 

 

1,054