DEVON ENERGY CORP/DE, 10-Q filed on 5/5/2021
Quarterly Report
v3.21.1
Document And Entity Information - shares
shares in Millions
3 Months Ended
Mar. 31, 2021
Apr. 21, 2021
Cover [Abstract]    
Document Type 10-Q  
Document Period End Date Mar. 31, 2021  
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 2021  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Document Fiscal Period Focus Q1  
Entity Common Stock, Shares Outstanding   676.9
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-32318  
Entity Tax Identification Number 73-1567067  
Entity Address, Address Line One 333 West Sheridan Avenue  
Entity Address, City or Town Oklahoma City  
Entity Address, State or Province OK  
Entity Address, Postal Zip Code 73102-5015  
City Area Code 405  
Local Phone Number 235-3611  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, par value $0.10 per share  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
v3.21.1
Consolidated Statements of Comprehensive Earnings - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Revenues $ 2,290 $ 1,367
Oil, gas and NGL derivatives (528) 720
Total revenues 1,762 2,087
Production expenses 489 318
Exploration expenses 3 112
Depreciation, depletion and amortization 467 401
Asset impairments   2,666
Asset dispositions (32)  
General and administrative expenses 107 102
Financing costs, net 77 65
Restructuring and transaction costs 189  
Other, net (29) (48)
Total expenses 1,794 4,194
Loss from continuing operations before income taxes (32) (2,107)
Income tax benefit (248) (417)
Net earnings (loss) from continuing operations 216 (1,690)
Net loss from discontinued operations, net of income taxes   (125)
Net earnings (loss) 216 (1,815)
Net earnings attributable to noncontrolling interests 3 1
Net earnings (loss) attributable to Devon $ 213 $ (1,816)
Basic net earnings (loss) per share:    
Basic earnings (loss) from continuing operations per share $ 0.33 $ (4.48)
Basic loss from discontinued operations per share   (0.34)
Basic net earnings (loss) per share 0.33 (4.82)
Diluted net earnings (loss) per share:    
Diluted earnings (loss) from continuing operations per share 0.32 (4.48)
Diluted loss from discontinued operations per share   (0.34)
Diluted net earnings (loss) per share $ 0.32 $ (4.82)
Comprehensive earnings (loss):    
Net earnings (loss) $ 216 $ (1,815)
Other comprehensive earnings (loss), net of tax:    
Pension and postretirement plans 23 1
Other comprehensive earnings, net of tax 23 1
Comprehensive earnings (loss): 239 (1,814)
Comprehensive earnings attributable to noncontrolling interests 3 1
Comprehensive earnings (loss) attributable to Devon 236 (1,815)
Oil, Gas and NGL Sales [Member]    
Revenues 1,788 807
Marketing and Midstream Revenues [Member]    
Revenues 502 560
Marketing and Midstream Expenses [Member]    
Expenses $ 523 $ 578
v3.21.1
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities:    
Net earnings (loss) $ 216 $ (1,815)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:    
Net loss from discontinued operations, net of income taxes   125
Depreciation, depletion and amortization 467 401
Asset impairments   2,666
Leasehold impairments 1 110
(Amortization) accretion of liabilities (54) 8
Total (gains) losses on commodity derivatives 528 (720)
Cash settlements on commodity derivatives (232) 101
Gains on asset dispositions (32)  
Deferred income tax benefit (243) (311)
Share-based compensation 41 20
Early retirement of debt 27  
Changes in assets and liabilities, net (127) (56)
Net cash from operating activities - continuing operations 592 529
Cash flows from investing activities:    
Capital expenditures (499) (425)
Acquisitions of property and equipment   (4)
Divestitures of property and equipment 15 25
WPX acquired cash 344  
Distributions from equity method investments 10  
Net cash from investing activities - continuing operations (130) (404)
Cash flows from financing activities:    
Repayments of long-term debt (533)  
Early retirement of debt (27)  
Repurchases of common stock   (38)
Dividends paid on common stock (203) (34)
Contributions from noncontrolling interests   5
Distributions to noncontrolling interests (4) (3)
Acquisition of noncontrolling interests (24)  
Shares exchanged for tax withholdings (33) (17)
Net cash from financing activities - continuing operations (824) (87)
Effect of exchange rate changes on cash - continuing operations 3  
Net change in cash, cash equivalents and restricted cash of continuing operations (359) 38
Cash flows from discontinued operations:    
Operating activities 0 (131)
Investing activities 0 (1)
Financing activities 0 0
Effect of exchange rate changes on cash 0 (23)
Net change in cash, cash equivalents and restricted cash of discontinued operations 0 (155)
Net change in cash, cash equivalents and restricted cash (359) (117)
Cash, cash equivalents and restricted cash at beginning of period 2,237 1,844
Cash, cash equivalents and restricted cash at end of period 1,878 1,727
Reconciliation of cash, cash equivalents and restricted cash:    
Cash and cash equivalents 1,683 1,527
Restricted cash 195 200
Cash, cash equivalents and restricted cash at end of period $ 1,878 $ 1,727
v3.21.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
ASSETS    
Cash, cash equivalents and restricted cash $ 1,878 $ 2,237
Accounts receivable 1,089 601
Income taxes receivable 166 174
Other current assets 334 248
Total current assets 3,467 3,260
Oil and gas property and equipment, based on successful efforts accounting, net 13,826 4,436
Other property and equipment, net ($106 million and $102 million related to CDM in 2021 and 2020, respectively) [1] 1,448 957
Total property and equipment, net 15,274 5,393
Goodwill 753 753
Right-of-use assets 255 223
Investments 402 12
Other long-term assets 306 271
Total assets 20,457 9,912
LIABILITIES AND EQUITY    
Accounts payable 564 242
Revenues and royalties payable 909 662
Short-term debt 226  
Other current liabilities 1,246 536
Total current liabilities 2,945 1,440
Long-term debt 7,042 4,298
Lease liabilities 260 246
Asset retirement obligations 455 358
Other long-term liabilities 1,269 551
Stockholders' equity:    
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 675 million and 382 million shares in 2021 and 2020, respectively 67 38
Additional paid-in capital 8,172 2,766
Retained earnings 218 208
Accumulated other comprehensive loss (104) (127)
Total stockholders’ equity attributable to Devon 8,353 2,885
Noncontrolling interests 133 134
Total equity 8,486 3,019
Total liabilities and equity $ 20,457 $ 9,912
[1] $106 million and $102 million related to CDM in 2021 and 2020, respectively.
v3.21.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
Other property and equipment, net [1] $ 1,448 $ 957
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) 675,000,000 382,000,000
CDM [Member]    
Other property and equipment, net $ 106 $ 102
[1] $106 million and $102 million related to CDM in 2021 and 2020, respectively.
v3.21.1
Consolidated Statements Of Equity - USD ($)
shares in Millions, $ in Millions
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earning (Accumulated Deficit) [Member]
Other Comprehensive Earnings (Loss) [Member]
Treasury Stock [Member]
Noncontrolling Interests [Member]
Balance at Dec. 31, 2019 $ 5,920 $ 38 $ 2,735 $ 3,148 $ (119)   $ 118
Balance, shares at Dec. 31, 2019   382          
Net earnings (loss) (1,815)     (1,816)     1
Other comprehensive earnings (loss), net of tax 1       1    
Restricted stock grants, net of cancellations, shares   3          
Common stock repurchased (54)         $ (54)  
Common stock retired     (54)     54  
Common stock retired, shares   (3)          
Common stock dividends (34)     (34)      
Share-based compensation 20   20        
Share-based compensation, shares   1          
Contributions from noncontrolling interests 5           5
Distributions to noncontrolling interests (3)           (3)
Balance at Mar. 31, 2020 4,040 $ 38 2,701 1,298 (118)   121
Balance, shares at Mar. 31, 2020   383          
Balance at Dec. 31, 2020 3,019 $ 38 2,766 208 (127)   134
Balance, shares at Dec. 31, 2020   382          
Net earnings (loss) 216     213     3
Other comprehensive earnings (loss), net of tax 23       23    
Restricted stock grants, net of cancellations, shares   4          
Common stock repurchased (38)         (38)  
Common stock retired     (38)     $ 38  
Common stock retired, shares   (2)          
Common stock dividends (203)     (203)      
Common stock issued 5,432 $ 29 5,403        
Common stock issued, Shares   290          
Share-based compensation 41   41        
Share-based compensation, shares   1          
Distributions to noncontrolling interests (4)           (4)
Balance at Mar. 31, 2021 $ 8,486 $ 67 $ 8,172 $ 218 $ (104)   $ 133
Balance, shares at Mar. 31, 2021   675          
v3.21.1
Summary Of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
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 2020 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 periods ended March 31, 2021 and 2020 and Devon’s financial position as of March 31, 2021.

Devon and WPX completed an all-stock merger of equals on January 7, 2021. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. See Note 2 for further discussion.

As further discussed in Note 18, Devon closed on the sale of its Barnett Shale assets in October 2020. Prior to December 31, 2020, activity relating to Devon’s Barnett Shale assets is classified as discontinued operations within Devon’s consolidated statements of comprehensive earnings and consolidated statements of cash flows.

As of March 31, 2021, Devon classified approximately $185 million of cash as restricted cash on the consolidated balance sheets for obligations associated with the abandonment of certain gas processing contracts related to divestitures of other Barnett Shale assets that occurred in 2018 and obligations retained related to the Canadian business. Cash payments for these charges related to the Barnett assets and Canada business total approximately $10 million per quarter.

 

Variable Interest Entity

Cotton Draw Midstream, L.L.C. (“CDM”) is a joint-venture entity formed by Devon and an affiliate of QL Capital Partners, LP (“QLCP”). CDM provides gathering, compression and dehydration services for natural gas production in the Cotton Draw area of the Delaware Basin. Devon holds a controlling interest in CDM and the portions of CDM’s net earnings and equity not attributable to Devon’s controlling interest are shown separately as noncontrolling interests in the accompanying consolidated statements of comprehensive earnings and consolidated balance sheets. CDM is considered a VIE to Devon. The assets of CDM cannot be used by Devon for general corporate purposes and are included in, and disclosed parenthetically, on Devon's consolidated balance sheets. The carrying amount of liabilities related to CDM for which the creditors do not have recourse to Devon's assets are also included in, and disclosed parenthetically, on Devon's consolidated balance sheets if material.

 

Investments

In conjunction with the Merger, Devon acquired an interest in Catalyst which is a joint venture established between WPX and Howard Energy Partners (“HEP”) to develop oil gathering and natural gas processing infrastructure in the Stateline area of the Delaware Basin. Under the terms of the agreement, Devon and HEP each have a 50 percent voting interest in the joint venture legal entity and HEP serves as the operator. Through 2038, Devon’s production from 50,000 net acres in the Stateline area of the Delaware Basin has been dedicated to Catalyst subject to fixed-fee oil gathering and natural gas processing agreements. The agreements do not include any minimum volume commitments. Devon accounts for the investment in Catalyst as an equity method investment. Devon’s investment in Catalyst is shown within investments on the consolidated balance sheet and Devon’s share of Catalyst earnings are reflected as a component of other, net in the accompanying consolidated statements of comprehensive earnings.         

Disaggregation of Revenue

 

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

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Oil

 

$

1,357

 

 

$

662

 

Gas

 

 

207

 

 

 

70

 

NGL

 

 

224

 

 

 

75

 

Oil, gas and NGL sales

 

 

1,788

 

 

 

807

 

 

 

 

 

 

 

 

 

 

Oil

 

 

209

 

 

 

329

 

Gas

 

 

118

 

 

 

94

 

NGL

 

 

175

 

 

 

137

 

Marketing and midstream revenues

 

 

502

 

 

 

560

 

Total revenues from contracts with customers

 

$

2,290

 

 

$

1,367

 

 

v3.21.1
Acquisition and Divestitures
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
Acquisition and Divestitures

2.Acquisitions and Divestitures

 

WPX Merger

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. WPX was an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. No fractional shares of Devon’s common stock were issued in the Merger, and holders of WPX common stock instead received cash in lieu of fractional shares of Devon common stock, if any. Based on the closing price of Devon’s common stock on January 7, 2021, the total value of Devon common stock issued to holders of WPX common stock as part of this transaction was approximately $5.4 billion. The Merger was structured as a tax-free reorganization for United States federal income tax purposes.

 

Purchase Price Allocation

The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries have been recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Merger. Determining the fair value of the assets and liabilities of WPX requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of WPX’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy.

The following table represents the preliminary allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.

 

 

Preliminary Purchase Price Allocation

 

Consideration:

 

 

 

 

WPX Common Stock outstanding

 

 

561.2

 

Exchange Ratio

 

 

0.5165

 

Devon common stock issued

 

 

289.9

 

Devon closing price on January 7, 2021

 

$

18.57

 

Total common equity consideration

 

 

5,383

 

Share-based replacement awards

 

 

49

 

Total consideration

 

$

5,432

 

Assets acquired:

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

344

 

Accounts receivable

 

 

425

 

Other current assets

 

 

49

 

Right-of-use assets

 

 

38

 

Proved oil and gas property and equipment

 

 

7,017

 

Unproved and properties under development

 

 

2,367

 

Other property and equipment

 

 

485

 

Investments

 

 

400

 

Other long-term assets

 

 

43

 

Total assets acquired

 

$

11,168

 

Liabilities assumed:

 

 

 

 

Accounts payable

 

$

346

 

Revenue and royalties payable

 

 

223

 

Other current liabilities

 

 

454

 

Debt

 

 

3,562

 

Lease liabilities

 

 

38

 

Asset retirement obligations

 

 

94

 

Deferred income taxes

 

 

254

 

Other long-term liabilities

 

 

765

 

Total liabilities assumed

 

 

5,736

 

Net assets acquired

 

$

5,432

 

 

WPX Revenues and Earnings

 

The following table represents WPX’s revenues and earnings included in Devon’s consolidated comprehensive statements of earnings subsequent to the closing date of the Merger.

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

Total revenues

 

$

772

 

Net earnings

 

$

166

 

 

 

Pro Forma Financial Information

 

Due to the Merger closing on January 7, 2021, all activity in the first quarter of 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive earnings. The following unaudited pro forma financial information for the three months ended March 31, 2020 is based on our historical consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2020. The information below reflects pro forma adjustments to conform WPX’s historical financial information to Devon’s financial statement presentation. The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it indicative of future results.

 

 

 

Three Months Ended March 31,

 

Continuing operations:

 

2020

 

Total revenues

 

$

3,485

 

Net loss

 

$

(1,864

)

Basic net loss per share

 

$

(2.77

)

 

Divestitures

 

On March 3, 2021, Devon completed the sale of non-core assets in the Rockies for proceeds of $9 million, net of purchase price adjustments, and recognized a $35 million gain related to the sale. The transaction includes contingent earnout payments of up to $8 million. The total estimated proved reserves associated with these divested assets are approximately 3 MMBoe. As of December 31, 2020, the associated assets and liabilities were classified as assets held for sale and included in other current assets and other current liabilities, respectively.

 

On October 1, 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, of $490 million. The agreement with BKV also provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commenced on January 1, 2021 and has a term of four years. Devon recognized a $748 million asset impairment related to these assets in the fourth quarter of 2019 and incremental asset impairments of $179 million and $3 million during the first quarter and third quarter of 2020, respectively. Additional information can be found in Note 18.

 

v3.21.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2021
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, price swaptions, basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of March 31, 2021, 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. As of March 31, 2021, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties.

Commodity Derivatives

As of March 31, 2021, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.

 

 

 

Price Swaps

 

 

Price Swaptions

 

 

Price Collars

 

 

Call Options Sold

 

Period

 

Volume

(Bbls/d)

 

 

Weighted

Average

Price ($/Bbl)

 

 

Volume

(Bbls/d)

 

 

Weighted

Average

Price ($/Bbl)

 

 

Volume

(Bbls/d)

 

 

Weighted

Average Floor

Price ($/Bbl)

 

 

Weighted

Average

Ceiling Price

($/Bbl)

 

 

Volume

(Bbls/d)

 

 

Weighted

Average Price

($/Bbl)

 

Q2-Q4 2021

 

 

81,122

 

 

$

40.45

 

 

 

6,691

 

 

$

40.12

 

 

 

40,905

 

 

$

39.84

 

 

$

49.84

 

 

 

5,000

 

 

$

39.50

 

Q1-Q4 2022

 

 

25,619

 

 

$

43.82

 

 

 

10,323

 

 

$

46.46

 

 

 

15,733

 

 

$

44.92

 

 

$

54.92

 

 

 

 

 

$

 

 

 

 

 

Oil Basis Swaps

 

Period

 

Index

 

Volume

(Bbls/d)

 

 

Weighted Average

Differential to WTI

($/Bbl)

 

Q2-Q4 2021

 

Midland Sweet

 

 

22,669

 

 

$

0.84

 

Q2-Q4 2021

 

Guernsey Light Sweet

 

 

2,007

 

 

$

(1.48

)

Q2-Q4 2021

 

BRENT

 

 

1,000

 

 

$

(8.00

)

Q2-Q4 2021

 

NYMEX Roll

 

 

11,676

 

 

$

0.38

 

Q1-Q4 2022

 

BRENT

 

 

1,000

 

 

$

(7.75

)

Q1-Q4 2022

 

NYMEX Roll

 

 

16,000

 

 

$

0.37

 

As of March 31, 2021, 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 and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.

 

 

 

Price Swaps (1)

 

 

Price Swaptions (2)

 

 

Price Collars (2)

 

 

Call Options Sold (2)

 

Period

 

Volume (MMBtu/d)

 

 

Weighted Average Price ($/MMBtu)

 

 

Volume (MMBtu/d)

 

 

Weighted Average Price ($/MMBtu)

 

 

Volume (MMBtu/d)

 

 

Weighted Average Floor Price ($/MMBtu)

 

 

Weighted Average

Ceiling Price ($/MMBtu)

 

 

Volume (MMBtu/d)

 

 

Weighted Average Price ($/MMBtu)

 

Q2-Q4 2021

 

 

270,636

 

 

$

2.63

 

 

 

 

 

$

 

 

 

196,218

 

 

$

2.46

 

 

$

2.96

 

 

 

50,000

 

 

$

2.68

 

Q1-Q4 2022

 

 

3,452

 

 

$

2.85

 

 

 

100,000

 

 

$

2.70

 

 

 

69,110

 

 

$

2.54

 

 

$

3.04

 

 

 

 

 

$

 

 

 

(1)

Related to the 2021 open positions, 30,636 MMBtu/d settle against the Inside FERC first of month Henry Hub index at an average price of $2.76 and 240,000 MMBtu/d settle against the end of month NYMEX index at an average price of $2.62. All 2022 open positions settle against the Inside FERC first of month Henry Hub index.

 

(2)

Price swaptions and call options settle against end of the month NYMEX index. Price collars settle against the Inside FERC first of the month Henry Hub Index.

 

 

 

Natural Gas Basis Swaps

 

Period

 

Index

 

Volume

(MMBtu/d)

 

 

Weighted Average

Differential to

Henry Hub

($/MMBtu)

 

Q2-Q4 2021

 

El Paso Natural Gas

 

 

35,000

 

 

$

(0.92

)

Q2-Q4 2021

 

WAHA

 

 

80,000

 

 

$

(0.65

)

Q1-Q4 2022

 

WAHA

 

 

70,000

 

 

$

(0.57

)

Q1-Q4 2023

 

WAHA

 

 

70,000

 

 

$

(0.51

)

Q1-Q4 2024

 

WAHA

 

 

40,000

 

 

$

(0.51

)

 

 

 

As of March 31, 2021, 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)

 

Q2-Q4 2021

 

Natural Gasoline

 

 

1,000

 

 

$

47.57

 

Q2-Q4 2021

 

Normal Butane

 

 

1,000

 

 

$

31.40

 

Q2-Q4 2021

 

Propane

 

 

1,000

 

 

$

27.88

 

 

Financial Statement Presentation

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

 

 

March 31, 2021

 

 

December 31, 2020

 

Commodity derivative assets:

 

 

 

 

 

 

 

 

Other current assets

 

$

3

 

 

$

5

 

Other long-term assets

 

 

3

 

 

 

1

 

Total derivative assets

 

$

6

 

 

$

6

 

Commodity derivative liabilities:

 

 

 

 

 

 

 

 

Other current liabilities

 

$

667

 

 

$

143

 

Other long-term liabilities

 

 

122

 

 

 

5

 

Total derivative liabilities

 

$

789

 

 

$

148

 

 

v3.21.1
Share-Based Compensation
3 Months Ended
Mar. 31, 2021
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 statements of comprehensive 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 statements of comprehensive earnings.

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

G&A

 

$

20

 

 

$

20

 

Restructuring and transaction costs

 

 

21

 

 

 

 

Total

 

$

41

 

 

$

20

 

 

 

Under its approved long-term incentive plan, Devon grants share-based awards to certain employees. 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.

 

 

 

 

 

 

Performance-Based

 

 

Performance

 

 

 

Restricted Stock Awards & Units

 

 

Restricted Stock Awards

 

 

Share Units

 

 

 

Awards/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 12/31/20

 

 

5,316

 

 

$

25.82

 

 

 

44

 

 

$

44.70

 

 

 

1,994

 

 

 

 

 

$

31.89

 

Granted (1)

 

 

5,542

 

 

$

18.71

 

 

 

 

 

$

 

 

 

861

 

 

 

 

 

$

18.08

 

Vested

 

 

(4,329

)

 

$

22.63

 

 

 

(39

)

 

$

45.41

 

 

 

(754

)

 

 

 

 

$

37.40

 

Forfeited

 

 

(20

)

 

$

24.79

 

 

 

 

 

$

 

 

 

(25

)

 

 

 

 

$

36.04

 

Unvested at 3/31/21

 

 

6,509

 

 

$

21.89

 

 

 

5

 

 

$

38.54

 

 

 

2,076

 

 

(2

)

 

$

24.12

 

 

 

(1)

Due to the closing of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. As a result, approximately 4.9 million awards relate to the conversion of WPX equity awards to Devon equity awards.  

 

(2)

A maximum of 4.2 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 2021, as indicated in the previous summary table.

 

 

 

2021

 

Grant-date fair value

 

$

18.08

 

Risk-free interest rate

 

0.18%

 

Volatility factor

 

67.8%

 

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 March 31, 2021.

 

 

 

 

 

 

 

Performance-Based

 

 

 

 

 

 

 

Restricted Stock

 

 

Restricted Stock

 

 

Performance

 

 

 

Awards/Units

 

 

Awards

 

 

Share Units

 

Unrecognized compensation cost

 

$

88

 

 

$

 

 

$

21

 

Weighted average period for recognition (years)

 

 

2.2

 

 

 

0.2

 

 

 

2.3

 

 

v3.21.1
Asset Impairments
3 Months Ended
Mar. 31, 2021
Asset Impairment Charges [Abstract]  
Asset Impairments

 

5.Asset Impairments

 

The following table presents a summary of Devon’s asset impairments. Unproved impairments shown below are included in exploration expenses in the consolidated statements of comprehensive earnings.

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Proved oil and gas assets

 

$

 

 

$

2,664

 

Other assets

 

 

 

 

 

2

 

Total asset impairments

 

$

 

 

$

2,666

 

 

 

 

 

 

 

 

 

 

Unproved impairments

 

$

1

 

 

$

110

 

 

 

Proved Oil and Gas and Other Asset Impairments

Due to the reduced demand from the COVID-19 pandemic causing an unprecedented downturn in the price of oil and reductions in near-term capital investment, Devon recognized approximately $2.7 billion of proved asset impairments during the first quarter of 2020. These impairments related to the Anadarko Basin and Rockies fields in which the cost basis included acquisitions completed in 2016 and 2015, respectively, when commodity prices were much higher. During the first quarter of 2020, Devon also recognized $2 million of product line fill impairments.

Unproved Impairments

Due to the downturn in the commodity price environment and reduced near-term investment as discussed above, Devon also recognized $110 million of unproved impairments during the first three months of 2020, primarily in the Rockies field.

v3.21.1
Restructuring and Transaction Costs
3 Months Ended
Mar. 31, 2021
Restructuring And Related Activities [Abstract]  
Restructuring and Transaction Costs

6.Restructuring and Transaction Costs

The following table summarizes Devon’s restructuring and transaction costs.

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Restructuring

 

$

143

 

 

$

 

Transaction costs

 

 

46

 

 

 

 

Total

 

$

189

 

 

$

 

In conjunction with the Merger closing, Devon recognized $143 million of restructuring expenses during the first quarter of 2021 related to employee severance and termination benefits, settlements and curtailments from defined retirement benefits and contract terminations. Of these expenses, $37 million and $21 million resulted from settlements and curtailments of defined retirement benefits and accelerated vesting of share-based grants, respectively, which are non-cash charges. Additionally, in conjunction with the Merger closing, Devon recognized $46 million of transaction costs primarily comprised of bank, legal and accounting fees.

The following table summarizes Devon’s restructuring liabilities.