DVN
$30.40
Devon Energy
$.22
.73%
Earnings Details
2nd Quarter June 2017
Tuesday, August 01, 2017 4:01:04 PM
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Summary

Devon Energy Misses

Devon Energy (DVN) reported 2nd Quarter June 2017 earnings of $0.34 per share on revenue of $3.3 billion. The consensus earnings estimate was $0.33 per share on revenue of $3.3 billion. The Earnings Whisper number was $0.37 per share. Revenue grew 31.6% on a year-over-year basis.

Devon Energy Corporation is an independent energy company engaged in the exploration, development and production of oil, natural gas and NGLs.

Results
Reported Earnings
$0.34
Earnings Whisper
$0.37
Consensus Estimate
$0.33
Reported Revenue
$3.27 Bil
Revenue Estimate
$3.33 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Devon Energy Reports Second-Quarter 2017 Results

Devon Energy Corp. (DVN) today reported operational and financial results for the second quarter of 2017. Also included within the release is the company’s guidance outlook for the third quarter and full-year 2017.

Highlights

-- Oil production from U.S. resource plays exceeds guidance

Operational momentum builds with high-rate wells in STACK and Delaware Basin

-- Efficiencies drive 2017 capital outlook $100 million lower

-- Free cash flow generation increases cash balances to $2.4 billion

-- Divestiture program advances with $340 million of asset sales

"Devon achieved another high-quality operating performance in the second quarter, building operational momentum in our U.S. resource plays and accelerating efficiency gains across our portfolio," said Dave Hager, president and CEO. "These successful efforts resulted in record-setting well results that drove our U.S. oil production above guidance expectations with a capital investment that was 17 percent below our budget year to date. As a result of this strong capital efficiency, we are lowering our full-year capital outlook by $100 million and, importantly, we have not made any changes to our planned activity levels in 2017.

"Given our advantaged asset base and ability to deliver best-in-class well results, we remain well positioned to deliver value and returns on our capital investments as we navigate industry conditions," said Hager. "With our ability to deliver attractive returns in this environment, our top strategic priorities are to maintain operational momentum in our U.S. resource plays, organically fund our capital investment and further improve our investment-grade financial strength."

STACK and Delaware Basin Drive U.S. Oil Production Beat

Devon’s net production averaged 536,000 oil-equivalent barrels (Boe) per day during the second quarter of 2017, exceeding midpoint guidance by 6,000 Boe per day. Of this total, oil production accounted for the largest component of the company’s product mix at 44 percent of total volumes.

The majority of Devon’s production was attributable to its U.S. resource plays, which averaged 412,000 Boe per day. This performance was highlighted by 8 percent production growth from the company’s STACK and Delaware Basin assets compared to the previous quarter, driving light-oil production in the U.S. above the top end of guidance to an average of 116,000 barrels per day.

Recent drilling activity from the company’s U.S. operations was highlighted by nine high-rate development wells in the STACK and Delaware Basin that achieved initial 30-day rates averaging nearly 2,000 Boe per day.

Best-In-Class Well Productivity

These high-rate development wells showcase Devon’s asset quality and outstanding execution that has generated best-in-class well productivity in North America. Based on publicly available data over the past year, Devon’s 90-day production rates from new wells have achieved the highest rates of any operator and the company’s well productivity has improved by more than 450 percent since 2012 (see page 6 of Q2 Operations Report for more detail).

Strong Exit Rates Build Momentum into 2018

Based on strong results year to date, Devon is firmly on track to achieve its full-year 2017 production targets. Importantly, based on accelerated activity levels in the second half of 2017, the company projects U.S. oil production to exit the year at a rate of 18 to 23 percent higher than the fourth quarter of 2016.

This strong production growth over the remainder of 2017 is driven by the company’s focused capital program in the STACK and Delaware Basin where 90 percent of its U.S. rig activity is allocated. Combined, these two franchise growth assets are expected to advance production by greater than 30 percent by the end of 2017 compared to the same period a year ago. With this strong growth in higher-margin production, liquids volumes are now projected to reach approximately 65 percent of Devon’s product mix by year-end.

In the third quarter, Devon expects total companywide oil production to range between 234,000 and 244,000 barrels per day. A maintenance event at Jackfish 2, completed over a three-week period in July, is expected to curtail production by approximately 15,000 barrels per day in the third quarter.

Lowering 2017 Capital Outlook by $100 Million

In the first half of 2017, the company’s E&P capital expenditures have been 17 percent below the midpoint of guidance, or 39 percent of the full-year budget. This strong performance has been driven by drilling and completion efficiency gains in the STACK and Delaware Basin combined with innovative supply chain initiatives that have completely offset industry inflation year to date.

Due to these positive operating trends, Devon now expects E&P capital investment to range from $1.9 billion to $2.2 billion in 2017, a $100 million decrease compared to previous guidance. With this updated outlook, the company has not made any changes to its planned activity levels in 2017 and is on track to increase to approximately 20 rigs by the end of 2017.

Second-Quarter 2017 Operations Report

For additional details regarding well results and other information about Devon’s E&P operations, please refer to the company’s second-quarter 2017 operations report at www.devonenergy.com. Highlights from the report include:

-- STACK production advances 20 percent year to date

-- Record Meramec well reaches 6,000 Boe per day

-- High-rate oil wells jump-start growth in Delaware Basin

-- Resource potential expands in Wolfcamp and Woodford plays

-- Powder River Basin delivers strong appraisal wells

Midstream Business Positioned to Achieve Double-Digit Growth in 2017

The company’s midstream business generated $224 million of operating profit in the second quarter, an 8 percent increase compared to the first quarter of 2017. This growth was driven entirely by Devon’s strategic investment in EnLink Midstream. Devon expects its midstream operating profits to advance to a range of $900 million to $950 million in 2017. Based on midpoint guidance, this estimate represents a 10 percent increase compared to 2016.

Devon has a 64 percent ownership in EnLink’s general partner (ENLC) and a 23 percent interest in the limited partner (ENLK). In aggregate, the company’s ownership in EnLink has a market value of approximately $3.6 billion and is expected to generate cash distributions of approximately $270 million annually.

Significant Operating Cost Improvement by Year-End

Devon’s cost-reduction initiatives are expected to achieve $1.4 billion of annualized operating and general and administrative expenses (G&A) savings in 2017. Lease operating expenses (LOE), the company’s largest field-level cost, totaled $399 million or $8.18 per Boe in the second quarter. Of this amount, $20 million was related to costs associated with maintenance work at Jackfish 3.

Looking ahead, the company projects its per-unit LOE to improve 5 to 10 percent by year-end compared to second-quarter results. This per-unit improvement is driven by the combination of higher production rates from the company’s resource plays and lower operating costs in Canada.

The company also is effectively managing its G&A cost structure. Overhead expenses declined to $164 million in the second quarter, a 9 percent improvement compared to the first quarter. This result was $21 million below the bottom end of the company’s guidance range. Savings were driven by lower employee-related costs.

Higher-Margin Production Expands Operating Cash Flow 135 Percent

Devon’s operating cash flow totaled $810 million in the second quarter compared to $345 million in the year-ago quarter. This 135 percent increase in operating cash flow year over year was attributable to higher commodity prices and an improved cost structure.

Devon’s reported net earnings totaled $425 million or $0.80 per diluted share in the second quarter. Adjusting for items that securities analysts typically exclude from their published estimates, the company’s core earnings totaled $177 million or $0.34 per diluted share.

Free Cash Flow Generation Increases Cash Balances to $2.4 Billion

In the second quarter, the company’s upstream operations fully funded its capital requirements and generated free cash flow, which helped increase Devon’s cash balances by $250 million to $2.4 billion at the end of June.

In addition to the company’s strong liquidity and investment-grade ratings, Devon’s financial position is further bolstered by its attractive hedge position. The company currently has approximately 55 percent of its estimated oil and gas production protected for the second half of 2017 at above-market prices and is in the process of accumulating additional hedges in 2018. This disciplined, risk-management program consists of systematic hedges added on a quarterly basis and discretionary hedges that take advantage of favorable market conditions.

Divestiture Program Achieves $340 Million of Asset Sales

The company’s financial strength will be further enhanced by proceeds from its previously announced $1 billion divestiture program. In aggregate, Devon’s divestiture program will include approximately 35,000 Boe per day (approximately 30 percent liquids) from select leasehold positions within the Barnett Shale and the Eagle Ford, along with other minor non-core properties across the U.S.

In July, Devon took an important step toward its divestiture goal by announcing the sale of its non-core Lavaca County assets in the Eagle Ford for $205 million, which is expected to close by the end of 2017. Combined with other minor asset sales, Devon now has sold $340 million of assets or roughly one-third of its divestiture target.

Efforts to monetize Devon’s Johnson County properties in the Barnett Shale are also progressing. The Johnson County assets represent approximately 20 percent of the company’s net production and cash flow generated from its Barnett Shale position. Devon is actively marketing these assets and expects to complete its $1 billion non-core divestiture program over the next year.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP (generally accepted accounting principles) financial measures to the related GAAP information. Core earnings and core earnings per share referenced within the commentary of this release are non-GAAP financial measures. Reconciliations of these and other non-GAAP measures are provided within the tables of this release.

Conference Call Webcast and Supplemental Earnings Materials

Please note that as soon as practicable today, Devon will post an operations report to its website at www.devonenergy.com. The company’s second-quarter conference call will be held at 10 a.m. Central (11 a.m. Eastern) on Wednesday, Aug. 2, 2017, and will serve primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (SEC). Such statements include those concerning strategic plans, expectations and objectives for future operations, and are often identified by use of the words "expects," "believes," "will," "would," "could," "forecasts," "projections," "estimates," "plans," "expectations," "targets," "opportunities," "potential," "anticipates," "outlook" and other similar terminology. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding our business and operations are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to: the volatility of oil, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in exploration and development activities; risks related to our hedging activities; counterparty credit risks; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters; risks relating to our indebtedness; our ability to successfully complete mergers, acquisitions and divestitures; the extent to which insurance covers any losses we may experience; our limited control over third parties who operate our oil and gas properties; midstream capacity constraints and potential interruptions in production; competition for leases, materials, people and capital; cyberattacks targeting our systems and infrastructure; and any of the other risks and uncertainties identified in our Form 10-K and our other filings with the SEC. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential, potential locations, risked and unrisked locations, estimated ultimate recovery (or EUR), exploration target size and other similar terms. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 10-K, available at www.devonenergy.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. and Canada with an emphasis on a balanced portfolio. The company is the second-largest oil producer among North American onshore independents. For more information, please visit www.devonenergy.com.

DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION NET OF ROYALTIES
Quarter Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Oil and bitumen (MBbls/d)
U. S.
116
123
119
132
Heavy Oil
122
121
130
124
Retained assets
238
244
249
256
Divested assets
--
15
--
16
Total
238
259
249
272
Natural gas liquids (MBbls/d)
U. S.
97
110
97
113
Divested assets
--
21
--
21
Total
97
131
97
134
Gas (MMcf/d)
U. S.
1,194
1,293
1,200
1,322
Heavy Oil
14
28
18
22
Retained assets
1,208
1,321
1,218
1,344
Divested assets
--
206
--
210
Total
1,208
1,527
1,218
1,554
Oil equivalent (MBoe/d)
U. S.
412
448
417
465
Heavy Oil
124
126
133
127
Retained assets
536
574
550
592
Divested assets
--
70
--
73
Total
536
644
550
665
KEY OPERATING STATISTICS BY REGION
Quarter Ended June 30, 2017
Avg. Production
Gross Wells
Operated Rigs at
(MBoe/d)
Drilled
June 30, 2017
STACK
105
46
7
Delaware Basin
56
29
6
Eagle Ford(1)
63
1
2
Heavy Oil
124
18
1
Barnett Shale
155
--
--
Rockies Oil
18
3
2
Other assets
15
5
--
Total
536
102
18
(1) Includes partner rig.
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
PRODUCTION TREND
2016
2017
Quarter 2
Quarter 3
Quarter 4
Quarter 1
Quarter 2
Oil and bitumen (MBbls/d)
STACK
19
21
19
21
25
Delaware Basin
36
31
29
30
30
Eagle Ford
41
33
34
48
36
Heavy Oil
121
137
139
138
122
Barnett Shale
1
1
1
1
1
Rockies Oil
15
11
11
13
13
Other assets
11
11
11
10
11
Retained assets
244
245
244
261
238
Divested assets
15
6
--
--
--
Total
259
251
244
261
238
Natural gas liquids (MBbls/d)
STACK
30
23
21
26
31
Delaware Basin
13
12
10
10
10
Eagle Ford
17
13
11
15
11
Barnett Shale
46
44
43
43
42
Rockies Oil
1
1
1
1
1
Other assets
3
3
4
3
2
Retained assets
110
96
90
98
97
Divested assets
21
8
--
--
--
Total
131
104
90
98
97
Gas (MMcf/d)
STACK
289
292
284
287
298
Delaware Basin
99
92
89
88
96
Eagle Ford
103
85
90
119
96
Heavy Oil
28
18
18
23
14
Barnett Shale
757
730
710
683
675
Rockies Oil
31
19
17
15
17
Other assets
14
13
13
13
12
Retained assets
1,321
1,249
1,221
1,228
1,208
Divested assets
206
75
--
--
--
Total
1,527
1,324
1,221
1,228
1,208
Oil equivalent (MBoe/d)
STACK
97
92
88
95
105
Delaware Basin
65
59
54
54
56
Eagle Ford
76
61
60
83
63
Heavy Oil
126
140
141
141
124
Barnett Shale
173
166
163
158
155
Rockies Oil
21
16
15
17
18
Other assets
16
16
16
15
15
Retained assets
574
550
537
563
536
Divested assets
70
27
--
--
--
Total
644
577
537
563
536
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
BENCHMARK PRICES
(average prices)
Quarter 2
June YTD
2017
2016
2017
2016
Oil ($/Bbl) - West Texas Intermediate (Cushing)
$
48.32
$ 45.54
$
50.16
$
39.60
Natural Gas ($/Mcf) - Henry Hub
$
3.19
$
1.95
$
3.25
$
2.02
REALIZED PRICES
Quarter Ended June 30, 2017
Oil /Bitumen
NGL
Gas
Total
(Per Bbl)
(Per Bbl)
(Per Mcf)
(Per Boe)
United States
$
46.65
$ 13.26
$
2.50
$
23.58
Canada
$
29.05
N/M
N/M
$
28.50
Realized price without hedges
$
37.63
$ 13.26
$
2.50
$
24.72
Cash settlements
$
0.29
$ (0.03 )
$
0.04
$
0.22
Realized price, including cash settlements
$
37.92
$ 13.23
$
2.54
$
24.94
Quarter Ended June 30, 2016
Oil /Bitumen
NGL
Gas
Total
(Per Bbl)
(Per Bbl)
(Per Mcf)
(Per Boe)
United States
$
41.56
$ 10.14
$
1.40
$
17.68
Canada
$
22.53
N/M
N/M
$
21.85
Realized price without hedges
$
32.64
$ 10.14
$
1.40
$
18.50
Cash settlements
$
(2.57 )
$ (0.25 )
$
0.24
$
(0.53 )
Realized price, including cash settlements
$
30.07
$
9.89
$
1.64
$
17.97
Year Ended June 30, 2017
Oil /Bitumen
NGL
Gas
Total
(Per Bbl)
(Per Bbl)
(Per Mcf)
(Per Boe)
United States
$
48.18
$ 14.36
$
2.59
$
24.72
Canada
$
27.60
N/M
N/M
$
27.03
Realized price without hedges
$
37.48
$ 14.36
$
2.59
$
25.28
Cash settlements
$
0.39
$ (0.02 )
$ --
$
0.19
Realized price, including cash settlements
$
37.87
$ 14.34
$
2.59
$
25.47
Year Ended June 30, 2016
Oil /Bitumen
NGL
Gas
Total
(Per Bbl)
(Per Bbl)
(Per Mcf)
(Per Boe)
United States
$
34.70
$
8.46
$
1.47
$
15.89
Canada
$
15.71
N/M
N/M
$
15.33
Realized price without hedges
$
26.05
$
8.46
$
1.47
$
15.78
Cash settlements
$
(1.23 )
$ (0.13 )
$
0.18
$
(0.10 )
Realized price, including cash settlements
$
24.82
$
8.33
$
1.65
$
15.68
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)
Quarter Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Oil, gas and NGL sales
$
1,206
$
1,085
$
2,515
$
1,910
Oil, gas and NGL derivatives
126
(142 )
358
(109 )
Marketing and midstream revenues
1,927
1,545
3,937
2,813
Asset dispositions and other
14
-
10
-
Total revenues and other
3,273
2,488
6,820
4,614
Lease operating expenses
399
416
785
860
Marketing and midstream operating expenses
1,703
1,338
3,506
2,404
General and administrative expenses
164
147
345
341
Production and property taxes
71
75
156
153
Depreciation, depletion and amortization
381
484
762
1,026
Asset impairments
--
1,497
7
4,532
Restructuring and transaction costs
--
24
--
271
Other operating items
13
4
11
24
Total operating expenses
2,731
3,985
5,572
9,611
Operating income (loss)
542
(1,497 )
1,248
(4,997 )
Net financing costs
116
163
243
327
Other nonoperating items
(32 )
85
(51 )
106
Earnings (loss) before income taxes
458
(1,745 )
1,056
(5,430 )
Income tax expense (benefit)
7
(182 )
26
(399 )
Net earnings (loss)
451
(1,563 )
1,030
(5,031 )
Net earnings (loss) attributable to noncontrolling interests
26
7
40
(405 )
Net earnings (loss) attributable to Devon
$
425
$ (1,570 )
$
990
$ (4,626 )
Net earnings (loss) per share attributable to Devon:
Basic
$
0.81
$
(3.04 )
$
1.88
$
(9.33 )
Diluted
$
0.80
$
(3.04 )
$
1.87
$
(9.33 )
Weighted average common shares outstanding:
Basic
526
524
525
502
Diluted
529
524
528
502
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Quarter Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Cash flows from operating activities:
Net earnings (loss)
$
451
$
(1,563 )
$
1,030
$
(5,031 )
Adjustments to reconcile net earnings (loss) to net cash from
operating activities:
Depreciation, depletion and amortization
381
484
762
1,026
Asset impairments
--
1,497
7
4,532
Gains on asset sales
(11 )
--
(7 )
--
Deferred income tax benefit
(5 )
(179 )
(6 )
(386 )
Commodity derivatives
(126 )
142
(358 )
109
Cash settlements on commodity derivatives
11
(16 )
19
3
Other derivatives and financial instruments
16
81
7
308
2
(28 )
--
(151 )
Cash settlements on other derivatives and financial instruments
Asset retirement obligation accretion
14
20
31
39
Share-based compensation
43
32
89
140
Other
(49 )
36
(49 )
(158 )
Net change in working capital
72
(143 )
87
71
Change in long-term other assets
9
(40 )
10
13
Change in long-term other liabilities
2
22
22
(5 )
Net cash from operating activities
810
345
1,644
510
Cash flows from investing activities:
Capital expenditures
(721 )
(489 )
(1,468 )
(1,238 )
Acquisitions of property, equipment and businesses
(13 )
(11 )
(33 )
(1,638 )
Proceeds from sale of investment
--
--
190
--
Divestitures of property and equipment
76
191
114
209
Other
(1 )
(26 )
(4 )
(27 )
Net cash from investing activities
(659 )
(335 )
(1,201 )
(2,694 )
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs
982
450
1,795
846
Repayments of long-term debt
(798 )
(290 )
(1,385 )
(549 )
Payment of installment payable
--
--
(250 )
--
Net short-term debt repayments
--
--
--
(626 )
Issuance of common stock
--
--
--
1,469
Issuance of subsidiary units
17
49
72
776
Dividends paid on common stock
(33 )
(33 )
(65 )
(158 )
Contributions from noncontrolling interests
8
3
29
6
Distributions to noncontrolling interests
(82 )
(74 )
(163 )
(147 )
Shares traded for tax withholdings
(3 )
(10 )
(64 )
(28 )
Other
--
(5 )
(2 )
(6 )
Net cash from financing activities
91
90
(33 )
1,583
Effect of exchange rate changes on cash
8
(12 )
--
14
Net change in cash and cash equivalents
250
88
410
(587 )
Cash and cash equivalents at beginning of period
2,119
1,635
1,959
2,310
Cash and cash equivalents at end of period
$
2,369
$
1,723
$
2,369
$
1,723
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in millions)
June 30,
December 31,
2017
2016
Current assets:
Cash and cash equivalents
$
2,369
$
1,959
Accounts receivable
1,248
1,356
Assets held for sale
--
193
Other current assets
469
264
Total current assets
4,086
3,772
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization
77,326
75,648
Not subject to amortization
3,048
3,437
Total oil and gas
80,374
79,085
Midstream and other
10,908
10,455
Total property and equipment, at cost
91,282
89,540
Less accumulated depreciation, depletion and amortization
(74,460 )
(73,350 )
Property and equipment, net
16,822
16,190
Goodwill
3,964
3,964
Other long-term assets
1,942
1,987
Total assets
$
26,814
$
25,913
Current liabilities:
Accounts payable
$
692
$
642
Revenues and royalties payable
949
908
Other current liabilities
891
1,066
Total current liabilities
2,532
2,616
Long-term debt
10,558
10,154
Asset retirement obligations
1,078
1,226
Other long-term liabilities
657
894
Deferred income taxes
659
648
Stockholders’ equity:
Common stock
53
52
Additional paid-in capital
7,211
7,237
Accumulated deficit
(656 )
(1,646 )
Accumulated other comprehensive earnings
291
284
Total stockholders’ equity attributable to Devon
6,899
5,927
Noncontrolling interests
4,431
4,448
Total stockholders’ equity
11,330
10,375
Total liabilities and stockholders’ equity
$
26,814
$
25,913
Common shares outstanding
526
523
DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION
CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)
Quarter Ended June 30, 2017
Devon U.S.
EnLink
Eliminations
Total
& Canada
Oil, gas and NGL sales
$
1,206
$ --
$ --
$
1,206
Oil, gas and NGL derivatives
126
--
--
126
Marketing and midstream revenues
833
1,264
(170 )
1,927
Asset dispositions and other
9
5
--
14
Total revenues and other
2,174
1,269
(170 )
3,273
Lease operating expenses
399
--
--
399
Marketing and midstream operating expenses
849
1,024
(170 )
1,703
General and administrative expenses
133
31
--
164
Production and property taxes
59
12
--
71
Depreciation, depletion and amortization
244
137
--
381
Other operating items
22
(9 )
--
13
Total operating expenses
1,706
1,195
(170 )
2,731
Operating income
468
74
--
542
Net financing costs
77
39
--
116
Other nonoperating items
(30 )
(2 )
--
(32 )
Earnings before income taxes
421
37
--
458
Income tax expense
3
4
--
7
Net earnings
418
33
--
451
Net earnings attributable to noncontrolling interests
--
26
--
26
Net earnings attributable to Devon
$
418
$
7
$ --
$
425
OTHER KEY STATISTICS
(in millions)
Quarter Ended June 30, 2017
Devon U.S.
EnLink
Eliminations
Total
& Canada
Cash flow statement related items:
Operating cash flow
$
658
$
152
$ --
$
810
Divestitures of property and equipment
$
75
$
1
$ --
$
76
Capital expenditures
$
(505 )
$
(216 )
$ --
$
(721 )
Debt activity, net
$ --
$
184
$ --
$
184
EnLink distributions received (paid)
$
67
$
(149 )
$ --
$
(82 )
Issuance of subsidiary units
$ --
$
17
$ --
$
17
Balance sheet statement items:
Net debt (1)
$
4,503
$ 3,686
$ --
$
8,189
(1) Net debt is a non-GAAP measure. For a reconciliation of the
comparable GAAP measure, see "Non-GAAP Financial Measures" later in
this release.
CAPITAL EXPENDITURES
(in millions)
Quarter Ended June 30, 2017
Six Months Ended June 30, 2017
Exploration and development capital
$
430
$
853
Land and other acquisitions
10
30
440
883
Exploration and production (E&P) capital
Capitalized G&A and interest
73
149
Other
26
40
Devon capital expenditures (1)
$
539
$
1,072
(1) Excludes $218 million and $466 million attributable to EnLink
for the second quarter and first six months of 2017, respectively.

DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION

NON-GAAP FINANCIAL MEASURES

This press release includes non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.

CORE EARNINGS

Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company’s financial results. Accordingly, the company also uses the measures of core earnings and core earnings per share attributable to Devon. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on second-quarter 2017 earnings.

(in millions, except per share amounts)
Quarter Ended June 30, 2017
Before-tax
After-tax
After
Per Diluted
Noncontrolling
Share
Interests
Earnings attributable to Devon (GAAP)
$
458
$
451
$
425
$
0.80
Adjustments:
Fair value changes in financial instruments and foreign currency
(148 )
(109 )
(109 )
(0.21 )
Deferred tax asset valuation allowance
--
(128 )
(128 )
(0.23 )
Gains and losses on asset sales
(11 )
(9 )
(7 )
(0.01 )
Early retirement of debt
(9 )
(7 )
(4 )
(0.01 )
Core earnings attributable to Devon (Non-GAAP)
$
290
$
198
$
177
$
0.34

NET DEBT

Devon defines net debt as debt less cash and cash equivalents and net debt attributable to the consolidation of EnLink Midstream as presented in the following table. Devon believes that netting these sources of cash against debt and adjusting for EnLink net debt provides a clearer picture of the future demands on cash from Devon to repay debt.

(in millions)
June 30, 2017
Devon U.S. & Canada
EnLink
Devon Consolidated
Total debt (GAAP)
$
6,861
$ 3,697
$ 10,558
Less cash and cash equivalents
(2,358 )
(11 )
(2,369 )
Net debt (Non-GAAP)
$
4,503
$ 3,686
$
8,189

UPSTREAM CASH FLOW

Devon defines upstream cash flow as cash flow from operations less EnLink cash flow from operations, less cash flow from divested assets and debt repayments, plus distributions received from EnLink. Devon believes upstream cash flow is relevant because it provides a clearer picture of cash flow generation ability from Devon’s retained upstream assets and its investment in EnLink.

(in billions)
Year Ended December 31, 2016
Consolidated cash flow from operations (GAAP)
$
1.8
Less: EnLink cash flow from operations
0.7
Devon cash flow from operations
1.1
Less: cash flow from divested assets
0.2
Less: cash flow associated with debt repayments
0.3
Add: EnLink distributions received
0.3
Upstream cash flow (Non-GAAP)
$
0.9
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
PRODUCTION GUIDANCE
Quarter 3
Full Year
Low
High
Low
High
Oil and bitumen (MBbls/d)
U.S.
117
122
119
123
Heavy Oil
117
122
130
135
Total
234
244
249
258
Natural gas liquids (MBbls/d)
Total
96
101
95
100
Gas (MMcf/d)
U.S.
1,160
1,190
1,160
1,200
Heavy Oil
13
15
14
16
Total
1,173
1,205
1,174
1,216
Oil equivalent (MBoe/d)
U.S.
407
421
407
423
Heavy Oil
119
125
132
138
Total
526
546
539
561
PRICE REALIZATIONS GUIDANCE
Quarter 3
Full Year
Low
High
Low
High
Oil and bitumen - % of WTI
U.S.
88 %
98 %
88 %
98 %
Canada
58 %
68 %
53 %
63 %
NGL - realized price
$ 12
$ 15
$ 13
$ 16
Natural gas - % of Henry Hub
75 %
85 %
76 %
86 %
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
OTHER GUIDANCE ITEMS
Quarter 3
Full Year
($ millions, except %)
Low
High
Low
High
Marketing & midstream operating profit
$
225
$
245
$
900
$
950
Lease operating expenses
$
360
$
410
$ 1,500
$
1,600
General & administrative expenses
$
150
$
170
$
630
$
690
Production and property taxes
$
65
$
75
$
275
$
325
Depreciation, depletion and amortization
$
375
$
425
$ 1,550
$
1,650
Other operating items
$
10
$
20
$
40
$
50
Net financing costs
$
125
$
135
$
485
$
535
Current income tax rate
5.0 %
15.0 %
5.0 %
10.0 %
Deferred income tax rate
20.0 %
30.0 %
20.0 %
30.0 %
Total income tax rate
25.0 %
45.0 %
25.0 %
40.0 %
Net earnings attributable to noncontrolling interests
$
10
$
20
$
50
$
100
CAPITAL EXPENDITURES GUIDANCE
Quarter 3
Full Year
(in millions)
Low
High
Low
High
Exploration and production
$ 550
$ 600
$ 1,900
$
2,200
Capitalized G&A
55
65
200
250
Capitalized interest
15
20
60
90
Other
10
20
25
50
Devon capital expenditures (1)
$ 630
$ 705
$ 2,185
$
2,590
(1) Excludes capital expenditures related to EnLink.
DEVON ENERGY CORPORATION
FORWARD LOOKING GUIDANCE
Oil Commodity Hedges
Price Swaps
Price Collars
Period
Volume (Bbls/d)
Weighted
Volume
Weighted
Weighted
Average
(Bbls/d)
Average Floor
Average Ceiling
Price
Price ($/Bbl)
Price ($/Bbl)
($/Bbl)
Q3-Q4 2017
78,914
$ 54.00
69,750
$
45.59
$
57.75
Q1-Q4 2018
15,292
$ 51.19
22,421
$
45.96
$
55.96
Oil Basis Swaps
Period
Index
Volume (Bbls/d)
Weighted Average Differential to
WTI ($/Bbl)
Q3-Q4 2017
Western Canadian Select
85,114
$
(14.46 )
Q1-Q4 2018
Western Canadian Select
48,036
$
(15.04 )
Q3-Q4 2017
Midland Sweet
20,000
$
(0.41 )
Natural Gas Commodity Hedges
Price Swaps
Price Collars
Period
Volume
Weighted
Volume
Weighted
Weighted
(MMBtu/d)
Average Price
(MMBtu/d)
Average Floor
Average Ceiling
($/MMBtu)
Price ($/MMBtu)
Price ($/MMBtu)
Q3-Q4 2017
237,500
$
3.24
437,500
$
3.03
$
3.42
Q1-Q4 2018
120,107
$
3.13
87,070
$
3.09
$
3.41

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index. Commodity hedge positions are shown as of July 27, 2017.

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Devon Energy Corporation
Investor Contacts
Scott Coody, 405-552-4735
Chris Carr, 405-228-2496
Media Contact
John Porretto, 405-228-7506