Devon Energy Earns $653 Million in Second Quarter of 2005; Earnings Per Share Climb 37 Percent to New Record
OKLAHOMA CITY, Aug. 3 /PRNewswire-FirstCall/ — Devon Energy Corporation today reported net earnings for the quarter ended June 30, 2005, of $653 million, or a record $1.40 per common share ($1.38 per diluted common share). This compares to Devon’s second quarter 2004 net earnings of $502 million, or $1.04 per common share ($1.01 per diluted common share). Per- share amounts reflect a two-for-one stock split completed in November 2004.
For the six months ended June 30, 2005, Devon reported net earnings of $1.2 billion or $2.57 per common share ($2.53 per diluted common share). Net earnings for the six months ended June 30, 2004, were $996 million, or $2.06 per share ($2.01 per diluted common share).
“Devon’s impressive second quarter results were driven by production growth from our core, North American property base and strong oil and gas prices,” commented J. Larry Nichols, chairman and chief executive officer. “In a separate release today, we also announced plans to launch a second share repurchase program. This reflects our focus on building value per share and the abundant free cash flow Devon is generating in today’s environment.”
200th Horizontal Barnett Shale Well Leads Exploration and Production Highlights
Devon drilled 493 gross wells in the second quarter of 2005 with a 98 percent success rate. Also in the second quarter:
* The company initiated production from its 200th horizontal natural gas well in the Barnett Shale field in north Texas in June. Production from horizontal wells has grown to 27 percent of Devon’s Barnett Shale production. Devon’s net Barnett Shale production averaged approximately 560 million cubic feet equivalent per day in the second quarter. * Also in the Barnett Shale, the company obtained regulatory approval for 20-acre well spacing covering most of its acreage. Devon drilled its first 20-acre Barnett Shale wells in June. * Devon acquired 165,000 net acres in the Iron River area of eastern Alberta from ExxonMobil Canada Energy. The company plans to drill 800 wells at Iron River in the next four years, increasing production to approximately 30,000 barrels of oil per day by 2010. * The company continued to ramp up production from the deepwater Magnolia field in the Gulf of Mexico. In June, the fourth well was completed bringing field production to 36,000 barrels of oil and 105 million cubic feet of natural gas per day. Devon’s net production from Magnolia is approximately 12,000 barrels of oil equivalent (Boe) per day, up from 7,000 Boe per day in the first quarter of 2005. * Also in the deepwater Gulf of Mexico, the company conducted a successful four-well recompletion program at Nansen. In aggregate, the four wells increased Devon’s net production from Nansen by 13,000 Boe per day. * In June, Devon finalized plans to develop its block BM-C-8 discovery in the Campos Basin offshore Brazil. Construction of facilities sized to handle up to 50,000 barrels per day is expected to begin in early 2006 with first production projected for the second half of 2007.
Oil, Gas and NGL Sales Increase to Record $2.1 Billion; Core Property Production Climbs
Quarterly sales of oil, gas and natural gas liquids increased to a record high $2.1 billion in the second quarter of 2005. This was 13 percent higher than second quarter 2004 sales of $1.8 billion. Increased production from Devon’s core, retained properties coupled with record high realized oil, gas and natural gas liquids prices led to the sales increase. The increase in sales was achieved despite lower oil and gas production in the second quarter of 2005, caused by divestitures of non-core oil and gas properties in the first half of 2005.
Combined daily oil, gas and natural gas liquids production was 641 thousand Boe in the second quarter of 2005. This was six percent lower than second quarter 2004 production of 685 thousand Boe per day. Excluding production from oil and gas properties divested in 2005, second quarter production was 610 thousand Boe per day. This was three percent greater than second quarter 2004 production, excluding the divestiture properties, of 590 thousand Boe per day.
The company’s second quarter 2005 average realized natural gas price increased 15 percent to $6.09 per thousand cubic feet, compared with $5.29 per thousand cubic feet in the second quarter of 2004. Devon’s second quarter 2005 average realized oil price increased 33 percent to $37.28 per barrel compared with $28.04 per barrel in the same quarter in 2004. The company’s second quarter 2005 average realized price for natural gas liquids increased 24 percent to $25.99 per barrel from $20.89 per barrel in the second quarter of 2004.
Marketing and midstream revenues increased three percent to $389 million in the second quarter of 2005, while related expenses decreased one percent to $296 million. This resulted in a 19 percent increase in the marketing and midstream operating margin to $93 million for the second quarter of 2005.
Expense Increases Include Interest Associated with Debt Redemption
Lease operating expenses increased 10 percent to $338 million in the second quarter of 2005 compared with the second quarter of 2004. Lease operating expenses per unit of production increased 18 percent to $5.80 per Boe. Increases in transportation costs, ad valorem taxes, well workover expenses, power, fuel and repairs and maintenance costs, in addition to the compounding effect of the weaker U. S. dollar, contributed to higher unit costs. Production taxes increased six percent to $75 million in the second quarter of 2005 due to higher overall oil and gas prices.
Depreciation, depletion and amortization of oil and gas properties decreased four percent to $494 million in the second quarter of 2005 compared with 2004. The decrease was due to lower overall production resulting from the property divestitures.
General and administrative expenses increased 11 percent, to $78 million in the second quarter of 2005. Increases in personnel expenses and charitable contributions were primary causes of the increase.
Interest expense increased nine percent to $146 million in the second quarter of 2005. This amount included $30 million attributable to the early redemption of the company’s zero coupon convertible debentures, as described below.
Second quarter 2005 income tax expense was $357 million, or 35 percent of pre-tax earnings. Gains for income tax purposes on sales of assets in the second quarter resulted in a shift of $59 million of income taxes to current from deferred.
Devon Retires $427 Million of Debt, Completes Stock Repurchase Program
In May, Devon announced that it would call for redemption its $427 million principal amount zero coupon convertible debentures due June 2020. The redemption date was June 27, 2005. All but one percent of the outstanding debentures were presented for conversion prior to the redemption date. Devon settled the redemptions from cash on hand for $452 million.
Following redemption of the zero coupon convertible debentures, Devon’s net debt to adjusted capitalization was 23 percent at June 30, 2005. Net debt to adjusted capitalization was 34 percent at June 30, 2004. Reconciliations of net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.
Also during the second quarter, the company repurchased 21.5 million shares of its common stock for approximately $1 billion. As of today, Devon has completed its targeted 50 million share repurchase program announced in September 2004. Devon announced a second share repurchase program in a separate news release today.
Divestiture Proceeds Add to Cash on Hand
Devon closed sales of non-core oil and gas properties during the second quarter of 2005 for aggregate proceeds of $1.7 billion. The divestiture program, first announced in September 2004, is now substantially complete.
Cash flow before balance sheet changes increased nine percent to $1.3 billion in the second quarter of 2005. A reconciliation of cash flow before balance sheet changes, which is a non-GAAP measure, is also provided in this release.
Cash and short term investments on hand were $2.8 billion as of June 30, 2005. Approximately $1.6 billion of this amount is intended for additional debt repayments through 2006. This includes early retirement in 2005 of $400 million of 6.75 percent senior notes due in 2011 that the company announced in a separate news release today.
Items Excluded from Published Estimates
Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates for the company’s financial results. These items and their effects upon second quarter 2005 reported earnings were as follows:
* A change in fair value of derivative financial instruments not associated with hedges increased earnings by $18 million pre-tax ($11 million after tax). * Effects of changes in foreign currency exchange rates decreased earnings $11 million pre-tax ($8 million after tax). * A loss on oil hedges associated with divestiture properties that no longer qualify for hedge accounting decreased earnings by $16 million pre-tax ($11 million after tax). * A reduction in the previously estimated current income tax expense resulting from the repatriation of foreign earnings increased earnings by $5 million. * Additional interest expense attributable to redemption of zero coupon convertible debentures decreased earnings by $30 million pre-tax ($19 million after tax).
The following table summarizes the effects of these items on earnings and income taxes. Included in the table are the tax effects of oil and gas property divestitures that had no effect on net earnings.
Summary of Items Typically Excluded by Securities Analysts (in millions) Cash Flow Pretax After-tax Before Earnings Income Tax Effect Earnings Balance Sheet Effect Current Deferred Total Effect Changes Effect Change in fair value of derivative financial instruments $18 — 7 7 11 — Foreign exchange effect (11) — (3) (3) (8) — Loss on hedges for divestiture properties (16) (5) — (5) (11) (11) Repatriation of Canadian cash — (5) — (5) 5 5 Additional interest costs on debt retirement (30) (11) — (11) (19) (14) Effects of oil and gas property divestitures — 59 (59) — — (59) Totals $(39) 38 (55) (17) (22) (79)
In aggregate, these items decreased 2005 net earnings by $22 million, or five cents per common share (three cents per diluted share). The diluted calculation is based upon 480 million shares, which includes nine million shares that are anti-dilutive for GAAP purposes. These items and their associated tax effects decreased cash flow before balance sheet changes by $79 million.
Conference Call to be Webcast Today
Devon will discuss its second quarter 2005 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon’s internet home page at http://www.devonenergy.com/
This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. 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 future drilling and production 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, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. 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.
Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration, production and property acquisitions. Devon is the largest U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For more information about Devon, please visit our website at http://www.devonenergy.com/ .
DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION PRODUCTION DATA Quarter Ended Six Months Ended (net of royalties) June 30, June 30, 2005 2004 2005 2004 Total Period Production Natural Gas (Bcf) U.S. Onshore 113.9 120.2 229.6 239.0 U.S. Offshore 25.7 30.1 54.8 63.1 Total U.S. 139.6 150.3 284.4 302.1 Canada 66.9 71.0 133.0 138.3 International 2.4 2.1 5.2 5.1 Total Natural Gas 208.9 223.4 422.6 445.5 Oil (MMBbls) U.S. Onshore 3.0 3.5 6.3 7.2 U.S. Offshore 3.9 4.6 8.4 9.6 Total U.S. 6.9 8.1 14.7 16.8 Canada 3.4 3.4 6.7 6.8 International 7.1 7.7 13.9 16.5 Total Oil 17.4 19.2 35.3 40.1 Natural Gas Liquids (MMBbls) U.S. Onshore 4.4 4.4 8.8 8.9 U.S. Offshore 0.2 0.2 0.5 0.5 Total U.S. 4.6 4.6 9.3 9.4 Canada 1.3 1.1 2.6 2.3 International 0.1 0.1 0.1 0.2 Total Natural Gas Liquids 6.0 5.8 12.0 11.9 Oil Equivalent (MMBoe) U.S. Onshore 26.4 28.0 53.4 55.9 U.S. Offshore 8.4 9.9 18.0 20.7 Total U.S. 34.8 37.9 71.4 76.6 Canada 15.9 16.3 31.4 32.2 International 7.6 8.1 14.9 17.4 Total Oil Equivalent 58.3 62.3 117.7 126.2 Average Daily Production Natural Gas (MMcf) U.S. Onshore 1,251.0 1,320.3 1,268.4 1,312.9 U.S. Offshore 282.6 331.0 303.0 347.2 Total U.S. 1,533.6 1,651.3 1,571.4 1,660.1 Canada 734.6 779.9 735.0 759.7 International 26.9 23.5 28.5 28.3 Total Natural Gas 2,295.1 2,454.7 2,334.9 2,448.1 Oil (MBbls) U.S. Onshore 33.1 38.8 35.0 39.6 U.S. Offshore 42.8 50.7 46.1 52.8 Total U.S. 75.9 89.5 81.1 92.4 Canada 38.0 37.4 37.1 37.6 International 77.8 84.3 76.7 90.4 Total Oil 191.7 211.2 194.9 220.4 Natural Gas Liquids (MBbls) U.S. Onshore 48.5 48.9 48.8 48.6 U.S. Offshore 2.6 2.5 2.6 3.0 Total U.S. 51.1 51.4 51.4 51.6 Canada 14.4 12.0 14.1 12.7 International 0.9 0.8 0.9 0.8 Total Natural Gas Liquids 66.4 64.2 66.4 65.1 Oil Equivalent (MBoe) U.S. Onshore 290.1 307.7 295.2 307.0 U.S. Offshore 92.5 108.4 99.2 113.7 Total U.S. 382.6 416.1 394.4 420.7 Canada 174.8 179.4 173.7 177.0 International 83.2 89.0 82.3 96.0 Total Oil Equivalent 640.6 684.5 650.4 693.7 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION PRODUCTION DATA – RETAINED PROPERTIES All periods exclude properties divested in 2005 YOY Sequential Q2 2005 Q2 2004 Q1 2005 %Change %Change Total Period Production Natural Gas (Bcf) U.S. Onshore 113.2 112.4 109.0 1% 4% U.S. Offshore 23.5 15.7 19.7 51% 20% Total U.S. 136.7 128.1 128.7 7% 6% Canada 61.3 61.2 57.6 — 6% International 2.4 2.1 2.7 14% -10% Total Natural Gas 200.4 191.4 189.0 5% 6% Oil (MMBbls) U.S. Onshore 2.9 3.0 2.9 — 4% U.S. Offshore 3.0 3.0 2.9 — 3% Total U.S. 5.9 6.0 5.8 — 3% Canada 3.2 2.7 2.7 14% 14% International 7.1 7.7 6.8 -8% 4% Total Oil 16.2 16.4 15.3 -1% 6% Natural Gas Liquids (MMBbls) U.S. Onshore 4.4 4.1 4.1 6% 6% U.S. Offshore 0.2 0.1 0.1 52% 56% Total U.S. 4.6 4.2 4.2 8% 8% Canada 1.2 1.0 1.2 22% 4% International 0.1 0.1 0.1 14% 5% Total Natural Gas Liquids 5.9 5.3 5.5 10% 7% Oil Equivalent (MMBoe) U.S. Onshore 26.2 25.8 25.2 1% 4% U.S. Offshore 7.1 5.7 6.3 24% 13% Total U.S. 33.3 31.5 31.5 6% 6% Canada 14.6 14.1 13.6 4% 8% International 7.6 8.1 7.3 -6% 3% Total Oil Equivalent 55.5 53.7 52.4 3% 6% Average Daily Production Natural Gas (MMcf) U.S. Onshore 1,243.4 1,235.2 1,210.9 1% 3% U.S. Offshore 258.8 171.8 218.8 51% 18% Total U.S. 1,502.2 1,407.0 1,429.7 7% 5% Canada 672.9 672.6 640.5 — 5% International 26.9 23.6 30.2 14% -11% Total Natural Gas 2,202.0 2,103.2 2,100.4 5% 5% Oil (MBbls) U.S. Onshore 32.8 32.9 31.9 — 3% U.S. Offshore 32.6 32.6 32.0 — 2% Total U.S. 65.4 65.5 63.9 — 2% Canada 35.0 30.6 31.0 14% 13% International 77.8 84.3 75.6 -8% 3% Total Oil 178.2 180.4 170.5 -1% 5% Natural Gas Liquids (MBbls) U.S. Onshore 48.1 45.3 45.9 6% 5% U.S. Offshore 2.1 1.4 1.4 52% 54% Total U.S. 50.2 46.7 47.3 8% 6% Canada 13.8 11.3 13.3 22% 3% International 0.9 0.8 0.8 14% 4% Total Natural Gas Liquids 64.9 58.8 61.4 10% 6% Oil Equivalent (MBoe) U.S. Onshore 288.2 284.0 279.6 1% 3% U.S. Offshore 77.8 62.7 69.8 24% 11% Total U.S. 366.0 346.7 349.4 6% 5% Canada 160.9 154.0 151.1 4% 6% International 83.2 89.0 81.5 -6% 2% Total Oil Equivalent 610.1 589.7 582.0 3% 5% DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION REALIZED PRICE DATA Quarter Ended Six Months Ended (average realized prices) June 30, June 30, 2005 2004 2005 2004 Realized Prices Natural Gas ($/Mcf) U.S. Onshore $5.96 $5.18 $5.56 $5.04 U.S. Offshore $7.10 $6.22 $6.81 $6.12 Total U.S. $6.17 $5.39 $5.80 $5.27 Canada $5.98 $5.16 $5.83 $5.04 International $4.08 $2.43 $3.95 $2.84 Total Natural Gas $6.09 $5.29 $5.79 $5.17 Oil ($/Bbl) U.S. Onshore $48.40 $30.58 $45.82 $29.94 U.S. Offshore $33.81 $29.96 $33.29 $30.19 Total U.S. $40.18 $30.23 $38.70 $30.08 Canada $24.05 $21.49 $23.98 $22.27 International $40.91 $28.63 $38.59 $28.03 Total Oil $37.28 $28.04 $35.86 $27.91 Natural Gas Liquids ($/Bbl) U.S. Onshore $23.42 $18.99 $22.69 $18.54 U.S. Offshore $29.48 $25.93 $27.83 $23.59 Total U.S. $23.73 $19.33 $22.95 $18.83 Canada $34.28 $27.54 $33.16 $26.33 International $21.16 $21.19 $24.56 $21.12 Total Natural Gas Liquids $25.99 $20.89 $25.15 $20.32 Oil Equivalent ($/Boe) U.S. Onshore $35.15 $29.11 $33.08 $28.35 U.S. Offshore $38.16 $33.62 $37.01 $33.34 Total U.S. $35.88 $30.29 $34.07 $29.70 Canada $33.20 $28.74 $32.50 $28.27 International $39.82 $27.95 $37.58 $27.44 Total Oil Equivalent $35.66 $29.58 $34.09 $29.02 BENCHMARK PRICES Quarter Ended Six Months Ended (average prices) June 30, June 30, 2005 2004 2005 2004 Benchmark Prices Natural Gas ($/Mcf) – Henry Hub $6.74 $6.00 $6.51 $5.84 Oil ($/Bbl) – West Texas Intermediate (Cushing) $53.23 $38.26 $51.57 $36.70 PRICE DIFFERENTIALS, EXCLUDING EFFECTS OF HEDGES (average floating price differentials from Quarter Ended Six Months Ended benchmark prices) June 30, June 30, 2005 2004 2005 2004 Price Differentials Natural Gas ($/Mcf) U.S. Onshore $(0.76) $(0.79) $(0.94) $(0.80) U.S. Offshore $ 0.39 $ 0.22 $ 0.31 $ 0.28 Total U.S. $(0.55) $(0.59) $(0.69) $(0.57) Canada $(0.58) $(0.69) $(0.51) $(0.64) International $(1.27) $(3.57) $(1.40) $(3.00) Total Natural Gas $(0.56) $(0.65) $(0.64) $(0.62) Oil ($/Bbl) U.S. Onshore $(4.83) $(1.94) $(4.83) $(2.04) U.S. Offshore $(4.41) $(2.15) $(4.74) $(1.51) Total U.S. $(4.59) $(2.06) $(4.78) $(1.74) Canada $(15.77) $(8.76) $(14.43) $(7.71) International $(5.63) $(4.74) $(6.74) $(5.18) Total Oil $(7.23) $(4.32) $(7.38) $(4.17) DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except Quarter Ended Six Months Ended per share data) June 30, June 30, 2005 2004 2005 2004 Revenues Oil sales $650 $539 $1,265 $1,120 Gas sales 1,272 1,181 2,447 2,302 Natural gas liquids sales 157 122 302 241 Marketing & midstream revenues 389 377 805 794 Total revenues 2,468 2,219 4,819 4,457 Expenses and Other Income, net Lease operating expenses 338 306 686 616 Production taxes 75 71 153 133 Marketing & midstream operating costs and expenses 296 299 627 630 Depreciation, depletion and amortization of oil and gas properties 494 517 1,035 1,055 Depreciation and amortization of non-oil and gas properties 41 35 79 69 Accretion of asset retirement obligation 11 10 23 22 General & administrative expenses 78 70 136 147 Interest expense 146 134 264 252 Effects of changes in foreign currency exchange rates 11 9 11 15 Change in fair value of derivative financial instruments (18) 11 34 7 Other income, net (14) (15) (152) (37) Total expenses and other income, net 1,458 1,447 2,896 2,909 Earnings before income tax expense 1,010 772 1,923 1,548 Income Tax Expense Current 277 198 629 401 Deferred 80 72 78 151 Total income tax expense 357 270 707 552 Net earnings 653 502 1,216 996 Preferred stock dividends 3 3 5 5 Net earnings applicable to common stockholders $650 $499 $1,211 $991 Net earnings per weighted average common shares outstanding Basic $1.40 $1.04 $2.57 $2.06 Diluted $1.38 $1.01 $2.53 $2.01 Basic weighted average shares outstanding 464 482 472 480 Diluted weighted average shares outstanding 471 498 479 495 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED BALANCE SHEETS (in millions) June 30, December 31, 2005 2004 Assets (Audited) Current assets Cash and cash equivalents $2,227 $1,152 Short-term investments 549 967 Accounts receivable 1,308 1,320 Fair value of derivative financial instruments — 1 Deferred income taxes 248 289 Other current assets 149 143 Total current assets 4,481 3,872 Property and equipment, at cost 31,819 32,114 Less accumulated depreciation, depletion and amortization 13,793 12,768 Net property and equipment 18,026 19,346 Investment in Chevron Corporation common stock, at fair value 793 745 Fair value of derivative financial instruments — 8 Goodwill 5,592 5,637 Other assets 378 417 Total Assets $29,270 $30,025 Liabilities and Stockholders’ Equity Current liabilities Accounts payable: Trade $900 $715 Revenues and royalties due to others 470 487 Income taxes payable 148 223 Current portion of long-term debt 906 933 Accrued interest payable 144 139 Fair value of derivative financial instruments 376 399 Current portion of asset retirement obligation 49 46 Accrued expenses and other current liabilities 192 158 Total current liabilities 3,185 3,100 Debentures exchangeable into shares of Chevron Corporation common stock 700 692 Other long-term debt 5,917 6,339 Fair value of derivative financial instruments 101 72 Asset retirement obligation, long-term 667 693 Other liabilities 377 366 Deferred income taxes 5,024 5,089 Stockholders’ equity Preferred stock 1 1 Common stock 45 48 Additional paid-in capital 7,609 9,087 Retained earnings 4,834 3,693 Accumulated other comprehensive income 882 930 Deferred compensation and other (72) (85) Stockholders’ Equity 13,299 13,674 Total Liabilities & Stockholders’ Equity $29,270 $30,025 Common Shares Outstanding 453 484 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Six Months Ended June 30, 2005 2004 Cash Flows From Operating Activities Net earnings $1,216 $996 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion and amortization 1,114 1,124 Accretion of asset retirement obligation 23 22 Amortization of premiums on long-term debt, net (2) (3) Effects of changes in foreign currency exchange rates 11 15 Change in fair value of derivative financial instruments 34 7 Deferred income tax expense 78 151 Net gain on sales of non-oil and gas properties (150) (4) Other 29 35 2,353 2,343 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 9 (161) Other current assets (6) (27) Long-term other assets 35 — Increase (decrease) in: Accounts payable 112 134 Income taxes payable (75) 157 Accrued interest and expenses 46 (81) Long-term debt, including current maturities (67) 8 Long-term other liabilities (22) (13) Net cash provided by operating activities $2,385 $2,360 Cash Flows From Investing Activities Proceeds from sales of property and equipment $2,161 $20 Capital expenditures (1,976) (1,655) Purchases of short-term investments (2,765) (1,627) Sales of short-term investments 3,183 1,603 Net cash provided by (used in) investing activities $603 $(1,659) Cash Flows From Financing Activities Principal payments on long-term debt $(354) $(971) Issuance of common stock, net of issuance costs 81 188 Repurchase of common stock (1,562) — Dividends paid on common stock (70) (48) Dividends paid on preferred stock (5) (5) Net cash used in financing activities $(1,910) $(836) Effect of exchange rate changes on cash $(3) $(15) Net increase (decrease) in cash and cash equivalents 1,075 (150) Cash and cash equivalents at beginning of period 1,152 932 Cash and cash equivalents at end of period $2,227 $782 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION DRILLING ACTIVITY Quarter Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Exploration Wells Drilled U.S. 9 4 21 10 Canada 35 32 152 131 International 7 — 7 2 Total 51 36 180 143 Exploration Wells Success Rate U.S. 89% 75% 76% 40% Canada 100% 97% 93% 92% International 43% — 43% 50% Total 90% 94% 89% 87% Development Wells Drilled U.S. 317 231 597 508 Canada 115 110 382 334 International 10 21 19 36 Total 442 362 998 878 Development Wells Success Rate U.S. 98% 99% 98% 98% Canada 99% 99% 99% 93% International 100% 100% 100% 100% Total 98% 99% 99% 97% Total Wells Drilled U.S. 326 235 618 518 Canada 150 142 534 465 International 17 21 26 38 Total 493 398 1,178 1,021 Total Wells Success Rate U.S. 98% 98% 98% 97% Canada 99% 99% 97% 93% International 76% 100% 85% 97% Total 98% 98% 97% 95% COMPANY OPERATED RIGS June 30, 2005 2004 Number of Company Operated Rigs Running U.S. 50 47 Canada 9 20 International 2 3 Total 61 70 CAPITAL EXPENDITURES DATA Quarter Ended Six Months Ended (in millions) June 30, 2005 June 30, 2005 Capital Expenditures U.S. Onshore $363 $695 U.S. Offshore 112 218 Total U.S. 475 913 Canada 463 938 International 18 51 Marketing & midstream 22 34 Capitalized general & administrative costs 45 92 Capitalized interest costs 18 37 Other 16 22 Total $1,057 $2,087 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION Non-GAAP Financial Measure
The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles.) The company must reconcile the Non-GAAP financial measure to related GAAP information. Cash flow before balance sheet changes is a Non-GAAP financial measure. Devon believes cash flow before balance sheet changes is relevant because it is a measure of cash available to fund the company’s capital expenditures, dividends and to service its debt. Cash flow before balance sheet changes is also used by certain securities analysts as a measure Devon’s financial results.
RECONCILIATION TO GAAP INFORMATION Quarter Ended Six Months Ended (in millions) June 30, June 30, 2005 2004 2005 2004 Net Cash Provided By Operating Activities (GAAP) $997 $1,137 $2,385 $2,360 Changes in assets and liabilities, net of effects of acquisitions of businesses 291 44 (32) (17) Cash flow before balance sheet changes (Non-GAAP) $1,288 $1,181 $2,353 $2,343
Devon believes that using net debt, defined as debt less cash and the market value of Chevron common stock, for the calculation of “net debt to adjusted capitalization” provides a better measure than using debt. Devon believes that because cash can be used to repay indebtedness, netting cash against debt provides a clearer picture of the future demands on cash to repay debt. Included in Devon’s indebtedness are $700 million of debentures exchangeable into 14.2 million shares of Chevron common stock owned outright by Devon. As of June 30, 2005, the market value of the shares ($793 million) exceeded the related debt obligation of $700 million. Since the value of Chevron common stock held by Devon is higher than the debt obligation, Devon believes deducting the market value of the stock provides a clearer picture of future demands on cash to repay debt. This methodology is also utilized by various lenders, rating agencies and securities analysts as a measure of Devon’s indebtedness.
RECONCILIATION TO GAAP INFORMATION (in millions) June 30, 2005 2004 Total debt (GAAP) $7,523 7,907 Adjustments: Cash and short-term investments (2,776) (1,147) Market value of Chevron Corporation common stock (793) (667) Net Debt (Non-GAAP) $3,954 6,093 Total Capitalization Total debt $7,523 7,907 Stockholders’ equity 13,299 11,963 Total Capitalization (GAAP) $20,822 19,870 Adjusted Capitalization Net debt $3,954 6,093 Stockholders’ equity 13,299 11,963 Adjusted Capitalization (Non-GAAP) $17,253 18,056
Devon Energy Corporation
CONTACT: investors, Zack Hager, +1-405-552-4526, or media, Brian Engel,+1-405-228-7750, both of Devon Energy Corporation
Web site: http://www.devonenergy.com/
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