UNITED STATES
Form 10-Q
|
(Mark One)
|
||
|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended March 31, 2003 | ||
| or | ||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| Commission file no. 000-30176 | ||
Devon Energy Corporation
|
Delaware
|
73-1567067 | |
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
|
|
20 North Broadway Oklahoma City, Oklahoma |
73102 -8260 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code:
Former name, former address and former fiscal year, if changed from last report.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
The number of shares outstanding of Registrant’s common stock, par value $.10, as of April 30, 2003, was 230,784,995.
DEVON ENERGY CORPORATION
| Page | ||||||
| No. | ||||||
| Part I. Financial Information | ||||||
|
Item 1.
|
Consolidated Financial Statements | |||||
| Consolidated Balance Sheets, March 31, 2003 (Unaudited)and December 31, 2002 | 4 | |||||
| Consolidated Statements of Operations (Unaudited), For the Three Months Ended March 31, 2003 and 2002 | 5 | |||||
| Consolidated Statements of Comprehensive Earnings (Unaudited), For the Three Months Ended March 31, 2003 and 2002 | 6 | |||||
| Consolidated Statements of Cash Flows (Unaudited), For the Three Months Ended March 31, 2003 and 2002 | 7 | |||||
| Notes to Consolidated Financial Statements | 8 | |||||
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||||
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk | 31 | ||||
|
Item 4.
|
Controls and Procedures | 32 | ||||
| Part II. Other Information | ||||||
|
Item 4.
|
Submission of Matters to a Vote of Security Holders | 32 | ||||
|
Item 6.
|
Exhibits and Reports on Form 8-K | 33 | ||||
DEFINITIONS
As used in this document:
| “Mcf” means thousand cubic feet | |
| “Bcf” means billion cubic feet | |
| “Bbl” means barrel | |
| “MMBbls” means million barrels | |
| “Boe” means equivalent barrels of oil | |
| “MBoe” means thousand equivalent barrels of oil | |
| “MMBoe” means million equivalent barrels of oil | |
| “Oil” includes crude oil and condensate | |
| “NGLs” means natural gas liquids |
2
DEVON ENERGY CORPORATION
PART I. FINANCIAL INFORMATION
(Forming a part of Form 10-Q Quarterly Report
3
DEVON ENERGY CORPORATION AND SUBSIDIARIES
| March 31, | December 31, | ||||||||||
| 2003 | 2002 | ||||||||||
| (Unaudited) | |||||||||||
| (In millions, except | |||||||||||
| share data) | |||||||||||
| ASSETS | |||||||||||
|
Current assets:
|
|||||||||||
|
Cash and cash equivalents
|
$ | 634 | $ | 292 | |||||||
|
Accounts receivable
|
910 | 639 | |||||||||
|
Inventories
|
31 | 26 | |||||||||
|
Fair value of financial instruments
|
5 | 4 | |||||||||
|
Income taxes receivable
|
11 | 56 | |||||||||
|
Assets of discontinued operations
|
— | 7 | |||||||||
|
Investments and other current assets
|
46 | 40 | |||||||||
|
Total current assets
|
1,637 | 1,064 | |||||||||
|
Property and equipment, at cost, based on the
full cost method of accounting for oil and gas properties
($2,287 and $2,289 excluded from amortization in 2003 and 2002,
respectively)
|
20,098 | 18,786 | |||||||||
|
Less accumulated depreciation, depletion and
amortization
|
8,338 | 7,934 | |||||||||
| 11,760 | 10,852 | ||||||||||
|
Investment in ChevronTexaco Corporation common
stock, at fair value
|
459 | 472 | |||||||||
|
Fair value of financial instruments
|
1 | 1 | |||||||||
|
Goodwill
|
3,699 | 3,555 | |||||||||
|
Other assets
|
272 | 281 | |||||||||
|
Total assets
|
$ | 17,828 | $ | 16,225 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
|
Current liabilities:
|
|||||||||||
|
Accounts payable:
|
|||||||||||
|
Trade
|
473 | 376 | |||||||||
|
Revenues and royalties due to others
|
389 | 261 | |||||||||
|
Income taxes payable
|
31 | 9 | |||||||||
|
Current portion of long-term debt
|
211 | — | |||||||||
|
Accrued interest payable
|
74 | 119 | |||||||||
|
Merger related expenses payable
|
10 | 12 | |||||||||
|
Fair value of financial instruments
|
192 | 151 | |||||||||
|
Accrued expenses and other current liabilities
|
76 | 114 | |||||||||
|
Total current liabilities
|
1,456 | 1,042 | |||||||||
|
Other liabilities
|
321 | 323 | |||||||||
|
Asset retirement obligation
|
469 | — | |||||||||
|
Debentures exchangeable into shares of
ChevronTexaco Corporation common stock
|
666 | 662 | |||||||||
|
Other long-term debt
|
6,709 | 6,900 | |||||||||
|
Fair value of financial instruments
|
7 | 18 | |||||||||
|
Deferred income taxes
|
2,862 | 2,627 | |||||||||
|
Stockholders’ equity:
|
|||||||||||
|
Preferred stock of $1.00 par value ($100
liquidation value)
Authorized 4,500,000 shares; issued 1,500,000 in 2003 and 2002 |
1 | 1 | |||||||||
|
Common stock of $.10 par value
Authorized 400,000,000 shares; issued 160,631,000 in 2003 and 160,461,000 in 2002 |
16 | 16 | |||||||||
|
Additional paid-in capital
|
5,181 | 5,178 | |||||||||
|
Retained earnings (accumulated deficit)
|
341 | (84 | ) | ||||||||
|
Accumulated other comprehensive loss
|
(11 | ) | (267 | ) | |||||||
|
Unamortized restricted stock awards
|
(2 | ) | (3 | ) | |||||||
|
Treasury stock, at cost: 3,704,000 shares in
2003 and 2002
|
(188 | ) | (188 | ) | |||||||
|
Total stockholders’ equity
|
5,338 | 4,653 | |||||||||
|
Total liabilities and stockholders’ equity
|
$ | 17,828 | $ | 16,225 | |||||||
See accompanying notes to consolidated financial statements.
4
DEVON ENERGY CORPORATION AND SUBSIDIARIES
| Three Months | ||||||||||
| Ended March 31, | ||||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| (In millions, | ||||||||||
| except per share | ||||||||||
| amounts) | ||||||||||
|
Revenues
|
||||||||||
|
Oil sales
|
$ | 256 | $ | 222 | ||||||
|
Gas sales
|
874 | 466 | ||||||||
|
Natural gas liquids sales
|
107 | 55 | ||||||||
|
Marketing and midstream revenues
|
434 | 160 | ||||||||
|
Total revenues
|
1,671 | 903 | ||||||||
|
Production and operating costs and
expenses
|
||||||||||
|
Lease operating expenses
|
165 | 154 | ||||||||
|
Transportation costs
|
41 | 38 | ||||||||
|
Production taxes
|
47 | 22 | ||||||||
|
Marketing and midstream operating costs and
expenses
|
356 | 125 | ||||||||
|
Depreciation, depletion and amortization of
property and equipment
|
296 | 311 | ||||||||
|
Accretion of asset retirement obligation
|
7 | — | ||||||||
|
General and administrative expenses
|
49 | 50 | ||||||||
|
Total production and operating costs and expenses
|
961 | 700 | ||||||||
|
Earnings from operations
|
710 | 203 | ||||||||
|
Other income (expenses)
|
||||||||||
|
Interest expense
|
(130 | ) | (124 | ) | ||||||
|
Effects of changes in foreign currency exchange
rates
|
22 | (1 | ) | |||||||
|
Change in fair value of financial instruments
|
10 | (17 | ) | |||||||
|
Other income
|
8 | 15 | ||||||||
|
Net other expenses
|
(90 | ) | (127 | ) | ||||||
|
Earnings from continuing operations before income
tax expense and cumulative effect of change in accounting
principle
|
620 | 76 | ||||||||
|
Income tax expense
|
||||||||||
|
Current
|
35 | 9 | ||||||||
|
Deferred
|
165 | 9 | ||||||||
|
Total income tax expense
|
200 | 18 | ||||||||
|
Earnings from continuing operations before
cumulative effect of change in accounting principle
|
420 | 58 | ||||||||
|
Discontinued operations
|
||||||||||
|
Results of discontinued operations before income
taxes
|
— | 8 | ||||||||
|
Total income tax expense
|
— | 4 | ||||||||
|
Net results of discontinued operations
|
— | 4 | ||||||||
|
Earnings before cumulative effect of change in
accounting principle
|
420 | 62 | ||||||||
|
Cumulative effect of change in accounting
principle, net of income tax expense of $10 million
|
16 | — | ||||||||
|
Net earnings
|
436 | 62 | ||||||||
|
Preferred stock dividends
|
2 | 2 | ||||||||
|
Net earnings applicable to common stockholders
|
$ | 434 | $ | 60 | ||||||
|
Basic net earnings per share:
|
||||||||||
|
Earnings from continuing operations
|
$ | 2.66 | $ | 0.38 | ||||||
|
Net results of discontinued operations
|
— | 0.03 | ||||||||
|
Cumulative effect of change in accounting
principle
|
0.10 | — | ||||||||
|
Net earnings applicable to common stockholders
|
$ | 2.76 | $ | 0.41 | ||||||
|
Diluted net earnings per share:
|
||||||||||
|
Earnings from continuing operations
|
2.57 | 0.37 | ||||||||
|
Net results of discontinued operations
|
— | 0.03 | ||||||||
|
Cumulative effect of change in accounting
principle
|
0.10 | — | ||||||||
|
Net earnings applicable to common stockholders
|
$ | 2.67 | $ | 0.40 | ||||||
|
Weighted average common shares
outstanding — basic
|
157 | 148 | ||||||||
|
Weighted average common shares
outstanding — diluted
|
163 | 150 | ||||||||
See accompanying notes to consolidated financial statements.
5
DEVON ENERGY CORPORATION AND SUBSIDIARIES
| Three Months | |||||||||
| Ended March 31, | |||||||||
| 2003 | 2002 | ||||||||
| (Unaudited) | |||||||||
| (In millions) | |||||||||
|
Net earnings
|
$ | 436 | $ | 62 | |||||
|
Other comprehensive earnings (loss), net of tax:
|
|||||||||
|
Foreign currency translation adjustments
|
293 | (2 | ) | ||||||
|
Reclassification adjustment for derivative losses
(gains) reclassified into oil and gas sales
|
83 | (42 | ) | ||||||
|
Change in fair value of outstanding hedging
positions
|
(112 | ) | (128 | ) | |||||
|
Unrealized gains (losses) on marketable securities
|
(8 | ) | 3 | ||||||
|
Comprehensive earnings (loss)
|
$ | 692 | $ | (107 | ) | ||||
See accompanying notes to consolidated financial statements.
6
DEVON ENERGY CORPORATION AND SUBSIDIARIES
| Three Months | |||||||||||||
| Ended March 31, | |||||||||||||
| 2003 | 2002 | ||||||||||||
| (Unaudited) | |||||||||||||
| (In millions) | |||||||||||||
|
Cash flows from operating activities
|
|||||||||||||
|
Earnings from continuing operations
|
$ | 420 | $ | 58 | |||||||||
|
Adjustments to reconcile net earnings to net cash
provided by operating activities:
|
|||||||||||||
|
Depreciation, depletion and amortization of
property and equipment
|
296 | 311 | |||||||||||
|
Accretion of asset retirement obligation
|
7 | — | |||||||||||
|
Accretion of discounts on long-term debt, net
|
8 | 8 | |||||||||||
|
Effects of changes in foreign currency exchange
rates
|
(22 | ) | 1 | ||||||||||
|
Change in fair value of financial instruments
|
(10 | ) | 17 | ||||||||||
|
Deferred income tax expense
|
165 | 9 | |||||||||||
|
Operating cash flows of discontinued operations
|
— | 7 | |||||||||||
|
Other
|
4 | — | |||||||||||
|
Changes in assets and liabilities, net of
acquisitions of businesses:
|
|||||||||||||
|
Decrease (increase) in:
|
|||||||||||||
|
Accounts receivable
|
(254 | ) | 18 | ||||||||||
|
Inventories
|
(6 | ) | 3 | ||||||||||
|
Prepaid expenses
|
(7 | ) | 5 | ||||||||||
|
Other assets
|
9 | (123 | ) | ||||||||||
|
Increase (decrease) in:
|
|||||||||||||
|
Accounts payable
|
228 | 17 | |||||||||||
|
Income taxes payable
|
65 | 105 | |||||||||||
|
Accrued expenses and other current liabilities
|
(69 | ) | (50 | ) | |||||||||
|
Deferred revenue
|
— | (18 | ) | ||||||||||
|
Long-term other liabilities
|
(7 | ) | — | ||||||||||
|
Net cash provided by operating activities
|
827 | 368 | |||||||||||
|
Cash flows from investing activities
|
|||||||||||||
|
Proceeds from sale of property and equipment
|
26 | ||||||||||||