DEVON ENERGY CORP/DE - 10-Q Quarterly Report

Former name, former address and former fiscal year, if changed from last report.
Not applicable

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 October 31, 2003, was 232,557,000.

DEVON ENERGY CORPORATION
Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission


		Page
		No.

	Part I. Financial Information
Item 1	Consolidated Financial Statements
	Consolidated Balance Sheets, September 30, 2003 (Unaudited) and		6
	December 31, 2002
	Consolidated Statements of Operations (Unaudited) for the
	Three Months and Nine Months Ended September 30, 2003
	and 2002		7
	Consolidated Statements of Comprehensive Income (Unaudited)
	for the Three Months and Nine Months Ended September 30, 2003
	and 2002		8
	Consolidated Statements of Cash Flows (Unaudited) for the Nine
	Months Ended September 30, 2003 and 2002		9
	Notes to Consolidated Financial Statements (Unaudited)		10
Item 2	Management's Discussion and Analysis of Financial Condition and		29
	Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk		48
Item 4	Controls and Procedures		55
	Part II. Other Information
Item 6	Exhibits and Reports on Form 8-K		57

“AECO” means the price of gas delivered onto the NOVA Gas Transmission Ltd. System.

“Boe” means barrel of oil equivalent, determined by using the ratio of one Bbl of oil or NGLs to six Mcf of gas.

“Inside FERC” refers to the publication Inside F.E.R.C.’s Gas Market Report.

(Forming a part of Form 10-Q Quarterly Report
to the Securities and Exchange Commission)


					September 30,			December 31,
					2003			2002

					(Unaudited)
					(In millions, except share data)
				ASSETS
Current assets:
	Cash and cash equivalents				$	840		$	292
	Accounts receivable					896			639
	Inventories					77			26
	Fair value of financial instruments					20			4
	Income taxes receivable					11			56
	Assets of discontinued operations					—			7
	Investments and other current assets					63			40

			Total current assets			1,907			1,064

Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,339 and $2,289 excluded from amortization in 2003 and 2002, respectively)						27,368			18,786
	Less accumulated depreciation, depletion and amortization					9,520			7,934

						17,848			10,852
Investment in ChevronTexaco Corporation common stock, at fair value						507			472
Fair value of financial instruments						26			1
Goodwill						5,341			3,555
Other assets						338			281

			Total assets		$	25,967		$	16,225

				LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable:
		Trade			$	633		$	376
		Revenues and royalties due to others				331			261
	Income taxes payable					83			9
	Current portion of long-term debt					340			—
	Accrued interest payable					95			119
	Merger related expenses payable					21			12
	Fair value of financial instruments					72			151
	Current portion of asset retirement obligation					32			—
	Accrued expenses and other current liabilities					99			114

			Total current liabilities			1,706			1,042

Other liabilities						404			323
Asset retirement obligation, long-term						619			—
Debentures exchangeable into shares of ChevronTexaco Corporation common stock						673			662
Other long-term debt						7,908			6,900
Preferred stock of a subsidiary						55			—
Deferred revenue						70			—
Fair value of financial instruments						16			18
Deferred income taxes						4,326			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 $0.10 par value Authorized 800,000,000 shares; issued 236,203,000 in 2003 and 160,461,000 in 2002					24			16
	Additional paid-in capital					8,899			5,178
	Retained earnings (accumulated deficit)					1,085			(84	)
	Accumulated other comprehensive income (loss)					368			(267	)
	Other					—			(3	)
	Treasury stock at cost: 3,700,000 shares in 2003 and 3,704,000 shares in 2002					(187	)		(188	)

			Total stockholders’ equity			10,190			4,653

			Total liabilities and stockholders’ equity		$	25,967		$	16,225


			Three Months Ended						Nine Months Ended
			September 30,						September 30,

			2003			2002			2003			2002

						(Unaudited)
			(In millions, except per share amounts)
Revenues
	Oil sales		$	469		$	217		$	1,104		$	687
	Gas sales			1,049			480			2,930			1,508
	Natural gas liquids sales			95			69			294			196
	Marketing and midstream revenues			335			265			1,104			692

		Total revenues		1,948			1,031			5,432			3,083

Production and operating costs and expenses
	Lease operating expenses			238			152			626			468
	Transportation costs			57			39			149			115
	Production taxes			54			25			152			80
	Marketing and midstream operating costs and expenses			268			212			901			559
	Depreciation, depletion and amortization of property and equipment			508			282			1,231			916
	Accretion of asset retirement obligation			10			—			26			—
	General and administrative expenses			79			47			221			151
	Expenses related to mergers			—			—			7			—
	Reduction of carrying value of oil and gas properties			—			—			—			651

		Total production and operating costs and expenses		1,214			757			3,313			2,940

Earnings from operations				734			274			2,119			143
Other income (expenses)
	Interest expense			(120	)		(130	)		(380	)		(402	)
	Dividends on subsidiary’s preferred stock			—			—			(1	)		—
	Effects of changes in foreign currency exchange rates			1			(17	)		52			—
	Change in fair value of financial instruments			(1	)		21			8			28
	Other income			4			2			29			23

		Net other expenses		(116	)		(124	)		(292	)		(351	)

Earnings (loss) from continuing operations before income tax expense and cumulative effect of change in accounting principle				618			150			1,827			(208	)
Income tax expense (benefit)
	Current			41			36			165			122
	Deferred			165			2			474			(294	)

		Total income tax expense (benefit)		206			38			639			(172	)

Earnings (loss) from continuing operations before cumulative effect of change in accounting principle				412			112			1,188			(36	)
Discontinued operations
	Results of discontinued operations before income taxes			—			(48	)		—			64
	Total income tax expense			—			2			—			8

		Net results of discontinued operations		—			(50	)		—			56

Earnings before cumulative effect of change in accounting principle				412			62			1,188			20
Cumulative effect of change in accounting principle, net of income tax expense of $10 million				—			—			16			—

Net earnings				412			62			1,204			20
Preferred stock dividends				2			2			7			7

Net earnings applicable to common stockholders			$	410		$	60		$	1,197		$	13

Basic earnings (loss) per share:
	Earnings (loss) from continuing operations		$	1.76		$	0.70		$	5.89		$	(0.28	)
	Net results of discontinued operations			—			(0.32	)		—			0.36
	Cumulative effect of change in accounting principle			—			—			0.08			—

	Net earnings applicable to common stockholders		$	1.76		$	0.38		$	5.97		$	0.08

Diluted earnings (loss) per share:
	Earnings (loss) from continuing operations		$	1.71		$	0.68		$	5.69		$	(0.28	)
	Net results of discontinued operations			—			(0.31	)		—			0.36
	Cumulative effect of change in accounting principle			—			—			0.07			—

	Net earnings applicable to common stockholders		$	1.71		$	0.37		$	5.76		$	0.08

Weighted average common shares outstanding — basic				232			156			200			154

Weighted average common shares outstanding — diluted				241			158			209			156


(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Quarterly Period Ended September 30, 2003

		or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


PART I. FINANCIAL INFORMATION
	ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
EX-31.1 Certification of CEO - Section 302
EX-31.2 Certification of CFO - Section 302
EX-32.1 Certification of CEO - Section 906
EX-32.2 Certification of CFO - Section 906

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Delaware (State or Other Jurisdiction of Incorporation or Organization)		73-1567067 (I.R.S. Employer Identification Number)


20 North Broadway Oklahoma City, Oklahoma (Address of Principal Executive Offices)		73102-8260 (Zip Code)