Exhibit 99.1

 

News Release		Devon Energy Corporation 20 North Broadway Oklahoma City, OK 73102-8260

 

Investor Contact		Shea Snyder		405 552 4782
Media Contact		Chip Minty		405 228 8647

DEVON ENERGY REPORTS 2011 RESULTS; RECORD NET EARNINGS, RESERVES AND PRODUCTION

OKLAHOMA CITY - February 15, 2012 - Devon Energy Corporation (NYSE:DVN) today reported record net earnings for the year ended December 31, 2011, of $4.7 billion, or $11.29 per common share ($11.25 per diluted common share). This compares to full-year 2010 net earnings of $4.6 billion, or $10.35 per common share ($10.31 per diluted common share).

For the quarter ended December 31, 2011, Devon reported net earnings of $507 million, or $1.25 per common share ($1.25 per diluted common share). Adjusting for items typically excluded by securities analysts, the company earned $628 million, or $1.55 per diluted common share. The adjusting items are discussed in detail later in this news release.

Devon generated cash flow before balance sheet changes from continuing operations of $6.5 billion in 2011, a 23 percent increase over the prior year. Other sources of cash included $3.2 billion of divestiture proceeds resulting from the sale of assets in Brazil.

“Devon delivered an outstanding performance in 2011. We drove production from our North American onshore asset base up eight percent, increased proved reserves to an all-time high and completed our highly-successful strategic repositioning, including $3.5 billion of share repurchases,” commented John Richels, president and chief executive officer.

Proved Reserves Increase to Record Levels

At December 31, 2011, Devon’s estimated proved reserves reached a record 3 billion oil-equivalent barrels (Boe). During 2011, the company added 386 million Boe through successful drilling (extensions, discoveries, and revisions other than price). Associated drill-bit capital invested during the year totaled $6.9 billion, including $1.5 billion spent on exploration and acreage acquisitions.

“Devon’s liquids-focused drilling program delivered excellent results in 2011. Our total drill-bit reserve additions comfortably outpaced production, including a liquids reserve replacement rate exceeding 230 percent,” said Dave Hager, executive vice president, exploration and production. “These reserves were added at attractive finding and development costs while investing $1.5 billion on acreage acquisitions and exploration activity focused on enhancing growth in future years.”

Proved reserves from oil and natural gas liquids increased to 42 percent of the company’s total proved reserves at December 31, 2011. Proved developed reserves reached 2.2 billion Boe at year-end, or 74 percent of total proved reserves.

Robust Liquids Growth and Strategic Leasehold Additions Lead Operating Highlights

 

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Devon increased its fourth-quarter liquids production by 21 percent compared to the year-ago period, to 238,000 barrels per day.

 

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This liquids growth drove total fourth-quarter North American onshore production ten percent higher than the year-ago quarter to a record 680,000 equivalent barrels per day.

 

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In the fourth quarter, Devon’s exploration and production capital totaled $1.9 billion. This amount includes $400 million of opportunistic leasehold acquisition, consisting of acreage additions in the Ohio Utica and leasehold capture in an undisclosed, new oil opportunity.

 

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In the Permian Basin, Devon increased oil and natural gas liquids production 22 percent compared to the fourth-quarter 2010. Liquids production accounted for nearly 75 percent of the 53,000 equivalent barrels per day produced in the Permian Basin during the quarter.

 

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The company completed eight operated Bone Spring wells within the Permian Basin in the fourth quarter. Initial daily production from the eight wells averaged more than 600 Boe per day per well.

 

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In total, net production from Devon’s Jackfish 1 and Jackfish 2 projects averaged a record 43,000 barrels per day in the fourth quarter, representing a 91 percent increase over the year-ago quarter. The company’s Jackfish 2 production exited the fourth quarter at 14,000 barrels per day and will continue to ramp-up throughout 2012.

 

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In early December, Devon received regulatory approval for its third 35,000 barrel per day Jackfish project. Devon has begun construction, with plant startup targeted for late 2014.

 

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Immediately adjacent to Jackfish, Devon is currently drilling appraisal wells and acquiring seismic on its Pike oil sands lease to determine the optimal development plan. In total, the company expects that Pike will support up to five 35,000 barrel per day projects.

 

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Fourth-quarter production from Devon’s Cana-Woodford Shale play in western Oklahoma increased 83 percent over the fourth quarter of 2010. Net production averaged a record 250 million cubic feet of gas equivalent per day, including 3,100 barrels of oil and 7,400 barrels per day of natural gas liquids.

 

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Devon’s Barnett Shale production averaged a record 1.32 billion cubic feet of gas equivalent per day in the fourth quarter of 2011, an 11 percent increase over the fourth quarter of 2010. Liquids production accounted for 21 percent of total production, averaging 47,000 barrels per day during the quarter.

 

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Devon brought six operated Granite Wash wells online in the fourth quarter. Initial production from these wells averaged 1,300 barrels of oil-equivalent per day. Fourth-quarter production from the company’s Granite Wash play reached 19,100 barrels per day, a 47 percent increase over 2010.

 

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In January, Devon announced a signed agreement whereby Sinopec will pay $2.5 billion to acquire 33 percent of Devon’s interest in 1.4 million net acres across five new venture plays (Mississippian, Tuscaloosa, Niobrara, Ohio Utica and Michigan Basin). The transaction price includes a $900 million cash payment at closing and a $1.6 billion drilling carry, funding 70 percent of Devon’s capital requirements during the carry period. By year-end 2012, the companies expect to have drilled approximately 125 gross wells.

 

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Devon’s marketing and midstream operating profit totaled $542 million in 2011, a six percent increase over 2010. The increase in operating profit was attributable to higher gas throughput and higher natural gas liquids pricing.

Liquids Sales Increase

Production from Devon’s North American onshore operations averaged 658,000 oil-equivalent barrels per day in 2011, an increase of eight percent over 2010. Sales of oil, gas and natural gas liquids from continuing operations increased 14 percent to $8.3 billion in 2011. Higher liquids production and pricing contributed to the increase. In 2011, liquids sales comprised nearly 60 percent of Devon’s total upstream revenues.

Cost Management Mitigates Inflation

Devon’s 2011 earnings reflect the company’s successful cost management efforts. In spite of rising industry costs and a stronger Canadian dollar, Devon’s total pre-tax cash costs increased only two percent in 2011 to $13.38 per Boe.

Lease operating expenses totaled $1.9 billion in 2011. Lease operating expense per unit of production climbed four percent in 2011 to $7.71 per barrel. The increase reflects the impact of a higher Canadian exchange rate and higher overall service costs.

General and administrative expenses (G&A) totaled $585 million, or $2.44 per Boe for the full-year 2011. Operating efficiencies achieved through the company’s strategic repositioning reduced G&A per Boe one percent compared to the prior year.

 

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Taxes other than income increased $44 million to $424 million in 2011. Higher production taxes, resulting from a significant rise in oil and natural gas liquids revenue, drove the year-over-year increase.

Depreciation, depletion and amortization (DD&A) totaled $2.2 billion for 2011, or $9.37 per Boe. This represents a 10 percent increase in unit DD&A over 2010.

Full-year 2011 income tax expense from continuing operations was $2.2 billion, or 50 percent of pre-tax earnings. This unusually high tax rate resulted from a $744 million charge related to foreign earnings assumed to be repatriated under U.S. tax law. After adjusting for this and other non-recurring items, Devon’s 2011 income tax rate totaled 34 percent of pre-tax earnings from continuing operations.

Share Repurchase Program Completed; Financial Position Remains Strong

On November 16, 2011, the company completed its $3.5 billion share repurchase program announced in May of 2010. In total, under the share repurchase authorization, the company repurchased 49.2 million shares or 11 percent of its outstanding shares.

As of December 31, 2011, Devon’s cash and short-term investments totaled $7.1 billion, and its net debt to adjusted capitalization ratio was 11 percent.

Divestitures Impact Financial Reporting

In accordance with accounting standards, Devon has classified the assets, liabilities, and results of its international segment as discontinued operations for all accounting periods presented in this release. Included with this release is a table of revenues, expenses, production by category, and the amounts classified as discontinued operations for each period presented.

Prior-year results from continuing operations include data from the company’s now divested Gulf of Mexico operations. Provided within this release is information that will enable the reader to isolate results of the company’s go-forward North American onshore operations.

Non-GAAP Reconciliations

Pursuant to regulatory disclosure requirements, Devon is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounting principles). Drill-bit capital, cash flow before balance sheet changes, net debt and adjusted capitalization are non-GAAP financial measures referenced within this release. Reconciliations of these non-GAAP measures are provided on pages 14 and 15.

Items Excluded from Published Earnings Estimates

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. The following tables summarize the fourth-quarter 2011 effects of these items on earnings and cash flow.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

		Quarter Ended December 31, 2011
		Before-Tax				After-Tax
Net earnings (GAAP)						$	507
Adjustments on asset sales - discontinued operations			(6	)			14
Oil and gas derivatives			256				173
Insurance proceeds			(88	)			(60	)
Foreign exchange rates			(11	)			(7	)
Interest rate and other financial instruments			4				1
Adjusted earnings (Non-GAAP)						$	628
Diluted share count							405
Adjusted diluted earnings per share (Non-GAAP)						$	1.55
Cash flow before balance sheet changes (Non-GAAP)						$	1,580
Insurance proceeds							(69	)
Adjusted cash flow before balance sheet changes (Non-GAAP)						$	1,511

Conference Call to be Webcast Today

Devon will discuss its 2011 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 is accessible from Devon’s internet home page at www.devonenergy.com.

This press release may include “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 the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or 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. 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 United States Securities and Exchange Commission 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 and exploration target size. 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. U.S. investors are urged to consider closely the disclosure in our Form 10-K for the fiscal year ended December 31, 2010, available from us at Devon Energy Corporation, Attn. Investor Relations, 20 North Broadway, Oklahoma City, OK 73102. 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.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading 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 www.devonenergy.com.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

PRODUCTION (net of royalties)

Excludes discontinued operations

 

		Year Ended								Quarter Ended
		December 31,								December 31,
		2011				2010				2011				2010
Total Period Production
Natural Gas (Bcf)
U.S. Onshore			739.7				698.5				191.8				180.6
Canada			212.8				214.2				52.5				52.6
North American Onshore			952.5				912.7				244.3				233.2
U.S. Offshore			—				16.8				—				—
Total Natural Gas			952.5				929.5				244.3				233.2
Oil (MMBbls)
U.S. Onshore			16.8				13.5				4.6				3.7
Canada			27.9				25.2				7.7				6.1
North American Onshore			44.7				38.7				12.3				9.8
U.S. Offshore			—				1.9				—				—
Total Oil			44.7				40.6				12.3				9.8
Natural Gas Liquids (MMBbls)
U.S. Onshore			33.0				28.2				8.7				7.4
Canada			3.6				3.6				0.9				0.9
North American Onshore			36.6				31.8				9.6				8.3
U.S. Offshore			—				0.3				—				—
Total Natural Gas Liquids			36.6				32.1				9.6				8.3
Oil Equivalent (MMBoe)
U.S. Onshore			173.1				158.2				45.2				41.2
Canada			67.0				64.4				17.4				15.7
North American Onshore			240.1				222.6				62.6				56.9
U.S. Offshore			—				5.0				—				—
Total Oil Equivalent			240.1				227.6				62.6				56.9
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore			2,026.6				1,913.8				2,084.5				1,963.0
Canada			583.1				586.9				571.1				571.7
North American Onshore			2,609.7				2,500.7				2,655.6				2,534.7
U.S. Offshore			—				46.0				—				—
Total Natural Gas			2,609.7				2,546.7				2,655.6				2,534.7
Oil (MBbls)
U.S. Onshore			46.0				37.0				49.7				40.0
Canada			76.5				68.9				83.8				66.0
North American Onshore			122.5				105.9				133.5				106.0
U.S. Offshore			—				5.2				—				—
Total Oil			122.5				111.1				133.5				106.0
Natural Gas Liquids (MBbls)
U.S. Onshore			90.4				77.3				94.5				80.8
Canada			9.9				9.8				9.8				9.2
North American Onshore			100.3				87.1				104.3				90.0
U.S. Offshore			—				0.9				—				—
Total Natural Gas Liquids			100.3				88.0				104.3				90.0
Oil Equivalent (MBoe)
U.S. Onshore			474.1				433.3				491.7				448.0
Canada			183.6				176.5				188.7				170.5
North American Onshore			657.7				609.8				680.4				618.5
U.S. Offshore			—				13.8				—				—
Total Oil Equivalent			657.7				623.6				680.4				618.5

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

BENCHMARK PRICES

(average prices)

 

		Year Ended								Quarter Ended
		December 31,								December 31,
		2011				2010				2011				2010
Natural Gas ($/Mcf) - Henry Hub		$	4.04			$	4.39			$	3.54			$	3.80
Oil ($/Bbl) - West Texas Intermediate (Cushing)		$	95.06			$	79.48			$	93.96			$	85.15
Year Ended December 31, 2011		Oil (Per Bbl)				Gas (Per Mcf)				NGLs (Per Bbl)				Total (Per Boe)
U.S. Onshore		$	91.19			$	3.50			$	39.47			$	31.31
Canada		$	66.97			$	3.87			$	55.99			$	43.23
North American Onshore		$	76.06			$	3.58			$	41.10			$	34.64
U.S. Offshore		$	—			$	—			$	—			$	—
Realized price without hedges		$	76.06			$	3.58			$	41.10			$	34.64
Cash settlements		$	(0.58	)		$	0.44			$	0.07			$	1.63
Realized price, including cash settlements		$	75.48			$	4.02			$	41.17			$	36.27
Year Ended December 31, 2010		Oil (Per Bbl)				Gas (Per Mcf)				NGLs (Per Bbl)				Total (Per Boe)
U.S. Onshore		$	75.53			$	3.73			$	30.78			$	28.42
Canada		$	58.60			$	4.11			$	46.60			$	39.11
North American Onshore		$	64.51			$	3.82			$	32.55			$	31.52
U.S. Offshore		$	77.81			$	5.12			$	38.22			$	49.06
Realized price without hedges		$	65.14			$	3.84			$	32.61			$	31.91
Cash settlements		$	—			$	0.96			$	—			$	3.90
Realized price, including cash settlements		$	65.14			$	4.80			$	32.61			$	35.81
Quarter Ended December 31, 2011		Oil (Per Bbl)				Gas (Per Mcf)				NGLs (Per Bbl)				Total (Per Boe)
U.S. Onshore		$	91.19			$	3.08			$	40.66			$	30.10
Canada		$	71.36			$	3.45			$	56.19			$	45.02
North American Onshore		$	78.75			$	3.16			$	42.11			$	34.24
U.S. Offshore		$	—			$	—			$	—			$	—
Realized price without hedges		$	78.75			$	3.16			$	42.11			$	34.24
Cash settlements		$	(0.28	)		$	0.63			$	0.05			$	2.42
Realized price, including cash settlements		$	78.47			$	3.79			$	42.16			$	36.66
Quarter Ended December 31, 2010		Oil (Per Bbl)				Gas (Per Mcf)				NGLs (Per Bbl)				Total (Per Boe)
U.S. Onshore		$	80.79			$	3.21			$	33.19			$	27.27
Canada		$	60.80			$	3.69			$	47.46			$	38.46
North American Onshore		$	68.35			$	3.32			$	34.65			$	30.36
U.S. Offshore		$	—			$	—			$	—			$	—
Realized price without hedges		$	68.35			$	3.32			$	34.65			$	30.36
Cash settlements		$	—			$	1.32			$	—			$	5.41
Realized price, including cash settlements		$	68.35			$	4.64			$	34.65			$	35.77

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

		Year Ended								Quarter Ended
		December 31,								December 31,
		2011				2010				2011				2010
Revenues
Oil, gas, and NGL sales		$	8,315			$	7,262			$	2,144			$	1,727
Oil, gas, and NGL derivatives			881				811				(105	)			(63	)
Marketing and midstream revenues			2,258				1,867				546				471
Total revenues			11,454				9,940				2,585				2,135
Expenses and other, net
Lease operating expenses			1,851				1,689				499				418
Marketing and midstream operating costs and expenses			1,716				1,357				412				344
Depreciation, depletion and amortization			2,248				1,930				626				489
General and administrative expenses			585				563				182				164
Taxes other than income taxes			424				380				88				92
Interest expense			352				363				82				83
Restructuring costs			(2	)			57				—				2
Other, net			(10	)			33				(98	)			(125	)
Total expenses and other, net			7,164				6,372				1,791				1,467
Earnings from continuing operations before income taxes			4,290				3,568				794				668
Current income tax (benefit) expense			(143	)			516				158				(180	)
Deferred income tax expense			2,299				719				115				370
Earnings from continuing operations			2,134				2,333				521				478
Earnings (loss) from discontinued operations			2,570				2,217				(14	)			84
Net earnings		$	4,704			$	4,550			$	507			$	562
Basic net earnings per share
Basic earnings from continuing operations per share		$	5.12			$	5.31			$	1.29			$	1.10
Basic earnings (loss) from discontinued operations per share			6.17				5.04				(0.04	)			0.20
Basic net earnings per share		$	11.29			$	10.35			$	1.25			$	1.30
Diluted net earnings per share
Diluted earnings from continuing operations per share		$	5.10			$	5.29			$	1.29			$	1.10
Diluted earnings (loss) from discontinued operations per share			6.15				5.02				(0.04	)			0.19
Diluted net earnings per share		$	11.25			$	10.31			$	1.25			$	1.29
Weighted average common shares outstanding
Basic			417				440				404				433
Diluted			418				441				405				434

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED BALANCE SHEETS

(in millions)

 

		December 31, 2011				December 31, 2010
Assets
Current assets:
Cash and cash equivalents		$	5,555			$	2,866
Short-term investments			1,503				145
Accounts receivable			1,379				1,202
Current assets held for sale			21				563
Other current assets			847				779
Total current assets			9,305				5,555
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization			61,696				56,012
Not subject to amortization			3,982				3,434
Total oil and gas			65,678				59,446
Other			5,098				4,429
Total property and equipment, at cost			70,776				63,875
Less accumulated depreciation, depletion and amortization			(46,002	)			(44,223	)
Property and equipment, net			24,774				19,652
Goodwill			6,013				6,080
Long-term assets held for sale			132				859
Other long-term assets			893				781
Total Assets		$	41,117			$	32,927
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	1,471			$	1,411
Revenues and royalties payable			678				538
Short-term debt			3,811				1,811
Current liabilities associated with assets held for sale			48				305
Other current liabilities			730				518
Total current liabilities			6,738				4,583
Long-term debt			5,969				3,819
Asset retirement obligations			1,496				1,423
Liabilities associated with assets held for sale			—				26
Other long-term liabilities			721				1,067
Deferred income taxes			4,763				2,756
Stockholders’ equity:
Common stock			40				43
Additional paid-in capital			3,507				5,601
Retained earnings			16,308				11,882
Accumulated other comprehensive earnings			1,575				1,760
Treasury stock, at cost			—				(33	)
Total Stockholders’ Equity			21,430				19,253
Total Liabilities and Stockholders’ Equity		$	41,117			$	32,927
Common Shares Outstanding			404				432

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

		Year Ended December 31,								Quarter Ended December 31,
		2011				2010				2011				2010
Cash Flows From Operating Activities
Net earnings		$	4,704			$	4,550			$	507			$	562
(Earnings) loss from discontined operations, net of tax			(2,570	)			(2,217	)			14				(84	)
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:
Depreciation, depletion and amortization			2,248				1,930				626				489
Deferred income tax expense			2,299				719				115				370
Unrealized change in fair value of financial instruments			(401	)			107				260				243
Other noncash charges			241				215				56				61
Net cash from operating activities before balance sheet changes			6,521				5,304				1,578				1,641
Net decrease (increase) in working capital			185				(273	)			493				(437	)
Decrease (increase) in long-term other assets			33				32				(18	)			4
Decrease in long-term other liabilities			(493	)			(41	)			(34	)			(98	)
Cash from operating activities - continuing operations			6,246				5,022				2,019				1,110
Cash from operating activities - discontinued operations			(22	)			456				(9	)			132
Net cash from operating activities			6,224				5,478				2,010				1,242
Cash Flows From Investing Activities
Capital expenditures			(7,534	)			(6,476	)			(2,019	)			(1,683	)
Proceeds from property and equipment divestitures			129				4,310				116				179
Purchases of short-term investments			(6,691	)			(145	)			(940	)			(145	)
Redemptions of short-term investments			5,333				—				668				—
Redemptions of long-term investments			10				21				—				1
Other			(39	)			(19	)			(6	)			(6	)
Cash from investing activities - continuing operations			(8,792	)			(2,309	)			(2,181	)			(1,654	)
Cash from investing activities - discontinued operations			3,146				2,197				(16	)			(101	)
Net cash from investing activities			(5,646	)			(112	)			(2,197	)			(1,755	)
Cash Flows From Financing Activities
Net commercial paper borrowings (repayments)			3,726				(1,432	)			530				—
Proceeds from borrowings of long term debt, net of issuance costs			2,221				—				—				—
Debt repayments			(1,760	)			(350	)			—				—
Proceeds from stock option exercises			101				111				—				93
Repurchases of common stock			(2,332	)			(1,168	)			(345	)			(239	)
Dividends paid on common stock			(278	)			(281	)			(69	)			(70	)
Excess tax benefits related to share-based compensation			13				16				2				9
Net cash from financing activities			1,691				(3,104	)			118				(207	)
Effect of exchange rate changes on cash			(4	)			17				6				12
Net increase (decrease) in cash and cash equivalents			2,265				2,279				(63	)			(708	)
Cash and cash equivalents at beginning of period			3,290				1,011				5,618				3,998
Cash and cash equivalents at end of period		$	5,555			$	3,290			$	5,555			$	3,290

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

RESERVES RECONCILIATION

 

		Total
		Oil (MMBbls)				Gas (Bcf)				NGLs (MMBbls)				Total (MMBoe)
As of December 31, 2010:
Proved developed			257				8,424				381				2,042
Proved undeveloped			424				1,859				98				831
Total Proved			681				10,283				479				2,873
Revisions due to prices			(13	)			(61	)			3				(21	)
Revisions other than price			10				(281	)			1				(35	)
Extensions and discoveries			72				1,468				104				421
Purchase of reserves			—				36				2				8
Production			(45	)			(953	)			(37	)			(240	)
Sale of reserves			—				(6	)			—				(1	)
As of December 31, 2011:
Proved developed			309				8,908				428				2,223
Proved undeveloped			396				1,578				124				782
Total Proved			705				10,486				552				3,005
		U.S. Onshore
		Oil (MMBbls)				Gas (Bcf)				NGLs (MMBbls)				Total (MMBoe)
As of December 31, 2010:
Proved developed			131				7,280				353				1,696
Proved undeveloped			17				1,785				96				411
Total Proved			148				9,065				449				2,107
Revisions due to prices			2				(1	)			4				6
Revisions other than price			(1	)			(243	)			1				(41	)
Extensions and discoveries			36				1,410				102				374
Purchase of reserves			—				16				2				5
Production			(17	)			(740	)			(33	)			(173	)
Sale of reserves			—				—				—				—
As of December 31, 2011:
Proved developed			146				7,957				402				1,875
Proved undeveloped			22				1,550				123				403
Total Proved			168				9,507				525				2,278
		Canada
		Oil (MMBbls)				Gas (Bcf)				NGLs (MMBbls)				Total (MMBoe)
As of December 31, 2010:
Proved developed			126				1,144				28				346
Proved undeveloped			407				74				2				420
Total Proved			533				1,218				30				766
Revisions due to prices			(15	)			(60	)			(1	)			(27	)
Revisions other than price			11				(38	)			—				6
Extensions and discoveries			36				58				2				47
Purchase of reserves			—				20				—				3
Production			(28	)			(213	)			(4	)			(67	)
Sale of reserves			—				(6	)			—				(1	)
As of December 31, 2011:
Proved developed			163				951				26				348
Proved undeveloped			374				28				1				379
Total Proved			537				979				27				727

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

COSTS INCURRED

(in millions)

 

		Total Year Ended December 31,
		2011				2010
Property Acquisition Costs:
Proved properties		$	48			$	33
Unproved properties			939				1,184
Exploration costs			538				688
Development costs			5,418				4,639
Costs Incurred		$	6,943			$	6,544
		U.S. Onshore
		Year Ended December 31,
		2011				2010
Property Acquisition Costs:
Proved properties		$	34			$	29
Unproved properties			851				592
Exploration costs			272				339
Development costs			4,130				3,126
Costs Incurred		$	5,287			$	4,086
		Canada
		Year Ended December 31,
		2011				2010
Property Acquisition Costs:
Proved properties		$	14			$	4
Unproved properties			88				590
Exploration costs			266				260
Development costs			1,288				1,216
Costs Incurred		$	1,656			$	2,070
		U.S. Offshore
		Year Ended December 31,
		2011				2010
Property Acquisition Costs:
Proved properties		$	—			$	—
Unproved properties			—				2
Exploration costs			—				89
Development costs			—				297
Costs Incurred		$	—			$	388

Devon capitalizes certain general and administrative expenses related to property acquisition, exploration and development activities. These capitalized expenses were $337 million and $311 million in 2011 and 2010, respectively. Devon also capitalizes certain interest expenses related to property acquisition, exploration and development activities. These capitalized expenses were $45 million and $37 million in 2011 and 2010, respectively. These capitalized general and administrative expenses and interest expenses are included in the costs shown in the preceding tables.

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

COMPANY OPERATED RIGS

 

		Year Ended December 31,
		2011				2010
Number of Company Operated Rigs Running
U.S. Onshore			53				61
Canada			7				10
Total			60				71

KEY OPERATING STATISTICS BY REGION

Quarter Ended December 31, 2011

 

		Avg. Production (MBOED)				Operated Rigs at December 31, 2011				Gross Wells Drilled
Barnett Shale			220.1				12				83
Canadian Oilsands - Jackfish / Pike			42.5				—				—
Cana-Woodford Shale			41.6				16				47
Granite Wash			19.1				3				13
Gulf Coast / East Texas			69.2				4				17
Lloydminster			38.5				—				60
Permian Basin			53.4				16				74
Rocky Mountains			63.3				2				17
Other			132.7				7				54
Total			680.4				60				365

KEY OPERATING STATISTICS BY REGION

Year Ended December 31, 2011

 

		Avg. Production (MBOED)				Operated Rigs at December 31, 2011				Gross Wells Drilled
Barnett Shale			213.1				12				309
Canadian Oilsands - Jackfish / Pike			34.8				—				21
Cana-Woodford Shale			33.4				16				207
Granite Wash			16.4				3				59
Gulf Coast / East Texas			70.8				4				72
Lloydminster			39.2				—				197
Permian Basin			49.0				16				284
Rocky Mountains			64.8				2				99
Other			136.2				7				157
Total			657.7				60				1,405

CAPITAL EXPENDITURES (in millions)

Quarter Ended December 31, 2011

 

		U.S. Onshore				Canada				Total
Capital Expenditures
Exploration		$	484				59			$	543
Development			1,000				335				1,335
Exploration and development capital		$	1,484				394			$	1,878
Capitalized G&A											90
Capitalized interest											10
Midstream capital											106
Other capital											145
Total Continuing Operations										$	2,229
Discontinued operations											20
Total Operations										$	2,249

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

CAPITAL EXPENDITURES (in millions)

Year Ended December 31, 2011

 

		U.S. Onshore				Canada				Total
Capital Expenditures
Exploration		$	1,077				302			$	1,379
Development			3,935				1,243				5,178
Exploration and development capital		$	5,012				1,545			$	6,557
Capitalized G&A											337
Capitalized interest											45
Midstream capital											347
Other capital											509
Total Continuing Operations										$	7,795
Discontinued operations											66
Total Operations										$	7,861

PRODUCTION FROM DISCONTINUED OPERATIONS

 

		Year Ended December 31,								Quarter Ended December 31,
		2011				2010				2011				2010
Oil (MMBbls)			0.5				9.3				—				1.5
Natural Gas (Bcf)			—				1.3				—				—
Total Oil Equivalent (MMBoe)			0.5				9.5				—				1.5

STATEMENTS OF DISCONTINUED OPERATIONS

(in millions)

 

		Year Ended December 31,								Quarter Ended December 31,
		2011				2010				2011				2010
Operating earnings		$	38			$	567			$	—			$	91
Gain on sale of oil and gas properties			2,552				1,818				6				(26	)
Earnings before income taxes			2,590				2,385				6				65
Income tax expense (benefit)			20				168				20				(19	)
Earnings (loss) from discontinued operations		$	2,570			$	2,217			$	(14	)		$	84

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

NON-GAAP FINANCIAL MEASURES

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 of Devon’s financial results.

RECONCILIATION TO GAAP INFORMATION

(in millions)

 

		Year Ended December 31,								Quarter Ended December 31,
		2011				2010				2011				2010
Net Cash Provided By Operating Activities (GAAP)		$	6,224			$	5,478			$	2,010			$	1,242
Changes in assets and liabilities - continuing operations			275				282				(441	)			531
Changes in assets and liabilities - discontinued operations			54				(88	)			11				(50	)
Cash flow before balance sheet changes (Non-GAAP)		$	6,553			$	5,672			$	1,580			$	1,723

Devon believes that using net debt for the calculation of “net debt to adjusted capitalization” provides a better measure than using debt. Devon defines net debt as debt less cash, cash equivalents and short-term investments. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt.

RECONCILIATION TO GAAP INFORMATION

(in millions)

 

		December 31,
		2011				2010
Total debt (GAAP)		$	9,780			$	5,630
Adjustments:
Cash and short term investments			7,058				3,435
Net debt (Non-GAAP)		$	2,722			$	2,195
Total debt		$	9,780			$	5,630
Stockholders’ equity			21,430				19,253
Total capitalization (GAAP)		$	31,210			$	24,883
Net debt		$	2,722			$	2,195
Stockholders’ equity			21,430				19,253
Adjusted capitalization (Non-GAAP)		$	24,152			$	21,448

 

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DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

 

NON-GAAP FINANCIAL MEASURES

Drill-bit capital is defined as costs incurred less proved acquisition costs and unproved acquisition costs resulting from business combinations. Drill-bit capital is a Non-GAAP measure. Devon believes drill-bit capital is relevant because it provides additional insight into costs associated with current year exploration and development activities. Certain securities analysts also use this methodology to measure Devon’s performance. It should be noted that the actual costs of reserves added through Devon’s drilling program will differ, sometimes significantly, from the direct comparison of capital spent and reserves added in any given period due to the timing of capital expenditures and reserve bookings.

RECONCILIATION TO GAAP INFORMATION

(in millions)

 

		Total Year Ended December  31,
		2011				2010
Costs Incurred (GAAP)		$	6,943			$	6,544
Less:
Proved acquisition costs			48				33
Drill-bit capital (Non-GAAP)		$	6,895			$	6,511
		U.S. Onshore Year Ended December 31,
		2011				2010
Costs Incurred (GAAP)		$	5,287			$	4,086
Less:
Proved acquisition costs			34				29
Drill-bit capital (Non-GAAP)		$	5,253			$	4,057
		Canada Year Ended  December 31,
		2011				2010
Costs Incurred (GAAP)		$	1,656			$	2,070
Less:
Proved acquisition costs			14				4
Drill-bit capital (Non-GAAP)		$	1,642			$	2,066
		U.S. Offshore Year Ended December 31,
		2011				2010
Costs Incurred (GAAP)		$	—			$	388
Less:
Proved acquisition costs			—				—
Drill-bit capital (Non-GAAP)		$	—			$	388

 

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