10-KPeriod: FY2004

DEVON ENERGY CORP/DE Annual Report, Year Ended Dec 31, 2004

Filed March 9, 2005For Securities:DVN

Summary

Devon Energy Corporation, as of March 9, 2005, is a substantial independent energy company with a global reach in oil and gas exploration, development, and production. The company reported record performance in 2004 across key financial and operational metrics, including production, earnings, and cash flow from operations. Devon's strategic objectives focus on building reserves, production, cash flow, and earnings per share through exploration, strategic acquisitions, and optimizing existing properties. Financially, Devon demonstrated strong operational cash flow, enabling significant capital expenditures, debt reduction, and shareholder returns through stock repurchases and dividends. The company is actively managing its portfolio by divesting non-core assets and investing in growth opportunities. Devon's robust asset base, diversified geographic operations, and strategic initiatives position it for continued growth, though it remains subject to the inherent commodity price volatility of the energy sector.

Key Highlights

  • 1Devon Energy reported record financial and operational performance in 2004, including record production, earnings, and cash flow from operations.
  • 2The company's primary strategy involves exploring for new oil and gas reserves, acquiring oil and gas properties, and optimizing existing operations.
  • 3Devon operates globally, with significant concentrations in the Permian Basin, Mid-Continent, Rocky Mountains, and Gulf Coast in the U.S., as well as Western Canada and international regions like Azerbaijan, China, Egypt, and West Africa.
  • 4At year-end 2004, Devon held estimated proved reserves of 2,077 MMBoe, with 60% being natural gas.
  • 5In late 2004, Devon announced plans to divest certain non-core properties and initiated a stock repurchase program of up to 50 million shares.
  • 6The company reported strong cash flow from operations ($4.8 billion in 2004), which funded capital expenditures ($3.1 billion), debt repayments ($1 billion), and dividends.
  • 7Devon announced a two-for-one stock split of its common stock and successfully moved its stock listing to the New York Stock Exchange.

Frequently Asked Questions

Devon Energy achieved record performance in 2004, reporting its best year in its 16 years as a public company. This included record production, net earnings of $2.2 billion, and diluted earnings per share of $4.38. Cash flow from operations reached an all-time high of $4.8 billion.

Devon's primary objectives are to build reserves, production, cash flow, and earnings per share. They achieve this through exploring for new oil and gas reserves, acquiring oil and gas properties, and optimizing production and value from existing properties. Key strategic elements include concentrating on core areas for economies of scale, acquiring high-margin properties, divesting marginal ones, balancing oil and gas reserves, maintaining financial flexibility, and leveraging marketing and midstream activities.

In September 2004, Devon announced two significant initiatives: first, a plan to divest oil and gas properties representing approximately 9% of its North American proved reserves to lengthen reserve life and lower costs. Second, a stock buyback program to repurchase up to 50 million shares of its common stock, funded by operational cash flow and property divestiture proceeds. Additionally, the company announced a two-for-one stock split and moved its stock listing to the New York Stock Exchange.

The company completed a significant merger with Ocean Energy, Inc. in April 2003, which added approximately 554 million Boe to its proved reserves and contributed significantly to production growth in 2004. Prior to that, the merger with Mitchell Energy & Development Corp. in January 2002 added approximately 404 million Boe, and the acquisition of Anderson Exploration Ltd. in October 2001 added approximately 534 million Boe. These strategic acquisitions have been key drivers of Devon's reserve and production growth.