10-KPeriod: FY2013

DEVON ENERGY CORP/DE Annual Report, Year Ended Dec 31, 2013

Filed February 28, 2014For Securities:DVN

Summary

Devon Energy Corporation's 2013 10-K report highlights a year of strategic portfolio reshaping, characterized by a focus on oil-weighted production growth and operational efficiencies. The company reported adjusted earnings of $1.7 billion, or $4.26 per diluted share, showing a significant increase from the previous year, primarily driven by improved gas prices and increased oil volumes. Key strategic moves included announcing a $6 billion acquisition in the Eagle Ford Shale, the combination of its U.S. midstream assets with Crosstex Energy to form EnLink Midstream, and the initiation of a non-core asset divestiture program. These initiatives aim to enhance shareholder value by focusing on higher-margin opportunities and optimizing the company's operational and financial structure. The report also details Devon's extensive proved reserves and production statistics across its North American operations, emphasizing its commitment to growth through exploration and development.

Financial Highlights

43 data points
Beta

Revenue

$10.40B

Net Income

-$20.00M

-0.2% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$42.88B

Cash & Equivalents

$6.07B

Free Cash Flow

$5.18B

Financial Statements
Beta
Revenue$10.40B
Operating Expenses$9.83B
Operating Income$567.00M
Interest Expense$437.00M
Net Income-$20.00M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)402.00M
Shares Outstanding (Diluted)402.00M

Key Highlights

  • 1Devon Energy announced significant strategic transactions in 2013, including a $6 billion acquisition in the Eagle Ford Shale and a midstream asset combination with Crosstex Energy, aiming to rebalance its portfolio towards oil and liquids.
  • 2The company reported strong execution on its oil-focused drilling programs, leading to production growth and improved operating cash flow, with adjusted earnings increasing by 33% to $1.7 billion.
  • 3Devon is actively divesting non-core, dry natural gas assets to allocate capital and resources to higher-value properties and prospects, expecting oil to represent over 30% of its production profile post-divestitures.
  • 4The company's production mix exiting 2013 was approximately 55% natural gas, 25% oil, and 20% natural gas liquids, with plans to shift this balance significantly with strategic acquisitions and divestitures.
  • 5Devon's extensive proved reserves data shows a total of 2,963 MMBoe at the end of 2013, with a significant portion in U.S. core and emerging properties (87%) and Canadian heavy oil (20%).
  • 6The company maintained strong liquidity with $6.1 billion in cash and cash equivalents at year-end 2013, supported by operating cash flow and available credit facilities, despite significant capital expenditures.
  • 7Devon's capital expenditures for 2013 totaled $6.76 billion, down 20% from 2012, reflecting a strategic shift and utilization of joint venture drilling carries.

Frequently Asked Questions

Devon Energy's primary strategic objectives for 2014, as outlined in the filing, are to grow cash flow and earnings per debt-adjusted share. This will be achieved by continuing its oil-focused development strategy, completing the acquisition of Eagle Ford Shale assets, divesting non-core natural gas properties, and integrating its midstream assets with Crosstex Energy into the new EnLink Midstream business. These actions are intended to significantly increase the company's oil production percentage and enhance overall profitability.

While North American natural gas prices saw improvement in 2013 compared to 2012, they remained challenged by supply/demand imbalances, though recent cold weather boosted prices. Oil prices remained relatively stable. Devon's financial performance, particularly its adjusted earnings and operating cash flow, improved due to higher gas prices and increased oil volumes and realizations. However, the company acknowledged ongoing volatility and the impact of lower NGL prices.

Devon Energy is combining substantially all of its U.S. midstream assets with Crosstex Energy's assets to form a new, publicly traded midstream business called EnLink Midstream. Devon will hold a controlling interest (70% in EnLink and 53% in EnLink Midstream Partners, L.P.). This strategic move is designed to enhance asset value and provide greater flexibility for growth and capital allocation within this segment.

Devon Energy recorded total asset impairments of $1.976 billion ($1.353 billion net of taxes) in 2013. The majority of these impairments ($1.110 billion gross) were related to U.S. oil and gas assets. The impairments were primarily driven by declines in the full cost ceilings, which were negatively impacted by decreases in the 12-month average trailing prices for oil, natural gas, and NGLs, reducing the value of proved reserves. Midstream assets were also impaired due to declining natural gas production and low prices.