01—Abstract
Summary
Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.
Devon Energy Corporation's 2014 10-K filing details a year of significant strategic transformation, marked by substantial acquisitions and divestitures aimed at sharpening its focus on high-return onshore North American assets.
The company completed a $6 billiona acquisition in the Eagle Ford shale and simultaneously streamlined its portfolio by divesting over $5 billion in non-core U.S. and Canadian assets. Financially, the company saw a dramatic increase in reported net earnings attributable to Devon, largely due to the impact of these portfolio changes and the recognition of derivative gains.
However, the company also faced a challenging commodity price environment, particularly in the latter half of 2014, leading to a significant goodwill impairment charge related to its Canadian operations. Despite this, Devon's strategy focused on growing cash flow per share and maintaining financial flexibility.
02—Key points
Key Highlights
- Completed a $6 billion acquisition of GeoSouthern Energy's Eagle Ford assets, significantly bolstering its liquids-focused portfolio.
- Divested over $5 billion in U.S. and Canadian assets to concentrate capital on core, high-return properties.
- Combined substantially all U.S. midstream assets with Crosstex Energy to form EnLink Midstream Partners, LP, creating a larger, integrated midstream business.
- Reported a substantial increase in Net Earnings Attributable to Devon ($1.6 billion) compared to a net loss in the prior year, driven by acquisitions, divestitures, and derivative fair value changes.
- Recognized a significant $1.9 billion goodwill impairment charge in the Canadian reporting unit due to declining oil prices.
- Anticipated a 20% decrease in capital expenditures for 2015, focusing on oily assets, and hedged approximately 50% of projected 2015 crude production at a floor price of $91 per barrel.
- Maintained a strong liquidity position with a $3.0 billion revolving credit facility and no outstanding borrowings as of December 31, 2014.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 20, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $20.64B$10.40B | +98.5% |
| Operating Expenses | $15.94B$9.83B | +62.2% |
| Operating Income | $4.70B$567.00M | +728.6% |
| Interest Expense | $536.00M$437.00M | +22.7% |
| Net Income | $1.61B-$20.00M | +8135.0% |
| EPS (Basic) | $3.93$-0.06 | +6650.0% |
| EPS (Diluted) | $3.91$-0.06 | +6616.7% |
| Shares Outstanding (Basic) | 405.00M402.00M | +0.7% |
| Shares Outstanding (Diluted) | 407.00M402.00M | +1.2% |
05—Questions
Frequently Asked Questions
What were Devon Energy's main strategic initiatives in 2014?
Devon Energy's main strategic initiatives in 2014 were the acquisition of GeoSouthern Energy's Eagle Ford assets for $6 billion, the combination of its U.S. midstream assets with Crosstex Energy to form EnLink Midstream Partners, LP, and the divestiture of over $5 billion in non-core U.S. and Canadian assets. These actions aimed to create a more focused portfolio and build value per share.
What was the impact of the commodity price decline on Devon Energy in 2014?
The significant decline in oil prices in the second half of 2014, particularly after OPEC's November decision, impacted Devon Energy. This led to a substantial $1.9 billion goodwill impairment charge related to its Canadian operations. The company anticipated lower commodity prices in 2015, prompting a projected 20% decrease in capital expenditures and a strategic focus on its highest-return, oil-weighted assets.
How did the formation of EnLink Midstream Partners affect Devon Energy's financial reporting?
The formation of EnLink Midstream Partners, LP, a master limited partnership, in March 2014 resulted in Devon consolidating EnLink's operations. The portions of EnLink's earnings and equity not attributable to Devon's controlling interest were reported as noncontrolling interests in Devon's consolidated financial statements.
What is Devon Energy's outlook for 2015 given the market conditions?
Devon Energy expected a challenging 2015 due to lower commodity prices. To navigate this, the company planned to reduce capital spending by 20%, focusing investment on its highest-return, oil-weighted assets. They also utilized hedging strategies, covering approximately 50% of projected 2015 crude production at a floor price of $91 per barrel and about 40% of natural gas production at $4.17 per Mcf.
06—Continue