10-KPeriod: FY2014

DEVON ENERGY CORP/DE Annual Report, Year Ended Dec 31, 2014

Filed February 20, 2015For Securities:DVN

Summary

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 billion 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.

Financial Highlights

46 data points
Beta

Revenue

$20.64B

Net Income

$1.61B

7.8% Net Margin

EPS (Diluted)

$3.91

Total Assets

$50.57B

Cash & Equivalents

$1.48B

Free Cash Flow

-$441.00M

Financial Statements
Beta
Revenue$20.64B
Operating Expenses$15.94B
Operating Income$4.70B
Interest Expense$536.00M
Net Income$1.61B
EPS (Basic)$3.93
EPS (Diluted)$3.91
Shares Outstanding (Basic)405.00M
Shares Outstanding (Diluted)407.00M

Key Highlights

  • 1Completed a $6 billion acquisition of GeoSouthern Energy's Eagle Ford assets, significantly bolstering its liquids-focused portfolio.
  • 2Divested over $5 billion in U.S. and Canadian assets to concentrate capital on core, high-return properties.
  • 3Combined substantially all U.S. midstream assets with Crosstex Energy to form EnLink Midstream Partners, LP, creating a larger, integrated midstream business.
  • 4Reported 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.
  • 5Recognized a significant $1.9 billion goodwill impairment charge in the Canadian reporting unit due to declining oil prices.
  • 6Anticipated 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.
  • 7Maintained a strong liquidity position with a $3.0 billion revolving credit facility and no outstanding borrowings as of December 31, 2014.

Frequently Asked Questions

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.

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.

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.

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.