01—Abstract
Summary
Summary of the 10-K filed February 17, 2016. Cited figures are marked; the original filing is the authoritative source.
Devon Energy Corp. (DVN) faced a challenging year in 2015, heavily impacted by the significant decline in oil and natural gas prices.
This resulted in substantial non-cash asset impairments totaling $20.8 billiona. Despite these headwinds, the company achieved record crude oil and bitumen production and grew its U.S. oil production by 28%. Strategic acquisitions in the STACK and Powder River Basin areas were completed to bolster its asset portfolio.
In response to the depressed commodity price environment, Devon announced significant capital expenditure reductions for 2016 (down approximately 75% from 2015 levels) and a 75% cut to its quarterly common stock dividend. The company is focused on protecting its balance sheet and managing costs, aiming for a $700 million to $900 millionb reduction in operating and G&A expenses. Liquidity remains strong, with $3.9 billion in available liquidity at the beginning of 2016, further supported by planned asset monetizations.
02—Key points
Key Highlights
- Significant decline in commodity prices led to a $20.8 billion non-cash asset impairment in 2015.
- Record crude oil and bitumen production achieved, with U.S. oil production up 28% year-over-year.
- Strategic acquisitions in STACK and Powder River Basin strengthened the asset base.
- Capital expenditures for 2016 are reduced by approximately 75% compared to 2015 in response to market conditions.
- Quarterly common stock dividend was reduced by 75% in February 2016.
- Strong liquidity position with $3.9 billion available at the start of 2016, supplemented by planned asset sales.
- Focus on cost reduction, targeting $700-$900 million in annualized savings for operating and G&A expenses.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 17, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $13.14B$20.64B | −36.3% |
| Operating Expenses | $33.87B$15.94B | +112.5% |
| Operating Income | -$20.73B$4.70B | −541.2% |
| Interest Expense | $565.00M$536.00M | +5.4% |
| Net Income | -$12.90B$1.61B | −902.5% |
| EPS (Basic) | $-31.72$3.93 | −907.1% |
| EPS (Diluted) | $-31.72$3.91 | −911.3% |
| Shares Outstanding (Basic) | 407.00M405.00M | +0.5% |
| Shares Outstanding (Diluted) | 407.00M407.00M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary impact of market conditions on Devon's 2015 financial performance?
The significant decline in oil and natural gas prices throughout 2015 led to substantial non-cash asset impairments totaling $20.8 billion, negatively impacting the company's reported earnings. This price environment also resulted in reduced operating cash flow compared to the prior year.
What steps is Devon taking to navigate the low commodity price environment in 2016?
Devon is significantly reducing its capital expenditures by approximately 75% for 2016, planning to invest between $900 million to $1.1 billion. The company is also cutting operating and G&A costs, targeting a reduction of $700 million to $900 million on an annualized basis. Additionally, the quarterly dividend was cut by 75%, and plans are in place to monetize non-core assets and its interest in Access Pipeline to strengthen its financial position.
How did Devon's reserve base change in 2015?
Devon's total proved reserves decreased by 21% to 2,182 MMBoe by the end of 2015. This reduction was largely driven by price revisions, with lower commodity prices making some reserves uneconomical to produce. Proved undeveloped reserves also saw a significant decrease.
What is the company's strategy regarding its EnLink investment?
Devon controls EnLink, a midstream business. While EnLink's operations are consolidated, Devon has been actively managing its stake, including the sale of EnLink units in 2015 to generate cash. EnLink itself continues to invest in growth projects within its midstream segment.
06—Continue