10-QPeriod: Q2 FY2010

DEVON ENERGY CORP/DE Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:DVN

Summary

Devon Energy Corp. reported strong financial results for the quarter ended June 30, 2010, driven by increased commodity prices and successful offshore asset divestitures. The company generated significant net earnings and improved operating cash flow compared to the prior year, largely due to higher oil and gas prices and gains from asset sales. Significant strategic progress was made with the completion of offshore divestitures, including exiting the Gulf of Mexico and selling China operations, which generated substantial after-tax proceeds. These proceeds are being strategically deployed towards debt reduction, share repurchases, and reinvestment in North America onshore exploration and development. The company also strengthened its balance sheet by repaying commercial paper and redeeming senior notes. With substantial liquidity from operating cash flow and available credit lines, Devon appears well-positioned to continue executing its strategic initiatives and pursuing growth opportunities.

Financial Highlights

44 data points
Beta

Revenue

$2.23B

Net Income

$706.00M

31.6% Net Margin

EPS (Diluted)

$1.58

Total Assets

$29.97B

Cash & Equivalents

$2.92B

Free Cash Flow

-$577.00M

Financial Statements
Beta
Revenue$2.23B
Operating Expenses$1.62B
Operating Income$352.00M
Interest Expense$104.00M
Net Income$706.00M
EPS (Basic)$1.59
EPS (Diluted)$1.58

Key Highlights

  • 1Net earnings were $706 million, or $1.58 per diluted share, a significant increase from $314 million, or $0.70 per diluted share, in the same quarter last year.
  • 2Operating cash flow increased 39% to $2.9 billion in the first half of 2010, indicating strong operational performance.
  • 3The company completed substantial offshore divestitures, including its Gulf of Mexico assets and China operations, generating $3.6 billion in after-tax proceeds.
  • 4Devon is actively repurchasing its common stock under a new $3.5 billion authorization, demonstrating a commitment to returning value to shareholders.
  • 5Long-term debt was reduced, with the repayment of $1.4 billion in commercial paper and the redemption of $350 million in senior notes.
  • 6The company maintained a strong liquidity position with $2.9 billion in cash and $2.6 billion in available credit facilities as of June 30, 2010.
  • 7Realized prices for oil, gas, and NGLs saw significant increases, contributing to higher revenues.

Frequently Asked Questions

The primary drivers were higher realized prices for oil, natural gas, and natural gas liquids, coupled with the successful completion of offshore asset divestitures which generated significant proceeds. These factors led to a substantial increase in net earnings and operating cash flow compared to the same period in the prior year.

Devon is strategically deploying the proceeds from its offshore divestitures towards debt reduction, repurchasing its common shares under a new authorization, and reinvesting in North America onshore exploration and development opportunities, including a joint venture investment in oil sands.

As of June 30, 2010, Devon reported a strong liquidity position with $2.9 billion in cash and cash equivalents and $2.6 billion of available capacity under its credit facilities. This provides ample resources to fund ongoing operations and strategic initiatives.

Overall production decreased slightly by 3% in the second quarter of 2010 compared to the prior year. This was primarily due to a decrease in U.S. Offshore production, which was a result of the divestiture of those assets, and lower natural gas production from North America onshore due to reduced drilling activity in the prior year.