10-QPeriod: Q1 FY2013

DEVON ENERGY CORP/DE Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 1, 2013For Securities:DVN

Summary

Devon Energy Corp/DE (DVN) reported a significant net loss of $1.339 billion for the first quarter of 2013, primarily driven by a substantial $1.913 billion asset impairment charge related to its oil and gas properties. This impairment was largely due to decreased commodity prices affecting the full cost ceiling calculation. Excluding this impairment and other adjustments, the company's adjusted earnings were $270 million, or $0.66 per share, a decrease from $427 million, or $1.05 per share, in the same period last year. Despite the reported net loss, operational cash flow remained stable at $1.002 billion, covering about half of the quarter's capital expenditures. The company's liquidity position is supported by its Senior Credit Facility and a commercial paper program. Devon also announced a modest increase in its quarterly dividend to $0.22 per share, effective second quarter of 2013, signaling management's confidence in ongoing operations and cash generation.

Financial Highlights

41 data points
Beta

Revenue

$1.97B

Net Income

-$1.34B

-67.9% Net Margin

EPS (Diluted)

$-3.34

Total Assets

$41.58B

Cash & Equivalents

$5.28B

Free Cash Flow

$1.00B

Financial Statements
Beta
Revenue$1.97B
Operating Expenses$3.93B
Operating Income-$1.86B
Interest Expense$110.00M
Net Income-$1.34B
EPS (Basic)$-3.34
EPS (Diluted)$-3.34
Shares Outstanding (Basic)402.00M
Shares Outstanding (Diluted)402.00M

Key Highlights

  • 1Reported a net loss of $1.339 billion, largely due to a $1.913 billion asset impairment charge on oil and gas properties.
  • 2Adjusted earnings (non-GAAP) were $270 million ($0.66 per share), down from $427 million ($1.05 per share) in Q1 2012, primarily due to lower oil and NGL prices.
  • 3Total revenues decreased to $1.972 billion from $2.497 billion in Q1 2012, impacted by lower commodity prices and derivative settlements.
  • 4Operating cash flow remained strong at $1.002 billion, comparable to the prior year's $1.026 billion.
  • 5Capital expenditures were $1.926 billion, a decrease from $2.088 billion in Q1 2012, with reduced exploration and development spending.
  • 6Total assets decreased to $41.582 billion from $43.326 billion at year-end 2012.
  • 7The company announced an increase in its quarterly dividend to $0.22 per share, effective Q2 2013.

Frequently Asked Questions

The substantial net loss of $1.339 billion was primarily caused by a non-cash asset impairment charge of $1.913 billion related to oil and gas properties. This impairment was triggered by declines in the full cost ceiling calculations due to lower commodity prices for oil, bitumen, and NGLs.

While net earnings declined significantly due to the asset impairment, operating cash flow remained stable at $1.002 billion. Production volumes were slightly down by 1%, but realized prices per Boe also decreased by 4%. Adjusted earnings, which exclude impairments and other items, were lower at $270 million compared to $427 million in the prior year, mainly due to lower oil and NGL prices.

The company maintained a strong liquidity position with $6.5 billion in cash and short-term investments. Total debt was $12.2 billion, with a debt-to-capitalization ratio of 26.3%, well within the covenant limit of 65% under its Senior Credit Facility. The company utilized commercial paper borrowings of $508 million during the quarter to fund capital expenditures.

Management noted that if current pricing conditions do not improve, Devon may incur further full cost ceiling impairments related to its oil and gas property and equipment in future quarters of 2013. The company is using derivative instruments to hedge a portion of its production.