10-QPeriod: Q1 FY2014

DEVON ENERGY CORP/DE Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 9, 2014For Securities:DVN

Summary

Devon Energy Corporation's first quarter 2014 results show a significant turnaround from the prior year, driven by strong operational execution and strategic acquisitions. The company reported a net profit of $324 million, or $0.79 per diluted share, a substantial improvement from a net loss of $1,339 million in the first quarter of 2013. This positive shift is attributed to increased oil and gas prices, higher production volumes, and the successful integration of the GeoSouthern acquisition. The quarter was marked by major strategic moves, including the acquisition of GeoSouthern Energy for approximately $6.0 billion, bolstering Devon's Eagle Ford Shale position, and the formation of EnLink Midstream, a new midstream business combining Devon's midstream assets with Crosstex Energy. These transactions, alongside the planned divestiture of Canadian conventional assets, demonstrate a clear strategy to optimize the company's asset portfolio and focus on core growth areas. Investors should note the significant increase in operating cash flow, up 41% year-over-year, reflecting improved operational performance and higher commodity prices.

Financial Highlights

46 data points
Beta

Revenue

$3.73B

Net Income

$324.00M

8.7% Net Margin

EPS (Diluted)

$0.79

Total Assets

$52.77B

Cash & Equivalents

$2.03B

Free Cash Flow

-$4.53B

Financial Statements
Beta
Revenue$3.73B
Operating Expenses$3.04B
Operating Income$690.00M
Interest Expense$115.00M
Net Income$324.00M
EPS (Basic)$0.80
EPS (Diluted)$0.79
Shares Outstanding (Basic)403.00M
Shares Outstanding (Diluted)405.00M

Key Highlights

  • 1Reported a net profit of $324 million in Q1 2014, a significant improvement from a net loss of $1,339 million in Q1 2013.
  • 2Completed the acquisition of GeoSouthern Energy for approximately $6.0 billion, enhancing its Eagle Ford Shale position.
  • 3Formed EnLink Midstream, a new midstream business, by combining its midstream assets with Crosstex Energy.
  • 4Total operating revenues surged by 88% to $3,725 million in Q1 2014, up from $1,971 million in Q1 2013, largely due to higher commodity prices and revenues from acquired/combined businesses.
  • 5Operating cash flow increased by 41% to $1,410 million in Q1 2014, driven by higher commodity prices and production.
  • 6Announced the planned divestiture of the majority of its Canadian conventional assets for approximately $2.7 billion after taxes.
  • 7Management highlights a strategic focus on building value per share through portfolio optimization and acquisitions.

Frequently Asked Questions

The primary drivers for the substantial improvement in profitability were higher average realized commodity prices (up 41% to $41.13 per Boe), increased liquids production volumes (up 20% in oil, 12% in NGLs), and the successful integration of the GeoSouthern acquisition. The absence of the significant asset impairments recorded in Q1 2013 also contributed to the net earnings improvement.

Devon completed two major strategic transactions: the acquisition of GeoSouthern Energy for approximately $6.0 billion, which significantly expanded its Eagle Ford Shale acreage and production, and the formation of EnLink Midstream by combining its midstream assets with Crosstex Energy. This strategic realignment aims to focus on core growth areas and optimize its asset portfolio.

Total debt increased to $15.5 billion at March 31, 2014, from $12.0 billion at December 31, 2013, primarily due to borrowings to finance the GeoSouthern acquisition and the consolidation of EnLink's debt. Cash and cash equivalents decreased significantly to $2,027 million from $6,066 million due to the large acquisition spend, although operating cash flow provided a substantial inflow of $1,410 million.

Capital expenditures in Q1 2014 were $7.5 billion, heavily influenced by the GeoSouthern acquisition. Excluding this acquisition, capital spending decreased 18% compared to Q1 2013. The company plans to use proceeds from its announced Canadian asset divestiture (approximately $2.7 billion after taxes) to repay borrowings related to the GeoSouthern acquisition, indicating a focus on deleveraging and strategic asset allocation.