8-KOther Events

DEVON ENERGY CORP/DE 8-K Report, Corporate Update (May 3, 2006)

Filed May 3, 2006For Securities:DVN

Summary

Devon Energy Corporation announced on May 3, 2006, a significant acquisition of the oil and gas properties of privately-owned Chief Holdings LLC for $2.2 billion. This strategic move is expected to be funded through a combination of existing cash reserves and short-term borrowings, signaling a proactive approach to expanding its asset base. The acquired properties are substantial, comprising an estimated 617 billion cubic feet of natural gas equivalent in proved reserves and 169,000 net acres in the prolific Barnett Shale area of Texas. The acquisition will impact Devon's 2006 operational and financial outlook, primarily for the latter half of the year. The company is updating its previously issued 2006 forward-looking estimates to incorporate the effects of this transaction. Key financial metrics such as production, revenue, expenses, and capital expenditures are being revised. Investors should pay close attention to the updated production estimates, which now include the contribution from the Chief assets, bringing the total estimated production for 2006 back to 217 MMBoe. The company also provided updated estimates for its marketing and midstream operations, production and operating expenses, DD&A rates, G&A, interest expense, and capital expenditures.

Key Highlights

  • 1Devon Energy is acquiring Chief Holdings LLC's oil and gas properties for $2.2 billion (including assumed liabilities).
  • 2The acquisition is expected to close by the end of Q2 2006 and will impact the second half of the year's operations.
  • 3The acquired assets include approximately 617 Bcf of natural gas equivalent in proved reserves and 169,000 net acres in the Barnett Shale, Texas.
  • 4Devon plans to fund the acquisition with approximately $900 million cash on hand and $1.3 billion in short-term borrowings.
  • 5The acquisition is expected to increase Devon's total 2006 production estimate to 217 MMBoe from a previously revised 215 MMBoe.
  • 6Updated 2006 financial and operational estimates are provided, reflecting the impact of the Chief acquisition.
  • 7Capital expenditures for 2006 are projected to be between $4.395 billion and $4.600 billion, excluding acquisition costs.

Frequently Asked Questions

Devon Energy plans to finance the $2.2 billion acquisition using approximately $900 million of cash on hand and approximately $1.3 billion of short-term borrowings under its commercial paper program.

The acquired properties are located in the Barnett Shale area of Texas and include an estimated 617 billion cubic feet of natural gas equivalent in proved reserves and 169,000 net acres.

The acquisition is expected to add approximately 2 MMBoe of production during the last six months of 2006. This brings the total estimated production for 2006 back to 217 MMBoe, the original estimate, after a previous downward revision.

The acquisition is expected to close near the end of the second quarter of 2006, meaning it will only affect Devon's operations for the last six months of the year.