8-KOther Events

DEVON ENERGY CORP/DE 8-K Report, Corporate Update (Feb 7, 2007)

Filed February 7, 2007For Securities:DVN

Summary

Devon Energy Corporation (DVN) filed an 8-K on February 7, 2007, providing forward-looking estimates for its 2007 operating and financial performance. The report details projected production volumes and revenue expectations across various geographical segments, including the United States (Onshore and Offshore), Canada, and International markets. A significant strategic move highlighted is the company's intent to divest its Egyptian and West African oil and gas assets, with expected completion in the first half and third quarter of 2007, respectively. These operations will be classified as discontinued operations in the 2007 financial statements. The company anticipates total production for 2007 to range between 219 to 221 million barrels of oil equivalent (MMBoe), with oil, gas, and natural gas liquids (NGLs) production forecasts provided by region. Significant capital expenditure is planned, with a total budget ranging from $4.87 billion to $5.27 billion for drilling, development, and facilities, in addition to expenditures for marketing and midstream assets. Liquidity is expected to be sufficient, primarily funded by operating cash flow and proceeds from asset divestitures, with the ability to draw on a credit facility if needed.

Key Highlights

  • 1Devon Energy plans to divest its Egyptian and West African oil and gas assets, expecting to complete these sales in H1 2007 and Q3 2007, respectively. These will be reported as discontinued operations.
  • 2Projected total production for 2007 is estimated between 219 to 221 MMBoe, with the majority (92%) expected from proved reserves as of December 31, 2006.
  • 3Significant capital expenditures are budgeted for 2007, ranging from $4.87 billion to $5.27 billion for drilling, development, and facilities, with substantial investments planned for U.S. Onshore and Canadian operations.
  • 4Marketing and midstream revenues are projected between $1.70 billion and $2.10 billion, with associated expenses estimated at $1.31 billion to $1.67 billion.
  • 5The company expects depreciation, depletion, and amortization (DD&A) for oil and gas properties to be between $11.00 and $11.50 per Boe.
  • 6Interest expense for 2007 is forecasted to be between $400 million and $410 million, with assumptions about debt levels and interest rates.
  • 7Devon anticipates its consolidated financial income tax rate for 2007 to be between 20% and 40%.

Frequently Asked Questions

Devon Energy announced its intention to divest its oil and gas assets in Egypt and West Africa. The sale of Egyptian assets is expected to conclude in the first half of 2007, while the West African assets sale is anticipated by the end of the third quarter of 2007. These operations will be treated as discontinued operations in the company's 2007 financial statements.

The company projects total production for 2007 to be in the range of 219 to 221 million barrels of oil equivalent (MMBoe). This estimate excludes the divested Egyptian and West African operations and is largely based on reserves classified as 'proved' as of December 31, 2006.

Devon Energy expects its 2007 capital expenditures, estimated between $4.87 billion and $5.27 billion for drilling, development, and facilities, to be primarily funded through operating cash flow and the proceeds from the planned divestitures of its Egyptian and West African assets. The company also has a credit facility of $408 million available as of December 31, 2006, which can be used to cover any funding shortfalls.

The forward-looking estimates are subject to significant risks and uncertainties common in the oil and gas industry, including price volatility for oil, natural gas, and NGLs, availability and cost of services, environmental risks, drilling risks, regulatory changes, and the inherent uncertainty in estimating future production and reserves. The company explicitly states that actual results may differ materially from these estimates.