8-KOther Events

DEVON ENERGY CORP/DE 8-K Report, Corporate Update (Aug 5, 2009)

Filed August 5, 2009For Securities:DVN

Summary

This Form 8-K filing from Devon Energy Corp. on August 5, 2009, provides updated forward-looking estimates for the full year 2009, reflecting the company's examination of historical operating trends and other available data. The report details revised production, price, expense, and capital expenditure projections across its various geographic segments (U.S. Onshore, U.S. Offshore, Canada, and International). Key areas of focus include production estimates totaling 243-247 million barrels of oil equivalent (MMBoe), with significant contributions expected from U.S. Onshore and Canada. The company also outlines its commodity price risk management strategies, including gas price collars and swaps, and provides detailed projections for marketing and midstream operating profit, production and operating expenses, depreciation, depletion, and amortization (DD&A), and general and administrative (G&A) expenses. The filing also addresses the potential impact of the full cost accounting method on potential writedowns of oil and gas properties due to price volatility, and provides updated interest expense and income tax rate estimates.

Key Highlights

  • 1Devon Energy updated its 2009 forward-looking estimates for production, prices, expenses, and capital expenditures.
  • 2Total estimated production for 2009 is projected to be between 243 and 247 MMBoe, with U.S. Onshore and Canada being significant contributors.
  • 3The company uses commodity price risk management tools, including gas price collars and swaps, to mitigate revenue volatility.
  • 4Marketing and midstream operating profit is estimated to be between $430 million and $500 million for 2009.
  • 5Estimated oil and gas property DD&A expense is projected to be between $1.95 billion and $2.07 billion, with a rate of $8.00-$8.50 per Boe.
  • 6General and Administrative (G&A) expenses are estimated between $650 million and $680 million, including non-cash share-based compensation.
  • 7Total capital expenditures for drilling, development, and facilities are expected to range from $3.44 billion to $4.05 billion.

Frequently Asked Questions

The primary purpose of this filing is to provide updated forward-looking estimates for Devon Energy's 2009 operations, including production volumes, commodity prices, operating expenses, and capital expenditures. This update is based on an examination of historical operating trends and other available data since the company's previous estimates.

Devon Energy utilizes financial commodity collar and price swap contracts to manage the inherent uncertainty of future revenues due to oil and gas price volatility. These contracts are designed to affect overall revenues, earnings, and cash flow in 2009.

The company notes that due to the volatile nature of oil and gas prices and its application of the full cost accounting method, writedowns of oil and gas properties are possible. These writedowns are triggered if the costs to be recovered exceed a calculated 'full cost ceiling,' which is based on current prices and costs. The filing indicates that writedowns may be more likely in the latter half of 2009 given current price estimates.

Devon Energy projects total capital expenditures for drilling, development, and facilities to be between $3.44 billion and $4.05 billion. Additionally, the company expects to spend between $280 million to $330 million on marketing and midstream assets, among other capital uses.