8-KMaterial AgreementsExhibits & Filings

DEVON ENERGY CORP/DE 8-K Report, Material Agreement (Feb 7, 2014)

Filed February 7, 2014For Securities:DVN

Summary

Devon Energy Corporation (DVN) filed an 8-K on February 7, 2014, reporting a material event on February 3, 2014, concerning a First Amendment to its Revolving Credit Agreement dated October 24, 2012. The primary purpose of this amendment is to introduce exceptions to existing debt and lien covenants. These exceptions specifically address indebtedness and associated liens related to EnLink Midstream, LLC (formerly New Public Rangers, L.L.C.) and its subsidiaries, particularly in the context of the previously announced combination of Devon's U.S. midstream assets with Crosstex Energy. This amendment allows for certain debt and liens incurred by EnLink Midstream and its non-wholly owned subsidiaries without violating the company's primary credit agreement. Further details of the amendment include provisions that link the Revolving Credit Agreement to the company's Term Loan Agreement. Specifically, the amendment establishes a cross-default to a payment default under the Term Loan Agreement. Additionally, it mandates that if any U.S. subsidiary not currently a guarantor under the Revolving Credit Agreement becomes a guarantor under the Term Loan Agreement, it must also become a guarantor under the Revolving Credit Agreement. This filing is crucial for investors to understand how Devon is structuring its financing and divesting midstream assets while maintaining flexibility within its debt covenants.

Key Highlights

  • 1Devon Energy entered into a First Amendment to its Revolving Credit Agreement on February 3, 2014.
  • 2The amendment provides exceptions to debt and lien covenants for indebtedness and liens related to EnLink Midstream, LLC and its subsidiaries.
  • 3These exceptions are primarily to accommodate the combination of Devon's U.S. midstream assets with Crosstex Energy.
  • 4The amendment ensures that EnLink Midstream and its non-wholly owned subsidiaries can incur certain debt and liens without breaching the Revolving Credit Agreement.
  • 5A cross-default provision is introduced, linking the Revolving Credit Agreement to payment defaults under the Term Loan Agreement.
  • 6New guarantees by U.S. subsidiaries under the Term Loan Agreement will also require them to become guarantors under the Revolving Credit Agreement.

Frequently Asked Questions

The main impact is that it creates specific exceptions to Devon Energy's debt and lien covenants. This allows EnLink Midstream, LLC (a partially divested midstream entity) and its subsidiaries to incur certain types of debt and place liens on their assets without violating Devon's primary credit agreement. This is essential for facilitating the combination of Devon's midstream assets with Crosstex Energy.

The amendment is directly related to the previously announced plan to combine Devon's U.S. midstream assets with Crosstex Energy, forming EnLink Midstream, LLC. It provides the necessary financial covenant flexibility for EnLink Midstream and its non-wholly owned subsidiaries, which may need to incur debt or create liens as part of that transaction's structure.

The cross-default provision means that a payment default on Devon's Term Loan Agreement would also be considered a default under the Revolving Credit Agreement. This tighter linkage between the two credit facilities could increase the company's financial risk, as a problem in one could trigger issues in the other.

If a U.S. subsidiary that is not currently a guarantor under the Revolving Credit Agreement agrees to become a guarantor for the Term Loan Agreement, it will automatically be required to become a guarantor for the Revolving Credit Agreement as well. This ensures that the guarantees are aligned across both major credit facilities.