8-KOther Events

DEVON ENERGY CORP/DE 8-K Report, Corporate Update (Mar 11, 2021)

Filed March 11, 2021For Securities:DVN

Summary

Devon Energy Corporation (DVN), through its wholly-owned subsidiary WPX Energy, Inc., has announced its intention to redeem a significant portion of its outstanding senior notes. This move involves the redemption of $210 million of 5.250% Senior Notes due 2027, $175 million of 5.875% Senior Notes due 2028, and $315 million of 4.500% Senior Notes due 2030. The total principal amount being redeemed is $700 million. The redemption is being carried out in accordance with the terms of the indenture, specifically following a cash equity contribution or other equity offering by WPX. The redemption price will be at a premium to the principal amount, ranging from 104.500% to 105.875%, plus any accrued and unpaid interest. The redemption dates are set for March 26, 2021, for the 2028 and 2030 notes, and April 10, 2021, for the 2027 notes. The company states that funds for this redemption will be provided by Devon Energy.

Key Highlights

  • 1Devon Energy (DVN) is redeeming $700 million in aggregate principal amount of WPX Energy senior notes.
  • 2The redemption includes $210 million of 5.250% Senior Notes due 2027.
  • 3The redemption includes $175 million of 5.875% Senior Notes due 2028.
  • 4The redemption includes $315 million of 4.500% Senior Notes due 2030.
  • 5Redemption prices are at a premium to par value (104.5% to 105.875%) plus accrued interest.
  • 6The redemption is funded by Devon Energy via equity contribution to WPX Energy.
  • 7Redemption dates are March 26, 2021 (for 2028 & 2030 notes) and April 10, 2021 (for 2027 notes).

Frequently Asked Questions

Devon Energy is redeeming these notes as per the terms of the indenture, which allows for redemption following a cash equity contribution or other equity offering by its subsidiary, WPX Energy. This suggests a potential strategy to optimize the capital structure or reduce interest expenses.

The total principal amount being redeemed is $700 million. The redemption price is at a premium to par, ranging from 104.5% to 105.875% of the principal amount, plus accrued interest. The exact total cost would depend on the precise accrued interest on the redemption dates.

By redeeming $700 million of debt, Devon Energy will reduce its overall debt obligations. This action is likely to improve its debt-to-equity ratio and potentially strengthen its credit profile, assuming the redemption is financed through equity or cash, which the filing indicates is the case.

The filing indicates the redemption is occurring at a premium (e.g., 105.250% for the 2027 notes), which is common for early redemptions of corporate bonds. This premium is essentially the cost of redeeming the debt before its maturity date.