UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 15, 2012

 

 

DEVON ENERGY CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

DELAWARE		001-32318		73-1567067
(State or Other Jurisdiction of		(Commission		(IRS Employer
Incorporation or Organization)		File Number)		Identification Number)

 

20 NORTH BROADWAY, OKLAHOMA CITY, OK				73102
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s telephone number, including area code: (405) 235-3611

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 8.01. Other Events

Information Regarding Forward-Looking Estimates

This report includes our 2012 forward-looking estimates and associated forward-looking statements regarding our expectations and plans, as well as future events or conditions. Such forward-looking statements are based on our examination of historical operating trends, the information used to prepare our December 31, 2011 reserve reports and other data in our possession or available from third parties. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Consequently, actual future results could differ materially from our expectations due to a number of factors, such as changes in the supply of and demand for oil, natural gas and NGLs and related products and services; exploration or drilling programs; political or regulatory events; general economic and financial market conditions; and other factors discussed in this report.

All subsequent written and oral forward-looking statements attributable to Devon, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on new information, future events or otherwise.

Financial amounts related to our Canadian operations in the following tables have been converted to U.S. dollars using estimated average exchange rates of $1.00 U.S. dollar to $1.00 Canadian dollar.

Oil, Gas and NGL Production and Prices

We estimate that our combined oil, gas and NGL production will total 253 to 257 MMBoe (690 to 700 MBoepd). Set forth below are our estimates of oil, gas and NGL production.

 

		Oil (MMBbls)				Gas (Bcf)				NGLs (MMBbls)				Total (MMBoe)
U.S.			21				768				38				187
Canada			34				181				3				68
Total			55				949				41				255

We expect our floating prices for production from each of our operating areas to differ from the NYMEX price as set forth in the following table. The price for oil and the NGLs relationship to crude oil is determined using the monthly average of NYMEX settled prices on each trading day for benchmark West Texas Intermediate crude oil delivered at Cushing, Oklahoma. The NYMEX price for gas is determined using the first-of-month South Louisiana Henry Hub price index as published monthly in Inside FERC.

 

Prices as a % of NYMEX Price

Oil

Gas

NGLs

U.S.

91% to 101%

81% to 91%

35% to 45%

Canada

63% to 73%

87% to 97%

53% to 63%

Total

74% to 84%

82% to 92%

36% to 46%

Commodity Price Risk Management

As of February 10, 2012, we had the following oil derivative positions associated with 2012 production. Our oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price.

 

Price Swaps						Price Collars												Call Options Sold
Volume (Bbls/d)		Weighted Average  Price ($/Bbl)				Volume (Bbls/d)				Weighted Average Floor  Price ($/Bbl)				Weighted Average Ceiling  Price ($/Bbl)				Volume (Bbls/d)				Weighted Average  Price ($/Bbl)
22,000		$	107.17				54,000			$	85.74			$	126.42				19,500			$	95.00

As of February 10, 2012, we had the following natural gas derivative positions associated with 2012 production. Our natural gas derivatives settle against the first-of-month Henry Hub index as published monthly in Inside FERC.

 

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Price Swaps				Price Collars						Call Options Sold
Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor  Price ($/MMBtu)		Weighted Average Ceiling  Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)
378,333		$4.77		501,189		$4.71		$5.52		487,500		$6.00

 

Basis Swaps
Index		Volume (MMBtu/d)				Weighted Average Differential to Henry Hub ($/MMBtu)
El Paso Natural Gas Co. (Permian)			85,000			$	(0.14	)
Panhandle Eastern Pipeline			70,000			$	(0.15	)
Colorado Interstate Gas Co.			10,000			$	(0.18	)

Other Operating Items

The following table includes estimates of other revenue and expense items associated with our operations, as well as our quarterly dividend rate. The other expense, net estimate consists of accretion of asset retirement obligations, interest rate swap settlements, interest income and other miscellaneous items.

 

				Low				High
		($ in millions, except per Boe)
Marketing & midstream operating profit				$	470			$	520
Lease operating expenses per Boe				$	8.00			$	8.40
Depreciation, depletion and amortization per Boe				$	10.05			$	10.65
General & administrative expenses per Boe				$	2.50			$	2.70
Taxes other than income taxes as % of oil, gas, and NGL sales					4.90	%			5.90	%
Interest expense				$	305			$	345
Other expense, net				$	40			$	60
Current income tax rate					—	%			10	%
Deferred income tax rate					20	%			30	%
Total income tax rate					20	%			40	%
Quarterly per share dividend rate				$	0.20

Interest Rate Risk Management

As of February 10, 2012, we had the following fixed-to-floating interest rate swaps.

 

Notional		Fixed Rate Received				Variable Rate Paid		Expiration
(In millions)
$100			1.90	%		Federal funds rate			August 3, 2012
$500			3.90	%		Federal funds rate			July 18, 2013
$250			3.85	%		Federal funds rate			July 22, 2013

 

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Capital Expenditures

Total oil and gas capital expenditures in the following table exclude the estimated $900 million payment we will receive in 2012 upon closing our recently announced transaction with Sinopec International Petroleum Exploration & Production Corporation in five of our new venture plays.

 

		Low				High
		($ in millions)
Development		$	4,525			$	4,825
Exploration			560				660
Subtotal			5,085				5,485
Capitalized G&A			320				340
Capitalized interest			55				65
Total oil and gas			5,460				5,890
Midstream			465				535
Corporate & other			305				405
Total other			770				940
Total capital expenditures		$	6,230			$	6,830

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

 

Date: February 15, 2012

 

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