Devon Energy Reports 2008 Financial Results and Year-End Reserves



    OKLAHOMA CITY, Feb. 4 /CNW/ -- Devon Energy Corporation (NYSE:   DVN) today
reported a net loss of $2.1 billion, or $4.85 per common share ($4.85 per
diluted common share), for the year ended December 31, 2008. Increased natural
gas and liquids production and sales were more than offset by a $7.1 billion
non-cash, after-tax reduction in the carrying value of oil and gas properties,
which is explained in detail below. In the year ended December 31, 2007, Devon
earned $3.6 billion, or $8.08 per common share ($8.00 per diluted common
share).
    

    
    For the quarter ended December 31, 2008, Devon reported a net loss of
$6.8 billion, or $15.42 per common share ($15.42 per diluted common share),
also reflecting the $7.1 billion non-cash charge. In the fourth quarter of
2007, the company reported net earnings of $1.3 billion or, $2.96 per common
share ($2.92 per diluted common share).
    

    2008 Earnings $9.91 per Share Excluding Items Not Estimated by Analysts;
    Non-Cash Ceiling Adjustment Triggered by Declining Prices

    
    Devon's full-year and fourth-quarter 2008 financial results were impacted
by certain items securities analysts typically exclude from their published
estimates. The most significant of these items was a $7.1 billion after-tax
reduction in the carrying value of oil and gas properties. This was the result
of a non-cash, full-cost ceiling adjustment in the fourth quarter of 2008.
This charge resulted from application of the ceiling test as prescribed by the
Securities and Exchange Commission (SEC) for companies that follow the
full-cost method of accounting.
    

    
    Under the full-cost method of accounting, a company's net book value of
its oil and gas properties, less related deferred income taxes, may not exceed
a calculated "ceiling." The test is performed separately for each country in
which the company operates. The ceiling is the estimated after-tax stream of
future net revenues from proved oil and gas properties, discounted at 10
percent per year, using year-end costs and prices held flat plus the cost of
unevaluated properties. Any excess is written off as a non-cash expense. The
expense may not be reversed in future periods, even though higher oil and gas
prices may subsequently increase the ceiling. Full-cost companies must use the
prices in effect at the end of each accounting quarter to calculate the
ceiling value of reserves. Future net revenues are calculated assuming
continuation of prices and costs in effect at the time of the calculation,
except for changes that are fixed and determinable by existing contracts.
Although the SEC recently modified its rules applicable to the ceiling test,
the new rules do not take effect until year-end 2009.
    

    
    Excluding the reduction in carrying value of oil and gas properties and
other adjusting items, Devon earned $4.4 billion or $9.91 per diluted common
share in 2008. In the fourth quarter of 2008, excluding adjusting items, the
company earned $297 million, or 67 cents per diluted common share. The
adjusting items are discussed in more detail later in this news release.
    

    
    "Despite the effects of the sharp fourth-quarter declines in oil and
natural gas prices, 2008 was a very successful year for the company," said J.
Larry Nichols, chairman and chief executive officer. "Cash flow reached an
all-time record of nearly $10 billion. We increased oil and gas production by
six percent and drilled 2,441 wells with a 98 percent success rate. In
addition, we added 584 million barrels of proved reserves before price
revisions at a very attractive cost per barrel."
    

    Cash Flow a Record $9.6 Billion

    
    Cash flow before balance sheet changes increased 31 percent to a record
$9.6 billion in 2008. Other sources of cash included $1.9 billion in after-tax
proceeds from the African divestiture program and $280 million from an
exchange of assets with Chevron Corporation. Devon utilized these sources of
cash and cash on hand to fund $10.5 billion of capital expenditures,
repurchase $815 million of common and preferred stock, pay $289 million in
dividends and reduce total debt by $2.1 billion during the year. The company
exited 2008 with cash of $379 million and a net debt to adjusted
capitalization ratio of less than 25 percent. Reconciliations of cash flow
before balance sheet changes, net debt and adjusted capitalization, which are
non-GAAP measures, are provided in this release.
    

    Drill-bit Reserve Additions More Than Double Production

    

    
    Capital and Reserve Summary
    (detailed tables and non-GAAP reconciliations are also      Year Ended
     provided in this release)                                  December 31,
                                                               2008    2007
     Drill-bit Capital (in millions)                          $9,012  $5,812
    

    
     Reserve Data (MMBoe)
       Discoveries and extensions                                546     315
       Revisions other than price                                 38      75
       Drill-bit and performance reserve additions               584     390

    
    In 2008, Devon added 584 million oil-equivalent barrels (Boe) to its
proved oil and gas reserves through successful drilling (discoveries,
extensions and performance revisions). The company invested $9 billion of
associated drill-bit capital during the year.
    

    
    Devon also acquired 66 million Boe through purchases of proved reserves.
Revisions related to changes in year-end oil, natural gas and natural gas
liquids prices decreased 2008 proved reserves by 473 million Boe. More than 70
percent of the price-related reserve revisions resulted from the impact of
year-end prices on heavy oil reserves at Devon's Jackfish oil sands project in
Canada.
    

    
    Oil and gas production from continuing operations increased six percent
to 238 million Boe in 2008. Estimated proved reserves at December 31, 2008,
were 2,428 million Boe.
    

    
    Proved developed reserves were 1,934 million Boe at December 31, 2008.
This represented 80 percent of total proved reserves. Year-end proved reserves
included 429 million barrels of crude oil, 9.9 trillion cubic feet of natural
gas and 352 million barrels of natural gas liquids. Devon's reserve life index
(proved reserves divided by annual production) is approximately 10 years.
    

    Barnett Shale Growth and Start-Up at Jackfish Paced 2008 Operations

    
    Devon drilled 2,441 wells in 2008 with a 98 percent success rate.
Following are operational highlights from 2008:
    

    --  The company drilled 659 wells in the Barnett Shale field in north
Texas
        during the year. Devon had 3,809 producing wells in the field at
        December 31, 2008.
    --  Devon produced 398 billion cubic feet of gas equivalent (Bcfe) from
the
        Barnett Shale field in 2008. This was a 31 percent increase compared
        with its 2007 net Barnett production.
    --  Net production from the Barnett Shale reached nearly 1.2 Bcfe per day
        during the fourth quarter of 2008. Devon had exited 2007 producing
        about 950 million cubic feet equivalent (MMcfe) per day.
    --  In east Texas, Devon increased production from its Carthage area by
        nearly 10 percent in 2008 to more than 300 MMcfe per day. The company
        drilled 132 wells at Carthage during the year, including 20 horizontal
        wells.
    --  Devon added another 40,000 net acres to its industry-leading lease
        position in the Haynesville Shale play in eastern Texas and western
        Louisiana in the fourth quarter of 2008. The company now holds some
        570,000 net acres in the Haynesville Shale and is evaluating its
        position through drilling, coring and testing.
    --  In the Arkoma Basin in Oklahoma, Devon increased net production from
        the Woodford Shale to about 64 million cubic feet of gas equivalent
per
        day. This is a 165 percent increase compared with the fourth quarter
of
        2007. Also in 2008, the company completed construction and commenced
        operation of its Northridge gas processing plant, which can process up
        to 200 million cubic feet of natural gas per day.
    --  Devon began successful development of a new shale play in the Anadarko
        Basin in Oklahoma in 2008. The company has assembled a lease position
        of 112,000 net acres in the "Cana" play and drilled 10 Devon-operated
        wells during the year. Devon's net production from Cana was nearly 20
        MMcfe per day at December 31, 2008. The company believes its net
risked
        resource potential in the Cana play represents nearly four trillion
        cubic feet of natural gas equivalent.
    --  Devon continued to advance its Lower Tertiary projects in the Gulf of
        Mexico in 2008. At Cascade, the company commenced drilling the first
of
        two initial producing wells and continued work on the production
        facilities and subsea equipment. When Cascade begins producing in
2010,
        it will utilize the Gulf's first floating production, storage and
        offloading vessel, or FPSO.
    --  Devon ramped up production from Jackfish, its 100-percent owned
        Canadian oil sands project, throughout 2008. Production reached 22,000
        barrels per day in the fourth quarter and is expected to peak at
35,000
        barrels per day in 2009.
    --  Jackfish is expected to produce at 35,000 barrels per day for more
than
        20 years. Devon sanctioned and began work on a second phase, Jackfish
        2, in 2008. Jackfish 2 is also sized to produce 35,000 barrels per
day,
        with production commencing by the end of 2011.


    African Divestitures Substantially Completed

    
    Devon completed the sales of its West African producing assets in 2008.
The aggregate pre-tax value of the combined African divestitures was
approximately $3 billion. In accordance with U.S. accounting standards, the
company classified the assets, liabilities and results of its operations in
Africa as discontinued operations for all accounting periods presented.
Included in this release is a table of revenues, expenses and production
categories and amounts reclassified as discontinued operations for each period
presented.
    

    Oil and Gas Sales Increase 36 Percent

    
    Sales of oil, gas and natural gas liquids from continuing operations
increased 36 percent to $13.1 billion in the year ended December 31, 2008.
Comparable sales for the year ended December 31, 2007, were $9.6 billion. The
combined effects of increased natural gas and liquids production and higher
realized oil, natural gas and natural gas liquids prices led to the increase
in sales.
    

    
    Combined oil, gas and natural gas liquids production from continuing
operations averaged 650 thousand Boe per day in 2008. This was a six percent
increase compared with Devon's 2007 average daily production.
    

    
    Marketing and midstream operating profit increased 31 percent to $668
million in 2008. The increase in operating profit was attributable to higher
throughput and higher natural gas and natural gas liquids prices.
    

    Expenses Generally in Line with Expectations

    
    With the exception of depreciation, depletion and amortization of oil and
gas properties (DD&A), most expense items were in line with expectations. Unit
DD&A in 2008 increased to $13.68 per Boe compared with $11.85 per Boe in 2007.
The higher than expected DD&A rate was attributable to the impact on estimated
proved reserves of low commodity prices at December 31, 2008.
    

    Items Excluded from Published Earnings Estimates

    
    Devon's reported net earnings include items of income and expense that
are typically excluded by securities analysts in their published estimates of
the company's financial results. These items and their effects upon reported
earnings for the full year and fourth quarter of 2008 were as follows:
    

    Items affecting continuing operations-

    --  An unrealized gain on oil and natural gas derivative instruments
        increased full-year earnings by $243 million pre-tax ($156 million
        after tax) and increased fourth-quarter earnings by $103 million
        pre-tax ($65 million after tax).
    --  A change in fair value of other financial instruments decreased
        full-year earnings by $151 million pre-tax ($97 million after tax) and
        decreased fourth-quarter earnings by $129 million pre-tax ($82 million
        after tax).
    --  A reduction in the carrying value of oil and gas properties decreased
        full-year and fourth-quarter earnings by $10.4 billion pre-tax ($7.1
        billion after tax).
    --  Income tax expense related to the repatriation of cash from outside
the
        United States and a related change in an income tax election decreased
        full-year after-tax earnings by $312 million.
    --  A modification to the company's stock compensation vesting policy
        decreased full-year earnings by $27 million pre-tax ($17 million after
        tax).
    --  A reduction in Canadian statutory income tax rates increased full-year
        after-tax earnings by $7 million.


    Items affecting discontinued operations-

    --  Divestitures of assets in Africa resulted in a full-year gain of $819
        million pre-tax ($769 million after tax) and a fourth-quarter gain of
        $4 million pre-tax ($25 million after tax).
    --  A reduction in the carrying value of oil and gas properties decreased
        full-year and fourth-quarter earnings by $6 million pre-tax ($6
million
        after tax).
    --  The decisions to exit Africa generated other financial benefits that
        increased full-year earnings by $55 million pre-tax ($27 million after
        tax).


    
    The following tables summarize the full-year and fourth-quarter effects
of these items on 2008 earnings and income taxes.
    


    

    
    Summary of Items Typically Excluded by Securities Analysts (in millions)
    

    
    Continuing Operations - Full Year 2008
                                                                     Cash Flow
                                                                       Before
                                                               After-  Balance
                             Pre-tax                            tax     Sheet
                            Earnings     Income Tax Effect    Earnings Changes
                             Effect  Current  Deferred  Total  Effect  Effect
    Unrealized gain on oil
     and gas derivative
     instruments              $243      -        87       87     156       -
    Change in fair value
     of other financial
     instruments              (151)     -       (54)     (54)    (97)      -
    Reduction in the
     carrying value of
     oil and gas assets    (10,379)     -    (3,264)  (3,264) (7,115)      -
    Taxes on repatriation
     and tax policy
     elections                   -    295        17      312    (312)   (295)
    Stock compensation
     vesting                   (27)     -       (10)     (10)    (17)      -
    Change in Canadian
     income tax rate             -      -        (7)      (7)      7       -
      Totals              $(10,314)   295    (3,231)  (2,936) (7,378)   (295)
    


    
    Discontinued Operations - Full Year 2008
    

    
                                                                     Cash Flow
                                                                       Before
                                                               After-  Balance
                             Pre-tax                            tax     Sheet
                            Earnings     Income Tax Effect    Earnings Changes
                             Effect  Current  Deferred  Total  Effect  Effect
    Gain on sale of West
     African assets           $819    518      (468)      50     769       -
    Reduction in the
     carrying value of
     oil and gas assets         (6)     -         -        -      (6)      -
    Financial benefits of
     decision to exit Africa    55      -        28       28      27       -
      Totals                  $868    518      (440)      78     790       -
    


    
    In aggregate, these items decreased full-year 2008 net earnings by $6.6
    billion, or $14.85 per common share ($14.76 per diluted share). These
    items and their associated tax effects decreased full-year 2008 cash flow
    before balance sheet changes by $295 million.
    


    
    Summary of Items Typically Excluded by Securities Analysts (in millions)
    

    
    Continuing Operations - Fourth Quarter 2008
    

    
                                                                     Cash Flow
                                                                       Before
                                                               After-  Balance
                             Pre-tax                            tax     Sheet
                            Earnings     Income Tax Effect    Earnings Changes
                             Effect  Current  Deferred  Total  Effect  Effect
    Unrealized gain on oil
     and gas derivative
     instruments              $103      -        38       38      65       -
    Change in fair value
     of other financial
     instruments              (129)     -       (47)     (47)    (82)      -
    Reduction in the
     carrying value of
     oil and gas assets    (10,379)     -    (3,264)  (3,264) (7,115)      -
      Totals              $(10,405)     -    (3,273)  (3,273) (7,132)      -
    


    
    Discontinued Operations - Fourth Quarter 2008
    

    
                                                                     Cash Flow
                                                                       Before
                                                               After-  Balance
                             Pre-tax                            tax     Sheet
                            Earnings     Income Tax Effect    Earnings Changes
                             Effect  Current  Deferred  Total  Effect  Effect
    Gain on sale of West
     African assets             $4      -       (21)     (21)     25       -
    Reduction in the
     carrying value of
     oil and gas assets         (6)     -         -        -      (6)      -
      Totals                   $(2)     -       (21)     (21)     19       -
    

    
    In aggregate, these items decreased fourth-quarter 2008 net earnings by
    $7.1 billion, or $16.09 per common share ($16.09 per diluted share).

    Conference Call to be Webcast Today

    
    Devon will discuss its 2008 financial and operating results in a
conference call webcast today. The webcast will begin at 10 a.m. Central Time
(11 a.m. Eastern Time). The webcast may be accessed from Devon's internet home
page at www.devonenergy.com.
    

    
    This press release includes "forward-looking statements" as defined by
the Securities and Exchange Commission. Such statements are those concerning
strategic plans, expectations and objectives for future operations. All
statements, other than statements of historical facts, included in this press
release that address activities, events or developments that the company
expects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the control of
the company. Statements regarding future drilling and production are subject
to all of the risks and uncertainties normally incident to the exploration for
and development and production of oil and gas. These risks include, but are
not limited to the volatility of oil, natural gas and NGL prices;
uncertainties inherent in estimating oil, natural gas and NGL reserves;
drilling risks; environmental risks; and political or regulatory changes.
Investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements. The forward-looking
statements in this press release are made as of the date of this press
release, even if subsequently made available by Devon on its website or
otherwise. Devon does not undertake any obligation to update the
forward-looking statements as a result of new information, future events or
otherwise.
    

    
    The United States Securities and Exchange Commission permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves
that a company has demonstrated by actual production or conclusive formation
tests to be economically and legally producible under existing economic and
operating conditions. This release may contain certain terms, such as resource
potential, reserve potential, probable reserves, possible reserves and
exploration target size. The SEC guidelines strictly prohibit us from
including these terms in filings with the SEC. U.S. investors are urged to
consider closely the disclosure in our Form 10-K, File No. 001-32318,
available from us at Devon Energy Corporation, Attn. Investor Relations, 20
North Broadway, Oklahoma City, OK 73102. You can also obtain this form from
the SEC by calling 1-800-SEC-0330.
    

    
    Devon Energy Corporation is an Oklahoma City-based independent energy
company engaged in oil and gas exploration and production. Devon is the
largest U.S.-based independent oil and gas producer and is included in the S&P
500 Index. For more information about Devon, please visit our website at
www.devonenergy.com.
    


    

    
                            DEVON ENERGY CORPORATION
                      FINANCIAL AND OPERATIONAL INFORMATION
    

    
    PRODUCTION (net of royalties)
    Excludes discontinued                 Year Ended         Quarter Ended
     operations                          December 31,        December 31,
                                        2008      2007      2008       2007
    Total Period Production
    Natural Gas (Bcf)
      U.S. Onshore                     668.1     557.9     181.2     150.1
      U.S. Offshore                     57.6      77.0      12.6      19.6
      Total U.S.                       725.7     634.9     193.8     169.7
      Canada                           212.1     226.0      53.6      55.8
      International                      2.2       1.7       0.7       0.5
      Total Natural Gas                940.0     862.6     248.1     226.0
    Oil (MMBbls)
      U.S. Onshore                      11.3      11.2       3.0       2.8
      U.S. Offshore                      5.9       7.8       1.0       1.9
      Total U.S.                        17.2      19.0       4.0       4.7
      Canada                            21.6      16.1       6.2       4.4
      International                     14.2      19.5       3.4       4.3
      Total Oil                         53.0      54.6      13.6      13.4
    Natural Gas Liquids (MMBbls)
      U.S. Onshore                      23.6      20.6       6.5       5.7
      U.S. Offshore                      0.6       0.8       0.1       0.2
      Total U.S.                        24.2      21.4       6.6       5.9
      Canada                             4.0       4.3       1.0       1.1
      International                        -         -         -         -
      Total Natural Gas Liquids         28.2      25.7       7.6       7.0
    Oil Equivalent (MMBoe)
      U.S. Onshore                     146.2     124.8      39.7      33.5
      U.S. Offshore                     16.1      21.4       3.2       5.4
      Total U.S.                       162.3     146.2      42.9      38.9
      Canada                            60.9      58.1      16.1      14.8
      International                     14.6      19.8       3.5       4.4
      Total Oil Equivalent             237.8     224.1      62.5      58.1
    

    
    Average Daily Production
    Natural Gas (MMcf)
      U.S. Onshore                   1,825.5   1,528.5   1,969.6   1,631.5
      U.S. Offshore                    157.3     210.9     136.3     213.4
      Total U.S.                     1,982.8   1,739.4   2,105.9   1,844.9
      Canada                           579.4     619.2     582.7     606.2
      International                      6.1       4.8       8.1       5.0
      Total Natural Gas              2,568.3   2,363.4   2,696.7   2,456.1
    Oil (MBbls)
      U.S. Onshore                      30.7      30.7      32.1      30.6
      U.S. Offshore                     16.2      21.3      11.3      20.8
      Total U.S.                        46.9      52.0      43.4      51.4
      Canada                            59.0      44.2      67.4      48.2
      International                     38.8      53.4      36.2      47.2
      Total Oil                        144.7     149.6     147.0     146.8
    Natural Gas Liquids (MBbls)
      U.S. Onshore                      64.6      56.6      71.2      61.4
      U.S. Offshore                      1.5       2.1       1.1       2.0
      Total U.S.                        66.1      58.7      72.3      63.4
      Canada                            10.9      11.7      10.9      12.1
      International                        -         -         -         -
      Total Natural Gas Liquids         77.0      70.4      83.2      75.5
    Oil Equivalent (MBoe)
      U.S. Onshore                     399.5     342.0     431.5     363.9
      U.S. Offshore                     44.0      58.5      35.1      58.4
      Total U.S.                       443.5     400.5     466.6     422.3
      Canada                           166.5     159.1     175.4     161.3
      International                     39.8      54.2      37.6      48.0
      Total Oil Equivalent             649.8     613.8     679.6     631.6
    


    
    BENCHMARK PRICES                     Year Ended         Quarter Ended
    (average prices)                    December 31,         December 31,
                                       2008       2007      2008       2007
    Natural Gas ($/Mcf) -
     Henry Hub                         $9.04     $6.86     $6.95     $6.97
    Oil ($/Bbl) - West
     Texas Intermediate (Cushing)     $99.75    $72.39    $58.51    $90.92
    



    
    REALIZED PRICES
    (excludes the effects of unrealized gains and losses from hedging)
    

    
    Quarter Ended December 31, 2008     Oil       Gas      NGLs      Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $55.11     $4.98    $20.52    $30.21
    U.S. Offshore                     $56.80     $6.95    $34.28    $46.31
    Total U.S.                        $55.56     $5.11    $20.73    $31.42
    Canada                            $30.67     $6.02    $35.95    $34.02
    International                     $46.24     $4.90        $-    $45.63
    Realized price without hedges     $41.86     $5.30    $22.73    $32.88
    Cash settlements                   $2.02     $0.52        $-     $2.47
    Realized price, including
     cash settlements                 $43.88     $5.82    $22.73    $35.35
    



    
    Quarter Ended December 31, 2007    Oil       Gas      NGLs      Total
                                    (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $87.46     $5.69    $45.19    $40.47
    U.S. Offshore                     $88.82     $7.26    $47.48    $59.81
    Total U.S.                        $88.01     $5.87    $45.27    $43.15
    Canada                            $54.54     $6.49    $56.64    $44.94
    International                     $86.29     $7.58        $-    $85.59
    Realized price without hedges     $76.46     $6.03    $47.08    $46.83
    Cash settlements                      $-     $0.04        $-     $0.15
    Realized price, including
     cash settlements                 $76.46     $6.07    $47.08    $46.98
    



    
    Year Ended December 31, 2008        Oil       Gas       NGLs     Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $95.63     $7.43    $40.97    $47.91
    U.S. Offshore                    $104.90     $9.53    $51.11    $74.55
    Total U.S.                        $98.83     $7.59    $41.21    $50.55
    Canada                            $71.04     $8.17    $61.45    $57.65
    International                     $94.05     $8.27        $-    $92.91
    Realized price without hedges     $86.22     $7.73    $44.08    $54.97
    Cash settlements                   $0.51    $(0.45)       $-    $(1.67)
    Realized price, including
     cash settlements                 $86.73     $7.28    $44.08    $53.30
    



    
    Year Ended December 31, 2007        Oil       Gas      NGLs      Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $67.34     $5.69    $36.08    $37.45
    U.S. Offshore                     $71.95     $7.17    $36.78    $53.30
    Total U.S.                        $69.23     $5.87    $36.11    $39.77
    Canada                            $49.80     $6.24    $46.07    $41.51
    International                     $70.60     $6.22        $-    $70.11
    Realized price without hedges     $63.98     $5.97    $37.76    $42.90
    Cash settlements                      $-     $0.04        $-     $0.18
    Realized price, including
     cash settlements                 $63.98     $6.01    $37.76    $43.08
    



    
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (in millions, except                  Year Ended        Quarter Ended
     per share amounts)                  December 31,        December 31,
                                       2008      2007       2008     2007
    Revenues
      Oil sales                       $4,567    $3,493      $566    $1,032
      Gas sales                        7,263     5,149     1,316     1,362
      NGL sales                        1,243       970       174       327
      Net (loss) gain on oil
       and gas derivative
       financial instruments            (154)       14       257        13
      Marketing and midstream
       revenues                        2,292     1,736       397       463
        Total revenues                15,211    11,362     2,710     3,197
    Expenses and other income, net
      Lease operating expenses         2,217     1,828       583       502
      Production taxes                   522       340        60        85
      Marketing and midstream
       operating costs and expenses    1,624     1,227       275       315
      Depreciation, depletion and
       amortization of oil and gas
       properties                      3,253     2,655       973       718
      Depreciation and amortization
       of non-oil and gas properties     256       203        70        57
      Accretion of asset retirement
       obligation                         86        74        20        19
      General and administrative
       expenses                          653       513       179       155
      Interest expense                   329       430        68       105
      Change in fair value of other
       financial instruments             149       (34)      127        (3)
      Reduction of carrying value
       of oil and gas properties      10,379         -    10,379         -
      Other income, net                 (224)      (98)     (103)      (27)
        Total expenses and other
         income, net                  19,244     7,138    12,631     1,926
    (Loss) earnings from continuing
     operations before income tax
     expense                          (4,033)    4,224    (9,921)    1,271
    Income tax (benefit) expense
      Current                            619       500      (124)       41
      Deferred                        (1,573)      578    (2,964)      126
        Total income tax (benefit)
         expense                        (954)    1,078    (3,088)      167
    (Loss) earnings from continuing
     operations                       (3,079)    3,146    (6,833)    1,104
    Discontinued operations
      Earnings (loss) from
       discontinued operations
       before income tax expense       1,131       696        (2)      254
      Income tax expense (benefit)       200       236       (19)       42
        Earnings from discontinued
         operations                      931       460        17       212
    Net (loss) earnings               (2,148)    3,606    (6,816)    1,316
    Preferred stock dividends              5        10         -         3
    Net (loss) earnings applicable
     to common stockholders          $(2,153)   $3,596   $(6,816)   $1,313
    

    
    Basic net (loss) earnings per
     share
      (Loss) earnings from
       continuing operations          $(6.95)    $7.05   $(15.46)    $2.48
      Earnings from discontinued
       operations                       2.10      1.03      0.04      0.48
      Net (loss) earnings             $(4.85)    $8.08   $(15.42)    $2.96
    

    
    Diluted net (loss) earnings
     per share
      (Loss) earnings from
       continuing operations          $(6.95)    $6.97   $(15.46)    $2.45
      Earnings from discontinued
       operations                       2.10      1.03      0.04      0.47
      Net (loss) earnings             $(4.85)    $8.00   $(15.42)    $2.92
    

    
    Weighted average common shares
     outstanding
      Basic                              444       445       442       444
      Diluted                            447       450       444       449
    



    
    CONSOLIDATED BALANCE SHEETS
     (in millions)                                      December 31,
                                                   2008              2007
    Assets
    Current assets
      Cash and cash equivalents                    $379            $1,364
      Short-term investments, at fair value           -               372
      Accounts receivable                         1,412             1,779
      Income taxes receivable                       334                30
      Derivative financial instruments, at
       fair value                                   282                12
      Current assets held for sale                   27               120
      Other current assets                          250               237
        Total current assets                      2,684             3,914
    Property and equipment, at cost, based
     on the full cost method of accounting
     for oil and gas properties ($4,540 and
     $3,417 excluded from amortization in
     2008 and 2007, respectively)                55,657            48,473
      Less accumulated depreciation,
       depletion and amortization                32,683            20,394
      Net property and equipment                 22,974            28,079
    Investment in Chevron Corporation
     common stock, at fair value                      -             1,324
    Goodwill                                      5,579             6,172
    Long-term assets held for sale                   19             1,512
    Other long-term assets, including
     $199 million at fair value in 2008             652               455
    Total Assets                                $31,908           $41,456
    

    
    Liabilities and Stockholders' Equity
    Current liabilities
      Accounts payable - trade                   $1,819            $1,360
      Revenues and royalties due to others          496               578
      Income taxes payable                           37                97
      Short-term debt                               180             1,004
      Current portion of asset retirement
       obligation, at fair value                    138                82
      Current liabilities associated with
       assets held for sale                          13               145
      Accrued expenses and other current
       liabilities                                  452               391
        Total current liabilities                 3,135             3,657
    Debentures exchangeable into shares of
     Chevron Corporation common stock                 -               641
    Other long-term debt                          5,661             6,283
    Derivative financial instruments, at
     fair value                                       -               488
    Asset retirement obligation, at fair value    1,347             1,236
    Liabilities associated with assets held
     for sale                                         -               404
    Other long-term liabilities                   1,026               699
    Deferred income taxes                         3,679             6,042
    

    
    Stockholders' equity
      Preferred stock                                 -                 1
      Common stock                                   44                44
      Additional paid-in capital                  6,257             6,743
      Retained earnings                          10,376            12,813
      Accumulated other comprehensive income        383             2,405
    Total Stockholders' Equity                   17,060            22,006
    Total Liabilities and Stockholders'
     Equity                                     $31,908           $41,456
    Common Shares Outstanding                       444               444
    



    
    CONSOLIDATED STATEMENTS OF CASH FLOWS                Year Ended
     (in millions)                                      December 31,
                                                  2008               2007
    Cash Flows From Operating Activities
      Net (loss) earnings                       $(2,148)           $3,606
      Earnings from discontinued operations,
       net of tax                                  (931)             (460)
      Adjustments to reconcile (loss)
       earnings from continuing operations
       to net cash provided by operating
       activities:
        Depreciation, depletion and
         amortization                             3,509             2,858
        Deferred income tax (benefit)
         expense                                 (1,573)              578
        Net gain on sales of non-oil and
         gas property and equipment                  (1)               (1)
        Reduction of carrying value of oil
         and gas properties                      10,379                 -
        Other noncash charges                       187               177
        Net increase in operating working
         capital                                   (138)             (499)
        Increase in long-term other assets          (59)              (92)
        Increase (decrease) in long-term
         other liabilities                           48                (5)
      Cash provided by operating activities
       - continuing operations                    9,273             6,162
      Cash provided by operating activities
       - discontinued operations                    135               489
    Net cash provided by operating activities     9,408             6,651
    

    
    Cash Flows From Investing Activities
      Proceeds from sales of property and
       equipment                                    117                76
      Capital expenditures                       (9,375)           (6,158)
      Proceeds from exchange of investment
       in Chevron Corporation common stock          280                 -
      Purchases of short-term investments           (50)             (934)
      Sales of short-term investments               300             1,136
      Cash used in investing activities
       - continuing operations                   (8,728)           (5,880)
      Cash provided by investing activities
       - discontinued operations                  1,855               166
    Net cash used in investing activities        (6,873)           (5,714)
    

    
    Cash Flows From Financing Activities
      Credit facility repayments                 (3,191)             (757)
      Credit facility borrowings                  1,741             2,207
      Net commercial paper borrowings
       (repayments)                                   1              (804)
      Principal payments on debt                 (1,031)             (567)
      Preferred stock redemption                   (150)                -
      Proceeds from stock option exercises          116                91
      Repurchases of common stock                  (665)             (326)
      Dividends paid on common and
       preferred stock                             (289)             (259)
      Excess tax benefits related to
       share-based compensation                      60                44
    Net cash used in financing activities        (3,408)             (371)
    

    
    Effect of exchange rate changes on cash        (116)               51
    Net (decrease) increase in cash and
     cash equivalents                              (989)              617
    Cash and cash equivalents at beginning
     of period (including assets held for sale)   1,373               756
    Cash and cash equivalents at end of
     period (including assets held for sale)       $384            $1,373
    



    
    RESERVE RECONCILIATION
                          Total                           Total U.S.
               ------------------------------  ------------------------------
                 Oil     Gas    NGLs    Total    Oil     Gas   NGLs    Total
               (MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
    As of December
     31, 2007:
      Proved
       developed   391  7,255    274   1,874      148   5,743     244  1,349
      Proved
       undeveloped 286  1,739     47     622       22   1,400      38    293
    Total proved   677  8,994    321   2,496      170   7,143     282  1,642
    Production     (53)  (940)   (28)   (238)     (17)   (726)    (24)  (162)
    Discoveries
     and
     extensions    132  2,077     67     546       12   1,966      65    405
    Divestitures    (6)    (5)     -      (7)      (1)     (1)      -     (1)
    Acquisitions    18    252      6      66       18     250       6     66
    Revisions due
     to prices    (355)  (588)   (20)   (473)     (20)   (369)    (18)  (100)
    Revisions
     other
     than price     16     95      6      38        5     106       6     28
    As of December
     31, 2008:
      Proved
       developed   301  8,044    292   1,934      133   6,681     261  1,508
      Proved
       undeveloped 128  1,841     60     494       34   1,688      56    370
    Total Proved   429  9,885    352   2,428      167   8,369     317  1,878
    


    
                       U.S. Onshore                   U.S. Offshore
               ------------------------------  ------------------------------
                 Oil     Gas    NGLs    Total    Oil     Gas   NGLs     Total
               (MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
    As of December
     31, 2007:
      Proved
       developed   122  5,547   243   1,290       26     196       1     59
      Proved
       undeveloped   9  1,218    38     249       13     182       -     44
    Total proved   131  6,765   281   1,539       39     378       1    103
    Production     (11)  (669)  (24)   (146)      (6)    (57)      -    (16)
    Discoveries
     and
     extensions     11  1,916    65     395        1      50       -     10
    Divestitures    (1)    (1)    -      (1)       -       -       -      -
    Acquisitions    18    250     6      66        -       -       -      -
    Revisions due
     to prices     (17)  (367)  (18)    (97)      (3)     (2)      -     (3)
    Revisions other
     than price      2     85     5      21        3      21       1      7
    As of December
     31, 2008:
      Proved
       developed   111  6,469   260   1,449       22     212       1     59
      Proved
       undeveloped  22  1,510    55     328       12     178       1     42
    Total Proved   133  7,979   315   1,777       34     390       2    101
    


    
                          Canada                      International
               ------------------------------  ------------------------------
                 Oil     Gas    NGLs    Total    Oil     Gas   NGLs     Total
               (MMBbls) (Bcf) (MMBbls) (MMBoe) (MMBbls) (Bcf) (MMBbls) (MMBoe)
    As of December
     31, 2007:
      Proved
       developed   195  1,506   30     476       48       6       -     49
      Proved
       undeveloped 193    338    9     258       71       1       -     71
    Total proved   388  1,844   39     734      119       7       -    120
    Production     (22)  (212)  (4)    (61)     (14)     (2)      -    (15)
    Discoveries
     and
     extensions    120    111    2     141        -       -       -      -
    Divestitures    (5)    (4)   -      (6)       -       -       -      -
    Acquisitions     -      2    -       -        -       -       -      -
    Revisions due
     to prices    (349)  (219)  (2)   (387)      14       -       -     14
    Revisions other
     than price      2    (12)   -       -        9       1       -     10
    As of December
     31, 2008:
      Proved
       developed   110  1,357   31     367       58       6       -     59
      Proved
       undeveloped  24    153    4      54       70       -       -     70
    Total Proved   134  1,510   35     421      128       6       -    129
    



    
    COSTS INCURRED                           Total            Total U.S.
    (in millions)                         Year Ended          Year Ended
                                         December 31,        December 31,
                                        2008      2007      2008       2007
    Property Acquisition Costs:
      Total proved                      $822       $10      $822        $3
      Total unproved                   1,764       206     1,411       156
    Exploration and development
     costs                             7,464     5,885     5,577     4,111
    Costs Incurred                   $10,050    $6,101    $7,810    $4,270
    


    
                                         U.S. Onshore        U.S. Offshore
                                          Year Ended          Year Ended
                                         December 31,        December 31,
                                        2008      2007      2008       2007
    Property Acquisition Costs:
      Total proved                      $822        $3        $-        $-
      Total unproved                   1,226        77       185        79
    Exploration and development
     costs                             4,388     3,378     1,189       733
    Costs Incurred                    $6,436    $3,458    $1,374      $812
    


    
                                            Canada           International
                                          Year Ended          Year Ended
                                         December 31,        December 31,
                                        2008      2007      2008       2007
    Property Acquisition Costs:
      Total proved                        $-        $7        $-        $-
      Total unproved                     352        49         1         1
    Exploration and development
     costs                             1,304     1,309       583       465
    Costs Incurred                    $1,656    $1,365      $584      $466
    



    
    Devon capitalizes certain general and administrative expenses related to
    property acquisition, exploration and development activities. These
    capitalized expenses were $406 million and $312 million in 2008 and
    2007, respectively. Devon also capitalizes certain interest expenses
    related to property development activities. These capitalized expenses
    were $96 million and $65 million in 2008 and 2007, respectively. These
    capitalized general and administrative expenses and interest expenses
    are included in the costs shown in the preceding tables.
    



    
    DRILLING ACTIVITY                        Year Ended
                                            December 31,
                                            2008   2007
    Exploration Wells Drilled
      U.S.                                   28     35
      Canada                                 90    122
      International                           8      1
      Total                                 126    158
    Exploration Wells Success Rate
      U.S.                                   75%    71%
      Canada                                 96%    98%
      International                           0%     0%
      Total                                  85%    91%
    Development Wells Drilled
      U.S.                                1,639  1,627
      Canada                                631    626
      International                          45     29
      Total                               2,315  2,282
    Development Wells Success Rate
      U.S.                                   98%    98%
      Canada                                 99%   100%
      International                          93%   100%
      Total                                  98%    99%
    Total Wells Drilled
      U.S.                                1,667  1,662
      Canada                                721    748
      International                          53     30
      Total                               2,441  2,440
    Total Wells Success Rate
      U.S.                                   98%    98%
      Canada                                 99%    99%
      International                          79%    97%
      Total                                  98%    98%
    



    
    COMPANY OPERATED RIGS                     Year Ended
                                              December 31,
                                             2008     2007
    Number of Company Operated Rigs Running
      U.S.                                    82       72
      Canada                                  13       14
      International                            1        1
      Total                                   96       87
    



    
    CAPITAL EXPENDITURES (in millions)
    Quarter Ended December 31, 2008
                             U.S.       U.S.
                            Onshore   Offshore   Canada  International  Total
    Capital Expenditures
      Exploration             $96       175        53        50         $374
      Development           1,085       230       347        52        1,714
      (1) Unproved acreage
           acquisition        894         9        12         -          915
      (2) Proved property
           acquisition        794         -         -         -          794
      Exploration and
       development capital $2,869       414       412       102       $3,797
      Capitalized G&A                                                    107
      Capitalized interest                                                26
      Discontinued operations                                              4
      Midstream capital                                                  183
      Other capital                                                       76
    Total Capital Expenditures                                        $4,193
    

    
    (1) $220 million is due to an asset exchange with Chevron and did not
        require the use of cash.
    (2) $390 million is due to an asset exchange with Chevron and did not
        require the use of cash.
    


    
     
    CAPITAL EXPENDITURES (in millions)
    Year Ended December 31, 2008
                             U.S.      U.S.
                           Onshore   Offshore   Canada  International  Total
    Capital Expenditures
      Exploration          $  192       539       164       249      $1,144
      Development           3,903       491       986       222       5,602
      (1) Unproved acreage
           acquisition      1,226       185       352         1       1,764
      (2) Proved property
           acquisition        822         -         -         -         822
      Exploration and
       development capital $6,143     1,215     1,502       472      $9,332
      Capitalized G&A                                                   406
      Capitalized interest                                               96
      Discontinued operations                                            34
      Midstream capital                                                 490
      Other capital                                                     186
    Total Capital Expenditures                                      $10,544
    

    
    (1) $220 million is due to an asset exchange with Chevron and did not
        require the use of cash.
    (2) $390 million is due to an asset exchange with Chevron and did not
        require the use of cash.
    



    
    PRODUCTION FROM DISCONTINUED OPERATIONS     Year Ended     Quarter Ended
                                                December 31,     December 31,
                                              2008       2007   2008     2007
    Production from Discontinued Operations
      Oil (MMBbls)                             3.2       10.9     -      2.0
      Natural Gas (Bcf)                        2.6        5.0     -      1.2
      Total Oil Equivalent (MMBoe)             3.6       11.8     -      2.2
    



    
    STATEMENTS OF DISCONTINUED OPERATIONS
    (in millions)                        Year Ended         Quarter Ended
                                         December 31,        December 31,
                                        2008      2007      2008      2007
    Revenues
      Oil sales                         $323      $746        $-      $175
      Gas sales                           11        15         -         3
      Marketing and midstream revenues    15        20         -         7
      Total revenues                     349       781         -       185
    Expenses and other income, net
      Lease operating expenses            25        75         -        16
      Marketing and midstream
       operating costs and expenses        5         7         -         2
      Depreciation, depletion and
       amortization of oil and gas
       properties                          -        20         -         -
      Accretion of asset retirement
       obligation                          1         3         -         -
      Gain on sale of oil and gas
       properties                       (819)      (90)       (4)      (90)
      Reduction of carrying value
       of assets held for sale             6        70         6         3
      Total expenses and other income,
       net                              (782)       85         2       (69)
    Earnings (loss) before income
     tax expense                       1,131       696        (2)      254
    Income tax expense (benefit)
      Current                            576       230       (67)       46
      Deferred                          (376)        6        48        (4)
      Total income tax expense
       (benefit)                         200       236       (19)       42
    Earnings from discontinued
     operations                         $931      $460       $17      $212
    



    
    RESERVE DATA FOR DISCONTINUED OPERATIONS
                                         Oil       Gas       NGLs     Total
                                       (MMBbls)   (Bcf)    (MMBbls)  (MMBoe)
    As of December 31, 2007:
      Proved developed                    30        28         -        35
      Proved undeveloped                  30        62         -        40
    Total proved                          60        90         -        75
    As of December 31, 2008:
      Proved developed                     -         -         -         -
      Proved undeveloped                   -         -         -         -
    Total proved                           -         -         -         -
    



    
    NON-GAAP FINANCIAL MEASURES
    The United States Securities and Exchange Commission has adopted
    disclosure requirements for public companies such as Devon concerning
    Non-GAAP financial measures. (GAAP refers to generally accepted accounting
    principles.) The company must reconcile the Non-GAAP financial measure to
    related GAAP information. Cash flow before balance sheet changes is a
    Non-GAAP financial measure. Devon believes cash flow before balance sheet
    changes is relevant because it is a measure of cash available to fund the
    company's capital expenditures, dividends and to service its debt. Cash
    flow before balance sheet changes is also used by certain securities
    analysts as a measure of Devon's financial results.
    



    
    RECONCILIATION TO GAAP INFORMATION
    (in millions)                         Year Ended        Quarter Ended
                                         December 31,       December 31,
                                       2008       2007     2008       2007
    Net Cash Provided By Operating
     Activities (GAAP)                $9,408    $6,651    $1,227    $1,542
      Changes in assets and
       liabilities - continuing
       operations                        149       596       540       633
      Changes in assets and
       liabilities - discontinued
       operations                         57        71       (31)       94
    Cash flow before balance sheet
     changes (Non-GAAP)               $9,614    $7,318    $1,736    $2,269
    




    
    Devon believes that using net debt for the calculation of "net debt to
    adjusted capitalization" provides a better measure than using debt. Devon
    defines net debt as debt less cash and short-term investments. Devon
    believes that because cash and short-term investments can be used to repay
    indebtedness, netting cash and short-term investments against debt
    provides a clearer picture of the future demands on cash to repay debt.
    



    
    RECONCILIATION TO GAAP INFORMATION
    (in millions)
                                               December 31,
                                             2008         2007
    

    
    Total debt (GAAP)                       $5,841       $7,928
    Adjustments:
      Cash and short-term investments          379        1,736
      Net debt (Non-GAAP)                   $5,462       $6,192
    

    
    Total debt                              $5,841       $7,928
    Stockholders' equity                    17,060       22,006
      Total capitalization (GAAP)          $22,901      $29,934
    

    
    Net debt                                $5,462       $6,192
    Stockholders' equity                    17,060       22,006
      Adjusted capitalization (Non-GAAP)   $22,522      $28,198
    




    
    Drill-bit capital is defined as costs incurred less proved acquisition
    costs, unproved acquisition costs resulting from business combinations and
    other significant similar transactions, and the net difference of accrued
    future asset retirement costs less actual cash retirement expenditures.
    Drill-bit capital is a non-GAAP measure. Devon believes drill-bit capital
    is relevant because it provides additional insight into costs associated
    with current year drilling, facilities and unproved acreage acquisitions
    unrelated to business combinations and other significant similar
    transactions. It should be noted that the actual costs of reserves added
    through Devon's drilling program will differ, sometimes significantly,
    from the direct comparison of capital spent and reserves added in any
    given period due to the timing of capital expenditures and reserve
    bookings. Certain securities analysts also use this methodology to measure
    Devon's performance.
    



    
    RECONCILIATION TO GAAP INFORMATION      Total            Total U.S.
     (in millions)                        Year Ended          Year Ended
                                         December 31,        December 31,
                                       2008      2007      2008       2007
    

    
    Costs Incurred (GAAP)            $10,050    $6,101    $7,810    $4,270
    Less:
      Proved acquisition costs           822        10       822         3
      Unproved portion of Chief
       acquisition                         -       (13)        -       (13)
      Accrued asset retirement costs     297       365       177       223
    Plus: Actual retirement
     expenditures                         81        73        56        48
      Drill-bit capital (Non-GAAP)    $9,012    $5,812    $6,867    $4,105
    


    
                                        U.S. Onshore        U.S. Offshore
                                         Year Ended           Year Ended
                                        December 31,         December 31,
                                       2008      2007      2008       2007
    

    
    Costs Incurred (GAAP)             $6,436    $3,458    $1,374      $812
    Less:
      Proved acquisition costs           822         3         -         -
      Unproved portion of Chief
       acquisition                         -       (13)        -         -
      Accrued asset retirement
       costs                             102        96        75       127
    Plus: Actual retirement
     expenditures                         11        10        45        38
      Drill-bit capital (Non-GAAP)    $5,523    $3,382    $1,344      $723
    


    
                                           Canada            International
                                         Year Ended           Year Ended
                                        December 31,         December 31,
                                       2008       2007      2008       2007
    

    
    Costs Incurred (GAAP)             $1,656    $1,365      $584      $466
    Less:
      Proved acquisition costs             -         7         -         -
      Accrued asset retirement
       costs                             102       129        18        13
    Plus: Actual retirement
     expenditures                         25        25         -         -
      Drill-bit capital (Non-GAAP)    $1,579    $1,254      $566      $453





    




For further information:

For further information: Investors, Zack Hager, +1-405-552-4526, or
Media, Chip Minty, +1-405-228-8647, both of Devon Energy Corporation Web Site:
http://www.devonenergy.com

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DEVON ENERGY CORPORATION

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