Devon Energy Reports Record Earnings, Cash Flow and Proved Reserves at Year-End 2007; Quarterly Earnings More Than Double



    OKLAHOMA CITY, Feb. 6 /CNW/ -- Devon Energy Corporation (NYSE:   DVN) today
reported record net earnings of $3.6 billion for the year ended December 31,
2007, a 27 percent increase compared with full-year 2006 earnings. Earnings
per share in 2007 increased 26 percent to a record $8.08 per common share
($8.00 per diluted common share). In the year ended December 31, 2006, Devon
earned $2.8 billion, or $6.42 per common share ($6.34 per diluted common
share).
    For the quarter ended December 31, 2007, Devon earned a record $1.3
billion, or $2.96 per common share ($2.92 per diluted common share). This was
126 percent greater than reported net earnings of $582 million or, $1.31 per
common share ($1.29 per diluted common share) in the fourth quarter of 2006.
    "Devon's 2007 results were exceptional, both financially and
operationally," said J. Larry Nichols, chairman and chief executive officer.
"We set earnings and cash flow records, increased production by 12 percent and
drilled 2,440 wells with a 98 percent success rate. Our 2007 drilling program
added 390 million barrels of proved reserves at very competitive finding and
development costs setting the stage for continued production growth in the
future. In 2008 we expect to deliver similar organic growth of reserves and
production."
    Securities analysts typically exclude certain items from their published
estimates. These items include non-cash charges, unrealized gains and other
items discussed in detail later in this news release. In aggregate, these
items increased Devon's fourth-quarter 2007 earnings by $342 million, or 76
cents per diluted share.


    Drill-bit Success Drives Reserves to a Record 2.5 Billion Boe

    
    Capital and Reserve Summary
     (detailed tables and non-GAAP reconciliations
     are also provided in this release)                Year Ended
                                                       December 31,
                                                     2007       2006
    Drill-bit Capital (in millions)                 $5,812     $5,035
    

    
    Reserve Data (MMBoe)
     Discoveries and extensions                        315        433
     Revisions other than price                         75         (8)
     Drill-bit and performance reserve additions       390        425
    
    Devon's estimated proved reserves attributable to continuing operations
reached a record 2,496 million oil-equivalent barrels (Boe) at December 31,
2007. This was nine percent greater than year-end 2006 estimated proved
reserves from continuing operations. Devon added 437 million Boe of proved
reserves from all sources. Annual oil and gas production from continuing
operations of 224 million Boe in 2007 was 12 percent more than in 2006. The
company's reserve life index (proved reserves divided by annual production) is
more than 11 years.
    The company added 390 million Boe through successful drilling
(discoveries, extensions and performance revisions) in 2007. Revisions related
to changes in year-end oil and gas prices increased 2007 proved reserves by 44
million Boe.
    Proved developed reserves were 1,874 million Boe at December 31, 2007.
This represented 75 percent of total proved reserves. Year-end proved reserves
included 677 million barrels of crude oil, nine trillion cubic feet of natural
gas and 321 million barrels of natural gas liquids.
    New Gulf of Mexico Field and Barnett Shale Growth Led 2007 Operating
Achievements
    Devon drilled 2,440 wells in 2007, with a 98 percent rate of success.
Following are operational highlights from the past year:

    
    -- In the third quarter of 2007, Devon commenced production from the
       Merganser field in the deepwater Gulf of Mexico. Combined initial
       production from the two Merganser natural gas wells was about
       150 million cubic feet per day. The company has a 50 percent working
       interest in the Merganser field, which produces into the Independence
       Hub.
    -- In the Barnett Shale in north Texas, Devon retained its position as the
       largest producer and largest lease holder. The company increased its
       net production from the Barnett by 33 percent in 2007, exiting the year
       at 950 million cubic feet of gas equivalent per day. The company holds
       approximately 727,000 net acres of Barnett Shale leases.
    -- The company drilled 539 wells in the Barnett Shale in 2007. This
       included Devon's 1,000th horizontal well. Devon has interests in nearly
       3,200 producing wells in the Barnett Shale.
    -- In Canada in 2007, Devon completed construction at the Jackfish project
       in the Alberta oil sands and commenced steam injection. Oil production
       from 100 percent-owned Jackfish is expected to ramp up throughout 2008
       toward a peak production target of 35,000 barrels per day.
    -- Also in Canada, the company increased production in 2007 from the
       Lloydminster area by 40 percent to approximately 33,500 Boe per day.
       Devon drilled 429 wells at Lloydminster in 2007.
    -- Also in the third quarter, Devon began producing oil from the first of
       ten planned wells in the Polvo field offshore Brazil. Polvo, located in
       the Campos basin, was discovered in 2004 and is Devon's first operated
       development project in Brazil. Devon has a 60 percent working interest
       in Polvo.
    -- The company commenced drilling the first Devon-operated exploratory
       well in the Lower Tertiary trend of the Gulf of Mexico in 2007. The
       Chuck exploratory well is currently drilling below 30,000 feet and
       nearing its objective. Devon has a 39.5 percent working interest in the
       Chuck prospect.
    -- Devon made progress toward commercial development of four previous
       discoveries in the Lower Tertiary trend in 2007. This included
       sanctioning of phase one of the Cascade project and delineation
       drilling on the Jack, St. Malo and Kaskida prospects.
    African Divestiture Update
    
    In October 2007, Devon completed the sale of its operations in Egypt for
an adjusted sales price of $341 million as of the closing date. In November
2007, the company announced an agreement to sell its operations in Gabon for
$205.5 million. Devon is in the process of divesting its remaining assets and
terminating all of its operations in West Africa. In accordance with
accounting standards, Devon has reclassified the assets, liabilities and
results of its operations in Egypt and West Africa as discontinued operations
for all accounting periods presented in this release. Although revenues and
expenses for prior periods were reclassified, there was no impact upon
previously reported net earnings. Included with the financial information that
follows is a table of revenues, expenses and production categories and the
amounts reclassified as discontinued operations for each period presented.
    
    Oil and Gas Sales Increase 19 Percent
    
    Sales from continuing operations of oil, gas and natural gas liquids
increased 19 percent to $9.6 billion in the year ended December 31, 2007. This
compares with sales for the year ended December 31, 2006, of $8.1 billion. The
combined effects of increased oil and gas production and higher realized oil
and natural gas liquids prices led to the increase in sales.
    Combined oil, gas and natural gas liquids production from continuing
operations averaged 614 thousand Boe per day in 2007. This was 12 percent more
than Devon's 2006 average daily production from continuing operations of 549
thousand Boe per day. The increase in 2007 production reflects growth in all
three of Devon's geographic producing areas: the United States, Canada and
international.
    Marketing and midstream operating profit was $509 million in 2007. This
compares with marketing and midstream operating profit of $436 million in
2006. The 17 percent increase was largely attributable to higher natural gas
processing margins.
    
    Cash Flow Jumps 21 Percent to Top $7 Billion
    
    Cash flow before balance sheet changes in 2007 increased 21 percent
compared with 2006, to a record $7.3 billion. Utilizing cash flow and
borrowings under the company's commercial paper and credit facilities, Devon
funded $6.5 billion of capital expenditures, repurchased $326 million of
common stock, paid $259 million in dividends and retired $567 million of
long-term debt. The company ended 2007 with cash and short-term investments of
$1.7 billion and a net debt to adjusted capitalization ratio of just 18
percent. Reconciliations of cash flow before balance sheet changes, net debt
and adjusted capitalization, which are non-GAAP measures, are provided in this
release.
    
    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 2007 were as follows:

    
    -- A change in fair value of derivative financial instruments increased
       full-year earnings by $34 million pre-tax ($22 million after tax) and
       increased fourth-quarter earnings by $3 million pre-tax ($2 million
       after tax).
    -- An unrealized loss on natural gas derivative instruments decreased
       full-year earnings by $25 million pre-tax ($16 million after tax). An
       unrealized gain on natural gas derivative instruments increased
       fourth-quarter earnings by $4 million pre-tax ($3 million after tax).
    -- A reduction in Canadian statutory income tax rates increased full-year
       after-tax earnings by $261 million and increased fourth-quarter
       after-tax earnings by $231 million.
    -- A gain on the sale of the Egyptian operations increased full-year and
       fourth-quarter pre-tax and after-tax earnings by $90 million.
    -- A reduction in the carrying value of assets held for sale in West
       Africa decreased full-year earnings by $64 million pre-tax ($13 million
       after tax).
    -- The decisions to exit Egypt and West Africa generated financial
       benefits that increased full-year earnings by $179 million pre-tax
       ($92 million after tax) and increased fourth-quarter earnings by
       $33 million pre-tax ($16 million after tax).
    
    The following tables summarize the full-year and fourth-quarter effects
of these items on 2007 earnings and income taxes.


    
    Summary of Items Typically Excluded by Securities Analysts -
     Full Year 2007
     (in millions)                                                Cash Flow
                       Pretax     Income Tax Effect   After-tax Before Balance
                      Earnings ----------------------- Earnings  Sheet Changes
                       Effect  Current Deferred  Total  Effect      Effect
    Change in fair
     value of
     financial
     instruments         $34        -       12     12      22           -
    Unrealized loss
     on natural gas
     derivative
     instruments         (25)       -       (9)    (9)    (16)          -
    Change in
     Canadian
     income tax
     rate                  -        -     (261)  (261)    261           -
    Gain on sale of
     Egyptian
     operations           90        -        -      -      90           -
    Reduction of the
     carrying value
     in West Africa      (64)       -      (51)   (51)    (13)          -
    Financial benefits
     of decision to
     exit Africa         179        -       87     87      92           -
      Totals            $214        -     (222)  (222)    436           -
    
    In aggregate, these items increased full-year 2007 net earnings by $436
million, or 98 cents per common share (97 cents per diluted share).

    
    Summary of Items Typically Excluded by Securities Analysts -
     Fourth Quarter 2007
     (in millions)                                                 Cash Flow
                       Pretax     Income Tax Effect   After-tax Before Balance
                      Earnings ----------------------- Earnings  Sheet Changes
                       Effect  Current Deferred  Total  Effect      Effect
    Change in fair
     value of
     financial
     instruments          $3        -        1      1       2           -
    Unrealized gain
     on natural gas
     derivative
     instruments           4        -        1      1       3           -
    Change in
     Canadian income
     tax rate              -        -     (231)  (231)    231           -
    Gain on sale of
     Egyptian
     operations           90        -        -      -      90           -
    Financial
     benefits of
     decision to
     exit Africa          33        -       17     17      16           -
      Totals            $130        -     (212)  (212)    342           -
    
    In aggregate, these items increased fourth-quarter 2007 net earnings by
$342 million, or 77 cents per common share (76 cents per diluted share).
    
    Conference Call to be Webcast Today
    
    Devon will discuss its 2007 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 http://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, inflation or lack of availability of goods and services,
environmental risks, drilling risks and 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 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
http://www.devonenergy.com.



    
                           DEVON ENERGY CORPORATION
                    FINANCIAL AND OPERATIONAL INFORMATION
    

    
    PRODUCTION (net of royalties)               Year Ended      Quarter Ended
    All periods exclude discontinued           December 31,      December 31,
     operations                               2007     2006     2007     2006
    

    
    Total Period Production
    Natural Gas (Bcf)
      U.S. Onshore                           557.9    487.5    150.1    129.5
      U.S. Offshore                           77.0     78.6     19.6     21.4
      Total U.S.                             634.9    566.1    169.7    150.9
      Canada                                 226.0    240.4     55.8     57.8
      International                            1.7      1.8      0.5      0.3
      Total Natural Gas                      862.6    808.3    226.0    209.0
    Oil (MMBbls)
      U.S. Onshore                            11.2     11.1      2.8      2.7
      U.S. Offshore                            7.8      8.5      1.9      2.0
      Total U.S.                              19.0     19.6      4.7      4.7
      Canada                                  16.1     12.8      4.4      3.4
      International                           19.5     10.0      4.3      3.9
      Total Oil                               54.6     42.4     13.4     12.0
    Natural Gas Liquids (MMBbls)
      U.S. Onshore                            20.6     18.1      5.7      4.7
      U.S. Offshore                            0.8      0.5      0.2      0.1
      Total U.S.                              21.4     18.6      5.9      4.8
      Canada                                   4.3      4.7      1.1      1.1
      International                              -        -        -        -
      Total Natural Gas Liquids               25.7     23.3      7.0      5.9
    Oil Equivalent (MMBoe)
      U.S. Onshore                           124.8    110.5     33.5     29.1
      U.S. Offshore                           21.4     22.0      5.4      5.6
      Total U.S.                             146.2    132.5     38.9     34.7
      Canada                                  58.1     57.6     14.8     14.2
      International                           19.8     10.3      4.4      4.0
      Total Oil Equivalent                   224.1    200.4     58.1     52.9
    

    
    Average Daily Production
    Natural Gas (MMcf)
      U.S. Onshore                         1,528.5  1,335.6  1,631.5  1,407.5
      U.S. Offshore                          210.9    215.4    213.4    232.8
      Total U.S.                           1,739.4  1,551.0  1,844.9  1,640.3
      Canada                                 619.2    658.7    606.2    627.9
      International                            4.8      5.1      5.0      3.0
      Total Natural Gas                    2,363.4  2,214.8  2,456.1  2,271.2
    Oil (MBbls)
      U.S. Onshore                            30.7     30.5     30.6     29.9
      U.S. Offshore                           21.3     23.1     20.8     21.2
      Total U.S.                              52.0     53.6     51.4     51.1
      Canada                                  44.2     35.2     48.2     37.1
      International                           53.4     27.4     47.2     42.5
      Total Oil                              149.6    116.2    146.8    130.7
    Natural Gas Liquids (MBbls)
      U.S. Onshore                            56.6     49.6     61.4     51.4
      U.S. Offshore                            2.1      1.4      2.0      1.2
      Total U.S.                              58.7     51.0     63.4     52.6
      Canada                                  11.7     12.9     12.1     12.2
      International                              -        -        -        -
      Total Natural Gas Liquids               70.4     63.9     75.5     64.8
    Oil Equivalent (MBoe)
      U.S. Onshore                           342.0    302.7    363.9    315.9
      U.S. Offshore                           58.5     60.4     58.4     61.2
      Total U.S.                             400.5    363.1    422.3    377.1
      Canada                                 159.1    157.9    161.3    153.9
      International                           54.2     28.2     48.0     43.0
      Total Oil Equivalent                   613.8    549.2    631.6    574.0
    



    
    AVERAGE REALIZED PRICES                    Year Ended      Quarter Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Realized Prices
    Natural Gas ($/Mcf)
      U.S. Onshore                          $5.72    $5.90    $5.77    $5.59
      U.S. Offshore                         $7.17    $7.24    $7.26    $6.72
      Total U.S.                            $5.89    $6.09    $5.95    $5.75
      Canada                                $6.24    $6.05    $6.49    $5.78
      International                         $6.22    $6.05    $7.58    $4.41
      Total Natural Gas                     $5.99    $6.08    $6.09    $5.76
    Oil ($/Bbl)
      U.S. Onshore                         $67.34   $60.70   $87.46   $54.50
      U.S. Offshore                        $71.95   $64.24   $88.82   $57.35
      Total U.S.                           $69.23   $62.23   $88.01   $55.68
      Canada                               $49.80   $46.94   $54.54   $41.08
      International                        $70.60   $61.35   $86.29   $57.85
      Total Oil                            $63.98   $57.39   $76.46   $52.24
    Natural Gas Liquids ($/Bbl)
      U.S. Onshore                         $36.08   $29.26   $45.19   $27.57
      U.S. Offshore                        $36.78   $35.43   $47.48   $28.38
      Total U.S.                           $36.11   $29.42   $45.27   $27.59
      Canada                               $46.07   $42.67   $56.64   $37.78
      International                            $-       $-       $-       $-
      Total Natural Gas Liquids            $37.76   $32.10   $47.08   $29.51
    Oil Equivalent ($/Boe)
      U.S. Onshore                         $37.57   $36.94   $40.86   $34.57
      U.S. Offshore                        $53.30   $51.23   $59.81   $45.96
      Total U.S.                           $39.87   $39.31   $43.48   $36.42
      Canada                               $41.51   $39.21   $44.94   $36.45
      International                        $70.11   $60.60   $85.59   $57.49
      Total Oil Equivalent                 $42.96   $40.38   $47.05   $38.00
    



    
    BENCHMARK PRICES                           Year Ended      Quarter Ended
     (average prices)                         December 31,      December 31,
                                             2007     2006     2007     2006
    Benchmark Prices
    Natural Gas ($/Mcf) - Henry Hub         $6.86    $7.24    $6.97    $6.56
    Oil ($/Bbl) - West Texas Intermediate
     (Cushing)                             $72.39   $66.22   $90.92   $60.19
    

    
    PRICE DIFFERENTIALS, EXCLUDING EFFECTS
     OF HEDGES                                  Year Ended      Quarter Ended
     (average floating price differentials     December 31,      December 31,
      from benchmark prices)                  2007     2006     2007     2006
    Price Differentials
    Natural Gas ($/Mcf)
      U.S. Onshore                          $(1.16)  $(1.41)  $(1.27)  $(1.21)
      U.S. Offshore                          $0.31    $0.00    $0.29    $0.16
      Total U.S.                            $(0.98)  $(1.22)  $(1.09)  $(1.02)
      Canada                                $(0.44)  $(1.02)  $(0.29)  $(0.61)
      International                         $(0.64)  $(1.19)   $0.61   $(2.15)
      Total Natural Gas                     $(0.85)  $(1.16)  $(0.90)  $(0.91)
    Oil ($/Bbl)
      U.S. Onshore                          $(5.05)  $(5.52)  $(3.46)  $(5.69)
      U.S. Offshore                         $(0.44)  $(1.98)  $(2.10)  $(2.84)
      Total U.S.                            $(3.16)  $(3.99)  $(2.91)  $(4.51)
      Canada                               $(22.59) $(19.28) $(36.38) $(19.11)
      International                         $(1.79)  $(4.87)  $(4.63)  $(2.34)
      Total Oil                             $(8.41)  $(8.83) $(14.46)  $(7.95)
    



    
    CONSOLIDATED STATEMENTS OF OPERATIONS      Year Ended      Quarter Ended
     (in millions, except per share data)     December 31,      December 31,
                                             2007     2006     2007    2006
    Revenues
      Oil sales                            $3,493   $2,434   $1,032    $628
      Gas sales                             5,163    4,912    1,375   1,203
      NGL sales                               970      749      327     176
      Marketing and midstream revenues      1,736    1,672      463     411
      Total revenues                       11,362    9,767    3,197   2,418
    Expenses and other income, net
      Lease operating expenses              1,828    1,425      502     389
      Production taxes                        340      341       85      80
      Marketing and midstream operating
       costs and expenses                   1,227    1,236      315     312
      Depreciation, depletion and
       amortization of oil and gas
       properties                           2,655    2,058      718     578
      Depreciation and amortization of
       non-oil and gas properties             203      173       57      46
      Accretion of asset retirement
       obligation                              74       47       19      12
      General and administrative expenses     513      397      155     113
      Interest expense                        430      421      105     106
      Change in fair value of financial
       instruments                            (34)     178       (3)     97
      Reduction of carrying value of oil
       and gas properties                       -       36        -       -
      Other income, net                       (98)    (115)     (27)    (29)
      Total expenses and other income, net  7,138    6,197    1,926   1,704
    Earnings from continuing operations
     before income tax expense              4,224    3,570    1,271     714
    Income tax expense
      Current                                 500      528       41      57
      Deferred                                578      408      126     155
      Total income tax expense              1,078      936      167     212
    Earnings from continuing operations     3,146    2,634    1,104     502
    Discontinued operations
      Earnings from discontinued
       operations before income tax
       expense                                696      464      254     127
      Income tax expense                      236      252       42      47
    Earnings from discontinuing
     operations                               460      212      212      80
    Net earnings                            3,606    2,846    1,316     582
    Preferred stock dividends                  10       10        3       3
    Net earnings applicable to common
     stockholders                          $3,596   $2,836   $1,313    $579
    Net earnings per weighted average
     common shares outstanding
      Basic                                 $8.08    $6.42    $2.96   $1.31
      Diluted                               $8.00    $6.34    $2.92   $1.29
    Basic weighted average shares
     outstanding                              445      442      444     443
    Diluted weighted average shares
     outstanding                              450      448      449     448
    



    
    CONSOLIDATED BALANCE SHEETS                              Year Ended
     (in millions)                                          December 31,
                                                      2007              2006
    Assets
    Current assets
      Cash and cash equivalents                     $1,364              $692
      Short-term investments, at fair value            372               574
      Accounts receivable                            1,779             1,324
      Deferred income taxes                             44               102
      Current assets held for sale                     120               232
      Other current assets                             235               288
      Total current assets                           3,914             3,212
    Property and equipment, at cost, based on
     the full cost method of accounting for oil
     and gas properties ($3,417 and $3,293
     excluded from amortization in 2007 and
     2006, respectively)                            48,473            39,585
      Less accumulated depreciation, depletion
       and amortization                             20,394            16,429
      Net property and equipment                    28,079            23,156
    Investment in Chevron Corporation common
     stock, at fair value                            1,324             1,043
    Goodwill                                         6,172             5,706
    Assets held for sale                             1,512             1,619
    Other assets                                       455               327
    Total Assets                                   $41,456           $35,063
    

    
    Liabilities and Stockholders' Equity
    Current liabilities
      Accounts payable - trade                      $1,360            $1,154
      Revenues and royalties due to others             578               522
      Income taxes payable                              97                82
      Short-term debt                                1,004             2,205
      Accrued interest payable                         109               114
      Current portion of asset retirement
       obligation                                       82                53
      Current liabilities associated with
       assets held for sale                            145               173
      Accrued expenses and other current
       liabilities                                     282               342
      Total current liabilities                      3,657             4,645
    Debentures exchangeable into shares of
     Chevron Corporation common stock                  641               727
    Other long-term debt                             6,283             4,841
    Financial instruments, at fair value               488               302
    Asset retirement obligation, at fair value       1,236               804
    Liabilities associated with assets held for
     sale                                              404               429
    Other liabilities                                  699               583
    Deferred income taxes                            6,042             5,290
    Stockholders' equity
      Preferred stock                                    1                 1
      Common stock                                      44                44
      Additional paid-in capital                     6,743             6,840
      Retained earnings                             12,813             9,114
      Accumulated other comprehensive income         2,405             1,444
      Treasury stock                                     -                (1)
    Total Stockholders' Equity                      22,006            17,442
    Total Liabilities & Stockholders'
     Equity                                        $41,456           $35,063
    Common Shares Outstanding                          444               444
    



    
    CONSOLIDATED STATEMENTS OF CASH FLOWS                    Year Ended
     (in millions)                                          December 31,
                                                      2007              2006
    Cash Flows From Operating Activities
     Net earnings                                   $3,606            $2,846
     Earnings from discontinued operations, net
      of tax                                          (460)             (212)
     Adjustments to reconcile net earnings from
      continuing operations to net cash
      provided by operating activities:
       Depreciation, depletion and amortization      2,858             2,231
       Deferred income tax expense                     578               408
       Net gain on sales of non-oil and gas
        property and equipment                          (1)               (5)
       Reduction of carrying value of oil and
        gas properties                                   -                36
       Other noncash charges                           177               269
     Changes in assets and liabilities:
      (Increase) decrease in:
       Accounts receivable                            (329)               91
       Other current assets                            (38)              (33)
       Long-term other assets                          (92)              (58)
      Increase (decrease) in:
       Accounts payable                                119              (175)
       Income taxes payable                            (28)             (245)
       Other current liabilities                      (223)               80
       Long-term other liabilities                      (5)              141
     Cash provided by operating activities -
      continuing operations                          6,162             5,374
     Cash provided by operating activities -
      discontinued operations                          489               619
    Net cash provided by operating activities       $6,651            $5,993
    

    
    Cash Flows From Investing Activities
     Proceeds from sales of property and
      equipment                                         76                40
     Capital expenditures, including
      acquisitions of businesses                    (6,158)           (7,346)
     Purchases of short-term investments              (934)           (2,395)
     Sales of short-term investments                 1,136             2,501
     Cash used in investing activities -
      continuing operations                         (5,880)           (7,200)
     Cash provided by (used in) investing
      activities - discontinued
      operations                                       166              (249)
    Net cash used in investing activities          $(5,714)          $(7,449)
    

    
    Cash Flows From Financing Activities
     Net senior credit facility borrowings,
      net of issuance costs                          1,450                 -
     Net commercial paper (repayments)
      borrowings, net of issuance costs               (804)            1,808
     Principal payments on debt, including
      current maturities                              (567)             (862)
     Proceeds from stock options exercises              91                73
     Repurchase of common stock                       (326)             (253)
     Excess tax benefits related to
      share-based compensation                          44                36
     Dividends paid on common stock                   (249)             (199)
     Dividends paid on preferred stock                 (10)              (10)
    Net cash (used in) provided by financing
     activities                                      $(371)             $593
    

    
    Effect of exchange rate changes on cash             51                13
    Net increase (decrease) in cash and cash
     equivalents                                       617              (850)
    Cash and cash equivalents at beginning of
     period (including assets held for sale)           756             1,606
    Cash and cash equivalents at end of period
     (including assets held for sale)               $1,373              $756
    

    
    Supplementary cash flow data:
     Interest paid (net of capitalized interest)      $406              $384
     Income taxes paid (including assets held
      for sale)                                       $588              $960
    



    
    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, 2006:
     Proved
      developed        318  6,484   229    1,628    147  4,916    196   1,163
     Proved
      undeveloped      316  1,775    46      658     23  1,439     37     299
    Total proved       634  8,259   275    2,286    170  6,355    233   1,462
    Production         (55)  (863)  (26)    (224)   (19)  (635)   (22)   (146)
    Discoveries and
     extensions         56  1,272    47      315      9  1,133     45     242
    Divestitures        (1)   (13)    -       (3)    (1)   (13)     -      (3)
    Acquisitions         1     15     -        3      1     10      -       2
    Revisions due
     to prices          11    169     5       44      4    119      5      29
    Revisions other
     than price         31    155    20       75      6    174     21      56
    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
    

    
                              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, 2006:
     Proved
      developed        116  4,672   194    1,089     31    244      2      74
     Proved
      undeveloped       11  1,307    36      264     12    132      1      35
    Total proved       127  5,979   230    1,353     43    376      3     109
    Production         (11)  (558)  (21)    (124)    (8)   (77)    (1)    (22)
    Discoveries and
     extensions          8  1,055    45      228      1     78      -      14
    Divestitures        (1)   (13)    -       (3)     -      -      -       -
    Acquisitions         1     10     -        2      -      -      -       -
    Revisions due
     to prices           4    117     5       28      -      2      -       1
    Revisions other
     than price          3    175    22       55      3     (1)    (1)      1
    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
    

    
                                Canada                   International
                        Oil   Gas   NGLs   Total    Oil    Gas   NGLs   Total
                     (MMBbls)(Bcf)(MMBbls)(MMBoe) (MMBbls)(Bcf)(MMBbls)(MMBoe)
    As of December
     31, 2006:
     Proved
      developed        112  1,560    33      405     59      8      -      60
     Proved
      undeveloped      217    336     9      282     76      -      -      77
    Total proved       329  1,896    42      687    135      8      -     137
    Production         (16)  (227)   (4)     (58)   (20)    (1)     -     (20)
    Discoveries and
     extensions         46    139     2       72      1      -      -       1
    Divestitures         -      -     -        -      -      -      -       -
    Acquisitions         -      5     -        1      -      -      -       -
    Revisions due
     to prices          16     50     -       25     (9)     -      -     (10)
    Revisions
     other than
     price              13    (19)   (1)       7     12      -      -      12
    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
    



    
    COSTS INCURRED                               Total           Total U.S.
    (in millions)                              Year Ended        Year Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Property Acquisition Costs:
     Total Proved                             $10   $1,113       $3   $1,066
     Total Unproved                          $206   $1,481     $156   $1,366
    Exploration and Development Costs      $5,885   $4,916   $4,111   $3,105
    Costs Incurred                         $6,101   $7,510   $4,270   $5,537
    

    
                                              U.S. Onshore     U.S. Offshore
                                               Year Ended        Year Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Property Acquisition Costs:
     Total Proved                              $3   $1,066     $-       $-
     Total Unproved                           $77   $1,311      $79      $55
    Exploration and Development Costs      $3,378   $2,479     $733     $626
    Costs Incurred                         $3,458   $4,856     $812     $681
    

    
                                                 Canada         International
                                               Year Ended        Year Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Property Acquisition Costs:
     Total Proved                              $7      $23     $-        $24
     Total Unproved                           $49      $70       $1      $45
    Exploration and Development Costs      $1,309   $1,461     $465     $350
    Costs Incurred                         $1,365   $1,554     $466     $419
    
    Devon capitalizes certain general and administrative expenses related to
property acquisition, exploration and development activities. These
capitalized expenses were $312 million and $243 million in 2007 and 2006,
respectively. Devon also capitalizes certain interest expenses related to
property development activities. These capitalized expenses were $65 million
and $49 million in 2007 and 2006, 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,
                                                       2007             2006
    Exploration Wells Drilled
     U.S.                                               35                79
     Canada                                            122               139
     International                                       1                 4
     Total                                             158               222
    Exploration Wells Success Rate
     U.S.                                              71%               82%
     Canada                                            98%               99%
     International                                      0%                0%
     Total                                             91%               91%
    Development Wells Drilled
     U.S.                                            1,627             1,471
     Canada                                            626               738
     International                                      29                26
     Total                                           2,282             2,235
    Development Wells Success Rate
     U.S.                                              98%               99%
     Canada                                           100%               99%
     International                                    100%              100%
     Total                                             99%               99%
    Total Wells Drilled
     U.S.                                            1,662             1,550
     Canada                                            748               877
     International                                      30                30
     Total                                           2,440             2,457
    Total Wells Success Rate
     U.S.                                              98%               98%
     Canada                                            99%               99%
     International                                     97%               87%
     Total                                             98%               98%
    



    
    COMPANY OPERATED RIGS                                    Year Ended
                                                            December 31,
                                                       2007             2006
    Number of Company Operated Rigs
     Running
     U.S.                                               72                58
     Canada                                             14                11
     International                                       1                 1
     Total                                              87                70
    



    
    CAPITAL EXPENDITURES (in millions)
    Quarter Ended December 31, 2007
    

    
                                 U.S.     U.S.                           Devon
                               Onshore  Offshore  Canada International   Total
    Capital Expenditures
       Exploration               $88      159      155        16         $418
       Development               821       70      188        96        1,175
       Exploration and
        development capital     $909      229      343       112       $1,593
       Capitalized G&A                                                     82
       Capitalized interest                                                18
       Discontinued operations                                             24
       Property acquisitions                                              (15)
       Midstream capital                                                  103
       Other capital                                                       61
    Total Capital Expenditures                                         $1,866
    



    
    CAPITAL EXPENDITURES (in millions)
    Year Ended December 31, 2007
    

    
                                 U.S.     U.S.                           Devon
                               Onshore  Offshore  Canada International   Total
    Capital Expenditures
       Exploration              $266      370      250        75         $961
       Development             2,956      257      931       324        4,468
       Exploration and
        development capital   $3,222      627    1,181       399       $5,429
       Capitalized G&A                                                    312
       Capitalized interest                                                65
       Discontinued operations                                            163
       Property acquisitions                                                2
       Midstream capital                                                  376
       Other capital                                                      143
    Total Capital Expenditures                                         $6,490
    



    
    PRODUCTION FROM DISCONTINUED
    OPERATIONS                                 Year Ended      Quarter Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Production from Discontinued
     Operations
     Oil (MMBbls)                            10.9     14.6      2.0      3.9
     Natural Gas (Bcf)                        5.0      6.2      1.2      1.5
     Total Oil Equivalent (MMBoe)            11.8     15.5      2.2      4.1
    



    
    STATEMENTS OF DISCONTINUED OPERATIONS      Year Ended      Quarter Ended
    (in millions)                             December 31,      December 31,
                                             2007     2006     2007     2006
    Revenues
     Oil sales                               $746     $889     $175     $213
     Gas sales                                 15       20        3        4
     Marketing and midstream revenues          20       20        7        5
     Total revenues                           781      929      185      222
    Expenses and other income, net
     Lease operating expenses                  75       86       16       29
     Marketing and midstream operating
      costs and expenses                        7        8        2        2
     Depreciation, depletion and
      amortization of oil and gas
      properties                               20      249        -       62
     Depreciation, depletion and
      amortization of non-oil and gas
      properties                                -        4        -        2
     Accretion of asset retirement
      obligation                                3        2        -        -
     Gain on sale of Egypt                    (90)       -      (90)       -
     Reduction of carrying value of oil
      and gas properties                       70      116        3        -
     Total expenses and other income, net      85      465      (69)      95
    Earnings before income tax expense        696      464      254      127
    Income tax expense (benefit)
     Current                                  230      305       46       43
     Deferred                                   6      (53)      (4)       4
     Total income tax expense                 236      252       42       47
    Earnings from discontinued operations    $460     $212     $212      $80
    


    
    RESERVE DATA FOR DISCONTINUED OPERATIONS
                                               Oil      Gas     NGLs    Total
                                            (MMBbls)   (Bcf)  (MMBbls) (MMboe)
    As of December 31, 2006:
     Proved developed                          48       33       -       53
     Proved undeveloped                        34       63       -       45
    Total proved                               82       96       -       98
    As of December 31, 2007:
     Proved developed                          30       28       -       35
     Proved undeveloped                        30       62       -       40
    Total proved                               60       90       -       75
    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         Year Ended      Quarter Ended
     (in millions)                            December 31,      December 31,
                                             2007     2006     2007     2006
    Net Cash Provided By Operating
     Activities (GAAP)                     $6,651   $5,993   $1,542   $1,111
     Changes in assets and
      liabilities - continuing
      operations                              596      164      633      396
     Changes in assets and
      liabilities - discontinued
      operations                               71     (100)      94      (12)
    Cash flow before balance sheet
     changes (Non-GAAP)                    $7,318   $6,057   $2,269   $1,495
    
    Devon believes that using net debt, defined as debt less cash, short-term
investments and the market value of Chevron Common stock, for the calculation
of "net debt to adjusted capitalization" provides a better measure than using
debt. Owned outright by Devon and included in Devon's indebtedness are $641
million of debentures exchangeable into shares of Chevron common stock. As of
December 31, 2007, the market value of the shares ($1.3 billion) exceeded the
related debt obligation. Because cash and short-term investments can repay
indebtedness, netting cash and short-term investments against debt provides a
clearer picture of the future demands on cash to repay debt. Various lenders,
rating agencies and securities analysts also use this methodology as a measure
of Devon's indebtedness.



    
    RECONCILIATION TO GAAP INFORMATION                      Year Ended
     (in millions)                                         December 31,
                                                     2007              2006
    Total debt (GAAP)                               $7,928            $7,773
    Adjustments:
     Cash and short-term investments                (1,736)           (1,266)
     Market value of Chevron Corporation
      common stock                                  (1,324)           (1,043)
     Net Debt (Non-GAAP)                            $4,868            $5,464
    

    
    Total debt                                      $7,928            $7,773
    Stockholders' equity                            22,006            17,442
     Total Capitalization (GAAP)                   $29,934           $25,215
    

    
    Net debt                                        $4,868            $5,464
    Stockholders' equity                            22,006            17,442
     Adjusted Capitalization (Non-GAAP)            $26,874           $22,906
    
    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,
                                             2007     2006     2007     2006
    Costs Incurred (GAAP)                  $6,101   $7,510   $4,270   $5,537
    Less:
     Proved acquisition costs                  10    1,113        3    1,066
     Unproved portion of Chief acquisition    (13)   1,185      (13)   1,185
     Accrued asset retirement costs           365      236      223       78
    Plus: Actual retirement expenditures       73       59       48       41
     Drill-bit capital (Non-GAAP)          $5,812   $5,035   $4,105   $3,249
    

    
                                              U.S. Onshore      U.S. Offshore
                                               Year Ended        Year Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Costs Incurred (GAAP)                  $3,458   $4,856     $812     $681
    Less:
     Proved acquisition costs                   3    1,066        -        -
     Unproved portion of Chief acquisition    (13)   1,185        -        -
     Accrued asset retirement costs            96       36      127       42
    Plus: Actual retirement expenditures       10        6       38       35
     Drill-bit capital (Non-GAAP)          $3,382   $2,575     $723     $674
    

    
                                                 Canada         International
                                               Year Ended        Year Ended
                                              December 31,      December 31,
                                             2007     2006     2007     2006
    Costs Incurred (GAAP)                  $1,365   $1,554     $466     $419
    Less:
     Proved acquisition costs                   7       23        -       24
     Unproved portion of Chief acquisition      -        -        -        -
     Accrued asset retirement costs           129      107       13       51
    Plus: Actual retirement expenditures       25       18        -        -
     Drill-bit capital (Non-GAAP)          $1,254   $1,442     $453     $344
    




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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