Devon Energy's Second-Quarter 2008 Net Earnings Increase 44 Percent to $1.3 Billion



    OKLAHOMA CITY, Aug. 6 /CNW/ -- Devon Energy Corporation (NYSE:   DVN) today
reported net earnings for the quarter ended June 30, 2008, of $1.3 billion, or
$2.91 per common share ($2.88 per diluted common share). This is a 44 percent
increase compared with Devon's second-quarter 2007 net earnings of $904
million, or $2.02 per common share ($2.00 per diluted common share).
    For the six months ended June 30, 2008, Devon reported net earnings of
$2.1 billion, or $4.59 per common share ($4.55 per diluted common share). This
compares with net earnings for the six months ended June 30, 2007, of $1.6
billion, or $3.48 per common share ($3.44 per diluted common share).
    
    Earnings $3.39 per Share Excluding Items Not Estimated by Analysts
    
    Second-quarter 2008 reported net earnings of $1.3 billion were affected
by certain items securities analysts typically exclude from their published
estimates. Excluding these adjusting items, Devon earned $1.5 billion or $3.39
per diluted common share.
    The most significant of the adjusting items impacting continuing
operations was a non-cash, unrealized loss on oil and natural gas derivative
instruments of $912 million pre-tax ($584 million after tax). Also impacting
continuing operations was $312 million of income tax expense attributable to
the repatriation of cash from outside the United States and to a related
income tax policy election.
    The most significant adjusting item impacting discontinued operations was
a $736 million pre-tax gain ($647 million after tax) on divestitures of assets
in Africa. These and other adjusting items are discussed in more detail later
in this news release.
    
    Oil and Gas Sales Increase by 65 Percent
    
    Sales of oil, natural gas and natural gas liquids from continuing
operations increased 65 percent to $4 billion in the second quarter of 2008.
The combined effects of increased oil and gas production and higher oil,
natural gas and natural gas liquids prices led to the increase in sales.
    Combined oil, natural gas and natural gas liquids production from
continuing operations reached 58.5 million oil-equivalent barrels (Boe) in the
second quarter of 2008. This was a four percent increase compared with the
second quarter of 2007. The company produced 643 thousand Boe per day in the
second quarter of 2008. This compares with production of 618 thousand Boe per
day in the second quarter of 2007 and 640 thousand Boe per day in the first
quarter of 2008. Devon has increased oil and natural gas production from
retained properties for nine consecutive quarters.
    
    U.S. Onshore and Canadian Operations Lead Quarterly Highlights
    
    Devon drilled 494 wells in the second quarter of 2008, with an overall
success rate of 98 percent. Following are recent operating highlights:
    -- Devon's second-quarter net exit-rate production from the Barnett Shale
field in north Texas reached almost 1.1 billion cubic feet of natural gas
equivalent per day. Devon is the largest producer in the field and brought 189
new Barnett Shale wells on line in the second quarter of 2008.
    -- Devon plans to drill more than 650 wells in the Barnett Shale in 2008
and has set a net production target of 1.2 billion cubic feet of natural gas
equivalent per day by year-end.
    -- In east Texas and northwest Louisiana, Devon added to its lease
position in the Haynesville Shale play, bringing its total Haynesville lease
holdings to 483,000 net acres.
    -- In the Groesbeck area in east Texas, Devon commenced production from
three high-rate gas wells in the second quarter. Devon has 100-percent working
interests in all three wells, with initial production rates averaging 16.2
million cubic feet of natural gas per day from each well.
    -- The company drilled two long-lateral horizontal wells in the Woodford
Shale in Coal County, Oklahoma, in the second quarter with excellent results.
Initial production rates from the two wells were 7.1 million and 6.7 million
cubic feet of natural gas per day. Devon's working interests in the two wells
are 66 percent and 73 percent, respectively.
    -- In Canada, Devon's wholly-owned Jackfish oil sands project reached a
cumulative production milestone of one million barrels of oil in the second
quarter of 2008. Second-quarter exit-rate production was about 14,500 barrels
per day. Production is expected to reach plant capacity of 35,000 barrels per
day in the first half of 2009.
    -- Also in Canada in the second quarter, Devon increased its lease
position in the Horn River Shale play in British Columbia to more than 100,000
net acres. The company is now planning its upcoming winter drilling program
for the Horn River area.
    
    African Divestitures Substantially Complete
    
    Devon has now completed substantially all of its planned divestitures in
Africa. In May, the company closed the $205.5 million sale of its assets in
Gabon. In June, Devon closed the $2.2 billion sale of its assets in Equatorial
Guinea. In aggregate, the sale prices of the combined African divestures
exceeded $3 billion before taxes. The company expects to close the remaining
approximately $250 million in transactions later in 2008.
    In accordance with U.S. accounting standards, Devon has classified the
assets, liabilities and results of its operations in Africa as discontinued
operations for all accounting periods presented in this release. Included with
this release is a table of revenues, expenses and production categories and
amounts reclassified as discontinued operations for each period presented.
    
    Marketing and Midstream Profit Rises with Product Prices
    
    Marketing and midstream operating profit increased 71 percent to $204
million in the second quarter of 2008. For comparison, marketing and midstream
operating profit was $119 million in the second quarter of 2007. The increase
was attributable to higher throughput and higher natural gas and natural gas
liquids prices.
    
    Expenses Track Increased Production and Activity Levels
    
    Expenses in most categories were generally in line with expectations in
the second quarter of 2008. However, second-quarter general and administrative
expenses (G&A) exceeded previous estimates at $180 million. This compares with
$113 million in the second quarter of 2007. Higher employee-related costs were
the largest contributor to the year-over-year increase. In addition, $27
million of the increase was a one-time charge attributable to a change in the
company's vesting policy for stock grants. Devon believes this modified
benefits policy better reflects industry practices. Devon has also increased
the size of its workforce to support expanding levels of investment in long
cycle-time exploration and development projects.
    Interest expense decreased in the second quarter of 2008 to $90 million,
compared with interest expense of $107 million in the second quarter of 2007.
The decrease reflects a decline in outstanding debt as the company repaid all
of its commercial paper and credit facility balances during the second quarter
of 2008.
    
    Repatriation of International Cash Increases Current Income Tax Rate
    
    Current income tax expense on earnings from continuing operations was
$414 million in the second quarter of 2008. This amount included $295 million
of U.S. income tax attributable to the repatriation of cash from outside the
United States and related income tax policy elections. During the second
quarter, the proceeds from Devon's African divestitures combined with cash
repatriated from foreign subsidiaries totaled approximately $3 billion.
    
    Record Cash Flow and Debt Repayments Further Strengthen Balance Sheet
    
    Cash flow before balance sheet changes reached a record $2.7 billion in
the second quarter of 2008. This was a 48 percent increase compared with the
second quarter of 2007. The company funded capital expenditures of $2 billion,
including $1.7 billion of exploration and development capital, in the quarter.
This resulted in free cash flow of approximately $700 million during the
second quarter.
    In addition to free cash flow of $700 million, Devon also received $2.4
billion of pre-tax proceeds from its African divestitures in the second
quarter. Utilizing free cash flow, proceeds of the divestitures and cash on
hand, the company deployed $2.6 billion to retire commercial paper and other
short-term borrowings and to repurchase over two million shares of its common
stock. In the first seven months of 2008, Devon repurchased 5.7 million shares
of its common stock at a cost of $590 million.
    Devon also redeemed its $150 million 6.49 percent Series A Cumulative
Preferred Stock in the second quarter. Cash and short-term investments were
$1.8 billion at June 30, 2008.
    Net debt as a percentage of adjusted capitalization decreased to 11
percent at June 30, 2008. Reconciliations of cash flow before balance sheet
changes, free cash flow, net debt and adjusted capitalization, which are
non-GAAP measures, are provided in this release.
    
    Accounting for Derivative Instruments
    
    Devon accounts for derivative instruments using mark-to-market
accounting. As a result, for each reporting period the company recognizes in
earnings the unrealized changes in the fair values of its derivative
instruments. A second-quarter unrealized loss on derivative instruments was
the result of rising oil and natural gas prices during the quarter. The
company could record unrealized gains or losses on oil and natural gas
derivative instruments in subsequent quarters depending upon the direction of
commodity prices.
    
    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 second quarter of 2008 were as follows:
    
    Items affecting continuing operations -
    
    -- A change in fair value of non-oil and gas derivative financial
instruments increased second-quarter earnings by $40 million pre-tax ($25
million after tax).
    -- An unrealized loss on oil and natural gas derivative financial
instruments decreased second-quarter earnings by $912 million pre-tax ($584
million 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
second-quarter after-tax earnings by $312 million.
    -- A modification to the company's stock compensation vesting policy
decreased second-quarter earnings by $27 million pre-tax ($17 million after
tax).
    
    Items affecting discontinued operations -
    
    -- Divestitures of assets in Africa resulted in a second-quarter 2008
gain of $736 million pre-tax ($647 million after tax).
    -- The decisions to exit Africa generated other financial benefits that
increased second-quarter earnings by $21 million pre-tax ($11 million after
tax).
    The following tables summarize the effects of these items on
second-quarter earnings and income taxes.



    
    Summary of Items Typically Excluded by Securities Analysts (in millions)
    Quarter Ended June 30, 2008
    

    
    Continuing    Pre-tax                         After tax   Cash Flow Before
    Operations    Earnings   Income Tax Effect     Earnings    Balance Sheet
                   Effect  Current Deferred Total   Effect     Changes Effect
    Change in
     fair value
     of non-oil
     and gas
     derivative
     instruments   $ 40       -       15     15       25                -
    Unrealized
     loss on oil
     and gas
     derivative
     financial
     instruments   (912)      -     (328)  (328)    (584)               -
    Taxes on
     repatriation
     and tax policy
     elections        -     295       17    312     (312)            (295)
    Stock
     compensation
     vesting        (27)      -      (10)   (10)     (17)               -
       Totals     $(899)    295     (306)   (11)    (888)            (295)
    


    
    Discontinued  Pre-tax                         After tax   Cash Flow Before
    Operations    Earnings   Income Tax Effect     Earnings    Balance Sheet
                   Effect  Current Deferred Total   Effect     Changes Effect
    

    
    Gain on sale
     of West
     African assets 736     518     (429)    89      647                -
    Financial
     benefits of
     decision to
     exit Africa     21       -       10     10       11                -
       Totals      $757     518     (419)    99      658                -
    
    In aggregate, these items decreased second-quarter 2008 net earnings by
$230 million, or 52 cents per common share (51 cents per diluted share). These
items and their associated tax effects decreased second-quarter 2008 cash flow
before balance sheet changes by $295 million.
    
    Conference Call to be Webcast Today
    
    Devon will discuss its second-quarter 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 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
               UNAUDITED FINANCIAL AND OPERATIONAL INFORMATION
    

    
    PRODUCTION (net of royalties)            Quarter Ended    Six Months Ended
    Excludes discontinued operations            June 30,          June 30,
                                             2008     2007     2008     2007
    Total Period Production
    Natural Gas (Bcf)
     U.S. Onshore                            162.3    135.9    314.8    263.6
     U.S. Offshore                            14.2     18.9     32.5     37.5
     Total U.S.                              176.5    154.8    347.3    301.1
     Canada                                   53.0     57.0    104.7    112.3
     International                             0.4      0.5      1.0      0.8
     Total Natural Gas                       229.9    212.3    453.0    414.2
    

    
    Oil (MMBbls)
     U.S. Onshore                              2.8      2.9      5.7      5.7
     U.S. Offshore                             1.8      2.0      3.6      3.7
     Total U.S.                                4.6      4.9      9.3      9.4
     Canada                                    5.3      4.0      9.9      7.5
     International                             3.3      5.5      8.1     10.8
     Total Oil                                13.2     14.4     27.3     27.7
    

    
    Natural Gas Liquids (MMBbls)
     U.S. Onshore                              5.8      5.1     11.6      9.9
     U.S. Offshore                             0.2      0.2      0.4      0.3
     Total U.S.                                6.0      5.3     12.0     10.2
     Canada                                    1.0      1.1      1.9      2.2
     International                               -        -        -        -
     Total Natural Gas Liquids                 7.0      6.4     13.9     12.4
    

    
    Oil Equivalent (MMBoe)
     U.S. Onshore                             35.7     30.7     69.7     59.5
     U.S. Offshore                             4.4      5.3      9.4     10.3
     Total U.S.                               40.1     36.0     79.1     69.8
     Canada                                   15.1     14.6     29.4     28.4
     International                             3.3      5.6      8.3     10.9
     Total Oil Equivalent                     58.5     56.2    116.8    109.1
    

    
    Average Daily Production
    Natural Gas (MMcf)
     U.S. Onshore                          1,783.0  1,493.7  1,729.7  1,456.3
     U.S. Offshore                           156.1    207.6    178.7    207.0
     Total U.S.                            1,939.1  1,701.3  1,908.4  1,663.3
     Canada                                  582.6    626.2    575.0    620.7
     International                             4.8      5.6      5.4      4.3
     Total Natural Gas                     2,526.5  2,333.1  2,488.8  2,288.3
    

    
    Oil (MBbls)
     U.S. Onshore                             30.9     31.5     31.0     31.1
     U.S. Offshore                            19.9     22.0     19.9     20.5
     Total U.S.                               50.8     53.5     50.9     51.6
     Canada                                   58.0     44.0     54.7     41.5
     International                            35.8     60.9     44.6     59.8
     Total Oil                               144.6    158.4    150.2    152.9
    

    
    Natural Gas Liquids (MBbls)
     U.S. Onshore                             64.1     56.4     63.7     54.8
     U.S. Offshore                             2.1      2.2      2.0      1.8
     Total U.S.                               66.2     58.6     65.7     56.6
     Canada                                   10.7     11.7     10.8     12.0
     International                               -        -        -        -
     Total Natural Gas Liquids                76.9     70.3     76.5     68.6
    

    
    Oil Equivalent (MBoe)
     U.S. Onshore                            392.2    336.9    382.9    328.7
     U.S. Offshore                            48.0     58.8     51.7     56.8
     Total U.S.                              440.2    395.7    434.6    385.5
     Canada                                  165.8    160.1    161.3    157.0
     International                            36.6     61.8     45.6     60.5
     Total Oil Equivalent                    642.6    617.6    641.5    603.0
    


    
                                             Quarter Ended    Six Months Ended
    BENCHMARK PRICES                            June 30,          June 30,
    (average prices)                         2008     2007     2008     2007
    

    
    Natural Gas ($/Mcf) - Henry Hub         $10.94    $7.55    $9.49    $7.16
    Oil ($/Bbl) - West Texas Intermediate
     (Cushing)                             $124.28   $65.08  $110.98   $61.71
    


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

    
    Quarter Ended June 30, 2008         Oil       Gas       NGLs     Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $120.69     $9.40    $50.56    $60.51
    U.S. Offshore                     $125.24    $11.43    $53.63    $91.38
    Total U.S.                        $122.47     $9.56    $50.66    $63.88
    Canada                             $94.35     $9.76    $75.10    $72.14
    International                     $119.87    $11.00        $-   $118.70
    Realized price without hedges     $110.56     $9.61    $54.08    $69.14
    Cash settlements                   $(0.01)   $(1.32)       $-    $(5.18)
    Realized price, including cash
     settlements                      $110.55     $8.29    $54.08    $63.96
    


    
    Quarter Ended June 30, 2007         Oil       Gas       NGLs     Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                       $60.82     $6.14    $33.35    $38.52
    U.S. Offshore                      $65.35     $7.82    $31.14    $53.24
    Total U.S.                         $62.68     $6.35    $33.26    $40.71
    Canada                             $46.32     $6.66    $43.82    $41.99
    International                      $67.57     $6.19        $-    $67.11
    Realized price without hedges      $60.01     $6.43    $35.03    $43.68
    Cash settlements                       $-     $0.03        $-     $0.10
    Realized price, including cash
     settlements                       $60.01     $6.46    $35.03    $43.78
    

    
    Six Months Ended June 30, 2008      Oil       Gas       NGLs     Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                      $107.15     $8.26    $47.65    $53.91
    U.S. Offshore                     $112.07     $9.94    $51.77    $79.52
    Total U.S.                        $109.08     $8.42    $47.78    $56.95
    Canada                             $84.16     $8.66    $68.86    $64.01
    International                     $105.63     $9.56        $-   $104.68
    Realized price without hedges      $98.98     $8.48    $50.76    $62.12
    Cash settlements                       $-    $(0.69)       $-    $(2.67)
    Realized price, including cash
     settlements                       $98.98     $7.79    $50.76    $59.45
    

    
    Six Months Ended June 30, 2007      Oil       Gas       NGLs     Total
                                     (Per Bbl) (Per Mcf) (Per Bbl) (Per Boe)
    

    
    U.S. Onshore                       $56.02     $6.04    $30.54    $37.15
    U.S. Offshore                      $60.16     $7.51    $30.52    $50.05
    Total U.S.                         $57.67     $6.22    $30.54    $39.05
    Canada                             $45.01     $6.55    $40.37    $40.88
    International                      $62.76     $5.16        $-    $62.39
    Realized price without hedges      $56.22     $6.31    $32.26    $41.87
    Cash settlements                       $-     $0.04        $-     $0.16
    Realized price, including cash
     settlements                       $56.22     $6.35    $32.26    $42.03
    


    
    CONSOLIDATED STATEMENTS
     OF OPERATIONS                          Quarter Ended   Six Months Ended
     (in millions, except per share            June 30,         June 30,
      amounts)                              2008     2007    2008     2007
    

    
    Revenues
     Oil sales                             $1,455    $865   $2,705   $1,556
     Gas sales                              2,210   1,366    3,840    2,612
     NGL sales                                379     224      707      401
     Net (loss) gain on oil and gas
      derivative financial instruments     (1,215)     14   (2,003)      (6)
     Marketing and midstream revenues         719     460    1,274      839
          Total revenues                    3,548   2,929    6,523    5,402
    Expenses and other income, net
     Lease operating expenses                 537     439    1,043      869
     Production taxes                         176      90      310      170
     Marketing and midstream operating
      costs and expenses                      515     341      897      611
     Depreciation, depletion and
      amortization of oil and gas
      properties                              762     645    1,499    1,232
     Depreciation and amortization of
      non-oil and gas properties               62      49      119       95
     Accretion of asset retirement
      obligation                               22      18       44       36
     General and administrative expenses      180     113      328      232
     Interest expense                          90     107      192      217
     Change in fair value of non-oil and
      gas derivative financial instruments    (40)    (10)     (24)      (9)
     Other income, net                        (17)    (17)     (38)     (43)
          Total expenses and other
           income, net                      2,287   1,775    4,370    3,410
    Earnings from continuing operations
     before income tax expense              1,261   1,154    2,153    1,992
    Income tax expense
     Current                                  414     174      517      363
     Deferred                                 253     156      391      231
          Total income tax expense            667     330      908      594
    Earnings from continuing operations       594     824    1,245    1,398
    Discontinued operations
     Earnings from discontinued
      operations before income tax expense    851     128    1,040      265
     Income tax expense                       144      48      235      108
          Earnings from discontinuing
           operations                         707      80      805      157
    Net earnings                            1,301     904    2,050    1,555
    Preferred stock dividends                   3       3        5        5
    Net earnings applicable to common
     stockholders                          $1,298    $901   $2,045   $1,550
    

    
    Basic net earnings per share
     Earnings from continuing operations    $1.33   $1.84    $2.79    $3.13
     Earnings from discontinued operations  $1.58   $0.18    $1.80    $0.35
     Net earnings                           $2.91   $2.02    $4.59    $3.48
    

    
    Diluted net earnings per share
     Earnings from continuing operations    $1.31   $1.82    $2.76    $3.09
     Earnings from discontinued operations  $1.57   $0.18    $1.79    $0.35
     Net earnings                           $2.88   $2.00    $4.55    $3.44
    

    
    Weighted average common
     shares outstanding
     Basic                                    446     446      445      445
     Diluted                                  450     450      450      450
    


    
    CONSOLIDATED BALANCE SHEETS
     (in millions)                                 June 30,       December 31,
                                                     2008            2007
    Assets                                                         (Audited)
    Current assets
     Cash and cash equivalents                      $1,837            $1,364
     Short-term investments, at fair value               1               372
     Accounts receivable                             2,460             1,779
     Deferred income taxes                             775                44
     Current assets held for sale                      105               120
     Other current assets                              255               235
          Total current assets                       5,433             3,914
    Property and equipment, at cost,
     based on the full cost method of
     accounting for oil and gas
     properties ($3,741 and $3,417
     excluded from amortization in 2008
     and 2007, respectively)                        51,953            48,473
    Less accumulated depreciation,
     depletion and amortization                     21,769            20,394
     Net property and equipment                     30,184            28,079
    Investment in Chevron Corporation
     common stock, at fair value                     1,406             1,324
    Goodwill                                         6,081             6,172
    Long-term assets held for sale                      84             1,512
    Other long-term assets, including
     $126 million at fair value in 2008                592               455
    Total Assets                                   $43,780           $41,456
    Liabilities and Stockholders' Equity
    Current liabilities
     Accounts payable - trade                       $1,525            $1,360
     Revenues and royalties due to others              966               578
     Income taxes payable                              306                97
     Debentures exchangeable into shares
      of Chevron Corporation common stock              621                 -
     Other short-term debt                               -             1,004
     Derivative financial instruments, at
      fair value                                     2,125                 -
     Current portion of asset retirement
      obligation, at fair value                         63                82
     Current liabilities associated with
      assets held for sale                              16               145
     Accrued expenses and other current
      liabilities                                      410               391
          Total current liabilities                  6,032             3,657
    Debentures exchangeable into shares
     of Chevron Corporation common stock                 -               641
    Other long-term debt                             4,829             6,283
    Derivative financial instruments, at
     fair value                                         83               488
    Asset retirement obligation, at fair value       1,430             1,236
    Long-term liabilities associated with
     assets held for sale                               24               404
    Other long-term liabilities                        905               699
    Deferred income taxes                            7,044             6,042
    Stockholders' equity
     Preferred stock                                     -                 1
     Common stock                                       44                44
     Additional paid-in capital                      6,591             6,743
     Retained earnings                              14,717            12,813
     Accumulated other comprehensive income          2,131             2,405
     Treasury stock                                    (50)                -
    Total Stockholders' Equity                      23,433            22,006
    Total Liabilities and Stockholders' Equity     $43,780           $41,456
    Common Shares Outstanding                          445               444
    


    
    CONSOLIDATED STATEMENTS OF CASH FLOWS
     (in millions)                                  Six Months Ended June 30,
                                                     2008              2007
    Cash Flows From Operating Activities
     Net earnings                                   $2,050            $1,555
     Earnings from discontinued
      operations, net of tax                          (805)             (157)
     Adjustments to reconcile net earnings
      from continuing operations to net cash
      provided by operating activities:
          Depreciation, depletion and amortization   1,618             1,327
          Deferred income tax expense                  391               231
          Net unrealized loss on oil and
           gas derivative financial instruments      1,692                23
          Other noncash charges                        122                71
     Changes in assets and liabilities:
        (Increase) decrease in:
          Accounts receivable                         (604)               32
          Other current assets                         (44)              (27)
          Other long-term assets                       (40)              (46)
        Increase (decrease) in:
          Accounts payable                             120                64
          Revenues and royalties due to others         348               (17)
          Income taxes payable                         136               178
          Other current liabilities                    (99)              (96)
          Other long-term liabilities                  181                14
     Cash provided by operating
      activities - continuing operations             5,066             3,152
     Cash provided by operating
      activities - discontinued operations             120               197
    Net cash provided by operating activities        5,186             3,349
    

    
    Cash Flows From Investing Activities
     Proceeds from sales of property and equipment     108                37
     Capital expenditures                           (3,867)           (2,990)
     Purchases of short-term investments               (50)             (589)
     Redemptions of short-term and
      long-term investments                            295               848
     Cash used in investing activities -
      continuing operations                         (3,514)           (2,694)
     Cash used in investing activities -
      discontinued operations                        1,709              (115)
    Net cash used in investing activities           (1,805)           (2,809)
    

    
    Cash Flows From Financing Activities
     Credit facility repayments                     (3,070)                -
     Credit facility borrowings                      1,620                 -
     Net commercial paper repayments                (1,004)             (183)
     Principal payments on debt                        (47)                -
     Preferred stock redemption                       (150)                -
     Proceeds from stock options exercises             104                60
     Repurchases of common stock                      (252)              (10)
     Dividends paid on common and
      preferred stock                                 (146)             (129)
     Excess tax benefits related to
      share-based compensation                          55                17
    Net cash used in financing activities           (2,890)             (245)
    

    
    Effect of exchange rate changes on cash            (19)               16
    Net increase in cash and cash equivalents          472               311
    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)        $1,845            $1,067
    

    
    Supplementary cash flow data:
     Interest paid (net of capitalized interest)      $189              $202
     Income taxes paid - continuing and
      discontinued operations                         $826              $159
    


    
    DRILLING ACTIVITY                        Quarter Ended   Six Months Ended
                                                June 30,         June 30,
                                              2008    2007    2008     2007
    Exploration Wells Drilled
     U.S.                                      8       5       17       27
     Canada                                    7       9       58       64
     International                             1       -        7        1
     Total                                    16      14       82       92
    

    
    Exploration Wells Success Rate
     U.S.                                     88%    100%      71%      81%
     Canada                                   86%     67%      95%      95%
     International                             0%       -       0%       0%
     Total                                    81%     91%      82%      90%
    

    
    Development Wells Drilled
     U.S.                                    405     360      777      624
     Canada                                   61      54      259      306
     International                            12       6       22        9
     Total                                   478     420    1,058      939
    

    
    Development Wells Success Rate
     U.S.                                     98%     98%      98%      98%
     Canada                                  100%    100%     100%     100%
     International                            92%    100%      91%     100%
     Total                                    98%     99%      98%      99%
    

    
    Total Wells Drilled
     U.S.                                    413     365      794      651
     Canada                                   68      63      317      370
     International                            13       6       29       10
     Total                                   494     434    1,140    1,031
    

    
    Total Wells Success Rate
     U.S.                                     98%     98%      98%      98%
     Canada                                   99%     95%      99%      99%
     International                            85%    100%      69%      90%
     Total                                    98%     98%      97%      98%
    


    
    COMPANY OPERATED RIGS
                                                              June 30,
                                                      2008              2007
    Number of Company Operated Rigs Running
     U.S.                                               79                77
     Canada                                             12                10
     International                                       1                 1
     Total                                              92                88
    


    
    CAPITAL EXPENDITURES (in millions)
    Quarter Ended June 30, 2008
    

    
                                 U.S.     U.S.
                               Onshore  Offshore  Canada  International  Total
    Capital Expenditures
       Exploration               $128     259       52         71        $510
       Development                956     112      101         56       1,225
       Exploration and
        development capital    $1,084     371      153        127      $1,735
       Capitalized G&A                                                    100
       Capitalized interest                                                22
       Discontinued operations                                              9
       Midstream capital                                                   99
       Other capital                                                       30
    Total Capital Expenditures                                         $1,995
    


    
    CAPITAL EXPENDITURES (in millions)
    Six Months Ended June 30, 2008
    

    
                                 U.S.     U.S.
                               Onshore  Offshore  Canada  International  Total
    Capital Expenditures
       Exploration               $181     404      183        142        $910
       Development              1,821     200      433        115       2,569
       Exploration and
        development capital    $2,002     604      616        257      $3,479
       Capitalized G&A                                                    199
       Capitalized interest                                                42
       Discontinued operations                                             23
       Midstream capital                                                  198
       Other capital                                                       46
    Total Capital Expenditures                                         $3,987
    


    
    PRODUCTION FROM DISCONTINUED
     OPERATIONS                              Quarter Ended    Six Months Ended
                                               June 30,          June 30,
                                             2008     2007     2008     2007
    Total Period Production
     Oil (MMBbls)                             1.1      3.2      3.2      6.3
     Natural Gas (Bcf)                        1.1      1.2      2.2      2.6
     Total Oil Equivalent (MMBoe)             1.3      3.4      3.6      6.7
    


    
    STATEMENTS OF DISCONTINUED OPERATIONS    Quarter Ended    Six Months Ended
    (in millions)                               June 30,           June 30,
                                             2008     2007      2008     2007
    Revenues
     Oil sales                               $122     $205      $318     $375
     Gas sales                                  5        4         9        8
     Marketing and midstream revenues           -        6         5        7
     Total revenues                           127      215       332      390
    Expenses and other income, net
     Lease operating expenses                  10       19        24       39
     Marketing and midstream operating
      costs and expenses                        2        2         3        3
     Depreciation, depletion and
      amortization of oil and gas properties    -        2         -       18
     Accretion of asset retirement
      obligation                                -        1         1        2
     Gain on sale of oil and gas
      properties                             (736)       -      (736)       -
     Reduction of carrying value of oil
      and gas properties                        -       63         -       63
     Total expenses and other income, net    (724)      87      (708)     125
    Earnings before income tax expense        851      128     1,040      265
    Income tax expense (benefit)
     Current                                  574       71       641      115
     Deferred                                (430)     (23)     (406)      (7)
     Total income tax expense                 144       48       235      108
    Earnings from discontinued operations    $707      $80      $805     $157
    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 and free cash flow are Non-GAAP
financial measures. 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. Devon believes free
cash flow is relevant because it is a measure of cash available to service
debt. Cash flow before balance sheet changes and free cash flow are used by
certain securities analysts as a measure of Devon's financial results.


    
    RECONCILIATION TO GAAP INFORMATION      Quarter Ended    Six Months Ended
     (in millions)                             June 30,          June 30,
                                            2008     2007     2008     2007
    Net Cash Provided By Operating
     Activities (GAAP)                     $2,931   $1,832   $5,186   $3,349
     Changes in assets and liabilities -
      continuing operations                  (365)     (59)       2     (102)
     Changes in assets and liabilities -
      discontinued operations                 124       43       61       37
    Cash flow before balance sheet
     changes (Non-GAAP)                    $2,690   $1,816   $5,249   $3,284
    Less:
     Capital expenditures                   1,995    1,428    3,987    3,005
    Free cash flow (Non-GAAP)                $695     $388   $1,262     $279
    
    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 and debentures
exchangeable into shares of Chevron Corporation common stock. 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.  Devon also
believes that excluding debentures exchangeable into shares of Chevron
Corporation common stock provides a clearer view of net debt. Devon owns 14.2
million shares of Chevron Corporation common stock. The majority of these
shares are on deposit with an exchange agent for the possible exchange on the
$621 million principal amount of exchangeable debentures.


    
    RECONCILIATION TO GAAP INFORMATION
     (in millions)
                                                            June 30,
                                                     2008              2007
    

    
    Total debt (GAAP)                               $5,450            $7,596
    Adjustments:
     Cash and short-term investments                (1,838)           (1,357)
     Debentures exchangeable into Chevron stock       (621)             (737)
     Net Debt (Non-GAAP)                            $2,991            $5,502
    

    
    Total debt                                      $5,450            $7,596
    Stockholders' equity                            23,433            19,686
     Total Capitalization (GAAP)                   $28,883           $27,282
    

    
    Net debt                                        $2,991            $5,502
    Stockholders' equity                            23,433            19,686
     Adjusted Capitalization (Non-GAAP)            $26,424           $25,188

    




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

Organization Profile

DEVON ENERGY CORPORATION

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