Devon Business Practices

[knightrider]

I thought I would start this thread since we have one for Chesapeake. After reading through some of today's financial news I found this intereseting.

From Mad Money's Jim Cramer:

That was the lesson of Devon (DVN +1.12%) Thursday. The company has decided the time is right to take a huge chunk of money and just go prospecting for oil. It makes sense that the stock could tack on still more points Friday, because Devon has a new find, still under wraps, that could be gigantic, a real needle mover -- and we know that needle movers get stocks rocking.

I wonder what the big find is? What formation/location?

http://money.msn.com/top-stocks/post...d-418f28480b27

[Pete]

Hope he's right!

Also, the lack of posting about Devon's business versus Chesapeake illustrates the tremendous difference in how the two companies operate.

[pw405]

So, if Devon spent 750 million on their new office, and they made 4 billion last quarter, doesn't that mean they had the tower paid for in 3 weeks?

[MikeOKC]

So, if Devon spent 750 million on their new office, and they made 4 billion last quarter, doesn't that mean they had the tower paid for in 3 weeks?

Devon basically paid cash for their tower. Unheard of. Read this blog post:
Optimizing Shareholder Value – A Lesson from Devon Energy’s Management

Seriously, Devon Energy is looked at, by a lot of corporate America, as a model for debt reduction/elimination. They are a very conservative corporation - as opposed to the complete opposite right here in the same city with the big spending of CHK (ridiculous), and even Sandridge.

Because I've been an outspoken critic of McClendon and the corporate (mal)governance of Chesapeake, I don't want anyone to think I'm a Devon homer either. Devon is just a well run corporation. However, I have problems with the amount of power in Larry Nichols hands. In my opinion, he's a plutocrat who has used his money and position to place him on the right boards at the right time and has played OKC like a fiddle for the long-term purposes of Devon Energy and Larry Nichols. But, I admire him as a businessman. John Richels is a great CEO, Hager, Agosta, and Nichols himself is an excellent corproate team. And this is critical --- the board is no rubber stamp.

[Bellaboo]

Devon basically paid cash for their tower. Unheard of. Read this blog post:
Optimizing Shareholder Value – A Lesson from Devon Energy’s Management

Seriously, Devon Energy is looked at, by a lot of corporate America, as a model for debt reduction/elimination. They are a very conservative corporation - as opposed to the complete opposite right here in the same city with the big spending of CHK (ridiculous), and even Sandridge.

Because I've been an outspoken critic of McClendon and the corporate (mal)governance of Chesapeake, I don't want anyone to think I'm a Devon homer either. Devon is just a well run corporation. However, I have problems with the amount of power in Larry Nichols hands. In my opinion, he's a plutocrat who has used his money and position to place him on the right boards at the right time and has played OKC like a fiddle for the long-term purposes of Devon Energy and Larry Nichols. But, I admire him as a businessman. John Richels is a great CEO, Hager, Agosta, and Nichols himself is an excellent corproate team. And this is critical --- the board is no rubber stamp.

He played his 'fiddle' all the way to a $750 million dollar investment in OKC....... could have taken that somewhere else...

[Questor]

I really love Devon as a business and a stock. They are very financially conservative, but they don't always act conservatively. But that's what is great about them... they know when to take a risk, and when they do something big they usually have enough cash backing them up to mitigate it. That plus they seem to go about things and doing their homework very smartly. Maybe I am crazy but I sort of view them as the Apple of energy stocks because of this. Just a great company.

[ou48A]

Devon Energy has an outstanding reputation.

Continental Resources is another OKC company who is very well run also.
They are growing rapidly and will also do some very good things for our community.
I know that Harold Hamm and his wife have already donated millions to OU’s diabetes center that bears their name. There is a Devon Energy center on OU’s campus. And they both do much more than this.

But successful corporations have a way of making our community’s better places to live and work.

[knightrider]

This is why its important to do your due diligence. But $3.5 million is pocket change.

http://www.reuters.com/article/2012/...anyNews&rpc=43

[Maynard]

Devon CEO: No Interest In Acquisitions, Despite Abundant Cash 04/04 11:41 AM

--------------------------------------------------------------------------------

--Company increases 2012 capital expenditure budget to $6.1 billion to $6.5 billion

--Devon plans to prioritize oil projects development over acquisitions

--Company expanding footprint in new U.S. shale oil regions

By Isabel Ordonez

Of DOW JONES NEWSWIRES

HOUSTON (Dow Jones)--Devon Energy Corp. (DVN:$71.12,00$-0.03,00-0.04%) is not planning to make acquisitions despite having an abundance of cash, the company's top executive said Wednesday.

"People think we need to do an acquisition to grow. We don't," Chief Executive John Richels told analysts in a presentation. "We have no interest in acquiring assets."

Richels spoke in an effort to soothe concerns of some investors who believe the company is likely to make a dilutive acquisition with the $7.1 billion cash it has in hand. Richels said he and his management team haven't thought "for five minutes" to make a large acquisition, he added.

Devon plans to invest its cash in ways that make financial sense for the company, such as increasing its capital expenditure for production and exploration projects that have significant potential to yield oil, Richels said.

Oklahoma City's Devon said it plans to spend $6.1 billion to $6.5 billion this year, up $1 billion from its original budget. The company expects to spend $7.8 billion in exploration and production projects by 2016.

Devon also expects a compound annual production growth from 2012 to 2016 of 16% to 18%. Oil and gas output is expected to increase to 340 million barrels of oil equivalent from the 255 million barrels of oil equivalent it expects to produce in 2012, the company said.

The company's projections assume WTI oil prices of $105 a barrel and natural gas prices of $2.75 a million British thermal units this year. Devon assumes WTI crude prices will be around $95 a barrel and gas prices at $4.40 a MMBtu by 2016.

On the exploration side, Devon said it has identified a number of new promising shale oil areas where it plans to increase its footprint. The company said plans to drill 15 wells in the oil-rich Cline Shale in West Texas where it has 500,000 acres. Devon is also building a "significant" position of 250,000 acres in an additional undisclosed shale oil formation, the company said.

Devon expects an additional joint venture transaction in 2013 that will be about half the size of the deal it recently announced with China Petroleum & Chemical Corp. (0386.HK), better known as Sinopec. In February, both companies entered into a $2.5 billion deal for a one-third stake in five U.S. shale oil and gas fields.

[ou48A]

Very good news for DVN^

According to CNBC, in the coming years there will be a minimum of 10 billion spent on new supporting oil and NG infrastructure each year.

It would be good to see Oklahoma leaders trying to recruit many of these new high wage jobs to Oklahoma.

[ou48A]

Very good CNBC DVN video


http://video.cnbc.com/gallery/?video...o%7C&par=yahoo

[Just the facts]

He played his 'fiddle' all the way to a $750 million dollar investment in OKC....... could have taken that somewhere else...

Not to derail the thread but do you realize what you are saying with this comment? You seem to be making the case that the City is for sale to the highest bidder and that doing so is okay.

Plutocracy (from Ancient Greek ploutos, meaning "wealth", and kratos, meaning "power, rule") is rule by the wealthy, or power provided by wealth.

1. the rule or power of wealth or of the wealthy.
2. a government or state in which the wealthy class rules.
3. a class or group ruling, or exercising power or influence, by virtue of its wealth.

Also, Devon Tower was an investment in Devon Energy. The building belongs to them and they use it to run THEIR business. I wonder how many people in OKC would feel if the urban core had the same type of voting system Central London has.

[Maynard]

Devon Energy Earns $393 Million in First-Quarter 2012; Oil Production Increases 26 Percent 05/02 06:30 AM

--------------------------------------------------------------------------------

OKLAHOMA CITY--(BUSINESS WIRE)-- Devon Energy Corporation (DVN:$70.65,00$0.80,001.15%) today reported net earnings of $393 million for the quarter ended March 31, 2012, or $0.97 per common share ($0.97 per diluted share). This compares with first-quarter 2011 net earnings of $416 million, or $0.97 per common share ($0.97 per diluted share).

Devon’s first-quarter 2012 financial results were impacted by certain items securities analysts typically exclude from their published estimates. Adjusting for these items, the company earned $427 million or $1.05 per diluted share in the first quarter of 2012. The adjusting items are discussed in more detail later in this news release.

Devon’s first-quarter 2012 earnings were significantly affected by unusually wide Canadian oil price differentials. Following the end of the quarter, Canadian oil differentials have begun to normalize.

Strong Oil Growth Drives Record Production

Total production of oil, natural gas and natural gas liquids averaged 694,000 oil-equivalent barrels (Boe) per day in the first quarter of 2012. This is the highest daily production rate in history from the company’s North American onshore properties and represents a 10 percent increase compared to the year-ago quarter. Record production from the company’s cornerstone development properties, including the Permian Basin, Jackfish, Cana-Woodford and Barnett Shale, drove the strong first quarter performance.

Devon’s first quarter liquids production increased for the sixth consecutive quarter to 256,000 Boe per day. This growth was led by a 26 percent year-over-year increase in oil production.

Sales of oil, natural gas and natural gas liquids, before the impact of hedges, increased 3 percent to $1.9 billion in the first quarter of 2012. Cash settlements related to oil and natural gas hedges increased revenues by $158 million or $2.50 per Boe in the first-quarter 2012.

Marketing and midstream operating profit was $112 million in the first quarter of 2012. This was a 7 percent decrease compared with the first-quarter 2011. The decrease was attributable to lower natural gas and natural gas liquids prices.

Permian Basin Activity and Production Growth Lead Operating Highlights

Devon continued to aggressively ramp-up activity in the Permian Basin in the first quarter. Since year-end the company has added five operated rigs and now has 21 rigs running in the basin.
Permian Basin oil production increased 32 percent over the first-quarter 2011. Liquids production accounted for 76 percent of the 56,000 Boe per day produced in the Permian Basin during the first quarter.
Additionally, Devon recently enhanced its leasehold position in the Permian Basin by assembling a 500,000 net acre position in the Cline Shale light-oil play. The company is currently drilling its first horizontal well in the Cline and expects to drill 15 wells in 2012.
Also in the Permian, Devon completed 16 operated Bone Spring wells in the first quarter. Initial daily production averaged 580 Boe per day per well.
Net production from Devon’s Jackfish 1 and Jackfish 2 oil sands projects in Canada averaged a record 46,000 barrels per day in the first quarter, representing a 55 percent increase over the year-ago quarter. The company’s Jackfish 2 production is now at 21,000 barrels per day and will continue to ramp-up throughout 2012.
Construction of Devon’s third Jackfish oil sands project is now approximately 30 percent complete. Jackfish 3 is expected to produce 35,000 barrels per day before royalties for more than 20 years. Plant startup is targeted for late 2014.
The company’s Cana-Woodford Shale production averaged a record 271 million cubic feet of natural gas equivalent per day in the first quarter of 2012. Liquids production averaged 13,000 barrels per day, an 80 percent year-over-year increase.
Net liquids production from the Barnett Shale increased more than 20 percent compared to the year-ago quarter to 52,500 barrels per day, accounting for 23 percent of total Barnett production. In aggregate, net production reached a record 1.37 billion cubic feet of natural gas equivalent per day in the first quarter.
Devon brought seven operated Granite Wash wells online in the first quarter. Initial production from these wells averaged 1,650 Boe per day. The company has an average working interest of 73 percent in these wells.
In the first quarter, the company continued to capture acreage in new oil-focused opportunities. Devon has now contracted for or leased 250,000 net acres in an undisclosed position. The company is targeting 500,000 net acres in this play.
Cost Containment Efforts Partially Offset Rising Costs

First-quarter 2012 expenses increased compared to the year-ago quarter due to rising oilfield service and supply costs. Compared to the first quarter of 2011, the company’s total pre-tax cash costs increased 5 percent to $13.80 per Boe. The company’s successful cost management efforts and efficient operations partially offset the full impact of industry inflation and a shift towards oil projects. In general, oil projects are more expensive to develop and have higher operating costs than gas production.

Lease operating expenses (LOE) were $514 million in the first quarter. On a unit of production basis, LOE increased 9 percent compared with the first-quarter 2011 and was 2 percent higher than the fourth-quarter 2011. The increase in LOE reflects rising industry costs coupled with increased activity levels in oil-focused basins.

Taxes other than income decreased 6 percent to $102 million in the first quarter of 2012. The year-over-year decrease was driven by lower ad valorem and production taxes.

Interest expense for the first quarter totaled $87 million, a $6 million increase over the first quarter of 2011. Higher average debt balances drove the increase.

First-quarter general and administrative expenses were $168 million, or $2.67 per Boe. This compares with $2.29 per Boe in the first quarter of 2011. Higher personnel costs were the largest contributor to the increase. Devon has increased the size of its workforce to support its expanding exploration and development activity.

Compared with the first-quarter 2011, depreciation, depletion and amortization expense (DD&A) increased 21 percent to $10.78 per Boe. Inflation in industry costs and increased investment in oil-focused projects drove DD&A expense higher.

Balance Sheet and Liquidity Remain Strong

In the first quarter of 2012, Devon generated cash flow before balance sheet changes of $1.4 billion. On a per share basis, this represents a 3 percent increase in cash flow compared to the first-quarter 2011. At March 31, 2012, the company’s cash and short-term investments totaled $7.1 billion, and its net debt to adjusted capitalization was 15 percent.

Devon Adds Oil and Gas Hedges in 2012 and 2013

The strong oil price environment has provided Devon the opportunity to add attractive oil hedges for 2013. The company has entered into various swap and collar contracts to hedge 72,000 barrels per day of oil production. Of this total, 31,000 barrels per day are swapped at a weighted average price of $104 per barrel. The remaining 41,000 barrels per day utilize costless collars with a weighted average ceiling of $117 per barrel and a floor of $91 per barrel. For the remainder of 2012, the company has 109,000 barrels per day of oil production hedged, or roughly 70 percent of forecasted oil production, at a weighted average floor price of $95 per barrel.

The company has also recently bolstered its natural gas hedging position. For the remaining three quarters of 2012, Devon has approximately 1 billion cubic feet per day protected at a weighted average floor price of $4.42 per thousand cubic feet. This represents about 40 percent of Devon’s 2012 forecasted gas production.

Conference Call to be Webcast Today

Devon will discuss its first-quarter 2012 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon’s internet home page at www.devonenergy.com

[Maynard]

Fitch rates Devon Energy bonds 'BBB+' -- Maintains Stable Outlook 05/07

--------------------------------------------------------------------------------

(The following statement was released by the rating agency)

May 7 - Fitch Ratings has assigned a 'BBB+' rating to Devon Energy Corporation's expected issuance of unsecured notes with maturities of 2017, 2022, and 2042. The proceeds are to be used to repaycommercial paper borrowings as they come due, to repay amounts drawn on the revolving credit facility and for other general corporate purposes. The Rating Outlook for Devon remains Stable. A complete list of ratings is provided at the end of this release.

Devon's ratings reflect the company's large, low cost proven reserve base in North America, its significant and growing production, its conservative financial strategy and robust credit profile. Devon's proven reserve base is roughly 3 billion barrels of oil equivalent (boe) split approximately 58% natural gas and 42% liquids. The proved developed (PD) component of the proven reserve base is 74%. In the first quarter of 2012, Devon's production grew to approximately 694,000 boe/d and is expected to be roughly flat in the near term, while growing modestly by year end.

Devon generated EBITDA of $6.4 billion in the latest 12 months (LTM) period resulting in debt/EBITDA of 1.7 times (x) and EBITDA/interest expense of over 15x. The company's gross debt of $10.8 billion at March 31, 2012 consisted of senior unsecured notes of nearly $6 billion, $750 million of revolver borrowings and approximately $4.2 billion of commercial paper outstanding. According to the preliminary prospectus at April 30, 2012 revolver borrowings were $600 million and $3.7 billion of commercial paper was outstanding for an implied gross debt total of $10.2 billion. Devon also possesses approximately $7.1 billion in cash and marketable securities that resulted largely from its international divestiture program over the several quarters. At this time, nearly this entire amount resides offshore awaiting potential changes to tax repatriation law in the U.S.

Using March 31, 2012 debt balances, Fitch calculates reserve based leverage metrics that result in an adjusted gross E&P debt/PD of approximately $5.24/boe of PD reserves after factoring asset retirement obligations and giving some credit for the company's consolidated midstream operations. Adjusted gross E&P debt/flowing barrel of production is $16,790/boe/d.

Largely as a result of growth oriented spending, Devon has been free cash flow negative in the LTM period by about $2.1 billion (nearly $500 million of this deficit is due a pension contribution in 2011). Fitch expects this trend to continue in 2012 given challenging price realizations and capital spending expectations.

Liquidity is provided by the aforementioned cash on hand and marketable securities, cash flow from operations and availability under the company's $2.16 billion unsecured credit facility due April 7, 2013 ($600 million drawn at April 30, 2012). The facility contains only one material financial covenant which0 requires Devon's ratio of total funded debt to total capitalization to be less than 65%. As of March 31, 2012, Devon had ample headroom under this covenant, with total debt to capitalization of 24%. Significant maturities other than commercial paper balances are relatively light and include $500 million due in 2014 and $500 million due 2016.

Potential catalysts for a positive rating action include continued robust reserve replacement rates at competitive F&D costs accompanied by a commitment from management to maintain a robust financial profile throughout industry cycles. Negative rating changes would likely result from significantly leveraging share repurchase activity, a leveraging acquisition, or from further increases to capital expenditure levels resulting in significantly higher than expected debt levels.


Devon Energy Corporation (DVN:$64.392,0$-0.638,0-0.98%)
--Long-term Issuer Default Rating at 'BBB+';
--Senior unsecured notes at 'BBB+';
--Senior unsecured credit facility at 'BBB+';
--Short-term IDR at 'F2';
--Commercial paper (CP) at 'F2'.

Devon Financing Corporation U.L.C.
--Senior unsecured notes at 'BBB+'.

Ocean Energy
--Senior unsecured notes at 'BBB'.

The Rating Outlook for Devon remains Stable.

[ljbab728]

Sounds like a good, sensible business decision.

http://newsok.com/devon-energy-to-bo...rticle/3674019

[lasomeday]

OKC Devon employees with the company match donated over $1.8 million to United Way today.

[ljbab728]

While not Earth shattering, this is interesting new coming from Devon.

Co-founder Larry Nichols to retire from Devon Energy in Oklahoma City | NewsOK.com

[catch22]

I had no idea he was 70 years old...

It looks like he will remain on the board.

[Spartan]

I had no idea he was 70 years old...

It looks like he will remain on the board.

I literally just saw the story and logged on here to make the exact same remark LOL

[Bellaboo]

Rode the elevator up to Vast last night and a man in a suit was telling his lady friend that he had heard that Devon was laying off some IT folks........his only comment was that it seemed a bit odd that they would do this with oil prices the way they were.

This is just hear say.

[HangryHippo]

Devon is proceeding with plans for a new MLP.

[Pete]

Anyone know if they plan to house this new independent entity in Devon Tower?

I'm sure the existing staff are there already.

[HangryHippo]

I had read elsewhere that the plan was to leave these employees in Devon Tower. Who knows if that's still the case.

[ou48A]

Devon Energy Corp. promoted David Hager, the head of its exploration and production business, as its chief operating officer.

President and Chief Executive John Richels said Mr. Hager's "extensive industry and leadership experience has enabled him to make a significant contribution to the company over the last four years. He will now be in a position to have an even greater impact upon Devon's success through his leadership of companywide operations and the related administrative functions."

Mr. Hager, 56 years old, has led the exploration and production business since 2009 after serving as a board member since 2007.

Tony Vaughn, 55, was named as Mr. Hager's successor. Mr. Vaughn will be responsible for all of Devon's oil and natural gas exploration, drilling and production operations. He previously had the title senior vice president, exploration and strategic services.

Devon Energy's board recently approved the company's proposed formation of a publicly traded midstream company, joining a long line of energy firms that have formed master limited partnerships.

The company in May reported that it swung to a substantial first-quarter loss as it recorded a $1.9 billion write-down stemming from lower oil and natural-gas liquids prices.

[Pete]

Just saw this in a NewsOK article from a few days ago.

Devon Energy has qualified for up to $66.8 million in tax rebates to create up to 989 new jobs over the next 10 years, the Commerce Department said.

The jobs Devon is adding are not part of an abrupt expansion for the company, but rather represent continued, steady growth, Devon spokesman Chip Minty said.

“These jobs are based on our long-range planning projections for the next 10 years,” Minty said.

Devon, Boeing earn state incentives for plans to bring up to 1,817 jobs to Oklahoma | News OK