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DVN > SEC Filings for DVN > Form 8-K on 7-Nov-2012All Recent SEC Filings

Show all filings for DEVON ENERGY CORP/DE

Form 8-K for DEVON ENERGY CORP/DE


7-Nov-2012

Other Events


Item 8.01. Other Events

Information Regarding Forward-Looking Estimates

Our original 2012 forward-looking estimates are included in our Form 8-K filed on February 15, 2012. These estimates were based on our examination of historical operating trends, the information used to prepare our December 31, 2011, reserve reports and other data in our possession or available from third parties. Subsequently, we updated certain of our capital and operating metrics at an analyst conference in April 2012, during our first quarter 2012 earnings call in May 2012 and in our Form 8-K filed on August 1, 2012.

Based on our examination of historical operating trends during the first three quarters of 2012, we are further updating certain of our fourth quarter 2012 estimates. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Consequently, actual future results could differ materially from our expectations due to a number of factors, such as changes in the supply of and demand for oil, natural gas and NGLs and related products and services; exploration or drilling programs; political or regulatory events; general economic and financial market conditions; and other factors discussed in this report.

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

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

Oil, Gas and NGL Production and Prices

We estimate that our combined fourth quarter 2012 oil, gas and NGL production
will total 670 to 680 MBoepd. Set forth below are our estimates of oil, gas and
NGL production per day.



                                            Low        High
                         Oil (MBbls/d)        148         150
                         Gas (MMcf/d)       2,470       2,510
                         NGLs (MBbls/d)       110         112

                         Total (MBoe/d)       670         680

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

                                   Prices as a % of NYMEX Price
                              Oil              Gas              NGLs
                 U.S.       89% to 99%       76% to 86%       28% to 33%
                 Canada     64% to 74%       80% to 90%       48% to 53%
                 Total      75% to 85%       77% to 87%       29% to 34%


Commodity Price Risk Management

As of October 31, 2012, we had the following oil derivative positions associated
with fourth quarter 2012 production. Our oil derivatives settle against the
average of the prompt month NYMEX West Texas Intermediate futures price.



                                             Price Swaps                                           Price Collars                                        Call Options Sold
                                                      Weighted                                Weighted                     Weighted                                  Weighted
                                     Volume        Average  Price        Volume         Average Floor  Price        Average Ceiling  Price         Volume         Average  Price
Period                              (Bbls/d)           ($/Bbl)          (Bbls/d)              ($/Bbl)                      ($/Bbl)                (Bbls/d)           ($/Bbl)
Q4 2012                                57,000      $        105.47         77,000      $                89.72      $                 122.39          19,500      $          95.00




                                    Basis Swaps
                                                        Weighted Average
                                         Volume       Differential to  WTI
Period              Index               (Bbls/d)            ($/Bbl)
Q4 2012     Western Canadian Select        15,000           ($17.29)

As of October 31, 2012, we had the following natural gas derivative positions associated with fourth quarter 2012 production. Our natural gas derivatives settle against the Inside FERC first of the month Henry Hub index.

                                      Price Swaps                                                 Price Collars                                               Call Options Sold
                                                 Weighted                                     Weighted                       Weighted                                       Weighted
                             Volume           Average  Price           Volume           Average Floor  Price          Average Ceiling  Price           Volume            Average  Price
Period                     (MMBtu/d)            ($/MMBtu)             (MMBtu/d)               ($/MMBtu)                     ($/MMBtu)                 (MMBtu/d)            ($/MMBtu)

Q4 2012 657,609 $ 3.92 1,323,696 $ 3.50 $ 4.17 487,500 $ 6.00

Other Operating Items

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



                                                           Low                       High
                                                          ($ in millions, except per Boe)
Marketing & midstream operating profit               $            90            $           110
Lease operating expenses per Boe                     $          8.40            $          8.60
Depreciation, depletion and amortization per
Boe                                                  $         11.30            $         11.50
General & administrative expenses per Boe            $          2.60            $          2.80
Taxes other than income taxes as % of oil, gas,
and NGL sales                                                   5.40 %                     6.40 %
Interest expense                                     $           105            $           115
Other expense, net                                   $            10            $            20

Current income tax rate                                           -  %                       10 %
Deferred income tax rate                                          30 %                       30 %

Total income tax rate                                             30 %                       40 %

Quarterly per share dividend rate                    $          0.20

Interest Rate Risk Management

As of October 31, 2012, we had fixed-to-floating interest rate swaps as follows.



                            Fixed Rate         Variable
             Notional        Received         Rate Paid           Expiration
            (In millions)
           $750               3.88%        Federal funds rate       July 2013


Capital Expenditures

The table below includes our estimates for our fourth quarter capital
expenditures.



                                                  Low         High
                                                  ($ in millions)
                 Development                    $  1,200     $ 1,300
                 Exploration                         425         475

                 Subtotal                          1,625       1,775
                 Capitalized G&A and interest         95         105

                 Total oil and gas                 1,720       1,880

                 Midstream                           140         160
                 Corporate & other                    40          60

                 Total other                         180         220

                 Total capital expenditures     $  1,900     $ 2,100


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