Market Overview

Devon Energy Reports Fourth-Quarter and Full-Year 2018 Results


Devon Energy Corp. (NYSE:DVN) today reported operational and financial
results for the fourth quarter and full-year 2018. Also provided is the
company's guidance for the first quarter and full-year 2019.
Supplemental financial tables for the fourth quarter, full-year 2018 and
2019 outlook are available on the company's website at

Fourth-Quarter and Full-Year 2018 Highlights

  • Light-oil production advances 20 percent year over year in fourth
  • Prolific well productivity in Delaware Basin drives high-return U.S.
    oil growth
  • U.S. oil reserves added at attractive finding cost
  • Corporate cost structure improves 21 percent in fourth quarter
  • Divestiture program approaches nearly $5 billion in proceeds
  • Stock-repurchase program reaches $3.4 billion

"2018 was a pivotal year for Devon as we took several significant steps
toward achieving our long-term strategic goals," said Dave Hager,
president and CEO. "Operationally, we successfully transitioned our
franchise U.S. oil business into full-field development, which resulted
in high-return, light-oil production advancing 20 percent in the fourth
quarter. In addition to this strong operating performance, we made
substantial progress high-grading our asset portfolio, building
per-share value through our industry-leading share-repurchase program
and reducing our outstanding debt by more than 40 percent."

Completing Transformation to High-Return U.S. Oil Growth Company

Additionally, in a separate press release issued today, Devon announced
that its board of directors has authorized the company to pursue the
separation of its Canadian and Barnett Shale assets to complete the
transformation to a high-return U.S. oil growth business. The company
will evaluate multiple methods of separating the assets, including a
potential sale or spin-off. The separation will allow Devon to focus on
its top-tier, high-return U.S. oil assets and is aligned with the
company's previously announced long-term strategic plan.

"With our world-class U.S. oil resource plays rapidly building momentum
and achieving operating scale, the final step in our multi-year
transformation is an aggressive, transformational move that will
accelerate value creation for our shareholders by further simplifying
our resource-rich asset portfolio," said Hager. "New Devon will emerge
with a highly focused U.S. oil portfolio and has the ability to
substantially increase returns and profitability as we aggressively
align our cost structure to expand margins with this top-tier oil
business. The New Devon will be able to grow oil volumes at a mid-teens
rate while generating free cash flow at pricing above $46 per barrel."

Share-Repurchase Program Increased to $5 Billion and Dividend Raised
13 Percent

Devon also announced today that its board of directors authorized a $1
billion increase to the company's previously announced $4 billion
share-repurchase program, bringing the total repurchase program to $5
billion. The authorization for the repurchase program expires on Dec.
31, 2019. As of Feb. 18, 2019, Devon had completed $3.4 billion of
repurchases under the program, totaling approximately 90 million shares.

All purchases will be made in accordance with applicable laws from time
to time in open-market or private transactions, depending on market
conditions, and may be discontinued at any time. At the current share
price, this program covers nearly 30 percent of the company's
outstanding common stock.

Additionally, the company's board of directors approved a 13 percent
increase in its quarterly common stock dividend beginning in the second
quarter of 2019. The new quarterly dividend rate will be $0.09 per
share, compared to the prior quarterly dividend of $0.08 per share. The
adjusted dividend is payable on June 28, 2019, to stockholders of record
at the close of business on June 14, 2019.

Delaware Basin Drives U.S. Oil Production 20 Percent Higher

Fourth-quarter production was highlighted by Devon's U.S. oil business,
which is attaining the highest margins and returns in the company's
portfolio. In the quarter, light-oil production from the company's
retained assets in the U.S. averaged 126,000 barrels per day, a 20
percent increase compared to the fourth quarter of 2017. This strong
performance in the U.S. was driven by growth in the company's four key
oil assets: the Delaware Basin, STACK, Powder River Basin and Eagle Ford.

The strongest asset-level performance in the quarter was achieved by the
Delaware Basin operations in southeast New Mexico. Oil production from
this world-class asset increased 49 percent year over year, driving
volumes to 84,000 oil-equivalent barrels (Boe) per day. In early 2019,
production growth has accelerated, with January rates averaging 96,000
Boe per day, a 14 percent increase compared to the fourth quarter of

In Canada, net oil production averaged 120,000 barrels per day in the
fourth quarter. Production was reduced by approximately 17,000 barrels
per day in the quarter due to the company's decision to curtail volumes
in response to market conditions. These curtailments were partially
offset by royalty adjustments related to the lower commodity price

Overall, Devon's reported net production averaged 532,000 Boe per day
during the fourth quarter of 2018, exceeding midpoint guidance by 3,000
Boe per day. Of this total, oil production accounted for the largest
component of the product mix at 47 percent of total volumes.

Light-Oil Reserves Added at Attractive Finding Costs

Devon's estimated proved reserves were 1.9 billion Boe on Dec. 31, 2018,
with proved developed reserves accounting for 77 percent of the total.
The company's reserve additions in 2018 came primarily from its retained
U.S. assets, where proved oil reserves increased 16 percent year over

In 2018, Devon's oil-driven capital programs in the U.S. added 232
million Boe of reserves (extensions and discoveries). This represents a
reserve replacement rate in the U.S. of approximately 150 percent.
Excluding property acquisition costs, these reserves were added at an
attractive finding cost of less than $10 per Boe.

Premium Gulf Coast Pricing Drives Upstream Revenue Higher in 2018

Devon's upstream revenue, excluding commodity derivatives, totaled $5.7
billion in 2018, a 10 percent increase compared to 2017. Contributing
factors to revenue growth were higher commodity price realizations and
growth in higher-margin U.S. oil production.

Also contributing to higher revenues in 2018 were firm transport and
marketing agreements that provide the majority of Devon's U.S. oil
production direct access to advantaged Gulf Coast pricing. Combined with
price protection provided by regional basis swaps, oil realizations in
the U.S. averaged nearly 100 percent of the West Texas Intermediate
(WTI) benchmark.

In the fourth quarter, the company's upstream revenue, excluding
commodity derivatives, totaled $1.1 billion, an 18 percent decline
compared to the year-ago quarter. Revenue in the fourth quarter was
impacted by historically wide differentials in Canada, which negatively
impacted the realized price on heavy oil production. Devon mitigated the
weak pricing environment in Canada through its Western Canadian Select
basis swap hedge position that generated $144 million of cash
settlements in the quarter.

Cost Structure Continues to Improve in the Fourth Quarter

Devon's production expense, which represents field-level operating
costs, totaled $556 million in the fourth quarter. This result is a 2
percent improvement on a per-unit basis compared to the third quarter of
2018. The largest components of production expense are lease operating
expense and transportation, which totaled $471 million, or $9.62 per Boe
in the quarter. Production and property taxes also contributed $85
million to production expense during the fourth quarter.

General and administrative (G&A) expenses totaled $151 million in the
fourth quarter, a 21 percent improvement from the fourth quarter of
2017. The lower overhead costs were driven by reduced personnel expenses.

The company also reduced financing costs in 2018. With the retirement of
$1.1 billion of outstanding debt over the past year, net financing costs
improved by 9 percent in the fourth quarter to $70 million compared to
the fourth quarter of 2017.

Fourth-Quarter Earnings and Cash-Flow Results

The company reported net earnings attributable to Devon of $1.1 billion,
or $2.48 per diluted share, in the fourth quarter. Adjusting for items
securities analysts typically exclude from published estimates, the
company's core earnings totaled $46 million, or $0.10 per diluted share.

Devon's operating cash flow from continuing operations totaled $542
million in the fourth quarter and $2.2 billion for the full-year 2018.
The company also generated additional cash inflows through its ongoing
divestiture activity. With the closing of the EnLink transaction,
combined with other minor asset sales, total proceeds from Devon's
divestiture program have reached nearly $5 billion.

Debt Reduction Strengthens Investment-Grade Financial Position

Overall, Devon's financial position remains exceptionally strong, with
investment-grade credit ratings and excellent liquidity. The company
exited the fourth quarter with $2.4 billion of cash on hand and an
undrawn credit facility of $3 billion. At year end, Devon had an
outstanding balance of $5.9 billion with no significant debt maturities
until mid-2021.

Three-Year Performance Targets and Detailed 2019 Guidance

In conjunction with fourth-quarter results, Devon provided updated
three-year performance targets and its detailed capital and production
outlook for 2019. The company's three-year performance targets are
available within the company's fourth-quarter 2018 operations report at
Detailed guidance for the first quarter and full-year 2019 are provided
within the supplemental financial tables that are available on the
company's website at

Conference Call Webcast and Supplemental Earnings Materials

Also provided with today's release is the company's detailed operations
report that is available on the company's website at
The company's fourth-quarter conference call will be held at 10 a.m.
Central (11 a.m. Eastern) on Wednesday, Feb. 20, 2019, and will serve
primarily as a forum for analyst and investor questions and answers.

Non-GAAP Disclosures

This release may include non-GAAP (generally accepted accounting
principles) financial measures. Such non-GAAP measures are not
alternatives to GAAP measures, and you should not consider these
non-GAAP measures in isolation or as a substitute for analysis of our
results as reported under GAAP. Reconciliations of these non-GAAP
measures and other disclosures are provided within the supplemental
financial tables that are available on the company's website at

Forward-Looking Statements

This press release includes "forward-looking statements" as defined
by the Securities and Exchange Commission (the "SEC"). Such statements
include those concerning strategic plans, our expectations and
objectives for future operations, as well as other future events or
conditions, and are often identified by use of the words and phrases
"expects," "believes," "will," "would," "could," "continue," "may,"
"aims," "likely to be," "intends," "forecasts," "projections,"
"estimates," "plans," "expectations," "targets," "opportunities,"
"potential," "anticipates," "outlook" and other similar terminology. All
statements, other than statements of historical facts, included in this
press release that address activities, events or developments that Devon
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 our
control. Consequently, actual future results could differ materially
from our expectations due to a number of factors, including, but not
limited to: the volatility of oil, gas and NGL prices; uncertainties
inherent in estimating oil, gas and NGL reserves; the extent to which we
are successful in acquiring and discovering additional reserves; the
uncertainties, costs and risks involved in oil and gas operations;
regulatory restrictions, compliance costs and other risks relating to
governmental regulation, including with respect to environmental
matters; risks related to regulatory, social and market efforts to
address climate change; risks related to our hedging activities;
counterparty credit risks; risks relating to our indebtedness;
cyberattack risks; our limited control over third parties who operate
some of our oil and gas properties; midstream capacity constraints and
potential interruptions in production; the extent to which insurance
covers any losses we may experience; competition for assets, materials,
people and capital; our ability to successfully complete mergers,
acquisitions and divestitures; and any of the other risks and
uncertainties discussed in our Form 10-K and other filings with the SEC.
Investors are cautioned that any such statements are not guarantees of
future performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this press release are made as of the date
of this press release, even if subsequently made available by Devon on
its website or otherwise. Devon does not undertake any obligation to
update the forward-looking statements as a result of new information,
future events or otherwise. The SEC permits oil and gas companies, in
their filings with the SEC, to disclose only proved, probable and
possible reserves that meet the SEC's definitions for such terms, and
price and cost sensitivities for such reserves, and prohibits disclosure
of resources that do not constitute such reserves. This release may
contain certain terms, such as resource potential, potential locations,
risked and unrisked locations, estimated ultimate recovery (or EUR),
exploration target size and other similar terms. These estimates are by
their nature more speculative than estimates of proved, probable and
possible reserves and accordingly are subject to substantially greater
risk of being actually realized.
The SEC guidelines strictly
prohibit us from including these estimates in filings with the SEC.
Investors are urged to consider closely the disclosure in our Form 10-K,
available at
You can also obtain this form from the SEC by calling 1-800-SEC-0330 or
from the SEC's website at

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding
and producing oil and natural gas. Based in Oklahoma City and included
in the S&P 500, Devon operates in several of the most prolific oil and
natural gas plays in the U.S. and Canada with an emphasis on achieving
strong returns and capital-efficient, cash-flow growth. For more
information, please visit

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