Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - DEVON ENERGY CORP/DE | d34951dex991.htm |
| 8-K - 8-K - DEVON ENERGY CORP/DE | d34951d8k.htm |
Exhibit 99.2
DEVON ENERGY CORPORATION
Unaudited Pro Forma Consolidated Financial Information
Introduction
On October 1, 2020, Devon Energy Corporation (the “Company” or “Devon”) completed the previously announced Barnett Shale divest transaction, pursuant to which Devon sold its Barnett Shale assets to BKV Barnett, LLC (the “Purchaser”). Under the terms of the agreement, Devon has received proceeds, net of purchase price adjustments, of $490 million, including a $170 million deposit previously received in April 2020. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commences on January 1, 2021 and has a term of four years.
With this disposition, Devon is effectively exiting its last natural gas focused asset and the transaction results in a material reduction to the Company’s total assets, revenues and proved reserves. Therefore, this disposition represents a strategic shift in Devon’s business, and the Company’s Barnett Shale financial information has been classified as discontinued operations since entering into the divestiture agreement with the Purchaser.
The unaudited pro forma consolidated financial information has been prepared in conformity with Article 11 of Regulation S-X. In addition, this unaudited pro forma consolidated financial information is based on currently available information and assumptions the Company believes are reasonable. This unaudited pro forma consolidated financial information is presented for informational purposes only and does not purport to represent what the Company’s financial position would have been had the disposition of Devon’s Barnett Shale assets occurred on the date indicated.
DEVON ENERGY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2020
(In millions)
| As Reported | Pro Forma Adjustments |
Pro Forma | ||||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 1,474 | $ | 315 | $ | 1,789 | ||||||
| Cash restricted for discontinued operations |
195 | — | 195 | |||||||||
| Accounts receivable |
515 | — | 515 | |||||||||
| Current assets associated with discontinued operations |
748 | (744 | ) | 4 | ||||||||
| Other current assets |
446 | — | 446 | |||||||||
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| Total current assets |
3,378 | (429 | ) | 2,949 | ||||||||
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| Oil and gas property and equipment, net |
4,673 | — | 4,673 | |||||||||
| Other property and equipment, net |
1,013 | — | 1,013 | |||||||||
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| Total property and equipment, net |
5,686 | — | 5,686 | |||||||||
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| Goodwill |
753 | — | 753 | |||||||||
| Right-of-use assets |
231 | — | 231 | |||||||||
| Other long-term assets |
227 | — | 227 | |||||||||
| Long-term assets associated with discontinued operations |
82 | 41 | 123 | |||||||||
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| Total assets |
$ | 10,357 | $ | (388 | ) | $ | 9,969 | |||||
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| Current liabilities: |
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| Accounts payable |
$ | 309 | $ | — | $ | 309 | ||||||
| Revenues and royalties payable |
473 | — | 473 | |||||||||
| Current liabilities associated with discontinued operations |
441 | (375 | ) | 66 | ||||||||
| Other current liabilities |
229 | — | 229 | |||||||||
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| Total current liabilities |
1,452 | (375 | ) | 1,077 | ||||||||
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| Long-term debt |
4,296 | — | 4,296 | |||||||||
| Lease liabilities |
245 | — | 245 | |||||||||
| Asset retirement obligations |
391 | — | 391 | |||||||||
| Other long-term liabilities |
458 | — | 458 | |||||||||
| Long-term liabilities associated with discontinued operations |
162 | — | 162 | |||||||||
| Deferred income taxes |
— | — | — | |||||||||
| Stockholders’ equity: |
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| Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 383 million shares |
38 | — | 38 | |||||||||
| Additional paid-in capital |
2,720 | — | 2,720 | |||||||||
| Retained earnings |
586 | (13 | ) | 573 | ||||||||
| Accumulated other comprehensive loss |
(117 | ) | — | (117 | ) | |||||||
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| Total stockholders’ equity attributable to Devon |
3,227 | (13 | ) | 3,214 | ||||||||
| Noncontrolling interests |
126 | — | 126 | |||||||||
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| Total equity |
3,353 | (13 | ) | 3,340 | ||||||||
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| Total liabilities and equity |
$ | 10,357 | $ | (388 | ) | $ | 9,969 | |||||
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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS:
1. Basis of Presentation
Because the Company’s Barnett Shale financial information has been presented as discontinued operations, the accompanying pro forma financial information only consists of a balance sheet prepared as of June 30, 2020. The historical consolidated balance sheet as of June 30, 2020 is derived from and should be read in conjunction with the Company’s unaudited financial statements in its June 30, 2020 Quarterly Report on Form 10-Q, which was filed on August 5, 2020.
The Company’s historical consolidated balance sheet has been adjusted in the unaudited pro forma consolidated financial information to present events that are (i) directly attributable to the sale of its Barnett Shale assets, (ii) factually supportable and (iii) are expected to have a continuing impact on the Company’s consolidated results following the Barnett Shale disposition.
The pro forma financial information does not purport to be indicative of the financial position of the Company as of June 30, 2020, nor is it indicative of future results.
2. Pro Forma Adjustments
The pro forma adjustments reflect the following:
| • | Devon’s receipt of $320 million of cash proceeds from the Purchaser at closing, less $5 million of transaction related expenses. This amount excludes the $170 million cash deposit received in April 2020. |
| • | The recognition of a $41 million long-term asset, which represents the estimated fair value of the contingent earnout payments. |
| • | The derecognition of $744 million of assets acquired and $375 million of liabilities assumed by the Purchaser. |
| • | The recognition of a $13 million decrease to retained earnings and total equity. |