<PAGE>
PROSPECTUS
RULE 424(b)(2)
Registration No. 333-85211
5,008,464 SHARES
COMMON STOCK
DEVON ENERGY CORPORATION
20 North Broadway, Suite 1500
Oklahoma City, OK 73202-8260
(405) 235-3611
This prospectus relates to up to 5,008,464 shares of common stock of
Devon Energy Corporation (formerly Devon Delaware Corporation) to be issuable
from time to time upon the possible future exchange of the exchangeable shares
of Northstar Energy Corporation, an Alberta corporation. Northstar is an
indirect subsidiary of Devon.
Holders of the exchangeable shares may exchange each of their
exchangeable shares into one share of Devon common stock, plus declared and
unpaid dividends. Because the shares of Devon common stock offered by this
prospectus, and any supplement to this prospectus, will be issued only in
exchange for the exchangeable shares, Devon will not receive any cash proceeds
from this offering. All expenses of registration incurred in connection with
this offering are being paid by Devon.
Our common stock is listed on the American Stock Exchange under the
symbol "DVN." On August 12, 1999, the last reported sale price of the common
stock on the American Stock Exchange was $40.8125 per share.
Investing in our common stock involves risks. Holders of exchangeable
shares should consider carefully the risk factors beginning on page 5.
----------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
----------------------
This prospectus is dated August 18, 1999
<PAGE>
You should rely only on the information contained in or incorporated
by reference in this prospectus. We have not authorized anyone to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information provided by this prospectus is accurate as of any date other than
the date on the front of this prospectus.
TABLE OF CONTENTS
About This Prospectus.........................................................3
Risk Factors..................................................................5
Taxability of the exchange...........................................5
Differences in Canada and U.S. trading markets.......................5
Foreign property.....................................................5
The Company...................................................................6
The Exchangeable Shares.......................................................6
Use of Proceeds...............................................................7
Plan of Distribution..........................................................7
Certain Income Tax Considerations.............................................13
Certain Legal Matters.........................................................23
Experts .....................................................................23
Where You Can Find More Information...........................................25
Cautionary Statement Concerning Forward-Looking Statements....................26
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus provides you with a general description of our common
stock. You should read this prospectus together with the additional information
described under the heading "Where You Can Find More Information" on page 25.
In this prospectus, unless otherwise indicated, the terms "Devon,"
"we," "us" and "our" mean:
(1) Prior to completion of the PennzEnergy merger, Devon Energy
Corporation, an Oklahoma corporation and its consolidated
subsidiaries; and
(2) After completion of the PennzEnergy merger, Devon Delaware
Corporation, a Delaware corporation, and its consolidated
subsidiaries.
For a description of the PennzEnergy merger, See "The Company - The PennzEnergy
merger."
Unless otherwise indicated, all dollar amounts in this prospectus are
expressed in U.S. dollars.
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, the risk
factors incorporated into this document from our registration statement on Form
S-4 filed with the SEC on July 15, 1999, and all the other information contained
in this document and the documents to which we have referred you, before
exchanging your exchangeable shares for the shares of Devon common stock offered
by this prospectus. See "Where You Can Find More Information" on page 25.
Taxability of the exchange
Based on the tax laws as of the date of this prospectus, the exchange
of exchangeable shares for shares of Devon common stock is generally a taxable
event in Canada and the United States. A holder's tax consequences can vary
depending on a number of factors, including the residency of the holder, the
method of the exchange and the length of time that the exchangeable shares were
held prior to the exchange. See "Certain Income Tax Considerations."
Differences in Canada and U.S. trading markets
The Devon common stock is listed on the American Stock Exchange, and
the exchangeable shares are listed on The Toronto Stock Exchange. As a result,
the price at which the exchangeable shares trade is based upon the market for
such shares on The Toronto Stock Exchange, and the price at which the shares of
Devon common stock trade is based upon the market for such shares on the
American Stock Exchange. Although Devon believes that the market price of the
exchangeable shares on The Toronto Stock Exchange and the market price of the
Devon common stock on the American Stock Exchange should reflect essentially
equivalent values, there can be no assurance that the market price of the Devon
common stock will be identical, or even similar, to the market price of the
exchangeable shares.
Foreign property
So long as the exchangeable shares are listed on a prescribed stock
exchange in Canada, which currently includes The Toronto Stock Exchange, and
Northstar maintains a substantial presence in Canada, the exchangeable shares
will not be foreign property under Canada's Income Tax Act for trusts governed
by registered pension plans, registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans or for other
tax-exempt persons. Devon common stock will, however, be foreign property for
these plans or persons.
<PAGE>
THE COMPANY
The PennzEnergy merger
On August 17, 1999, (1) Devon Oklahoma Corporation, a newly-formed,
wholly-owned subsidiary of Devon, was merged into Old Devon, with Old Devon
surviving as a wholly-owned subsidiary of Devon; and (2) PennzEnergy was merged
into Devon, with Devon continuing as the surviving corporation. For more
information regarding the PennzEnergy merger, see "Where You Can Find More
Information" on page 25.
Devon's business
Devon is an independent energy company engaged primarily in oil and
gas exploration, development and production, and in the acquisition of producing
properties.
On a pro forma basis for the PennzEnergy merger at December 31, 1998,
Devon had aggregate proved reserves of approximately 660 million barrels of oil
equivalent. On an energy equivalent basis, about 52% of these reserves were
natural gas and 48% were oil and natural gas liquids. Approximately 64% of the
proved reserves, or 423 million equivalent barrels, were located in the United
States. These reserves were concentrated in four primary operating areas: the
Permian Basin, the Rocky Mountain Region, the Gulf Coast/East Texas Region and
the Offshore Gulf of Mexico. Approximately 22% of the combined reserves, or 144
million equivalent barrels, were located in the Western Canadian Sedimentary
Basin. The balance of proved reserves, approximately 94 million equivalent
barrels, was located outside North America, primarily in Azerbaijan. In addition
to the proved oil and gas properties, Devon had a substantial inventory of
exploration acreage totaling approximately 15 million net acres.
Devon has significant expertise with regard to various oilfield
technologies, including coal bed methane, enhanced oil recovery, deep onshore
natural gas drilling, shallow and deep water offshore drilling and other
exploration, production and processing technologies. Devon also has significant
international operations and experience in Canada and outside North America. As
a result, Devon has the ability to acquire, explore for, develop and exploit oil
and natural gas reserves domestically both onshore and offshore, as well as
internationally.
Devon's corporate office is located at 20 North Broadway, Suite 1500,
Oklahoma City, Oklahoma 73102-8260. Northstar's corporate office is located at
3000, 400-3rd Avenue S.W., Calgary, Alberta, Canada T2P 4H2.
THE EXCHANGEABLE SHARES
On December 10, 1998, Devon completed a merger with Canadian-based
Northstar Energy Corporation, whereby Northstar became a subsidiary of Devon. As
part of the merger consideration, Devon issued, through Northstar, 16.1 million
exchangeable shares. The exchangeable shares are exchangeable at any time, at
<PAGE>
the holder's option, for shares of Devon common stock on a one-for-one basis.
Although the exchangeable shares are essentially equivalent to Devon common
stock, because they were issued by Northstar and they are listed on a recognized
Canadian stock exchange, they qualify as a domestic Canadian investment for
Canadian institutional stockholders. The exchangeable shares entitle holders to
dividends and other rights economically equivalent to the Devon common stock,
including the right through a voting trust to vote at Devon stockholder
meetings. Devon has reserved 5,008,464 shares of common stock as of August 17,
1999 for the possible conversion of the exchangeable shares at the option of the
holders. The exchangeable shares trade on The Toronto Stock Exchange under the
symbol "NSX."
USE OF PROCEEDS
Because the shares of Devon common stock will be issued for the
exchangeable shares, Devon will not receive any cash proceeds upon the issuance
of these shares.
PLAN OF DISTRIBUTION
The Devon common stock may be issued to holders of exchangeable shares
as follows:
o holders of exchangeable shares may require at any time that
their shares be exchanged for an equivalent number of shares
of Devon common stock, plus declared but unpaid dividends,
if any;
o Devon or Northstar may, under certain circumstances,
purchase or redeem the exchangeable shares by exchanging
them for an equal number of shares of Devon common stock,
plus declared and unpaid dividends, if any; and
o upon liquidation of Devon or Northstar, holders of
exchangeable shares may be required to, or may elect to,
exchange their exchangeable shares for an equal number of
shares of Devon common stock, plus declared and unpaid
dividends, if any.
No broker, dealer or underwriter has been engaged in connection with the
offering of the Devon common stock made by this prospectus.
The following is a description of the terms on which Devon may issue
common stock in exchange for the exchangeable shares. These terms are set forth
in the plan of arrangement under Section 186 of the Business Corporations Act
(Alberta) involving and affecting Northstar and the holders of its common shares
and options, which we refer to as the plan of arrangement, the provisions
attaching to the exchangeable shares, which we refer to as the exchangeable
share provisions, as set forth in Appendix A to the plan of arrangement, and the
voting and exchange trust agreement entered into by Devon, Northstar and CIBC
Mellon Trust Company, as trustee. Devon and Northstar filed with the SEC a joint
proxy statement on November 6, 1998. The plan of arrangement and the voting and
exchange trust agreement, included in the Devon/Northstar joint proxy statement
as Annexes E and G, are incorporated by reference into this prospectus. To
<PAGE>
request a copy of the Devon/Northstar joint proxy statement, see "Where You Can
Find More Information."
The following description may not contain all of the information that
is important to you. You should read the description together with the more
detailed information in the Northstar combination agreement, the plan of
arrangement, including the exchangeable shares provisions, and the voting and
exchange trust agreement.
Procedures for Issuance of Devon Common Stock
The primary rights relating to the exchangeable shares are:
(a) the rights, which are called exchange put rights and retraction
rights to require an exchange by Devon or redemption by Northstar of
exchangeable shares for shares of Devon common stock; and
(b) overriding call rights granted to Devon to require an exchange
with Devon if a holder exercises retraction rights or in any
circumstances where Northstar would redeem the exchangeable shares.
Devon anticipates that it will exercise its call rights, when available, and
currently foresees no circumstances under which it would not exercise its call
rights. Therefore it is expected that holders of exchangeable shares will only
receive shares of Devon common stock through an exchange, as opposed to a
redemption, of exchangeable shares for shares of Devon common stock. While the
economic result of an exchange or a redemption will be the same, the tax
consequences would be substantially different. See "Certain Income Tax
Considerations - Holders of Exchangeable Shares Resident in Canada." Certain
automatic or event triggered rights, including automatic redemption, optional
exchange right, automatic exchange right, liquidation call right and redemption
call right, will result in the exchange or redemption of exchangeable shares for
shares of Devon common stock, without any action by the holders of exchangeable
shares.
Devon granted exchange rights, including the exchange put right
described below, to the trustee for the benefit of the holders of the
exchangeable shares. The holders of exchangeable shares have the right to
retract (i.e., require Northstar to redeem) any or all of their exchangeable
shares.
Exchange Put Right of Holders
A holder of exchangeable shares is entitled to require Devon to
exchange, which is called an exchange put right, all or any part of the holder's
exchangeable shares for an equivalent number of shares of Devon common stock,
plus the amount of all declared, payable and unpaid, and all undeclared but
payable, dividends, if any. A holder of exchangeable shares may exercise the
exchange put right by presenting written notice to the trustee accompanied by
presentation and surrender of a certificate or certificates representing the
exchangeable shares the holder desires to have Devon redeem, together with such
other documents and instruments as may be required to effect a transfer of
exchangeable shares as provided in the exchangeable share provisions, at the
principal offices in Calgary, Alberta or Toronto, Ontario of the trustee. An
<PAGE>
exchange pursuant to this right will be completed not later than the close of
business on the third business day following receipt by the trustee of the
notice, the certificates and other required documents.
Retraction Rights
Holders of the exchangeable shares are entitled at any time to retract
(i.e., to require Northstar to redeem) any or all exchangeable shares owned by
them and to receive an equivalent number of shares of Devon common stock plus
the amount of all declared, payable and unpaid, and all undeclared but payable,
dividends, if any, subject to the retraction call right of Devon described
below. Holders of exchangeable shares may effect a retraction by presenting a
certificate or certificates representing the number of exchangeable shares the
holder desires to retract to Northstar or the trustee, together with a duly
executed retraction request:
(a) specifying the number of the exchangeable shares the holder
desired to retract;
(b) stating the business day on which the holder desires to have
Northstar redeem such shares; and
(c) acknowledging the retraction call right of Devon to purchase all
but not less than all the retracted shares directly from the holder
and that the retraction request will be deemed to be a revocable offer
by the holder to sell the retracted shares to Devon in accordance with
the retraction call right on the terms and conditions described below.
Upon receipt by Northstar of a retraction request, Northstar will
promptly notify Devon. In order to exercise its retraction call right, Devon
must notify Northstar of its determination to do so within two business days of
such notification to Devon. If Devon delivers the call notice within such two
business days, and provided that the retraction request is not revoked by the
holder in the manner described below, Northstar will not redeem the retracted
shares and Devon will purchase from the holder and the holder will sell to Devon
on the retraction date the retracted shares. In the event that Devon does not
deliver to Northstar a call notice within the two business days period, and
provided that the retraction request is not revoked by the holder in the manner
described below, Northstar will redeem the retracted shares on the retraction
date.
A holder of retracted shares may, by notice in writing given by the
holder to Northstar before the close of business on the business day immediately
preceding the retraction date, withdraw its retraction request. If the
retraction request is withdrawn, the revocable offer constituted by the
retraction request to sell the retracted shares to Devon will be deemed to have
been revoked.
If, as a result of liquidity or solvency requirements or other
provisions of applicable law, Northstar is not permitted to redeem all
exchangeable shares tendered by a retracting holder, Northstar will redeem only
those exchangeable shares tendered by the holder as would be permitted by such
provisions of applicable law. This right is subject to Devon's liquidation call
right described below. The holder of any exchangeable shares not redeemed by
Northstar as a consequence of such applicable law or purchased by Devon will be
deemed to have required Devon to purchase the unretracted shares in exchange for
an equal number of shares of Devon common stock, plus the amount of all
<PAGE>
declared, payable and unpaid, and all undeclared but payable, dividends, if any,
on the retraction date pursuant to the exchange right provided for in the voting
and exchange trust agreement described below.
Redemption of Exchangeable Shares
Subject to applicable law and the redemption call rights of Devon
described below, on an automatic redemption date, described below, Northstar
will redeem all but not less than all of the then outstanding exchangeable
shares in exchange for an equal number of shares of Devon common stock, plus the
amount of all declared, payable and unpaid, and all undeclared but payable,
dividends, if any. Notwithstanding any proposed redemption of the exchangeable
shares, Devon will, pursuant to redemption call rights, have the overriding
right to acquire on an automatic redemption date all but not less than all of
the outstanding exchangeable shares in exchange for one share of Devon common
stock for each such exchangeable share, plus the amount of all declared, payable
and unpaid, and all undeclared but payable, dividends, if any. An automatic
redemption date is the first to occur of:
(a) the date, if any, selected pursuant to this clause (a) by the
board of directors of Northstar, such date to be no earlier than the
10th anniversary of the effective date of the plan of arrangement;
(b) the date selected by the Northstar board of directors (such date
to be no earlier than the third anniversary of the effective date of
the plan of arrangement) at a time when less than 5% of the number of
exchangeable shares issuable on the effective date of the plan of
arrangement are outstanding;
(c) the business day prior to the record date for any meeting or vote
of the Northstar shareholders to consider any matter on which the
holders of exchangeable shares would be entitled to vote as Northstar
shareholders, but excluding any meeting or vote as described in clause
(d) below;
(d) the business day following the day on which the holders of
exchangeable shares fail to take the necessary action at a meeting or
other vote of holders of exchangeable shares, if and to the extent
such action is required, to approve or disapprove, as applicable any
change to, or in the rights of the holders of, exchangeable shares, if
the approval or disapproval, as applicable, of such change would be
required to maintain the economic and legal equivalence of the
exchangeable shares and the Devon common stock; or
(e) the date on which the share purchase rights issued pursuant to the
rights agreement dated as of August 17, 1999, as amended from time to
time, between Devon and BankBoston, N.A., or any successor or
replacement rights agreement, separate from the Devon common stock and
become exercisable.
At least 45 days before an automatic redemption date or before a possible
automatic redemption date which may result from a failure of holders of
exchangeable shares to take necessary action as described in clause (d) above,
Northstar shall provide the registered holders of exchangeable shares with
written notice of the proposed redemption or possible redemption of the
exchangeable shares by Northstar. In the case of any notice given in connection
<PAGE>
with a possible automatic redemption date, such notice will be given
contingently and will be withdrawn if the contingency does not occur.
Optional Exchange Right
Subject to Devon's liquidation call right described below, upon the
occurrence and during the continuance of a Northstar insolvency event, described
below, a holder of exchangeable shares will be entitled to instruct the trustee
to exercise the right, which we refer to as the optional exchange right, with
respect to any or all of the holder's exchangeable shares, thereby requiring
Devon to acquire the exchangeable shares from the holder. Immediately upon the
occurrence of a Northstar insolvency event or any event which may, with the
passage of time or the giving of notice, become a Northstar insolvency event,
Northstar and Devon will give written notice to the trustee. The trustee will
then promptly notify each holder of exchangeable shares of the event or
potential event and will advise the holder of its rights with respect to the
optional exchange right. The consideration for each exchangeable share to be
required under the optional exchange right will be one share of Devon common
stock plus the amount of all declared, payable and unpaid, and all undeclared
but payable, dividends, if any.
"Northstar insolvency event" means:
(a) the institution of, or the consent of Northstar to the institution
of, any proceeding for Northstar to be adjudicated bankrupt or
insolvent or to be dissolved or wound-up, or the filing of a petition,
answer or consent seeking dissolution or winding-up under bankruptcy
insolvency or analogous laws;
(b) the failure of Northstar to contest in good faith any such
proceeding commenced against it within 15 days of becoming aware of
the proceeding;
(c) the consent of Northstar to the filing of any such petition or
appointment of a receiver;
(d) the making by Northstar of a general assignment for the benefit of
creditors, or the admission in writing of its inability to pay its
debts generally as they become due; or
(e) Northstar's not being permitted, pursuant to liquidity or solvency
requirements of applicable law, to redeem any exchangeable shares
pursuant to a retraction request.
If, as a result of liquidity or solvency requirements or other
provisions of applicable law, Northstar is not permitted to redeem all of the
exchangeable shares tendered for retraction by a holder in accordance with the
exchangeable share provisions as described under "-Retraction Rights" above, the
holder will be deemed to have exercised the optional exchange right with respect
to the unredeemed exchangeable shares, and Devon will be required to purchase
such shares from the holder in the manner described above under "-Retraction
Rights."
<PAGE>
Automatic Exchange Right
In the event of a Devon liquidation event, described below, Devon will
be deemed to have purchased each outstanding exchangeable share and each holder
of exchangeable shares will be deemed to have sold the exchangeable shares held
by it on the basis of one share of Devon common stock, plus the amount of all
declared, payable and unpaid, and all undeclared but payable, dividends, if any,
for each exchangeable share.
"Devon liquidation event" means:
(a) any determination by the Devon board of directors to institute
voluntary liquidation, dissolution or winding-up proceedings with
respect to Devon or to effect any other distribution of assets of
Devon among its stockholders for the purpose of winding-up its
affairs; or
(b) the earlier of (A) receipt of notice of and (B) Devon's otherwise
becoming aware of, any threatened or instituted claim or other
proceeding with respect to the involuntary liquidation, dissolution or
winding-up of Devon or to effect any other distribution of assets of
Devon among its stockholders for the purpose of winding-up its
affairs.
Call Rights
In the circumstances described below, Devon will have certain
overriding rights to acquire exchangeable shares from holders by delivering one
share of Devon common stock, plus the amount of all declared, payable and
unpaid, and all undeclared but payable, dividends, if any, for each exchangeable
share acquired. Different Canadian federal income tax consequences to a holder
of exchangeable shares and to Northstar may arise depending upon whether the
call rights are exercised by Devon or whether the relevant exchangeable shares
are redeemed by Northstar pursuant to the exchangeable share provisions. See
"Certain Income Tax Considerations."
Retraction Call Right
A holder requesting Northstar to redeem the exchangeable shares will
be deemed to offer such shares to Devon, and Devon will have an overriding
retraction call right to acquire all, but not less than all, of the exchangeable
shares that the holder has requested Northstar to redeem in exchange for one
share of Devon common stock, plus the amount of all declared, payable and
unpaid, and all undeclared but payable, dividends, if any, in exchange for each
exchangeable share. See "- Retraction Rights" above.
Liquidation Call Right
Devon will be granted an overriding liquidation call right, in the
event of and notwithstanding a proposed liquidation, dissolution or winding-up
of Northstar or any other distribution of the assets of Northstar among its
shareholders for the purpose of winding-up its affairs, to acquire all, but not
less than all, of the exchangeable shares then outstanding in exchange for Devon
common stock, plus the amount of all declared, payable and unpaid, and all
undeclared but payable, dividends, if any. Upon the exercise by Devon of the
liquidation call right, the holders of the exchangeable shares will be obligated
to transfer their shares to Devon. The acquisition by Devon of all of the
<PAGE>
outstanding exchangeable shares upon the exercise of the liquidation call right
will occur on the effective date of the voluntary or involuntary liquidation,
dissolution or winding-up of Northstar.
Redemption Call Right
Devon has an overriding redemption call right to acquire on the
automatic redemption date all, but not less than all, of the exchangeable shares
then outstanding in exchange for Devon common stock, plus the amount of all
declared, payable and unpaid, and all undeclared but payable, dividends, if any,
and, upon the exercise by Devon of the redemption call right, the holders of the
exchangeable shares will be obligated to transfer their shares to Devon.
Effect of Call Right Exercise
If Devon exercises one or more of its call rights, it will directly
issue Devon common stock to holders of exchangeable shares and will become the
holder of the exchangeable shares. Devon will not be entitled to exercise any
voting rights attached to the exchangeable shares it so acquires. If Devon
declines to exercise its call rights when applicable, it will be required to
issue Devon common stock as Northstar directs, including to Northstar, which
will, in turn, transfer the stock to the holders of exchangeable shares in
consideration for the return and cancellation of the exchangeable shares. In the
event Devon does not exercise its call rights when applicable and instead
delivers shares of Devon common stock as Northstar directs, the economic result
for holders of the exchangeable shares would be the same, while the Canadian tax
consequences would be substantially different. See "Certain Income Tax
Considerations - Holders of Exchangeable Shares Resident in Canada." However,
Devon anticipates that it will exercise its call rights, when available, and
currently foresees no circumstances under which it would not exercise its call
rights. In addition, Devon does not anticipate any restriction or limitation on
the number of exchangeable shares it would acquire upon the exercise of its call
rights.
CERTAIN INCOME TAX CONSIDERATIONS
Canadian Federal Income Tax Considerations
In the opinion of Burnet, Duckworth & Palmer, Canadian counsel for
Devon, the following are the material Canadian federal income tax considerations
under the Income Tax Act (Canada), which we refer to as the Canadian Tax Act,
that are generally applicable to holders of exchangeable shares who hold their
exchangeable shares and shares of Devon common stock as capital property, deal
at arm's length with Northstar and Devon and are not, and will at all relevant
times not be, affiliated with Northstar or Devon. This summary does not apply
to: (a) a holder of exchangeable shares with respect to whom Devon is or will be
a foreign affiliate within the meaning of the Canadian Tax Act; (b) a holder of
exchangeable shares who at any time holds more than 10% of the issued and
outstanding exchangeable shares; (c) a holder of exchangeable shares which is a
"financial institution" as defined in the Canadian Tax Act for purposes of the
"mark-to-market" rules; or (d) a holder that is a specified financial
institution as defined in the Canadian Tax Act.
<PAGE>
Exchangeable shares will generally be considered to be capital
property to a shareholder unless held in the course of carrying on a business in
an adventure in the nature of trade or as "mark-to-market" property for purposes
of the Canadian Tax Act. Holders of exchangeable shares should consult their own
tax advisors regarding whether, as a matter of fact, they hold their
exchangeable shares and shares of Devon common stock as capital property for the
purposes of the Canadian Tax Act. Holders of exchangeable shares who are
resident in Canada and whose exchangeable shares might not otherwise qualify as
capital property may be entitled to have them treated as capital property by
making the irrevocable election provided by subsection 39(4) of the Canadian Tax
Act. Holders of exchangeable shares who do not hold their shares as capital
property should consult their own tax advisors regarding their particular
circumstances and, in the case of certain "financial institutions" (as defined
in the Canadian Tax Act), the potential application to them of the special
"mark-to-market" rules in the Canadian Tax Act.
This opinion is based on the current provisions of the Canadian Tax
Act, the regulations thereunder, the Canada-United States Income Tax Convention,
1980, as amended, which we refer to as the Tax Treaty, and counsel's
understanding of the current administrative practices published by Revenue
Canada, Customs, Excise and Taxation, which we refer to as Revenue Canada. This
opinion takes into account specific proposals to amend the Canadian Tax Act and
regulations publicly announced by the Minister of Finance prior to the date
hereof, which we refer to as the tax proposals, and assumes that all tax
proposals will be enacted in their present form. However, no assurances can be
given that the tax proposals will be enacted in the form proposed, or at all.
Except for the foregoing, this opinion does not take into account or anticipated
any changes in law, whether by judicial, administrative or legislative action or
decision, nor does it take into account provincial, territorial or foreign
income tax legislation or considerations, which may differ from the Canadian
federal income tax considerations described herein. No advance income tax ruling
has been obtained from Revenue Canada to confirm the tax consequences of any of
the transactions described herein.
Holders of exchangeable shares should consult their own tax advisors
with respect to the tax consequences of the transactions described herein in
their particular circumstances.
In computing a holder's liability for tax under the Canadian Tax Act,
any cash amounts received in U.S. dollars must be converted into the Canadian
dollar equivalent, and the amount of any non-cash consideration received must be
expressed in Canadian dollars, generally determined by reference to the fair
market value at the time such consideration is received.
Holders of Exchangeable Shares Resident in Canada
The following portion of the summary is applicable only to holders of
exchangeable shares who, for purposes of the Canadian Tax Act and any relevant
bilateral tax treaty, are resident or deemed to be resident in Canada.
Dividends
Dividends on Exchangeable Shares. In the case of a holder of
exchangeable shares who is in individual, dividends received or deemed to be
received on the exchangeable shares will be included in computing the holder's
income and will be subject to the gross-up and dividend tax credit rules
<PAGE>
normally applicable to taxable dividends received from taxable Canadian
corporations.
Subject to the discussion below as to the denial of the dividend
deduction, in the case of a holder of exchangeable shares that is a corporation,
dividends received or deemed to be received on the exchangeable shares will be
included in computing the corporation's income and will normally be deductible
in computing its taxable income. A holder of exchangeable shares that is a
"private corporation" (as defined in the Canadian Tax Act) or any other
corporation resident in Canada and controlled or deemed to be controlled
directly or indirectly in any manner whatsoever by or for the benefit of an
individual (other than a trust) or a related group of individuals (other than
trusts) may be liable under Part IV of the Canadian Tax Act to pay a refundable
tax of 331/3% on dividends received or deemed to be received on the exchangeable
shares to the extent that such dividends are deductible in computing the
shareholder's taxable income.
If Devon or any other person with whom Devon does not deal at arm's
length is a specified financial institution under the Canadian Tax Act when a
dividend is paid on an exchangeable share, then, subject to the exemption
described below, dividends received or deemed to be received by a holder of
exchangeable shares that is a corporation will not be deductible in computing
taxable income, but will be fully includable in computing income under Part I of
the Canadian Tax Act.
This denial of the dividend deduction for a corporate shareholder will
not apply if, at the time a dividend is received or deemed to be received, the
exchangeable shares are listed on a prescribed stock exchange in Canada (which
currently includes the TSE), Devon controls Northstar, and the recipient
(together with persons with whom the recipient does not deal at arm's length or
any partnership or trust of which the recipient or person is a member or
beneficiary, respectively) does not receive (and is not deemed to receive)
dividends in respect of more than 10% of the issued and outstanding exchangeable
shares.
A holder of exchangeable shares that is a "Canadian-controlled private
corporation" (as defined in the Canadian Tax Act) may be liable to pay an
additional refundable tax of 6 2/3% on dividends or deemed dividends that are
not deductible in computing taxable income.
The exchangeable shares will be "taxable preferred shares" and
"short-term preferred shares" for purposes of the Canadian Tax Act. Accordingly,
Northstar will be subject to a 66 2/3% tax under Part VI.1 of the Canadian Tax
Act on dividends paid or deemed to be paid on the exchangeable shares and will
be entitled to deduct an amount equal to 9/4 of the tax payable in computing its
taxable income under Part I of the Canadian Tax Act. Dividends received or
deemed to be received on the exchangeable shares will not be subject to the 10%
tax under Part IV.1 of the Canadian Tax Act applicable to certain corporations.
Dividends on Devon common stock. Dividends on Devon common stock will
be included in the recipient's income for the purposes of the Canadian Tax Act.
Such dividends received by an individual will not be subject to the gross-up and
dividend tax credit rules in the Canadian Tax Act. A corporation that is a
shareholder will include such dividends in computing its income and generally
will not be entitled to deduct the amount of such dividends in computing its
taxable income. A Canadian-controlled private corporation may be liable to pay
an additional refundable tax of 6 2/3% on such dividends. United States
<PAGE>
non-resident withholding tax on such dividends will be eligible for foreign tax
credit or deduction treatment where applicable under the Canadian Tax Act.
Redemption or Exchange of Exchangeable Shares. On the redemption
(including a retraction) of an exchangeable share by Northstar, the holder of an
exchangeable shares will be deemed to have received a dividend equal to the
amount, if any, by which the redemption proceeds (the fair market value at the
time of the shares of Devon common stock received by the shareholder from
Northstar on the redemption plus the Dividend Amount, if any) exceeds the
paid-up capital (for purposes of the Canadian Tax Act) at that time of the
exchangeable share so redeemed. Immediately after the Effective Time, the
paid-up capital of the exchangeable shares was approximately Cdn. $8.66 per
share. The amount of any such deemed dividend will be subject to the tax
treatment accorded to dividends described above under "-- Dividends -- Dividends
on Exchangeable Shares." On the redemption, the holder of an exchangeable share
will also be considered to have disposed of the exchangeable share for proceeds
of disposition equal to the redemption proceeds less the amount of any such
deemed dividend. A holder will in general realize a capital loss (or a capital
gain) equal to the amount by which the adjusted cost base to the holder of the
exchangeable share exceeds (or is less than) such proceeds of disposition. See
"--Taxation of Capital Gain or Capital Loss" below. In the case of a shareholder
that is a corporation, in some circumstances the amount of any such deemed
dividend may be treated as proceeds of disposition and not as a dividend.
On the exchange of an exchangeable share by the holder thereof with
Devon for Devon common stock, the holder will in general realize a capital gain
(or a capital loss) equal to the amount by which the proceeds of disposition for
the exchangeable share exceed (or are less than) the adjusted cost base to the
holder of the exchangeable share. For these purposes, the proceeds of
disposition will be the fair market value of a share of Devon common stock at
the time of the exchange plus the amount of all declared, payable and unpaid,
and all undeclared but payable, dividends, if any, received by the holder as
part of the exchange consideration. See "-- Taxation of Capital Gain or Capital
Loss" below.
Because of the potentially adverse tax consequences of the receipt of
a deemed dividend upon the redemption (including a retraction) of an
exchangeable share by Northstar, holders of exchangeable shares should consult
wit their own tax advisors concerning the possible benefits in their particular
circumstances of exchanging with Devon for shares of Devon common stock or
otherwise disposing of their exchangeable shares.
Taxation of Capital Gain or Capital Loss. Three-quarters of any
capital gain (the "taxable capital gain") realized on a retraction, redemption,
exchange or other disposition of exchangeable shares or disposition of Devon
common stock will be included in the holder's income for the year of
disposition. Three-quarters of any capital loss so realized (the "allowable
capital loss") may be deducted by the holder against taxable capital gains for
the year of disposition. Any excess of allowable capital losses over taxable
capital gains of the holder of exchangeable shares for the year of disposition
may be carried back up to three taxation years or forward indefinitely and
deducted against net taxable capital gains in those other years.
Capital gains realized by an individual or trust, other than certain
specified trust, may give rise to alternative minimum tax under the Canadian Tax
Act. A holder of exchangeable shares that is a Canadian controlled private
<PAGE>
corporation may be liable to pay an additional refundable tax of 6 2/3% on
taxable capital gains.
If the holder of exchangeable shares is a corporation, the amount of
any capital loss arising from a disposition or deemed disposition of
exchangeable shares may be reduced by the amount of dividends received or deemed
to have been received by it on such or on the Northstar common shares previously
owned by such holder, to the extent and under circumstances prescribed by the
Canadian Tax Act. Similar rules may apply where a corporation is a member of a
partnership or a beneficiary of a trust that owns exchangeable shares or where a
trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns exchangeable
shares.
Acquisition and Disposition of Devon Common Stock. The cost of Devon
common stock received on the redemption (including a retraction) or exchange of
exchangeable shares will be equal to the fair market value of shares of Devon
common stock at the time of such event.
A disposition or deemed disposition of shares of Devon common stock by
a holder will generally result in a capital gain (or capital loss) equal to the
amount by which the proceeds of disposition, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the holder of
shares of Devon common stock.
Foreign Property Information Reporting. A holder of shares of Devon
common stock who is a "specified Canadian entity" for a taxation year or fiscal
period and whose total cost amount of "specified foreign property," including
such shares, at any time in the year or fiscal period exceeds Canadian $100,000
will be required to file an information return for the year or period disclosing
prescribed information, including the holder's cost amount, any dividends
received in the year and any gains or losses realized in the year in respect of
such property. A specified Canadian entity means a taxpayer resident in Canada
in the year, other than a person exempt from tax under Part I of the Canadian
Tax Act, a non-resident-owned investment corporation, a mutual fund corporation,
a mutual fund trust and certain other trusts, corporations and partnerships.
Foreign Property. Provided that they are listed on a prescribed stock
exchange in Canada (which currently includes the TSE), the exchangeable shares
will not be foreign property under the Canadian Tax Act for trusts governed by
registered pension plans, registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans or for certain other
tax-exempt persons. The voting rights and the exchange rights will be foreign
property under the Canadian Tax Act. However, as indicated above, Northstar is
of the view that the fair market value of these rights is nominal. Shares of
Devon common stock will be foreign property under the Canadian Tax Act.
Qualified Investments. Provided that they are listed on a prescribed
stock exchange in Canada (which currently includes the TSE), the exchangeable
shares will be qualified investments under the Canadian Tax Act for trusts
governed by registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans. Devon common stock will be a qualified
investment under the Canadian Tax Act for such plans as long as such shares
remain listed on the AMEX (or are listed on certain other prescribed exchanges).
The voting rights and the exchange rights will not be qualified investments
<PAGE>
under the Canadian Tax Act. However, as indicated above, Northstar is of the
view that the fair market value of these rights is nominal.
Holders of Exchangeable Shares Not Resident in Canada
The following is applicable to holders of exchangeable shares who, for
purposes of the Canadian Tax Act, have not been and will not be resident or
deemed to be resident in Canada at any time during which they have held
exchangeable shares or Devon common stock and to whom such shares are not
"taxable Canadian property" (as defined in the Canadian Tax Act) and who do not
use or hold and are not deemed to use or hold such shares in connection with
carrying on a business in Canada.
Generally, exchangeable shares and shares of Devon common stock will
not be taxable Canadian property provided that such shares are listed on a
prescribed stock exchange (which currently includes the TSE and the AMEX), the
holder does not use or hold, and is not deemed to use or hold, such shares in
connection with carrying on a business in Canada and the holder, persons with
whom the holder does not deal at arm's length, or the holder and such persons,
has not owned (or had under option) 25% or more of the issued shares of any
class or series of the capital stock of Northstar or Devon at any time within
five years preceding the date of disposition. Northstar has applied for the
listing of the exchangeable shares on the TSE, and Devon has indicated that it
intends to use its best efforts to cause Northstar to maintain such listing.
Devon has indicated that it will maintain the listing of the shares of Devon
common stock on the AMEX.
A holder of Northstar common shares will not be subject to tax under
the Canadian Tax Act on the exchange of an exchangeable share for shares of
Devon common stock (except to the extent the exchange takes place by way of a
redemption of an exchangeable share) or on the sale or other disposition of an
exchangeable share or Devon common stock. A holder whose exchangeable shares are
redeemed (either under Northstar's redemption right or pursuant to the holder's
retraction rights) will be deemed to receive a dividend as described above for
shareholders resident in Canada under "Shareholders Resident in Canada
Redemption or Exchange of Exchangeable Shares." The amount of such deemed
dividend will be subject to the tax treatment accorded to dividends described
below.
Dividends paid or deemed to be paid on the exchangeable shares are
subject to nonresident withholding tax under the Canadian Tax Act at the rate of
25%, although such rate may be reduced under the provisions of an applicable
income tax treaty. Under the Tax Treaty, the rate is generally reduced to 15% in
respect of dividends paid to a person who is the beneficial owner and who is
resident in the United States for purposes of the Tax Treaty.
United States Federal Income Tax Considerations to Northstar Shareholders
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, United
States counsel to Devon, the following summarizes certain United States federal
income tax consequences generally applicable to holders of exchangeable shares
that are "United States persons" as defined for United States federal income tax
purposes and that hold their exchangeable shares as capital assets, which we
refer to in this document as United States holders, with respect to the exchange
of exchangeable shares for shares of Devon common stock pursuant to the plan of
arrangement. For United States federal income tax purposes, "United States
persons" are United States citizens or residents, corporations or partnerships
organized under the laws of the United States or any state thereof, estates
<PAGE>
subject to United States federal income tax on their income regardless of source
and trusts subject to the primary supervision of a court within the United
States and control of a United States fiduciary as described in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended, which we refer to
as the U.S. Code.
This summary is based upon the U.S. Code, laws, regulations, rulings
and decisions in effect as of the date hereof, all of which are subject to
change, possibly with retroactive effect. No statutory, judicial, or
administrative authority exists that directly addresses certain of the United
States federal income tax consequences of the issuance and ownership of
instruments and rights comparable to the exchangeable shares, the voting rights,
the exchange rights and the call rights. Consequently (as discussed more fully
below), the United States federal income tax treatment of the exchange of
exchangeable shares for shares of Devon common stock is not certain. No advance
income tax ruling has been sought or obtained from the United States Internal
Revenue Service, which we refer to as the IRS, regarding the United States
federal income tax consequences of any of the transactions described herein.
This summary does not address aspects of United States taxation other
than United States federal income taxation, nor does it address all aspects of
United States federal income taxation that may be applicable to particular
United States holders, including, without limitation, United States holders that
own, or have owned during a five-year lookback period, 10% or more of the voting
power of the voting stock of Northstar. In addition, this summary does not
address the United States state or local tax consequences or the foreign tax
consequences of the exchange of exchangeable shares for shares of Devon common
stock.
United States holders are strongly urged to consult their tax advisors
with respect to the United States federal, state and local tax consequences and
the foreign tax consequences of exchanging exchangeable shares for shares of
Devon common stock and the ownership of Devon common stock.
Shareholders that are United States Holders
Exchange of Exchangeable Shares. Assuming United States holders are
treated as owning stock of Northstar for United States federal income tax
purposes, it is anticipated that (subject to certain exceptions described below)
a United States holder who exchanges the exchangeable shares for shares of Devon
common stock (including an exchange upon the occurrence of an automatic
redemption date) generally will recognize gain or loss on the receipt of the
shares of Devon common stock in exchange for such exchangeable shares. The gain
or loss will be equal to the difference between the fair market value of the
shares of Devon common stock received and the United States holder's tax basis
in the exchangeable shares exchanged therefor. The gain or loss will be capital
gain or loss, except with respect to amounts attributable to dividends, which
will be subject to United States federal income tax as ordinary income. Under
current law, the tax rate applicable to capital gains of an individual taxpayer
varies depending on the taxpayer's holding period for the shares. In the case of
an individual holder of exchangeable shares, any such capital gain will be
subject to a maximum United States federal income tax rate of 20% if the
individual held the exchangeable shares for more than 12 months at the time of
the exchange. The deductibility of capital losses is subject to limitations for
both individuals and corporations. Gain recognized on the exchange of
exchangeable shares for shares of Devon common stock generally will be treated
as United States source gain. The United States holder's tax basis in the shares
<PAGE>
of Devon common stock will be the fair market value of the shares of Devon
common stock received by the United States holder in the exchange, and the
holding period will begin on the day after the exchange.
In view of the likelihood of the recognition of gain or loss upon the
exchange of the exchangeable shares for shares of Devon common stock, United
States holders may wish to consider delaying the exchange until such time as
they intend to dispose of the shares of Devon common stock receivable in
exchange for their exchangeable shares or (as discussed below) until such time
as Devon will own at least 80% of all of the then issued and outstanding
exchangeable shares either at the time of or as a result of the exchange.
Under certain limited circumstances, the exchange by a United States
holder of exchangeable shares for shares of Devon common stock may be
characterized as a tax-free exchange. An exchange of exchangeable shares for
shares of Devon common stock generally may be characterized as a tax-free
exchange if, at the time of such exchange: (i) at least 80% of the then
outstanding exchangeable shares are held by Devon; and (ii) in such exchange,
Devon, rather than Northstar, acquires the exchangeable shares in exchange for
shares of Devon common stock pursuant to the exercise of its call rights. In any
case, the exchange would not be tax free unless certain other requirements are
satisfied, which, in turn, will depend upon facts and circumstances existing at
the time of the exchange and cannot be accurately predicted as of the date
hereof. If such exchange did qualify as a tax-free exchange, a United States
holder's tax basis in the shares of Devon common stock received would be equal
to such holder's tax basis in the exchangeable shares exchanged therefor. The
holding period of the shares of Devon common stock received by the United States
holder should include the holding period of the exchangeable shares exchanged
therefor, which in turn, should include the holding period of the Northstar
common shares exchanged pursuant to the plan of arrangement, provided that such
Northstar common shares and exchangeable shares have been held as capital assets
immediately prior to the arrangement of Northstar under section 186 of the
Business Corporations Act (Alberta) pursuant to the plan of arrangement and the
subsequent exchange, respectively.
Passive Foreign Investment Company Considerations. For United States
federal income tax purposes, Northstar generally will be classified as a passive
foreign investment company for any taxable year during which either: (i) 75% or
more of its gross income is passive income (as defined for United States federal
income tax purposes); or (ii) on average for a taxable year, 50% or more of its
assets (by value) produce or are held for the production of passive income. For
purposes of applying the foregoing tests, Northstar's proportionate share of the
assets and gross income of corporations with respect to which Northstar owns at
least 25% of the stock (by value) will be attributed to Northstar.
While there can be no assurance with respect to the classification of
Northstar as a passive foreign investment company, Northstar believes that it
did not constitute a passive foreign investment company during its taxable years
ending prior to consummation of the plan of arrangement. At the present time,
Northstar and Devon intend to endeavor to cause Northstar to avoid passive
foreign investment company status in the future, although there can be no
assurance that they will be able to do so or that their intent will not change.
For purposes of applying the 50% asset test following the plan of
arrangement, Northstar's assets must be measured by their adjusted tax bases (as
<PAGE>
calculated in order to compute earnings and profits for United States federal
income tax purposes) instead of by value, subject to certain adjustments. As a
result, it is possible that Northstar will be a passive foreign investment
company for taxable years ending after the plan of arrangement even though less
than 50% of Northstar's assets (measured by the fair market value of such
assets) constitute passive assets. After the plan of arrangement, Northstar
intends to monitor its status regularly, and promptly following the end of each
taxable year Northstar will notify United States holders of exchangeable shares
if it believes that Northstar was a passive foreign investment company for that
taxable year.
If Northstar is a passive foreign investment company following the
plan of arrangement during a United States holder's holding period for such
holder's exchangeable shares, and the United States holder has neither made an
election to treat Northstar as a qualified electing fund under Section 1295 of
the U.S. Code nor made a mark to market election under Section 1296 of the U.S.
Code, then: (a) the United States holder will be required to allocate gain
recognized upon the exchange of the United States holder's exchangeable shares
for shares of Devon common stock ratably over the United States holder's holding
period for the exchangeable shares; (b) the amount allocated to each year other
than: (1) the year of the exchange of the exchangeable shares or (2) any year
prior to the beginning of the first taxable year of Northstar for which it was a
passive foreign investment company, will be subject to tax at the highest rate
applicable to individuals or corporations, as the case may be, for the taxable
year to which such income is allocated, and an interest charge will be imposed
upon the resulting tax attributable to each such year (which charge will accrue
from the due date of the return for the taxable year to which such tax was
allocated); and (c) amounts allocated to periods described in (1) and (2) will
be taxable to the United States holder as ordinary income.
In addition, although the matter is not free from doubt, if the
exchange of exchangeable shares for shares of Devon common stock otherwise
qualified as a non-recognition exchange (as described above) and if Northstar
were a passive foreign investment company at any time during a particular United
States holder's holding period for its exchangeable shares and the United States
holder had neither made a qualified electing fund election under Section 1295 of
the U.S. Code nor made a mark to market election under Section 1296 of the U.S.
Code, then the United States holder might be required to recognize gain upon the
exchange of its exchangeable shares for exchangeable shares. In the event that
gain recognition is required, then: (a) the amount of the gain would be equal to
the difference between the fair market value of the shares of Devon common stock
at the time of the exchange and the United States holder's tax basis in the
exchangeable shares exchanged therefor; and (b) any exchange of exchangeable
shares for shares of Devon common stock would be taxable under the rules
described above.
If the United States holder has made a qualified electing fund
election under Section 1295 of the U.S. Code, then the United States holder
generally will be currently taxable on the holder's pro rata share of
Northstar's ordinary earnings and net capital gains (at ordinary income and
capital gains rates, respectively) for each taxable year of Northstar in which
Northstar is classified as a passive foreign investment company, even if no
dividend distributions are received by the United States holder, unless the
United States holder makes an election to defer the taxes. If Northstar believes
that it was a passive foreign investment company for a taxable year, it will
provide United States holders of exchangeable shares with information sufficient
to allow eligible holders to make a qualified electing fund election and report
and pay any current or deferred taxes due with respect to their pro rata shares
of Northstar's ordinary earnings and profits and net capital gains for the
taxable year. United States holders should consult their tax advisors concerning
<PAGE>
the merits and mechanics of making a qualified electing fund election and other
relevant tax considerations if Northstar is a passive foreign investment company
for any taxable year.
If a United States holder has made a mark to market election under
Section 1296 of the U.S. Code for the first year in its holding period for its
exchangeable shares during which Northstar is a passive foreign investment
company (or, if such election was made in a subsequent year in its holding
period, the United States holder has made a qualified electing fund election for
all prior years in which Northstar was a passive foreign investment company),
then the United States holder generally (a) will include in each year as
ordinary income any excess of the fair market value of the exchangeable shares
owned by the United States holder over the adjusted basis of such exchangeable
shares and (b) will be permitted an ordinary loss in respect of any excess of
the adjusted basis of such exchangeable shares over the fair market value
thereof, but only to the extent of the net amount previously included in income
as a result of the mark to market election. The electing United States holder's
basis in the holder's exchangeable shares will be adjusted to reflect any of
these income or loss amounts. Any gain or loss on the sale of the exchangeable
shares will be ordinary income or loss, except that a loss will be ordinary loss
only to the extent of the previously included net mark to market gain. The mark
to market election is only available with respect to stock in a passive foreign
investment company that is regularly traded on specific United States exchanges
and other exchanges designated by the United States Treasury. The meaning of the
term "regularly traded," for purposes of the mark to market election, is
unclear. United States holders should consult their tax advisors concerning the
availability, merits and mechanics of making a mark to market election and other
relevant tax considerations if Northstar is a passive foreign investment company
for any taxable year.
The foregoing summary of the possible application of the passive
foreign investment company rules to Northstar and the United States holders of
Northstar common shares is only a summary of certain aspects of those rules.
Because the United States federal income tax consequences to a United States
holder of exchangeable shares under the passive foreign investment company
provisions may be significant, United States holders of exchangeable shares are
urged to discuss those consequences with their tax advisors.
Shareholders that are Not United States Holders
The following summary is applicable to holders of exchangeable shares
that are not United States holders, which we refer to as non-United States
holders.
A non-United States holder generally will not be subject to United
States federal income tax on gain (if any) recognized on the exchange of the
exchangeable shares for shares of Devon common stock, unless: (a) such gain is
attributable to an office or fixed place of business and is effectively
connected with a trade or business of the non-United States holder in the United
States, or, if a tax treaty applies, is attributable to a permanent
establishment maintained by the non-United States holder in the United States;
or (b) the non-United States holder is an individual who holds the Northstar
common shares, the exchangeable shares or the shares of Devon common stock, as
the case may be, as capital assets and is present in the United States for 183
days or more in the taxable year of disposition, and certain other conditions
are satisfied.
Northstar and Devon intend to treat dividends, if any, received by a
non-United States holder with respect to the exchangeable shares as dividends
from Northstar rather than from Devon and as not subject to United States
withholding tax, and Northstar and Devon do not intend that Northstar or Devon
will withhold any amounts for tax from those dividends. There is some
possibility, however, that the IRS may assert that United States withholding tax
is payable with respect to any dividends paid on the exchangeable shares to
non-United States holders. In such case, a non-United States holder of
exchangeable shares could be subject to United States withholding tax at a rate
of 30%, which rate may be reduced by an applicable income tax treaty in effect
between the United States and the non-United States holder's country of
residence (generally 15% on dividends paid to eligible residents of Canada under
the Tax Treaty).
Dividends received by non-United States holders with respect to the
shares of Devon common stock generally will be subject to United States
withholding tax at a rate of 30%, which rate may be subject to reduction by an
applicable income tax treaty (generally 15% on dividends paid to eligible
residents of Canada under the Tax Treaty).
The discussion of United States federal income tax consequences set
forth above is for general information only and does not purport to be a
complete analysis or listing of all potential tax effects that may apply to a
United States holder of exchangeable shares. United States holders of
exchangeable shares are strongly urged to consult their tax advisors to
determine the particular tax consequences to them of holding and exchanging
exchangeable shares, including the application and effect of federal, state,
local, foreign and other tax laws.
CERTAIN LEGAL MATTERS
The validity of the Devon common stock offered by this prospectus will
be passed upon for Devon by Skadden, Arps, Slate, Meagher & Flom LLP,
Washington, D.C. Certain U.S. federal income tax matters have been passed upon
for Devon by Skadden, Arps, Slate, Meagher & Flom LLP and certain Canadian
federal income tax matters have been passed upon for Devon by Burnet, Duckworth
& Palmer, as set forth under "Certain Income Tax Considerations."
EXPERTS
The consolidated financial statements of Devon as of and for the years
ended December 31, 1998, 1997 and 1996 have been incorporated by reference in
this prospectus and in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and Deloitte & Touche LLP and
PricewaterhouseCoopers LLP, chartered accountants, incorporated by reference in
this document, and upon the authority of said firms as experts in accounting and
auditing.
The audited consolidated financial statements of PennzEnergy and its
subsidiaries incorporated by reference in this registration statement/prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and is incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.
Certain information with respect to our oil and gas reserves derived
from reports of LaRoche Petroleum Consultants, Ltd., AMH Group Ltd., John P.
Hunter & Associates Ltd., Paddock Lindstrom & Associates Ltd. and Ryder Scott
Company, L.P., independent consulting petroleum engineers, has been incorporated
by reference herein in reliance upon the authority of said firms as experts with
respect to matters covered by such reports and in giving such reports.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Devon files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov".
We filed with the SEC a registration statement on Form S-3 with
respect to the common stock offered by this prospectus. This prospectus is a
part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in, or incorporated by reference in,
this prospectus. This prospectus incorporates by reference the documents set
forth below that we, Devon or PennzEnergy have previously filed with the SEC.
These documents contain important information about our companies and their
finances.
<TABLE>
<CAPTION>
Devon SEC Filings
(File No. 333-82903) Period
------------------------------------ -----------------------------------
<S> <C>
Registration Statement on Form S-4 Filed on July 15, 1999
Devon SEC Filings
(File No. 001-10067) Period
------------------------------------ -----------------------------------
<S> <C>
Proxy Statement on Schedule 14A Filed on November 6, 1998
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Report on Form 8-K/A Filed on February 2, 1999
Current Report on Form 8-K Filed on February 8, 1999
Current Report on Form 8-K Filed on February 22, 1999
Proxy Statement on Schedule 14A Filed on April 9, 1999
Current Report on Form 8-K Filed on April 28, 1999
Current Report on Form 8-K Filed on May 21, 1999
Current Report on Form 8-K Filed on June 1, 1999
Proxy Statement on Schedule 14A Filed on July 16, 1999
Current Report on Form 8-K Filed on July 22, 1999
Definitive Additional Proxy Materials Filed on July 30, 1999
on Schedule 14A
Quarterly Report on Form 10Q Quarter ended June 30, 1999
Current Report on Form 8-K Filed on August 13, 1999
<PAGE>
PennzEnergy SEC Filings
(File No. 001-05591) Period
------------------------------------ -----------------------------------
<S> <C>
Part II, Item 8. "Financial Statements and
Supplementary Data" of the Annual
Report on Form 10-K Fiscal year ended December 31, 1998
Part I, Item 1. "Financial Statements" of
the Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Part I. "Election of Directors--Nominees"
of the Proxy Statement on Schedule 14A Filed on March 25, 1999
Part I, Item 1. "Financial Statements"
of the Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Current Report on Form 8-K Filed on August 16, 1999
</TABLE>
We are also incorporating by reference additional documents that we
file with the SEC between the date of this prospectus and the termination of the
offering.
Documents incorporated by reference are available from us without
charge, excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this prospectus. You may obtain documents incorporated
by reference in this prospectus by requesting them in writing, by e-mail or by
telephone from us at the following address:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: Corporate Secretary
Tel: (405) 235-3611
[email protected]
You can also get more information by visiting Devon's web site at
"http://www.devonenergy.com". Web site materials are not part of this
prospectus.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Devon has made forward-looking statements in this document and in the
documents referred to in this document which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of our
management and on the information currently available to it.
Statements and calculations concerning oil and gas reserves and their
present value also may be deemed to be forward-looking statements in that they
reflect the determination, based on estimates and assumptions, that oil and gas
reserves may be profitably exploited in the future. When used or referred to in
this document, these forward-looking statements may be preceded by, followed by,
or otherwise include the words "believes," "expects," "anticipates," "intends,"
"plans," "estimates," "projects" or similar expressions, or statements that
certain events or conditions "will" or "may" occur.
Except for our ongoing obligations to disclose material information as
required by the federal securities laws, we do not have any intention or
obligation to update forward-looking statements after we distribute this
document.
<PAGE>
5,008,464 Shares
DEVON ENERGY CORPORATION
Common Stock
[Devon Logo]
PROSPECTUS
August 18, 1999
