<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event report): August 29, 2000
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-30176 73-1567067
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation or Organization) Identification Number)
20 NORTH BROADWAY, SUITE 1500, OKLAHOMA CITY, OK 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Page 1 of 20 pages
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 29, 2000, Devon Energy Corporation ("Devon") completed its
merger (the "Merger") with Santa Fe Snyder Corporation ("Santa Fe Snyder")
pursuant to an Agreement and Plan of Merger dated May 25, 2000, as amended on
July 11, 2000 (the "Merger Agreement"). The shareholders of Devon and Santa
Fe Snyder approved the Merger at special meetings held on August 29, 2000.
In the Merger, each issued and outstanding share of common stock of Santa Fe
Snyder, par value $0.01 per share, was converted into the right to receive
0.22 shares of common stock of Devon. This exchange ratio was determined
through arms' length negotiations between the parties.
Devon expects to issue up to 40.6 million shares of common stock to
the former holders of Santa Fe Snyder common stock. Shares of Santa Fe
Snyder common stock are no longer transferable and certificates evidencing
such shares represent only the right to receive shares of Devon common stock
in accordance with the provisions of the Merger Agreement.
A description of the Merger is contained in the August 29, 2000,
press release included as Exhibit 99 to Devon's Form 8-K filed on August 29,
2000, and incorporated herein by reference. The Agreement and Plan of Merger
by and among Devon, Devon Merger Co. and Santa Fe Snyder dated as of May 25,
2000, is incorporated herein by reference to Annex A to the Joint Proxy
Statement/Prospectus contained in Devon's Registration Statement on Form S-4
(No. 333-39908). Amendment No. One, dated as of July 11, 2000, to the
Agreement and Plan of Merger by and among Devon, Devon Merger Co. and Santa
Fe Snyder dated as of May 25, 2000, is incorporated herein by reference to
Exhibit 2.1 to Devon's Form 8-K filed on July 12, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited Annual Financial Statements of Santa Fe Snyder:
Consolidated Balance Sheets as of December 31, 1999 and 1998,
and Consolidated Statements of Operations, Consolidated
Statements of Cash Flows, Consolidated Statements of
Comprehensive Income and Consolidated Statements of
Shareholders' Equity for the Years Ended December 31, 1999,
1998 and 1997 (incorporated by reference to Santa Fe
Snyder's Annual Report on Form 10-K for the year ended
December 31, 1999)
Unaudited Interim Financial Statements of Santa Fe Snyder:
Consolidated Balance Sheet as of June 30, 2000, and
Consolidated Statements of Operations, Consolidated
Statements of Cash Flows and Consolidated Statements of
Comprehensive Income for the six months ended June 30, 2000
and 1999 (incorporated by reference to Santa Fe
2
<PAGE>
Snyder's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000)
(b) Unaudited Pro Forma Combined Financial Information
(c) Exhibits
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger by and among Registrant, Devon
Merger Co. and Santa Fe Snyder Corporation dated as of May 25,
2000 (incorporated by reference to Annex A to the Joint Proxy
Statement/Prospectus contained in Registrant's Registration
Statement on Form S-4, File No. 333-39908)
2.2 Amendment No. One, dated as of July 11, 2000, to Agreement
and Plan of Merger by and among Registrant, Devon Merger Co.
and Santa Fe Snyder Corporation dated as of May 25, 2000
(incorporated by reference to Exhibit 2.1 to Registrant's
Form 8-K filed on July 12, 2000)
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Ryder Scott Company, L.P.
99.1 Press release dated August 29, 2000 (incorporated by
reference to Exhibit 99 to Registrant's Form 8-K filed on
August 29, 2000)
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEVON ENERGY CORPORATION
/s/ DANNY J. HEATLY
Danny J. Heatly
Vice President - Accounting
Date: September 12, 2000
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger by and among Registrant, Devon Merger
Co. and Santa Fe Snyder Corporation dated as of May 25, 2000
(incorporated by reference to Annex A to the Joint Proxy
Statement/Prospectus contained in Registrant's Registration
Statement on Form S-4, File No. 333-39908)
2.2 Amendment No. One, dated as of July 11, 2000, to Agreement and Plan
of Merger by and among Registrant, Devon Merger Co. and Santa Fe
Snyder Corporation dated as of May 25, 2000 (incorporated by reference
to Exhibit 2.1 to Registrant's Form 8-K filed on July 12, 2000)
23.1 Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Ryder Scott Company, L.P.
99.1 Press release dated August 29, 2000 (incorporated by reference to
Exhibit 99 to Registrant's Form 8-K filed on August 29, 2000)
</TABLE>
4
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared to
assist in your analysis of the financial effects of the merger. This pro forma
information is based on the historical financial statements of Devon and Santa
Fe Snyder.
The information was prepared based on the following:
- The merger was accounted for as a pooling-of-interests of Devon and
Santa Fe Snyder. Therefore, the unaudited pro forma combined balance
sheet was prepared as if Devon and Santa Fe Snyder were combined on
June 30, 2000. The unaudited pro forma combined statements of operations
have been prepared as if Devon and Santa Fe Snyder were combined as of
the beginning of the earliest period presented.
- The combined company will utilize the full cost method of accounting for
its oil and gas activities.
- The historical financial results of Santa Fe Snyder, which were prepared
using the successful efforts method of accounting, have been restated to
the full cost method to conform to Devon's method of accounting.
- Expected annual cost savings of $30 to $35 million have not been reflected
as an adjustment to the historical data. These cost savings are expected
to result from the consolidation of the corporate headquarters of Devon
and Santa Fe Snyder and the elimination of duplicate staff and expenses.
Some of the cost savings will relate to items that, under the full cost
method of accounting, are capitalized rather than expensed in the
consolidated financial statements. Therefore, not all of the $30 to
$35 million of expected savings will result in reductions to expenses as
reported in the accompanying unaudited pro forma combined statements of
operations.
There are several unusual items in each company's historical results that
should be considered when making period-to-period comparisons. These items
include:
- Devon merged with PennzEnergy Company on August 17, 1999. This merger was
accounted for as a purchase. Accordingly, Devon's results for the year
1999 include the results of the PennzEnergy merger for only the last 4 1/2
months of the year.
- Santa Fe Snyder was formed on May 5, 1999, as a result of the merger of
Santa Fe Energy Resources, Inc. and Snyder Oil Corporation. This merger
was accounted for as a purchase by Santa Fe Energy Resources, Inc. of
Snyder. Accordingly, Santa Fe Snyder's results for the year 1999 include
the results of the Snyder merger for only the last eight months of the
year.
- Santa Fe Snyder's results for the year 1999 include $16.8 million of costs
related to the Snyder merger.
- Devon's results for the year 1998 include $13.1 million of costs related
to its December 1998 merger with Northstar Energy Corporation. This merger
was accounted for as a pooling-of-interests. Accordingly, Northstar's
results are included in Devon's results for all periods presented.
5
<PAGE>
- In 1998 and 1997, Devon reduced the carrying value of its oil and gas
properties by $126.9 million and $625.5 million ($88.0 million and
$397.9 million after-tax), respectively, due to the full cost ceiling
limitation. The 1998 reduction related to Devon's domestic properties. The
1997 reduction related to the Canadian properties acquired in the
Northstar merger.
- In 1999, 1998 and 1997, Santa Fe Snyder reduced the carrying value of its
oil and gas properties by $476.1 million, $295.6 million and
$16.2 million ($309.7 million, $211.2 million and $22.7 million after-tax,
which includes the establishment of an $11.0 million and $9.9 million
valuation allowance relating to deferred tax assets in 1998 and 1997),
respectively, due to the full cost ceiling limitation.
- On July 25, 1997, Santa Fe Energy Resources, Inc. spun off its subsidiary
Monterey Resources, Inc. At the time of the spin off, Santa Fe Energy
Resources, Inc. owned approximately 83% of Monterey. The Santa Fe Snyder
results for the year 1997 include the results for Monterey for only the
first seven months prior to the spin off.
The unaudited pro forma information is presented for illustrative purposes
only. If the merger had occurred in the past, the combined company's financial
position or operating results might have been different from those presented in
the unaudited pro forma information. You should not rely on the unaudited pro
forma information as an indication of the financial position or operating
results that the combined company would have achieved if the merger had occurred
in the past. You also should not rely on the unaudited pro forma information as
an indication of the future results that the combined company will achieve after
the merger.
6
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED PRO FORMA COMPANY
DEVON (NOTE 4) ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Current assets.............................. $ 628,642 $ 250,300 $ 878,942
Oil and gas properties, net................. 3,126,340 1,509,900 4,636,240
Other properties, net....................... 53,421 15,800 69,221
Investment in common stock of Chevron
Corporation............................... 601,527 -- 601,527
Goodwill, net............................... 299,481 -- 299,481
Other assets................................ 118,525 31,000 149,525
---------- ---------- --------- ----------
Total assets.............................. $4,827,936 $1,807,000 $ -- $6,634,936
========== ========== ========= ==========
LIABILITIES:
Current liabilities......................... $ 272,545 $ 223,500 $ 496,045
Debentures exchangeable into shares of
Chevron Corporation common stock.......... 760,313 -- 760,313
Other long-term debt........................ 1,025,514 766,800 $ 57,000 (a) 1,849,314
Deferred revenue............................ -- 145,800 145,800
Other long-term liabilities................. 160,062 72,100 232,162
Deferred income taxes....................... 431,882 38,500 (16,000)(a) 454,382
STOCKHOLDERS' EQUITY:
Preferred stock............................. 1,500 -- 1,500
Common stock................................ 8,698 1,800 2,252 (b) 12,750
Additional paid-in capital.................. 2,273,989 1,247,400 (2,252)(b) 3,516,437
(2,700)(c)
Accumulated deficit......................... (26,408) (686,500) (41,000)(a) (753,908)
Accumulated other comprehensive earnings
(loss).................................... (80,159) 3,100 -- (77,059)
Treasury stock.............................. -- (2,700) 2,700 (c) --
Unamortized restricted stock awards......... -- (2,800) -- (2,800)
---------- ---------- --------- ----------
Total stockholders' equity................ 2,177,620 560,300 (41,000) 2,696,920
---------- ---------- --------- ----------
Total liabilities and stockholders'
equity.................................. $4,827,936 $1,807,000 $ -- $6,634,936
========== ========== ========= ==========
</TABLE>
7
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
-------- ------------ ---------
<S> <C> <C> <C>
REVENUES:
Oil sales............................................... $293,793 $246,800 $ 540,593
Gas sales............................................... 366,286 185,800 552,086
NGL sales............................................... 65,703 5,200 70,903
Other................................................... 22,772 2,000 24,772
-------- -------- --------
Total revenues........................................ 748,554 439,800 1,188,354
-------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses................................ 136,687 87,200 223,887
Production taxes........................................ 21,790 18,200 39,990
Depreciation, depletion and amortization of property and
equipment............................................. 221,703 115,800 337,503
Amortization of goodwill................................ 20,693 -- 20,693
General and administrative expenses..................... 32,773 16,100 48,873
Interest expense........................................ 50,951 30,000 80,951
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt................... 2,408 -- 2,408
-------- -------- --------
Total costs and expenses.............................. 487,005 267,300 754,305
-------- -------- --------
Earnings before income tax expense ....................... 261,549 172,500 434,049
INCOME TAX EXPENSE:
Current................................................. 63,505 9,000 72,505
Deferred................................................ 46,223 56,800 103,023
-------- -------- --------
Total income tax expense.............................. 109,728 65,800 175,528
-------- -------- --------
Net earnings.............................................. 151,821 106,700 258,521
Preferred stock dividends................................. 4,868 -- 4,868
-------- -------- --------
Net earnings applicable to common shareholders............ $146,953 $106,700 $ 253,653
======== ======== ========
Net earnings per average common share outstanding:
Basic................................................... $ 1.70 $ 0.58 $ 2.00
======== ======== ========
Diluted................................................. $ 1.67 $ 0.58 $ 1.97
======== ======== ========
Weighted average common shares outstanding:
Basic................................................... 86,481 182,700 126,675
======== ======== ========
Diluted................................................. 87,827 185,700 128,681
======== ======== ========
</TABLE>
8
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(NOTE 5)
SANTA FE -----------------------
SNYDER ADJUSTMENTS FOR MERGERS COMBINED
HISTORICAL COMBINED ----------------------- COMPANY
RESTATED COMPANY PENNZENERGY SNYDER PRO FORMA
DEVON (NOTE 4) PRO FORMA MERGER MERGER AS ADJUSTED
-------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil sales......................... $ 64,784 $102,700 $167,484 $ 85,114 $ 31,900 $ 284,498
Gas sales......................... 112,938 73,300 186,238 150,884 7,100 344,222
NGL sales......................... 9,764 3,800 13,564 18,732 -- 32,296
Other............................. 4,092 1,400 5,492 61,562 700 67,754
------- ------- -------- -------- --------- ---------
Total revenues.................. 191,578 181,200 372,778 316,292 39,700 728,770
------- ------- -------- -------- --------- ---------
COSTS AND EXPENSES:
Lease operating expenses.......... 54,520 61,300 115,820 76,476 10,200 202,496
Production taxes.................. 6,415 5,800 12,215 6,764 2,200 21,179
Depreciation, depletion and
amortization of property and
equipment....................... 69,321 50,500 119,821 164,387 43,500 327,708
Amortization of goodwill.......... -- -- -- 23,300 -- 23,300
General and administrative
expenses........................ 13,175 13,600 26,775 44,720 10,900 82,395
Expenses related to prior
merger.......................... -- 16,800 16,800 -- -- 16,800
Interest expense.................. 13,779 16,800 30,579 41,364 5,700 77,643
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt............................ (8,746) -- (8,746) -- -- (8,746)
Distributions on preferred
securities of subsidiary
trust........................... 4,859 -- 4,859 -- -- 4,859
Reduction of carrying value of oil
and gas properties.............. -- 463,800 463,800 -- -- 463,800
------- ------- -------- -------- --------- ---------
Total costs and expenses........ 153,323 628,600 781,923 357,011 72,500 1,211,434
------- ------- -------- -------- --------- ---------
Earnings (loss) before income tax
expense (benefit)................. 38,255 (447,400) (409,145) (40,719) (32,800) (482,664)
INCOME TAX EXPENSE (BENEFIT):
Current........................... 4,302 100 4,402 (4,834) 200 (232)
Deferred.......................... 11,764 (149,600) (137,836) (12,444) (11,700) (161,980)
------- ------- -------- -------- --------- ---------
Total income tax expense
(benefit)..................... 16,066 (149,500) (133,434) (17,278) (11,500) (162,212)
------- ------- -------- -------- --------- ---------
Net earnings (loss)................. 22,189 (297,900) (275,711) (23,441) (21,300) (320,452)
Preferred stock dividends........... -- -- -- 4,868 -- 4,868
------- ------- -------- -------- --------- ---------
Net earnings (loss) applicable to
common shareholders............... $22,189 $(297,900) (275,711) $ (28,309) $ (21,300) $(325,320)
======= ======= ======== ======== ========= =========
Net earnings (loss) per average
common share outstanding--basic
and diluted....................... $ 0.46 $ (2.41) $ (3.64) $ (2.76)
======= ======= ======== =========
Weighted average common shares
outstanding:
Basic............................. 48,575 123,900 75,833 117,957
======= ======= ======== =========
Diluted........................... 53,773 125,300 81,339 123,463
======= ======= ======== =========
</TABLE>
9
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(NOTE 5)
SANTA FE ------------------------
SNYDER ADJUSTMENTS FOR MERGERS COMBINED
HISTORICAL COMBINED ------------------------ COMPANY
RESTATED COMPANY PENNZENERGY SNYDER PRO FORMA
DEVON (NOTE 4) PRO FORMA MERGER MERGER AS ADJUSTED
-------- ---------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil sales....................... $273,234 $ 280,600 $ 553,834 $116,743 $ 31,900 $ 702,477
Gas sales....................... 385,925 217,300 603,225 196,012 7,100 806,337
NGL sales....................... 56,344 11,600 67,944 25,885 -- 93,829
Other........................... 18,996 1,600 20,596 66,157 700 87,453
-------- --------- ---------- -------- -------- ----------
Total revenues................ 734,499 511,100 1,245,599 404,797 39,700 1,690,096
-------- --------- ---------- -------- -------- ----------
COSTS AND EXPENSES:
Lease operating expenses........ 166,848 136,400 303,248 96,107 10,200 409,555
Production taxes................ 23,055 19,300 42,355 8,951 2,200 53,506
Depreciation, depletion and
amortization of property and
equipment..................... 254,275 152,100 406,375 215,990 43,500 665,865
Amortization of goodwill........ 16,111 -- 16,111 30,210 -- 46,321
General and administrative
expenses...................... 53,845 26,800 80,645 55,483 10,900 147,028
Expenses related to prior
mergers....................... -- 16,800 16,800 -- -- 16,800
Interest expense................ 66,913 42,700 109,613 43,500 5,700 158,813
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt.......................... (13,154) -- (13,154) -- -- (13,154)
Distributions on preferred
securities of subsidiary
trust......................... 6,884 -- 6,884 -- -- 6,884
Reduction of carrying value of
oil and gas properties........ -- 476,100 476,100 -- -- 476,100
-------- --------- ---------- -------- -------- ----------
Total costs and expenses...... 574,777 870,200 1,444,977 450,241 72,500 1,967,718
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before income tax
expense (benefit)............... 159,722 (359,100) (199,378) (45,444) (32,800) (277,622)
INCOME TAX EXPENSE (BENEFIT):
Current......................... 24,656 (1,600) 23,056 5 200 23,261
Deferred........................ 40,510 (113,000) (72,490) (8,983) (11,700) (93,173)
-------- --------- ---------- -------- -------- ----------
Total income tax expense
(benefit)................... 65,166 (114,600) (49,434) (8,978) (11,500) (69,912)
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before
extraordinary item.............. 94,556 (244,500) (149,944) (36,466) (21,300) (207,710)
Preferred stock dividends......... 3,651 -- 3,651 6,085 -- 9,736
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before
extraordinary item applicable to
common shareholders (Note 6).... $ 90,905 $(244,500) $ (153,595) $(42,551) $(21,300) $ (217,446)
======== ========= ========== ======== ======== ==========
Earnings (loss) before
extraordinary item per average
common share outstanding:
Basic........................... $ 1.51 $ (1.60) $ (1.64) $ (1.81)
======== ========= ========== ==========
Diluted......................... $ 1.46 $ (1.60) $ (1.64) $ (1.81)
======== ========= ========== ==========
Weighted average common shares
outstanding:
Basic........................... 60,015 152,900 93,653 119,988
======== ========= ========== ==========
Diluted......................... 65,213 155,000 99,313 125,648
======== ========= ========== ==========
</TABLE>
10
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
-------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Oil sales............................................... $143,624 $ 163,300 $ 306,924
Gas sales............................................... 209,344 119,100 328,444
NGL sales............................................... 16,692 8,000 24,692
Other................................................... 17,848 6,400 24,248
-------- --------- ----------
Total revenues........................................ 387,508 296,800 684,308
-------- --------- ----------
COSTS AND EXPENSES:
Lease operating expenses................................ 113,484 116,400 229,884
Production taxes........................................ 13,916 8,900 22,816
Depreciation, depletion and amortization of property and
equipment............................................. 123,844 119,300 243,144
General and administrative expenses..................... 23,554 21,900 45,454
Expenses related to prior merger........................ 13,149 -- 13,149
Interest expense........................................ 22,632 20,900 43,532
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt................... 16,104 -- 16,104
Distributions on preferred securities of subsidiary
trust................................................. 9,717 -- 9,717
Reduction of carrying value of oil and gas properties... 126,900 295,600 422,500
-------- --------- ----------
Total costs and expenses.............................. 463,300 583,000 1,046,300
-------- --------- ----------
Earnings (loss) before income tax expense (benefit)....... (75,792) (286,200) (361,992)
INCOME TAX EXPENSE (BENEFIT):
Current................................................. 7,687 (11,400) (3,713)
Deferred................................................ (23,194) (77,900) (101,094)
-------- --------- ----------
Total income tax expense (benefit).................... (15,507) (89,300) (104,807)
-------- --------- ----------
Net earnings (loss) applicable to common shareholders..... $(60,285) $(196,900) $ (257,185)
======== ========= ==========
Net earnings (loss) per average common share outstanding--
basic and diluted....................................... $ (1.25) $ (1.92) $ (3.62)
======== ========= ==========
Weighted average common shares outstanding:
Basic................................................... 48,376 102,600 70,948
======== ========= ==========
Diluted................................................. 53,876 104,800 76,932
======== ========= ==========
</TABLE>
11
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Oil sales................................................. $ 207,725 $344,800 $ 552,525
Gas sales................................................. 219,459 138,100 357,559
NGL sales................................................. 24,920 10,900 35,820
Other..................................................... 47,555 700 48,255
--------- -------- ---------
Total revenues.......................................... 499,659 494,500 994,159
--------- -------- ---------
COSTS AND EXPENSES:
Lease operating expenses.................................. 100,897 165,300 266,197
Production taxes.......................................... 19,227 11,800 31,027
Depreciation, depletion and amortization of property and
equipment............................................... 169,108 116,200 285,308
General and administrative expenses....................... 24,381 28,700 53,081
Interest expense.......................................... 18,788 22,700 41,488
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt..................... 5,860 -- 5,860
Distributions on preferred securities of subsidiary
trust................................................... 9,717 -- 9,717
Reduction of carrying value of oil and gas properties..... 625,514 16,200 641,714
--------- -------- ---------
Total costs and expenses................................ 973,492 360,900 1,334,392
--------- -------- ---------
Earnings (loss) before income tax expense (benefit) and
minority interest......................................... (473,833) 133,600 (340,233)
INCOME TAX EXPENSE (BENEFIT):
Current................................................... 26,857 8,900 35,757
Deferred.................................................. (200,699) 54,400 (146,299)
--------- -------- ---------
Total income tax expense (benefit)...................... (173,842) 63,300 (110,542)
--------- -------- ---------
Earnings (loss) before minority interest.................... (299,991) 70,300 (229,691)
Minority interest in Monterey Resources, Inc................ -- (4,700) (4,700)
--------- -------- ---------
Net earnings (loss)......................................... (299,991) 65,600 (234,391)
Preferred stock dividends................................... -- 12,000 12,000
--------- -------- ---------
Net earnings (loss) applicable to common shareholders....... $(299,991) $ 53,600 $(246,391)
========= ======== =========
Net earnings (loss) per average common share outstanding:
Basic..................................................... $ (6.38) $ 0.54 $ (3.58)
========= ======== =========
Diluted................................................... $ (6.38) $ 0.53 $ (3.58)
========= ======== =========
Weighted average common shares outstanding:
Basic..................................................... 47,040 98,600 68,732
========= ======== =========
Diluted................................................... 52,640 100,600 74,772
========= ======== =========
</TABLE>
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997
1. METHOD OF ACCOUNTING FOR THE MERGER
Devon accounted for the merger using the pooling-of-interests method of
accounting for business combinations. Accordingly, Devon's and Santa Fe
Snyder's historical balance sheets and statements of operations were combined
as if the two companies had always been combined. Santa Fe Snyder's
historical financial data was restated to conform to Devon's accounting
policies. The effect of this restatement of Santa Fe Snyder's historical
results is included in note 4.
In the merger, Devon issued 0.22 shares of Devon common stock for each
outstanding share of Santa Fe Snyder common stock. This resulted in Devon
issuing approximately 40.6 million shares of its common stock to Santa Fe
Snyder stockholders.
2. PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined balance sheet includes the
following adjustments:
(a) To record the payment of $57.0 million ($41.0 million net of tax) of
estimated business combination costs. These costs include investment
banking expenses, severance, legal and accounting fees, printing expenses
and other costs directly related to the merger. These one-time merger
costs are not reflected in the unaudited pro forma combined statements of
operations since they are non-recurring in nature. Devon will expense
these costs in the third quarter of 2000.
(b) To record the issuance of 40.6 million shares, par value $0.10 per
share, of Devon common stock in exchange for all 184.2 million shares of
Santa Fe Snyder common stock, par value $0.01 per share, outstanding on
June 30, 2000. This is based on the exchange ratio of 0.22 shares of
Devon common stock for each share of Santa Fe Snyder common stock.
(c) To retire all 0.2 million shares of Santa Fe Snyder treasury stock
outstanding on June 30, 2000.
The unaudited pro forma combined statements of operations include no
adjustments to the historical statements of Devon or the restated historical
statements of Santa Fe Snyder. The adjustments necessary to restate Santa Fe
Snyder's historical statements to conform to Devon's accounting policies are
explained in note 4.
3. COMMON SHARES OUTSTANDING
Net earnings (loss) per average common share outstanding have been
calculated based upon the pro forma weighted average number of shares
outstanding for each period presented. To compute the combined company pro forma
basic and diluted net earnings (loss) per share, Devon's historical weighted
average number of basic and diluted shares outstanding were increased in each
period by the historical weighted average number of Santa Fe Snyder basic and
diluted common shares outstanding, multiplied by the exchange ratio of 0.22.
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES
Devon and Santa Fe Snyder have certain different accounting policies upon
which their respective historical results are based. The primary difference is
that Devon follows the full cost method of accounting for its oil and gas
activities, while Santa Fe Snyder followed the successful efforts method of
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
accounting. To present the accompanying unaudited pro forma combined financial
statements, Santa Fe Snyder's historical results have been restated to conform
its accounting policies to those which Devon follows. The following tables
present Santa Fe Snyder's balances as presented in its historical financial
statements, and the restated balances which are included in the accompanying
unaudited pro forma combined financial statements. The tables also include a
separate column for various reclassifications to conform Santa Fe Snyder's
presentation of certain revenues and expenses to Devon's presentation.
UNAUDITED RESTATED SANTA FE SNYDER BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RESTATED
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Current assets....................................... $ 250,300 $ 250,300
Oil and gas properties, net.......................... 1,837,500 $(327,600)(a) 1,509,900
Other properties, net................................ 39,400 (23,600)(a) 15,800
Other assets, net.................................... 37,100 (6,100)(b) 31,000
---------- --------- ----------
Total assets....................................... $2,164,300 $(357,300) $1,807,000
========== ========= ==========
LIABILITIES:
Current liabilities.................................. $ 223,500 $ 223,500
Deferred revenue..................................... 151,900 (6,100)(b) 145,800
Other liabilities.................................... 72,100 72,100
Long-term debt....................................... 766,800 766,800
Deferred income taxes................................ 120,900 (82,400)(a) 38,500
STOCKHOLDERS' EQUITY:
Common stock......................................... 1,800 1,800
Additional paid-in capital........................... 1,247,400 1,247,400
Accumulated deficit.................................. (417,700) (268,800)(a) (686,500)
Accumulated other comprehensive earnings (loss)...... 3,100 3,100
Treasury stock....................................... (2,700) (2,700)
Unamortized restricted stock awards.................. (2,800) (2,800)
---------- --------- ----------
Total stockholders' equity......................... 829,100 (268,800) 560,300
---------- --------- ----------
Total liabilities and stockholders' equity......... $2,164,300 $(357,300) $1,807,000
========== ========= ==========
</TABLE>
14
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales................................... $246,800 $246,800
Gas sales................................... 185,800 185,800
NGL sales................................... 5,200 5,200
Other....................................... 600 $ 1,400 2,000
-------- -------- -------- --------
Total revenues............................ 438,400 -- 1,400 439,800
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses.................... 83,900 3,300 87,200
Production and other taxes.................. 24,400 (6,200) 18,200
Exploration................................. 18,100 $(18,100)(c) --
Depreciation, depletion and amortization of
property and equipment.................... 137,800 (22,000)(e) 115,800
General and administrative expenses......... 14,500 (1,300)(c) 2,900 16,100
Interest expense............................ -- 30,000 30,000
Loss (gain) on disposition of assets........ (200) 200 (d) --
-------- -------- -------- --------
Total costs and expenses.................. 278,500 (41,200) 30,000 267,300
-------- -------- -------- --------
Income (loss) from operations................. 159,900 41,200 (28,600) 172,500
Interest income............................... 1,400 (1,400) --
Interest expense.............................. (30,500) 30,500 --
Interest capitalized.......................... 3,300 (2,800)(c) (500) --
-------- -------- -------- --------
Income (loss) before income taxes............. 134,100 38,400 -- 172,500
INCOME TAX EXPENSE (BENEFIT):
Current..................................... 9,000 9,000
Deferred.................................... 42,500 14,300 (g) 56,800
-------- -------- -------- --------
Total income tax expense (benefit)........ 51,500 14,300 -- 65,800
-------- -------- -------- --------
Net earnings (loss) applicable to common
shareholders................................ $ 82,600 $ 24,100 $ -- $106,700
======== ======== ======== ========
Net earnings (loss) per average common share
outstanding--basic and diluted.............. $ 0.45 $ 0.58
======== ========
Weighted average common shares outstanding:
Basic....................................... 182,700 182,700
======== ========
Diluted..................................... 185,700 185,700
======== ========
</TABLE>
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales.................................... $102,700 $102,700
Gas sales.................................... 73,300 73,300
NGL sales.................................... 3,800 3,800
Other........................................ 700 $ 700 1,400
-------- -------- ------- -------
Total revenues............................. 180,500 -- 700 181,200
-------- -------- ------- -------
COSTS AND EXPENSES:
Lease operating expenses..................... 59,200 2,100 61,300
Production and other taxes................... 9,600 (3,800) 5,800
Exploration.................................. 20,600 $(20,600)(c) --
Depreciation, depletion and amortization of
property and equipment..................... 76,000 (25,500)(e) 50,500
Impairment of oil and gas properties......... 196,400 (196,400)(f) --
General and administrative expenses.......... 13,000 (1,100)(c) 1,700 13,600
Expenses related to prior merger............. 16,800 16,800
Interest expense............................. -- 16,800 16,800
Loss (gain) on disposition of assets......... 200 (200)(d) --
Reduction of carrying value of oil and gas
properties................................. -- 463,800 (f) 463,800
-------- -------- ------- -------
Total costs and expenses................... 391,800 220,000 16,800 628,600
-------- -------- ------- -------
Income (loss) from operations.................. (211,300) (220,000) (16,100) (447,400)
Interest income................................ 700 (700) --
Interest expense............................... (17,500) 17,500 --
Interest capitalized........................... 2,600 (1,900)(c) (700) --
-------- -------- ------- -------
Income (loss) before income tax expense (benefit)
and extraordinary item....................... (225,500) (221,900) -- (447,400)
INCOME TAX EXPENSE (BENEFIT):
Current...................................... 100 100
Deferred..................................... (69,700) (79,900)(g) (149,600)
-------- -------- ------- -------
Total income tax expense (benefit)......... (69,600) (79,900) -- (149,500)
-------- -------- ------- -------
Income (loss) before extraordinary item........ (155,900) (142,000) -- (297,900)
Extraordinary item--debt extinguishment costs.. (4,200) (4,200)
-------- -------- ------- -------
Net earnings (loss) applicable to common
shareholders................................. $(160,100) $(142,000) $ -- $(302,100)
======== ======== ======= =======
Net earnings (loss) per average common share
outstanding:
Basic and diluted:
Before extraordinary item.................. $ (1.26) $ (2.41)
Extraordinary item......................... (0.03) (0.03)
-------- -------
Per common share........................... $ (1.29) $ (2.44)
======== =======
Weighted average common shares outstanding:
Basic........................................ 123,900 123,900
======== =======
Diluted...................................... 125,300 125,300
======== =======
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales........................................ $ 280,600 $ 280,600
Gas sales........................................ 217,300 217,300
NGL sales........................................ 11,600 11,600
Other............................................ 800 $ (300)(c) $ 1,100 1,600
--------- --------- ------------ ---------
Total revenues................................. 510,300 (300) 1,100 511,100
--------- --------- ------------ ---------
COSTS AND EXPENSES:
Lease operating expenses......................... 132,100 4,300 136,400
Production and other taxes....................... 26,600 (7,300) 19,300
Exploration...................................... 54,200 (54,200)(c) --
Depreciation, depletion and amortization of
property and equipment......................... 185,800 (33,700)(e) 152,100
Impairment of oil and gas properties............. 196,400 (196,400)(f) --
General and administrative expenses.............. 26,200 (2,400)(c) 3,000 26,800
Expenses related to prior merger................. 16,800 16,800
Interest expense................................. -- 42,700 42,700
Reduction of carrying value of oil and gas
properties..................................... -- 476,100 (f) 476,100
Loss (gain) on disposition of assets............. 1,000 (1,000)(d) --
--------- --------- ------------ ---------
Total costs and expenses....................... 639,100 188,400 42,700 870,200
--------- --------- ------------ ---------
Income (loss) from operations...................... (128,800) (188,700) (41,600) (359,100)
Interest income.................................... 1,100 (1,100) --
Interest expense................................... (43,600) 43,600 --
Interest capitalized............................... 6,000 (5,100)(c) (900) --
--------- --------- ------------ ---------
Income (loss) before income tax expense (benefit)
and extraordinary item........................... (165,300) (193,800) -- (359,100)
INCOME TAX EXPENSE (BENEFIT):
Current.......................................... (1,600) (1,600)
Deferred......................................... (43,000) (70,000)(g) (113,000)
--------- --------- ------------ ---------
Total income tax expense (benefit)............. (44,600) (70,000) -- (114,600)
--------- --------- ------------ ---------
Income (loss) before extraordinary item............ (120,700) (123,800) -- (244,500)
Extraordinary item--debt extinguishment costs...... (4,200) (4,200)
--------- --------- ------------ ---------
Net earnings (loss) applicable to common
shareholders..................................... $(124,900) $(123,800) $ -- $(248,700)
========= ========= ============ =========
Net earnings (loss) per average common share
outstanding:
Basic and diluted:
Before extraordinary item...................... $ (0.79) $ (1.60)
Extraordinary item............................. (0.03) (0.03)
--------- ---------
Per common share................................. $ (0.82) $ (1.63)
========= =========
Weighted average common shares
outstanding:
Basic.......................................... 152,900 152,900
========= =========
Diluted........................................ 155,000 155,000
========= =========
</TABLE>
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales.................................. $163,300 $ 163,300
Gas sales.................................. 119,100 119,100
NGL sales.................................. 8,000 8,000
Other...................................... 300 $ (100)(c) $ 6,200 6,400
-------- --------- ------------ ---------
Total revenues........................... 290,700 (100) 6,200 296,800
-------- --------- ------------ ---------
COSTS AND EXPENSES:
Lease operating expenses................... 112,500 3,900 116,400
Production and other taxes................. 16,300 (7,400) 8,900
Exploration................................ 71,100 (71,100)(c) --
Depreciation, depletion and amortization of
property and equipment................... 136,100 (16,800)(e) 119,300
Impairment of oil and gas properties....... 87,800 (87,800)(f) --
General and administrative expenses........ 19,700 (1,300)(c) 3,500 21,900
Interest expense........................... -- -- 20,900 20,900
Reduction of carrying value of oil and gas
properties............................... -- 295,600 (f) 295,600
Loss (gain) on disposition of assets....... 1,500 (1,500)(d) --
-------- --------- ------------ ---------
Total costs and expenses................. 445,000 117,100 20,900 583,000
-------- --------- ------------ ---------
Income (loss) from operations................ (154,300) (117,200) (14,700) (286,200)
Interest income.............................. 6,200 (6,200) --
Interest expense............................. (22,000) 22,000 --
Interest capitalized......................... 7,200 (6,100)(c) (1,100) --
-------- --------- ------------ ---------
Income (loss) before income taxes............ (162,900) (123,300) -- (286,200)
INCOME TAX EXPENSE (BENEFIT):
Current.................................... (11,400) (11,400)
Deferred................................... (52,800) (25,100)(g) (77,900)
-------- --------- ------------ ---------
Total income tax expense (benefit)....... (64,200) (25,100) -- (89,300)
-------- --------- ------------ ---------
Net earnings (loss) applicable to common
shareholders............................... $(98,700) $ (98,200) $ -- $(196,900)
======== ========= ============ =========
Net earnings (loss) per average common share
outstanding--basic and diluted............. $ (0.96) $ (1.92)
======== =========
Weighted average common shares
outstanding:
Basic.................................... 102,600 102,600
======== =========
Diluted.................................. 104,800 104,800
======== =========
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT RECLASS- HISTORICAL
HISTORICAL ADJUSTMENTS IFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales................................................ $344,800 $344,800
Gas sales................................................ 138,100 138,100
NGL sales................................................ 10,900 10,900
Crude oil purchased...................................... 20,500 $ (20,500) --
Other.................................................... (200) $ (100)(c) 1,000 700
-------- -------- ------------ --------
Total revenues......................................... 514,100 (100) (19,500) 494,500
-------- -------- ------------ --------
COSTS AND EXPENSES:
Lease operating expenses................................. 158,900 6,400 165,300
Production and other taxes............................... 21,600 (9,800) 11,800
Cost of crude oil purchased.............................. 22,000 (22,000) --
Exploration.............................................. 49,100 (49,100)(c) --
Depreciation, depletion and amortization of property and
equipment.............................................. 127,800 (11,600)(e) 116,200
General and administrative expenses...................... 28,100 (2,800)(c) 3,400 28,700
Merger related costs..................................... -- --
Interest expense......................................... -- 22,700 22,700
Reduction of carrying value of oil and gas properties.... -- 16,200 (f) 16,200
Loss (gain) on disposition of assets..................... (3,600) 3,600 (d) --
-------- -------- ------------ --------
Total costs and expenses............................... 403,900 (43,700) 700 360,900
-------- -------- ------------ --------
Income (loss) from operations.............................. 110,200 43,600 (20,200) 133,600
Interest income............................................ 2,500 (2,500) --
Interest expense........................................... (23,800) 23,800 --
Interest capitalized....................................... 6,700 (5,600)(c) (1,100) --
-------- -------- ------------ --------
Income (loss) before income tax expense (benefit) and
minority interest........................................ 95,600 38,000 -- 133,600
INCOME TAX EXPENSE (BENEFIT):
Current.................................................. 8,900 8,900
Deferred................................................. 27,300 27,100 (g) 54,400
-------- -------- ------------ --------
Total income tax expense (benefit)..................... 36,200 27,100 -- 63,300
-------- -------- ------------ --------
Income (loss) before minority interest..................... 59,400 10,900 -- 70,300
Minority interest in Monterey Resources, Inc............... (4,700) (4,700)
-------- -------- ------------ --------
Net earnings (loss)........................................ 54,700 10,900 -- 65,600
Preferred stock dividends.................................. 3,600 3,600
Convertible preferred repurchase premium................... 8,400 8,400
-------- -------- ------------ --------
Net earnings (loss) applicable to common shareholders...... $ 42,700 $ 10,900 $ -- $ 53,600
======== ======== ============ ========
Net earnings (loss) per average common share outstanding:
Basic.................................................... $ 0.43 $ 0.54
======== ========
Diluted.................................................. $ 0.43 $ 0.53
======== ========
Weighted average common shares outstanding:
Basic.................................................... 98,600 98,600
======== ========
Diluted.................................................. 100,600 100,600
======== ========
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
JUNE 30, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
Following are explanations of the conforming adjustments to restate Santa Fe
Snyder's historical balances:
(a) To record the cumulative effect of adjusting the historical property and
equipment, deferred taxes and accumulated deficit balances, prepared
using the successful efforts method, to the restated balances using the
full cost method followed by Devon.
(b) To record the cumulative effect of adjusting the historical accounts
receivable and deferred revenue prepared using the "entitlements method"
of accounting for natural gas imbalances, to the restated balances using
the "sales method" followed by Devon. Adjustments to natural gas sales
for the periods presented as a result of conforming to the sales method
are immaterial and are not included in the unaudited pro forma combined
statements of operations.
(c) To capitalize under the full cost method certain costs that are expensed
under the successful efforts method of accounting.
(d) To capitalize under the full cost method gains or losses from property
sales that are recognized under the successful efforts method.
(e) To adjust the depreciation, depletion and amortization expense
recognized under the successful efforts method to the restated expense
recognized under the full cost method.
(f) To adjust oil and gas property impairment expense recognized under the
successful efforts method to the restated expense recognized under the
full cost method.
(g) To adjust the historical deferred income tax expense for the effects of
adjustments (c) through (f).
5. 1999 ACQUISITIONS
On May 5, 1999, Santa Fe Energy Resources, Inc. closed its merger with
Snyder Oil Corporation thus forming Santa Fe Snyder. On August 17, 1999,
Devon closed its merger with PennzEnergy Company. Both of these transactions
were accounted for using the purchase method of accounting. Therefore, the
historical statements of operations for Devon and Santa Fe Snyder for the
year 1999 do not include any effects from the PennzEnergy and Snyder mergers,
respectively, prior to the closing dates noted above. Devon's historical
statement of operations for the first six months of 1999 does not include any
effects of the PennzEnergy merger since the transaction closed subsequent to
June 30, 1999. Santa Fe Snyder's historical statement of operations for the
first six months of 1999 includes only two months' effects of the Snyder
merger closed in early May, 1999. The Adjustments for Mergers columns include
the effects of these two purchases as if the combined company closed the
mergers as of January 1, 1999. The information is provided for illustrative
purposes only.
6. EXTRAORDINARY LOSS
In connection with the retirement of certain debt in the second quarter
of 1999, Santa Fe Snyder recorded a $4.2 million extraordinary loss, net of
$2.3 million of taxes. The extraordinary loss represents the write-off of
certain debt issue costs and prepayment penalties pertaining to the
retirement of 11% Senior Subordinated Debentures, net of related tax
benefits. Pursuant to Securities and Exchange Commission guidelines on
presentation of pro forma information, the accompanying unaudited pro forma
combined statements of operations for the six months ended June 30, 1999, and
for the year ended December 31, 1999, do not include this extraordinary loss.
20
