<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): June 21, 2000
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 001-30176 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 24 pages
<PAGE>
ITEM 5. OTHER EVENTS
On May 25, 2000, Devon Energy Corporation ("Devon") and Santa Fe Snyder
Corporation ("Santa Fe Snyder") announced their intention to enter into a
merger. In the merger, stockholders of Santa Fe Snyder will receive 0.22
shares of Devon common stock for each share of Santa Fe Snyder common stock.
The merger is subject, among other things, to approval by the stockholders of
both companies.
Devon is preparing to file with the Securities and Exchange Commission
a Registration Statement on Form S-4 concerning the merger. This registration
statement will include a joint proxy statement/prospectus with relevant
information concerning the merger. This information will include unaudited
pro forma financial information of the combined company.
In connection with the merger, Devon is hereby including in this Form
8-K the preliminary unaudited pro forma combined financial information that
will be included in the Registration Statement on Form S-4 expected to be
filed no later than June 23, 2000. The preliminary unaudited pro forma
combined financial information included in this Form 8-K is subject to changes
that could be made to the information prior to the time the final joint proxy
statement/prospectus is mailed to the stockholders of Devon and Santa Fe
Snyder.
2
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL AND OTHER INFORMATION
The following unaudited pro forma combined 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 is expected to be accounted for as a pooling-of-interests of
Devon and Santa Fe Snyder. Therefore, the summary unaudited pro forma
combined balance sheet has been prepared as if Devon and Santa Fe Snyder
were combined on March 31, 2000. The summary 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.
If the merger is ultimately accounted for under the purchase method of
accounting, historical results for the two companies would not be combined
and the impact of the merger would be included in the statements of
operations only in periods subsequent to the closing of the merger. Under
the purchase method of accounting, the assets acquired and liabilities
assumed would be recorded at their estimated fair values rather than at
their historical book costs. This increase to fair value generally would
result in significantly higher depreciation, depletion and amortization
expenses and therefore significantly lower net earnings in future periods.
- 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.
- 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
3
<PAGE>
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 a $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.
<TABLE>
<CAPTION>
COMBINED COMPANY
PRO FORMA AS OF
MARCH 31, 2000
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
BALANCE SHEET DATA:
Investment in common stock of Chevron Corporation...... $ 655,606
Total assets........................................... 6,286,257
Debentures exchangeable into shares of Chevron
Corporation common stock............................. 760,313
Other long-term debt................................... 1,693,004
Stockholders' equity................................... 2,557,835
Book value per share................................... 20.20
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
COMBINED COMPANY UNAUDITED PRO FORMA
----------------------------------------------------------
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ------------------------------------
2000 1999(1) 1999(1) 1998 1997
-------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
OPERATING RESULTS
Oil sales.................................. $267,944 $ 69,313 $ 553,834 $ 306,924 $ 552,525
Gas sales.................................. 233,032 78,351 603,225 328,444 357,559
NGL sales.................................. 37,370 5,629 67,944 24,692 35,820
Other revenues............................. 12,065 2,573 20,596 24,248 48,255
-------- -------- ---------- ---------- ----------
Total revenues........................... 550,411 155,866 1,245,599 684,308 994,159
-------- -------- ---------- ---------- ----------
Lease operating expenses................... 109,393 56,720 303,248 229,884 266,197
Production taxes........................... 18,520 4,869 42,355 22,816 31,027
Depreciation, depletion and amortization of
property and equipment................... 165,252 59,758 406,375 243,144 285,308
Amortization of goodwill................... 10,332 -- 16,111 -- --
General and administrative expenses........ 24,850 11,923 80,645 45,454 53,081
Expenses related to prior mergers.......... -- -- 16,800 13,149 --
Interest expense........................... 40,076 13,164 109,613 43,532 41,488
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt........................... 2,408 (3,161) (13,154) 16,104 5,860
Distributions on preferred securities of
subsidiary trust......................... -- 2,429 6,884 9,717 9,717
Reduction of carrying value of oil and gas
properties............................... -- -- 476,100 422,500 641,714
-------- -------- ---------- ---------- ----------
Total costs and expenses................. 370,831 145,702 1,444,977 1,046,300 1,334,392
-------- -------- ---------- ---------- ----------
Earnings (loss) before income tax expense
(benefit) and minority interest.......... 179,580 10,164 (199,378) (361,992) (340,233)
Income tax expense (benefit):
Current.................................. 36,147 2,603 23,056 (3,713) 35,757
Deferred................................. 38,246 981 (72,490) (101,094) (146,299)
-------- -------- ---------- ---------- ----------
Total income tax expense............... 74,393 3,584 (49,434) (104,807) (110,542)
-------- -------- ---------- ---------- ----------
Earnings (loss) before minority interest... 105,187 6,580 (149,944) (257,185) (229,691)
Minority interest in Monterey Resources,
Inc...................................... -- -- -- -- (4,700)
-------- -------- ---------- ---------- ----------
Net earnings (loss)........................ 105,187 6,580 (149,944) (257,185) (234,391)
Preferred stock dividends.................. 2,434 -- 3,651 -- 12,000
-------- -------- ---------- ---------- ----------
Net earnings (loss) applicable to common
stockholders............................. $102,753 $ 6,580 $ (153,595) $ (257,185) $ (246,391)
======== ======== ========== ========== ==========
Net earnings (loss) per share:
Basic.................................... $ 0.81 $ 0.09 $ (1.64) $ (3.62) $ (3.58)
Diluted.................................. 0.80 0.09 (1.64) (3.62) (3.58)
Cash dividends per share................... 0.03 0.03 0.14 0.10 0.09
Weighted average common shares
outstanding--basic....................... 126,336 70,954 93,653 70,948 68,732
CASH FLOW DATA:
Net cash provided by operating
activities............................... $345,970 $ 92,467 $ 532,228 $ 334,471 $ 530,156
Net cash used in investing activities...... (432,511) (144,748) (768,217) (607,260) (545,683)
Net cash provided (used) by financing
activities............................... (25,271) 45,984 377,198 256,518 34,859
OTHER DATA:
Modified EBITDA(2)(4)...................... 397,648 82,354 802,551 373,005 643,854
Cash margin(3)(4).......................... 321,425 64,158 662,998 323,469 556,892
</TABLE>
--------------------------
(1) The 1999 operating results include the historical results of Devon and Santa
Fe Snyder (excluding the $4.2 million extraordinary loss, net of
$2.3 million of taxes, resulting from Santa Fe Snyder's early
5
<PAGE>
extinguishment of debt). The 1999 operating results do not include the pro
forma results of PennzEnergy Company and Snyder Oil Corporation prior to
their respective purchase dates of August 17, 1999 and May 5, 1999,
respectively. (See Unaudited Pro Forma Combined Statement of Operations for
the three months ended March 31, 1999 and the year ended December 31, 1999
included herein).
(2) Modified EBITDA represents earnings before interest (including deferred
effect of changes in foreign currency exchange rate on subsidiary's
long-term debt, and distributions on preferred securities of subsidiary
trust), taxes, depreciation, depletion and amortization and reduction of
carrying value of oil and gas properties.
(3) "Cash margin" equals total revenues less cash expenses. Cash expenses are
all expenses other than the non-cash expenses of depreciation, depletion and
amortization, deferred effect of changes in foreign currency exchange rate
on subsidiary's long-term debt, reduction of carrying value of oil and gas
properties and deferred income tax expense. Cash margin measures the net
cash which is generated by a company's operations during a given period,
without regard to the period such cash is actually physically received or
spent by the company. This margin ignores the non-operational effect on a
company's "net cash provided by operating activities", as measured by
generally accepted accounting principles, from a company's activities as an
operator of oil and gas wells. Such activities produce net increases or
decreases in temporary cash funds held by the operator which have no effect
on net earnings of the company.
(4) Modified EBITDA is presented because it is commonly accepted in the oil and
gas industry as a financial indicator of a company's ability to service or
incur debt. Cash margin is presented because it is commonly accepted in the
oil and gas industry as a financial indicator of a company's ability to fund
capital expenditures or service debt. Modified EBITDA and cash margin are
also presented because investors routinely request such information.
Management interprets the trends of modified EBITDA and cash margin in a
similar manner as trends in net earnings.
Modified EBITDA and cash margin should be used as supplements to, and not as
substitutes for, net earnings and net cash provided by operating activities
determined in accordance with generally accepted accounting principles as
measures of Devon's profitability or liquidity. There may be operational or
financial demands and requirements that reduce management's discretion over
the use of modified EBITDA and cash margin. Modified EBITDA and cash margin
may not be comparable to similarly titled measures used by other companies.
6
<PAGE>
<TABLE>
<CAPTION>
COMBINED COMPANY PRO FORMA
----------------------------------------------------
THREE
MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRODUCTION, PRICE AND OTHER DATA:
Production:
Oil (MMBbls)........................... 10,915 6,355 31,756 25,628 32,565
Gas (MMcf)............................. 103,767 51,412 304,203 198,051 186,239
NGL (MBbls)............................ 1,934 748 5,111 3,054 2,842
MBoe................................... 30,144 15,672 87,568 61,691 66,447
Average prices:
Oil (per Bbl).......................... $ 24.55 $ 10.91 $ 17.44 $ 11.98 $ 16.97
Gas (per Mcf).......................... 2.25 1.52 1.98 1.66 1.92
NGL (per Bbl).......................... 19.32 7.53 13.29 8.09 12.60
Per Boe................................ 17.86 9.78 13.99 10.70 14.24
Costs per Boe:
Operating costs........................ 4.24 3.93 3.95 4.10 4.47
Depreciation depletion and amortization
of oil and gas properties............ 5.27 3.64 4.46 3.74 4.16
General and administrative expenses.... 0.82 0.76 0.92 0.74 0.80
</TABLE>
<TABLE>
<CAPTION>
COMBINED COMPANY
PRO FORMA AS OF
DECEMBER 31, 1999
-----------------
<S> <C>
PROPERTY DATA:
Proved reserves:
Oil (MMBbls)........................................... 496.7
Gas (Bcf).............................................. 2,949.6
NGL (MMBbls)........................................... 67.8
Total (MMBoe).......................................... 1,056.1
SEC 10% present value (millions)....................... $ 5,812
Standardized measure of discounted future net cash
flows (millions)..................................... $ 4,768
</TABLE>
7
<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 is expected to be accounted for as a pooling-of-interests of
Devon and Santa Fe Snyder. Therefore, the unaudited pro forma combined
balance sheet has been prepared as if Devon and Santa Fe Snyder were
combined on March 31, 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. If the
merger is ultimately accounted for under the purchase method of
accounting, historical results for the two companies would not be combined
and the impact of the merger would be included in the statements of
operations only in periods subsequent to the closing of the merger. Under
the purchase method of accounting, the assets acquired and liabilities
assumed would be recorded at their estimated fair values rather than at
their historical book costs. This increase to fair value generally would
result in significantly higher depreciation, depletion and amortization
expenses and therefore significantly lower net earnings in future periods.
- 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.
8
<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.
9
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 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.............................. $ 313,563 $ 203,800 $ 517,363
Oil and gas properties, net................. 3,110,031 1,480,900 4,590,931
Other properties, net....................... 51,913 16,700 68,613
Investment in common stock of Chevron
Corporation............................... 655,606 -- 655,606
Goodwill, net............................... 314,955 -- 314,955
Other assets................................ 115,089 23,700 138,789
---------- ---------- --------- ----------
Total assets.............................. $4,561,157 $1,725,100 $ -- $6,286,257
========== ========== ========= ==========
LIABILITIES:
Current liabilities......................... $ 245,141 $ 214,000 $ 459,141
Debentures exchangeable into shares of
Chevron Corporation common stock.......... 760,313 -- 760,313
Other long-term debt........................ 842,004 794,000 $ 57,000 (a) 1,693,004
Deferred revenue............................ -- 158,200 158,200
Other long-term liabilities................. 173,680 75,400 249,080
Deferred income taxes....................... 424,184 500 (16,000)(a) 408,684
STOCKHOLDERS' EQUITY:
Preferred stock............................. 1,500 -- 1,500
Common stock................................ 8,652 1,800 2,208 (b) 12,660
Additional paid-in capital.................. 2,257,795 1,247,300 (2,208)(b) 3,486,287
(16,600)(c)
Accumulated deficit......................... (110,362) (750,100) (41,000)(a) (901,462)
Accumulated other comprehensive earnings
(loss).................................... (41,750) 1,700 -- (40,050)
Treasury stock.............................. -- (16,600) 16,600 (c) --
Unamortized restricted stock awards......... -- (1,100) -- (1,100)
---------- ---------- --------- ----------
Total stockholders' equity................ 2,115,835 483,000 (41,000) 2,557,835
---------- ---------- --------- ----------
Total liabilities and stockholders'
equity.................................. $4,561,157 $1,725,100 $ -- $6,286,257
========== ========== ========= ==========
</TABLE>
10
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 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............................................... $145,544 $122,400 $267,944
Gas sales............................................... 155,532 77,500 233,032
NGL sales............................................... 35,270 2,100 37,370
Other................................................... 11,365 700 12,065
-------- -------- --------
Total revenues........................................ 347,711 202,700 550,411
-------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses................................ 65,893 43,500 109,393
Production taxes........................................ 10,420 8,100 18,520
Depreciation, depletion and amortization of property and
equipment............................................. 108,552 56,700 165,252
Amortization of goodwill................................ 10,332 -- 10,332
General and administrative expenses..................... 16,650 8,200 24,850
Interest expense........................................ 25,276 14,800 40,076
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt................... 2,408 -- 2,408
-------- -------- --------
Total costs and expenses.............................. 239,531 131,300 370,831
-------- -------- --------
Earnings (loss) before income tax expense (benefit)....... 108,180 71,400 179,580
INCOME TAX EXPENSE (BENEFIT):
Current................................................. 29,847 6,300 36,147
Deferred................................................ 17,246 21,000 38,246
-------- -------- --------
Total income tax expense (benefit).................... 47,093 27,300 74,393
-------- -------- --------
Net earnings (loss)....................................... 61,087 44,100 105,187
Preferred stock dividends................................. 2,434 -- 2,434
-------- -------- --------
Net earnings (loss) applicable to common shareholders..... $ 58,653 $ 44,100 $102,753
======== ======== ========
Net earnings (loss) per average common share outstanding:
Basic................................................... $ 0.68 $ 0.24 $ 0.81
======== ======== ========
Diluted................................................. $ 0.67 $ 0.24 $ 0.80
======== ======== ========
Weighted average common shares outstanding--basic......... 86,208 182,400 126,336
======== ======== ========
</TABLE>
11
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 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......................... $27,913 $41,400 $ 69,313 $ 37,001 $ 25,000 $ 131,314
Gas sales......................... 53,551 24,800 78,351 69,428 5,000 152,779
NGL sales......................... 3,929 1,700 5,629 8,884 -- 14,513
Other............................. 1,873 700 2,573 7,517 600 10,690
------- ------- -------- -------- --------- ---------
Total revenues.................. 87,266 68,600 155,866 122,830 30,600 309,296
------- ------- -------- -------- --------- ---------
COSTS AND EXPENSES:
Lease operating expenses.......... 27,420 29,300 56,720 38,916 7,500 103,136
Production taxes.................. 2,969 1,900 4,869 2,968 1,500 9,337
Depreciation, depletion and
amortization of property and
equipment....................... 33,558 26,200 59,758 84,485 24,900 169,143
Amortization of goodwill.......... -- -- -- 11,767 -- 11,767
General and administrative
expenses........................ 6,223 5,700 11,923 22,068 4,500 38,491
Expenses related to prior
merger.......................... -- -- -- -- 16,800 16,800
Interest expense.................. 6,664 6,500 13,164 20,337 4,200 37,701
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt............................ (3,161) -- (3,161) -- -- (3,161)
Distributions on preferred
securities of subsidiary
trust........................... 2,429 -- 2,429 -- -- 2,429
Reduction of carrying value of oil
and gas properties.............. -- -- -- -- 240,500 240,500
------- ------- -------- -------- --------- ---------
Total costs and expenses........ 76,102 69,600 145,702 180,541 299,900 626,143
------- ------- -------- -------- --------- ---------
Earnings (loss) before income tax
expense (benefit)................. 11,164 (1,000) 10,164 (57,711) (269,300) (316,847)
INCOME TAX EXPENSE (BENEFIT):
Current........................... 1,903 700 2,603 (11,957) (100) (9,454)
Deferred.......................... 3,281 (2,300) 981 (16,128) (94,200) (109,347)
------- ------- -------- -------- --------- ---------
Total income tax expense
(benefit)..................... 5,184 (1,600) 3,584 (28,085) (94,300) (118,801)
------- ------- -------- -------- --------- ---------
Net earnings (loss)................. $ 5,980 $ 600 $ 6,580 (29,626) (175,000) (198,046)
Preferred stock dividends........... -- -- -- 2,434 -- 2,434
------- ------- -------- -------- --------- ---------
Net earnings (loss) applicable to
common shareholders............... $ 5,980 $ 600 $ 6,580 $(32,060) $(175,000) $(200,480)
======= ======= ======== ======== ========= =========
Net earnings (loss) per average
common share outstanding:
Basic............................. $ 0.12 $ 0.01 $ 0.09 $ (1.70)
======= ======= ======== =========
Diluted........................... $ 0.12 $ 0.01 $ 0.09 $ (1.70)
======= ======= ======== =========
Weighted average common shares
outstanding--basic................ 48,470 102,200 70,954 47,888 68,800 117,852
======= ======= ======== ======== ========= =========
</TABLE>
12
<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 30,029 23,400 119,988
======== ========= ========== ======== ======== ==========
</TABLE>
13
<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................................................... $ (1.25) $ (1.92) $ (3.62)
======== ========= ==========
Diluted................................................. $ (1.25) $ (1.92) $ (3.62)
======== ========= ==========
Weighted average common shares outstanding--basic......... 48,376 102,600 70,948
======== ========= ==========
</TABLE>
14
<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
========= ======== =========
</TABLE>
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997
1. METHOD OF ACCOUNTING FOR THE MERGER
Devon expects to account 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 will be
combined as if the two companies had always been combined. Santa Fe Snyder's
historical financial data will be restated to conform to Devon's accounting
policies. The estimated effect of this restatement of Santa Fe Snyder's
historical results is included in note 4.
In the merger, Devon will issue 0.22 shares of Devon common stock for each
outstanding share of Santa Fe Snyder common stock. This will result in Devon
issuing approximately 40.1 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. The combined company
will expense these costs in the quarter in which the merger is
consummated.
(b) To record the issuance of 40.1 million shares, par value $0.10 per
share, of Devon common stock in exchange for all 182.2 million shares of
Santa Fe Snyder common stock, par value $0.01 per share, outstanding on
March 31, 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 2.3 million shares of Santa Fe Snyder treasury stock
outstanding on March 31, 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 follows the successful efforts method of
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RESTATED
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Current assets....................................... $ 203,800 $ 203,800
Oil and gas properties, net.......................... 1,828,900 $(348,000)(a) 1,480,900
Other properties, net................................ 40,900 (24,200)(a) 16,700
Other assets, net.................................... 32,000 (8,300)(b) 23,700
---------- --------- ----------
Total assets....................................... $2,105,600 $(380,500) $1,725,100
========== ========= ==========
LIABILITIES:
Current liabilities.................................. $ 214,000 $ 214,000
Deferred revenue..................................... 166,500 (8,300)(b) 158,200
Other liabilities.................................... 75,400 75,400
Long-term debt....................................... 794,000 794,000
Deferred income taxes................................ 90,500 (90,000)(a) 500
STOCKHOLDERS' EQUITY:
Common stock......................................... 1,800 1,800
Additional paid-in capital........................... 1,247,300 1,247,300
Accumulated deficit.................................. (467,900) (282,200)(a) (750,100)
Accumulated other comprehensive earnings (loss)...... 1,700 1,700
Treasury stock....................................... (16,600) (16,600)
Unamortized restricted stock awards.................. (1,100) (1,100)
---------- --------- ----------
Total stockholders' equity......................... 765,200 (282,200) 483,000
---------- --------- ----------
Total liabilities and stockholders' equity......... $2,105,600 $(380,500) $1,725,100
========== ========= ==========
</TABLE>
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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
THREE MONTHS ENDED MARCH 31, 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................................... $122,400 $122,400
Gas sales................................... 77,500 77,500
NGL sales................................... 2,100 2,100
Other....................................... -- $ 700 700
-------- -------- -------- --------
Total revenues............................ 202,000 -- 700 202,700
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses.................... 41,900 1,600 43,500
Production and other taxes.................. 11,400 (3,300) 8,100
Exploration................................. 10,100 $(10,100)(c) --
Depreciation, depletion and amortization of
property and equipment.................... 68,900 (12,200)(e) 56,700
General and administrative expenses......... 7,100 (600)(c) 1,700 8,200
Interest expense............................ -- 14,800 14,800
Loss (gain) on disposition of assets........ (200) 200 (d) --
-------- -------- -------- --------
Total costs and expenses.................. 139,200 (22,700) 14,800 131,300
-------- -------- -------- --------
Income (loss) from operations................. 62,800 22,700 (14,100) 71,400
Interest income............................... 700 (700) --
Interest expense.............................. (15,000) 15,000 --
Interest capitalized.......................... 1,500 (1,300)(c) (200) --
-------- -------- -------- --------
Income (loss) before income taxes............. 50,000 21,400 -- 71,400
INCOME TAX EXPENSE (BENEFIT):
Current..................................... 6,300 6,300
Deferred.................................... 13,000 8,000 (g) 21,000
-------- -------- -------- --------
Total income tax expense (benefit)........ 19,300 8,000 -- 27,300
-------- -------- -------- --------
Net earnings (loss) applicable to common
shareholders................................ $ 30,700 $ 13,400 $ -- $ 44,100
======== ======== ======== ========
Net earnings (loss) per average common share
outstanding:
Basic....................................... $ 0.17 $ 0.24
======== ========
Diluted..................................... $ 0.17 $ 0.24
======== ========
Weighted average common shares outstanding--
basic....................................... 182,400 182,400
======== ========
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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
THREE MONTHS ENDED MARCH 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.................................... $ 41,400 $41,400
Gas sales.................................... 24,800 24,800
NGL sales.................................... 1,700 1,700
Other........................................ 300 $ 400 700
-------- -------- ------- -------
Total revenues............................. 68,200 -- 400 68,600
-------- -------- ------- -------
COSTS AND EXPENSES:
Lease operating expenses..................... 28,300 1,000 29,300
Production and other taxes................... 3,500 (1,600) 1,900
Exploration.................................. 11,200 $(11,200)(c) --
Depreciation, depletion and amortization of
property and equipment..................... 31,900 (5,700)(e) 26,200
General and administrative expenses.......... 5,400 (300)(c) 600 5,700
Interest expense............................. -- 6,500 6,500
Loss (gain) on disposition of assets......... 100 (100)(d) --
-------- -------- ------- -------
Total costs and expenses................... 80,400 (17,300) 6,500 69,600
-------- -------- ------- -------
Income (loss) from operations.................. (12,200) 17,300 (6,100) (1,000)
Interest income................................ 400 (400) --
Interest expense............................... (6,800) 6,800 --
Interest capitalized........................... 1,300 (1,000)(c) (300) --
-------- -------- ------- -------
Income (loss) before income taxes.............. (17,300) 16,300 -- (1,000)
INCOME TAX EXPENSE (BENEFIT):
Current...................................... 700 700
Deferred..................................... (5,900) 3,600 (g) (2,300)
-------- -------- ------- -------
Total income tax expense (benefit)......... (5,200) 3,600 -- (1,600)
-------- -------- ------- -------
Net earnings (loss) applicable to common
shareholders................................. $(12,100) $ 12,700 $ -- $ 600
======== ======== ======= =======
Net earnings (loss) per average common share
outstanding:
Basic........................................ $ (0.12) $ 0.01
======== =======
Diluted...................................... $ (0.12) $ 0.01
======== =======
Weighted average common shares outstanding--
basic........................................ 102,200 102,200
======== =======
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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
========= =========
</TABLE>
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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...................................... $ (0.96) $ (1.92)
======== =========
Diluted.................................... $ (0.96) $ (1.92)
======== =========
Weighted average common shares
outstanding--basic....................... 102,600 102,600
======== =========
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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
FOR THE 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)(c) 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
======== ========
</TABLE>
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 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 and Santa Fe Snyder's historical
statements for the first quarter of 1999 do not include any effects of the
PennzEnergy or Snyder mergers since both transactions closed subsequent to
March 31, 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 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.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
DEVON ENERGY CORPORATION
By: /s/ William T. Vaughn
Senior Vice President - Finance
Date: June 21, 2000
24
