SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
OR
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
Commission File No. 1-10067
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Oklahoma 73-1474008
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification Number)
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma
73102
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (405) 235-
3611
Not applicable
Former name, former address and former fiscal year, if changed
from last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
The number of shares outstanding of Registrant's common
stock, par value $.10, as of August 8, 1995, was 22,093,496.
1 of 32 total pages
(Exhibit Index is found at page 30)
<PAGE>
DEVON ENERGY CORPORATION
Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission
Page No.
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, June 30, 1995 (Unaudited)
and December 31, 1994 4
Consolidated Statements of Operations (Unaudited),
For the Three Months and the Six Months Ended
June 30, 1995 and 1994 5
Consolidated Statements of Stockholders' Equity
(Unaudited), For the Three Months and the Six Months
Ended June 30, 1995 and 1994 6
Consolidated Statements of Cash Flows (Unaudited),
For the Six Months Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 12
Part II. Other Information
Item 4. Submission of Matters o a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
2
<PAGE>
DEVON ENERGY CORPORATION
Part I. Financial Information
Item 1. Consolidated Financial Statements
June 30, 1995 and 1994
(Forming a part of Form 10-Q Quarterly Report
to the Securities and Exchange Commission)
3
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 8,807,024 8,336,371
Accounts receivable 17,192,292 15,626,799
Inventories 549,495 534,326
Prepaid expenses 1,330,903 564,371
Deferred income taxes 262,000 262,000
Total current assets 28,141,714 25,323,867
Property and equipment, at cost, based on the
full cost method of accounting for oil and
gas properties 556,126,622 523,941,141
Less: Accumulated depreciation,
depletion and amortization 221,340,641 202,634,961
334,785,981 321,306,180
Other assets 3,870,334 4,817,489
Total assets $366,798,029 351,447,536
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable:
Trade 3,674,943 6,394,897
Revenues and royalties due to others 6,402,169 7,398,199
Accrued expenses 3,056,938 3,225,493
Total current liabilities 13,134,050 17,018,589
Revenues and royalties due to others 1,383,135 1,383,135
Deposits (Note 3) 11,521,923 -
Long-term debt 95,000,000 98,000,000
Deferred revenue (Note 3) 7,596,884 1,299,947
Deferred income taxes 29,518,000 27,340,000
Stockholders' equity:
Preferred stock of $1.00 par value.
Authorized 3,000,000 shares; none
issued - -
Common stock of $.10 par value.
Authorized 120,000,000 shares; issued
22,058,496 shares in 1995 and
2,050,996 in 1994 2,205,850 2,205,100
Additional paid-in capital 166,743,587 166,654,305
Retained earnings 39,694,600 37,546,460
Total stockholders' equity 208,644,037 206,405,865
Total liabilities and stockholders'
equity $366,798,029 351,447,536
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
Revenues:
<S> <C> <C> <C> <C>
Gas sales $ 9,552,692 14,622,933 19,452,697 32,131,921
Oil sales 14,376,088 9,162,648 26,365,389 16,543,399
Natural gas liquids sales 1,403,186 1,167,464 3,033,448 2,056,029
Other 318,368 566,308 561,127 932,285
Total revenues 25,650,334 25,519,353 49,412,661 51,663,634
Costs and expenses:
Production and operating
expenses 8,110,585 7,597,400 16,552,362 15,186,620
Depreciation, depletion and
amortization 9,600,192 8,187,731 19,059,444 16,309,505
General and administrative
expenses 2,053,044 2,226,672 4,389,814 4,278,099
Interest expense 1,743,091 1,313,697 3,526,817 2,306,583
Total costs and expenses 21,506,912 19,325,500 43,528,437 38,080,807
Earnings before income taxes 4,143,422 6,193,853 5,884,224 13,582,827
Income tax expense:
Current 235,000 252,000 235,000 547,000
Deferred 1,464,000 1,888,000 2,178,000 4,105,000
Total income tax expense 1,699,000 2,140,000 2,413,000 4,652,000
Net earnings $ 2,444,422 4,053,853 3,471,224 8,930,827
Net earnings per average common
share outstanding $0.11 0.19 0.16 0.42
Weighted average common shares
outstanding 22,052,149 21,253,781 22,051,576 21,050,006
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Common stock:
<S> <C> <C> <C> <C>
Balance, beginning of period $ 2,205,100 2,084,512 2,205,100 2,084,232
Par value of common shares
issued 750 120,395 750 120,675
Balance, end of period 2,205,850 2,204,907 2,205,850 2,204,907
Additional paid-in capital:
Balance, beginning of period 166,654,305 144,432,288 166,654,305 144,403,743
Common shares issued 89,282 22,217,620 89,282 22,246,165
Balance, end of period 166,743,587 166,649,908 166,743,587 166,649,908
Retained earnings:
Balance, beginning of period 37,911,732 30,663,192 37,546,460 26,411,572
Dividends on common stock (661,554) (661,471) (1,323,084) (1,286,825)
Net earnings 2,444,422 4,053,853 3,471,224 8,930,827
Balance, end of period 39,694,600 34,055,574 39,694,600 34,055,574
Total stockholders' equity,
end of period $208,644,037 202,910,389 208,644,037 202,910,389
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
<CAPTION>
Six Months
Ended June 30,
1995 1994
Cash flows from operating activities
<S> <C> <C>
Net earnings $3,471,224 8,930,827
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 19,059,444 16,309,505
(Gain) loss on sale of assets (26,763) 218
Deferred income taxes 2,178,000 4,105,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (1,774,987) 2,699,474
Inventories (15,169) 180,001
Prepaid expenses (766,532) (532,357)
Other assets 624,327 (759,915)
Increase (decrease) in:
Accounts payable (1,324,500) (7,760,762)
Income taxes payable - (467,962)
Accrued expenses (168,555) (188,157)
Deferred revenue (Note 3) 6,296,937 (79,476)
Net cash provided by operating activities 27,553,426 22,436,396
Cash flows from investing activities
Proceeds from sale of property and equipment 1,460,712 362,479
Increase in deposits (Note 3) 11,521,923 -
Capital expenditures (33,440,872) (12,874,028)
Payments made for acquisitions of business (Note 2) (2,391,484) (42,233,853)
Net cash provided by (used in) investing
activities (22,849,721) (54,745,402)
Cash flows from financing activities
Proceeds from borrowings on revolving lines of
credit 4,000,000 29,500,000
Principal payments on revolving line of credit (7,000,000) (4,500,000)
Issuance of common stock 90,032 359,430
Dividends paid on common stock (1,323,084) (1,286,825)
Net cash provided by (used in) financing
activities (4,233,052) 24,072,605
Net increase (decrease) in cash and cash equivalents 470,653 (8,236,401)
Cash and cash equivalents at beginning of period 8,336,371 19,550,288
Cash and cash equivalents at end of period $ 8,807,024 11,313,887
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements
and notes thereto have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission.
Accordingly, certain footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such
rules and regulations. The accompanying consolidated financial
statements and notes thereto should be read in conjunction with
the consolidated financial statements and notes included in
Devon's 1994 annual report on Form 10-K.
In the opinion of Devon's management, all
adjustments (all of which are normal and recurring) have been
made which are necessary to fairly state the consolidated
financial position of Devon and its subsidiaries as of June 30,
1995, and the results of their operations for the three month and
six month periods ended June 30, 1995 and 1994 and their cash
flows for the six month periods ended June 30, 1995 and 1994.
2. Acquisition
On May 18, 1994, Devon acquired Alta Energy Corporation
("Alta") via a merger between the two companies (the "Merger").
The accompanying consolidated statements of cash flows include
cash payments related to the Merger in both the six month periods
ended June 30, 1995 and 1994. The $42.2 million of cash payments
in the first half of 1994 represent substantially all of the
$42.4 million paid in the year 1994 related to the Merger. In
addition to these payments, Devon also issued approximately
1,168,000 shares of its common stock for the Merger.
Subsequently, in February 1995, Devon paid an additional
$2.4 million to the former Alta stockholders. This payment, in
accordance with the Merger agreement, was based upon the
evaluation of a well completed by Alta during the first half of
1994.
3. Contingent Transaction
In early 1995, Devon and an unrelated entity entered into a
transaction covering substantially all of Devon's San Juan Basin
gas properties. However, the transaction is subject to a
material unresolved contingency and a confidentiality agreement.
Until the contingency is resolved, Devon is deferring the
recognition of the operating statement impact from the
transaction. The pro forma information at the end of this note
presents the potential impact on Devon's operating statement from
this contingent transaction.
8
<PAGE>
As of June 30, 1995, Devon had received $17.9 million under
the terms of the transaction. Since the entire $17.9 million is
refundable, these funds are recorded as liabilities in the
accompanying June 30, 1995 consolidated balance sheet, pending
the resolution of the contingency. Approximately $6.4 million of
the total received to date will be recorded as revenues if the
contingency is favorably resolved. This amount is included in
deferred revenues in the June 30, 1995 balance sheet. The
remaining $11.5 million will affect only the balance sheet upon a
favorable resolution, and is recorded as deposits in the
accompanying balance sheet.
The contingency should be resolved by year-end 1995. Upon a
favorable resolution of the contingency, the cumulative
unrecorded effects of the transaction will be recorded, starting
from the January 1, 1995 effective date. Also, Devon will have
either consumed, or otherwise will no longer have available, a
substantial portion of the income tax benefits it currently
possesses. If the resolution is unfavorable, Devon will return
the cash received, thereby liquidating the liabilities, and its
results of operations will not be affected.
Though the $17.9 million which has been received through
June 30, 1995, is refundable pending the resolution of the
contingency, Devon's use of the funds is not restricted.
However, to secure the possible repayment of the cash it receives
under the terms of the transaction, Devon has established a
letter of credit in favor of the other entity which expires no
later than December 29, 1995. The amount of the letter of credit
increases throughout 1995, to a maximum of $20 million, based
upon the expected timing of Devon's cash receipts. As of June
30, 1995, the letter of credit was $18 million. Devon's
available borrowings under its credit lines are restricted by the
amount of the letter of credit.
9
<PAGE>
Assuming that the transaction had been effective as of the
beginning of each period presented below, and was not subject to
the contingency, Devon's pro forma results for the six months
ended June 30, 1995 and 1994 are as follows:
<TABLE>
Pro Forma Effects Attributable to Contingent Transaction
<CAPTION>
Pro Forma
Six Months Ended June 30,
1995 1994
Revenues
<S> <C> <C>
Gas sales $25,000,000 36,700,000
Oil sales 26,400,000 16,500,000
Natural gas liquids sales 3,000,000 2,100,000
Other 500,000 900,000
Total revenues 54,900,000 56,200,000
Costs and expenses
Production and operating expenses 16,400,000 15,000,000
Depreciation, depletion and
amortization 18,400,000 15,700,000
General and administrative expenses 4,400,000 4,300,000
Interest expense 3,500,000 2,000,000
Total costs and expenses 42,700,000 37,000,000
Earnings before income taxes 12,200,000 19,200,000
Income tax expense
Current 2,300,000 2,200,000
Deferred 2,800,000 4,500,000
Total income tax expense 5,100,000 6,700,000
Net earnings $ 7,100,000 12,500,000
Net earnings per average common share
outstanding $0.32 0.59
</TABLE>
10
<PAGE>
4. Interest Rate Swap Agreement
Devon entered into an interest rate swap
agreement in June, 1995, to hedge the impact of interest rate
changes on a portion of its long-term debt. The principal amount
of the swap agreement is $75 million, and the other party to the
agreement is one of the lenders of Devon's credit lines (the
"Lender"). The agreement terminates on June 16, 1998, unless the
Lender exercises its right to extend the termination date to June
16, 2000. The terms of the agreement provide for quarterly
payments either to or from Devon, determined by whether the three
month London Interbank Offered Rate ("LIBOR") in effect at the
beginning of each quarterly calculation period is greater or less
than 5.6%. The calculation periods begin on the sixteenth day of
March, June, September and December. If, on the date of the
beginning of the quarterly calculation period, the three month
LIBOR exceeds 5.6%, the Lender will owe Devon the quarterly
amount of the excess rate applied to the $75 million principal.
Alternately, if the three month LIBOR on the applicable quarterly
date is less than 5.6%, Devon will owe the Lender.
The swap agreement is accounted for as a hedge,
with the amount which is either due to or from Devon recorded as
a reduction or increase in interest expense. The three month
LIBOR as of the first quarterly calculation period which began on
June 16, 1995, was 6.0%. Accordingly, the Lender owes Devon
$76,667, which is payable under the terms of the agreement on
September 16, 1995. Devon has recognized $12,500 of this amount
as a reduction of interest expense in the second quarter, with
the remainder deferred until the third quarter.
The swap agreement does not alter or affect any
terms or conditions of Devon's lines of credit.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion addresses material
changes in results of operations for the three months and six
months ended June 30, 1995, compared to the three months and six
months ended June 30, 1994, and in financial condition since
December 31, 1994. It is presumed that readers have read or have
access to Devon's 1994 annual report on Form 10-K.
The 1994 annual report on Form 10-K
contained various forward-looking information for the year 1995.
Where necessary, that information has been revised in the
following discussion. The forward-looking information provided
herein is based on management's examination of historical
operating trends, the December 31, 1994 reserve report of
LaRoche, Swindell & Associates, data in Devon's files and other
data available from third parties. The forward-looking
information in this discussion was prepared assuming demand,
curtailment, producibility and general market conditions for
Devon's oil, natural gas and natural gas liquids ("NGL") for the
second half of 1995 will be substantially similar to those for
the first half of the year, unless otherwise noted. No assurance
as to the ultimate accuracy of the forward-looking information
can be given.
Overview
Devon's combined oil, gas and NGLs production
increased 9% and 7%, respectively, for the quarter and year-to-
date periods ended June 30, 1995. However, net earnings declined
significantly for both periods. These results were driven by
several factors:
Devon's May 1994 merger with Alta coupled
with the company's extensive drilling
efforts in the Grayburg-Jackson Field and
the Sand Dunes Area, increased oil
production by 46% in the second quarter and
34% year-to-date.
Natural gas prices were sharply lower in the
1995 periods, offsetting the gains in total
production of oil, gas and NGLs. The
average price Devon received for its gas
production fell 32% in the second quarter
and 37% for the year-to-date period.
The Merger with Alta boosted depreciation,
depletion and amortization expense and to a
lesser extent operating costs during the
1995 periods.
Interest expense increased in both the
quarter and year-to-date periods ended June
30, 1995. Higher interest rates were the
primary cause for the expense increase in
both periods.
In early 1995, Devon and an unrelated party
entered into a transaction involving
substantially all of Devon's San Juan Basin
properties. Because the transaction is
subject to a material unresolved
contingency, Devon is deferring recognition
of the operating statement impact. However,
Devon benefitted from the use of $17.9
12
<PAGE>
million of cash received in 1995 under the
terms of the agreement. See note 3 to the
consolidated financial statements in Part 1,
Item 1 of this report, and "Capital
Expenditures, Capital Resources and
Liquidity - Capital Resources and Liquidity"
in this section of the report.
The positive benefits derived from Devon's
acquisition and drilling efforts were muted by sharply lower gas
prices in the quarter and year-to-date periods. Unfortunately,
Devon can only marginally influence the prices it receives for
oil, natural gas and NGLs.
13
<PAGE>
Results of Operations
Combined oil, gas and NGL revenues increased by
2% for the second quarter of 1995, and decreased by 4% for the
first half of 1995. The relative contributions of production and
price changes are shown below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 Change 1995 1994 Change
Production
<S> <C> <C> <C> <C> <C> <C>
Gas (Mcf) 9,374,203 9,780,271 -4% 19,355,504 20,076,899 -4%
Oil (Bbls) 822,891 565,427 +46% 1,541,135 1,146,168 +34%
<F1>
NGL (Boe)1 133,192 117,176 +14% 271,881 225,193 +21%
Oil, Gas and
NGL (EMcf) 115,110,701 13,875,889 +9% 30,233,600 28,305,065 +7%
Revenues
Gas $ 9,552,692 14,622,933 -35% 19,452,697 32,131,921 -39%
Oil 14,376,088 9,162,648 +57% 26,365,389 16,543,399 +59%
NGL 1,403,186 1,167,464 +20% 3,033,448 2,056,029 +48%
Combined $25,331,966 24,953,045 +2% 48,851,534 50,731,349 -4%
Average Prices
Gas (Per Mcf) $1.02 1.50 -32% 1.01 1.60 -37%
Oil (Per Bbl) $17.47 16.20 +8% 17.11 14.43 +19%
<F1>
NGL (Per Boe)1 $10.54 9.96 +6% 11.16 9.13 +22%
Oil, Gas and NGL
<F1>
(Per EMcf)1 $1.68 1.80 -7% 1.62 1.79 -9%
<F1>
1 NGL is converted to barrels of oil equivalent ("Boe") at the
rate of 42 gallons of liquids per barrel. Oil and NGL are
converted to equivalent thousand cubic feet ("EMcf") at the
rate of six Mcf per barrel of oil (or Boe of NGL). These
conversions are based upon the approximate relative energy
content of natural gas, oil and NGL. Such rate is not
necessarily indicative of the relationship of oil, gas and NGL
prices, which are affected by market and other factors in
addition to relative energy content.
</TABLE>
Gas Revenues. Gas revenues declined by $5.1 million,
or 35%, in the second quarter of 1995, primarily because the
average price dropped by $0.48 per Mcf, or 32%. This price
decline accounted for $4.5 million of the reduction in gas
revenues in the 1995 quarter. Also, declines in production of
0.4 Bcf, or 4%, caused a $0.6 million drop in gas revenues.
14
<PAGE>
Coal seam gas averaged $0.70 per Mcf in the second
quarter of 1995, or 41% lower than the $1.18 per Mcf price
received in 1994's second quarter. The average price for
conventional gas production was $1.47 per Mcf in the 1995
quarter, a 19% reduction from the $1.82 per Mcf price realized in
the 1994 quarter. The price per Mcf for coal seam gas has
historically been less than Devon's conventional gas (i.e., gas
produced from other than coal formations) due to the former's low
Btu content and the costs of transportation and removing carbon
dioxide. These adjustments have been taken into account in
calculating the coal seam gas prices referred to above.
Coal seam gas production increased from 5.0 Bcf in the
second quarter of 1994 to 5.5 Bcf in the second quarter of 1995.
Coal seam gas production in the second quarter of 1994 was
limited by Devon's decision to sell approximately 0.7 Bcf less
than its full share of Northeast Blanco Unit ("NEBU") production.
Conventional gas production in the second quarter of 1995
benefited from a complete quarter of production from the
properties acquired in the May 1994 Merger (the "Merger
Properties"). The Merger Properties' gas production increased
0.1 Bcf in the 1995 quarter. This was offset, however, by a 0.1
Bcf reduction due to properties which were sold subsequent to the
second quarter of 1994, and a 0.9 Bcf net reduction in all other
conventional production.
Gas revenues declined by $12.7 million, or 39%, in the
first half of 1995, primarily because the average price dropped
by $0.59 per Mcf, or 37%. This price decline accounted for $11.5
million of the drop in gas revenues in the first half of 1995.
Also, declines in production of 0.7 Bcf, or 4%, caused a $1.2
million drop in gas revenues.
Coal seam gas averaged $0.73 per Mcf in the first half
of 1995, or 46% lower than the $1.34 per Mcf price received in
1994's first six months. The average price for conventional gas
production was $1.40 per Mcf in the first six months of 1995, a
27% reduction from the $1.91 per Mcf price realized in 1994's
comparable period.
Coal seam gas production increased by 4% in the first
half of 1995, from 11.0 Bcf produced in the 1994 period to 11.4
Bcf produced in the 1995 period. Conventional gas production
decreased from 9.1 Bcf in the first half of 1994 to 8.0 Bcf in
the first half of 1995. The Merger Properties accounted for a
0.3 Bcf increase in production. However, this was offset by a
0.3 Bcf reduction due to property sales subsequent to June 1994,
and a 1.1 Bcf net reduction in all other conventional production.
1995 Revised Estimates. The original estimate in the
1994 10-K for 1995 gas production was between 37 Bcf and 43 Bcf
in total, which consisted of between 20 Bcf and 24 Bcf of coal
seam gas production and between 17 Bcf and 19 Bcf of conventional
gas production. Primarily due to the decision to delay drilling
projects related to proved undeveloped gas properties, the
estimate for 1995 conventional gas production has been revised to
between 15 Bcf and 17 Bcf, and the estimate for total gas
production has been revised to between 35 Bcf and 41 Bcf. The
original estimate for coal seam production has not changed.
15
<PAGE>
It was originally estimated in the 1994 10-K that coal
seam gas prices in 1995, after the effects of BTU content,
transportation and carbon dioxide removal, would be between $0.45
to $0.50 per Mcf less than Texas Gulf Coast ("TGC") spot
averages. In the first half of 1995, mild weather and an
unusually large supply of hydroelectric power in the West Coast
area of the U.S. (generated from large amounts of snowfall in the
winter and spring months of 1995) lowered natural gas demand in
that area, which is where a majority of the coal seam gas is
marketed. As a result, coal seam gas averaged $0.75 per Mcf less
than the TGC average for the first six months of 1995. While it
is obviously difficult to accurately predict such weather related
market effects, Devon does not consider these changes in market
conditions to be permanent. It is, however, expected that the
West Coast gas market will continue to be weaker than usual into
the fourth quarter of 1995. Based on this, it is estimated that
coal seam gas for the year 1995 should average between $0.65 and
$0.75 less than the TGC spot average.
Oil Revenues. Oil revenues increased by 57% from $9.2
million in the second quarter of 1994 to $14.4 million in the
second quarter of 1995. Production gains of 257,000 barrels, or
46%, added $4.2 million of oil revenues in the 1995 quarter.
Also, the average oil price increased by $1.27 per barrel, or 8%,
in the 1995 quarter, which added $1.0 million to the period's oil
revenues.
The primary contributor to the increased oil production
was the added production from the Merger Properties. The Merger
Properties only contributed production for approximately one
month in the 1994 quarter. More importantly, however, oil
production from these properties has increased steadily since the
Merger. As a result, the Merger Properties produced 200,000
barrels in the second quarter of 1995, compared to 38,000 barrels
produced in the second quarter of 1994. Devon's other oil
properties also increased from 527,000 barrels in the second
quarter of 1994 to 623,000 barrels in the second quarter of 1995.
This 18% increase was caused by production from new wells which
were completed in 1995, and additional production from
recompletions and workovers.
Oil revenues increased by 59% from $16.5 million in the
first half of 1994 to $26.4 million in the first half of 1995.
Production gains of 395,000 barrels, or 34%, added $5.7 million
of oil revenues in the 1995 period. Also, the average oil price
increased by $2.68 per barrel, or 19%, in the 1995 period, which
added $4.2 million of oil revenues compared to the 1994 period.
As discussed above, the Merger Properties contributed
only one month of oil production in the first half of 1994,
compared to a full six months of production in the first half of
1995. The Merger Properties produced 339,000 barrels in the
first six months of 1995, compared to the 38,000 barrels which
they produced for the month of June 1994. Production from
Devon's other oil properties increased 94,000 barrels, or 8%, in
the first half of 1995 due to the increase in the second quarter
discussed above.
1995 Revised Estimate. It was originally estimated in
the 1994 10-K that Devon's net oil price for the year 1995 would
average between $0.25 and $0.50 below West Texas Intermediate
("WTI") posted prices. Through the first six months of 1995,
Devon's net oil price averaged only $0.11 below the average WTI
price. The increase in Devon's net price was primarily the
result of successful renegotiations of crude contracts. Devon's
position in these renegotiations benefited from a higher demand
for sour crude, which is the primary type produced from the
properties Devon acquired in 1994, and the aggregation of
supplies from various properties for marketing purposes. Devon
now estimates that its net oil price for the year 1995 should
average between $0.05 and $0.15 less than WTI posted prices. The
original estimate for 1995 oil production of between 3.0 to 3.5
million barrels has not changed.
16
<PAGE>
NGL Revenues. NGL revenues increased by 20% from $1.2
million in the second quarter of 1994 to $1.4 million in the
second quarter of 1995. Production increased in the 1995 period
by 16,000 Boe, or 14%, which added $0.1 million to NGL revenues.
The Merger Properties accounted for all of the production
increase. Also, the average price increased by $0.58 per Boe, or
6%, in the 1995 quarter. This price increase added $0.1 million
to NGL revenues in the 1995 period.
NGL revenues increased by 48% from $2.1 million in the
first half of 1994 to $3.0 million in the first half of 1995.
Production increased in 1995 by 47,000 Boe, or 21%, which added
$0.4 million to NGL revenues. The Merger Properties accounted
for 30,000 Boe of the production increase. Also, the average
price increased by $2.03 per Boe, or 22%, in the first six months
of 1995. This price increase added $0.5 million to NGL revenues
in the first half of 1995.
Production and Operating Expenses. Components of
production and operating expenses in the second quarter and first
half of 1995 increased or decreased compared to 1994 as shown in
the table below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 Change 1995 1994 Change
Absolute:
Recurring operations and
<S> <C> <C> <C> <C> <C> <C>
maintenance expenses $5,578,820 5,165,569 +8% 11,168,811 10,304,605 +8%
Well workover expenses 974,543 707,894 +38% 2,149,873 1,244,159 +73%
Production taxes 1,557,222 1,723,937 -10% 3,233,678 3,637,856 -11%
Total production and
operating expenses $8,110,585 7,597,400 +7% 16,552,362 15,186,620 +9%
Per EMcf:
Recurring operations and
maintenance expenses $0.37 0.37 - 0.37 0.37 -
Well workover expenses 0.07 0.05 +40% 0.07 0.04 +75%
Production taxes 0.10 0.13 -23% 0.11 0.13 -15%
Total production and
operating expenses $0.54 0.55 -2% 0.55 0.54 +2%
</TABLE>
Recurring operations and maintenance expenses
increased in both the second quarter and year-to-date periods in
1995, primarily due to the additional expenses incurred on the
Merger Properties acquired in the second quarter of 1994. The
Merger Properties accounted for $0.4 million of the increase in
the second quarter's recurring expenses, and $1.1 million of the
increase in the year-to-date period. Recurring expenses on
Devon's other properties were constant between the second quarter
of 1995 and 1994, and decreased by $0.2 million, or 3%, in the
first half of 1995.
17
<PAGE>
The Merger Properties are primarily oil producing
properties, which are traditionally more expensive to operate
than gas producing properties. The per unit rate of the Merger
Properties' recurring expenses in the second quarter and first
six months of 1995 was $0.46 per EMcf and $0.52 per EMcf,
respectively. These compare to respective rates of $0.36 per
EMcf and $0.35 per EMcf for the recurring expenses of all other
properties owned by Devon.
Well workover expenses increased by substantial
margins in both the second quarter and the first half of 1995.
This is a trend that should also continue in the second half of
1995. The expenses incurred in the first half of 1995 related to
projects to increase production from certain wells as well as
routine repairs.
1995 Revised Estimates. It was originally
estimated that approximately $5 to $6 million would be spent in
1995 for well workovers, and that total production and operating
expenses would total between $35 and $41 million. Devon now
estimates that its workover expenses for the year will be between
$4 and $5 million, and its total production and operating
expenses will be between $33 and $39 million.
Depreciation, Depletion and Amortization Expenses
("DD&A"). Oil and gas property related DD&A increased $1.4
million, or 18%, from $7.9 million in the second quarter of 1994
to $9.3 million in the same quarter of 1995. Approximately half
of the increase was caused by an increase in the DD&A rate per
EMcf. The DD&A rate in 1994's second quarter was $0.57 per EMcf,
compared to 1995's second quarter rate of $0.61 per EMcf. The
inclusion of the Merger Properties for a full quarter in 1995,
compared to only one month in 1994, accounted for substantially
all of the DD&A rate increase. The other half of the DD&A
increase was caused by the 9% increase in total production.
Oil and gas property related DD&A increased by
$2.7 million, or 17%, from $15.7 million in the first half of
1994 to $18.4 million in the first half of 1995. The DD&A rate
increased from $0.56 per EMcf in the 1994 period to $0.61 per
EMcf in the 1995 period, primarily due to the inclusion of the
Merger Properties as discussed above. This rate increase caused
approximately 60% of the DD&A increase, with the other 40% caused
by the 7% increase in total production.
General and Administrative Expenses ("G&A"). G&A
decreased $0.2 million, or 8%, in the second quarter of 1995
compared to the same period of 1994. The primary reason for the
decrease was a change in the method used to calculate overhead
reimbursements on certain properties operated by Devon. This
change, which was retroactive to the prior two years, reduced G&A
by approximately $0.2 million in the quarter.
G&A increased $0.1 million, or 3%, for the first
half of 1995 compared to the same period of 1994. Personnel
expenses, including salary, pension and insurance expenses,
increased $0.5 million, or 13%, in the 1995 period. Of these
components, salaries were up 6%, pension expense was up 61% and
insurance expense was up 18%. These increases were offset by
higher overhead reimbursements. In addition to the retroactive
$0.2 million benefit referred to in the above paragraph,
recurring overhead reimbursements for the first half of 1995 were
also up by $0.3 million, primarily due to the increased number of
wells which Devon now operates.
18
<PAGE>
Interest Expense. Interest expense increased
$0.4 million, or 33%, in the second quarter of 1995, due
exclusively to higher rates. The annualized interest rate on the
debt outstanding during 1995's second quarter was 6.7%, compared
to 4.9% during the second quarter of 1994. The overall average
interest rate (including the effect of various fees paid to the
banks and the amortization of certain loan costs) during the
second quarter of 1995 was 7.4%, compared to 5.5% during the
second quarter of 1994. The average debt balance outstanding
during the second quarter of 1995 was $93.9 million, or slightly
lower than 1994's second quarter average balance of $95.3
million.
Interest expense increased $1.2 million, or 53%,
in the first six months of 1995. Higher interest rates caused
$1.0 million of the increase. The annualized rate on the debt
outstanding during the first half of 1995 was 6.8%, compared to
4.6% during the first six months of 1994. The overall average
interest rate during the first half of 1995 was 7.5%, compared to
5.3% during the same period in 1994. An increase in the average
debt balance caused interest expense to rise by $0.2 million in
the first half of 1995. The average balance increased 7% from
$87.9 million in the first half of 1994 to $94.3 million in the
first half of 1995. The increase in the average balance was
primarily caused by the timing of borrowings to fund a portion of
the Merger in the second quarter of 1994.
Devon entered into an interest rate swap
agreement in June, 1995, to hedge the impact of interest rate
changes on a portion of its long-term debt. The principal amount
of the swap agreement is $75 million, and the other party to the
agreement is one of the lenders of Devon's credit lines (the
"Lender"). The agreement terminates on June 16, 1998, unless the
Lender exercises its right to extend the termination date to June
16, 2000. The terms of the agreement provide for quarterly
payments either to or from Devon, determined by whether the three
month London Interbank Offered Rate ("LIBOR") in effect at the
beginning of each quarterly calculation period is greater or less
than 5.6%. The calculation periods begin on the sixteenth day of
March, June, September and December. If, on the date of the
beginning of the quarterly calculation period, the three month
LIBOR exceeds 5.6%, the Lender will owe Devon the quarterly
amount of the excess rate applied to the $75 million principal.
Alternately, if the three month LIBOR on the applicable quarterly
date is less than 5.6%, Devon will owe the Lender.
The swap agreement is accounted for as a hedge,
with the amount which is either due to or from Devon recorded as
a reduction or increase in interest expense. The three month
LIBOR as of the first quarterly calculation period which began on
June 16, 1995, was 6.0%. Accordingly, the Lender owes Devon
$76,667, which is payable under the terms of the agreement on
September 16, 1995. Devon has recognized $12,500 of this amount
as a reduction of interest expense in the second quarter, with
the remainder deferred until the third quarter.
The swap agreement does not alter or affect any
terms or conditions of Devon's lines of credit.
19
<PAGE>
1995 Revised Estimate. It was originally
estimated in the 1994 10-K that interest expense for the year
1995 would be between $7 and $9 million, excluding the effect of
the contingent transaction discussed in "Capital Expenditures,
Capital Resources and Liquidity - Capital Resources and
Liquidity" in this report. Pending resolution of the
contingency, Devon is able to utilize the cash which is received
pursuant to the transaction to reduce debt. Also, Devon expects
its average interest rate for the year to be lower than
originally estimated, and the postponement of certain gas related
drilling has lowered the estimate of the year's average debt
outstanding. All of these factors more than offset the effect of
lower gas prices on the amount of cash flow which was estimated
at the beginning of the year to be applied toward outstanding
debt. As a result, interest expense for the year 1995 is now
estimated to be between $6.5 and $7.5 million.
Income Taxes. During interim periods, income tax
expense is based on the estimated effective tax rate which is
expected for the entire fiscal year. The estimated effective tax
rate in the second quarter and first half of 1995 was 41%,
compared to approximately 34% in the same periods of 1994. The
increase in the 1995 rates is primarily due to the effect of
certain financial deductions for DD&A which are not allowed for
income tax purposes due to the tax free nature of the Merger.
Also, although the estimated 1994 income tax rate used in
preparing the second quarter and first half of 1994 consolidated
financial statements was 34%, the rate for the entire year of
1994 was actually 36%. The effect of this change in the
estimated income tax rate was recorded in the fourth quarter of
1994.
Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("Statement 109"), requires
that the tax benefit of available tax carryforwards be recorded
as an asset to the extent that management assesses the
utilization of such carryforwards to be "more likely than not".
When the future utilization of some portion of the carryforwards
is determined not to be "more likely than not", Statement 109
requires that a valuation allowance be provided to reduce the
recorded tax benefits from such assets.
Approximately $13.1 million of deferred tax
assets were included in the net deferred tax liability as of June
30, 1995. Over 90% of such assets related to the tax benefits
expected from the future utilization of net operating loss
carryforwards, statutory depletion carryforwards, investment tax
credit carryforwards and minimum tax credit carryforwards. To
assess the likelihood of realizing tax benefits from the future
utilization of these carryforwards, management considered four
primary factors: (1) estimates of future yearly taxable income
which Devon is expected to generate; (2) the level of future
taxable income necessary to utilize the carryforwards; (3) the
expiration dates, if any, of such carryforwards, and (4) certain
limitations on the annual utilization of the carryforwards as set
forth by federal tax regulations.
Based upon current estimates of future production
and average prices, management believes that taxable income
during the carryforward periods will be sufficient to utilize
substantially all of the carryforwards currently available. The
tax benefit from net operating loss and investment tax credit
carryforwards, which totals approximately $6.9 million, is
expected to be realized between 1995 and 2002. This is well
before the 2006 expiration date for the majority of such
benefits. The remaining $6.2 million of tax benefits consist
primarily of statutory depletion and minimum tax credit
carryforwards. These carryforwards do not have expiration dates,
and are therefore available to reduce taxes in any future year.
However, based upon limitations imposed on the utilization of
certain of the depletion carryforwards acquired in the Merger, a
$100,000 valuation allowance was recorded at the time of the
Merger. No changes in this valuation allowance have occurred
through June 30, 1995.
20
<PAGE>
Management's assessment of the future utilization
of Devon's deferred tax assets is based upon current estimates of
taxable income to be generated in 1995 and beyond. Significant
changes in such estimates from variables such as future oil and
gas prices or capital expenditures could alter the timing of the
eventual utilization of such assets. There can be no assurance
that Devon will generate any specific level of continuing taxable
earnings.
Capital Expenditures, Capital Resources and Liquidity
The following discussion of capital expenditures,
capital resources and liquidity should be read in conjunction
with the consolidated statements of cash flows included in Part
1, Item I herein.
Capital Expenditures. Cash used for capital
expenditures increased 160% from $12.9 million in the first half
of 1994 to $33.4 million in the first half of 1995.
Approximately $32.2 million was spent in 1995 on exploration and
development efforts, compared to $12.2 million spent in the first
half of 1994 for such efforts. Approximately $16.0 million of
1995's total expenditures related to the drilling and development
of the Grayburg-Jackson Field which was acquired in the Merger.
1995 Revised Estimate. In the 1994 10-K, it was
estimated that 1995 capital expenditures would total between $75
and $80 million. However, a number of drilling projects on
proved undeveloped natural gas properties which were planned for
1995 have been postponed until later in 1995 or 1996 due to low
gas prices. It is now estimated that 1995 capital expenditures
will be between $62 and $68 million.
Cash Used in the Merger with Alta Energy
Corporation. The Merger was consummated in the second quarter of
1994. Through June 30, 1994, Devon incurred costs of $42.2
million related to the Merger. Devon also incurred subsequent
Merger-related costs in the second half of 1994 and in the first
quarter of 1995. Approximately $0.2 million of various costs
were incurred in the second half of 1994. In February 1995,
Devon paid an additional $2.4 million to the former Alta
stockholders. This payment, in accordance with the Merger
agreement, was based upon the evaluation of a well completed by
Alta during the first half of 1994.
21
<PAGE>
Capital Resources and Liquidity. Net cash
provided by operating activities continued to be a primary source
of capital and liquidity in the first half of 1995. Net cash
provided by operating activities increased by 23% from $22.4
million in the first six months of 1994 to $27.6 million in the
first half of 1995.
Included in 1995's net cash provided by operating
activities was $6.4 million received pursuant to a transaction
entered into in early 1995 between Devon and an unrelated entity.
The transaction, which covers substantially all of Devon's San
Juan Basin gas properties, could have a significant and very
positive financial impact on Devon. However, the transaction is
subject to a material unresolved contingency and a
confidentiality agreement. Until the contingency is resolved,
Devon is deferring the recognition of the operating statement
impact from the transaction.
In addition to the $6.4 million recorded as
operating cash flow, Devon has also received $11.5 million which
will affect only the balance sheet if the contingency is
favorably resolved. Since the entire $17.9 million received to
date is refundable, these funds are recorded as liabilities in
the accompanying June 30, 1995 consolidated balance sheet,
pending the resolution of the contingency.
The contingency should be resolved by year-end
1995. Upon a favorable resolution of the contingency, the
cumulative unrecorded effects of the transaction will be
recorded, starting from the January 1, 1995 effective date.
Also, Devon will have either consumed, or otherwise will no
longer have available, a substantial portion of the income tax
benefits it currently possesses. If the resolution is
unfavorable, Devon will return the cash received, thereby
liquidating the liability, and its results of operations will not
be affected.
If the contingency is resolved favorably, the
transaction could have a significant effect on Devon's 1995
results of operations and liquidity. Devon estimates that the
transaction could add between $6.5 million to $7.5 million to its
net earnings for the year 1995, an impact of $0.29 to $0.34 per
common share. Net cash provided by operating activities for the
year 1995 could also be boosted by $5.5 million to $6.5 million,
of which a net $4.1 million was received in the first half of
1995. (This figure consists of the $6.4 million received
pursuant to the transaction, less $2.3 million paid to date for
related income taxes due.)
Though the $17.9 million which has been received
through June 30, 1995, is refundable pending the resolution of
the contingency, Devon's use of the funds is not restricted.
However, to secure the possible repayment of the cash it receives
under the terms of the transaction, Devon has established a
letter of credit in favor of the other entity which expires no
later than December 29, 1995. The amount of the letter of credit
increases throughout 1995, to a maximum of $20 million, based
upon the expected timing of Devon's cash receipts. As of June
30, 1995, the letter of credit was $18 million. Devon's
available borrowings under its credits lines are restricted by
the amount of the letter of credit.
22
<PAGE>
After deducting the $18 million letter of credit
restriction, Devon had $92 million of borrowings available under
its credit lines at June 30, 1995. Currently, the capital
resources available from operating activities and credit lines
are more than adequate to cover Devon's known capital
requirements.
23
<PAGE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of
Security Holders
(a) The Company's annual meeting of shareholders
was held in Oklahoma City, Oklahoma at 1:00
p.m. local time, on Wednesday, June 7, 1995.
(b) Proxies for the meeting were solicited
pursuant to Regulation 14 under the
Securities Exchange Act of 1934, as amended.
There was no solicitation in opposition to
the nominees for election as directors as
listed in the proxy statement and all
nominees were elected.
(c) Out of a total of 22,050,996 shares of the
Company's common stock outstanding and
entitled to vote, 18,936,719 shares were
present at the meeting in person or by proxy,
representing approximately 86 percent.
Matters voted upon at the meeting were as
follows:
(i) Election of two directors to serve on
the Company's board of directors until
the 1998 annual meeting of shareholders.
The vote tabulation with respect to each
nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Authority Withheld
<S> <C> <C>
David M. Gavrin 18,905,123 31,596
John W. Nichols 18,863,431 73,288
</TABLE>
24
<PAGE>
(ii) The appointment of KPMG Peat Marwick
LLP, the U.S. member firm of KPMG
(Klynveld Peat Marwick Goerdeler) as the
Company's certified public accountants
for 1995 was approved by a vote of
18,900,726 shares for, 10,188 shares
against, 25,805 shares abstaining and
zero broker non-votes.
(iii) A Plan and Agreement of Merger and
Reorganization having the effect
of (a) reincorporating Devon,
which was a Delaware corporation,
as an Oklahoma corporation and (b)
making certain other changes in
the corporate structure was
approved by a vote of 17,149,553
shares for, 699,672 shares
against, 53,390 shares abstaining
and 1,034,104 broker non-votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation
S-K are as follows:
Exhibit
No.
2.1 Agreement and Plan of Merger and
Reorganization by and among Registrant
and Devon Energy Corporation, a
Delaware corporation, dated as of April
13, 1995 (incorporated by reference to
Exhibit A to Registrant's definitive
Proxy Statement for its 1995 Annual
Meeting of Shareholders).
2.2 Agreement and Plan of Merger by and
among Devon Energy Corporation, Devon
Acquisition Corp. and Alta Energy
Corporation dated February 18, 1994
[incorporated by reference to Exhibit
2.1 to Registrant's Registration
Statement on Form S-4 (No. 33-76524)].
2.3 Amendment to Agreement and Plan of
Merger by and among Devon Energy
Corporation, Devon Acquisition Corp.
and Alta Energy Corporation dated April
13, 1994 [incorporated by reference to
Exhibit 2.2 to Amendment No. One to
Registrant's Registration Statement on
Form S-4 (No. 33-76524)].
4.1 Registrant's Certificate of
Incorporation (incorporated by
reference to Exhibit B to Registrant's
definitive Proxy Statement for its 1995
Annual Meeting of Shareholders).
25
<PAGE>
4.2 Registrant's Bylaws (incorporated by
reference to Exhibit 3.2 to
Registrant's Registration Statement on
Form 8-B).
4.3 Form of Common Stock Certificate
(incorporated herein by reference to
Exhibit 4.1 to Registrant's
Registration Statement on Form 8-B).
4.4 Rights Agreement between Registrant and
The First National Bank of Boston
(incorporated by reference to Exhibit
4.2 to Registrant's Registration
Statement on Form 8-B).
4.5 Certificate of Designations of Series A
Junior Participating Preferred Stock of
Registrant (incorporated by reference
to Exhibit 3.3 to Registrant's
Registration Statement on Form 8-B).
10.1 Credit Agreement dated October 7,
1994, among Devon Energy Corporation
(Nevada), as Borrower, the
Registrant and Devon Energy
Operating Corporation, as
Guarantors, NationsBank of
Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Bank
One, Texas, N.A., Bank of Montreal,
and First Union National Bank of
North Carolina, as Lenders (incorporated
herein by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994).
10.2 First Amendment, dated January 27, 1995, to Credit
Agreement among Devon Energy Corporation
(Nevada), as Borrower, the Registrant and
Devon Energy Operating Corporation, as
Guarantors, NationsBank of Texas, N.A., as
Agent, and NationsBank of Texas, N.A., Bank
One, Texas, N.A., Bank of Montreal
and First Union National Bank of
North Carolina, as Lenders (incorporated
herein by reference to Exhibit 10.2 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.3 Devon Energy Corporation 1988 Stock Option Plan
[incorporated herein by reference to
Exhibit 10.4 to Registrant's Registration
Statement on Form S-4 (No. 33-23564)]. *
26
<PAGE>
10.4 Devon Energy Corporation 1993 Stock Option Plan
(incorporated herein by reference to Exhibit A to
Registrant's Proxy Statement for the 1993 Annual
Meeting of Shareholders).*
10.5 Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Mr.
J. Larry Nichols, dated December 3, 1992 (incorporated
herein by reference to Exhibit 10.10 to
Registrant's Amendment No. 1 to Annual Report on
Form 10-K for the year ended December 31, 1992).*
10.6 Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Mr.
H. R.Sanders, Jr., dated December 3, 1992
(incorporated herein by reference to
Exhibit 10.11 to Registrant's Amendment No. 1 to
Annual Report on Form 10-K for the year ended
December 31, 1992).*
10.7 Severance Agreement between Devon Energy Corporation
(Nevada), Registrant and Mr. J. Michael Lacey,
dated December 3, 1992 (incorporated herein by
reference to Exhibit 10.12 to Registrant's
Amendment No. 1 to Annual Report on Form 10-K for the
year ended December 31, 1992).*
10.8 Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Mr. H. Allen
Turner, dated December 3, 1992 (incorporated
herein by reference to Exhibit 10.13 to
Registrant's Amendment No. 1 to Annual Report on
Form 10-K for the year ended December 31, 1992).*
10.9 Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Mr.
Darryl G. Smette, dated December 3, 1992 (incorporated
herein by reference to Exhibit 10.14 to Registrant's
Amendment No. 1 to Annual Report on Form 10-K for the
year ended December 31, 1992).*
10.10Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Mr.
William T. Vaughn, dated December 3,
1992 (incorporated herein by reference to
Exhibit 10.15 to Registrant's Amendment No. 1 to
Annual Report on Form 10-K for the year ended
December 31, 1992).*
10.11Stock Purchase Agreement dated December 22, 1993,
between Registrant and John R. Fitzgerald
(incorporated herein by reference to Exhibit 1 to
Registrant's Schedule 13D dated as of December 22,
1993).
27
<PAGE>
10.12Schedule identifying other Stock Purchase
Agreements entered into by Registrant with certain
holders of Alta Energy Corporation common stock
(incorporated herein by reference to Exhibit 2 to
Registrant's Schedule 13D dated as of December 22,
1993).
10.13Stock Purchase Agreement dated January 14, 1994,
between GSS Investments Corp. [a wholly-owned
subsidiary of Registrant] and Princor Growth Fund,Inc.
(incorporated herein by reference to Exhibit 3 to
Amendment No. 2 to Registrant's Schedule 13D dated
as of January 7, 1994).
10.14Stock Purchase Agreement dated January 14, 1994,
between Registrant and Andrew P. Carstensen, Jr.
(incorporated herein by reference to Exhibit 4 to
Amendment No. 2 to Registrant's Schedule 13D dated
as of January 7, 1994).
11 Computation of earnings per share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
three months ended June 30, 1995. A Form 8-K
was filed on July 12, 1995, regarding the
reincorporation of Devon Energy Corporation
from Delaware to Oklahoma.
* Compensatory plans or arrangements.
28
<PAGE>
SIGNATURES
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
Date: August 8, 1995 /s/William T. Vaughn
William T. Vaughn
Vice President - Finance
29
<PAGE>
EXHIBIT INDEX
Page
2.1 Agreement and Plan of Merger and Reorganization *
by and among Registrant and Devon Energy
Corporation, a Delaware corporation, dated as of
April 13, 1995.
2.2 Agreement and Plan of Merger by and among Devon *
Energy Corporation, Devon Acquisition Corp. and
Alta Energy Corporation dated February 18, 1994.
2.3 Amendment to Agreement and Plan of Merger by and *
among Devon Energy Corporation, Devon Acquisition
Corp. and Alta Energy Corporation dated April 13,
1994.
4.1 Registrant's Certificate of Incorporation. *
4.2 Registrant's Bylaws. *
4.3 Form of Common Stock Certificate. *
4.4 Rights Agreement between Registrant and the First *
National Bank of Boston.
4.5 Certificate of Designations of Series A Junior *
Participating Preferred Stock of Registrant.
10.1 Credit Agreement dated October 7, 1994, among *
Devon Energy Corporation (Nevada), as Borrower,
the Registrant and Devon Energy Operating
Corporation, as Guarantors, NationsBank of Texas,
N.A., as Agent, and NationsBank of Texas, N.A.,
Bank One, Texas, N.A., Bank of Montreal, and
First Union National Bank of North Carolina, as
Lenders.
10.2 First Amendment, dated January 27, 1995, to *
Credit Agreement among Devon Energy Corporation
(Nevada), as Borrower, the Registrant and Devon
Energy Operating Corporation, as Guarantors,
NationsBank of Texas, N.A., as Agent, and
NationsBank of Texas, N.A., Bank One, Texas,
N.A., Bank of Montreal, and First Union National
Bank of North Carolina, as Lenders.
10.3 Devon Energy Corporation 1988 Stock Option Plan. *
10.4 Devon Energy Corporation 1993 Stock Option Plan. *
30
<PAGE>
10.5 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr. J. Larry
Nichols, dated December 3, 1992.
10.6 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr. H. R.
Sanders, Jr., dated December 3, 1992.
10.7 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr. J.
Michael Lacey, dated December 3, 1992.
10.8 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr. H. Allen
Turner, dated December 3, 1992.
10.9 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr. Darryl
G. Smette, dated December 3, 1992.
10.10 Severance Agreement between Devon Energy *
Corporation (Nevada), Registrant and Mr.
William T. Vaughn, dated December 3, 1992.
10.11 Stock Purchase Agreement dated December 22, *
1993, between Registrant and John R.
Fitzgerald.
10.12 Schedule identifying other Stock Purchase *
Agreements entered into by Registrant with
certain holders of Alta Energy Corporation
common stock.
10.13 Stock Purchase Agreement dated January 14, *
1994, between GSS Investments Corp. [a
wholly-owned subsidiary of Registrant] and
Princor Growth Fund, Inc.
10.14 Stock Purchase Agreement dated January 14, *
1994, between Registrant and Andrew P.
Carstensen, Jr.
11 Computation of earnings per share 32
* Incorporated by reference.
31
<PAGE>
<TABLE>
Exhibit 11
DEVON ENERGY CORPORATION
Computation of Earnings Per Share
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
PRIMARY EARNINGS PER SHARE
Computation for Statement of Operations
Net earnings per statement of
<S> <C> <C> <C> <C>
operations $ 2,444,422 4,053,853 3,471,224 8,930,827
Weighted average common shares
outstanding 22,052,149 21,253,781 22,051,576 21,050,006
Primary earnings per common
share $0.11 0.19 0.16 0.42
Additional Primary Computation (A)
Net earnings per statement of
operations $ 2,444,422 4,053,853 3,471,224 8,930,827
Adjustment to weighted average
common shares outstanding:
Weighted average as shown above
in primary computation 22,052,149 21,253,781 22,051,576 21,050,006
Add dilutive effect of
outstanding stock options (as
determined using the treasury
stock method) 145,740 131,330 124,318 129,500
Weighted average common shares
outstanding, as adjusted 22,197,889 21,385,111 22,175,894 21,179,506
Net earnings per common share,
as adjusted $0.11 0.19 0.16 0.42
<FA>
FULLY DILUTED EARNINGS PER SHARE (A)
Net earnings per statement of
operations $ 2,444,422 4,053,853 3,471,224 8,930,827
Weighted average common shares
outstanding as shown in
primary computation above 22,052,149 21,253,781 22,051,576 21,050,006
Add fully dilutive effect of
outstanding stock options (as
determined using the treasury
stock method) 148,337 133,753 148,619 137,861
Weighted average common shares
outstanding, as adjusted 22,200,486 21,387,534 22,200,195 21,187,867
Fully diluted earnings per
common share $0.11 0.19 0.16 0.42
<FA>
(A) These calculations are submitted in accordance with Regulation
S-K item 601(b)(11) although not required by footnote 2 to paragraph 14
of APB Opinion No. 15 because they result in dilution of less than 3%.
</TABLE>
32
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 8807024
<SECURITIES> 0
<RECEIVABLES> 17192292
<ALLOWANCES> 225000
<INVENTORY> 549495
<CURRENT-ASSETS> 28141714
<PP&E> 556126622
<DEPRECIATION> 221340641
<TOTAL-ASSETS> 366798029
<CURRENT-LIABILITIES> 13134050
<BONDS> 95000000
<COMMON> 2205850
0
0
<OTHER-SE> 206438187
<TOTAL-LIABILITY-AND-EQUITY> 366798029
<SALES> 48851534
<TOTAL-REVENUES> 49412661
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16552362
<LOSS-PROVISION> 31000
<INTEREST-EXPENSE> 3526817
<INCOME-PRETAX> 5884224
<INCOME-TAX> 2413000
<INCOME-CONTINUING> 3471224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3471224
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
