UNITED STATES
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
For the Quarterly Period Ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-10067
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 73-1333969
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
20 N. 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 May 3, 1996, was 22,113,896.
1 of 32 total pages
(Exhibit Index is found at page 23)
<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, March 31, 1996
(Unaudited) and December 31, 1995 4
Consolidated Statements of Operations (Unaudited),
For the Three Months Ended March 31, 1996 and
1995 5
Consolidated Statements of Cash Flows (Unaudited),
For the Three Months Ended March 31, 1996 and
1995 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
2
<PAGE>
DEVON ENERGY CORPORATION
Part I. Financial Information
Item 1. Consolidated Financial Statements
March 31, 1996 and 1995
(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>
March 31, December 31,
1996 1995
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 18,378,505 8,897,891
Accounts receivable 14,591,150 14,400,295
Inventories 566,850 605,263
Prepaid expenses 725,152 222,135
Deferred income taxes 749,000 749,000
Total current assets 35,010,657 24,874,584
Property and equipment, at cost, based on the
full cost method of accounting for oil and
gas properties 649,989,546 631,437,904
Less: Accumulated depreciation,
depletion and amortization 249,497,053 239,619,167
400,492,493 391,818,737
Other assets 4,408,597 4,870,796
Total assets $439,911,747 421,564,117
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable:
Trade 3,512,983 3,868,458
Revenues and royalties due to others 6,291,447 7,322,418
Income taxes payable 1,664,368 1,364,070
Accrued expenses 2,049,546 3,003,943
Total current liabilities 13,518,344 15,558,889
Revenues and royalties due to others 1,038,672 816,412
Other liabilities 8,975,090 8,623,057
Long-term debt 155,000,000 143,000,000
Deferred revenue 56,383 72,761
Deferred income taxes 37,375,000 34,452,000
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 22,113,896 in 1996 and
22,111,896 in 1995 2,211,390 2,211,190
Additional paid-in capital 167,446,897 167,430,347
Retained earnings 54,289,971 49,399,461
Total stockholders' equity 223,948,258 219,040,998
Total liabilities and stockholders'
equity $439,911,747 421,564,117
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Three Months
Ended March 31,
1996 1995
(Unaudited)
Revenues
<S> <C> <C>
Oil sales $16,144,794 11,989,301
Gas sales 14,621,634 9,900,005
Natural gas liquids sales 2,967,801 1,630,262
Other 313,831 242,759
Total revenues 34,048,060 23,762,327
Costs and expenses
Lease operating expenses 7,418,179 6,765,321
Production taxes 2,141,917 1,676,456
Depreciation, depletion and
amortization 10,126,984 9,459,252
General and administrative expenses 2,135,898 2,336,770
Interest expense 2,481,156 1,783,726
Total costs and expenses 24,304,134 22,021,525
Earnings before income taxes 9,743,926 1,740,802
Income tax expense
Current 1,267,000 -
Deferred 2,923,000 714,000
Total income tax expense 4,190,000 714,000
Net earnings $ 5,553,926 1,026,802
Net earnings per average common share
outstanding $0.25 0.05
Weighted average common shares outstanding 22,112,489 22,050,996
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Three Months
Ended March 31,
1996 1995
(Unaudited)
Cash flows from operating activities
<S> <C> <C>
Net earnings $5,553,926 1,026,802
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 10,126,984 9,459,252
(Gain) loss on sale of assets (34,897) (8,907)
Deferred income taxes 2,923,000 714,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (190,855) 2,982,357
Inventories 164,706 (371)
Prepaid expenses (503,017) (527,882)
Other assets 208,323 628,860
Increase (decrease) in:
Accounts payable (1,571,415) 970,381
Income taxes payable 300,298 -
Accrued expenses (954,397) (859,067)
Revenues and royalties due to others 222,260 -
Long-term other liabilities 85,648 -
Deferred revenue (16,378) 3,199,431
Net cash provided by operating
activities 16,314,186 17,584,856
Cash flows from investing activities
Proceeds from sale of property and equipment 84,283 1,167,037
Increase in deposits - 11,175,936
Capital expenditures (18,537,574) (15,585,565)
Payments made for acquisitions of business - (2,391,484)
Net cash used in investing
activities (18,453,291) (5,634,076)
Cash flows from financing activities
Proceeds from borrowings on revolving lines
of credit 12,000,000 2,000,000
Principal payments on revolving line of credit - (6,000,000)
Issuance of common stock 16,750 -
Dividends paid on common stock (663,416) (661,530)
Increase in long-term other liabilities 266,385 -
Net cash provided (used) by
financing activities 11,619,719 (4,661,530)
Net increase in cash and cash equivalents 9,480,614 7,289,250
Cash and cash equivalents at beginning of period 8,897,891 8,336,371
Cash and cash equivalents at end of period $ 18,378,505 15,625,621
See accompanying notes to consolidated financial statements.
</TABLE>
6
<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 1995 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 March 31,
1996, and the results of their operations and their cash flows
for the three month periods ended March 31, 1996 and 1995.
2. San Juan Basin Transaction
Effective January 1, 1995, Devon and an unrelated
company entered into a transaction covering substantially all of
Devon's San Juan Basin coal seam gas properties (the "San Juan
Basin Transaction"). This transaction is more fully described in
Devon's 1995 annual report on Form 10-K.
The San Juan Basin Transaction was initially
subject to a material contingency, and thus the transaction's
impact on Devon's operating statement was deferred pending the
contingency's resolution. In October 1995, the contingency was
favorably resolved, and therefore the transaction's cumulative
effect for the first nine months of 1995 was recorded in the
third quarter of 1995. Had the contingency not been in effect,
and had the results of the transaction not been deferred, the
following results would have been reported for the quarter ended
March 31, 1995.
7
<PAGE>
<TABLE>
<CAPTION>
First Quarter
1995
Revenues:
<S> <C>
Oil sales $11,989,301
Gas sales 12,859,207
Natural gas liquids sales 1,630,262
Other 317,809
Total revenues 26,796,579
Costs and expenses:
Production and operating equipment 8,408,386
Depreciation, depletion and
amortization 9,242,570
General and administrative expenses 2,336,770
Interest expense 1,783,726
Total costs and expenses 21,771,452
Earnings before income taxes 5,025,127
Income tax expense:
Current 1,055,000
Deferred 1,106,000
Total income tax expense 2,161,000
Net earnings $ 2,864,127
Net earning per average common share
outstanding $.13
</TABLE>
3. 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 in 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
each March, June, September and December during the term of the
agreement. 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 exceeded 5.6% at the beginning of the calculation period
for the first quarter of 1996. Therefore, Devon has recognized
8
<PAGE>
$35,000 as a reduction to interest expense in such quarter. The
three month LIBOR was less than 5.6% at the beginning of the
calculation period for the quarter ending June 30, 1996.
Accordingly, Devon will recognize $31,000 of additional interest
expense for the swap agreement in the second quarter of 1996.
The fair value of the interest rate swap as of March 31, 1996,
was a liability of $25,500.
The swap agreement does not alter or affect any
terms or condition of Devon's lines of credit.
9
<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 ended March
31, 1996, compared to the three months ended March 31, 1995, and
in financial condition since December 31, 1995. It is presumed
that readers have read or have access to Devon's 1995 annual
report on Form 10-K.
Overview
Record quarterly production and higher prices
combined to produce the highest quarterly revenues in Devon's
history in the first three months of 1996. Total revenues in the
first quarter of 1996 reached $34.0 million, a 43% increase over
the first quarter of 1995's revenues of $23.8 million.
Oil, gas and NGL production in the first quarter
of 1996 was 2.6 million barrels of oil equivalent ("Boe"), a 3%
increase over the first quarter of 1995. Devon acquired certain
Wyoming properties (the "Worland Properties") in December 1995
for approximately $50 million. Additional interests in the
Worland Properties were acquired in the first quarter of 1996 for
$4.3 million. These acquisitions added approximately 160,000 Boe
of production to the first quarter of 1996's totals.
Additionally, the continued development of the Grayburg-Jackson
Field in the Permian Basin resulted in an increase of 139,000
barrels of oil during the first quarter of 1996.
Oil, gas and NGL prices were all up in the first
quarter of 1996 compared to the first quarter of 1995. Gas price
comparisons for the quarter were aided in 1996 by the effect of
the San Juan Basin Transaction. This transaction added $0.61 per
Mcf to Devon's coal seam gas price, or $0.32 per Mcf for Devon's
total gas production. Although this transaction was effective
January 1, 1995, a contingency which was not resolved until the
third quarter of 1995 delayed the recognization of the
transaction's benefits. Therefore, no benefit from the
transaction was recognized until the third quarter of 1995.
Devon's cash expenses (i.e., all expenses other
than the non-cash expenses of depreciation, depletion and
amortization and deferred income tax expense) also rose in the
first quarter of 1996, but at a much smaller rate than revenues.
Cash expenses increased by 23% in the 1996 period, compared to a
<F1>
43% jump in revenues. This resulted in a cash margin1 of $18.6
<F1>
1 "Cash margin" equals Devon's total revenues less cash expenses as
defined above. Cash margin is an indicator which is commonly used by the
investment community in the oil and gas industry. This 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 effects 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. Cash margin should be used as a supplement to,
and not as a substitute for, net earnings and net cash provided by operating
acitivities (as disclosed in the consolidated financial statements) in
analyzing Devon's results of operations and liquidity.
10
<PAGE>
million in the first quarter of 1996, which was up by 66%
compared to the cash margin of $11.2 million in the first quarter
of 1995. Had the effects of the San Juan Basin Transaction been
recognized in the first quarter of 1995, that quarter's cash
margin would have been $13.2 million.
Devon's non-cash expenses increased by $2.9
million, or 28%, in 1996's first quarter. This increase was
almost entirely due to a $2.2 million increase in deferred income
taxes caused by an $8.0 million increase in earnings before
income taxes.
The increase in cash margin, slightly offset by
the increase in non-cash expenses, resulted in a substantial
increase in net earnings and net earnings per share for the first
quarter of 1996. The quarter's net earnings totaled $5.6
million, or $0.25 per share. These results are considerably
higher than the $1.0 million of net earnings and $0.05 earnings
per share recognized in the first quarter of 1995. Had the
effects of the San Juan Basin Transaction been recognized in the
first quarter of 1995, that quarter's results would have totaled
$2.9 million of net earnings, or $0.13 per share.
11
<PAGE>
Results of Operations
Oil, gas and NGL revenues were up 43% for the
quarter ended March 31, 1996. Had the first quarter of 1995
included the effect of the San Juan Basin Transaction (see note 2
to the consolidated financial statements included elsewhere in
this report), then oil, gas and NGL revenues would have been up
27% for the quarter ended March 31, 1996. The relative
contributions of production and price changes to the quarterly
comparisons, both with and without the effect of the San Juan
Basin Transaction on 1995's first quarter, are shown in the
tables below.
<TABLE>
<CAPTION>
<F1>
<F2>
Actual Reported Results (1) Adjusted Results (2)
Three Months Ended Three Months Ended
March 31, March 31,
1996 1995 Change 1996 1995 Change
Production
<S> <C> <C> <C> <C> <C> <C>
Oil (Bbls) 874,515 718,244 +22% 874,515 718,244 +22%
Gas (Mcf) 8,983,622 9,981,301 -10% 8,983,622 9,657,511 -7%
NGL (Bbls) 227,593 138,689 +64% 227,593 138,689 +64%
Oil, Gas and NGL
<F3>
(Boe) 3 2,599,378 2,520,483 +3% 2,599,378 2,466,518 +5%
Revenues
Oil $16,144,794 11,989,301 +35% 16,144,794 11,989,301 +35%
Gas 14,621,634 9,900,005 +48% 14,621,634 12,859,207 +14%
NGL 2,967,801 1,630,262 +82% 2,967,801 1,630,262 +82%
Combined $33,734,229 23,519,568 +43% 33,734,229 26,478,770 +27%
Average Prices
Oil (Per Bbl) $18.46 16.69 +11% 18.46 16.69 +11%
Gas (Per Mcf) $1.63 0.99 +65% 1.63 1.33 +23%
NGL (Per Bbl) $13.04 11.75 +11% 13.04 11.75 +11%
Oil, Gas and NGL
<F3>
(Per Boe)3 $12.98 9.33 +39% 12.98 10.74 +21%
<F1>
1 The 1995 column in this table reflects the results actually reported in the
first quarter of 1995. These figures do not include the first quarter's
effect of the San Juan Basin Transaction. This transaction was effective
January 1, 1995, but the financial effects of the transaction on Devon's
operations were deferred recognition until the third quarter of 1995 when
a significant contingency was favorably resolved. The cumulative
nine-month effect of the San Juan Basin Transaction was recorded entirely
in the third quarter of 1995.
<F2>
2 The 1995 column in this table presents the results of the first quarter of
1995 which would have been reported if there had been no contingency at the
time the San Juan Basin Transaction was executed.
<F3>
3 Gas is converted to barrels of oil equivalent ("Boe") at the rate of six
Mcf of gas per barrel of oil, based upon the approximate relative energy
content of natural gas and oil, which rate is not necessarily indicative of
the relationship of oil, gas and NGL prices. The respective prices of these
products are affected by market and other factors in addition to relative
energy content.
</TABLE>
12
<PAGE>
Oil Revenues. Oil revenues increased by $4.2
million, or 35%, in the first quarter of 1996. Production gains
of 156,000 barrels, or 22%, added $2.6 million of oil revenues in
the 1996 period. An increase of $1.77 per barrel, or 11%, in the
average oil price added the remaining $1.6 million of increased
oil revenues.
Approximately 89% of the production gains were
from the Grayburg-Jackson Field acquired in May 1994. As Devon's
development of this field has progressed, more wells have come on
line and the initial stage of a waterflood has begun since the
first quarter of 1995. The Grayburg-Jackson Field produced
approximately 268,000 barrels in the first quarter of 1996. This
is an increase of 139,000 barrels, or 107%, compared to the
129,000 barrels produced in the first quarter of 1995.
Gas Revenues. Gas revenues increased by $4.7
million, or 48%, in the first quarter of 1996. An increase in
the average gas price of $0.64 per Mcf, or 65%, added $5.7
million to gas sales in the first quarter of 1996. This was
partially offset by a $1.0 million reduction from a drop in gas
production of 1.0 Bcf, or 10%. The San Juan Basin Transaction
added $2.9 million to 1996's first quarter gas sales, which
resulted in an increase of $0.32 per Mcf in Devon's total gas
price. As discussed previously, the effects of this transaction
on 1995's results were not recorded until the third quarter of
that year. Therefore, 1995's first quarter results as reported
in the consolidated financial statements do not include any
effect of the San Juan Basin Transaction. As shown in the above
tables, if this transaction had been recorded in the first
quarter of 1995, such quarter's gas sales would have increased by
$1.8 million.
Coal seam gas averaged $1.40 per Mcf in the first
quarter of 1996 compared to $0.75 per Mcf in 1995's first
quarter. The San Juan Basin Transaction added $0.61 per Mcf to
the 1996 average price. The average price for conventional gas
production in the first quarter of 1996 was $1.88 per Mcf. This
compares to 1995's first quarter average for conventional gas
production of $1.33 per Mcf.
Coal seam gas production in the 1996 quarter was
4.7 Bcf, which was down by 1.2 Bcf from the 5.9 Bcf produced in
the first quarter of 1995. Approximately 0.3 Bcf of such
decrease was due to the fact that a small portion of Devon's coal
seam gas interest was sold as part of the San Juan Basin
Transaction. The effect of this sold interest is reflected in
1996's production quantities, but the effect on the first quarter
of 1995 was not recorded until the third quarter as previously
discussed.
Conventional gas production increased by 0.2 Bcf
from 4.1 Bcf in 1995's first quarter to 4.3 Bcf in the first
quarter of 1996. The additional interests in the Worland
Properties which were acquired in December 1995 and the first
quarter of 1996 added 0.5 Bcf to 1996's conventional production.
13
<PAGE>
NGL Revenues. NGL revenues increased by $1.3
million, or 82%, in the first quarter of 1996. An increase in
production of 89,000 barrels, or 64%, added $1.0 million to 1996
revenues. The additional interests in the Worland Properties
accounted for 64,000 barrels of the increased production. The
remaining $0.3 million increase in NGL revenues was caused by a
price increase of $1.29 per barrel, or 11%.
Production and Operating Expenses. Production and
operating expenses in the first quarter of 1996 varied compared
to the first quarter of 1995 as shown in the tables below.
<TABLE>
<CAPTION>
<F1>
<F2>
Actual Reported Results (1) Adjusted Results (2)
Three Months Ended Three Months Ended
March 31, March 31,
1996 1995 Change 1996 1995 Change
Absolute
Recurring operations and
<S> <C> <C> <C> <C> <C> <C>
maintenance expenses $6,546,242 5,589,991 +17% 6,546,242 5,576,049 +17%
Well workover expenses 871,937 1,175,330 -26% 871,937 1,175,330 -26%
Production taxes 2,141,917 1,676,456 +28% 2,141,917 1,657,007 +29%
Total production and
operating expenses $9,560,096 8,441,777 +13% 9,560,096 8,408,386 +14%
Per Boe
Recurring operations and
maintenance expenses $2.52 2.22 +14% 2.52 2.26 +12%
Well workover expenses 0.34 0.47 -28% 0.34 0.48 -29%
Production taxes 0.82 0.66 +24% 0.82 0.67 +22%
Total production and
operating expenses $3.68 3.35 +10% 3.68 3.41 +8%
<F1>
1 The 1995 column in this table reflects the results actually reported
in the first quarter of 1995. These figures do not include the first
quarter's effect of the San Juan Basin Transaction. This transaction was
effective January 1, 1995, but the financial effects of the transaction
on Devon's operations were deferred recognition until the third quarter of
1995 when a significant contingency was favorably resolved. The cumulative
nine-month effect of the San Juan Basin Transaction was recorded entirely in
the third quarter of 1995.
<F2>
2 The 1995 column in this table presents the results of the first quarter
of 1995 which would have been reported if there had been no contingency at the
time the San Juan Basin Transaction was executed.
</TABLE>
Recurring operations and maintenance expenses
increased by $1.0 million, or 17%, in the first quarter of 1996.
The additional interests in the Worland Properties which were
acquired in the fourth quarter of 1995 and the first quarter of
1996 accounted for approximately $0.6 million of the increase.
Also, as Devon has continued development of the properties
acquired in the May 1994 merger, most notably in the Grayburg-
Jackson Field, more wells have come on line during the twelve
months ended March 31, 1996. Therefore, the recurring expenses
incurred on these properties increased by $0.2 million in the
first quarter of 1996 compared to the same quarter in 1995.
14
<PAGE>
Well workover expenses decreased by $0.3 million,
or 26%, in the first quarter of 1996. However, this reduction is
related only to the timing of these workover expenses. For the
full year 1996, Devon expects to exceed the $3.4 million of
workover costs incurred in the year 1995.
Production taxes increased by $0.5 million, or
28%, in the 1996 quarter. This increase was due to the increase
in combined oil, gas and NGL revenues. Excluding the revenues
generated by the San Juan Basin Transaction which are not subject
to production taxes, revenues in the first quarter of 1996 were
up by 31% compared to the first quarter of 1995.
On a per unit of production basis, the recurring
expenses per Boe were up by $0.30 per Boe, or 14%, in the first
quarter of 1996. This is primarily due to the increase in
Devon's mix of oil/gas production toward more oil production. Of
Devon's total Boe production in the first quarter of 1996, 34%
was oil production compared to 28% in the first quarter of 1995.
Oil wells are generally more expensive to operate on a per unit
of production basis. However, oil wells also produce more
revenues per unit of production than gas wells.
Production taxes per unit of production increased
by $0.16 per Boe, or 24%, in the first quarter of 1996. This is
consistent with the increase in the average price per Boe
received in the 1996 quarter. Excluding the effect on the 1996
average price from the San Juan Basin Transaction, Devon's total
revenues per Boe increased by 27% in the first quarter of 1996.
Depreciation, Depletion and Amortization Expenses
("DD&A"). Oil and gas property related DD&A increased $0.6
million, or 6%, from $9.1 million in the first quarter of 1995 to
$9.7 million in the first quarter of 1996. The increase in total
oil, gas and NGL production of 0.1 Boe, or 3%, accounted for $0.3
million of the increased DD&A. The remaining $0.3 million of
increase was caused by a 3% increase in the DD&A rate from $3.63
per Boe in 1995 to $3.73 per Boe in 1996.
General and Administrative Expenses ("G&A"). G&A
decreased $0.2 million, or 9%, in the first quarter of 1996.
Approximately half of the decrease was due to increased overhead
reimbursements which Devon receives on the wells it operates.
The remaining $0.1 million of decrease was due to the combined
effect of several G&A items whose individual decreases were
immaterial.
Interest Expense. Interest expense increased $0.7
million, or 39%,in the first quarter of 1996. The average debt
balance outstanding rose from $94.8 million in the first quarter
of 1995 to $149.9 million in the first quarter of 1996. This
increase in average debt outstanding, which was primarily due to
the funds borrowed to acquire the Worland Properties, caused
interest expense in 1996 to increase by $1.0 million. This
increase was partially offset by a $0.3 million decrease due to
lower interest rates in 1996. The annualized interest rate on
the debt outstanding in 1996 was 6.3%, compared to 6.7% in the
first quarter of 1995. The overall average interest rate
(including the effect of various fees paid to the banks and the
amortization of certain loan costs) during 1996's first quarter
was 6.6%, compared to an overall rate in the first quarter of
1995 of 7.5%.
15
<PAGE>
Devon entered into an interest rate swap agreement
in the second quarter of 1995. This agreement is more fully
described in note 3 to the consolidated financial statements
included elsewhere in this report. This agreement had the effect
of reducing Devon's interest expense in the first quarter of 1996
by $35,000.
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 first quarter of 1996 was 43%, compared to 41% in the
first quarter of 1995. The increase in the 1996 rate was due to
the San Juan Basin Transaction. The 41% rate estimated in 1995
was without the effect of such transaction, which was not
recorded until the third quarter of 1995. After this transaction
was recorded, the 1995 effective financial income tax rate was
43%, the same as the rate currently estimated for 1996.
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.
Included as deferred tax assets at March 31, 1996,
were approximately $14 million of various tax carryforwards. Of
this amount, $6 million are for net operating loss carryforwards
which expire between 1996 and 2008. The remaining $8 million of
carryforward benefits relate to depletion and minimum tax credit
carryforwards which do not have expiration dates.
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.
Devon expects the tax benefits from its net operating loss
carryforwards to be utilized between 1996 and 2002. This is well
before the 2006 expiration date for the majority of such
benefits. However, based upon limitations imposed on the
utilization of certain of the depletion carryforwards acquired in
a 1994 merger, a $100,000 valuation allowance has been provided
since such merger.
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 1996 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.
16
<PAGE>
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 1 elsewhere herein.
Capital Expenditures. Cash used for capital
expenditures increased 19% from $15.6 million in the first
quarter of 1995 to $18.5 million in the first quarter of 1996.
Approximately $18.3 million was spent in 1996 on acquisition,
exploration and development costs, compared to $14.4 million
spent in the 1995 quarter. Exploration and development costs on
the Grayburg-Jackson Field totaled $6.0 million in the first
quarter of 1996 compared to $6.7 million in the first quarter of
1995. The 1996 capital expenditures also included $4.3 million
to acquire additional interests in the Worland Properties.
Capital Resources and Liquidity. Net cash
provided by operating activities continued to be a primary source
of capital and liquidity in the first quarter of 1996. Net cash
provided by operating activities was $16.3 million in the 1996
quarter, compared to $17.6 million in the first quarter of 1995.
Differences in the timing of collections of receivables and the
payment of liabilities were the reasons for the decrease. These
timing differences caused net cash provided by operating
activities to decrease by $6.4 million in the first quarter of
1996 compared to the same quarter of 1995.
Devon's credit lines were also a source of capital
and liquidity in the first quarter of 1996. The total debt
outstanding at the end of the first quarter was $155 million, up
from $143 million at the end of 1995. On April 4, 1996, Devon
reduced its debt balance to $151 million. During the first
quarter, the lending banks increased Devon's credit lines by $55
million to a total of $260 million.
17
<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
None
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 filed on April
21, 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
[incorporated by reference to Exhibit
2.1 to Registrant's Registration
Statement on Form S-4 (No. 33-76524)].
18
<PAGE>
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)].
3.1 Registrant's Certificate of
Incorporation, as amended (incorporated
by reference to Exhibit B to
Registrant's definitive Proxy Statement
for its 1995 Annual Meeting of
Shareholders filed on April 21, 1995).
3.2 Registrant's Bylaws (incorporated by
reference to Exhibit 3.2 to
Registrant's Registration Statement on
Form 8-B filed on June 7, 1995).
4.1 Form of Common Stock Certificate
(incorporated by reference to Exhibit
4.1 to Registrant's Registration
Statement on Form 8-B filed on June 7,
1995).
4.2 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 filed on June 7,
1995).
4.3 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
filed on June 7, 1995).
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 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 by reference to
Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
19
<PAGE>
10.3 Second Amendment, dated March 4, 1996, 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
Caroliana, as Lenders.
10.4 Devon Energy Corporation [a Delaware
corporation] 1988 Stock Option Plan
[incorporated by reference to Exhibit 10.4 to
Registrant's Registration Statement on Form
S-4 (No. 33- 23564)]. *
10.5 Devon Energy Corporation 1993 Stock Option Plan
(incorporated by reference to Exhibit A to
Registrant's Proxy Statement for the 1993
Annual Meeting of Shareholders filed on May 6, 1993).*
10.6 Severance Agreement between Devon Energy
Corporation (Nevada), Devon Energy Corporation
(Delaware) and Mr. J. Larry Nichols, dated December 3,
1992 (incorporated 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).*
10.7 Severance Agreement between Devon Energy Corporation
(Nevada), Devon Energy Corporation (Delaware) and Mr.
H.R. Sanders, Jr., dated December 3, 1992
(incorporated 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).*
10.8 Severance Agreement between Devon Energy Corporation
(Nevada), Devon Energy Corporation (Delaware) and Mr.
J. Michael Lacey, dated December 3, 1992
(incorporated 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).*
10.9 Severance Agreement between Devon Energy Corporation
(Nevada), Devon Energy Corporation (Delaware) and Mr.
H. Allen Turner, dated December 3, 1992
(incorporated 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).*
10.10 Severance Agreement between Devon Energy Corporation
(Nevada), Devon Energy Corporation (Delaware) and Mr.
Darryl G. Smette, dated December 3, 1992
(incorporated 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).*
20
<PAGE>
10.11 Severance Agreement between Devon Energy Corporation
(Nevada), Devon Energy Corporation (Delaware) and Mr.
William T. Vaughn, dated December 3, 1992
(incorporated 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).*
10.12 Sale and Purchase Agreement relating to Registrant's
San Juan Basin gas properties (incorporated by
reference to Exhibit 10.15 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
10.13 Second Restatement of and Amendment to Sale and
Purchase Agreement relating to Registrant's San
Juan Basin gas properties (incorporated by
reference to Exhibit 10.16 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
10.14 Purchase and Sale Agreement between Union Oil
Company of California and Devon Energy Corporation
(Nevada) (incorporated by reference to Exhibit 2 to
Registrant's Current Report on Form 8-K dated
December 18, 1995).
11 Computation of earnings per share
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during
the three months ended March 31, 1996.
* Compensatory plans or arrangements.
21
<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: May 3, 1996 /s/William T. Vaughn
William T. Vaughn
Vice President - Finance
22
<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.
3.1 Registrant's Certificate of Incorporation. *
3.2 Registrant's Bylaws. *
4.1 Form of Common Stock Certificate. *
4.2 Rights Agreement between Registrant and The First *
National Bank of Boston.
4.3 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 Second Amendment, dated March 4, 1996, to Credit XX
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.
23
<PAGE>
10.4 Devon Energy Corporation [a Delaware corporation] *
1988 Stock Option Plan.
10.5 Devon Energy Corporation 1993 Stock Option Plan. *
10.6 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy Corporation
(Delaware) and Mr. J. Larry Nichols, dated
December 3, 1992.
10.7 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy Corporation
(Delaware) and Mr. H. R. Sanders, Jr., dated
December 3, 1992.
10.8 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy Corporation
(Delaware) and Mr. J. Michael Lacey, dated
December 3, 1992.
10.9 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy Corporation
(Delaware) and Mr. H. Allen Turner, dated
December 3, 1992.
10.10 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy
Corporation (Delaware) and Mr. Darryl G.
Smette, dated December 3, 1992.
10.11 Severance Agreement between Devon Energy *
Corporation (Nevada), Devon Energy
Corporation (Delaware) and Mr. William T.
Vaughn, dated December 3, 1992.
10.12 Sale and Purchase Agreement relating to *
Registrant's San Juan Basin gas properties.
10.13 Second Restatement of and Amendment to Sale *
and Purchase Agreement relating to
Registrant's San Juan Basin gas properties.
10.14 Purchase and Sale Agreement between Union *
Oil Company of California and Devon Energy
Corporation (Nevada).
11 Computation of earnings per share XX
* Incorporated by reference.
24
<PAGE>
<TABLE>
Exhibit 11
DEVON ENERGY CORPORATION
Computation of Earnings Per Share
<CAPTION>
Three Months Ended March 31,
1996 1995
PRIMARY EARNINGS PER SHARE
Computation for Statement of Operations
<S> <C> <C>
Net earnings per statement of operations $ 5,553,926 1,026,802
Weighted average common shares outstanding 22,112,489 22,050,996
Primary earnings per common share $0.25 0.05
Additional Primary Computation (A)
Net earnings per statement of operations $ 5,553,926 1,026,802
Adjustments to weighted average common
shares outstanding:
Weighted average as shown above 22,112,489 22,050,996
Add dilutive effect of outstanding stock
options (as determined using the treasury
stock method) 135,253 95,383
Weighted average common shares outstanding,
as adjusted 22,247,742 22,146,379
Net earnings per common share, as adjusted $0.25 0.05
FULLY DILUTED EARNINGS PER SHARE (A)
Net earnings per statement of operations $ 5,553,926 1,026,802
Weighted average common shares outstanding as shown
in primary computation above 22,112,489 22,050,996
Add fully dilutive effect of outstanding stock options
(as determined using the treasury stock method) 147,146 111,854
Weighted average common shares outstanding, as adjusted 22,259,635 22,162,850
Fully diluted earnings per common share $0.25 0.05
(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>
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18378505
<SECURITIES> 0
<RECEIVABLES> 14591150
<ALLOWANCES> 0
<INVENTORY> 566850
<CURRENT-ASSETS> 35010657
<PP&E> 649989546
<DEPRECIATION> 249497053
<TOTAL-ASSETS> 439911747
<CURRENT-LIABILITIES> 13518344
<BONDS> 155000000
2211390
0
<COMMON> 0
<OTHER-SE> 221736868
<TOTAL-LIABILITY-AND-EQUITY> 439911747
<SALES> 33734229
<TOTAL-REVENUES> 34048060
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9560096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2481156
<INCOME-PRETAX> 9743926
<INCOME-TAX> 4190000
<INCOME-CONTINUING> 5553926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5553926
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
Exhibit 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (herein called
this "Amendment") is made as of the 4th day of March, 1996, by
and among DEVON ENERGY CORPORATION (NEVADA), as Borrower
("Borrower"), DEVON ENERGY CORPORATION ("Parent") and DEVON
ENERGY OPERATING CORPORATION ("DEOC"), as guarantors,
NATIONSBANK OF TEXAS, N.A., as Agent ("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 ("Lenders").
WHEREAS, Borrower, Parent, DEOC, Agent and Lenders have
entered into that certain Credit Agreement dated as of October
7, 1994, as amended by a First Amendment to Credit Agreement
dated January 27, 1995 (the "Original Agreement"); and
WHEREAS, Parent and DEOC have guaranteed to Agent and
Lenders the payment of the Notes and of all other sums payable
under the Credit Agreement and the other Loan Documents
pursuant to their respective Guaranties; and
WHEREAS, Borrower, Parent, DEOC, Agent and Lenders desire
to amend the Original Agreement as herein provided;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Original Agreement, in consideration of the loans which may
hereafter be made by Lenders to Borrower, and for other good
and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby
agree as follows:
ARTICLE I -- Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless
the context otherwise requires or unless otherwise expressly
defined herein, the terms defined in the Original Agreement
shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context
otherwise requires, the following terms when used in this
Amendment shall have the meanings assigned to them in this
Section 1.2.
"Amendment" means this Second Amendment to Credit
Agreement.
"Credit Agreement" means the Original Agreement as
amended hereby.
ARTICLE II -- Amendments
Section 2.1. Defined Terms. (a) The reference to
"$5,000,000" contained in the definition of "Approved
Additional Debt" set forth in Section 1.1 of the Original
Agreement is hereby amended to refer instead to "$10,000,000".
(b) The reference to "March 31, 1998" contained in the
definition of "Commitment Period" set forth in Section 1.1 of
the Original Agreement is hereby amended to refer instead to
"March 31, 1999".
(c) The reference to "$220,000,000" contained in clause
(a)(ii) of the definition of "Percentage Share" set forth in
Section 1.1 of the Original Agreement is hereby amended to
refer instead to "$250,000,000".
(d) The definitions of "Base Rate Margin" and "Euro/CD
Margin" set forth in Section 1.1 of the Original Agreement are
hereby amended in their entirety to read as follows:
"Base Rate Margin" means:
(a) one half of one percent (0.5%) per annum whenever
the Loan Balance is greater than 100% of the
Borrowing Base in effect at the time in question;
(b) one-quarter of one percent (0.25%) per annum
whenever the Loan Balance is greater than 75%, but
less than or equal to 100%, of the Borrowing Base in
effect at the time in question; or
(c) zero, whenever the Loan Balance is less than or
equal to 75% of the Borrowing Base in effect at the
time in question.
"Euro/CD Margin" means:
(a) one and one-quarter percent (1.25%) per annum
whenever the Loan Balance is greater than 100% of
the Borrowing Base in effect at the time in
question;
(b) one percent (1%) per annum whenever the Loan Balance
is greater than 75%, but less than or equal to 100%,
of the Borrowing Base in effect at the time in
question;
(c) three-quarters of one percent (0.75%) per annum
whenever the Loan Balance is greater than or equal
to 62.5%, but less than or equal to 75%, of the
Borrowing Base in effect at the time in question; or
(d) sixty-five hundredths of one percent (0.65%) per
annum whenever the Loan Balance is less than 62.5%
of the Borrowing Base in effect at the time in
question.
Section 2.2. Proportionate and Disproportionate Loans. The
reference to "$5,000,000" contained in Section 2.3(d)(D) of
the Original Agreement is hereby amended to refer instead to
"$10,000,000".
Section 2.3. Limitation on Debt. The reference to
"$1,000,000" contained in Section 5.2(a)(ii) of the Original
Agreement is hereby amended to refer instead to "$2,000,000".
The reference to "$5,000,000" contained in Section
5.2(a)(iii)(D) of the Original Agreement is hereby amended to
refer instead to "$10,000,000".
Section 2.4. Designation of Borrowing Base. Pursuant to
Section 2.13(a) of the Credit Agreement, Agent, with the
concurrence of Evaluating Lenders, hereby designates the new
Borrowing Base as $250,000,000, effective for the period
beginning on the date hereof, a Determination Date, and
continuing until but not including the next date as of which
the Borrowing Base is redetermined.
Section 2.5. Maximum Loan Amounts. Each Lender's Maximum Loan
Amount set forth opposite its name on the signature pages to
the Original Agreement is hereby amended in its entirety to
read as follows:
<TABLE>
<CAPTION>
Maximum Loan Amount
<S> <C>
NationsBank of Texas, N.A. $100,000,000
Bank One, Texas, N.A. $60,000,000
Bank of Montreal $60,000,000
First Union National Bank $30,000,000
of North Carolina
</TABLE>
Section 2.6. Exhibits. Exhibit A to the Original Agreement is
hereby amended in its entirety to read as set forth on Exhibit
A attached hereto.
ARTICLE III. -- Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become
effective as of the date first above written when, and only
when, (i) Agent shall have received, at Agent's office, a
counterpart of this Amendment executed and delivered by
Borrower and each Lender, (ii) Borrower shall have issued and
delivered to Agent, for subsequent delivery to each Lender, a
Note with appropriate insertions in the form attached hereto
as Exhibit A payable to the order of such Lender on or before
March 31, 1999, duly executed on behalf of Borrower and dated
the date hereof, and (iii) Agent shall have additionally
received all of the following documents, each document (unless
otherwise indicated) being dated the date of receipt thereof
by Agent, duly authorized, executed and delivered, and in form
and substance satisfactory to Agent:
(a) Opinion of Counsel for Borrower. Agent shall
have received the written opinion of McAfee & Taft, P.C.,
dated as of the date of this Amendment, addressed to
Agent, to the effect that this Amendment and each Note
have been duly authorized, executed and delivered by
Borrower and that the Credit Agreement and each Note
constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms
(subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency and similar laws
and to moratorium laws and other laws affecting
creditors' rights generally from time to time in effect).
(b) Officer's Certificate. Agent shall have
received a certificate of a duly authorized officer of
Borrower to the effect that all of the representations
and warranties set forth in Article IV hereof are true
and correct at and as of the time of such effectiveness.
(c) Supporting Documents. Agent shall have
received (i) a certificate of the Secretary of Borrower
dated the date of this Amendment certifying that attached
thereto is a true and complete copy of resolutions
adopted by the Board of Directors of Borrower authorizing
the execution, delivery and performance of this Amendment
and each Note and certifying the names and true
signatures of the officers of Borrower authorized to sign
this Amendment and each Note and (ii) such supporting
documents as Agent may reasonably request.
ARTICLE IV -- Miscellaneous
Section 4.1. Ratification of Agreements. The Original
Agreement is hereby ratified and confirmed in all respects.
Any reference to the Credit Agreement in any Loan Document
shall be deemed to refer to the Original Agreement as amended
hereby. Any reference to the Notes in any other Loan Document
shall be deemed to be a reference to the Notes issued and
delivered pursuant to this Amendment. Each of Parent and
DEOC hereby consents to the provisions of this Amendment and
hereby ratifies and confirms its Guaranty and agrees that its
obligations and covenants thereunder are unimpaired hereby and
shall remain in full force and effect.
Section 4.2. Representations. Each of Borrower, Parent and
DEOC represent and warrant that the representations and
warranties contained in Section 4.1 and Section 9.1(b) of the
Credit Agreement are true and correct at and as of the date
hereof (taking into account the fact that this Amendment and
the Notes issued in connection herewith are each a Loan
Document as referred to in such Sections). Each of Borrower,
Parent and DEOC represent and warrant that the resolutions of
their respective Boards of Directors, attached as Exhibits A,
B and C to that certain Omnibus Certificate dated as of
October 7, 1994, given on behalf of Borrower, Parent and DEOC
in connection with the Original Agreement, remain in full
force and effect on the date hereof.
Section 4.3. Survival of Agreements. All representations,
warranties, covenants and agreements of Borrower, Parent or
DEOC herein shall survive the execution and delivery of this
Amendment and the Notes issued in connection herewith and the
performance hereof and shall further survive until all of the
Obligations are paid in full.
Section 4.4. Delivery of Notes. Each Lender shall promptly
deliver to Agent, for subsequent delivery to Borrower, the
Note heretofore delivered to it under the Original Agreement.
Section 4.5. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of
Texas and any applicable laws of the United States of America
in all respects, including construction, validity and
performance.
Section 4.6. Counterparts. This Amendment may be separately
executed in counterparts and by the different parties hereto
in separate counterparts, each of which when so executed shall
be deemed to constitute one and the same Amendment. This
Amendment shall, when executed by each party hereto, take
effect as of the date first above written.
Section 4.7. Loan Documents. This Amendment is a Loan
Document, and all provisions in the Credit Agreement applying
to Loan Documents (including, without limitation, Section
9.1(b) thereof) apply hereto.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the
date first above written.
DEVON ENERGY CORPORATION (NEVADA)
By:
H.R. Sanders, Jr., Executive Vice President
DEVON ENERGY CORPORATION
By:
H.R. Sanders, Jr., Executive Vice President
DEVON ENERGY OPERATING CORPORATION
By:
H.R. Sanders, Jr., Executive Vice President
NATIONSBANK OF TEXAS, N.A.
By:
Roger S. Manny, Senior Vice President
BANK ONE, TEXAS, N.A.
By:
Jill A. Hachtel, Vice President
BANK OF MONTREAL
By:
Michael P. Stuckey, Director
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Michael J. Kolosowsky, Vice President
CONSENT OF GUARANTOR
Avon Energy Corporation hereby consents to the foregoing
Amendment and the transactions contemplated therein and hereby
ratifies and confirms its obligations under its certain
Guaranty dated as of October 7, 1994 in favor of Agent, as
agent for the Lenders. This Consent is executed as of the
date of the Amendment.
AVON ENERGY CORPORATION
By:
H.R. Sanders, Jr., Executive Vice President
