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, 1999
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)
Oklahoma 73-1474008
(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 April 23, 1999, was 48,521,337.
1 of 36 total pages
(Exhibit Index is found at page 32)
<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, 1999 (Unaudited) 4
and December 31, 1998
Consolidated Statements of Operations (Unaudited), 5
For the Three Months Ended March 31, 1999
Consolidated Statements of Comprehensive Operations 6
(Unaudited), For the Three Months Ended March 31,
1999 and 1998
Consolidated Statements of Cash Flows (Unaudited), 7
For the Three Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements. 8
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 25
DEFINITIONS
As used in this document:
"Mcf" means thousand cubic feet
"MMcf" means million cubic feet
"Bcf" means billion cubic feet
"Bbl" means barrel
"MBbls" means thousand barrels
"MMBbls" means million barrels
"Boe" means equivalent barrels of oil
"Mboe" means thousand equivalent barrels of oil
"Oil" includes crude oil and condensate
"NGLs" means natural gas liquids
<PAGE>
DEVON ENERGY CORPORATION
Part I. Financial Information
Item 1. Consolidated Financial Statements
March 31, 1999 and 1998
(Forming a part of Form 10-Q Quarterly Report
to the Securities and Exchange Commission)
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, Except Share Data)
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 13,440 19,154
Accounts receivable 78,860 83,858
Inventories 2,787 2,750
Prepaid expenses 3,483 2,351
Deferred income taxes 605 605
Investments and other assets 1,892 1,930
Total current assets 101,067 110,648
Property and equipment, at cost, based
on the full cost method of accounting
for oil and gas properties 2,708,424 2,610,511
Less accumulated depreciation,
depletion and amortizatio 1,556,362 1,509,583
1,152,062 1,100,928
Other assets 14,376 14,780
Total assets $1,267,505 1,226,356
Liabilities and stockholders' equity
Current liabilities:
Accounts payable:
Trade 64,491 40,177
Revenues and royalties due to
others 9,441 12,508
Accrued expenses 21,220 27,971
Total current liabilities 95,152 80,656
Other liabilities 34,590 34,747
Long-term debt 422,293 405,271
Deferred income taxes 36,172 33,219
Company-obligated mandatorily redeemable
convertible preferred securities of
subsidiary trust holding solely 6.5%
convertible junior subordinated
debentures of Devon Energy Corporation 149,500 149,500
Stockholders' equity:
Preferred stock of $1.00 par value.
Authorized 3,000,000 shares; none
issued - -
Common stock of $.10 par value.
Authorized 400,000,000 shares; issued
48,492,000 in 1999 and 48,425,000
in 1998 4,849 4,842
Additional paid-in capital 798,640 796,992
Accumulated deficit (239,353) (242,909)
Accumulated other comprehensive loss (34,338) (35,962)
Total stockholders' equity 529,798 522,963
Total liabilities and stockholders'
equity $1,267,505 1,226,356
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended March 31,
1999 1998
(Unaudited)
Revenues
<S> <C> <C>
Oil sales $27,913 41,589
Gas sales 53,551 51,905
Natural gas liquids sales 3,929 4,814
Other 1,873 2,129
Total revenues 87,266 100,437
Costs and expenses
Lease operating expenses 27,420 29,376
Production taxes 2,969 3,415
Depreciation, depletion and
amortization 33,558 29,993
General and administrative expenses 6,223 5,643
Interest expense 6,664 5,410
Deferred effect of changes in foreign
currency exchange rate on
subsidiary's long-term debt (3,161) -
Distributions on preferred securities
of subsidiary trust 2,429 2,429
Total costs and expenses 76,102 76,266
Earnings before income tax expense 11,164 24,171
Income tax expense
Current 1,903 3,160
Deferred 3,281 6,786
Total income tax expense 5,184 9,946
Net earnings $ 5,980 14,225
Net earnings per average common share
outstanding (Note 1) - basic and
diluted $0.12 0.29
Weighted average common shares
outstanding - basic (Note 1) 48,470 48,310
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Operations
(In Thousands)
<CAPTION>
Three Months Ended March 31,
1999 1998
(Unaudited)
<S> <C> <C>
Net earnings $5,980 14,225
Other comprehensive earnings -
foreign currency translation
adjustments (Note 1) 1,624 856
Comprehensive earnings $7,604 15,081
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
<CAPTION>
Three Months Ended March 31,
1999 1998
(Unaudited)
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 5,980 14,225
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion and amortization 33,558 29,993
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt (3,161) -
Gain on sale of assets (18) (41)
Deferred income taxes 3,281 6,786
Other - 1,362
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 5,562 12,663
Inventories (32) 826
Prepaid expenses (1,121) (782)
Other assets 76 835
Increase (decrease) in:
Accounts payable 20,287 16,512
Income taxes payable - (2,233)
Accrued expenses (6,608) (9,573)
Long-term other liabilities (737) 1,215
Net cash provided by operating
activities 57,067 71,788
Cash flows from investing activities
Proceeds from sale of property and equipment 4,702 32,587
Proceeds from sale of investments - 43,687
Capital expenditures (82,798) (102,165)
Increase in equity investment - (3,136)
Decrease (increase) in other assets 448 (578)
Net cash used in investing activities (77,648) (29,605)
Cash flows from financing activities
Proceeds from borrowings on revolving
lines of credit 297,063 443,019
Principal payments on revolving lines of
credit (281,934) (485,839)
Issuance of common stock, net of issuance
costs 1,654 412
Dividends paid on common stock (2,424) (1,616)
Increase in long-term other liabilities 525 5,192
Net cash provided (used) by financing
activities 14,884 (38,832)
Effect of exchange rate changes on cash (17) 241
Net increase (decrease) in cash and cash
equivalents (5,714) 3,592
Cash and cash equivalents at beginning of
period 19,154 42,064
Cash and cash equivalents at end of period $ 13,440 45,656
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEVON ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
On December 10, 1998, Devon Energy Corporation ("Devon") and
Northstar Energy Corporation ("Northstar") closed a merger of the
two companies (the "Northstar Combination"). At that date,
Northstar became a wholly-owned subsidiary of Devon. Pursuant to
the Northstar Combination, Northstar's common shareholders
received approximately 16.1 million exchangeable shares (the
"Exchangeable Shares") based on an exchange ratio of 0.235
Exchangeable Shares for each Northstar common share outstanding.
The Exchangeable Shares were issued by Northstar, but are
exchangeable at any time into Devon's common shares on a one-for-
one basis. Prior to such exchange, the Exchangeable Shares have
rights identical to those of Devon's common shares, including
dividend, voting and liquidation rights. Between December 10,
1998 and March 31, 1999, approximately 10.4 million of the
originally issued 16.1 million Exchangeable Shares had been
exchanged for shares of Devon common stock.
The Northstar Combination was accounted for under the
pooling-of-interests method of accounting for business
combinations. All operational and financial information
contained herein includes the combined amounts of Devon and
Northstar for all periods presented.
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. The accompanying consolidated
financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes
thereto included in Devon's 1998 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, 1999, and the results
of their operations and their cash flows for the three month
periods ended March 31, 1999 and 1998.
2. Earnings Per Share
The following table reconciles the net earnings and common
shares outstanding used in the calculations of basic and diluted
earnings per share for the three month period ended March 31,
1998. The diluted earnings per share calculation for the three
months ended March 31, 1999, produced results that are anti-
dilutive. The diluted calculation for the 1999 quarter increased
net earnings by $1.5 million and increased the common shares
outstanding by 5.1 million shares.
<TABLE>
<CAPTION>
Net
Common Earnings
Net Shares Per
Earnings Outstanding Share
(In Thousands)
Three Months Ended March 31, 1998:
<S> <C> <C> <C>
Basic earnings per share $14,225 48,310 $0.29
Dilutive effect of:
Potential common shares issuable upon the
conversion of Trust Convertible Preferred
securities (the increase in net earnings
is net of income tax expense of $963,000) 1,506 4,902
Potential common shares issuable upon the
exercise of outstanding stock options - 574
Diluted earnings per share $15,731 53,786 $0.29
</TABLE>
3. Segment Information
Devon manages its business by country. As such, Devon
identifies its segments based on geographic areas. Devon has two
reportable segments: its operations in the U.S. and its
operations in Canada. Substantially all of both segments'
operations involve oil and gas producing activities.
Following is certain financial information regarding Devon's
segments for the first quarters of 1999 and 1998. The revenues
reported are all from external customers.
<TABLE>
<CAPTION>
U.S. Canada Total
(In Thousands)
As of March 31, 1999:
<S> <C> <C> <C>
Current assets $ 48,213 52,854 101,067
Property and equipment, net of
accumulated depreciation, depletion
and amortization 659,810 492,252 1,152,062
Other assets 13,362 1,014 14,376
Total assets $721,385 546,120 1,267,505
Current liabilities 21,991 73,161 95,152
Long-term debt 50,000 372,293 422,293
Deferred tax liabilities (assets) 57,488 (21,316) 36,172
Other liabilities 29,516 5,074 34,590
TCP Securities 149,500 - 149,500
Stockholders' equity 412,890 116,908 529,798
Total liabilities and stockholders'
equity $721,385 546,120 1,267,505
Three Months ended March 31, 1999:
Revenues
Oil sales $ 14,467 13,446 27,913
Gas sales 28,161 25,390 53,551
Natural gas liquids sales 2,518 1,411 3,929
Other 700 1,173 1,873
Total revenues 45,846 41,420 87,266
Costs and expenses
Lease operating expenses 14,923 12,497 27,420
Production taxes 2,592 377 2,969
Depreciation, depletion and amortization 18,009 15,549 33,558
General and administrative expenses 2,914 3,309 6,223
Interest expense 642 6,022 6,664
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - (3,161) (3,161)
Distributions on preferred securities of
subsidiary trust 2,429 - 2,429
Total costs and expenses 41,509 34,593 76,102
Earnings before income tax expense 4,337 6,827 11,164
Income tax expense
Current 820 1,083 1,903
Deferred 95 3,186 3,281
Total income tax expense 915 4,269 5,184
Net earnings $ 3,422 2,558 5,980
Capital expenditures $ 42,466 40,332 82,798
Three months ended March 31, 1998:
Revenues
Oil sales $ 21,108 20,481 41,589
Gas sales 31,981 19,924 51,905
Natural gas liquids sales 3,545 1,269 4,814
Other 1,182 947 2,129
Total revenues 57,816 42,621 100,437
Costs and expenses
Lease operating expenses 16,672 12,704 29,376
Production taxes 2,956 459 3,415
Depreciation, depletion and amortization 19,398 10,595 29,993
General and administrative expenses 2,684 2,959 5,643
Interest expense 10 5,400 5,410
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt - - -
Distributions on preferred securities of
subsidiary trust 2,429 - 2,429
Total costs and expenses 44,149 32,117 76,266
Earnings before income tax expense 13,667 10,504 24,171
Income tax expense
Current 2,041 1,119 3,160
Deferred 2,725 4,061 6,786
Total income tax expense 4,766 5,180 9,946
Net earnings $ 8,901 5,324 14,225
Capital expenditures $ 37,186 64,979 102,165
</TABLE>
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, 1999,
compared to the three months ended March 31, 1998, and in
financial condition since December 31, 1998. It is presumed that
readers have read or have access to Devon's 1998 annual report on
Form 10-K.
Overview
On December 10, 1998, Devon merged with Canadian-based Northstar.
As a result of the accounting for this combination as a "pooling-of-
interests," the financial data for all periods presented herein represent
the combined results of the two companies. The pooling-of-interests
method of accounting requires historical information to be restated
as if the combining companies had always been merged. The restated
data varies significantly from the historical data Devon has previously
presented on a stand-alone basis.
Net earnings for the quarter ended March 31, 1999 were $6.0 million,
or 12 cents per share. This compares to first quarter 1998 net earnings
of $14.2 million or 29 cents per share. The decrease in first quarter
earnings was due primarily to lower oil and natural gas prices. The
prices Devon received for its first quarter 1999 production were
significantly lower than those received in the first quarter of 1998.
The merged company's first quarter 1999 production of oil, natural
gas and natural gas liquids increased significantly over Devon's
stand-alone first quarter 1998 production. However, total first
quarter production for Devon and Northstar combined declined slightly
in 1999. The decrease in total production resulted from the sale
of certain Canadian oil-producing properties during 1998 and from
deferring many oil-oriented drilling projects pending stronger oil
prices. The majority of the resulting decrease in first quarter oil
production was offset by a significant increase in first quarter 1999
natural gas production.
Results of Operations
Total revenues decreased $13.2 million, or 13%, in the first
quarter of 1999. This decrease was caused by reductions in the
average prices of oil, gas and NGLs, along with decreased
production on a combined Boe basis. Oil, gas and NGLs revenues
were down $12.9 million, or 13%, for the first quarter of 1999.
The quarterly comparisons of production and price changes are
shown in the following tables. (Note: Unless otherwise stated,
all references in this report to dollar amounts regarding Devon's
Canadian operations are expressed in U.S. dollars.)
<TABLE>
<CAPTION>
Total
Three Months Ended
March 31,
1999 1998 Change
Production
<S> <C> <C> <C>
Oil (MBbls) 2,565 3,197 -20%
Gas (MMcf) 35,122 32,523 +8%
NGL (MBbls) 476 509 -6%
<FN>
Oil, Gas and NGLs (MBoe)1 8,895 9,127 -3%
Average Prices
Oil (Per Bbl) $10.88 13.01 -16%
Gas (Per Mcf) 1.52 1.60 -5%
NGL (Per Bbl) 8.25 9.46 -13%
<FN>
Oil, Gas and NGLs (Per Boe)1 9.60 10.77 -11%
<CAPTION>
(In Thousands)
Revenues
Oil $27,913 41,589 -33%
Gas 53,551 51,905 +3%
NGLs 3,929 4,814 -18%
Combined $85,393 98,308 -13%
<CAPTION>
Domestic
Three Months Ended
March 31,
1999 1998 Change
Production
Oil (MBbls) 1,299 1,485 -13%
Gas (MMcf) 16,361 15,935 +3%
NGL (MBbls) 314 354 -11%
<FN>
Oil, Gas and NGLs (MBoe)1 4,340 4,495 -3%
Average Prices
Oil (Per Bbl) $11.14 14.21 -22%
Gas (Per Mcf) 1.72 2.01 -14%
NGL (Per Bbl) 8.02 10.02 -20%
<FN>
Oil, Gas and NGLs (Per Boe)1 10.40 12.60 -17%
<CAPTION>
(In Thousands)
Revenues
Oil $14,467 21,108 -31%
Gas 28,161 31,981 -12%
NGLs 2,518 3,545 -29%
Combined $45,146 56,634 -20%
<CAPTION>
Canada
Three Months Ended
March 31,
1999 1998 Change
Production
Oil (MBbls) 1,266 1,712 -26%
Gas (MMcf) 18,761 16,588 +13%
NGL (MBbls) 162 155 +5%
<FN>
Oil, Gas and NGLs (MBoe)1 4,555 4,632 -2%
Average Prices
Oil (Per Bbl) $10.62 11.96 -11%
Gas (Per Mcf) 1.35 1.20 +13%
NGL (Per Bbl) 8.71 8.19 +6%
<FN>
Oil, Gas and NGLs (Per Boe)1 8.84 9.00 -2%
(In Thousands)
Revenues
Oil $13,446 20,481 -34%
Gas 25,390 19,924 +27%
NGLs 1,411 1,269 +11%
Combined $40,247 41,674 -3%
_______________
<FN>
1 Gas volumes are converted to Boe or MBoe 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 and gas prices. The respective prices of oil, gas
and NGLs are affected by market and other factors in addition to
relative energy content.
</TABLE>
Oil Revenues. Oil revenues decreased $13.7 million, or 33%,
in the first quarter of 1999. A decrease in the average price of
$2.13 per barrel, or 16%, reduced oil revenues by $5.5 million.
The remaining $8.2 million reduction in oil revenues was caused
by a 632,000 barrel, or 20%, decrease in production. Of this
drop in oil production, 446,000 barrels were attributable to
Devon's Canadian production. Approximately 264,000 barrels of
the Canadian reduction was attributable to the disposition of
producing properties at the end of 1998's first and fourth
quarters. Low oil prices led to the shut-in of some oil
producing wells and the decision to defer many oil-oriented
drilling projects. These factors, along with normal decline,
accounted for the majority of the remaining decline in U.S. and
Canadian oil production.
Gas Revenues. Gas revenues increased $1.6 million, or 3%,
in 1999's first quarter. Production rose 2.6 Bcf in the 1999
period, which added $4.1 million of gas revenues. However, this
increase was partially offset by the effect of lower gas prices
in the 1999 quarter. Average gas prices dropped $0.08 per Mcf,
or 5%, in 1999. The lower prices reduced gas revenues by $2.5
million in the 1999 period.
Devon's San Juan Basin coal seam gas properties produced 5.5
Bcf in the 1999 quarter compared to 5.0 Bcf in the 1998 quarter.
Devon's other domestic properties produced 10.9 Bcf in 1999 and
1998. The coal seam gas properties averaged $1.67 per Mcf in
1999 compared to $1.83 in 1998. The other domestic gas
properties averaged $1.75 per Mcf in 1999 and $2.09 per Mcf in
1998.
Canadian gas production increased 2.2 Bcf, or 13% in the
1999 quarter. Production added from two acquisitions in 1998
(one in July and the other in December) was the primary cause of
the increased production in 1999's first quarter.
NGLs Revenues. NGLs revenues decreased $0.9 million, or
18%, in the first quarter of 1999. A decrease in the average
prices in 1999 of $1.21 per barrel, or 13%, caused NGLs revenues
to drop $0.6 million in the 1999 period. The remaining $0.3
million decrease in NGLs revenues was caused by a decrease in
production of 33,000 barrels, or 6%.
Other Revenues. Other revenues declined $0.3 million, or
12%, in the 1999 quarter primarily due to a reduction in third
party gas processing revenues.
Production and Operating Expenses. The components of
production and operating expenses for the first quarter of 1999
and 1998 are set forth in the following tables.
<TABLE>
<CAPTION>
Total
Three Months Ended
March 31,
1999 1998 Change
Absolute (Thousands)
Recurring operations and maintenance
<S> <C> <C> <S>
expenses $26,032 27,875 -7%
Well workover expenses 1,388 1,501 -8%
Production taxes 2,969 3,415 -13%
Total production and operating
expenses $30,389 32,791 -7%
Per Boe
Recurring operations and maintenance
expenses 2.93 3.05 -4%
Well workover expenses 0.16 0.17 -6%
Production taxes 0.33 0.37 -11%
Total production and operating
expenses $3.42 3.59 -5%
<CAPTION>
Domestic
Three Months Ended
March 31,
1999 1998 Change
Absolute (Thousands)
Recurring operations and maintenance
expenses $13,808 15,484 -11%
Well workover expenses 1,115 1,188 -6%
Production taxes 2,592 2,956 -12%
Total production and operating
expenses $17,515 19,628 -11%
Per Boe
Recurring operations and maintenance
expenses 3.18 3.45 -8%
Well workover expenses 0.26 0.26 -
Production taxes 0.60 0.66 -9%
Total production and operating
expenses $4.04 4.37 -8%
<CAPTION>
Canada
Three Months Ended
March 31,
1999 1998 Change
Absolute (Thousands)
Recurring operations and maintenance
expenses $12,224 12,391 -1%
Well workover expenses 273 313 -13%
Production taxes 377 459 -18%
Total production and operating
expenses $12,874 13,163 -2%
Per Boe
Recurring operations and maintenance
expenses 2.69 2.67 +1%
Well workover expenses 0.06 0.07 -14%
Production taxes 0.08 0.10 -20%
Total production and operating
expenses $2.83 2.84 -
</TABLE>
Recurring operations and maintenance expenses decreased $1.8
million, or 7%, in the first quarter of 1999. Of this decrease,
$1.7 million was related to Devon's domestic properties. The
reduction in the domestic expenses was centered in the primary
oil producing properties, where various efficiencies were
achieved since the 1998 quarter and certain non-essential
services were delayed due to the low oil prices in effect during
the 1999 quarter.
Production taxes decreased $0.4 million, or 13%, in the 1999
quarter. The majority of Devon's production taxes are assessed
on its domestic properties. In the U.S., most of the production
taxes are based on a fixed percentage of revenues. Therefore,
the 20% decline in domestic oil, gas and NGLs revenues in the
first quarter of 1999 was the primary cause of the production tax
decrease.
Depreciation, Depletion and Amortization Expenses ("DD&A").
Oil and gas property related DD&A increased $3.6 million, or 12%,
from $29.0 million in the first quarter of 1998 to $32.6 million
in the first quarter of 1999. An increase in the combined U.S.
and Canadian DD&A rate from $3.17 per Boe in 1998 to $3.66 per
Boe in 1999 caused oil and gas property related DD&A to increase
by $4.3 million. This increase was partially offset by a
decrease of $0.7 million caused by the 3% drop in combined oil,
gas and NGLs production in 1999.
General and Administrative Expenses ("G&A"). G&A increased
$0.6 million, or 10%, in the first quarter of 1999 compared to
the first quarter of 1998. Gross G&A (before amounts capitalized
and before overhead reimbursements) increased $0.1 million, or
1%. This increase was offset by the fact that the amount of G&A
capitalized pursuant to the full cost method of accounting
increased $0.2 million in the 1999 quarter. G&A capitalized in
1999's first quarter was $2.5 million compared to $2.3 million in
1998's first quarter.
However, the $0.1 million net decrease in G&A after
capitalization was more than offset by lower overhead
reimbursements in the 1999 quarter. As the operator of a
property, Devon receives these reimbursements from the property's
working interest owners during both the drilling and operational
stages of the property's life. Devon records the reimbursements
as reductions to G&A. These reimbursements were $0.7 million
lower in the first quarter of 1999 compared to the same quarter
of 1998. All of the reduction in the reimbursements was related
to the Canadian operations, where a less extensive capital
program in 1999 led to the reduction in drilling overhead
reimbursements.
Interest Expense. Interest expense increased $1.3 million,
or 23%, in 1999's first quarter. An increase in the average debt
balance outstanding from $359.6 million in 1998 to $418.0 million
in 1999 caused interest expense to increase by $1.0 million. The
average rate on the debt outstanding was 6.2% in both quarters
and had no effect on the interest expense variance. The
remaining increase of $0.3 million was caused by an increase in
other components of interest expense such as facility and agency
fees and the amortization of capitalized loan costs.
The following schedule includes the components of interest
expense for the first quarter of 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
(In Thousands)
<S> <C> <C>
Interest based on debt outstanding $6,419 5,463
Facility and agency fees 147 117
Amortization of capitalized loan costs 69 18
Hedging gains - (102)
Other 29 (86)
Total interest expense $6,664 5,410
</TABLE>
Deferred Effect of Changes in Foreign Currency Exchange Rate
on Subsidiary's Long-term Debt. Devon's Canadian subsidiary
Northstar has certain fixed rate senior notes which are
denominated in U.S. dollars. The outstanding principal amount of
these notes is $225 million. Changes in the exchange rate
between the U.S. dollar and the Canadian dollar from the dates
the notes were issued to the dates of repayment will increase or
decrease the expected amount of Canadian dollars eventually
required to repay the notes. Such changes in the Canadian dollar
equivalent balance of the debt are required to be included in
determining net earnings for the period in which the exchange
rate changes.
The rate of converting Canadian dollars to U.S. dollars
increased from $0.6535 at the end of 1998 to $0.6626 at the end
of 1999's first quarter. This decreased the Canadian dollar
equivalent balance of the debt recorded by Northstar, and
resulted in $3.2 million of reduced expenses in 1999's first
quarter.
The rate of converting Canadian dollars to U.S. dollars
remained virtually constant from the end of 1997 to the end of
1998's first quarter. The rate was $0.6997 at the end of 1997
and $0.7045 at the end of March 1998. Also, the principal
balance of the U.S. dollar denominated notes increased from $135
million to $225 million in March 1998. As a result of the
minimal changes in the exchange rate and the smaller balance of
U.S. dollar denominated debt outstanding during the 1998 quarter,
the deferred effect of the change in the foreign currency
exchange rate was less than a thousand dollars.
Distributions on Preferred Securities of Subsidiary Trust.
Devon has $149.5 million of 6.5% Trust Convertible Preferred
Securities outstanding. Distributions on these securities accrue
and are paid at the rate of 1.625% per quarter.
Income Taxes. During interim periods, income tax expense is
based on the estimated effective income tax rate that is expected
for the entire fiscal year. The estimated effective tax rate in
the first quarter of 1998 was 46%, compared to 41% estimated in
the first quarter of 1998.
The higher expected 1999 rate is primarily due to the effect
of certain components of 1999's income tax expense that will not
fluctuate in relation to pre-tax earnings. Examples are the
amounts of Canadian DD&A recorded for financial statement
purposes that are not deductible for income purposes, and the
Canadian large corporation tax that is based on capitalization
levels instead of pre-tax earnings. At lower levels of pre-tax
earnings, these "fixed" components of income tax expense result
in higher effective tax rates. As pre-tax earnings increase, the
fixed components have less impact on the effective tax rate.
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 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", SFAS 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, 1999, were
approximately $21.8 million of net operating loss carryforwards.
The carryforwards include U.S. federal net operating loss
carryforwards, the majority of which do not begin to expire until
2008, U.S. state net operating loss carryforwards which expire
primarily between 1999 and 2011, and Canadian carryforwards which
expire primarily between 2000 and 2005. Devon expects the tax
benefits from the net operating loss carryforwards to be utilized
between 1999 and 2002. Such expectation is based upon current
estimates of taxable income during this period, considering
limitations on the annual utilization of these benefits as set
forth by federal tax regulations. Significant changes in such
estimates caused by variables such as future oil and gas prices
or capital expenditures could alter the timing of the eventual
utilization of such carryforwards. There can be no assurance
that Devon will generate any specific level of continuing taxable
earnings. However, Devon's management believes that future
taxable income will more likely than not be sufficient to utilize
substantially all its tax carryforwards prior to their
expirations.
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. Approximately $82.8 million was spent
in the first three months of 1999 for capital expenditures. This
total includes $69.9 million for the acquisition, drilling or
development of oil and gas properties, $12.1 million related to
the construction of an extensive gas gathering system, related
CO2 removal facilities and gas processing project all located in
the Powder River Basin of Wyoming, and $0.8 million for other
fixed assets.
Approximately $102.2 million was spent for capital
expenditures in the first quarter of 1998. This total includes
$100.4 million for the acquisition, drilling or development of
oil and gas properties and $1.8 million for other fixed assets.
Capital Resources and Liquidity. Net cash provided by
operating activities ("operating cash flow") continued to be the
primary source of capital and liquidity in the first quarter of
1999. Operating cash flow in the first quarter of 1999 was $57.1
million, compared to $71.8 million in the first quarter of 1998.
The decrease in operating cash flow in the 1999 quarter was
primarily caused by the drop in revenues discussed earlier in
this section.
In addition to operating cash flow, Devon also utilized a
portion of its credit facilities during the first quarter of 1999
to fund its capital expenditures. Net borrowings against the
credit facilities in the first three months of 1999 were $15.1
million. As of March 31, 1998, Devon had $202.7 million
available under its $400 million credit facilities.
Year 2000 Status. Devon's company-wide Year 2000 Project
("the Project") is proceeding on schedule. The Project is
addressing the Year 2000 issue caused by computer programs being
written utilizing two digits rather than four to define an
applicable year. As a result, Devon's computer equipment,
software (all of which is externally developed), and devices with
embedded technology that are time sensitive may misinterpret the
actual date beginning on January 1, 2000. This could result in a
system failure or miscalculations causing disruptions of
operations, including, but not limited to, a temporary inability
to process transactions.
Devon has undertaken various initiatives intended to ensure
that its computer equipment and software will function properly
with respect to dates in the Year 2000 and thereafter. In
planning and developing the Project, Devon has considered both
its information technology ("IT") and its non-IT systems. The
term "computer equipment and software" includes systems that are
commonly thought of as IT systems, including accounting, data
processing, telephone systems, scanning equipment, and other
miscellaneous systems. Those items not to be considered as IT
technology include alarm systems, fax machines, monitors for
field operations, or other miscellaneous systems. Both IT and
non-IT systems may contain embedded technology, which complicates
Devon's Year 2000 identification, assessment, remediation, and
testing efforts. Based upon its identification and assessment
efforts to date, Devon is in the process of replacing the
computer equipment and software it currently uses to become Year
2000 compliant. In addition, in the ordinary course of replacing
computer equipment and software, Devon plans to obtain
replacements that are in compliance with year 2000.
Devon has also mailed letters to its significant vendors and
service providers and has verbally communicated with many
strategic customers to determine the extent to which interfaces
with such entities are vulnerable to Year 2000 issues and whether
the products and services purchased from or by such entities are
year 2000 compliant. Devon has received an overall favorable
response from such third parties and it is anticipated that their
significant Year 2000 issues will be addressed on a timely basis.
With regard to IT and non-IT systems and communications with
third parties, Devon anticipates that the Project will be
completed by September 30, 1999.
As noted above, Devon is in the process of replacing certain
computer equipment and software because of the Year 2000 issue.
Devon estimates that the total cost of such replacements will
approximate $0.5 million. Substantially all of the personnel
being used on the Project are existing Devon employees. Devon
does not separately track the time that its own employees spend
on the Project. Therefore, the internal costs incurred on the
Project are not known. Such costs would consist almost entirely
of the payroll costs associated with the time spent on the
Project. Third party consulting costs of Devon's Year 2000
identification, assessment, remediation and testing efforts, as
well as currently anticipated costs to be incurred with respect
to Year 2000 issues of third parties, are expected to be
approximately $0.2 million.
Devon has not yet begun a comprehensive analysis of the
operational problems and costs that would be reasonably likely to
result from the failure by Devon and significant third parties to
complete efforts necessary to achieve Year 2000 compliance on a
timely basis. A contingency plan has not been developed for
dealing with the most reasonably likely worst case scenario, and
such scenario has not yet been clearly identified. Devon plans
to complete such analysis and contingency planning by December
31, 1999.
Devon presently does not expect to incur significant
operational problems due to the Year 2000 issue. However, if all
Year 2000 issues are not properly and timely identified,
assessed, remediated and tested, there can be no assurances that
the Year 2000 issue will not materially impact Devon's results of
operations or adversely affect its relationships with customers,
vendors, or others. Additionally, there can be no assurance that
the Year 2000 issues of other entities will not have a material
impact on Devon's systems or results of operations.
Impact of Recently Issued Accounting Standards Not Yet
Adopted. In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain
recognition of all derivatives as either assets or liabilities in
the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be
specifically designated as a hedge. The accounting for changes
in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and whether it
qualifies as a hedge. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Devon
plans to adopt the provisions of SFAS 133 in the first quarter of
the year ending December 31, 2000, and is currently evaluating
the effects of this pronouncement.
Revisions to 1999 Estimates
The 1998 annual report on Form 10-K, and a Form 8-K filed on
February 8, 1999, contained forward-looking information for the
year 1999. Where necessary, that information has been revised as
set forth in the following discussion. The revised forward-
looking statements provided in this discussion are based on
management's examination of historical operating trends, the
December 31, 1998 reserve reports of independent petroleum
engineers, other data in Devon's possession or available from
third parties and actual results for the first quarter of 1999.
Devon cautions that its future oil, gas and NGLs production,
revenues and expenses are subject to all of the risks and
uncertainties normally incident to the exploration for and
development and production and sale of oil and gas. These risks
include, but are not limited to, price volatility, inflation or
lack of availability of goods and services, environmental risks,
drilling risks, regulatory changes, the uncertainty inherent in
estimating future oil and gas production or reserves, and other
risks as outlined below. Also, the financial results of Devon's
Canadian operations are subject to currency exchange rate risks.
Additional risks are discussed below in the context of line items
most affected by such risks.
Specific Assumptions and Risks Related to Price and
Production Estimates. Prices for oil, natural gas and NGLs are
determined primarily by prevailing market conditions. Market
conditions for these products are influenced by regional and
world-wide economic growth, weather and other substantially
variable factors. These factors are beyond Devon's control and
are difficult to predict. In addition to volatility in general,
Devon's oil, gas and NGLs prices may vary considerably due to
differences between regional markets, transportation availability
and demand for different grades of oil, gas and NGLs. Over 90%
of Devon's revenues are attributable to sales of these three
commodities. Consequently, Devon's financial results and
resources are highly influenced by this price volatility.
Estimates for Devon's future production of oil, natural gas
and NGLs are based on the assumption that market demand and
prices for oil and gas will continue at levels that allow for
profitable production of these products. There can be no
assurance of such stability.
Certain of Devon's individual oil and gas properties are
sufficiently significant as to have a material impact on the
overall financial results. With respect to oil production, these
properties include the West Red Lake Field and the Grayburg-
Jackson Unit, both in southeast New Mexico, and the Gilby and
Halkirk areas in Alberta. Devon's interest in NEBU and the 32-9
Unit, both in the San Juan Basin, and the Coleman and Hamburg
areas in Alberta can have a significant effect on overall gas
production.
The production, transportation and marketing of oil, natural
gas and NGLs are complex processes which are subject to
disruption due to transportation and processing availability,
mechanical failure, human error, meteorological events and
numerous other factors. The following forward-looking statements
were prepared assuming demand, curtailment, producibility and
general market conditions for Devon's oil, natural gas and NGLs
for 1999 will be substantially similar to those of 1998, unless
otherwise noted. Given the general limitations expressed herein,
Devon's forward-looking statements for 1999 are set forth below.
Unless otherwise noted, all of the following dollar amounts are
expressed in U.S. dollars. Those amounts related to Canadian
operations have been converted to U.S. dollars using an exchange
rate of $0.6626 U.S. dollar to one Canadian dollar. This
exchange rate approximates both the average rate for the first
quarter of 1999 and the rate as of March 31, 1999. The actual
1999 exchange rate may vary materially from the year-end 1998
rate used. Such variations could have a material effect on the
following Canadian estimates.
Discussed below are those areas where revisions have been
made to the 1999 estimates originally included in the
aforementioned Form 10-K and Form 8-K.
Oil Prices. The original estimate for Devon's average 1999
realized price for domestic oil production was between $0.25 to
$0.55 above West Texas Intermediate ("WTI") posted prices. For
the first quarter of 1999, Devon's domestic production averaged
$11.14 per barrel, which was $0.75 above the average WTI posted
price of $10.39 per barrel. The primary cause for the higher
differential in the first quarter of 1999 was the renegotiation
of certain contracts during the quarter at higher premiums above
WTI posted prices. As a result, Devon has revised upward its
estimate of realized domestic oil prices for the year 1999 to
between $0.50 to $0.80 above the average WTI posted price for the
year.
The original estimate for Devon's average 1999 realized
price for its Canadian oil production not subject to hedges was
between $1.75 and $2.25 below WTI posted prices. For the first
quarter of 1999, Devon's Canadian production not subject to
hedges averaged $9.40 per barrel, which was $0.99 less than the
average WTI posted prices for the quarter. This better
differential was the result of several factors. The original
estimate included a negative effect of $1.25 per barrel from
certain foreign exchange hedges. The actual effect of the hedges
on the first quarter oil price was approximately $1.05 per
barrel. Also, the original estimate included a negative effect
of approximately $0.90 per barrel for quality adjustments. The
actual effect of such quality adjustments in the first quarter
was only $0.30 per barrel. As a result of these and other
factors, Devon has revised upward its estimate of realized
Canadian oil prices related to non-hedged production for the year
1999 to between $1.25 and $1.75 below WTI posted prices.
Gas Prices - Floating. The original estimate of Devon's
average 1999 realized price for Canadian production not subject
to fixed prices was between $0.80 to $0.95 less than the New York
Mercantile Exchange price ("NYMEX"). For the first quarter of
1999, the Canadian production not subject to fixed prices
averaged $1.28, which was only $0.47 less than the NYMEX average
for the quarter. This differential was substantially better than
that originally estimated for the year.
Devon's Canadian production that is not fixed as to price is
primarily sold at prices based on either the NYMEX price or the
market price at the Alberta Energy Company ("AECO") trading
center. Production sold based on AECO prices at times generates
a higher net price per Mcf than that sold based on NYMEX prices.
For the first quarter of 1999, approximately 55% of the Canadian
floating-price production was tied to AECO. However, this
percentage is expected to drop to 30% for the last three quarters
of the year, and average 40% for the year. Also, the AECO base
price was only $0.11 less than the NYMEX price for the first
quarter. This difference is expected to be approximately $0.45
for the last three quarters and to average $0.40 for the year.
The combination of the higher first quarter percentage of
floating-price production tied to AECO and the lower differential
between AECO and NYMEX yielded a Canadian gas price differential
compared to NYMEX that is expected to be lower than the remainder
of the year.
However, based on the actual first quarter results and other
factors that should increase the Canadian gas price realization
for the remainder of the year, Devon has revised its expected
Canadian floating-price differential for the year. For the last
three quarters of 1999, Devon expects its Canadian floating-price
production to average between $0.65 to $0.80 less than NYMEX.
For the full year 1999, Devon expects such production to average
between $0.60 and $0.75 less than NYMEX.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The information included in "Quantitative and Qualitative
Disclosures About Market Risk" in Item 7A of Devon's 1998 Annual
Report on Form 10-K is incorporated herein by reference. Such
information includes a description of Devon's potential exposure
to market risks, including commodity price risk, interest rate
risk and foreign currency risk. As of March 31, 1999, there have
been no material changes in Devon's market risk exposure from
that disclosed in the 1998 Form 10-K.
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 Amended and Restated Combination Agreement
between the Registrant and Northstar Energy
Corporation dated as of June 29, 1998
(incorporated by reference to Annex B to
Registrant's definitive proxy statement for a
special meeting of shareholders, filed November 6,
1998).
3.1 Registrant's Amended and Restated
Certificate of incorporation (incorporated by
reference to Exhibit 3 to Registrant's Form 8-K
dated as of December 11, 1998).
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 First Amendment to Rights Agreement between
Registrant and The First National Bank of Boston,
dated October 16, 1996 (incorporated by reference
to Exhibit H-1 to Addendum A to Registrant's
definitive proxy statement for a special meeting
of shareholders, filed on November 6, 1996).
4.4 Second Amendment to Rights Agreement between
Registrant and the First National Bank of Boston,
dated December 31, 1996 (incorporated by reference
to Exhibit 4.2 to Registrant's Current Report on
Form 8-K dated December 31, 1996).
4.5 Third Amendment to Rights Agreement between
Registrant and The First National Bank of Boston,
dated December 10, 1998 (incorporated by reference
to Exhibit 4.5 of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998).
4.6 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).
4.7 Certificate of Trust of Devon Financing
Trust [incorporated by reference to Exhibit 4.5 to
Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
4.8 Amended and Restated Declaration of
Trust of Devon Financing Trust, dated as of July
3, 1996, by J. Larry Nichols, H. Allen Turner,
William T. Vaughn, The Bank of New York (Delaware)
and The Bank of New York as Trustees and the
Registrant as Sponsor [incorporated by reference
to Exhibit 4.6 to Amendment No. 1 to Registrant's
Registration Statement on Form S-3 (No. 333-
00815)].
4.9 Indenture, dated as of July 3, 1996, between the
Registrant and The Bank of New York [incorporated
by reference to Exhibit 4.7 to Amendment No. 1 to
Registrant's Registration Statement on Form S-3
(No. 333-00815)].
4.10 First Supplemental Indenture, dated as of July 3,
1996, between the Registrant and The Bank of New
York [incorporated by reference to Exhibit 4.8 to
Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
4.11 Form of 6 1/2% Preferred Convertible
Securities (included as Exhibit A-1 to Exhibit 4.7
above).
4.12 Form of 6 1/2% Convertible Junior
Subordinated Debentures (included as Exhibit B to
Exhibit 4.7 above).
4.13 Preferred Securities Guarantee
Agreement, dated July 3, 1996, between Registrant,
as Guarantor, and The Bank of New York, as
Preferred Guarantee Trustee [incorporated by
reference to Exhibit 4.11 to Amendment No. 1 to
Registrant's Registration Statement on Form S-3
(No. 333-00815)].
4.14 Stock Rights and Restrictions Agreement,
dated as of December 31, 1996, between Registrant
and Kerr-McGee Corporation (incorporated by
reference to Exhibit 4.3 to Registrant's Current
Report on Form 8-K dated December 31, 1996).
4.15 Registration Rights Agreement, dated December
31, 1996, by and between Registrant and Kerr-McGee
Corporation (incorporated by reference to Exhibit
4.4 to Registrant's Current Report on Form 8-K,
dated December 31, 1996).
4.16 Support Agreement, dated December 10,
1998, between the Registrant and Northstar Energy
Corporation (incorporated by reference to Exhibit
4.1 to Registrant's Form 8-K dated as of December
11, 1998).
4.17 Exchangeable Share Provisions
(incorporated by reference to Exhibit 4.2 to
Registrant's Form 8-K dated as of December 11,
1998).
10.1 U.S. Credit Agreement, dated December 11,
1998, among the Registrant, as U.S. Borrower,
NationsBank, N.A., as Administrative Agent,
NationsBanc Montgomery Securities, L.L.C., as
Arranger, Bank One, Texas, N.A., as Syndication
Agent, Bank of Montreal, as Documentation Agent,
First Union, as Co-Documentation Agent, and
Certain Financial Institutions, as Lenders
(incorporated by reference to Exhibit 10.1 to
Registrant's Form 8-K dated as of December 11,
1998).
10.2 Canadian Credit Agreement, dated December 11,
1998, among Northstar Energy Corporation and Devon
Energy Canada Corporation, as Canadian Borrowers,
Bank of America Canada, as Administrative Agent,
NationsBanc Montgomery Securities, L.L.C., as
Arranger, First Chicago Capital Markets, Inc., as
Syndication Agent, Bank of Montreal, as
Documentation Agent, First Union, as Co-
Documentation Agent, and Certain Financial
Institutions, as Lenders (incorporated by
reference to Exhibit 10.2 to Registrant's Form 8-K
dated as of December 11, 1998).
10.3 Morrison Petroleums Ltd. U.S. $75,000,000
6.76% Senior Notes Due July 19, 2005 Note
Agreement Dated as of July 19, 1995 (incorporated
by reference to Exhibit 10.3 of Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1998).
10.4 Northstar Energy Corporation U.S.
$150,000,000 6.79% Senior Notes Due 2009 Note
Agreement Dated as of March 2, 1998 (incorporated
by reference to Exhibit 10.4 of Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1998).
10.5 Devon Energy Corporation 1988 Stock Option
Plan [incorporated by reference to Exhibit 10.4 to
Registrant's Registration Statement on Form S-4
(No. 33-23564)].*
10.6 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).*
10.7 Devon Energy Corporation 1997 Stock Option
Plan (incorporated by reference to Exhibit A to
Registrant's Proxy Statement for the 1997 Annual
Meeting of the Shareholders filed on April 3,
1997).*
10.8 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).*
10.9 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).*
10.10 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).*
10.11 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).*
10.12 Severance Agreement between Devon Energy
Corporation (Nevada), Registrant and Duke R.
Ligon, dated March 26, 1997 (incorporated by
reference to Exhibit 10.11 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).*
10.13 Employment Agreement between Devon
Energy Corporation (Nevada), Registrant and Duke
R. Ligon, dated February 7, 1997 (incorporated by
reference to Exhibit 10.12 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).*
10.14 Supplemental Retirement Income
Agreement among Devon Energy Corporation (Nevada),
Registrant and John W. Nichols, dated March 26,
1997 (incorporated by reference to Exhibit 10.13
to Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997).*
10.15 Supplemental Benefit Agreement
between Northstar Energy Corporation and John A.
Hagg dated February 17, 1999 (incorporated by
reference to Exhibit 10.15 of Registrant's Annual
Report on Form 10-K for the year ended December
31, 1998).*
10.16 Consulting Agreement between
Registrant and Thomas F. Ferguson dated June 1,
1989 (incorporated by reference to Exhibit 10.16
of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998).*
10.17 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).
10.18 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).
10.19 Registration Rights Agreement,
dated July 3, 1996, by and among the Registrant,
Devon Financing Trust and Morgan Stanley & Co.
Incorporated [incorporated by reference to Exhibit
10.1 to Amendment No. 1 to Registrant's
Registration Statement on Form S-3 (No. 333-
00815)].
* Compensatory plans or arrangements.
(b) Reports on Form 8-K - A Current Report on Form
8-K dated January 28, 1999, was filed by the Registrant
regarding year-end 1998 financial results and year-end
oil and gas reserves. A Current Report on Form 8-K
dated February 8, 1999, was filed by the Registrant
regarding 1999 forward-looking information. A Current
Report on Form 8-K dated February 22, 1999 was filed
regarding January, 1999 financial results. A Current
Report on Form 8-K dated April 22, 1999 was filed regarding
certain revisions to the Registrant's forward-looking
information initially included in the February 8, 1999
Form 8-K.
<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 7, 1999 /s/Danny J. Heatly
Danny J. Heatly
Controller
<PAGE>
INDEX TO EXHIBITS
Page
2.1 Amended and Restated Combination Agreement between the #
Registrant and Northstar Energy Corporation dated as of
June 29, 1998 (incorporated by reference to Annex B to
Registrant's definitive proxy statement for a special
meeting of shareholders, filed November 6, 1998).
3.1 Registrant's Amended and Restated Certificate of #
incorporation (incorporated by reference to Exhibit 3
to Registrant's Form 8-K dated as of December 11, 1998).
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 First Amendment to Rights Agreement between Registrant and #
The First National Bank of Boston, dated October 16, 1996
(incorporated by reference to Exhibit H-1 to Addendum A to
Registrant's definitive proxy statement for a special meeting
of shareholders, filed on November 6, 1996).
4.4 Second Amendment to Rights Agreement between Registrant and #
the First National Bank of Boston, dated December 31, 1996
(incorporated by reference to Exhibit 4.2 to Registrant's
Current Report on Form 8-K dated December 31, 1996).
4.5 Third Amendment to Rights Agreement between Registrant and #
The First National Bank of Boston, dated December 10, 1998
(incorporated by reference to Exhibit 4.5 of Registrant's
Annual Report on Form 10-K for the year ended December 31,
1998).
4.6 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).
4.7 Certificate of Trust of Devon Financing Trust [incorporated #
by reference to Exhibit 4.5 to Amendment No. 1 to Registrant's
Registration Statement on Form S-3 (No. 333-00815)].
4.8 Amended and Restated Declaration of Trust of Devon Financing #
Trust, dated as of July 3, 1996, by J. Larry Nichols,
H. Allen Turner, William T. Vaughn, The Bank of New York
(Delaware) and The Bank of New York as Trustees and
the Registrant as Sponsor [incorporated by reference to
Exhibit 4.6 to Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
4.9 Indenture, dated as of July 3, 1996, between the Registrant #
and The Bank of New York [incorporated by reference to
Exhibit 4.7 to Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
4.10 First Supplemental Indenture, dated as of July 3, 1996, #
between the Registrant and The Bank of New York [incorporated
by reference to Exhibit 4.8 to Amendment No. 1 to Registrant's
Registration Statement on Form S-3 (No. 333-00815)].
4.11 Form of 6 1/2% Preferred Convertible Securities (included as #
Exhibit A-1 to Exhibit 4.7 above).
4.12 Form of 6 1/2% Convertible Junior Subordinated Debentures #
(included as Exhibit B to Exhibit 4.7 above).
4.13 Preferred Securities Guarantee Agreement, dated July 3, 1996, #
between Registrant, as Guarantor, and The Bank of New York,
as Preferred Guarantee Trustee [incorporated by reference to
Exhibit 4.11 to Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
4.14 Stock Rights and Restrictions Agreement, dated as of December #
31, 1996, between Registrant and Kerr-McGee Corporation
(incorporated by reference to Exhibit 4.3 to Registrant's
Current Report on Form 8-K dated December 31, 1996).
4.15 Registration Rights Agreement, dated December 31, 1996, by #
and between Registrant and Kerr-McGee Corporation
(incorporated by reference to Exhibit 4.4 to Registrant's
Current Report on Form 8-K, dated December 31, 1996).
4.16 Support Agreement, dated December 10, 1998, between the #
Registrant and Northstar Energy Corporation (incorporated by
reference to Exhibit 4.1 to Registrant's Form 8-K dated as
of December 11, 1998).
4.17 Exchangeable Share Provisions (incorporated by reference to #
Exhibit 4.2 to Registrant's Form 8-K dated as of December 11,
1998).
10.1 U.S. Credit Agreement, dated December 11, 1998, among the #
Registrant, as U.S. Borrower, NationsBank, N.A., as
Administrative Agent, NationsBanc Montgomery Securities,
L.L.C., as Arranger, Bank One, Texas, N.A., as Syndication
Agent, Bank of Montreal, as Documentation Agent, First Union,
as Co-Documentation Agent, and Certain Financial Institutions,
as Lenders (incorporated by reference to Exhibit 10.1 to
Registrant's Form 8-K dated as of December 11, 1998).
10.2 Canadian Credit Agreement, dated December 11, 1998, among #
Northstar Energy Corporation and Devon Energy Canada
Corporation, as Canadian Borrowers, Bank of America Canada,
as Administrative Agent, NationsBanc Montgomery Securities,
L.L.C., as Arranger, First Chicago Capital Markets, Inc.,
as Syndication Agent, Bank of Montreal, as Documentation
Agent, First Union, as Co-Documentation Agent, and Certain
Financial Institutions, as Lenders (incorporated by reference
to Exhibit 10.2 to Registrant's Form 8-K dated as of December
11, 1998).
10.3 Morrison Petroleums Ltd. U.S. $75,000,000 6.76% Senior Notes #
Due July 19, 2005 Note Agreement Dated as of July 19, 1995
(incorporated by reference to Exhibit 10.3 of Registrant's
Annual Report on Form 10-K for the year ended December 31,
1998).
10.4 Northstar Energy Corporation U.S. $150,000,000 6.79% Senior #
Notes Due 2009 Note Agreement Dated as of March 2, 1998
(incorporated by reference to Exhibit 10.4 of Registrant's
Annual Report on Form 10-K for the year ended December 31,
1998).
10.5 Devon Energy Corporation 1988 Stock Option Plan [incorporated #
by reference to Exhibit 10.4 to Registrant's Registration
Statement on Form S-4 (No. 33-23564)].*
10.6 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).*
10.7 Devon Energy Corporation 1997 Stock Option Plan (incorporated #
by reference to Exhibit A to Registrant's Proxy Statement for
the 1997 Annual Meeting of the Shareholders filed on April 3,
1997).*
10.8 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).*
10.9 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).*
10.10 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).*
10.11 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).*
10.12 Severance Agreement between Devon Energy Corporation #
(Nevada), Registrant and Duke R. Ligon, dated March 26,
1997 (incorporated by reference to Exhibit 10.11 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).*
10.13 Employment Agreement between Devon Energy Corporation #
(Nevada), Registrant and Duke R. Ligon, dated February 7,
1997 (incorporated by reference to Exhibit 10.12 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June30,1997).*
10.14 Supplemental Retirement Income Agreement among Devon Energy #
Corporation (Nevada), Registrant and John W. Nichols, dated
March 26, 1997 (incorporated by reference to Exhibit 10.13
to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).*
10.15 Supplemental Benefit Agreement between Northstar Energy #
Corporation and John A. Hagg dated February 17, 1999
(incorporated by reference to Exhibit 10.15 of Registrant's
Annual Report on Form 10-K for the year ended December
31, 1998).*
10.16 Consulting Agreement between Registrant and Thomas F. Ferguson #
dated June 1, 1989 incorporated by reference to Exhibit 10.16
of Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).*
10.17 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).
10.18 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).
10.19 Registration Rights Agreement, dated July 3, 1996, by and #
among the Registrant, Devon Financing Trust and Morgan
Stanley & Co. Incorporated [incorporated by reference to
Exhibit 10.1 to Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (No. 333-00815)].
_________________________________
# Incorporated by reference.
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