SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event report): April 27, 1999
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OKLAHOMA 1-10067 73-1474008
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation or Organization) Identification
Number)
20 NORTH BROADWAY, SUITE 1500, OKLAHOMA CITY, OK 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Page 1 of 5 pages
<PAGE>
Item 5. Other Events
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 these 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereto
duly authorized.
DEVON ENERGY CORPORATION
By: /s/ Danny J. Heatly
Controller
Date: April 27, 1999
