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DVN » Topics » Certain of Our Investments Are Subject To Risks That May Affect Their Liquidity and ValueThese excerpts taken from the DVN 10-K filed Feb 27, 2009. Certain
of Our Investments Are Subject To Risks That May Affect Their
Liquidity and Value
To maximize earnings on available cash balances, we periodically
invest in securities that we consider to be short-term in nature
and generally available for short-term liquidity needs. During
2007, we purchased asset-backed securities that have an auction
rate reset feature (“auction rate securities”). Our
auction rate securities generally have contractual maturities of
more than 20 years. However, the underlying interest rates
on our securities are scheduled to reset every seven to
28 days. Therefore, when we bought these securities, they
were generally priced and subsequently traded as short-term
investments because of the interest rate reset feature. At
December 31, 2008, our auction rate securities totaled
$122 million.
Since February 8, 2008, we have experienced difficulty
selling our securities due to the failure of the auction
mechanism, which provided liquidity to these securities. An
auction failure means that the parties wishing to sell
securities could not do so. The securities for which auctions
have failed will continue to accrue interest and be auctioned
every seven to 28 days until the auction succeeds, the
issuer calls the securities or the securities mature. Due to
continued auction failures throughout 2008, we consider these
investments to be long-term in nature and generally not
available for short-term liquidity needs.
Our auction rate securities are rated AAA — the
highest rating — by one or more rating agencies and
are collateralized by student loans that are substantially
guaranteed by the United States government. These investments
are subject to general credit, liquidity, market and interest
rate risks, which may be exacerbated by continued problems in
the global credit markets, including but not limited to,
U.S. subprime mortgage defaults, writedowns by major
financial institutions due to deteriorating values of their
asset portfolios (including leveraged loans, collateralized debt
obligations, credit default swaps, and other credit-linked
products). These and other related factors have affected various
sectors of the financial markets and caused credit and liquidity
issues. If issuers are unable to successfully close future
auctions and their credit ratings deteriorate, our ability to
liquidate these securities and fully recover the carrying value
of our investment in the near term may be limited. Under such
circumstances, we may record an impairment charge on these
investments in the future.
Not applicable.
Table of Contents
Substantially all of our properties consist of interests in
developed and undeveloped oil and gas leases and mineral acreage
located in our core operating areas. These interests entitle us
to drill for and produce oil, gas and NGLs from specific areas.
Our interests are mostly in the form of working interests and,
to a lesser extent, overriding royalty, mineral and net profits
interests, foreign government concessions and other forms of
direct and indirect ownership in oil and gas properties.
We also have certain midstream assets, including natural gas and
NGL processing plants and pipeline systems. Our most significant
midstream assets are our assets serving the Barnett Shale region
in north Texas. These assets include approximately
3,100 miles of pipeline, two natural gas processing plants
with 750 MMcf per day of total capacity, and a
15 MBbls per day NGL fractionator. To support our continued
development and growing production in the Woodford Shale,
located in southeastern Oklahoma, we constructed the Northridge
natural gas processing plant in 2008. The Northridge plant has a
capacity of 200 MMcf per day.
Our midstream assets also include the Access Pipeline
transportation system in Canada. This
220-mile
dual pipeline system extends from our Jackfish operations in
northern Alberta to a 350 MBbls storage terminal in
Edmonton. The dual pipeline system allows us to blend the
Jackfish heavy oil production with condensate and transport the
combined product to the Edmonton crude oil market for sale. We
have a 50% ownership interest in the Access Pipeline.
Certain
of Our Investments Are Subject To Risks That May Affect Their
Liquidity and Value
To maximize earnings on available cash balances, we periodically
invest in securities that we consider to be short-term in nature
and generally available for short-term liquidity needs. During
2007, we purchased asset-backed securities that have an auction
rate reset feature (“auction rate securities”). Our
auction rate securities generally have contractual maturities of
more than 20 years. However, the underlying interest rates
on our securities are scheduled to reset every seven to
28 days. Therefore, when we bought these securities, they
were generally priced and subsequently traded as short-term
investments because of the interest rate reset feature. At
December 31, 2008, our auction rate securities totaled
$122 million.
Since February 8, 2008, we have experienced difficulty
selling our securities due to the failure of the auction
mechanism, which provided liquidity to these securities. An
auction failure means that the parties wishing to sell
securities could not do so. The securities for which auctions
have failed will continue to accrue interest and be auctioned
every seven to 28 days until the auction succeeds, the
issuer calls the securities or the securities mature. Due to
continued auction failures throughout 2008, we consider these
investments to be long-term in nature and generally not
available for short-term liquidity needs.
Our auction rate securities are rated AAA — the
highest rating — by one or more rating agencies and
are collateralized by student loans that are substantially
guaranteed by the United States government. These investments
are subject to general credit, liquidity, market and interest
rate risks, which may be exacerbated by continued problems in
the global credit markets, including but not limited to,
U.S. subprime mortgage defaults, writedowns by major
financial institutions due to deteriorating values of their
asset portfolios (including leveraged loans, collateralized debt
obligations, credit default swaps, and other credit-linked
products). These and other related factors have affected various
sectors of the financial markets and caused credit and liquidity
issues. If issuers are unable to successfully close future
auctions and their credit ratings deteriorate, our ability to
liquidate these securities and fully recover the carrying value
of our investment in the near term may be limited. Under such
circumstances, we may record an impairment charge on these
investments in the future.
Not applicable.
Table of Contents
Substantially all of our properties consist of interests in
developed and undeveloped oil and gas leases and mineral acreage
located in our core operating areas. These interests entitle us
to drill for and produce oil, gas and NGLs from specific areas.
Our interests are mostly in the form of working interests and,
to a lesser extent, overriding royalty, mineral and net profits
interests, foreign government concessions and other forms of
direct and indirect ownership in oil and gas properties.
We also have certain midstream assets, including natural gas and
NGL processing plants and pipeline systems. Our most significant
midstream assets are our assets serving the Barnett Shale region
in north Texas. These assets include approximately
3,100 miles of pipeline, two natural gas processing plants
with 750 MMcf per day of total capacity, and a
15 MBbls per day NGL fractionator. To support our continued
development and growing production in the Woodford Shale,
located in southeastern Oklahoma, we constructed the Northridge
natural gas processing plant in 2008. The Northridge plant has a
capacity of 200 MMcf per day.
Our midstream assets also include the Access Pipeline
transportation system in Canada. This
220-mile
dual pipeline system extends from our Jackfish operations in
northern Alberta to a 350 MBbls storage terminal in
Edmonton. The dual pipeline system allows us to blend the
Jackfish heavy oil production with condensate and transport the
combined product to the Edmonton crude oil market for sale. We
have a 50% ownership interest in the Access Pipeline.
Certain of Our Investments Are Subject To Risks That May Affect Their Liquidity and Value To maximize earnings on available cash balances, we periodically invest in securities that we consider to be short-term in nature and generally available for short-term liquidity needs. During 2007, we purchased asset-backed securities that have an auction rate reset feature (“auction rate securities”). Our auction rate securities generally have contractual maturities of more than 20 years. However, the underlying interest rates on our securities are scheduled to reset every seven to 28 days. Therefore, when we bought these securities, they were generally priced and subsequently traded as short-term investments because of the interest rate reset feature. At December 31, 2008, our auction rate securities totaled $122 million. Since February 8, 2008, we have experienced difficulty selling our securities due to the failure of the auction mechanism, which provided liquidity to these securities. An auction failure means that the parties wishing to sell securities could not do so. The securities for which auctions have failed will continue to accrue interest and be auctioned every seven to 28 days until the auction succeeds, the issuer calls the securities or the securities mature. Due to continued auction failures throughout 2008, we consider these investments to be long-term in nature and generally not available for short-term liquidity needs. Our auction rate securities are rated AAA — the highest rating — by one or more rating agencies and are collateralized by student loans that are substantially guaranteed by the United States government. These investments are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by continued problems in the global credit markets, including but not limited to, U.S. subprime mortgage defaults, writedowns by major financial institutions due to deteriorating values of their asset portfolios (including leveraged loans, collateralized debt obligations, credit default swaps, and other credit-linked products). These and other related factors have affected various sectors of the financial markets and caused credit and liquidity issues. If issuers are unable to successfully close future auctions and their credit ratings deteriorate, our ability to liquidate these securities and fully recover the carrying value of our investment in the near term may be limited. Under such circumstances, we may record an impairment charge on these investments in the future.
Not applicable.
Table of Contents
Substantially all of our properties consist of interests in developed and undeveloped oil and gas leases and mineral acreage located in our core operating areas. These interests entitle us to drill for and produce oil, gas and NGLs from specific areas. Our interests are mostly in the form of working interests and, to a lesser extent, overriding royalty, mineral and net profits interests, foreign government concessions and other forms of direct and indirect ownership in oil and gas properties. We also have certain midstream assets, including natural gas and NGL processing plants and pipeline systems. Our most significant midstream assets are our assets serving the Barnett Shale region in north Texas. These assets include approximately 3,100 miles of pipeline, two natural gas processing plants with 750 MMcf per day of total capacity, and a 15 MBbls per day NGL fractionator. To support our continued development and growing production in the Woodford Shale, located in southeastern Oklahoma, we constructed the Northridge natural gas processing plant in 2008. The Northridge plant has a capacity of 200 MMcf per day. Our midstream assets also include the Access Pipeline transportation system in Canada. This 220-mile dual pipeline system extends from our Jackfish operations in northern Alberta to a 350 MBbls storage terminal in Edmonton. The dual pipeline system allows us to blend the Jackfish heavy oil production with condensate and transport the combined product to the Edmonton crude oil market for sale. We have a 50% ownership interest in the Access Pipeline. Certain of Our Investments Are Subject To Risks That May Affect Their Liquidity and Value To maximize earnings on available cash balances, we periodically invest in securities that we consider to be short-term in nature and generally available for short-term liquidity needs. During 2007, we purchased asset-backed securities that have an auction rate reset feature (“auction rate securities”). Our auction rate securities generally have contractual maturities of more than 20 years. However, the underlying interest rates on our securities are scheduled to reset every seven to 28 days. Therefore, when we bought these securities, they were generally priced and subsequently traded as short-term investments because of the interest rate reset feature. At December 31, 2008, our auction rate securities totaled $122 million. Since February 8, 2008, we have experienced difficulty selling our securities due to the failure of the auction mechanism, which provided liquidity to these securities. An auction failure means that the parties wishing to sell securities could not do so. The securities for which auctions have failed will continue to accrue interest and be auctioned every seven to 28 days until the auction succeeds, the issuer calls the securities or the securities mature. Due to continued auction failures throughout 2008, we consider these investments to be long-term in nature and generally not available for short-term liquidity needs. Our auction rate securities are rated AAA — the highest rating — by one or more rating agencies and are collateralized by student loans that are substantially guaranteed by the United States government. These investments are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by continued problems in the global credit markets, including but not limited to, U.S. subprime mortgage defaults, writedowns by major financial institutions due to deteriorating values of their asset portfolios (including leveraged loans, collateralized debt obligations, credit default swaps, and other credit-linked products). These and other related factors have affected various sectors of the financial markets and caused credit and liquidity issues. If issuers are unable to successfully close future auctions and their credit ratings deteriorate, our ability to liquidate these securities and fully recover the carrying value of our investment in the near term may be limited. Under such circumstances, we may record an impairment charge on these investments in the future.
Not applicable.
Table of Contents
Substantially all of our properties consist of interests in developed and undeveloped oil and gas leases and mineral acreage located in our core operating areas. These interests entitle us to drill for and produce oil, gas and NGLs from specific areas. Our interests are mostly in the form of working interests and, to a lesser extent, overriding royalty, mineral and net profits interests, foreign government concessions and other forms of direct and indirect ownership in oil and gas properties. We also have certain midstream assets, including natural gas and NGL processing plants and pipeline systems. Our most significant midstream assets are our assets serving the Barnett Shale region in north Texas. These assets include approximately 3,100 miles of pipeline, two natural gas processing plants with 750 MMcf per day of total capacity, and a 15 MBbls per day NGL fractionator. To support our continued development and growing production in the Woodford Shale, located in southeastern Oklahoma, we constructed the Northridge natural gas processing plant in 2008. The Northridge plant has a capacity of 200 MMcf per day. Our midstream assets also include the Access Pipeline transportation system in Canada. This 220-mile dual pipeline system extends from our Jackfish operations in northern Alberta to a 350 MBbls storage terminal in Edmonton. The dual pipeline system allows us to blend the Jackfish heavy oil production with condensate and transport the combined product to the Edmonton crude oil market for sale. We have a 50% ownership interest in the Access Pipeline. | EXCERPTS ON THIS PAGE:
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