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These excerpts taken from the DVN 10-K filed Feb 27, 2009. Overview
of 2008 Results
2008 was a year of contrasts. By many measures, 2008 was
the best year in our history. Throughout the year, we achieved
key operational successes as we continued to execute on our
operating strategy. We drilled a record amount of wells with a
98% success rate and delivered a record amount of operating cash
flow. As a result of our operational success and rising
commodity prices, in the third quarter of 2008, we reported the
largest quarterly earnings in our history.
However, sharp declines in oil, gas and NGL prices during the
fourth quarter caused us to record noncash impairments of our
oil and gas properties totaling $7.1 billion, net of income
taxes. Due to this impairment charge, our record earnings in the
third quarter were immediately followed by a record quarterly
loss in the fourth quarter.
We account for our oil and gas properties using the full cost
accounting method. Full cost impairment calculations require the
use of quarter-end prices. As a result, such calculations do not
indicate the true fair value of the underlying reserves because
of the volatile nature of commodity prices. In fact, the SEC
recently recognized that impairment calculations based upon
prices as of a single day of the year are not ideal and issued
new rules that require the use of
12-month
average prices for impairment calculations. These new rules will
be effective for our 2009 year-end reporting. Had these new
rules been in place as of December 31, 2008, we would not
have recognized the noncash impairments.
Key measures of our performance for 2008, as well as certain
operational developments, are summarized below:
Table of Contents
Despite these positive results, we reported a net loss of
$2.1 billion, or $4.85 per diluted share, for 2008. This
represents a $5.8 billion decrease in earnings compared to
2007, which was primarily attributable to the $7.1 billion,
net of income tax, property impairments recognized in the fourth
quarter of 2008.
From an operational perspective, we completed another successful
year with the drill-bit. We drilled a record 2,441 gross
wells with an overall 98% rate of success. This success rate
enabled us to increase proved reserves by 584 million Boe,
which represented nearly 2 and one half times our 2008
production. Consistent with our two-pronged operating strategy,
93% of the wells we drilled were North American development
wells.
Besides completing another successful year of drilling, we also
had several other key operational achievements during 2008. In
the Gulf of Mexico, we continued to build off prior years’
successful drilling results with our deepwater exploration and
development program. At Cascade, we commenced drilling the first
of two initial producing wells and continued work on production
facilities and subsea equipment. We also continued progressing
toward commercial development of our other previous discoveries
in the Lower Tertiary trend of the Gulf of Mexico. We also added
some 800,000 net undeveloped acres to our lease inventory,
positioning us with more than 1.4 million net acres in four
emerging unconventional natural gas plays in the United States.
In 2008, we substantially completed our African divestiture
program. We have now sold all our oil and gas producing
properties in Africa, generating aggregate proceeds of
$2.2 billion after income taxes.
Additionally, on October 31, 2008, we transferred our
14.2 million shares of Chevron common stock to Chevron. In
exchange, we received Chevron’s interest in the
Drunkard’s Wash coalbed natural gas field in east-central
Utah and $280 million in cash. The field has approximately
51,000 net acres and had net production of about
40 million cubic feet of natural gas equivalent per day at
the time of the exchange.
Even with the fourth quarter net loss, we strengthened our
financial position during 2008. We used cash on hand, operating
cash flow, divestiture proceeds and Chevron exchange proceeds to
fund $9.4 billion of capital expenditures, reduce debt by
$2.1 billion, repurchase $815 million of common and
preferred stock and pay $289 million of dividends. At the
end of 2008, we had $379 million of cash, and as of
January 31, 2009, we had $3.1 billion of availability
under our credit lines.
Overview
of 2008 Results
2008 was a year of contrasts. By many measures, 2008 was
the best year in our history. Throughout the year, we achieved
key operational successes as we continued to execute on our
operating strategy. We drilled a record amount of wells with a
98% success rate and delivered a record amount of operating cash
flow. As a result of our operational success and rising
commodity prices, in the third quarter of 2008, we reported the
largest quarterly earnings in our history.
However, sharp declines in oil, gas and NGL prices during the
fourth quarter caused us to record noncash impairments of our
oil and gas properties totaling $7.1 billion, net of income
taxes. Due to this impairment charge, our record earnings in the
third quarter were immediately followed by a record quarterly
loss in the fourth quarter.
We account for our oil and gas properties using the full cost
accounting method. Full cost impairment calculations require the
use of quarter-end prices. As a result, such calculations do not
indicate the true fair value of the underlying reserves because
of the volatile nature of commodity prices. In fact, the SEC
recently recognized that impairment calculations based upon
prices as of a single day of the year are not ideal and issued
new rules that require the use of
12-month
average prices for impairment calculations. These new rules will
be effective for our 2009 year-end reporting. Had these new
rules been in place as of December 31, 2008, we would not
have recognized the noncash impairments.
Key measures of our performance for 2008, as well as certain
operational developments, are summarized below:
Table of Contents
Despite these positive results, we reported a net loss of
$2.1 billion, or $4.85 per diluted share, for 2008. This
represents a $5.8 billion decrease in earnings compared to
2007, which was primarily attributable to the $7.1 billion,
net of income tax, property impairments recognized in the fourth
quarter of 2008.
From an operational perspective, we completed another successful
year with the drill-bit. We drilled a record 2,441 gross
wells with an overall 98% rate of success. This success rate
enabled us to increase proved reserves by 584 million Boe,
which represented nearly 2 and one half times our 2008
production. Consistent with our two-pronged operating strategy,
93% of the wells we drilled were North American development
wells.
Besides completing another successful year of drilling, we also
had several other key operational achievements during 2008. In
the Gulf of Mexico, we continued to build off prior years’
successful drilling results with our deepwater exploration and
development program. At Cascade, we commenced drilling the first
of two initial producing wells and continued work on production
facilities and subsea equipment. We also continued progressing
toward commercial development of our other previous discoveries
in the Lower Tertiary trend of the Gulf of Mexico. We also added
some 800,000 net undeveloped acres to our lease inventory,
positioning us with more than 1.4 million net acres in four
emerging unconventional natural gas plays in the United States.
In 2008, we substantially completed our African divestiture
program. We have now sold all our oil and gas producing
properties in Africa, generating aggregate proceeds of
$2.2 billion after income taxes.
Additionally, on October 31, 2008, we transferred our
14.2 million shares of Chevron common stock to Chevron. In
exchange, we received Chevron’s interest in the
Drunkard’s Wash coalbed natural gas field in east-central
Utah and $280 million in cash. The field has approximately
51,000 net acres and had net production of about
40 million cubic feet of natural gas equivalent per day at
the time of the exchange.
Even with the fourth quarter net loss, we strengthened our
financial position during 2008. We used cash on hand, operating
cash flow, divestiture proceeds and Chevron exchange proceeds to
fund $9.4 billion of capital expenditures, reduce debt by
$2.1 billion, repurchase $815 million of common and
preferred stock and pay $289 million of dividends. At the
end of 2008, we had $379 million of cash, and as of
January 31, 2009, we had $3.1 billion of availability
under our credit lines.
Overview of 2008 Results 2008 was a year of contrasts. By many measures, 2008 was the best year in our history. Throughout the year, we achieved key operational successes as we continued to execute on our operating strategy. We drilled a record amount of wells with a 98% success rate and delivered a record amount of operating cash flow. As a result of our operational success and rising commodity prices, in the third quarter of 2008, we reported the largest quarterly earnings in our history. However, sharp declines in oil, gas and NGL prices during the fourth quarter caused us to record noncash impairments of our oil and gas properties totaling $7.1 billion, net of income taxes. Due to this impairment charge, our record earnings in the third quarter were immediately followed by a record quarterly loss in the fourth quarter. We account for our oil and gas properties using the full cost accounting method. Full cost impairment calculations require the use of quarter-end prices. As a result, such calculations do not indicate the true fair value of the underlying reserves because of the volatile nature of commodity prices. In fact, the SEC recently recognized that impairment calculations based upon prices as of a single day of the year are not ideal and issued new rules that require the use of 12-month average prices for impairment calculations. These new rules will be effective for our 2009 year-end reporting. Had these new rules been in place as of December 31, 2008, we would not have recognized the noncash impairments. Key measures of our performance for 2008, as well as certain operational developments, are summarized below:
Table of ContentsDespite these positive results, we reported a net loss of $2.1 billion, or $4.85 per diluted share, for 2008. This represents a $5.8 billion decrease in earnings compared to 2007, which was primarily attributable to the $7.1 billion, net of income tax, property impairments recognized in the fourth quarter of 2008. From an operational perspective, we completed another successful year with the drill-bit. We drilled a record 2,441 gross wells with an overall 98% rate of success. This success rate enabled us to increase proved reserves by 584 million Boe, which represented nearly 2 and one half times our 2008 production. Consistent with our two-pronged operating strategy, 93% of the wells we drilled were North American development wells. Besides completing another successful year of drilling, we also had several other key operational achievements during 2008. In the Gulf of Mexico, we continued to build off prior years’ successful drilling results with our deepwater exploration and development program. At Cascade, we commenced drilling the first of two initial producing wells and continued work on production facilities and subsea equipment. We also continued progressing toward commercial development of our other previous discoveries in the Lower Tertiary trend of the Gulf of Mexico. We also added some 800,000 net undeveloped acres to our lease inventory, positioning us with more than 1.4 million net acres in four emerging unconventional natural gas plays in the United States. In 2008, we substantially completed our African divestiture program. We have now sold all our oil and gas producing properties in Africa, generating aggregate proceeds of $2.2 billion after income taxes. Additionally, on October 31, 2008, we transferred our 14.2 million shares of Chevron common stock to Chevron. In exchange, we received Chevron’s interest in the Drunkard’s Wash coalbed natural gas field in east-central Utah and $280 million in cash. The field has approximately 51,000 net acres and had net production of about 40 million cubic feet of natural gas equivalent per day at the time of the exchange. Even with the fourth quarter net loss, we strengthened our financial position during 2008. We used cash on hand, operating cash flow, divestiture proceeds and Chevron exchange proceeds to fund $9.4 billion of capital expenditures, reduce debt by $2.1 billion, repurchase $815 million of common and preferred stock and pay $289 million of dividends. At the end of 2008, we had $379 million of cash, and as of January 31, 2009, we had $3.1 billion of availability under our credit lines. Overview of 2008 Results 2008 was a year of contrasts. By many measures, 2008 was the best year in our history. Throughout the year, we achieved key operational successes as we continued to execute on our operating strategy. We drilled a record amount of wells with a 98% success rate and delivered a record amount of operating cash flow. As a result of our operational success and rising commodity prices, in the third quarter of 2008, we reported the largest quarterly earnings in our history. However, sharp declines in oil, gas and NGL prices during the fourth quarter caused us to record noncash impairments of our oil and gas properties totaling $7.1 billion, net of income taxes. Due to this impairment charge, our record earnings in the third quarter were immediately followed by a record quarterly loss in the fourth quarter. We account for our oil and gas properties using the full cost accounting method. Full cost impairment calculations require the use of quarter-end prices. As a result, such calculations do not indicate the true fair value of the underlying reserves because of the volatile nature of commodity prices. In fact, the SEC recently recognized that impairment calculations based upon prices as of a single day of the year are not ideal and issued new rules that require the use of 12-month average prices for impairment calculations. These new rules will be effective for our 2009 year-end reporting. Had these new rules been in place as of December 31, 2008, we would not have recognized the noncash impairments. Key measures of our performance for 2008, as well as certain operational developments, are summarized below:
Table of ContentsDespite these positive results, we reported a net loss of $2.1 billion, or $4.85 per diluted share, for 2008. This represents a $5.8 billion decrease in earnings compared to 2007, which was primarily attributable to the $7.1 billion, net of income tax, property impairments recognized in the fourth quarter of 2008. From an operational perspective, we completed another successful year with the drill-bit. We drilled a record 2,441 gross wells with an overall 98% rate of success. This success rate enabled us to increase proved reserves by 584 million Boe, which represented nearly 2 and one half times our 2008 production. Consistent with our two-pronged operating strategy, 93% of the wells we drilled were North American development wells. Besides completing another successful year of drilling, we also had several other key operational achievements during 2008. In the Gulf of Mexico, we continued to build off prior years’ successful drilling results with our deepwater exploration and development program. At Cascade, we commenced drilling the first of two initial producing wells and continued work on production facilities and subsea equipment. We also continued progressing toward commercial development of our other previous discoveries in the Lower Tertiary trend of the Gulf of Mexico. We also added some 800,000 net undeveloped acres to our lease inventory, positioning us with more than 1.4 million net acres in four emerging unconventional natural gas plays in the United States. In 2008, we substantially completed our African divestiture program. We have now sold all our oil and gas producing properties in Africa, generating aggregate proceeds of $2.2 billion after income taxes. Additionally, on October 31, 2008, we transferred our 14.2 million shares of Chevron common stock to Chevron. In exchange, we received Chevron’s interest in the Drunkard’s Wash coalbed natural gas field in east-central Utah and $280 million in cash. The field has approximately 51,000 net acres and had net production of about 40 million cubic feet of natural gas equivalent per day at the time of the exchange. Even with the fourth quarter net loss, we strengthened our financial position during 2008. We used cash on hand, operating cash flow, divestiture proceeds and Chevron exchange proceeds to fund $9.4 billion of capital expenditures, reduce debt by $2.1 billion, repurchase $815 million of common and preferred stock and pay $289 million of dividends. At the end of 2008, we had $379 million of cash, and as of January 31, 2009, we had $3.1 billion of availability under our credit lines. | EXCERPTS ON THIS PAGE:
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