|
|
 | | | |
- close
- close
- close
- close
DVN » Topics » Our Short-Term Investments Are Subject To Risks Which May Affect Their Liquidity and ValueThese excerpts taken from the DVN 10-K filed Jun 9, 2008. Our
Short-Term Investments Are Subject To Risks Which 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. Such
investments include asset-backed securities that have an auction
rate reset feature (“auction rate securities”). Our
auction rate securities are collateralized by student loans
which are substantially guaranteed by the United States
government, and generally have contractual maturities of more
than 20 years. However, the underlying interest rates on
such securities are scheduled to reset every 28 days.
Therefore, these auction rate securities are generally priced
and subsequently trade as short-term investments because of the
interest rate reset feature.
At December 31, 2007, we held $372 million of auction
rate securities. Subsequent to December 31, 2007, we have
reduced our auction rate securities holdings to
$153 million. However, beginning on February 8, 2008,
we experienced difficulty selling additional securities due to
the failure of the auction mechanism which provides 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 28 days until the auction succeeds, the
issuer calls the securities or the securities mature.
Accordingly, there may be no effective mechanism for selling
these securities.
All of our auction rate securities, including those subject to
failed auctions, are currently rated AAA — the highest
rating — by one or more rating agencies. However,
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. As a result, we may deem such investments to be
long-term in nature and generally not available for short-term
liquidity needs. Additionally, under such circumstances, we may
record an impairment charge on these investments in the future.
Table of Contents
Not applicable.
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, natural 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
2,700 miles of pipeline, two gas processing plants with
750 MMcf per day of total capacity, and a 15 MBbls per
day NGL fractionator. To support our production in the Woodford
Shale, located in southeast Oklahoma, we plan to bring online a
200 MMcf per day gas processing plant in 2008.
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. We have a 50%
ownership interest in the Access Pipeline.
Our Short-Term Investments Are Subject To Risks Which 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. Such investments include asset-backed securities that have an auction rate reset feature (“auction rate securities”). Our auction rate securities are collateralized by student loans which are substantially guaranteed by the United States government, and generally have contractual maturities of more than 20 years. However, the underlying interest rates on such securities are scheduled to reset every 28 days. Therefore, these auction rate securities are generally priced and subsequently trade as short-term investments because of the interest rate reset feature. At December 31, 2007, we held $372 million of auction rate securities. Subsequent to December 31, 2007, we have reduced our auction rate securities holdings to $153 million. However, beginning on February 8, 2008, we experienced difficulty selling additional securities due to the failure of the auction mechanism which provides 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 28 days until the auction succeeds, the issuer calls the securities or the securities mature. Accordingly, there may be no effective mechanism for selling these securities. All of our auction rate securities, including those subject to failed auctions, are currently rated AAA — the highest rating — by one or more rating agencies. However, 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. As a result, we may deem such investments to be long-term in nature and generally not available for short-term liquidity needs. Additionally, under such circumstances, we may record an impairment charge on these investments in the future.
Table of Contents
Not applicable.
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, natural 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 2,700 miles of pipeline, two gas processing plants with 750 MMcf per day of total capacity, and a 15 MBbls per day NGL fractionator. To support our production in the Woodford Shale, located in southeast Oklahoma, we plan to bring online a 200 MMcf per day gas processing plant in 2008. 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. We have a 50% ownership interest in the Access Pipeline. These excerpts taken from the DVN 10-K filed Feb 28, 2008. Our
Short-Term Investments Are Subject To Risks Which 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. Such
investments include asset-backed securities that have an auction
rate reset feature (“auction rate securities”). Our
auction rate securities are collateralized by student loans
which are substantially guaranteed by the United States
government, and generally have contractual maturities of more
than 20 years. However, the underlying interest rates on
such securities are scheduled to reset every 28 days.
Therefore, these auction rate securities are generally priced
and subsequently trade as short-term investments because of the
interest rate reset feature.
At December 31, 2007, we held $372 million of auction
rate securities. Subsequent to December 31, 2007, we have
reduced our auction rate securities holdings to
$153 million. However, beginning on February 8, 2008,
we experienced difficulty selling additional securities due to
the failure of the auction mechanism which provides 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 28 days until the auction succeeds, the
issuer calls the securities or the securities mature.
Accordingly, there may be no effective mechanism for selling
these securities.
All of our auction rate securities, including those subject to
failed auctions, are currently rated AAA — the highest
rating — by one or more rating agencies. However,
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. As a result, we may deem such investments to be
long-term in nature and generally not available for short-term
liquidity needs. Additionally, under such circumstances, we may
record an impairment charge on these investments in the future.
Table of Contents
Not applicable.
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, natural 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
2,700 miles of pipeline, two gas processing plants with
750 MMcf per day of total capacity, and a 15 MBbls per
day NGL fractionator. To support our production in the Woodford
Shale, located in southeast Oklahoma, we plan to bring online a
200 MMcf per day gas processing plant in 2008.
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. We have a 50%
ownership interest in the Access Pipeline.
Our Short-Term Investments Are Subject To Risks Which 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. Such investments include asset-backed securities that have an auction rate reset feature (“auction rate securities”). Our auction rate securities are collateralized by student loans which are substantially guaranteed by the United States government, and generally have contractual maturities of more than 20 years. However, the underlying interest rates on such securities are scheduled to reset every 28 days. Therefore, these auction rate securities are generally priced and subsequently trade as short-term investments because of the interest rate reset feature. At December 31, 2007, we held $372 million of auction rate securities. Subsequent to December 31, 2007, we have reduced our auction rate securities holdings to $153 million. However, beginning on February 8, 2008, we experienced difficulty selling additional securities due to the failure of the auction mechanism which provides 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 28 days until the auction succeeds, the issuer calls the securities or the securities mature. Accordingly, there may be no effective mechanism for selling these securities. All of our auction rate securities, including those subject to failed auctions, are currently rated AAA — the highest rating — by one or more rating agencies. However, 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. As a result, we may deem such investments to be long-term in nature and generally not available for short-term liquidity needs. Additionally, under such circumstances, we may record an impairment charge on these investments in the future.
Table of Contents
Not applicable.
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, natural 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 2,700 miles of pipeline, two gas processing plants with 750 MMcf per day of total capacity, and a 15 MBbls per day NGL fractionator. To support our production in the Woodford Shale, located in southeast Oklahoma, we plan to bring online a 200 MMcf per day gas processing plant in 2008. 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. We have a 50% ownership interest in the Access Pipeline. | EXCERPTS ON THIS PAGE:
RELATED TOPICS for DVN: |
| |||||||
