8-K
DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2020-10-01 2020-10-01

 

 

UNITED STATES

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 reported): October 1, 2020

 

 

Devon Energy Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

 

DELAWARE   001-32318   73-1567067

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

333 W. SHERIDAN AVE., OKLAHOMA CITY, OKLAHOMA   73102-5015
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (405) 235-3611

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol

 

Name of each exchange

on which registered

Common Stock, par value $0.10 per share   DVN   The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.01

Completion of Acquisition or Disposition of Assets.

As previously disclosed, Devon Energy Production Company, L.P. (the “Seller”), a wholly-owned subsidiary of Devon Energy Corporation (the “Company”), and BKV Barnett, LLC (the “Purchaser”) entered into a Purchase and Sale Agreement, dated December 17, 2019 (the “Original Agreement”), as amended by the First Amendment to Purchase and Sale Agreement, dated April 13, 2020 (the “Amendment” and, together with the Original Agreement, the “Amended Agreement”), pursuant to which the Seller agreed to sell its Barnett Shale assets to the Purchaser for $570 million in cash, subject to certain purchase price adjustments. The Amended Agreement also provides for contingent earnout payments to the Seller of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commences on January 1, 2021 and has a term of four years.

On October 1, 2020, the transaction contemplated by the Amended Agreement was completed, pursuant to which the Seller received proceeds, net of purchase price adjustments, of $490 million from the Purchaser, including a $170 million deposit previously received in April 2020.

The foregoing description of the Amended Agreement and the transaction contemplated thereby is not complete and is subject to and qualified in its entirety by reference to the Original Agreement and the Amendment, copies of which were included as Exhibit 2.1 to the Company’s Form 8-K, filed with the Securities and Exchange Commission on December 18, 2019, and as Exhibit 2.1 to the Company’s Form 8-K, filed with the Securities and Exchange Commission on April 14, 2020, respectively, and the terms of which are incorporated herein by reference.

 

Item 7.01

Regulation FD Disclosure.

On October 1, 2020, the Company issued a press release in connection with the closing of the transaction described in Item 2.01 above.

The information in Item 7.01 of this Current Report and in Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 7.01 of this Current Report and in Exhibit 99.1 attached hereto shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.

 

Item 9.01

Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

The unaudited pro forma consolidated financial information of the Company giving effect to the transaction described in Item 2.01 above is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein.

(d) Exhibits.

 

Exhibit

Number

  

Description of Exhibits

  2.1    Purchase and Sale Agreement, dated December 17, 2019, by and between Devon Energy Production Company, L.P. and BKV Barnett, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed December 18, 2019; File No. 001-32318).
  2.2    First Amendment to Purchase and Sale Agreement, dated April 13, 2020, by and between Devon Energy Production Company, L.P., BKV Barnett, LLC, and solely with respect to certain provisions therein, BKV Oil & Gas Capital Partners, L.P. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed April 14, 2020; File No. 001-32318).
99.1    Press release dated October 1, 2020.
99.2    Unaudited Pro Forma Consolidated Financial Information of Devon Energy Corporation.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


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: October 2, 2020           

/s/ Jeremy D. Humphers

      Jeremy D. Humphers
      Senior Vice President and Chief Accounting Officer

 

EX-99.1

Exhibit 99.1

 

LOGO    

Devon Energy Corporation

333 West Sheridan Avenue

    Oklahoma City, OK 73102-5015

Devon Energy Completes Sale of Barnett Shale Assets

OKLAHOMA CITY – Oct. 1, 2020 – Devon Energy Corp. (NYSE: DVN) today announced that it has completed the sale of its assets in the Barnett Shale to Banpu Kalnin Ventures (BKV). Devon received a cash payment of $320 million from BKV at closing, after adjusting for a $170 million deposit received in April and purchase-price adjustments that, among other things, allocate revenues and expenses based on a Sept. 1, 2019, effective date.

The sale agreement with BKV provides Devon the opportunity for contingent cash payments of up to $260 million based upon future commodity prices, with upside participation beginning at either a $2.75 Henry Hub natural gas price or a $50 West Texas Intermediate oil price. The contingent payment period commences on Jan. 1, 2021 and has a term of four years. The contingent payments are earned and paid on an annual basis.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the federal securities laws. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. These risks include, but are not limited to: the risk that depressed commodity prices prevent Devon from earning some or all of the contingent payments; and the other risks identified in the Company’s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission (SEC). Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date hereof, and the company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

ABOUT DEVON ENERGY

Devon Energy is a leading independent energy company engaged in finding and producing oil and natural gas. Based in Oklahoma City and included in the S&P 500, Devon operates in several of the most prolific oil and natural gas plays in the U.S. with an emphasis on achieving strong returns and capital-efficient cash-flow growth. For more information, please visit www.devonenergy.com.

 

Investor Contacts

  

Media Contact

Scott Coody, 405-552-4735

  

Lisa Adams, 405-228-1732

Chris Carr, 405-228-2496

  
EX-99.2

Exhibit 99.2

DEVON ENERGY CORPORATION

Unaudited Pro Forma Consolidated Financial Information

Introduction

On October 1, 2020, Devon Energy Corporation (the “Company” or “Devon”) completed the previously announced Barnett Shale divest transaction, pursuant to which Devon sold its Barnett Shale assets to BKV Barnett, LLC (the “Purchaser”). Under the terms of the agreement, Devon has received proceeds, net of purchase price adjustments, of $490 million, including a $170 million deposit previously received in April 2020. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commences on January 1, 2021 and has a term of four years.

With this disposition, Devon is effectively exiting its last natural gas focused asset and the transaction results in a material reduction to the Company’s total assets, revenues and proved reserves. Therefore, this disposition represents a strategic shift in Devon’s business, and the Company’s Barnett Shale financial information has been classified as discontinued operations since entering into the divestiture agreement with the Purchaser.

The unaudited pro forma consolidated financial information has been prepared in conformity with Article 11 of Regulation S-X. In addition, this unaudited pro forma consolidated financial information is based on currently available information and assumptions the Company believes are reasonable. This unaudited pro forma consolidated financial information is presented for informational purposes only and does not purport to represent what the Company’s financial position would have been had the disposition of Devon’s Barnett Shale assets occurred on the date indicated.


DEVON ENERGY CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2020

(In millions)

 

     As Reported     Pro Forma
Adjustments
    Pro Forma  

Current assets:

      

Cash and cash equivalents

   $ 1,474     $ 315     $ 1,789  

Cash restricted for discontinued operations

     195       —         195  

Accounts receivable

     515       —         515  

Current assets associated with discontinued operations

     748       (744     4  

Other current assets

     446       —         446  
  

 

 

   

 

 

   

 

 

 

Total current assets

     3,378       (429     2,949  
  

 

 

   

 

 

   

 

 

 

Oil and gas property and equipment, net

     4,673       —         4,673  

Other property and equipment, net

     1,013       —         1,013  
  

 

 

   

 

 

   

 

 

 

Total property and equipment, net

     5,686       —         5,686  
  

 

 

   

 

 

   

 

 

 

Goodwill

     753       —         753  

Right-of-use assets

     231       —         231  

Other long-term assets

     227       —         227  

Long-term assets associated with discontinued operations

     82       41       123  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 10,357     $ (388   $ 9,969  
  

 

 

   

 

 

   

 

 

 

Current liabilities:

      

Accounts payable

   $ 309     $ —       $ 309  

Revenues and royalties payable

     473       —         473  

Current liabilities associated with discontinued operations

     441       (375     66  

Other current liabilities

     229       —         229  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,452       (375     1,077  
  

 

 

   

 

 

   

 

 

 

Long-term debt

     4,296       —         4,296  

Lease liabilities

     245       —         245  

Asset retirement obligations

     391       —         391  

Other long-term liabilities

     458       —         458  

Long-term liabilities associated with discontinued operations

     162       —         162  

Deferred income taxes

     —         —         —    

Stockholders’ equity:

      

Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 383 million shares

     38       —         38  

Additional paid-in capital

     2,720       —         2,720  

Retained earnings

     586       (13     573  

Accumulated other comprehensive loss

     (117     —         (117
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity attributable to Devon

     3,227       (13     3,214  

Noncontrolling interests

     126       —         126  
  

 

 

   

 

 

   

 

 

 

Total equity

     3,353       (13     3,340  
  

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 10,357     $ (388   $ 9,969  
  

 

 

   

 

 

   

 

 

 


NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS:

1. Basis of Presentation

Because the Company’s Barnett Shale financial information has been presented as discontinued operations, the accompanying pro forma financial information only consists of a balance sheet prepared as of June 30, 2020. The historical consolidated balance sheet as of June 30, 2020 is derived from and should be read in conjunction with the Company’s unaudited financial statements in its June  30, 2020 Quarterly Report on Form 10-Q, which was filed on August 5, 2020.

The Company’s historical consolidated balance sheet has been adjusted in the unaudited pro forma consolidated financial information to present events that are (i) directly attributable to the sale of its Barnett Shale assets, (ii) factually supportable and (iii) are expected to have a continuing impact on the Company’s consolidated results following the Barnett Shale disposition.

The pro forma financial information does not purport to be indicative of the financial position of the Company as of June 30, 2020, nor is it indicative of future results.

2. Pro Forma Adjustments

The pro forma adjustments reflect the following:

 

   

Devon’s receipt of $320 million of cash proceeds from the Purchaser at closing, less $5 million of transaction related expenses. This amount excludes the $170 million cash deposit received in April 2020.

 

   

The recognition of a $41 million long-term asset, which represents the estimated fair value of the contingent earnout payments.

 

   

The derecognition of $744 million of assets acquired and $375 million of liabilities assumed by the Purchaser.

 

   

The recognition of a $13 million decrease to retained earnings and total equity.

v3.20.2
Document and Entity Information
Oct. 01, 2020
Cover [Abstract]  
Entity Registrant Name DEVON ENERGY CORP/DE
Entity Incorporation State Country Code DE
Entity Address, State or Province OK
Amendment Flag false
Entity Central Index Key 0001090012
Document Type 8-K
Document Period End Date Oct. 01, 2020
Entity File Number 001-32318
Entity Tax Identification Number 73-1567067
Entity Address, Address Line One 333 W. SHERIDAN AVE.
Entity Address, City or Town OKLAHOMA CITY
Entity Address, Postal Zip Code 73102-5015
City Area Code (405)
Local Phone Number 235-3611
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common Stock, par value $0.10 per share
Trading Symbol DVN
Security Exchange Name NYSE
Entity Emerging Growth Company false