Devon Energy Corporation (DVN)
Q4 2009 Earnings Call Transcript
February 17, 2010 11:00 am ET
Vince White – SVP, IR
Larry Nichols – Chairman and CEO
John Richels – President
Dave Hager – EVP, Exploration and Production
Darryl Smette – EVP, Marketing and Midstream
Doug Leggate – Merrill Lynch
David Heikkinen – Tudor Pickering
Mark Gilman – Benchmark
Brian Singer – Goldman Sachs
Bob Morris – Citigroup
Robert Christensen – Buckingham Research Group
John Abbott [ph] – Richard Capital [ph]
Previous Statements by DVN
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Good morning, everyone, and welcome to our call. I’m going to start with – start the call with a few preliminary comments, and then turn it over to our Chairman and CEO, Larry Nichols. Larry’s going to provide an overview of 2009 and recap our reserves performance for the year. Following Larry’s remarks, our President, John Richels will review 2009 financial results and update our 2010 outlook. And then our Executive Vice President of Exploration and Production, Dave Hager, will cover fourth quarter operating highlights.
We’ll conclude the call in about an hour. So if we don’t get to your questions in the Q&A period, please feel free to follow-up with us later in the day. A replay of this call will be available later today through a link on our homepage. That’s www.devonenergy.com.
In November of 2009, we filed a Form 8-K with detailed guidance for 2010. During the call today, we’re going to update some of that guidance, and those updates will be posted to our Web site under the Estimates link in the Investor Relations area of the Web site. In addition, the 2009 Form 10-K, we expect to file that on February 26th, and it will reflect this updated guidance.
Before we get to the business of the call, we’re obligated to remind you that the discussion of our expectations, plans, forecasts, and estimates are all considered forward-looking statements under US Securities Law. And while we always make every effort to give you the very best data possible, there are many factors that could cause our actual results to differ from our estimates. For a discussion of those risk factors, please refer to our Form 8-K filed in November 16th, 2009.
One final compliance item, we will make reference today in the call the various non-GAAP performance measures. When we refer to these measures, we’re required to provide certain disclosures under Securities Law. If you would like to review those disclosures, they are also available on the Devon Web site.
Finally, I want to remind everyone that in November of 2009, we announced plans to divest all of our international and Gulf of Mexico assets. And as a result of these plans, accounting rules require our financial reporting to be somewhat illogical. The oil and gas production from the international operations that we are divesting are excluded for all periods presented, while the production from the Gulf of Mexico assets we are selling are included in our reported volumes and financials. Similarly, revenues, expenses for the international assets are collapsed into a single line item at the end of the statement of operations, and that line item is titled Discontinued Operations, while the revenues and expenses for the Gulf divestiture assets remain imbedded in our Continuing Operations.
In providing increased transparency in today’s press release, you’ll find additional tables that provide a detailed statement of operations as well as production and reserve data and cost incurred figures attributable to the operations classified as discontinued. And again, that’s only the international operations. Our comments today on the financial statements will generally conform to the presentation for continued operations. But when it’s practical, we will provide commentaries specifically targeting the North American onshore operations that represent the go-forward Devon.
The accounting treatment of the divestiture properties also muddies the water for Devon’s fourth quarter comparison to consensus estimates. We pulled the cell site analyst that report estimates the first call, and learned that about half the analysts included international operations, while the other half excluded the impact of these operations. The mean estimate for the analyst who included discontinued operations was $1.29 per share. This compares to our non-GAAP diluted earnings per share of $1.60 for the fourth quarter. The mean estimate for the analyst who excluded discontinued operations was $1.20 per share. And that figure compares to our adjusted earnings from continuing operations of $1.33 per diluted share.
The reconciling items are included in our press release today. In either case, with or without the contribution of our international assets, our fourth quarter results significantly exceeded expectations. With those items out of the way, I’m going to turn the call over to Devon’s CEO, Larry Nichols.
Thanks, Vince, and good morning, everyone. This year, 2010, is a transition for Devon. A very much of a transition year as we divest our onshore international assets, and refocused all of our efforts on Devon’s very powerful North American onshore growth engine. Our philosophy of focusing on optimizing returns and refusing to get caught up in that growth at any cause mentality is reflected in the very solid 2009 results that we reported today. We have achieved solid production growth while significantly reducing operating costs and delivering industry-leading finding and development costs.