Devon Energy Corporation (DVN)

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Devon Energy (DVN)

Q4 2010 Earnings Call

February 16, 2011 11:00 am ET


Vincent White - Senior Vice President of Investor Relations

Darryl Smette - Executive Vice President of Marketing & Midstream

David Hager - Executive Vice President of Exploration & Production

J. Nichols - Co-Founder and Executive Chairman

Jeffrey Agosta - Chief Financial Officer and Executive Vice President

John Richels - Chief Executive Officer, President and Director


Brian Singer - Goldman Sachs Group Inc.

Scott Hanold - RBC Capital Markets, LLC

Mark Polak - Scotia Capital Inc.

David Tameron - Wells Fargo Securities, LLC

Mark Gilman - The Benchmark Company, LLC

Douglas Leggate - BofA Merrill Lynch



Welcome to Devon Energy's Fourth Quarter and Full Year 2010 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference over to Mr. Vince White, Senior Vice President of Investor Relations. Sir, you may begin.

Vincent White

Thank you, operator, and good morning to everyone. Welcome to Devon's year-end 2010 earnings call and webcast.

Today, we will follow our standard format. I will begin with a few preliminary items and then I'll turn the call over to our President and CEO, John Richels. John's going to provide the highlights of 2010 and his thoughts on the year ahead. Following John's remarks, Dave Hager, our Executive Vice President of Exploration and Production, will cover the operating highlights as well as our 2011 capital program. And then finally, Jeff Agosta, our CFO, will finish up with a review of the year's financial results and our guidance for 2011. At that point, we'll open the call to your questions. I'd like to point out that we have our Executive Chairman, Larry Nichols, and other members of the senior management team with us today for the Q&A session. As usual, we'll conclude the call in about an hour. And if we don't get to your question during the call, the IR staff will be around the rest of the day to take any follow-up. As always, we ask each participant to limit his or her question to one initial inquiry and one follow-up, and we'll attempt to enforce that.

A replay of this call will be available later today through a link on our Home page. That's After the call today, we'll file a Form 8-K. That will provide our full year detailed forecast for operating items, as well as our capital plans for 2011. And the guidance section of the Devon website will contain a copy of the 8-K, along with any other forward-looking estimates that we mention on the call. To access that information, you just click on the Guidance link found within the Investor Relations section of the Devon website.

Before we get to the business of the call, we are obligated to remind you that the discussions today of our expectations, plans, forecasts and estimates are all considered forward-looking statements under U.S. Securities Law. And while we always strive to give you the very best estimates possible, there are many factors that could cause our actual results to differ from these estimates. For a discussion of those risk factors, see the Form 8-K that we're filing today.

One other note, we refer to various non-GAAP performance measures in today's call. When we use these measures, U.S. securities law requires us to provide certain additional disclosures. Those disclosures are available for your review on our website as well.

Before we jump into the call, I have a couple of things to remind everybody of. First, our strategic repositioning that took us out of the Gulf of Mexico and international businesses triggered accounting rules for discontinued operations. However, the accounting standards for discontinued ops do not apply to our Gulf of Mexico divestitures, so that creates a confusing situation. While we've excluded the international production volumes for all periods presented and collapsed the revenues and expenses associated with the international operations into the discontinued ops line item on the income statement, the results from our divested Gulf of Mexico operations are included in our continuing operations for the portion of 2010 up to the point of sale of those assets. For that reason, we're providing supplemental information in our press release today that isolates our results from go-forward North American onshore operations.

Similar to the last several quarters, the accounting treatment for discontinued ops affected the comparability of earnings estimates from TheStreet during the fourth quarter. However, now by this time, most analysts are reporting fourth quarter estimates for continuing operations only. The first call mean [ph] of those analysts that forecasted continuing ops was $1.40 a share. And our actual results of non-GAAP earnings of $1.46 per share exceeded those expectations by $0.06. With those items out of the way, I'll turn the call over to our President and CEO, John Richels.

John Richels

Thank you, Vince, and good morning, everyone. Throughout 2010, we undertook the strategic repositioning of Devon by selling our international and Gulf of Mexico properties to focus solely on North America. The process has gone extremely well. And today, we are reporting some very good results, which reflect our continued commitment to capital discipline and cost management and as you know, ultimately, we are focused on maximizing our per share returns.

We're emerging from the repositioning in a very enviable situation. The depth and breadth of Devon's North American property portfolio provides many years of visible economic growth and a good balance between liquids and natural gas. Our asset base underpins our confidence, that we can deliver strong growth in oil and liquids over the next several years from opportunities that we have already captured within our asset portfolio. Furthermore, we have one of the strongest balance sheets in the industry, and we're in a position to supplement our top line growth and enhance our per share returns with our stock buyback program.

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