13. Discontinued Operations
Egypt and West Africa
In November 2006 and January 2007, Devon announced its plans to divest its operations in Egypt and West Africa, including Equatorial Guinea, Cote d'Ivoire, Gabon and other countries in the region. Pursuant to accounting rules for discontinued operations, Devon has classified all 2007 and prior period amounts related to its operations in Egypt and West Africa as discontinued operations.
In October 2007, Devon completed the sale of its Egyptian operations and received proceeds of $341 million. As a result of this sale, Devon recognized a $90 million after-tax gain in the fourth quarter of 2007. In November 2007, Devon announced an agreement to sell its operations in Gabon for $205.5 million. Devon is finalizing purchase and sales agreements and obtaining the necessary partner and government approvals for the remaining properties in the West African divestiture package. Devon is optimistic it can complete these sales during the first half of 2008.
Revenues related to Devon's operations in Egypt and West Africa totaled $781 million, $929 million and $714 million during 2007, 2006 and 2005, respectively. The following table presents the main classes of assets and liabilities associated with Devon's operations in Egypt and West Africa as of December 31, 2007 and 2006.
| December 31, | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | |||||
| (In millions) | ||||||
| Assets: Cash |
$ | 9 | 64 | |||
| Accounts receivable | 83 | 101 | ||||
| Other current assets | 28 | 67 | ||||
| Current assets | $ | 120 | 232 | |||
Long-term assets — property and equipment, net of accumulated depreciation, depletion and amortization |
$ | 1,512 | 1,619 | |||
Liabilities: Accounts payable — trade |
$ | 23 | 41 | |||
| Revenues and royalties due to others | 11 | 7 | ||||
| Income taxes payable | 100 | 115 | ||||
| Current portion of asset retirement obligation | 9 | 8 | ||||
| Accrued expenses and other current liabilities | 2 | 2 | ||||
| Current liabilities | $ | 145 | 173 | |||
Asset retirement obligation, long-term |
$ | 35 | 38 | |||
| Deferred income taxes | 366 | 375 | ||||
| Other liabilities | 3 | 16 | ||||
| Long-term liabilities | $ | 404 | 429 | |||
Reductions of carrying value related to discontinued operations
Based on drilling activities in Nigeria, Devon reduced the carrying value of its Nigerian assets held for sale in 2007. As a result, earnings from discontinued operations in 2007 include a $13 million after-tax loss ($64 million pre-tax).
As a result of unsuccessful exploratory activities in Egypt during 2006, the net book value of Devon's Egyptian oil and gas properties, less related deferred income taxes, exceeded the ceiling by $18 million as of the end of September 30, 2006. Therefore, in 2006, Devon recognized an $18 million after-tax loss ($31 million pre-tax).
Due to unsuccessful drilling activities in Nigeria, in the first quarter of 2006, Devon recognized an $85 million impairment of its investment in Nigeria equal to the costs to drill two dry holes and a proportionate share of block-related costs. There was no income tax benefit related to this impairment.