15. Supplemental Information on Oil and Gas Operations (Unaudited)
The following supplemental unaudited information regarding the oil and gas activities of Devon is presented pursuant to the disclosure requirements promulgated by the Securities and Exchange Commission and SFAS No. 69, Disclosures About Oil and Gas Producing Activities. This supplemental information excludes amounts for all periods presented related to Devon's discontinued operations in Egypt and West Africa.
Costs Incurred
The following tables reflect the costs incurred in oil and gas property acquisition, exploration and development activities:
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Property acquisition costs: Proved properties |
$ | 10 | 1,113 | 54 | |||||
| Unproved properties | 206 | 1,481 | 346 | ||||||
| Exploration costs | 891 | 881 | 826 | ||||||
| Development costs | 4,994 | 4,035 | 2,629 | ||||||
| Costs incurred | $ | 6,101 | 7,510 | 3,855 | |||||
| Domestic | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Property acquisition costs: Proved properties |
$ | 3 | 1,066 | 5 | |||||
| Unproved properties | 156 | 1,366 | 106 | ||||||
| Exploration costs | 569 | 547 | 422 | ||||||
| Development costs | 3,542 | 2,558 | 1,597 | ||||||
| Costs incurred | $ | 4,270 | 5,537 | 2,130 | |||||
| Canada | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Property acquisition costs: Proved properties |
$ | 7 | 23 | 49 | |||||
| Unproved properties | 49 | 70 | 239 | ||||||
| Exploration costs | 211 | 217 | 361 | ||||||
| Development costs | 1,098 | 1,244 | 1,020 | ||||||
| Costs incurred | $ | 1,365 | 1,554 | 1,669 | |||||
| International | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Property acquisition costs: Proved properties |
$ | — | 24 | — | |||||
| Unproved properties | 1 | 45 | 1 | ||||||
| Exploration costs | 111 | 117 | 43 | ||||||
| Development costs | 354 | 233 | 12 | ||||||
| Costs incurred | $ | 466 | 419 | 56 | |||||
Pursuant to the full cost method of accounting, Devon capitalizes certain of its general and administrative expenses that are related to property acquisition, exploration and development activities. Such capitalized expenses, which are included in the costs shown in the preceding tables, were $312 million, $243 million and $158 million in the years 2007, 2006 and 2005, respectively. Also, Devon capitalizes interest costs incurred and attributable to unproved oil and gas properties and major development projects of oil and gas properties. Capitalized interest expenses, which are included in the costs shown in the preceding tables, were $65 million, $49 million and $40 million in the years 2007, 2006 and 2005, respectively.
Results of Operations for Oil and Gas Producing Activities
The following tables include revenues and expenses associated directly with Devon's continuing oil and gas producing activities, including general and administrative expenses directly related to such producing activities. They do not include any allocation of Devon's interest costs or general corporate overhead and, therefore, are not necessarily indicative of the contribution to net earnings of Devon's oil and gas operations. Income tax expense has been calculated by applying statutory income tax rates to oil, gas and NGL sales after deducting costs, including depreciation, depletion and amortization and after giving effect to permanent differences.
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions, except per equivalent barrel amounts) |
|||||||||
| Oil, gas and NGL sales | $ | 9,626 | 8,095 | 8,235 | |||||
| Production and operating expenses | (2,168 | ) | (1,766 | ) | (1,579 | ) | |||
| Depreciation, depletion and amortization | (2,655 | ) | (2,058 | ) | (1,767 | ) | |||
| Accretion of asset retirement obligation | (74 | ) | (47 | ) | (42 | ) | |||
| General and administrative expenses | (226 | ) | (155 | ) | (105 | ) | |||
| Reduction of carrying value of oil and gas properties | — | (36 | ) | (42 | ) | ||||
| Income tax expense | (1,253 | ) | (1,191 | ) | (1,631 | ) | |||
| Results of operations | $ | 3,250 | 2,842 | 3,069 | |||||
| Depreciation, depletion and amortization per Boe | $ | 11.85 | 10.27 | 8.56 | |||||
| Domestic | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | ||||||||||
| 2007 | 2006 | 2005 | ||||||||
| (In millions, except per equivalent barrel amounts) |
||||||||||
| Oil, gas and NGL sales | $ | 5,828 | 5,211 | 5,475 | ||||||
| Production and operating expenses | (1,217 | ) | (1,048 | ) | (983 | ) | ||||
| Depreciation, depletion and amortization | (1,672 | ) | (1,311 | ) | (1,137 | ) | ||||
| Accretion of asset retirement obligation | (38 | ) | (25 | ) | (25 | ) | ||||
| General and administrative expenses | (167 | ) | (115 | ) | (84 | ) | ||||
| Income tax expense | (962 | ) | (996 | ) | (1,145 | ) | ||||
| Results of operations | $ | 1,772 | 1,716 | 2,101 | ||||||
| Depreciation, depletion and amortization per Boe | $ | 11.44 | 9.89 | 8.35 | ||||||
| Canada | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions, except per equivalent barrel amounts) |
|||||||||
| Oil, gas and NGL sales | $ | 2,411 | 2,260 | 2,363 | |||||
| Production and operating expenses | (658 | ) | (550 | ) | (504 | ) | |||
| Depreciation, depletion and amortization | (740 | ) | (644 | ) | (570 | ) | |||
| Accretion of asset retirement obligation | (32 | ) | (21 | ) | (16 | ) | |||
| General and administrative expenses | (36 | ) | (29 | ) | (20 | ) | |||
| Income tax expense | (63 | ) | (144 | ) | (426 | ) | |||
| Results of operations | $ | 882 | 872 | 827 | |||||
| Depreciation, depletion and amortization per Boe | $ | 12.73 | 11.17 | 9.20 | |||||
| International | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions, except per equivalent barrel amounts) |
|||||||||
| Oil, gas and NGL sales | $ | 1,387 | 624 | 397 | |||||
| Production and operating expenses | (293 | ) | (168 | ) | (92 | ) | |||
| Depreciation, depletion and amortization | (243 | ) | (103 | ) | (60 | ) | |||
| Accretion of asset retirement obligation | (4 | ) | (1 | ) | (1 | ) | |||
| General and administrative expenses | (23 | ) | (11 | ) | (1 | ) | |||
| Reduction of carrying value of oil and gas properties | — | (36 | ) | (42 | ) | ||||
| Income tax expense | (228 | ) | (51 | ) | (60 | ) | |||
| Results of operations | $ | 596 | 254 | 141 | |||||
| Depreciation, depletion and amortization per Boe | $ | 12.31 | 10.02 | 7.20 | |||||
In 2007, 2006 and 2005, the Canadian income tax amounts in the tables above were reduced by $261 million, $243 million and $14 million, respectively, due to statutory rate reductions that were enacted in each such year.
Quantities of Oil and Gas Reserves
Set forth below is a summary of the reserves that were evaluated, either by preparation or audit, by independent petroleum consultants for each of the years ended 2007, 2006 and 2005.
| 2007 | 2006 | 2005 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Prepared | Audited | Prepared | Audited | Prepared | Audited | |||||||||||||
| Domestic | 6 | % | 83 | % | 7 | % | 81 | % | 9 | % | 79 | % | ||||||
| Canada | 34 | % | 51 | % | 46 | % | 39 | % | 46 | % | 26 | % | ||||||
| International | 99 | % | — | 99 | % | — | 98 | % | — | |||||||||
| Total | 19 | % | 69 | % | 28 | % | 61 | % | 31 | % | 54 | % | ||||||