v2.4.0.6
Fair Value Measurements
 6 Months Ended
Jun. 30, 2012
Fair Value Measurements [Abstract]  
Fair Value Measurements

18. Fair Value Measurements

 

The following tables provide carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other payables and accrued expenses included in the accompanying balance sheets approximated fair value at June 30, 2012 and December 31, 2011. Therefore, such financial assets and liabilities are not presented in the following tables.

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using:

 

Carrying Amount

Total Fair Value

 Level 1

Inputs

Level 2

Inputs

Level 3

Inputs

 

(In millions)

June 30, 2012 assets (liabilities):

 

 

 

 

 

Cash equivalents.....................................

$        5,841

$        5,841

$           850

$        4,991

$              —

Short-term investments..........................

$           944

$           944

$           300

$           644

$              —

Long-term investments..........................

$              69

$              69

$              —

$              —

$              69

Commodity derivatives.........................

$           968

$           968

$              —

$           968

$              —

Commodity derivatives.........................

$            (37)

$            (37)

$              —

$            (37)

$              —

Interest rate derivatives.........................

$              37

$              37

$              —

$              37

$              —

Foreign exchange derivatives...............

$               (8)

$               (8)

$              —

$               (8)

$              —

Debt...........................................................

$    (10,603)

$    (12,260)

$              —

$    (12,241)

$            (19)

 

 

 

 

 

 

 

December 31, 2011 assets (liabilities):

 

 

 

 

 

Cash equivalents.....................................

$        5,123

$        5,123

$           929

$        4,194

$              —

Short-term investments..........................

$        1,503

$        1,503

$           201

$        1,302

$              —

Long-term investments..........................

$              84

$              84

$              —

$              —

$              84

Commodity derivatives.........................

$           628

$           628

$              —

$           628

$              —

Commodity derivatives.........................

$            (82)

$            (82)

$              —

$            (82)

$              —

Interest rate derivatives.........................

$              52

$              52

$              —

$              52

$              —

Debt...........................................................

$       (9,780)

$    (11,380)

$              —

$    (11,295)

$            (85)

 

The following methods and assumptions were used to estimate the fair values in the tables above.

 

Level 1 Fair Value Measurements

Cash equivalents and short-term investments — Amounts consist primarily of U.S. and Canadian treasury securities and money market investments. The fair value approximates the carrying value.

 

Level 2 Fair Value Measurements

 

Cash equivalents and short-term investments — Amounts consist primarily of Canadian agency and provincial securities and commercial paper investments. The fair value is based upon quotes from brokers, which approximate the carrying value.

 

Commodity, interest rate and foreign exchange derivatives — The fair values of commodity and interest rate derivatives are estimated using internal discounted cash flow calculations based upon forward curves and quotes obtained from brokers for contracts with similar terms or quotes obtained from counterparties to the agreements.

 

Debt — Devon's debt instruments do not actively trade in an established market. The fair values of its fixed-rate debt are estimated based on rates available for debt with similar terms and maturity. The fair values of Devon’s variable-rate commercial paper and credit facility borrowings are the carrying values.

 

Level 3 Fair Value Measurements

 

Long-term investments — Devon’s long-term investments presented in the tables above consisted entirely of auction rate securities. Due to auction failures and the lack of an active market for Devon’s auction rate securities, quoted market prices for these securities were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs to estimate the fair values of its long-term auction rate securities. These inputs were based on the AAA credit rating of the securities, the probability of full repayment of the securities considering the U.S. government guarantees substantially all of the underlying student loans, the collection of all accrued interest to date and continued receipts of principal at par. As a result of using these inputs, Devon concluded the estimated fair values of its long-term auction rate securities approximated the par values as of June 30, 2012 and December 31, 2011.

 

Debt — Devon's Level 3 debt consisted of a non-interest bearing promissory note. Due to the lack of an active market, quoted marked prices for this note, or similar notes, were not available. Therefore, Devon used valuation techniques that rely on unobservable inputs to estimate the fair value of its promissory note. The fair value of this debt is estimated using internal discounted cash flow calculations based upon estimated future payment schedules and a 3.125% interest rate.

 

Included below is a summary of the changes in Devon's Level 3 fair value measurements during the first six months of 2012 and 2011.

 

 

 

 

 

Six Months Ended June 30,

 

2012

2011

 

(In millions)

Long-term investments balance at beginning of period...........................

$                     84

$                     94

Redemptions of principal............................................................................

                      (15)

                        (1)

Long-term investments balance at end of period.....................................

$                     69

$                     93

 

 

 

 

 

Six Months Ended June 30,

 

2012

2011

 

(In millions)

Debt balance at beginning of period............................................................

$                   (85)

$                 (144)

Foreign exchange translation adjustment................................................

                        (1)

                        (4)

Accretion of promissory note.....................................................................

                       —

                        (2)

Redemptions of principal............................................................................

                       67

                       46

Debt balance at end of period......................................................................

$                   (19)

$                 (104)