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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2014
Derivative Financial Instruments [Abstract] |
Derivative Financial Instruments | 3. D erivative Financial Instruments Objectives and Strategies Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production. These instruments are used to manage the inherent uncertainty of future revenues due to commodity price volatility and typically include financial price swaps, basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. Devon periodically enters into foreign exchange forward contracts to manage its exposure to fluctuations in exchange rates. Additionally, EnLink manages its exposure to fluctuations in commodity prices by hedging the impact of market fluctuations. Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment. Counterparty Credit Risk By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon's policy to enter into derivative contracts only with investment grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon's derivative contracts contain provisions that provide for collateral payments, depending on levels of exposure and the credit rating of the counterparty. As of September 30, 2014, Devon held $31 million of cash collateral which represented the estimated fair value of certain derivative positions in excess of Devon’s credit guidelines. The collateral is reported in other current liabilities in the accompanying balance sheet. Commodity Derivatives As of September 30, 2014, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX West Texas Intermediate futures price. The second table presents Devon’s oil derivatives that settle against the Western Canadian Select index.
|  | Price Swaps |  | Price Collars |  | Call Options Sold
Period |  | Volume (Bbls/d) |  | Weighted Average Price ($/Bbl) |  | Volume (Bbls/d) |  | Weighted Average Floor Price ($/Bbl) |  | Weighted Average Ceiling Price ($/Bbl) |  | Volume (Bbls/d) |  | Weighted Average Price ($/Bbl)
Q4 2014 |  | 75,000 |  | $ | 94.14 |  | 64,750 |  | $ | 89.33 |  | $ | 100.00 |  | 42,000 |  | $ | 116.43
Q1-Q4 2015 |  | 106,736 |  | $ | 91.22 |  | 31,500 |  | $ | 89.67 |  | $ | 97.84 |  | 28,000 |  | $ | 116.43
Q1-Q4 2016 |  | — |  | $ | — |  | — |  | $ | — |  | $ | — |  | 18,500 |  | $ | 103.11
|  | Oil Basis Swaps
Period |  | Index |  | Volume (Bbls/d) |  | Weighted Average Differential to WTI ($/Bbl)
Q4 2014 |  | Western Canadian Select |  | 50,000 |  | $ | (17.40)
Q1-Q4 2015 |  | Western Canadian Select |  | 14,890 |  | $ | (18.92)
As of September 30, 2014, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the AECO and PEPL indices.
|  | Price Swaps |  | Price Collars |  | Call Options Sold
Period |  | Volume (MMBtu/d) |  | Weighted Average Price ($/MMBtu) |  | Volume (MMBtu/d) |  | Weighted Average Floor Price ($/MMBtu) |  | Weighted Average Ceiling Price ($/MMBtu) |  | Volume (MMBtu/d) |  | Weighted Average Price ($/MMBtu)
Q4 2014 |  | 800,000 |  | $ | 4.42 |  | 460,000 |  | $ | 4.03 |  | $ | 4.51 |  | 500,000 |  | $ | 5.00
Q1-Q4 2015 |  | 210,000 |  | $ | 4.38 |  | 260,000 |  | $ | 4.05 |  | $ | 4.36 |  | 550,000 |  | $ | 5.09
Q1-Q4 2016 |  | — |  | $ | — |  | — |  | $ | — |  | $ | — |  | 400,000 |  | $ | 5.00
|  | Natural Gas Basis Swaps
Period |  | Index |  | Volume (MMBtu/d) |  | Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2014 |  | AECO |  | 94,781 |  | $ | (0.52)
Q1-Q4 2015 |  | PEPL |  | 100,000 |  | $ | (0.28)
Interest Rate Derivatives As of September 30, 2014, Devon had the following open interest rate derivative positions:
Notional |  | Rate Received |  | Rate Paid |  | Expiration
(In millions) |  |  |  |  |  |
$ | 100 |  | Three Month LIBOR |  | 0.92% |  | December 2016
$ | 100 |  | 1.76% |  | Three Month LIBOR |  | January 2019
Foreign Currency Derivatives As of September 30, 2014, Devon had the following open foreign currency derivative positions:
Forward Contract
Currency |  | Contract Type |  | CAD Notional |  | Weighted Average Fixed Rate Received |  | Expiration
|  |  |  | (In millions) |  | (CAD-USD) |  |
Canadian Dollar |  | Sell |  | $ | 1,312 |  | 0.899 |  | December 2014
Financial Statement Presentation The following table presents the net gains and losses recognized in the accompanying comprehensive statements of earnings associated with derivative financial instruments.
|  | Comprehensive Statements of |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | Earnings Caption |  | 2014 |  | 2013 |  | 2014 |  | 2013
|  |  |  | (In millions)
Commodity derivatives |  | Oil, gas and NGL derivatives |  | $ | 748 |  | $ | (141) |  | $ | 29 |  | $ | (95)
EnLink commodity derivatives |  | Marketing and midstream revenues |  |  | 1 |  |  | — |  |  | (2) |  |  | —
Interest rate derivatives |  | Other nonoperating items |  |  | — |  |  | 1 |  |  | 1 |  |  | 1
Foreign currency derivatives |  | Other nonoperating items |  |  | 55 |  |  | (28) |  |  | 15 |  |  | 29
Net gains (losses) recognized in comprehensive statements of earnings |  | $ | 804 |  | $ | (168) |  | $ | 43 |  | $ | (65)
The following table presents the derivative fair values included in the accompanying balance sheets.
|  | Balance Sheet Caption |  | September 30, 2014 |  | December 31, 2013
|  |  |  | (In millions)
Asset derivatives: |  |  |  |  |  |  |  |
Commodity derivatives |  | Other current assets |  | $ | 231 |  | $ | 75
Commodity derivatives |  | Other long-term assets |  |  | 66 |  |  | 28
EnLink commodity derivatives |  | Other current assets |  |  | 1 |  |  | —
Interest rate derivatives |  | Other current assets |  |  | 1 |  |  | —
Foreign currency derivatives |  | Other current assets |  |  | 11 |  |  | —
Total asset derivatives |  |  |  | $ | 310 |  | $ | 103
Liability derivatives: |  |  |  |  |  |  |  |
Commodity derivatives |  | Other current liabilities |  | $ | 30 |  | $ | 58
Commodity derivatives |  | Other long-term liabilities |  |  | 50 |  |  | 62
EnLink commodity derivatives |  | Other current liabilities |  |  | 1 |  |  | —
EnLink commodity derivatives |  | Other long-term liabilities |  |  | 1 |  |  | —
Interest rate derivatives |  | Other current liabilities |  |  | 1 |  |  | —
Interest rate derivatives |  | Other long-term liabilities |  |  | 1 |  |  | —
Foreign currency derivatives |  | Other current liabilities |  |  | — |  |  | 1
Total liability derivatives |  |  |  | $ | 84 |  | $ | 121

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 + Details
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