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Acquisitions And Divestitures | 9 Months Ended
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Sep. 30, 2014
Acquisitions And Divestitures [Abstract] |
Acquisitions And Divestitures | 2. Acquisitions and Divestitures Formation of EnLink Midstream, LLC and EnLink Midstream Partners, LP On March 7, 2014, Devon, Crosstex Energy, Inc. and Crosstex Energy, LP (together with Crosstex Energy, Inc., “Crosstex”) completed a business combination to combine substantially all of Devon’s U.S. midstream assets with Crosstex’s assets to form a new midstream business. The new busi ness consists of the Partnership and EnLink, a master limited partnership and a general partner entity, respectively, which are both publicly traded entities. In exchange for a controlling interest in both EnLink and the Partnership, Devon contributed its equity interest in a newly formed Devon subsidiary, EnLink Midstream Holdings, LP (“EnLink Holdings”) and $100 million in cash. EnLink Holdings owns Devon’s midstream assets in the Barnett Shale in north Texas and the Cana and Arkoma Woodford Shales in Oklahoma, as well as Devon’s economic interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. The Partnership and EnLink each own 50 percent of EnLink Holdings. The ownership of EnLink is approximately:
| • |  | 70% - Devon
| • |  | 30% - Public unitholders
The ownership of the Partnership is approximately:
| • |  | 52% - Devon
| • |  | 41% - Public unitholders
| • |  | 7% - EnLink
This business combination was accounted for using the acquisition method of accounting. Under the acquisition method of accounting, EnLink Holdings was the accounting acquirer because its parent company, Devon, obtained control of EnLink and the Partnership as a result of the business combination. Consequently, EnLink Holdings’ assets and liabilities retained their carrying values. Additionally, the Crosstex assets acquired and liabil ities assumed by the Partnership and EnLink in the business combination, as well as EnLink’s noncontrol ling interest in the Partnership, were recorded at their fair values which were measured as of the acquisition date, March 7, 2014. The excess of the purchase price over the estimated fair values of Crosstex’s net assets acquired was recorded as goodwill. The following table summarizes the purchase price (in millions, except unit price).
Crosstex Energy, Inc. outstanding common shares: |  |  |  |
Held by public shareholders |  |  | 48.0 |
Restricted shares |  |  | 0.4 |
Total subject to conversion |  |  | 48.4 |
Exchange ratio |  |  | 1.0 | x
Converted shares |  |  | 48.4 |
Crosstex Energy, Inc. common share price (1) |  | $ | 37.60 |
Crosstex Energy, Inc. consideration |  | $ | 1,823 |
Fair value of noncontrolling interests in E2 (2) |  | $ | 12 |
Total Crosstex Energy, Inc. consideration and fair value of noncontrolling interests |  | $ | 1,835 |
Partnership outstanding units: |  |  |  |
Common units held by public unitholders |  |  | 75.1 |
Preferred units held by third party (3) |  |  | 17.1 |
Restricted units |  |  | 0.4 |
Total |  |  | 92.6 |
Partnership common unit price (4) |  | $ | 30.51 |
Partnership common units value |  | $ | 2,825 |
Partnership outstanding unit options value |  | $ | 4 |
Total fair value of noncontrolling interests in the Partnership (4) |  | $ | 2,829 |
Total consideration and fair value of noncontrolling interests |  | $ | 4,664 |
__________________________ (1) The final purchase price is based on the fair value of Crosstex Energy Inc.’s common shares as of the closing date, March 7, 2014. (2) Represents the value of noncontrolling interests related to EnLink’s equity investment in E2 Energy Services, LLC and E2 Appalachian Compression, LLC (collectively “E2”). (3) The Partnership converted the preferred units to common units in February 2014. (4) The final purchase price is based on the fair value of the Partnership’s common shares as of the closing date, March 7, 2014. The preliminary allocation of the purchase price is as follows (in millions):
Assets acquired: |  |  |
Current assets |  | $ | 438
Property, plant and equipment, net |  |  | 2,438
Intangible assets |  |  | 547
Equity investment |  |  | 222
Goodwill (1) |  |  | 3,292
Other long term assets |  |  | 1
Liabilities assumed: |  |  |
Current liabilities |  |  | (516)
Long-term debt |  |  | (1,454)
Deferred income taxes |  |  | (203)
Other long-term liabilities |  |  | (101)
Total consideration and fair value of noncontrolling interests |  | $ | 4,664
__________________________ (1) Goodwill is the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill is not amortized and is not deductible for tax purposes. GeoSouthern Energy Acquisition On November 20, 2013, Devon entered into a Purchase and Sale Agreement with GeoSouthern Energy Corporation (“GeoSouthern”) and a wholly owned subsidiary of GeoSouthern to acquire GeoSouthern’s interests in certain affiliates (the “Acquired Companies”) that own certain oil and gas properties, leasehold mineral interest and related assets located in the Eagle Ford Shale. On February 28, 2014, the GeoSouthern acquisition closed, and GeoSouthern transferred the Acquired Companies to Devon in exchange for the aggregate purchase price of approximately $6.0 billion. Devon funded the acquisition price with cash on hand and debt financing. In connection with the GeoSouthern acquisition, Devon acquired approximately 82,000 net acres located in DeWitt and Lavaca counties in south Texas. The transaction was accounted for using the acquisition method, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the preliminary allocation of the purchase price to the assets acquired and liabilities assumed in the transaction (in millions).
Cash and cash equivalents |  | $ | 95
Other current assets |  |  | 256
Proved properties |  |  | 5,029
Unproved properties |  |  | 1,008
Midstream assets |  |  | 85
Current liabilities |  |  | (437)
Long-term liabilities |  |  | (6)
Net assets acquired |  | $ | 6,030
EnLink and GeoSouthern Operating Results The following table presents EnLink’s (acquired Crosstex operations) and GeoSouthern’s operating revenues and net earnings included in Devon’s consolidated statements of earnings subsequent to the transactions described above.
|  | Three Months Ended September 30, 2014 |  | Nine Months Ended September 30, 2014
|  | GeoSouthern |  | EnLink |  | GeoSouthern |  | EnLink
|  | (In millions) |  | (In millions)
Total operating revenues |  | $ | 634 |  | $ | 700 |  | $ | 1,374 |  | $ | 1,670
Total operating expenses |  |  | 322 |  |  | 692 |  |  | 708 |  |  | 1,654
Operating income |  | $ | 312 |  | $ | 8 |  | $ | 666 |  | $ | 16
Pro Forma Financial Information The following unaudited pro forma financial information has been prepared assuming both the EnLink formation and the GeoSouthern acquisition occurred on January 1, 2013. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the business combination and acquisition had been completed at the dates indicated. In addition, they do not project Devon’s results of operations for any future period.
|  | Nine Months Ended September 30,
|  | 2014 |  | 2013
|  | (In millions)
Total operating revenues |  | $ | 14,218 |  | $ | 9,603
Net earnings (loss) |  | $ | 2,109 |  | $ | (192)
Noncontrolling interests |  | $ | 68 |  | $ | 32
Net earnings (loss) attributable to Devon |  | $ | 2,041 |  | $ | (224)
Net earnings (loss) per common share attributable to Devon |  | $ | 4.98 |  | $ | (0.55)
Partnership Acquisitions and Dropdowns Effective November 1, 2014, the Partnership acquired Gulf Coast natural pipeline assets predominantly located in southern Louisiana for $235 million, subject to certain adjustments. Furthermore, in October 2014, the Partnership acquired equity interests in E2 Appalachian Compression, LLC and E2 Energy Services, LLC (together “E2”) from EnLink. The total consideration for the transaction was approximately $193 million, including a $163 million cash payment and 1.0 million Partnership units valued at $30 million based on the fair value of the Partnership’s units as of the closing date of the transaction. Non-Core Asset Divestitures In November 2013, Devon announced plans to divest certain non-core properties located throughout Canada and the U.S. Canada In the first quarter of 2014, Devon completed minor divestiture transactions for $142 million ($155 million Canadian dollars). In the second quarter of 2014, Devon sold conventional assets to Canadian Natural Resources Limited for $2.8 billion ($3.125 billion Canadian dollars). Under full-cost accounting rules, sales or dispositions of oil and gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of gain or loss. However, if not recognizing a gain or loss on the disposition would otherwise significantly alter the relationship between a cost center’s capitalized costs and proved reserves, then a gain or loss must be recognized. The Canadian divestitures significantly altered such relationship. Therefore, Devon recognized gains totaling $1.1 billion ($0.6 billion after-tax) in 2014 associated with these transactions. These gains are included as a separate item in the accompanying consolidated comprehensive statements of earnings. Included in the gain calculation noted above were asset retirement obligations of approximately $700 million assumed by the purchaser as well as the derecognition of approximately $700 million of goodwill allocated to the sold assets. In conjunction with the divestitures noted above, Devon repatriated approximately $2.8 billion of proceeds to the U.S. in the second quarter of 2014. The proceeds were used to repay $0.7 billion of commercial paper and the $2.0 billion term loans that were drawn in the first quarter of 2014 to fund a portion of the GeoSouthern acquisition. Between collecting the divestiture proceeds and repatriating funds to the U.S., Devon recognized an $84 million foreign currency exchange loss and a $29 million foreign currency derivative loss. These losses are included in other nonoperating items in the accompanying consolidated comprehensive statements of earnings. U.S. On August 29, 2014, Devon sold its U.S. non-core assets to LINN Energy for $2.3 billion ($1.7 billion after-tax proceeds). Additionally, approximately $200 million of asset retirement obligations were assumed by LINN Energy. No gain or loss was recognized on the sale.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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