13.Debt and Related Expenses

A summary of Devon's debt is as follows:



	December 31, 2014		December 31, 2013

	(In millions)
Devon debt
Commercial paper	$	932	$	1,317
5.625% due January 15, 2014		-		500
Floating rate due December 15, 2015		500		500
2.40% due July 15, 2016		-		500
Floating rate due December 15, 2016		350		350
1.20% due December 15, 2016		-		650
1.875% due May 15, 2017		-		750
8.25% due July 1, 2018		125		125
2.25% due December 15, 2018		750		750
6.30% due January 15, 2019		700		700
4.00% due July 15, 2021		500		500
3.25% due May 15, 2022		1,000		1,000
7.50% due September 15, 2027		150		150
7.875% due September 30, 2031		1,250		1,250
7.95% due April 15, 2032		1,000		1,000
5.60% due July 15, 2041		1,250		1,250
4.75% due May 15, 2042		750		750
Net discount on debentures and notes		(18)		(20)
Total Devon debt		9,239		12,022
EnLink debt
Credit facilities		237		-
2.70% due April 1, 2019		400		-
7.125% due June 1, 2022		163		-
4.40% due April 1, 2024		550		-
5.60% due April 1, 2044		350		-
5.05% due April 1, 2045		300
Net premium on debentures and notes		23		-
Total EnLink debt		2,023		-
Total debt		11,262		12,022
Less amount classified as short-term debt (1)		1,432		4,066
Total long-term debt	$	9,830	$	7,956

__________________________

(1)

2014 short-term debt consists of $932 million of commercial paper and $500 million floating rate due on December 15, 2015. 2013 short-term debt consists of $2.25 billion of senior notes issued in conjunction with the GeoSouthern acquisition, $1.3 billion of commercial paper and $500 million of senior notes due January 15, 2014.

Debt maturities as of December 31, 2014, excluding premiums and discounts, are as follows (in millions):


2015	$	1,432
2016		350
2017		-
2018		875
2019		1,337
2020 and thereafter		7,263
Total	$	11,257

Credit Lines

Devon has a $3.0 billion syndicated, unsecured revolving line of credit (the Senior Credit Facility). The maturity date for $30 million of the Senior Credit Facility is October 24, 2017. The maturity date for $164 million of the Senior Credit Facility is October 24, 2018. The maturity date for the remaining $2.8 billion is October 24, 2019. Amounts borrowed under the Senior Credit Facility may, at the election of Devon, bear interest at various fixed rate options for periods of up to twelve months. Such rates are generally less than the prime rate. However, Devon may elect to borrow at the prime rate. The Senior Credit Facility currently provides for an annual facility fee of $3.8 million that is payable quarterly in arrears. As of December 31, 2014, there were no borrowings under the Senior Credit Facility.

The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65 percent. The credit agreement contains definitions of total funded debt and total capitalization that include adjustments to the respective amounts reported in the accompanying consolidated financial statements. Also, total capitalization is adjusted to add back noncash financial write-downs such as full cost ceiling impairments or goodwill impairments. As of December 31, 2014, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 20.9 percent.

Commercial Paper

Devon has access to $3.0 billion of short-term credit under its commercial paper program. Commercial paper debt generally has a maturity of between 1 and 90 days, although it can have a maturity of up to 365 days, and bears interest at rates agreed to at the time of the borrowing. The interest rate is generally based on a standard index such as the Federal Funds Rate, LIBOR or the money market rate as found in the commercial paper market. As of December 31, 2014, Devon’s commercial paper borrowings of $932 million have a weighted-average borrowing rate of 0.44 percent.

Retirement of Senior Notes

On November 13, 2014, Devon redeemed $1.9 billion of senior notes prior to their scheduled maturity, primarily with proceeds received from its asset divestitures. The redemption includes the 2.4% $500 million senior notes due 2016, the 1.2% $650 million senior notes due 2016 and the 1.875% $750 million senior notes due 2017. The notes were redeemed for $1.9 billion, which included 100 percent of the principal amount and a make-whole premium of $40 million. On the date of redemption, these notes also had an unamortized discount of $2 million and unamortized debt issuance costs of $6 million. The make-whole premium, unamortized discounts and debt issuance costs are included in net financing costs on the accompanying 2014 consolidated comprehensive statement of earnings.

Other Debentures and Notes

Following are descriptions of the various other debentures and notes outstanding at December 31, 2014 and 2013, as listed in the table presented at the beginning of this note.

GeoSouthern Debt

In December 2013, in conjunction with the planned GeoSouthern acquisition, Devon issued $2.25 billion aggregate principal amount of fixed and floating rate senior notes resulting in cash proceeds of approximately $2.2 billion, net of discounts and issuance costs. The floating rate senior notes due in 2015 bear interest at a rate equal to three-month LIBOR plus 0.45 percent, which rate will be reset quarterly. The floating rate senior notes due in 2016 bears interest at a rate equal to three-month LIBOR plus 0.54 percent, which rate will be reset quarterly. The schedule below summarizes the key terms of these notes (in millions).


Floating rate due December 15, 2015	$	500
Floating rate due December 15, 2016		350
1.20% due December 15, 2016 (1)		650
2.25% due December 15, 2018		750
Discount and issuance costs		(2)
Net proceeds	$	2,248

__________________________

(1) The 1.20% $650 million note due December 15, 2016 was redeemed on November 13, 2014.

The senior notes were classified as short-term debt on Devon’s consolidated balance sheet as of December 31, 2013 due to certain redemption features in the event that the GeoSouthern acquisition was not completed on or prior to June 30, 2014. On February 28, 2014, the GeoSouthern acquisition closed and thus the senior notes were subsequently classified as long-term debt.

Additionally, during December 2013, Devon entered into a term loan agreement with a group of major financial institutions pursuant to which Devon could draw up to $2.0 billion to finance, in part, the GeoSouthern acquisition and to pay transaction costs. In February 2014, Devon drew the $2.0 billion of term loans for the GeoSouthern transaction, and the amount was subsequently repaid on June 30, 2014 with the Canadian divestiture proceeds that were repatriated to the U.S. in June 2014, at which point the term loan was terminated.

Other Notes

In 2012, 2011, 2009 and 2002, Devon issued senior notes that are unsecured and unsubordinated obligations of Devon. Devon used the net proceeds to repay outstanding commercial paper and credit facility borrowings. The schedule below summarizes the key terms of these notes (in millions).


	Date Issued
	May 2012		July 2011		January 2009		March 2002

1.875% due May 15, 2017 (1)	$	750	$	-	$	-	$	-
3.25% due May 15, 2022		1,000		-		-		-
4.75% due May 15, 2042		750		-		-		-
2.40% due July 15, 2016 (1)		-		500		-		-
4.00% due July 15, 2021		-		500		-		-
5.60% due July 15, 2041		-		1,250		-		-
5.625% due January 15, 2014 (2)		-		-		500		-
6.30% due January 15, 2019		-		-		700		-
7.95% due April 15, 2032		-		-		-		1,000
Discount and issuance costs		(35)		(29)		(13)		(14)
Net proceeds	$	2,465	$	2,221	$	1,187	$	986

__________________________

(1) The 1.875% $750 million note due May 15, 2017 and 2.4% $500 million note due July 15, 2016 were redeemed on November 13, 2014.

(2) The 5.625% $500 million note due January 15, 2014 was redeemed upon maturity.

Ocean Debt

On April 25, 2003, Devon merged with Ocean Energy, Inc. and assumed certain debt instruments. The table below summarizes the debt assumed that remains outstanding as of December 31, 2014, including the fair value of the debt at April 25, 2003 and the effective interest rate of the debt after determining the fair values using April 25, 2003 market interest rates. The premiums resulting from fair values exceeding face values are being amortized using the effective interest method. Both notes are general unsecured obligations of Devon.


	Fair Value of Debt Assumed		Effective Rate of Debt Assumed

Debt Assumed		(In millions)
8.250% due July 2018 (principal of $125 million)	$	147		5.5%
7.500% due September 2027 (principal of $150 million)	$	169		6.5%

7.875% Debentures due September 30, 2031

In October 2001, Devon, through Devon Financing Corporation, U.L.C. (“Devon Financing”), a wholly owned finance subsidiary, sold debentures, which are unsecured and unsubordinated obligations of Devon Financing. Devon has fully and unconditionally guaranteed, on an unsecured and unsubordinated basis, the obligations of Devon Financing under the debt securities. The proceeds were used to fund a portion of the acquisition of Anderson Exploration.

EnLink Debt

All of EnLink’s and the General Partner’s debt is non-recourse to Devon.

The table below summarizes the fair value of EnLink’s debt as of March 7, 2014, the formation date of EnLink. The premiums are being amortized using the effective interest method.


	March 7, 2014 Fair Value of Debt		Effective Rate of Debt
	(In millions)
8.875% due February 15, 2018 (principal of $725 million) (1)	$	760	7.7%
7.125% due June 1, 2022 (principal of $197 million)		226	5.3%
Credit facilities		468
Total long-term debt	$	1,454

__________________________

(1) The 2018 senior notes were redeemed on April 18, 2014.

EnLink has a $1.0 billion unsecured revolving credit facility. As of December 31, 2014, there were $14 million in outstanding letters of credit and $237 million outstanding borrowings under the $1.0 billion credit facility, leaving $749 million available for future borrowing.

The $1.0 billion credit facility matures on the fifth anniversary of the initial funding date, which was March 7, 2014, unless EnLink requests, and the requisite lenders agree, to extend it pursuant to its terms. On February 5, 2015, the commitments under EnLink’s credit facility were increased to $1.5 billion, and the maturity date was extended by a year to March 7, 2020.

The credit facility contains certain financial, operational and legal covenants. Among other things, these covenants include maintaining a ratio of EnLink’s consolidated indebtedness to consolidated EBITDA (as defined in the credit facility, which definition includes projected EBITDA from certain capital expansion projects) of no more than 5.0 to 1.0. If EnLink consummates one or more acquisitions in which the aggregate purchase price is $50 million or more, the maximum allowed ratio of EnLink’s consolidated indebtedness to consolidated EBITDA may increase to 5.5 to 1.0 for the quarter of the acquisition and the three following quarters.

Additionally, as of December 31, 2014, E2 Energy Services, LLC had certain promissory notes outstanding related to its vehicle fleet in the amount of $0.4 million due in increments through July 2017.

The General Partner also has a $250 million revolving credit facility. As of December 31, 2014, the General Partner had no outstanding borrowings under the $250 million credit facility.

The $250 million credit facility will mature on March 7, 2019. The credit facility contains certain financial, operational and legal covenants. The financial covenants are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter, and include (i) maintaining a maximum consolidated leverage ratio (as defined in the credit facility, but generally computed as the ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation, amortization and certain other noncash charges) of 4.00 to 1.00, provided that the maximum consolidated leverage ratio is 4.50 to 1.00 during an acquisition period (as defined in the credit facility) and (ii) maintaining a minimum consolidated interest coverage ratio (as defined in the credit facility, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other noncash charges to consolidated interest charges) of 2.50 to 1.00 at all times unless an investment grade event (as defined in the credit facility) occurs. EnLink and the General Partner are in compliance with all such covenants as of December 31, 2014.

On March 19, 2014, EnLink issued $1.2 billion aggregate principal amount of unsecured senior notes, consisting of $400 million aggregate principal amount of its 2.70% senior notes due 2019, $450 million aggregate principal amount of its 4.40% senior notes due 2024 and $350 million aggregate principal amount of its 5.60% senior notes due 2044, at discounts of their face value. The 2019 notes mature on April 1, 2019, the 2024 notes mature on April 1, 2024 and the 2044 notes mature on April 1, 2044. The interest payments on the notes are due semi-annually in arrears in April and October.

On November 12, 2014, EnLink issued $100 million aggregate principal amount of its 4.40% senior notes due 2024 and $300 million aggregate principal amount of its 5.05% senior notes due 2045, at a premium and discount, respectively, of their face value. The 2024 notes were offered as an additional issue of EnLink’s outstanding 4.40% senior notes due 2024, issued in an aggregate principal amount of $450 million on March 19, 2014. The 2024 notes and the notes issued March 19, 2014 are treated as a single class of debt securities and have identical terms, other than the issue date. The 2045 notes mature on April 1, 2045, and interest payments on the 2045 notes are due semi-annually in arrears in April and October.

Net Financing Costs

The following schedule includes the components of net financing costs.


	Year Ended December 31,
	2014		2013		2012

	(In millions)
Interest based on debt outstanding	$	546	$	466	$	440
Early retirement of debt		48		-		-
Capitalized interest		(70)		(56)		(48)
Other fees and expenses		12		27		14
Interest expense		536		437		406
Interest income		(10)		(20)		(36)
Net financing costs	$	526	$	417	$	370