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Discontinued Operations | 12 Months Ended
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Dec. 31, 2020
Discontinued Operations And Disposal Groups [Abstract] |
Discontinued Operations |
1 9. | Discontinued Operations
Barnett Shale On December 17, 2019, Devon announced that it had entered into an agreement to sell its Barnett Shale assets to BKV. Devon concluded that the transaction was a strategic shift and met the requirements of assets held for sale and discontinued operations upon the authorization to enter the agreement by Devon’s Board of Directors. As part of its assessment, Devon effectively exited its last natural gas focused asset and the transaction resulted in a material reduction to total assets, revenues, net earnings and total proved reserves. Estimated proved reserves associated with Devon’s Barnett Shale assets were approximately 45% of the total proved reserves. As a result, Devon classified the results of operations and cash flows related to its Barnett Shale assets, inclusive of Barnett properties divested in previous reporting periods located primarily in Johnson and Wise counties, Texas, as discontinued operations on its consolidated financial statements. In conjunction with the divestiture agreement, which was amended in April 2020, Devon recognized a $182 million and $748 million asset impairment related to the Barnett Shale assets in 2020 and 2019, respectively, primarily due to the difference between the net carrying value and the purchase price, net of estimated customary purchase price adjustments, which qualifies as a level 2 fair value measurement. Approximately $88 million of the U.S. reporting unit goodwill was allocated to the Barnett Shale assets. Additionally, Devon ceased depreciation for all plant, property and equipment classified as assets held for sale on the date the sales agreement was approved by the Board of Directors. On October 1, 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, of $490 million, including a $170 million deposit previously received in April 2020. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commences on January 1, 2021 and has a term of four years. The valuation of the future contingent earnout payments included within other current assets in the December 31, 2020 balance sheet was $66 million. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement. As of December 31, 2020, Devon has classified approximately $20 million of cash as restricted cash on the consolidated balance sheets for obligations associated with the abandonment of certain gas processing contracts related to divestitures of other Barnett Shale assets that occurred in 2018. Cash payments for these charges total approximately $2 million per quarter. Canada In the second quarter of 2019, Devon completed the sale of its Canadian business for $2.6 billion ($3.4 billion Canadian dollars), net of purchase price adjustments, and recognized a pre-tax gain of $223 million ($425 million net of tax, primarily due to a significant deferred tax benefit) in 2019. Current (cash) income and withholding taxes associated with the Canadian business were approximately $175 million and were paid in the first half of 2020. Devon concluded that the transaction was a strategic shift and met the requirements of assets held for sale and discontinued operations based upon the following: 1) Devon was exiting its entire heavy oil and Canadian operations; 2) Devon’s Canadian operations were a separate reportable segment and a component of Devon’s business; and 3) the transaction resulted in a material reduction in total assets, revenues, net earnings and total proved reserves. The disposition of substantially all of Devon’s Canadian oil and gas assets resulted in Devon releasing its historical cumulative foreign currency translation adjustment of $1.2 billion from accumulated other comprehensive earnings to be included within the gain computation. The historical cumulative foreign currency translation portion of the gain is not taxable. During the third quarter of 2019, Devon utilized a portion of the sales proceeds to early retire $500 million of the 4.00% senior notes due July 15, 2021 and $1.0 billion of the 3.25% senior notes due May 15, 2022. Devon recognized a charge on the early retirement of these notes consisting of $52 million in cash retirement costs and $6 million of noncash charges. As of December 31, 2020, Devon has classified approximately $170 million of cash as restricted cash on the consolidated balance sheets for obligations retained related to the Canadian business. The remaining obligations consist of a firm transportation agreement and office leases. Cash payments for these charges total approximately $8 million per quarter. EnLink On June 6, 2018, Devon announced that it had entered into an agreement to sell its aggregate ownership interests in EnLink and the General Partner for $3.125 billion. Upon entering into the agreement to sell its ownership interest in June 2018, Devon concluded that the transaction was a strategic shift and met the requirements of assets held for sale and discontinued operations. As a result, Devon classified the results of operations and cash flows related to EnLink and the General Partner as discontinued operations on its consolidated financial statements. On July 18, 2018, Devon completed the sale of its aggregate ownership interests in EnLink and the General Partner for $3.125 billion and recognized a gain of approximately $2.6 billion ($2.2 billion after-tax). Current (cash) income tax associated with the transaction was approximately $12 million. The vast majority of the tax effect relates to deferred tax expense offset by the valuation allowance adjustment. As part of the sale agreement, Devon extended its fixed-fee gathering and processing contracts with respect to the Bridgeport and Cana plants with EnLink through 2029. Although the agreements were extended to 2029, the minimum volume commitments for the Bridgeport and Cana plants expired at the end of 2018. Devon had minimum volume commitments for gathering and processing of 77-128 MMcf/d with EnLink at the Chisholm plant which expired at the end of 2020. Prior to the divestment of Devon’s aggregate ownership of EnLink and the General Partner, certain activity between Devon and EnLink were eliminated in consolidation. Subsequent to the divestment, all activity related to EnLink represent third-party transactions and are no longer eliminated in consolidation. During 2020, 2019 and from the period of July 19, 2018 through December 31, 2018, Devon had net outflows of approximately $430 million, $560 million and $380 million with EnLink, respectively, which primarily related to gathering and processing expenses. These net outflows represent gross cash amounts and not net working interest amounts. The following table presents the amounts reported in the consolidated statements of comprehensive earnings as discontinued operations.
Year ended December 31, |  | Barnett Shale |  |  | Canada |  |  | EnLink |  |  | Total |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil, gas and NGL sales |  | $ | 263 |  |  | $ | — |  |  | $ | — |  |  | $ | 263 |
Total revenues |  |  | 263 |  |  |  | — |  |  |  | — |  |  |  | 263 |
Production expenses |  |  | 214 |  |  |  | — |  |  |  | — |  |  |  | 214 |
Asset impairments |  |  | 182 |  |  |  | — |  |  |  | — |  |  |  | 182 |
Asset dispositions |  |  | (4 | ) |  |  | 5 |  |  |  | — |  |  |  | 1 |
General and administrative expenses |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 3 |
Financing costs, net |  |  | — |  |  |  | (3 | ) |  |  | — |  |  |  | (3 | )
Restructuring and transaction costs |  |  | — |  |  |  | 9 |  |  |  | — |  |  |  | 9 |
Other expenses |  |  | 10 |  |  |  | (1 | ) |  |  | — |  |  |  | 9 |
Total expenses |  |  | 402 |  |  |  | 13 |  |  |  | — |  |  |  | 415 |
Earnings (loss) from discontinued operations before income taxes |  |  | (139 | ) |  |  | (13 | ) |  |  | — |  |  |  | (152 | )
Income tax benefit |  |  | (11 | ) |  |  | (13 | ) |  |  | — |  |  |  | (24 | )
Net earnings (loss) from discontinued operations, net of tax |  | $ | (128 | ) |  | $ | — |  |  | $ | — |  |  | $ | (128 | )
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil, gas and NGL sales |  | $ | 486 |  |  | $ | 741 |  |  | $ | — |  |  | $ | 1,227 |
Oil, gas and NGL derivatives |  |  | — |  |  |  | (113 | ) |  |  | — |  |  |  | (113 | )
Marketing and midstream revenues |  |  | — |  |  |  | 38 |  |  |  | — |  |  |  | 38 |
Total revenues |  |  | 486 |  |  |  | 666 |  |  |  | — |  |  |  | 1,152 |
Production expenses |  |  | 306 |  |  |  | 293 |  |  |  | — |  |  |  | 599 |
Exploration expenses |  |  | — |  |  |  | 13 |  |  |  | — |  |  |  | 13 |
Marketing and midstream expenses |  |  | — |  |  |  | 18 |  |  |  | — |  |  |  | 18 |
Depreciation, depletion and amortization |  |  | 77 |  |  |  | 128 |  |  |  | — |  |  |  | 205 |
Asset impairments |  |  | 748 |  |  |  | 37 |  |  |  | — |  |  |  | 785 |
Asset dispositions |  |  | 1 |  |  |  | (223 | ) |  |  | — |  |  |  | (222 | )
General and administrative expenses |  |  | — |  |  |  | 34 |  |  |  | — |  |  |  | 34 |
Financing costs, net |  |  | — |  |  |  | 87 |  |  |  | — |  |  |  | 87 |
Restructuring and transaction costs |  |  | — |  |  |  | 248 |  |  |  | — |  |  |  | 248 |
Other expenses |  |  | 11 |  |  |  | 6 |  |  |  | — |  |  |  | 17 |
Total expenses |  |  | 1,143 |  |  |  | 641 |  |  |  | — |  |  |  | 1,784 |
Earnings (loss) from discontinued operations before income taxes |  |  | (657 | ) |  |  | 25 |  |  |  | — |  |  |  | (632 | )
Income tax benefit |  |  | (142 | ) |  |  | (216 | ) |  |  | — |  |  |  | (358 | )
Net earnings (loss) from discontinued operations, net of tax |  | $ | (515 | ) |  | $ | 241 |  |  | $ | — |  |  | $ | (274 | )
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil, gas and NGL sales |  | $ | 777 |  |  | $ | 814 |  |  | $ | — |  |  | $ | 1,592 |
Oil, gas and NGL derivatives |  |  | — |  |  |  | 151 |  |  |  | — |  |  |  | 150 |
Marketing and midstream revenues |  |  | — |  |  |  | 95 |  |  |  | 3,567 |  |  |  | 3,662 |
Total revenues |  |  | 777 |  |  |  | 1,060 |  |  |  | 3,567 |  |  |  | 5,404 |
Production expenses |  |  | 467 |  |  |  | 605 |  |  |  | — |  |  |  | 1,072 |
Exploration expenses |  |  | — |  |  |  | 48 |  |  |  | — |  |  |  | 48 |
Marketing and midstream expenses |  |  | — |  |  |  | 42 |  |  |  | 2,912 |  |  |  | 2,954 |
Depreciation, depletion and amortization |  |  | 100 |  |  |  | 330 |  |  |  | 244 |  |  |  | 674 |
Asset dispositions |  |  | 14 |  |  |  | — |  |  |  | (2,607 | ) |  |  | (2,593 | )
General and administrative expenses |  |  | — |  |  |  | 76 |  |  |  | 65 |  |  |  | 141 |
Financing costs, net |  |  | — |  |  |  | 14 |  |  |  | 98 |  |  |  | 112 |
Restructuring and transaction costs |  |  | — |  |  |  | 17 |  |  |  | — |  |  |  | 17 |
Other expenses |  |  | (34 | ) |  |  | 182 |  |  |  | (8 | ) |  |  | 140 |
Total expenses |  |  | 547 |  |  |  | 1,314 |  |  |  | 704 |  |  |  | 2,565 |
Earnings (loss) from discontinued operations before income taxes |  |  | 230 |  |  |  | (254 | ) |  |  | 2,863 |  |  |  | 2,839 |
Income tax expense (benefit) |  |  | 50 |  |  |  | (124 | ) |  |  | 403 |  |  |  | 329 |
Net earnings (loss) from discontinued operations, net of tax |  |  | 180 |  |  |  | (130 | ) |  |  | 2,460 |  |  |  | 2,510 |
Net earnings attributable to noncontrolling interests |  |  | — |  |  |  | — |  |  |  | 160 |  |  |  | 160 |
Net earnings (loss) from discontinued operations, attributable to Devon |  | $ | 180 |  |  | $ | (130 | ) |  | $ | 2,300 |  |  | $ | 2,350 |
Prior to December 31, 2020, activity on the consolidated statement of comprehensive earnings and assets and liabilities on the consolidated balance sheet related to Devon’s Barnett Shale and Canadian operations were classified as discontinued operations. Under the terms of the Canadian and Barnett disposition agreements, Devon retained certain long-term obligations for firm transportation, office leases and potential income tax matters. Appropriate assets and liabilities related to these obligations have been recognized on Devon's consolidated balance sheet. Because these amounts will be settled over a period extending as far as 13 years in the future, these assets and liabilities have been reclassified as part of Devon's continuing operations as of December 31, 2020. The following table presents the carrying amounts of the assets and liabilities associated with discontinued operations on the consolidated balance sheet as of December 31, 2019.
|  | As of December 31, 2019 |
|  | Barnett Shale |  |  | Canada |  |  | Total |
Accounts receivable |  | $ | 38 |  |  | $ | 1 |  |  | $ | 39 |
Other current assets |  |  | 5 |  |  |  | 2 |  |  |  | 7 |
Oil and gas property and equipment, based on successful efforts accounting, net |  |  | 751 |  |  |  | — |  |  |  | 751 |
Other property and equipment, net |  |  | 11 |  |  |  | — |  |  |  | 11 |
Goodwill |  |  | 88 |  |  |  | — |  |  |  | 88 |
Other long-term assets |  |  | — |  |  |  | 81 |  |  |  | 81 |
Total assets associated with discontinued operations |  | $ | 893 |  |  | $ | 84 |  |  | $ | 977 |
Accounts payable |  | $ | 15 |  |  | $ | 4 |  |  | $ | 19 |
Revenues and royalties payable |  |  | 44 |  |  |  | 3 |  |  |  | 47 |
Other current liabilities |  |  | 19 |  |  |  | 233 |  |  |  | 252 |
Asset retirement obligations |  |  | 141 |  |  |  | — |  |  |  | 141 |
Other long-term liabilities |  |  | 16 |  |  |  | 169 |  |  |  | 185 |
Total liabilities associated with discontinued operations |  | $ | 235 |  |  | $ | 409 |  |  | $ | 644 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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