Debt And Related Expenses

6 Months Ended

Jun. 30, 2021

13.	Debt and Related Expenses

See below for a summary of debt instruments and balances. The notes and debentures are senior, unsecured obligations of Devon.

	June 30, 2021			December 31, 2020
8.25% due August 1, 2023 ⁽¹⁾	$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾		472			—
5.85% due December 15, 2025		485			485
7.50% due September 15, 2027		73			73
5.25% due October 15, 2027 ⁽¹⁾		390			—
5.875% due June 15, 2028 ⁽¹⁾		325			—
4.50% due January 15, 2030 ⁽¹⁾		585			—
7.875% due September 30, 2031		675			675
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium (discount) on debentures and notes		171			(20	)
Debt issuance costs		(32	)		(31	)
Total long-term debt	$	6,502		$	4,298

(1)

These instruments were assumed by Devon in January 2021 in conjunction with the Merger. Subsequent to debt retirements and the obligor exchange transaction completed during the first six months of 2021, approximately $51 million of these instruments remain the unsecured and unsubordinated obligation of WPX, a wholly-owned subsidiary of Devon.

Debt maturities as of June 30, 2021, excluding debt issuance costs, premiums and discounts, are as follows:

	Total
2022	$	—
2023		242
2024		472
2025		485
2026		—
Thereafter		5,164
Total	$	6,363

The following schedule includes the summary of the WPX debt Devon assumed upon closing of the Merger on January 7, 2021.

	Face Value		Fair Value		Optional Redemption⁽¹⁾
6.00% due January 15, 2022	$	43	$	44
8.25% due August 1, 2023		242		281	June 1, 2023
5.25% due September 15, 2024		472		530	June 15, 2024
5.75% due June 1, 2026		500		529	June 1, 2021
5.25% due October 15, 2027		600		646	October 15, 2022
5.875% due June 15, 2028		500		554	June 15, 2023
4.50% due January 15, 2030		900		978	January 15, 2025
	$	3,257	$	3,562

(1)

At any time prior to these dates, Devon has or had the option to redeem (i) some or all of the notes at a specified "make whole" premium and (ii) a portion of certain of the notes at applicable redemption prices, in each case as described in the indenture documents governing the notes to be redeemed. On or after these dates, Devon has or had the option to redeem the notes, in whole or in part, at the applicable redemption prices set forth in the indenture documents, plus accrued and unpaid interest thereon to the redemption date as more fully described in such documents.

Credit Lines

Devon has a $3.0 billion Senior Credit Facility. As of June 30, 2021, Devon had no outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under this 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%. Under the terms of the credit agreement, total capitalization is adjusted to add back non-cash financial write-downs such as impairments. As of June 30, 2021, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 25.6%.

Retirement of Senior Notes

In the first six months of 2021, Devon redeemed $43 million of the 6.00% senior notes due 2022, $175 million of the 5.875% senior notes due 2028, $315 million of the 4.50% senior notes due 2030, $210 million of the 5.25% senior notes due 2027 and $500 of the 5.75% senior notes due 2026. In the first six months of 2021, Devon recognized $30 million of gains on early retirement of debt, consisting of $89 million of non-cash premium accelerations, partially offset by $59 million of cash retirement costs. The gain on early retirement is included in financing costs, net in the consolidated statements of comprehensive earnings.

Net Financing Costs

The following schedule includes the components of net financing costs.

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest based on debt outstanding	$	98		$	65		$	203		$	130
Gain on early retirement of debt		(10	)		—			(30	)		—
Interest income		—			(2	)		(1	)		(7	)
Other		(8	)		6			(15	)		11
Total net financing costs	$	80		$	69		$	157		$	134