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Acquisition and Divestitures | 9 Months Ended
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Sep. 30, 2021
Business Combinations [Abstract] |
Acquisition and Divestitures | 2.Acquisitions and Divestitures WPX Merger On January 7, 2021, Devon and WPX completed an all-stock merger of equals. WPX was an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. No fractional shares of Devon’s common stock were issued in the Merger, and holders of WPX common stock instead received cash in lieu of fractional shares of Devon common stock, if any. Based on the closing price of Devon’s common stock on January 7, 2021, the total value of Devon common stock issued to holders of WPX common stock as part of this transaction was approximately $5.4 billion. The Merger was structured as a tax-free reorganization for United States federal income tax purposes. Purchase Price Allocation The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries have been recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Merger. Determining the fair value of the assets and liabilities of WPX requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of WPX’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy. The following table represents the preliminary allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.
|  | Preliminary Purchase |
|  | Price Allocation |
|  | as of September 30, 2021 |
Consideration: |  |  |  |
WPX Common Stock outstanding |  |  | 561.2 |
Exchange Ratio |  |  | 0.5165 |
Devon common stock issued |  |  | 289.9 |
Devon closing price on January 7, 2021 |  | $ | 18.57 |
Total common equity consideration |  |  | 5,383 |
Share-based replacement awards |  |  | 49 |
Total consideration |  | $ | 5,432 |
Assets acquired: |  |  |  |
Cash, cash equivalents and restricted cash |  | $ | 344 |
Accounts receivable |  |  | 425 |
Other current assets |  |  | 49 |
Right-of-use assets |  |  | 38 |
Proved oil and gas property and equipment |  |  | 7,017 |
Unproved and properties under development |  |  | 2,362 |
Other property and equipment |  |  | 485 |
Investments |  |  | 400 |
Other long-term assets |  |  | 43 |
Total assets acquired |  | $ | 11,163 |
Liabilities assumed: |  |  |  |
Accounts payable |  | $ | 346 |
Revenue and royalties payable |  |  | 223 |
Other current liabilities |  |  | 454 |
Debt |  |  | 3,562 |
Lease liabilities |  |  | 38 |
Asset retirement obligations |  |  | 94 |
Deferred income taxes |  |  | 249 |
Other long-term liabilities |  |  | 765 |
Total liabilities assumed |  |  | 5,731 |
Net assets acquired |  | $ | 5,432 |
WPX Revenues and Earnings The following table represents WPX’s revenues and earnings included in Devon’s consolidated statements of comprehensive earnings subsequent to the closing date of the Merger.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2021 |
Total revenues |  | $ | 1,564 |  |  | $ | 3,977 |
Net earnings |  | $ | 414 |  |  | $ | 969 |
Pro Forma Financial Information Due to the Merger closing on January 7, 2021, all activity in the first nine months of 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive earnings for the nine months ended September 30, 2021. The following unaudited pro forma financial information for the three and nine months ended September 30, 2020 is based on our historical consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2020. The information below reflects pro forma adjustments to conform WPX’s historical financial information to Devon’s financial statement presentation. The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it indicative of future results.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
Continuing operations: |  | 2020 |  |  | 2020 |
Total revenues |  | $ | 1,540 |  |  | $ | 5,452 |
Net loss |  | $ | (281 | ) |  | $ | (3,247 | )
Basic net loss per share |  | $ | (0.42 | ) |  | $ | (4.87 | )
Divestitures In the first quarter of 2021, Devon completed the sale of non-core assets in the Rockies for proceeds of $9 million, net of purchase price adjustments, and recognized a $35 million gain related to the sale. The transaction includes contingent earnout payments of up to $8 million. The total estimated proved reserves associated with these divested assets was approximately 3 MMBoe. As of December 31, 2020, the associated assets and liabilities were classified as assets held for sale and included in other current assets and other current liabilities, respectively. In the fourth quarter of 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, of $490 million. The agreement with BKV also 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 commenced on January 1, 2021 and has a term of four years. The valuation of the future contingent earnout payments included within other current assets and other long-term assets in the September 30, 2021 consolidated balance sheet was $46 million and $85 million, respectively. During the first nine months of 2021, Devon recorded a $65 million increase to the fair value within asset dispositions on the consolidated statements of comprehensive earnings. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement. Additional information can be found in Note 17.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: 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 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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