DBRS Confirms Devon Energy at BBB (high), R-2 (high), Stable Trend

DBRS has today confirmed the Senior Unsecured Debt ratings of Devon Energy Corporation (Devon or the Company) and its subsidiary, Devon Finance Corporation (Devon Finance), at BBB (high) and the Company’s Commercial Paper at R-2 (high). All trends are Stable. The Devon Finance debt rating is based on the guarantee of the Company. The ratings confirmation reflects Devon’s strong asset base, substantial growth prospects and solid financial profile.

Devon benefits from a strong reserve profile with above-average production growth and a large portfolio of potential exploration and development expansion prospects in North America. With its continued focus on liquids-rich natural gas project developments, such as the Barnett Shale formation and production at the Jackfish operation in the oil sands, the production mix will gradually become more balanced (34% liquids, 66% natural gas in 2011). Assuming a continued favorable pricing environment for liquids, Devon’s financial profile should remain strong with a higher proportion of liquids in the production mix. The Company has also significantly decreased its operational risk through a completed divestiture of its International and Gulf of Mexico (GOM) assets in mid-2010. With all production and reserves located in North America, the Company has minimized its political risk exposure.

Devon has maintained a solid balance sheet and financial flexibility through 2011. The Company had a conservative debt-to-capital ratio of 31% and total debt-to-cash flow of 1.50 times at December 31, 2011. Though both increased from 2010, these ratios still compare favorably with Devon’s BBB (high) rated peers. The Company also had adequate liquidity with $7 billion cash on hand and an available credit facility. DBRS expects the Company to maintain its financial profile within the rating category. However, if the Company continues to pursue aggressive share repurchases and capital programs after the divestiture proceeds are largely used, credit metrics could deteriorate significantly, triggering negative rating implications.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The rating of Devon Finance Corporation is based on the irrevocable guarantee of Devon Energy Corporation.

The applicable methodology is Rating Oil and Gas Companies, which can be found on our website under Methodologies.