Devon Energy's Earnings Climb to $6.34 Per Share in 2006; Proved Reserves Reach Record 2.4 Billion Barrels

OKLAHOMA CITY, Feb. 7 /PRNewswire-FirstCall/ -- Devon Energy Corporation today reported net earnings of $2.8 billion for the year ended December 31, 2006. Earnings per share were $6.42 per common share ($6.34 per diluted common share). In 2005 the company earned $2.9 billion, or $6.38 per common share ($6.26 per diluted common share).

For the quarter ended December 31, 2006, Devon reported net earnings of $582 million, or $1.31 per common share ($1.29 per diluted common share). This compares to reported earnings of $970 million or $2.18 per common share ($2.14 per diluted common share) in the fourth quarter of 2005.

In aggregate, items securities analysts typically exclude from their published estimates reduced reported fourth-quarter 2006 net earnings by $28 million, or seven cents per diluted share. These items include non-cash charges, unrealized gains and other items discussed in detail later in this news release.

"From almost every perspective, 2006 was an outstanding year for Devon," commented J. Larry Nichols, chairman and chief executive officer. "We invested over $5 billion in exploration and development projects adding more than 400 million barrels of proved reserves. These investments fortified our North American onshore production base and moved our major development projects toward completion in 2007. In addition, our successful production test in the Gulf of Mexico's Lower Tertiary Trend validated our long-term growth strategy and set the stage to extend Devon's growth trajectory well into the next decade."

Oil and Gas Reserves Climb to Record Levels Capital and Reserve Summary Year Ended December 31, 2006 2005 Drill-bit Capital (in millions) $5,236 $3,952 Reserve Data (MMBoe) Discoveries and extensions 433 400 Revisions other than price (6) 37 Drill-bit and performance reserve additions 427 437

Devon's estimated proved reserves at December 31, 2006, were a record 2,376 million oil-equivalent barrels (Boe). This is a 13 percent increase over year-end 2005 estimated proved reserves. Reserve additions from all sources before price revisions were 533 million Boe, more than double the company's annual oil and gas production of 214 million Boe. During 2006, Devon's reserve life index (proved reserves divided by annual production) increased from 9.4 years to 11.1 years.

Devon added 427 million Boe through successful drilling (discoveries, extensions and performance revisions) in 2006. The company also acquired 106 million Boe in 2006, primarily through the purchase of Chief's Barnett Shale natural gas properties. Revisions, largely related to changes in year-end oil and gas prices, reduced 2006 proved reserves by 50 million Boe.

Proved developed reserves were 1,674 million Boe at December 31, 2006, or 70 percent of proved reserves. Year-end reserves comprised 708 million barrels of crude oil, 8.4 trillion cubic feet of natural gas and 275 million barrels of natural gas liquids.

Active Year Yields Many Exploration and Development Achievements

Devon drilled more than 2,400 wells in 2006, with a success rate of 98 percent. Following are highlights from the year's operations activity.

* Devon dramatically increased its presence in the Barnett Shale in north Texas in 2006 by completing the $2.2 billion acquisition of Chief. The acquired properties include estimated proved reserves of approximately 600 billion cubic feet of natural gas equivalent and leasehold totaling 169,000 net acres with some 2,000 additional drilling locations. * The company's United States onshore properties, including the Barnett Shale and the Groesbeck and Carthage areas in east Texas, showed strong production growth in 2006. Total fourth-quarter production for the U.S. onshore increased seven percent in 2006 compared with 2005. * Devon and its co-owners conducted a successful production test of the deepwater Jack No. 2 well in the Gulf of Mexico's Lower Tertiary Trend. During the test, the Jack No. 2 flowed at a sustained rate of 6,000 barrels of oil per day from approximately 40 percent of the total net pay measured in the well. The successful production test was an important milestone in moving the Jack project toward sanctioning and development. Devon has a 25 percent working interest in the Jack prospect. * Also in the Lower Tertiary Trend, the company increased its working interest in the Cascade project from 25 percent to 50 percent. Devon and equal-partner Petrobras plan to develop Cascade using a floating production, storage and offloading vessel. The partners anticipate first production from Cascade in late 2009. * Elsewhere in the Lower Tertiary Trend, Devon and its co-owners announced an oil discovery on the Kaskida prospect. Kaskida is Devon's fourth discovery in the Lower Tertiary Trend and its first in the Keathley Canyon deepwater lease area. Devon has identified 12 additional exploratory prospects on its acreage in Keathley Canyon. The company believes that Kaskida, in which it has a 20 percent working interest, is the largest of its four Lower Tertiary discoveries to date. * In the fourth quarter of 2006, the company announced a Miocene-aged oil discovery on the Mission Deep prospect in the Gulf of Mexico. The well, in 7,300 feet of water, was drilled to 25,000 feet and encountered more than 250 feet of net oil pay. The company has 15 additional prospects in its deepwater Miocene inventory. Devon has a 50 percent working interest in Mission Deep, which is operated by Anadarko. * At the 100 percent-owned Jackfish thermal heavy oil project in Canada, facilities construction and drilling continued in 2006. Devon expects to commence steam injection at Jackfish in the second quarter of 2007, with full production of 35,000 barrels per day anticipated by the end of 2008. * Construction and fabrication for the 50 million barrel Polvo oil development project in Brazil continued on schedule throughout 2006. Devon expects first production from Polvo in mid-2007. Devon operates Polvo with a 60 percent working interest. African Operations Designated for Divestiture

In the fourth quarter of 2006, Devon announced its intention to divest its assets and terminate operations in Egypt. In accordance with accounting standards, Devon reclassified the assets, liabilities and results of its operations in Egypt as discontinued operations for all accounting periods presented. Therefore, Devon's annual and quarterly results from continuing operations for all periods presented in this release exclude results attributable to Egypt. Although revenues and expenses for prior periods were reclassified, there was no impact upon previously reported net earnings. Included with the financial information that follows is a table of revenues, expenses and production categories and the amounts reclassified as discontinued operations for each period presented.

Early in the first quarter of 2007, the company announced that it plans to divest its assets and terminate operations in West Africa. Therefore, commencing with reporting for the first quarter of 2007, Devon will also reclassify the assets, liabilities and results of its operations in West Africa as discontinued operations.

Oil, Gas and Liquids Sales Remain Steady

Sales of oil, gas and natural gas liquids increased less than one percent to $8.9 billion in the year ended December 31, 2006, compared with the year ended December 31, 2005. The positive effects of higher realized oil and natural gas liquids prices were largely offset by lower realized natural gas prices and a decline in oil and gas production.

Combined oil, gas and natural gas liquids production averaged 587 thousand Boe per day in 2006. This was four percent less than Devon's 2005 average daily production of 613 thousand Boe per day. This decrease in 2006 production was driven by property divestitures completed during 2005, partially offset by growth in production from retained properties during 2006.

Devon's combined production of oil, gas and natural gas liquids production increased throughout 2006. Fourth-quarter production climbed seven percent from 574 thousand Boe per day in 2005 to 613 thousand Boe per day in 2006.

Marketing and midstream operating profit totaled $448 million in 2006, some $2 million less than Devon's marketing and midstream operating profit for 2005. Marketing and midstream revenues decreased by $100 million while related expenses decreased by $98 million.

Cash Flow Before Balance Sheet Changes Reaches Record Levels

Cash flow before balance sheet changes in 2006 climbed seven percent to a record $6.1 billion. With cash flow, cash on hand and short-term borrowings under the company's commercial paper facility, Devon funded more than $8.0 billion of capital expenditures, including the $2.2 billion property acquisition of Chief, and repurchased $253 million of common stock. The company ended the year with cash and short-term investments of approximately $1.3 billion.

At December 31, 2006, net debt to adjusted capitalization was 24 percent. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.

Items Excluded from Published Earnings Estimates

Devon's reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company's financial results. These items and their effects upon reported earnings for the full year and fourth quarter of 2006 were as follows:

* A change in fair value of derivative financial instruments decreased full-year earnings by $178 million pre-tax ($114 million after tax) and decreased fourth-quarter earnings by $97 million pre-tax ($62 million after tax). * An unrealized gain on natural gas derivative instruments increased full-year earnings by $37 million pre-tax ($24 million after tax) and increased fourth-quarter earnings by $32 million pre-tax ($21 million after tax). * A reduction in Canadian statutory income tax rates increased full-year after-tax earnings by $243 million. * A new income-based tax in the state of Texas decreased full-year after- tax earnings by $39 million. * A reduction in the carrying value of oil and gas properties reduced full-year earnings by $152 million pre-tax ($129 million after tax). * The decision to exit Egypt generated financial benefits that increased full-year and fourth-quarter earnings by $5 million pre-tax ($13 million after tax).

The following tables summarize the full-year and fourth-quarter effects of these items on 2006 earnings and income taxes. Included in the tables are the tax effects resulting from an income tax accrual adjustment that did not affect net earnings.

Summary of Items Typically Excluded by Securities Analysts - Full Year 2006 (in millions) Cash Flow Before Balance Pre-tax After-tax Sheet Earnings Income Tax Effect Earnings Changes Effect Current Deferred Total Effect Effect Change in fair value of financial instruments $(178) --- (64) (64) (114) --- Unrealized gain on natural gas derivative instruments 37 --- 13 13 24 --- Change in Canadian income tax rate --- --- (243) (243) 243 --- Texas income-based tax --- --- 39 39 (39) --- Reduction in the carrying value of properties (152) --- (23) (23) (129) --- Financial benefits generated by decision to exit Egypt 5 --- (8) (8) 13 --- Income tax accrual adjustment --- (35) 35 --- --- 35 Totals $(288) (35) (251) (286) (2) 35

In aggregate, these items decreased full-year 2006 net earnings by $2 million, or one cent per common share (no effect per diluted share). In addition, a reclassification of deferred tax benefits increased cash flow before balance sheet changes by $35 million.

Summary of Items Typically Excluded by Securities Analysts - Fourth Quarter 2006 (in millions) Cash Flow Before Balance Pre-tax After-tax Sheet Earnings Income Tax Effect Earnings Changes Effect Current Deferred Total Effect Effect Change in fair value of financial instruments $(97) --- (35) (35) (62) --- Unrealized gain on natural gas derivatives 32 --- 11 11 21 --- Financial benefits generated by decision to exit Egypt 5 --- (8) (8) 13 --- Totals $(60) --- (32) (32) (28) ---

In aggregate, these items decreased fourth-quarter 2006 net earnings by $28 million, or six cents per common share (seven cents per diluted share).

Conference Call to be Webcast Today

Devon will discuss its 2006 financial and operating results in a conference call webcast today. The webcast will begin at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast may be accessed from Devon's internet home page at http://www.devonenergy.com/ .

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward- looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is one of the world's leading independent oil and gas producers and is included in the S&P 500 Index. For more information about Devon, please visit our website at http://www.devonenergy.com/ .

DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION PRODUCTION DATA (net of royalties) All periods exclude properties Year Ended Quarter Ended discontinued in 2006 December 31, December 31, 2006 2005 2006 2005 Total Period Production Natural Gas (Bcf) U.S. Onshore 487.5 462.7 129.5 119.1 U.S. Offshore 78.6 92.5 21.4 15.0 Total U.S. 566.1 555.2 150.9 134.1 Canada 240.4 261.0 57.8 61.3 International 8.1 10.8 1.8 3.2 Total Natural Gas 814.6 827.0 210.5 198.6 Oil (MMBbls) U.S. Onshore 11.1 12.1 2.7 2.9 U.S. Offshore 8.5 13.4 2.0 2.3 Total U.S. 19.6 25.5 4.7 5.2 Canada 12.8 13.1 3.4 3.3 International 22.6 23.4 7.2 5.4 Total Oil 55.0 62.0 15.3 13.9 Natural Gas Liquids (MMBbls) U.S. Onshore 18.1 17.3 4.7 4.3 U.S. Offshore 0.5 0.8 0.1 0.0 Total U.S. 18.6 18.1 4.8 4.3 Canada 4.7 5.3 1.1 1.4 International --- 0.3 --- 0.1 Total Natural Gas Liquids 23.3 23.7 5.9 5.8 Oil Equivalent (MMBoe) U.S. Onshore 110.5 106.6 29.1 27.1 U.S. Offshore 22.0 29.6 5.6 4.8 Total U.S. 132.5 136.2 34.7 31.9 Canada 57.6 61.9 14.2 14.9 International 23.9 25.5 7.5 6.0 Total Oil Equivalent 214.0 223.6 56.4 52.8 Average Daily Production Natural Gas (MMcf) U.S. Onshore 1,335.6 1,267.6 1,407.5 1,295.0 U.S. Offshore 215.4 253.5 232.8 163.1 Total U.S. 1,551.0 1,521.1 1,640.3 1,458.1 Canada 658.7 715.1 627.9 665.9 International 22.1 29.5 19.5 34.2 Total Natural Gas 2,231.8 2,265.7 2,287.7 2,158.2 Oil (MBbls) U.S. Onshore 30.5 33.2 29.9 31.6 U.S. Offshore 23.1 36.6 21.2 25.0 Total U.S. 53.6 69.8 51.1 56.6 Canada 35.2 36.0 37.1 35.8 International 61.8 64.3 78.2 58.2 Total Oil 150.6 170.1 166.4 150.6 Natural Gas Liquids (MBbls) U.S. Onshore 49.6 47.5 51.4 46.9 U.S. Offshore 1.4 2.2 1.2 0.4 Total U.S. 51.0 49.7 52.6 47.3 Canada 12.9 14.5 12.2 15.3 International --- 0.9 --- 0.8 Total Natural Gas Liquids 63.9 65.1 64.8 63.4 Oil Equivalent (MBoe) U.S. Onshore 302.7 292.0 315.9 294.3 U.S. Offshore 60.4 81.0 61.2 52.5 Total U.S. 363.1 373.0 377.1 346.8 Canada 157.9 169.7 153.9 162.1 International 65.5 70.0 81.5 64.7 Total Oil Equivalent 586.5 612.7 612.5 573.6 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION FULL-YEAR PRODUCTION DATA - RETAINED PROPERTIES Both periods exclude properties divested in 2005 and discontinued in Year Ended 2006 December 31, YOY 2006 2005 % Change Total Period Production Natural Gas (Bcf) U.S. Onshore 487.5 455.2 7% U.S. Offshore 78.6 80.3 -2% Total U.S. 566.1 535.5 6% Canada 240.4 246.6 -3% International 8.1 10.8 -25% Total Natural Gas 814.6 792.9 3% Oil (MMBbls) U.S. Onshore 11.1 11.6 -4% U.S. Offshore 8.5 10.7 -21% Total U.S. 19.6 22.3 -12% Canada 12.8 12.4 3% International 22.6 23.4 -3% Total Oil 55.0 58.1 -5% Natural Gas Liquids (MMBbls) U.S. Onshore 18.1 17.1 6% U.S. Offshore 0.5 0.6 -17% Total U.S. 18.6 17.7 5% Canada 4.7 5.1 -8% International --- 0.3 -100% Total Natural Gas Liquids 23.3 23.1 1% Oil Equivalent (MMBoe) U.S. Onshore 110.5 104.5 6% U.S. Offshore 22.0 24.8 -11% Total U.S. 132.5 129.3 2% Canada 57.6 58.6 -2% International 23.9 25.5 -6% Total Oil Equivalent 214.0 213.4 0% Average Daily Production Natural Gas (MMcf) U.S. Onshore 1,335.6 1,247.1 7% U.S. Offshore 215.4 220.1 -2% Total U.S. 1,551.0 1,467.2 6% Canada 658.7 675.5 -2% International 22.1 29.5 -25% Total Natural Gas 2,231.8 2,172.2 3% Oil (MBbls) U.S. Onshore 30.5 31.8 -4% U.S. Offshore 23.1 29.4 -21% Total U.S. 53.6 61.2 -12% Canada 35.2 33.9 4% International 61.8 64.3 -4% Total Oil 150.6 159.4 -6% Natural Gas Liquids (MBbls) U.S. Onshore 49.6 46.6 6% U.S. Offshore 1.4 1.7 -18% Total U.S. 51.0 48.3 6% Canada 12.9 14.0 -8% International --- 0.9 -100% Total Natural Gas Liquids 63.9 63.2 1% Oil Equivalent (MBoe) U.S. Onshore 302.7 286.3 6% U.S. Offshore 60.4 67.6 -11% Total U.S. 363.1 353.9 3% Canada 157.9 160.7 -2% International 65.5 70.0 -6% Total Oil Equivalent 586.5 584.6 0% DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION REALIZED PRICE DATA Year Ended Quarter Ended (average realized prices) December 31, December 31, 2006 2005 2006 2005 Realized Prices Natural Gas ($/Mcf) U.S. Onshore $5.90 $6.90 $5.59 $9.41 U.S. Offshore $7.24 $7.95 $6.72 $11.15 Total U.S. $6.09 $7.08 $5.75 $9.61 Canada $6.05 $6.95 $5.78 $9.36 International $3.95 $3.75 $3.11 $2.74 Total Natural Gas $6.06 $6.99 $5.74 $9.42 Oil ($/Bbl) U.S. Onshore $60.70 $51.23 $54.50 $55.58 U.S. Offshore $64.24 $32.96 $57.35 $31.08 Total U.S. $62.23 $41.64 $55.68 $44.75 Canada $46.94 $26.88 $41.08 $26.09 International $61.36 $40.26 $56.58 $41.25 Total Oil $58.30 $38.00 $52.85 $38.96 Natural Gas Liquids ($/Bbl) U.S. Onshore $29.26 $26.50 $27.57 $31.16 U.S. Offshore $35.43 $30.61 $28.38 $47.72 Total U.S. $29.42 $26.68 $27.59 $31.29 Canada $42.67 $37.19 $37.78 $41.13 International $--- $22.81 $--- $21.07 Total Natural Gas Liquids $32.10 $28.96 $29.51 $33.53 Oil Equivalent ($/Boe) U.S. Onshore $36.94 $40.10 $34.57 $52.34 U.S. Offshore $51.23 $40.58 $45.96 $49.73 Total U.S. $39.31 $40.21 $36.42 $51.94 Canada $39.21 $38.17 $36.45 $48.10 International $59.24 $38.80 $55.07 $38.81 Total Oil Equivalent $41.51 $39.48 $38.91 $49.38 BENCHMARK PRICES Year Ended Quarter Ended (average prices) December 31, December 31, 2006 2005 2006 2005 Benchmark Prices Natural Gas ($/Mcf) - Henry Hub $7.24 $8.64 $6.56 $13.00 Oil ($/Bbl) - West Texas Intermediate (Cushing) $66.22 $56.57 $60.19 $60.00 PRICE DIFFERENTIALS, EXCLUDING EFFECTS OF HEDGES (average floating price differentials from benchmark Year Ended Quarter Ended prices) December 31, December 31, 2006 2005 2006 2005 Price Differentials Natural Gas ($/Mcf) U.S. Onshore $(1.41) $(1.71) $(1.21) $(3.54) U.S. Offshore $0.00 $(0.42) $0.16 $(0.50) Total U.S. $(1.22) $(1.50) $(1.02) $(3.20) Canada $(1.02) $(1.46) $(0.61) $(3.26) International $(1.15) $(3.90) $(1.90) $(9.94) Total Natural Gas $(1.16) $(1.50) $(0.91) $(3.29) Oil ($/Bbl) U.S. Onshore $(5.52) $(4.85) $(5.69) $(4.42) U.S. Offshore $(1.96) $(5.45) $(2.84) $(4.85) Total U.S. $(3.99) $(5.16) $(4.51) $(4.61) Canada $(19.28) $(15.48) $(19.11) $(19.64) International $(4.86) $(7.27) $(3.61) $(7.87) Total Oil $(7.92) $(8.14) $(7.34) $(9.44) DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per Year Ended Quarter Ended share data) December 31, December 31, 2006 2005 2006 2005 Revenues Oil sales $3,205 $2,359 $809 $540 Gas sales 4,932 5,784 1,207 1,871 Natural gas liquids sales 749 687 177 195 Marketing & midstream revenues 1,692 1,792 416 582 Total revenues 10,578 10,622 2,609 3,188 Expenses and other income, net Lease operating expenses 1,488 1,324 412 334 Production taxes 341 335 80 101 Marketing & midstream operating costs and expenses 1,244 1,342 314 421 Depreciation, depletion and amortization of oil and gas properties 2,266 1,981 634 492 Depreciation and amortization of non-oil and gas properties 176 160 47 41 Accretion of asset retirement obligation 49 43 13 9 General & administrative expenses 397 291 113 85 Interest expense 421 533 106 105 Effects of changes in foreign currency exchange rates --- (2) 1 2 Change in fair value of derivative financial instruments 178 94 97 (74) Reduction of carrying value of oil and gas properties 121 212 --- 212 Other income, net (115) (196) (30) (17) Total expenses and other income, net 6,566 6,117 1,787 1,711 Earnings from continuing operations before income tax expense 4,012 4,505 822 1,477 Income tax expense Current 819 1,218 104 397 Deferred 370 388 159 117 Total income tax expense 1,189 1,606 263 514 Earnings from continuing operations 2,823 2,899 559 963 Discontinued operations Results of discontinued operations before income taxes 22 46 19 12 Income tax (benefit) expense (1) 15 (4) 5 Net results of discontinued operations 23 31 23 7 Net earnings 2,846 2,930 582 970 Preferred stock dividends 10 10 3 3 Net earnings applicable to common stockholders $2,836 $2,920 $579 $967 Net earnings per weighted average common shares outstanding Basic $6.42 $6.38 $1.31 $2.18 Diluted $6.34 $6.26 $1.29 $2.14 Basic weighted average shares outstanding 442 458 443 443 Diluted weighted average shares outstanding 448 470 448 451 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED BALANCE SHEETS (in millions) December 31, December 31, 2006 2005 Assets Current assets Cash and cash equivalents $739 $1,593 Short-term investments 574 680 Accounts receivable 1,393 1,565 Deferred income taxes 102 158 Current assets held for sale 81 66 Other current assets 323 144 Total current assets 3,212 4,206 Property and equipment, at cost, based on the full cost method of accounting for oil and gas properties ($3,674 and $2,704 excluded from amortization in 2006 and 2005, respectively) 41,889 33,824 Less accumulated depreciation, depletion and amortization 17,294 14,913 Net property and equipment 24,595 18,911 Investment in Chevron Corporation common stock, at fair value 1,043 805 Goodwill 5,706 5,705 Assets of held for sale 185 217 Other assets 322 429 Total Assets $35,063 $30,273 Liabilities and Stockholders' Equity Current liabilities Accounts payable: Trade $1,190 $928 Revenues and royalties due to others 529 666 Income taxes payable 197 293 Current portion of long-term debt 2,205 662 Accrued interest payable 114 127 Fair value of derivative financial instruments 6 18 Current portion of asset retirement obligation 61 50 Current liabilities associated with assets held for sale 5 19 Accrued expenses and other current liabilities 338 171 Total current liabilities 4,645 2,934 Debentures exchangeable into shares of Chevron Corporation common stock 727 709 Other long-term debt 4,841 5,248 Fair value of derivative financial instruments 302 125 Asset retirement obligation, long- term 833 610 Liabilities associated with assets held for sale 25 40 Other liabilities 598 371 Deferred income taxes 5,650 5,374 Stockholders' equity Preferred stock 1 1 Common stock 44 44 Additional paid-in capital 6,840 6,928 Retained earnings 9,114 6,477 Accumulated other comprehensive income 1,444 1,414 Treasury stock (1) (2) Stockholders' Equity 17,442 14,862 Total Liabilities & Stockholders' Equity $35,063 $30,273 Common Shares Outstanding 444 443 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2006 2005 Cash Flows From Operating Activities Net earnings $2,846 $2,930 Less income from discontinued operations, net of tax (23) (31) Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion and amortization 2,442 2,141 Deferred income tax expense 370 388 Net gain on sales of non-oil and gas property and equipment (5) (150) Reduction of carrying value of oil and gas properties 121 212 Other non-cash charges 270 128 6,021 5,618 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 212 (279) Other current assets (37) (17) Long-term other assets (66) 48 Increase (decrease) in: Accounts payable (183) 255 Income taxes payable (231) 69 Debt, including current maturities --- (67) Accrued interest and expenses 78 (34) Long-term other liabilities 142 (79) Cash provided by operating activities - continuing operations 5,936 5,514 Cash provided by operating activities - discontinued operations 57 98 Net cash provided by operating activities $5,993 $5,612 Cash Flows From Investing Activities Proceeds from sales of property and equipment $40 $2,151 Capital expenditures (7,551) (4,026) Purchases of short-term investments (2,395) (4,020) Sales of short-term investments 2,501 4,307 Cash used in investing activities - continuing operations (7,405) (1,588) Cash used in investing activities - discontinued operations (44) (64) Net cash used in investing activities $(7,449) $(1,652) Cash Flows From Financing Activities Proceeds from borrowings of debt, net of issuance costs $1,808 $--- Principal payments on debt, including current maturities (862) (1,258) Proceeds from exercise of stock options 73 124 Repurchase of common stock (253) (2,263) Excess tax benefits related to share-based compensation 36 --- Dividends paid on common stock (199) (136) Dividends paid on preferred stock (10) (10) Net cash provided by (used in) financing activities $593 $(3,543) Effect of exchange rate changes on cash $13 $37 Net (decrease) increase in cash and cash equivalents (850) 454 Cash and cash equivalents at beginning of year (including discontinued operations) 1,606 1,152 Cash and cash equivalents at end of year (including discontinued operations) $756 $1,606 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION RESERVE RECONCILIATION Total Total U.S. Oil Gas NGLs Total Oil Gas NGLs Total (MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe) As of December 31, 2005: Proved developed 355 6,111 216 1,589 150 4,343 175 1,049 Proved undeveloped 285 1,185 30 513 23 821 22 183 Total proved 640 7,296 246 2,102 173 5,164 197 1,232 Production (55) (815) (23) (214) (19) (566) (19) (132) Discoveries and extensions 139 1,491 45 433 16 1,298 43 274 Divestitures --- (5) --- (1) --- --- --- --- Acquisitions --- 584 9 106 --- 580 9 105 Revisions due to prices (21) (89) (7) (44) --- (110) (3) (22) Revisions other than price 5 (106) 5 (6) --- (11) 6 5 As of December 31, 2006: Proved developed 358 6,518 229 1,674 147 4,916 196 1,163 Proved undeveloped 350 1,838 46 702 23 1,439 37 299 Total proved 708 8,356 275 2,376 170 6,355 233 1,462 U.S. Onshore U.S. Offshore Oil Gas NGLs Total Oil Gas NGLs Total (MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe) As of December 31, 2005: Proved developed 121 4,110 173 979 29 233 2 70 Proved undeveloped 8 651 20 137 15 170 2 46 Total proved 129 4,761 193 1,116 44 403 4 116 Production (11) (487) (18) (110) (8) (79) (1) (22) Discoveries and extensions 11 1,270 43 265 5 28 --- 9 Divestitures --- --- --- --- --- --- --- --- Acquisitions --- 580 9 105 --- --- --- --- Revisions due to prices --- (107) (3) (21) --- (3) --- (1) Revisions other than price (2) (38) 6 (2) 2 27 --- 7 As of December 31, 2006: Proved developed 116 4,672 194 1,089 31 244 2 74 Proved undeveloped 11 1,307 36 264 12 132 1 35 Total proved 127 5,979 230 1,353 43 376 3 109 Canada International Oil Gas NGLs Total Oil Gas NGLs Total (MMBbls)(Bcf)(MMBbls)(MMBoe)(MMBbls)(Bcf)(MMBbls)(MMBoe) As of December 31, 2005: Proved developed 103 1,708 41 429 102 60 --- 111 Proved undeveloped 150 298 8 207 112 66 --- 123 Total proved 253 2,006 49 636 214 126 --- 234 Production (13) (241) (4) (58) (23) (8) --- (24) Discoveries and extensions 109 193 2 145 14 --- --- 14 Divestitures --- (5) --- (1) --- --- --- --- Acquisitions --- 4 --- 1 --- --- --- --- Revisions due to prices (19) 23 (4) (20) (2) (2) --- (2) Revisions other than price (1) (84) (1) (16) 6 (11) --- 5 As of December 31, 2006: Proved developed 112 1,560 33 405 99 42 --- 106 Proved undeveloped 217 336 9 282 110 63 --- 121 Total proved 329 1,896 42 687 209 105 --- 227 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION COSTS INCURRED Total Total U.S. (in millions) Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Property Acquisition Costs: Total proved $1,113 $54 $1,066 $5 Total unproved $1,485 $347 $1,366 $106 Exploration and Development Costs $5,124 $3,677 $3,105 $2,019 Costs Incurred $7,722 $4,078 $5,537 $2,130 U.S. Onshore U.S. Offshore Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Property Acquisition Costs: Total proved $1,066 $3 $--- $2 Total unproved $1,311 $86 $55 $20 Exploration and Development Costs $2,479 $1,554 $626 $465 Costs Incurred $4,856 $1,643 $681 $487 Canada International Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Property Acquisition Costs: Total proved $23 $49 $24 $--- Total unproved $70 $239 $49 $2 Exploration and Development Costs $1,461 $1,381 $558 $277 Costs Incurred $1,554 $1,669 $631 $279

Devon capitalizes certain general and administrative expenses which are related to property acquisition, exploration and development activities. Such capitalized expenses, which are included in the costs shown in the preceding tables, were $269 million and $188 million in the years 2006 and 2005, respectively. In addition, Devon capitalizes certain interest expenses which are related to property development activities. Such capitalized expenses, which are also included in the costs shown in the preceding tables, were $70 million in each of the years 2006 and 2005.

Year Ended Quarter Ended CAPITAL EXPENDITURES DATA December 31, 2006 December 31, 2006 (in millions) Capital expenditures Drill-bit capital [1] $5,236 $1,433 Chief acquisition 2,210 2 Other acquisitions of proved properties 88 33 Marketing & midstream 376 129 Other 183 60 Total $8,093 $1,657 [1] Drill-bit capital, a Non-GAAP measure, is defined in a following table. DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION DRILLING ACTIVITY Year Ended December 31, 2006 2005 Total Wells Drilled U.S. 1,550 1,298 Canada 877 1,020 International 41 44 Total 2,468 2,362 Total Wells Success Rate U.S. 98% 98% Canada 99% 98% International 88% 82% Total 98% 97% COMPANY OPERATED RIGS December 31, 2006 2005 Number of Company Operated Rigs Running U.S. 58 53 Canada 11 16 International 2 3 Total 71 72 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION DETAIL OF RECLASSIFICATION FOR DISCONTINUED Year Ended Quarter Ended OPERATIONS IN EGYPT December 31, December 31, 2006 2005 2006 2005 Production from Discontinued Operations Oil (MMBbls) 1.9 2.4 0.6 0.5 Natural Gas (Bcf) --- --- --- --- Natural Gas Liquids (MMBbls) --- --- --- --- Total Oil Equivalent (MMBoe) 1.9 2.4 0.6 0.5 STATEMENT OF DISCONTINUED OPERATIONS DATA Year Ended Quarter Ended (US$ in millions) December 31, December 31, 2006 2005 2006 2005 Revenues Oil sales $118 $119 $32 $30 Expenses and other income, net Lease operating expenses 23 21 7 6 Depreciation, depletion and amortization of oil and gas properties 41 50 6 12 Depreciation and amortization of non-oil and gas properties 1 1 --- --- Accretion of asset retirement obligation --- 1 --- --- Reduction of carrying value of oil and gas properties 31 --- --- --- Total expenses and other income, net 96 73 13 18 Earnings before income tax expense 22 46 19 12 Income tax (benefit) expense Current 15 20 (4) 9 Deferred (16) (5) --- (4) Total income tax (benefit) expense (1) 15 (4) 5 Earnings from discontinued operations $23 $31 $23 $7 RESERVE DATA FOR EGYPT Oil Gas NGLs Total (MMBbls) (Bcf) (MMBbls) (MMBoe) As of December 31, 2005: Proved developed 10 --- --- 10 Proved undeveloped --- --- --- --- Total proved 10 --- --- 10 As of December 31, 2006: Proved developed 8 --- --- 8 Proved undeveloped --- --- --- --- Total proved 8 --- --- 8 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION Non-GAAP Financial Measures

The United States Securities and Exchange Commission has adopted disclosure requirements for public companies such as Devon concerning Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles.) The company must reconcile the Non-GAAP financial measure to related GAAP information. Cash flow before balance sheet changes is a Non-GAAP financial measure. Devon believes cash flow before balance sheet changes is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt. Cash flow before balance sheet changes is also used by certain securities analysts as a measure of Devon's financial results.

RECONCILIATION TO GAAP INFORMATION Year Ended Quarter Ended (in millions) December 31, December 31, 2006 2005 2006 2005 Net Cash Provided By Operating Activities (GAAP) $5,993 $5,612 $1,111 $1,960 Changes in assets and liabilities - continuing operations 84 103 423 (202) Changes in assets and liabilities - discontinued operations 14 (20) (5) (19) Cash flow before balance sheet changes (Non-GAAP) $6,091 $5,695 $1,529 $1,739

Devon believes that using net debt, defined as debt less cash, short-term investments and the market value of Chevron common stock, for the calculation of "net debt to adjusted capitalization" provides a better measure than using debt. Devon believes that because cash and short-term investments can be used to repay indebtedness, netting cash and short-term investments against debt provides a clearer picture of the future demands on cash to repay debt. Included in Devon's indebtedness are $727 million of debentures exchangeable into 14.2 million shares of Chevron common stock owned outright by Devon. As of December 31, 2006, the market value of the shares ($1.0 billion) exceeded the related debt obligation. Devon believes deducting the market value of the stock provides a clearer picture of future demands on cash to repay debt. This methodology is also utilized by various lenders, rating agencies and securities analysts as a measure of Devon's indebtedness.

RECONCILIATION TO GAAP INFORMATION (in millions) December 31, 2006 2005 Total debt (GAAP) $7,773 6,619 Adjustments: Cash and short-term investments (1,313) (2,273) Market value of Chevron Corporation common stock (1,043) (805) Net Debt (Non-GAAP) $5,417 3,541 Total Capitalization Total debt $7,773 6,619 Stockholders' equity 17,442 14,862 Total Capitalization (GAAP) $25,215 21,481 Adjusted Capitalization Net debt $5,417 3,541 Stockholders' equity 17,442 14,862 Adjusted Capitalization (Non-GAAP) $22,859 18,403 DEVON ENERGY CORPORATION FINANCIAL AND OPERATIONAL INFORMATION

Drill-bit capital is defined as costs incurred less proved acquisition costs, unproved acquisition costs resulting from business combinations and other significant similar transactions, and the net difference of accrued future asset retirement costs less actual cash retirement expenditures. Drill- bit capital is a non-GAAP measure. Devon believes drill-bit capital is relevant because it provides additional insight into costs associated with current year drilling, facilities and unproved acreage acquisitions unrelated to business combinations and other significant similar transactions. It should be noted that the actual costs of reserves added through Devon's drilling program will differ, sometimes significantly, from the direct comparison of capital spent and reserves added in any given period due to the timing of capital expenditures and reserve bookings. This methodology is also utilized by certain securities analysts as a measure of Devon's performance.

RECONCILIATION TO GAAP INFORMATION Total Total U.S. (in millions) Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Costs Incurred (GAAP) $7,722 $4,078 $5,537 $2,130 Less: Proved acquisition costs 1,113 54 1,066 5 Unproved portion of Chief acquisition 1,185 --- 1,185 --- Accrued asset retirement costs 250 113 78 70 Plus: Actual retirement expenditures 62 41 41 22 Drill-bit capital (Non-GAAP) $5,236 $3,952 $3,249 $2,077 U.S. Onshore U.S. Offshore Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Costs Incurred (GAAP) $4,856 $1,643 $681 $487 Less: Proved acquisition costs 1,066 3 --- 2 Unproved portion of Chief acquisition 1,185 --- --- --- Accrued asset retirement costs 36 23 42 47 Plus: Actual retirement expenditures 6 5 35 17 Drill-bit capital (Non-GAAP) $2,575 $1,622 $674 $455 Canada International Year Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Costs Incurred (GAAP) $1,554 $1,669 $631 $279 Less: Proved acquisition costs 23 49 24 --- Unproved portion of Chief acquisition --- --- --- --- Accrued asset retirement costs 107 37 65 6 Plus: Actual retirement expenditures 18 16 3 3 Drill-bit capital (Non-GAAP) $1,442 $1,599 $545 $276