Devon Energy Reports Record 2010 Net Earnings and Proved Reserves

NCDevon Energy Corporation (NYSE:DVN) today reported record net earnings for the year ended December 31, 2010, of $4.6 billion, or $10.35 per common share ($10.31 per diluted common share). This compares to a full-year 2009 net loss of $2.5 billion, or $5.58 per common share ($5.58 per diluted common share). The company’s 2009 financial results were impacted by a $4.2 billion non-cash, after-tax reduction in the carrying value of oil and gas properties.

For the quarter ended December 31, 2010, Devon reported net earnings of $562 million, or $1.30 per common share ($1.29 per diluted common share). In the fourth quarter of 2009, the company reported net earnings of $667 million, or $1.50 per common share ($1.49 per diluted common share).

Devon’s fourth-quarter 2010 financial results were impacted by certain items securities analysts typically exclude from their published estimates. Excluding these adjusting items, the company earned $683 million, or $1.57 per diluted common share. The adjusting items are discussed in detail later in this news release.

"2010 was an outstanding year for Devon. The company’s record earnings were accompanied by excellent operating results and the successful execution of our strategic repositioning,” commented John Richels, president and chief executive officer. "Our focused North American onshore capital program helped grow proved reserves to an all-time record of 2.9 billion equivalent barrels, and we are nearing completion of our strategic repositioning with total asset sales of more than $10 billion.”

Proved Oil and Gas Reserves Climb to Record Levels

In accordance with accounting standards, Devon’s year-end 2009 reserve balances include the reserves associated with the company’s Gulf of Mexico properties that were divested in 2010. Following is a discussion of proved reserves related only to Devon’s retained North American onshore assets, excluding the impact of the divested properties.

At year-end 2010, Devon’s North American onshore estimated proved reserves were a record 2,873 million oil-equivalent barrels (Boe), a nine percent increase over year-end 2009. During 2010 Devon added 389 million oil-equivalent barrels through successful drilling (discoveries, extensions and performance revisions). Drill-bit capital applicable to its North American onshore properties totaled $6.1 billion, including $1.2 billion of unproved leasehold capture. Revisions related to changes in oil, natural gas, and natural gas liquids prices increased North American onshore proved reserves by an additional 71 million Boe.

Proved developed reserves were 2,042 million Boe at December 31, 2010, or 71 percent of total proved reserves. Year-end proved reserves were composed of 681 million barrels of crude oil, 10.3 trillion cubic feet of natural gas and 479 million barrels of natural gas liquids.

"Devon delivered outstanding results with our North American onshore drilling program in 2010,” said Dave Hager, executive vice president, exploration and production. "Our drill-bit reserve additions were 175 percent of our production output for the year. In addition, the reserves were added at very competitive finding costs in spite of adding $1.2 billion of unproved acreage during the year.”

Drill-bit Capital and Reserves Summary (1)											Year Ended December 31,
											North American Onshore
												2010			2009
Drill-bit Capital (in millions)											$	6,123		$	3,244
Reserves Data (MMBoe)
	Extensions and discoveries											352			446
	Revisions other than price											37			46
	Drill-bit and performance reserve additions											389			492
(1) Detailed tables and non-GAAP reconciliations are also provided in this release.

Liquids Production Growth and Cana-Woodford Development Lead 2010 Operating Highlights

Devon drilled 1,588 wells in 2010 applicable to its continuing operations with a 99 percent success rate. Following are operational highlights from the past year:

• Devon increased oil and natural gas liquids production from its North American onshore properties by six percent in 2010, to an average of 193,000 barrels per day.
• During the year, Devon completed 87 wells in the Cana-Woodford Shale play in western Oklahoma and more than doubled its industry-leading leasehold position in the play to 243,000 net acres. Fourth-quarter production from the Cana-Woodford increased more than 200 percent over the year-ago quarter to an average of 137 million cubic feet of gas equivalent per day. The company also completed construction and commenced operation of its Cana gas processing plant in 2010.
• In the Permian Basin, Devon increased fourth-quarter production 16 percent over the fourth quarter of 2009, to 45,000 Boe per day. Devon has nearly 1 million net acres of leasehold in the region targeting various oil and liquids-rich play types. In 2011, the company plans to run 17 operated rigs and drill approximately 300 wells to continue de-risking and developing these plays.
• In 2010, production from the Devon-operated Jackfish oil sands project averaged 26,000 gross barrels per day or 25,000 barrels per day net to the company. Following scheduled facilities maintenance in the third quarter and the Enbridge pipeline system outage in the fourth quarter, Jackfish production ramped back up to 31,000 gross barrels per day at year-end.
• Construction of the company’s second Jackfish project is now complete. Devon expects to begin injecting steam at Jackfish 2 in the second quarter, with first oil production expected by the end of 2011. Devon applied for regulatory approval of a third phase of Jackfish in the third quarter of 2010.
• During the year, Devon added to its Canadian oil position by acquiring a 50 percent interest in the Pike oil sands leases. The Pike acreage lies immediately adjacent to the company’s highly successful Jackfish project and has estimated gross recoverable resources of up to 1.5 billion barrels. Devon is the operator of the project and is currently drilling appraisal wells to determine an optimal development configuration.
• The company’s net production from the Barnett Shale field in north Texas averaged 1.2 billion cubic feet of natural gas equivalent per day in the fourth quarter, including 42,000 barrels per day of liquids production. This represents a 14 percent increase in production compared to fourth quarter of 2009.

Oil and Gas Sales Increase 19 Percent

Sales of oil, gas and natural gas liquids from continuing operations increased 19 percent to $7.3 billion in the year ended December 31, 2010. Comparable sales for the year ended December 31, 2009, were $6.1 billion. Devon’s average full-year 2010 realized price per Boe, including the impact of hedges, increased 26 percent over the prior year to $35.81 per barrel. Higher commodity prices more than offset a decrease in production resulting from the Gulf of Mexico properties that were divested during 2010.

Full-year 2010 production from the company’s North American onshore properties grew by 3 million Boe over the prior year to a total of 223 million oil-equivalent barrels. The improvement was driven entirely by higher oil and natural gas liquids production.

Devon’s fourth quarter production was impacted by a number of minor operational issues including volume curtailments attributable to the Enbridge pipeline outage, completion delays, and interruptions due to severe weather. In aggregate, these items reduced fourth quarter production by 11,000 equivalent barrels per day. In spite of these operational issues, North American onshore production in the fourth quarter averaged 619,000 Boe per day, an eight percent increase over the fourth quarter of 2009.

Repositioning Drives Cost Savings

Cost efficiencies realized through Devon’s strategic repositioning were reflected in the company’s 2010 results. In spite of a rising industry cost environment, expenses in most categories declined or increased only modestly.

Lease operating expenses (LOE) in 2010 increased one percent over 2009 to $1.7 billion. The increase in LOE is primarily attributable to the strengthening of the Canadian dollar. Devon’s divestiture of higher cost Gulf of Mexico properties helped offset the effects of rising oilfield service and supply costs.

Depreciation, depletion and amortization (DD&A) of oil and gas properties decreased nine percent in 2010 to $1.7 billion. The lower DD&A expense was primarily driven by the disposition of Devon’s Gulf of Mexico properties.

General and administrative expenses declined 13 percent in 2010 to $563 million. Lower employee costs related to the company’s strategic repositioning drove the improvement.

Interest expense in 2010 increased $14 million to $363 million. However, 2010 interest expense included a $19 million charge attributable to the early redemption of the company’s senior notes. Absent the early redemption charge, interest expense declined by $5 million when compared to 2009.

Cash Flow Before Balance Sheet Changes Increases 21 Percent;
Share Repurchases and Debt Reduction Total $3 Billion

Cash flow before balance sheet changes in 2010 reached $5.7 billion, a 21 percent increase over the prior year. During 2010, divestiture sale proceeds from the company’s strategic repositioning efforts provided an additional $7 billion of cash flow. In total, these sources of cash allowed Devon to fund its total capital demands, to repurchase 18.3 million shares of common stock for $1.2 billion, and to retire $1.8 billion of debt during the year.

As of December 31, 2010, the company’s cash balances totaled $3.4 billion, reducing net debt to 10 percent of adjusted capitalization compared with 29 percent at year-end 2009. Reconciliations of cash flow before balance sheet changes, net debt and adjusted capitalization, which are non-GAAP measures, are provided in this release.

Strategic Repositioning Nears Completion

In 2010, the company divested its Gulf of Mexico operations and closed on the sale of its assets in Azerbaijan and China for aggregate pre-tax proceeds of $7 billion. The company’s remaining divestiture package, consisting of its assets in Brazil, is under contract for $3.2 billion. Total proceeds for Devon’s strategic repositioning will exceed $10 billion with after-tax proceeds approximating $8 billion.

In accordance with accounting standards, Devon has reclassified the assets, liabilities, and results of its international segment as discontinued operations for all accounting periods presented in this release. Although revenues and expenses for prior periods were reclassified, previously reported net earnings were not impacted. Included with this release is a table of revenues, expenses, production categories, and the amounts reclassified as discontinued operations for each period presented.

Although Devon successfully completed the divestiture of its Gulf of Mexico operations, results from these assets do not qualify as discontinued operations under accounting standards and reside within continuing operations. However, information is provided within this release to enable the reader to isolate results of the company’s North American onshore operations.

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 2010 were as follows:

Items affecting continuing operations:

• A change in the fair value of oil, gas and NGL derivative instruments decreased full-year earnings by $77 million pre-tax ($50 million after tax) and decreased fourth-quarter earnings by $371 million pre-tax ($244 million after tax).
• A change in fair value of interest-rate and other financial instruments decreased full-year earnings by $30 million pre-tax ($19 million after tax) and increased fourth-quarter earnings by $128 million pre-tax ($86 million after tax).
• U.S. income taxes on foreign earnings now expected to be repatriated to the U.S. decreased full-year earnings by $144 million and decreased fourth-quarter earnings by $70 million.
• Income tax accrual adjustments increased full-year earnings by $57 million and increased fourth-quarter earnings by $72 million.
• Restructuring costs decreased full-year earnings by $57 million pre-tax ($36 million after tax) and decreased fourth-quarter earnings by $2 million pre-tax ($1 million after tax).
• Additional interest expense attributable to the early redemption of 7.25 percent senior notes decreased full-year earnings by $19 million pre-tax ($12 million after tax).

Items affecting discontinued operations:

• Divestitures of assets increased full-year earnings by $1.8 billion pre-tax ($1.8 billion after tax) and decreased fourth-quarter earnings by $25 million pre-tax and increased after-tax earnings by $20 million.
• The decision to divest all international assets generated financial benefits that increased full-year earnings by $143 million pre-tax ($93 million after tax) and increased fourth-quarter earnings by $29 million pre-tax ($19 million after tax).
• Insurance settlement proceeds related to a business interruption claim in Azerbaijan increased full-year earnings by $60 million pre-tax ($60 million after tax).
• Restructuring costs increased full-year earnings by $4 million pre-tax ($3 million after tax) and decreased fourth-quarter earnings by $4 million pre-tax ($3 million after tax).

The following tables summarize the full-year and fourth-quarter effects of these items on 2010 earnings, income taxes and cash flow.

Full-Year 2010 - Summary of Items Typically Excluded by Analysts (in millions)
Continuing Operations			Pre-tax Earnings Effect													After-tax Earnings Effect			Cash Flow Before Balance Sheet Changes Effect
							Income Tax Effect
							Current			Deferred			Total
Oil, gas, and NGL derivatives			$	(77	)		-			(27	)		(27	)		(50	)		-
Interest-rate and other financial instruments				(30	)		-			(11	)		(11	)		(19	)		-
U.S. income taxes on foreign earnings				-			-			144			144			(144	)		-
Income tax accrual adjustment				-			(329	)		272			(57	)		57			329
Restructuring costs				(57	)		8			(29	)		(21	)		(36	)		(64	)
Additional interest costs on debt retirement				(19	)		(10	)		3			(7	)		(12	)		(17	)
Effects of oil and gas property divestitures				-			783			(783	)		-			-			(783	)
	Totals		$	(183	)		452			(431	)		21			(204	)		(535	)

Discontinued Operations			Pre-tax Earnings Effect											After-tax Earnings Effect		Cash Flow Before Balance Sheet Changes Effect
						Income Tax Effect
						Current			Deferred			Total
Effects of oil and gas property divestitures			$	1,818		84			(43	)		41		1,777		(84	)
Financial benefits of decision to divest assets				143		-			50			50		93		-
Insurance settlement				60		-			-			-		60		60
Restructuring costs				4		1			-			1		3		(2	)
	Totals		$	2,025		85			7			92		1,933		(26	)

In aggregate, these items increased full-year 2010 net earnings by $1.7 billion, or $3.94 per common share ($3.92 per diluted share). These items and their associated tax effects decreased full-year 2010 cash flow before balance sheet changes by $561 million.

Fourth-Quarter 2010 - Summary of Items Typically Excluded by Analysts (in millions)
Continuing Operations			Pre-tax Earnings Effect													After-tax Earnings Effect			Cash Flow Before Balance Sheet Changes Effect
							Income Tax Effect
							Current			Deferred			Total
Oil, gas, and NGL derivatives			$	(371	)		-			(127	)		(127	)		(244	)		-
Interest-rate and other financial instruments				128			-			42			42			86			-
U.S. income taxes on foreign earnings				-			-			70			70			(70	)		-
Income tax accrual adjustment				-			(72	)		-			(72	)		72			72
Restructuring costs				(2	)		(1	)		-			(1	)		(1	)		(1	)
	Totals		$	(245	)		(73	)		(15	)		(88	)		(157	)		71

Discontinued Operations			Pre-tax Earnings Effect												After-tax Earnings Effect			Cash Flow Before Balance Sheet Changes Effect
							Income Tax Effect
							Current			Deferred		Total
Effects of oil and gas property divestitures				(25	)		(45	)		-		(45	)		20			45
Financial benefits of decision to divest assets			$	29			-			10		10			19			-
Restructuring costs				(4	)		(1	)		-		(1	)		(3	)		(4	)
	Totals		$	-			(46	)		10		(36	)		36			41

In aggregate, these items decreased fourth-quarter 2010 net earnings by $121 million, or $0.28 per common share ($0.28 per diluted share). These items and their associated tax effects increased fourth-quarter 2010 cash flow before balance sheet changes by $112 million.

Conference Call to be Webcast Today

Devon will discuss its 2010 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 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 the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or 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. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by Devon on its website or otherwise. Devon does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

Effective January 1, 2010, the United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This release may contain certain terms, such as resource potential and exploration target size. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K for the fiscal year ended December 31, 2009, available from us at Devon Energy Corporation, Attn. Investor Relations, 20 North Broadway, Oklahoma City, OK 73102. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For more information about Devon, please visit our website at www.devonenergy.com.

DEVON ENERGY CORPORATION
FINANCIAL AND OPERATIONAL INFORMATION

PRODUCTION (net of royalties)				Year Ended								Quarter Ended
Excludes discontinued operations				December 31,								December 31,
				2010				2009				2010				2009
Total Period Production
Natural Gas (Bcf)
U.S. Onshore				698.5				698.7				180.6				162.8
Canada				214.2				222.8				52.6				51.6
North American Onshore				912.7				921.5				233.2				214.4
U.S. Offshore				16.8				44.9				-				11.4
Total Natural Gas				929.5				966.4				233.2				225.8
Oil (MMBbls)
U.S. Onshore				13.5				11.6				3.7				2.9
Canada				25.2				25.3				6.1				6.6
North American Onshore				38.7				36.9				9.8				9.5
U.S. Offshore				1.9				5.0				-				1.3
Total Oil				40.6				41.9				9.8				10.8
Natural Gas Liquids (MMBbls)
U.S. Onshore				28.2				25.7				7.4				6.5
Canada				3.6				3.8				0.9				1.0
North American Onshore				31.8				29.5				8.3				7.5
U.S. Offshore				0.3				0.7				-				0.2
Total Natural Gas Liquids				32.1				30.2				8.3				7.7
Oil Equivalent (MMBoe)
U.S. Onshore				158.2				153.7				41.2				36.5
Canada				64.4				66.3				15.7				16.2
North American Onshore				222.6				220.0				56.9				52.7
U.S. Offshore				5.0				13.2				-				3.4
Total Oil Equivalent				227.6				233.2				56.9				56.1
Average Daily Production
Natural Gas (MMcf)
U.S. Onshore				1,913.8				1,914.3				1,963.0				1,769.7
Canada				586.9				610.5				571.7				560.5
North American Onshore				2,500.7				2,524.8				2,534.7				2,330.2
U.S. Offshore				46.0				123.0				-				123.8
Total Natural Gas				2,546.7				2,647.8				2,534.7				2,454.0
Oil (MBbls)
U.S. Onshore				37.0				31.6				40.0				31.3
Canada				68.9				69.3				66.0				72.0
North American Onshore				105.9				100.9				106.0				103.3
U.S. Offshore				5.2				13.8				-				13.7
Total Oil				111.1				114.7				106.0				117.0
Natural Gas Liquids (MBbls)
U.S. Onshore				77.3				70.4				80.8				71.1
Canada				9.8				10.4				9.2				10.2
North American Onshore				87.1				80.8				90.0				81.3
U.S. Offshore				0.9				2.0				-				2.2
Total Natural Gas Liquids				88.0				82.8				90.0				83.5
Oil Equivalent (MBoe)
U.S. Onshore				433.3				421.1				448.0				397.4
Canada				176.5				181.5				170.5				175.6
North American Onshore				609.8				602.6				618.5				573.0
U.S. Offshore				13.8				36.3				-				36.5
Total Oil Equivalent				623.6				638.9				618.5				609.5

BENCHMARK PRICES				Year Ended										Quarter Ended
(average prices)				December 31,										December 31,
				2010					2009					2010					2009
Natural Gas ($/Mcf) – Henry Hub				$	4.39				$	3.99				$	3.80				$	4.16
Oil ($/Bbl) – West Texas Intermediate (Cushing)				$	79.48				$	61.82				$	85.15				$	76.00

Quarter Ended December 31, 2010				Oil					Gas					NGLs					Total
				(Per Bbl)					(Per Mcf)					(Per Bbl)					(Per Boe)
U.S. Onshore				$	80.79				$	3.21				$	33.19				$	27.27
Canada				$	60.80				$	3.69				$	47.46				$	38.46
North American Onshore				$	68.35				$	3.32				$	34.65				$	30.36
U.S. Offshore				$	-				$	-				$	-				$	-
Realized price without hedges				$	68.35				$	3.32				$	34.65				$	30.36
Cash settlements				$	-				$	1.32				$	-				$	5.41
Realized price, including cash settlements				$	68.35				$	4.64				$	34.65				$	35.77

Quarter Ended December 31, 2009				Oil					Gas					NGLs					Total
				(Per Bbl)					(Per Mcf)					(Per Bbl)					(Per Boe)
U.S. Onshore				$	71.62				$	3.65				$	30.48				$	27.35
Canada				$	58.43				$	4.13				$	41.88				$	39.58
North American Onshore				$	62.43				$	3.77				$	31.92				$	31.10
U.S. Offshore				$	74.45				$	4.45				$	37.59				$	45.26
Realized price without hedges				$	63.84				$	3.80				$	32.07				$	31.95
Cash settlements				$	-				$	0.65				$	-				$	2.60
Realized price, including cash settlements				$	63.84				$	4.45				$	32.07				$	34.55

Year Ended December 31, 2010					Oil					Gas					NGLs					Total
					(Per Bbl)					(Per Mcf)					(Per Bbl)					(Per Boe)
U.S. Onshore					$	75.53				$	3.73				$	30.78				$	28.42
Canada					$	58.60				$	4.11				$	46.60				$	39.11
North American Onshore					$	64.51				$	3.82				$	32.55				$	31.52
U.S. Offshore					$	77.81				$	5.12				$	38.22				$	49.06
Realized price without hedges					$	65.14				$	3.84				$	32.61				$	31.91
Cash settlements					$	-				$	0.96				$	-				$	3.90
Realized price, including cash settlements					$	65.14				$	4.80				$	32.61				$	35.81

Year Ended December 31, 2009			Oil			Gas			NGLs			Total
			(Per Bbl)			(Per Mcf)			(Per Bbl)			(Per Boe)
U.S. Onshore			$	56.17		$	3.14		$	23.40		$	22.41
Canada			$	47.35		$	3.66		$	33.09		$	32.29
North American Onshore			$	50.11		$	3.27		$	24.65		$	25.38
U.S. Offshore			$	60.75		$	4.20		$	27.42		$	38.83
Realized price without hedges			$	51.39		$	3.31		$	24.71		$	26.15
Cash settlements			$	-		$	0.52		$	-		$	2.16
Realized price, including cash settlements			$	51.39		$	3.83		$	24.71		$	28.31

CONSOLIDATED STATEMENTS OF OPERATIONS					Year Ended												Quarter Ended
(in millions, except per share amounts)					December 31,												December 31,
					2010						2009						2010						2009
Revenues
	Oil, gas, and NGL sales				$	7,262					$	6,097					$	1,727					$	1,791
	Oil, gas, and NGL derivatives					811						384						(63	)					194
	Marketing and midstream revenues					1,867						1,534						471						460
	Total revenues					9,940						8,015						2,135						2,445
Expenses and other, net
	Lease operating expenses					1,689						1,670						418						404
	Taxes other than income taxes					380						314						92						65
	Marketing and midstream operating costs and expenses					1,357						1,022						344						327
	Depreciation, depletion and amortization of oil and gas properties					1,675						1,832						426						418
	Depreciation and amortization of non-oil and gas properties					255						276						63						68
	Accretion of asset retirement obligation					92						91						21						23
	General and administrative expenses					563						648						164						176
	Restructuring costs					57						105						2						105
	Interest expense					363						349						83						86
	Interest-rate and other financial instruments					(14	)					(106	)					(135	)					(86	)
	Reduction of carrying value of oil and gas properties					-						6,408						-						-
	Other, net					(45	)					(68	)					(11	)					(7	)
	Total expenses and other, net					6,372						12,541						1,467						1,579
Earnings (loss) from continuing operations before income tax expense						3,568						(4,526	)					668						866
Income tax expense (benefit)
	Current					516						241						(180	)					106
	Deferred					719						(2,014	)					370						203
	Total income tax expense (benefit)					1,235						(1,773	)					190						309
Earnings (loss) from continuing operations						2,333						(2,753	)					478						557
Discontinued operations
	Earnings from discontinued operations before income taxes					2,385						322						65						124
	Discontinued operations income tax expense (benefit)					168						48						(19	)					14
	Earnings from discontinued operations					2,217						274						84						110
Net earnings (loss)					$	4,550					$	(2,479	)				$	562					$	667
Basic net earnings (loss) per share
	Basic earnings (loss) from continuing operations per share				$	5.31					$	(6.20	)				$	1.10					$	1.25
	Basic earnings from discontinued operations per share					5.04						0.62						0.20						0.25
	Basic net earnings (loss) per share				$	10.35					$	(5.58	)				$	1.30					$	1.50
Diluted net earnings (loss) per share
	Diluted earnings (loss) from continuing operations per share				$	5.29					$	(6.20	)				$	1.10					$	1.25
	Diluted earnings from discontinued operations per share					5.02						0.62						0.19						0.24
	Diluted net earnings (loss) per share				$	10.31					$	(5.58	)				$	1.29					$	1.49
Weighted average common shares outstanding
	Basic					440						444						433						445
	Diluted					441						446						434						447

CONSOLIDATED BALANCE SHEETS
(in millions)						December 31,						December 31,
						2010						2009
Assets
Current assets:
	Cash and cash equivalents					$	2,866					$	646
	Accounts receivable						1,202						1,208
	Current assets held for sale						563						657
	Other current assets						924						481
	Total current assets						5,555						2,992
Property and equipment, at cost:
	Oil and gas, based on full cost accounting:
		Subject to amortization					56,012						52,352
		Not subject to amortization					3,434						4,078
		Total oil and gas					59,446						56,430
	Other						4,429						4,045
Total property and equipment, at cost							63,875						60,475
Less accumulated depreciation, depletion and amortization							(44,223	)					(41,708	)
		Property and equipment, net					19,652						18,767
Goodwill							6,080						5,930
Long-term assets held for sale							859						1,250
Other long-term assets							781						747
Total Assets						$	32,927					$	29,686
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable - trade					$	1,411					$	1,137
	Revenues and royalties due to others						538						486
	Short-term debt						1,811						1,432
	Current liabilities associated with assets held for sale						305						234
	Other current liabilities						518						513
	Total current liabilities						4,583						3,802
Long-term debt							3,819						5,847
Asset retirement obligations							1,423						1,418
Liabilities associated with assets held for sale							26						213
Other long-term liabilities							1,067						937
Deferred income taxes							2,756						1,899
Stockholders' equity:
	Common stock						43						45
	Additional paid-in capital						5,601						6,527
	Retained earnings						11,882						7,613
	Accumulated other comprehensive earnings						1,760						1,385
	Treasury stock, at cost						(33	)					-
Total Stockholders' Equity							19,253						15,570
Total Liabilities and Stockholders' Equity						$	32,927					$	29,686
Common Shares Outstanding							432						447

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)					Year Ended														Quarter Ended
					December 31,														December 31,
						2010							2009							2010							2009
Cash Flows From Operating Activities
	Earnings (loss) from continuing operations				$	2,333						$	(2,753	)					$	478						$	557
	Adjustments to reconcile earnings (loss) from continuing
	operations to net cash provided by operating activities:
	Depreciation, depletion and amortization					1,930							2,108							489							486
	Deferred income tax expense (benefit)					719							(2,014	)						370							203
	Reduction of carrying value of oil and gas properties					-							6,408							-							-
	Unrealized change in fair value of financial instruments					107							55							243							(129	)
	Other noncash charges					215							288							61							106
	Net cash from operating activities before balance sheet changes					5,304							4,092							1,641							1,223
	Net (increase) decrease in working capital					(273	)						149							(437	)						68
	Decrease (increase) in long-term other assets					32							(6	)						4							(23	)
	(Decrease) increase in long-term other liabilities					(41	)						(3	)						(98	)						29
	Cash from operating activities - continuing operations					5,022							4,232							1,110							1,297
	Cash from operating activities - discontinued operations					456							505							132							148
Net cash from operating activities						5,478							4,737							1,242							1,445
Cash Flows From Investing Activities
	Proceeds from property and equipment divestitures					4,310							34							179							11
	Capital expenditures					(6,476	)						(4,879	)						(1,683	)						(1,072	)
	Purchases of short-term investments					(145	)						-							(145	)						-
	Redemptions of long-term investments					21							7							1							1
	Other					(19	)						(17	)						(6	)						(17	)
	Cash from investing activities - continuing operations					(2,309	)						(4,855	)						(1,654	)						(1,077	)
	Cash from investing activities - discontinued operations					2,197							(499	)						(101	)						(123	)
Net cash from investing activities						(112	)						(5,354	)						(1,755	)						(1,200	)
Cash Flows From Financing Activities
	Net commercial paper (repayments) borrowings					(1,432	)						426							-							63
	Debt repayments					(350	)						(178	)						-							(177	)
	Proceeds from borrowings of long term debt, net of issuance costs					-							1,187							-							-
	Proceeds from stock option exercises					111							42							93							23
	Repurchases of common stock					(1,168	)						-							(239	)						-
	Dividends paid on common stock					(281	)						(284	)						(70	)						(71	)
	Excess tax benefits related to share-based compensation					16							8							9							2
Net cash from financing activities						(3,104	)						1,201							(207	)						(46	)
Effect of exchange rate changes on cash						17							43							12							14
Net increase (decrease) in cash and cash equivalents						2,279							627							(708	)						99
Cash and cash equivalents at beginning of period						1,011							384							3,998							912
Cash and cash equivalents at end of period					$	3,290						$	1,011						$	3,290						$	1,011

RESERVES RECONCILIATION
			Total												North American Onshore
			Oil			Gas			NGLs			Total			Oil			Gas			NGLs			Total
			(MMBbls)			(Bcf)			(MMBbls)			(MMBoe)			(MMBbls)			(Bcf)			(MMBbls)			(MMBoe)
As of December 31, 2009:
	Proved developed		289			7,845			326			1,922			268			7,660			325			1,869
	Proved undeveloped		397			1,912			95			811			385			1,755			94			772
Total proved			686			9,757			421			2,733			653			9,415			419			2,641
Revisions due to prices			(19	)		472			13			72			(20	)		470			13			71
Revisions other than price			13			62			15			38			11			88			12			37
Extensions and discoveries			79			1,226			70			354			78			1,219			70			352
Purchase of reserves			-			21			-			4			-			21			-			4
Production			(41	)		(930	)		(32	)		(228	)		(39	)		(913	)		(32	)		(223	)
Sale of reserves			(37	)		(325	)		(8	)		(100	)		(2	)		(17	)		(3	)		(9	)
As of December 31, 2010:
	Proved developed		257			8,424			381			2,042			257			8,424			381			2,042
	Proved undeveloped		424			1,859			98			831			424			1,859			98			831
Total Proved			681			10,283			479			2,873			681			10,283			479			2,873
			U.S. Onshore												Canada
			Oil			Gas			NGLs			Total			Oil			Gas			NGLs			Total
			(MMBbls)			(Bcf)			(MMBbls)			(MMBoe)			(MMBbls)			(Bcf)			(MMBbls)			(MMBoe)
As of December 31, 2009:
	Proved developed		119			6,447			293			1,486			149			1,213			32			383
	Proved undeveloped		20			1,680			92			392			365			75			2			380
Total proved			139			8,127			385			1,878			514			1,288			34			763
Revisions due to prices			4			449			14			92			(24	)		21			(1	)		(21	)
Revisions other than price			2			105			13			32			9			(17	)		(1	)		5
Extensions and discoveries			19			1,088			68			269			59			131			2			83
Purchase of reserves			-			12			-			2			-			9			-			2
Production			(14	)		(699	)		(28	)		(158	)		(25	)		(214	)		(4	)		(65	)
Sale of reserves			(2	)		(17	)		(3	)		(8	)		-			-			-			(1	)
As of December 31, 2010:
	Proved developed		131			7,280			353			1,696			126			1,144			28			346
	Proved undeveloped		17			1,785			96			411			407			74			2			420
Total Proved			148			9,065			449			2,107			533			1,218			30			766
			U.S. Offshore
			Oil			Gas			NGLs			Total
			(MMBbls)			(Bcf)			(MMBbls)			(MMBoe)
As of December 31, 2009:
	Proved developed		21			185			1			53
	Proved undeveloped		12			157			1			39
Total proved			33			342			2			92
Revisions due to prices			1			2			-			1
Revisions other than price			2			(26	)		3			1
Extensions and discoveries			1			7			-			2
Purchase of reserves			-			-			-			-
Production			(2	)		(17	)		-			(5	)
Sale of reserves			(35	)		(308	)		(5	)		(91	)
As of December 31, 2010:
	Proved developed		-			-			-			-
	Proved undeveloped		-			-			-			-
Total Proved			-			-			-			-

COSTS INCURRED					Total										North American Onshore
(in millions)					Year Ended December 31,										Year Ended December 31,
					2010					2009					2010					2009
Property Acquisition Costs:
Total proved					$	33				$	35				$	33				$	35
Total unproved						1,184					135					1,182					124
Exploration and development costs						5,327					3,917					4,941					3,120
Costs Incurred					$	6,544				$	4,087				$	6,156				$	3,279
					U.S. Onshore										Canada
					Year Ended December 31,										Year Ended December 31,
					2010					2009					2010					2009
Property Acquisition Costs:
Total proved					$	29				$	17				$	4				$	18
Total unproved						592					52					590					72
Exploration and development costs						3,465					2,133					1,476					987
Costs Incurred					$	4,086				$	2,202				$	2,070				$	1,077
					U.S. Offshore
					Year Ended December 31,
					2010					2009
Property Acquisition Costs:
Total proved					$	-				$	-
Total unproved						2					11
Exploration and development costs						386					797
Costs Incurred					$	388				$	808

Devon capitalizes certain general and administrative expenses related to property acquisition, exploration and development activities. These capitalized expenses were $311 million and $332 million in 2010 and 2009, respectively. Devon also capitalizes certain interest expenses related to property acquisition, exploration and development activities. These capitalized expenses were $37 million and $74 million in 2010 and 2009, respectively. These capitalized general and administrative expenses and interest expenses are included in the costs shown in the preceding tables.

DRILLING ACTIVITY						Year Ended
(Gross Wells Drilled)						December 31,
						2010					2009
Exploration Wells Drilled
	U.S. Onshore					34					11
	Canada					57					42
	North American Onshore					91					53
	U.S. Offshore					-					1
	Total					91					54
Exploration Wells Success Rate
	U.S. Onshore					91	%				82	%
	Canada					98	%				100	%
	North American Onshore					95	%				96	%
	U.S. Offshore					n/a					0	%
	Total					95	%				94	%
Development Wells Drilled
	U.S. Onshore					1,180					734
	Canada					313					343
	North American Onshore					1,493					1,077
	U.S. Offshore					4					4
	Total					1,497					1,081
Development Wells Success Rate
	U.S. Onshore					99	%				100	%
	Canada					100	%				100	%
	North American Onshore					100	%				100	%
	U.S. Offshore					100	%				50	%
	Total					100	%				99	%
Total Wells Drilled
	U.S. Onshore					1,214					745
	Canada					370					385
	North American Onshore					1,584					1,130
	U.S. Offshore					4					5
	Total					1,588					1,135
Total Wells Success Rate
	U.S. Onshore					99	%				99	%
	Canada					100	%				100	%
	North American Onshore					99	%				99	%
	U.S. Offshore					100	%				40	%
	Total					99	%				99	%

COMPANY OPERATED RIGS				Year Ended
				December 31,
				2010				2009
Number of Company Operated Rigs Running
U.S. Onshore				61				46
Canada				10				17
North American Onshore				71				63
U.S. Offshore				-				1
Total				71				64

CAPITAL EXPENDITURES (in millions)
Quarter Ended December 31, 2010
					U.S.					Canada				N.A.					U.S.				Total
					Onshore									Onshore					Offshore
Capital Expenditures
	Exploration				$	246				64				$	310				-				$	310
	Development					917				430					1,347				10					1,357
	Exploration and development capital				$	1,163				494				$	1,657				10				$	1,667
	Capitalized G&A																							79
	Capitalized interest																							12
	Midstream capital																							51
	Other capital																							111
Total Continuing Operations																							$	1,920
	Discontinued operations																							63
Total Operations																							$	1,983

CAPITAL EXPENDITURES (in millions)
Year Ended December 31, 2010
					U.S.					Canada				N.A.					U.S.				Total
					Onshore									Onshore					Offshore
Capital Expenditures
	Exploration				$	899				322				$	1,221				97				$	1,318
	Development					2,897				1,062					3,959				258					4,217
	Exploration and development capital				$	3,796				1,384				$	5,180				355				$	5,535
	Pike property acquisition																							500
	Capitalized G&A																							311
	Capitalized interest																							40
	Midstream capital																							220
	Other capital																							313
Total Continuing Operations																							$	6,919
	Discontinued operations																							481
Total Operations																							$	7,400

PRODUCTION FROM DISCONTINUED OPERATIONS					Year Ended								Quarter Ended
					December 31,								December 31,
					2010				2009				2010				2009
	Oil (MMBbls)				9.3				15.7				1.5				4.1
	Natural Gas (Bcf)				1.3				1.5				-				0.5
	Total Oil Equivalent (MMBoe)				9.5				16.0				1.5				4.2

STATEMENTS OF DISCONTINUED OPERATIONS
(in millions)					Year Ended								Quarter Ended
					December 31,								December 31,
					2010				2009				2010				2009
Revenues
	Total operating revenues				$ 693				$ 945				$ 120				$ 299
Expenses and other, net
	Operating expenses				212				496				36				131
	Gain on sale of oil and gas properties				(1,818)				(17)				26				-
	Other, net				(86)				144				(7)				44
	Total expenses and other, net				(1,692)				623				55				175
Earnings before income tax expense					2,385				322				65				124
Income tax expense (benefit)
	Current				195				44				5				24
	Deferred				(27)				4				(24)				(10)
	Total income tax expense (benefit)				168				48				(19)				14
Earnings from discontinued operations					$ 2,217				$ 274				$ 84				$ 110

RESERVES DATA FOR DISCONTINUED OPERATIONS
					Oil					Gas					NGLs				Total
					(MMBbls)					(Bcf)					(MMBbls)				(MMBoe)
As of December 31, 2009:
	Proved developed				54					8					-				55
	Proved undeveloped				53					-					-				53
Total proved					107					8					-				108
Revisions due to prices					(3	)				-					-				(3	)
Revisions other than price					-					(7	)				-				(1	)
Extensions and discoveries					2					-					-				2
Production					(10	)				(1	)				-				(10	)
Sale of reserves					(89	)				-					-				(89	)
As of December 31, 2010:
	Proved developed				7					-					-				7
	Proved undeveloped				-					-					-				-
Total proved					7					-					-				7

COSTS INCURRED FOR DISCONTINUED OPERATIONS
(in millions)					Year Ended December 31,
						2010					2009
Costs Incurred					$	470				$	450

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,
					2010						2009						2010						2009
Net Cash Provided By Operating Activities (GAAP)					$	5,478					$	4,737					$	1,242					$	1,445
	Changes in assets and liabilities - continuing operations					282						(140	)					531						(74	)
	Changes in assets and liabilities - discontinued operations					(88	)					90						(50	)					15
Cash flow before balance sheet changes (Non-GAAP)					$	5,672					$	4,687					$	1,723					$	1,386

Devon believes that using net debt for the calculation of "net debt to adjusted capitalization” provides a better measure than using debt. Devon defines net debt as debt less cash, cash equivalents and short-term investments. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt.

RECONCILIATION TO GAAP INFORMATION
(in millions)
				December 31,
				2010					2009
Total debt (GAAP)				$	5,630				$	7,279
Adjustments:
	Cash and short term investments				3,435					1,011
	Net debt (Non-GAAP)			$	2,195				$	6,268
Total debt				$	5,630				$	7,279
Stockholders' equity					19,253					15,570
	Total capitalization (GAAP)			$	24,883				$	22,849
Net debt				$	2,195				$	6,268
Stockholders' equity					19,253					15,570
	Adjusted capitalization (Non-GAAP)			$	21,448				$	21,838

NON-GAAP FINANCIAL MEASURES

Drill-bit capital is defined as costs incurred less proved acquisition costs and unproved acquisition costs resulting from business combinations. 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 exploration and development activities. Certain securities analysts also use this methodology to measure Devon’s performance. 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.

RECONCILIATION TO GAAP INFORMATION					Total										North America Onshore
(in millions)					Year Ended December 31,										Year Ended December 31,
					2010					2009					2010					2009
Costs Incurred (GAAP)					$	6,544				$	4,087				$	6,156				$	3,279
Less:
	Proved acquisition costs					33					35					33					35
	Drill-bit capital (Non-GAAP)				$	6,511				$	4,052				$	6,123				$	3,244
																-
					U.S. Onshore										Canada
					Year Ended December 31,										Year Ended December 31,
					2010					2009					2010					2009
Costs Incurred (GAAP)					$	4,086				$	2,202				$	2,070				$	1,077
Less:
	Proved acquisition costs					29					17					4					18
	Drill-bit capital (Non-GAAP)				$	4,057				$	2,185				$	2,066				$	1,059
					U.S. Offshore
					Year Ended December 31,
					2010					2009
Costs Incurred (GAAP)					$	388				$	808
Less:
	Proved acquisition costs					-					-
	Drill-bit capital (Non-GAAP)				$	388				$	808