Devon Energy Corp. is about to get a major cash infusion, officials said Wednesday.
The Oklahoma City oil and natural gas producer has banked more than $6 billion to avoid paying higher U.S. taxes on proceeds from its foreign asset sales in 2010-2011.
“Recent changes to our tax position now afford us the opportunity to immediately repatriate approximately $2 billion of our foreign cash with minimal additional tax,” CEO John Richels said Wednesday during Devon's first-quarter earnings call.
Jeff Agosta, Devon's chief financial officer, said the company expects net operating losses from last year to offset the taxes it would have to pay on its repatriated foreign cash.
Lower commodity prices played a role in those operating losses, just as they did for the first quarter of 2013.
Devon on Wednesday reported a net loss of $1.3 billion, or $3.34 a share, for the quarter because of a $1.9 billion noncash impairment charge related to lower oil and natural gas liquids prices.
Excluding that charge, Devon earned $270 million, or 66 cents a share, in the quarter. The company reported net earnings of $393 million, or 97 cents a share, for the same period of 2012.
Devon is set to capitalize on waiting to bring home the proceeds from its foreign asset sales.
Agosta said Devon will be taxed at a percentage “in the middle single digits” when it returns that cash to the U.S.
Officials said taxes likely would have been about 25 percent if the cash had been repatriated immediately after Devon's asset sales.
Agosta expects Devon to move $2 billion back to the U.S. by midyear, with the potential to repatriate another “sizable amount” of cash later this year or in 2014.
He said Devon will use that cash to repay outstanding debt once it is back in the U.S.
“Beyond that, we will allocate capital as we always have by assessing the relative attractiveness of E&P (exploration and production) expenditures versus share repurchases and debt repayments, in an effort to optimize growth and cash flow per share,” he said.
Agosta said Devon has used about $500 million from its asset sales to fund ongoing operations in Canada.
Devon is working to expand its operations in the oil sands, but the bulk of its first-quarter production growth came in the U.S.
“Our continued focus on oil production growth is successfully transitioning Devon's production mix to a higher oil weighting, as evidenced by our first-quarter results,” Richels said. “Oil and liquids production, our highest margin products, now account for 41 percent of our total production.
“Driven by our success in the Permian, we are on track to grow our U.S. oil production by almost 40 percent in 2013.”
Dave Hager, Devon's executive vice president of exploration and production, said also expressed optimism about the company's holdings in the Mississippian formation in north central Oklahoma.
“Strong results from the Mississippian trend confirm our belief that this area will provide the next leg of large-scale, highly economic oil growth for Devon,” he said.
Devon's stock closed Wednesday at $55.24, up 18 cents.