Debt And Related Expenses

3 Months Ended

Mar. 31, 2021

13.	Debt and Related Expenses

See below for a summary of debt instruments and balances. The notes and debentures are senior, unsecured obligations of Devon.

	March 31, 2021			December 31, 2020
8.25% due August 1, 2023 ⁽¹⁾	$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾		472			—
5.85% due December 15, 2025		485			485
5.75% due June 1, 2026 ⁽¹⁾		500			—
7.50% due September 15, 2027		73			73
5.25% due October 15, 2027 ⁽¹⁾		600			—
5.875% due June 15, 2028 ⁽¹⁾		325			—
4.50% due January 15, 2030 ⁽¹⁾		585			—
7.875% due September 30, 2031		675			675
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium (discount) on debentures and notes		226			(20	)
Debt issuance costs		(31	)		(31	)
Total debt	$	7,268		$	4,298
Less amount classified as short-term debt		226			—
Total long-term debt	$	7,042		$	4,298

(1)

These instruments were assumed by Devon in January 2021 in conjunction with the Merger. These instruments are the unsecured and unsubordinated obligation of WPX, a wholly-owned subsidiary of Devon.

The following schedule includes the summary of the WPX debt Devon assumed upon closing of the Merger on January 7, 2021.

	Face Value		Fair Value		Optional Redemption⁽¹⁾
6.00% due January 15, 2022	$	43	$	44
8.25% due August 1, 2023		242		281	June 1, 2023
5.25% due September 15, 2024		472		530	June 15, 2024
5.75% due June 1, 2026		500		529	June 1, 2021
5.25% due October 15, 2027		600		646	October 15, 2022
5.875% due June 15, 2028		500		554	June 15, 2023
4.50% due January 15, 2030		900		978	January 15, 2025
	$	3,257	$	3,562

(1)

At any time prior to these dates, Devon has the option to redeem some or all of the notes at a specified "make whole" premium as described in the indenture documents governing the notes to be redeemed. On or after these dates, Devon has the option to redeem the notes, in whole or in part, at the applicable redemption prices set forth in the indenture documents, plus accrued and unpaid interest thereon to the redemption date as more fully described in such documents.

Credit Lines

Devon has a $3.0 billion Senior Credit Facility. As of March 31, 2021, Devon had no outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under this facility. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back non-

cash financial write-downs such as impairments. As of March 31, 2021, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 27.4%.

Retirement of Senior Notes

In first quarter of 2021, Devon redeemed $43 million of the 6.00% senior notes due 2022, $175 million of the 5.875% senior notes due 2028 and $315 million of the 4.50% senior notes due 2030. In the first quarter of 2021, Devon recognized a $20 million gain on early retirement of debt, consisting of $47 million of non-cash premium accelerations partially offset by $27 million of cash retirement costs. The gain on early retirement is included in net financing costs in the consolidated comprehensive statements of earnings. Devon also redeemed $210 million of the 5.25% senior notes due 2027 in April 2021. In May 2021, Devon gave notice to exercise its early redemption to fully retire the 5.75% senior notes due 2026 in June 2021.

Net Financing Costs

The following schedule includes the components of net financing costs.

	Three Months Ended March 31,
	2021			2020
Interest based on debt outstanding	$	105		$	65
Gain on early retirement of debt		(20	)		—
Interest income		(1	)		(5	)
Other		(7	)		5
Total net financing costs	$	77		$	65