Form 11-K/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 11-K/A

 

 

 

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-32318

 

 

 

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

Devon Energy Corporation Incentive Savings Plan

 

B. Name of the issuer of the securities held pursuant to the plan and the address of its principal executive office:

Devon Energy Corporation

333 West Sheridan Avenue

Oklahoma City, OK 73102-5015

 

 

 


EXPLANATORY NOTE

This Form 11-K/A is being filed to amend and restate the Form 11-K filed June 27, 2013 with respect to the Devon Energy Corporation Incentive Savings Plan. The original Form 11-K failed to attach the consent of the Independent Registered Public Accounting Firm. The consent is attached to this Form 11-K/A. The original Form 11-K is not otherwise changed.

 

2


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

FORM 11-K

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting Firm

     4   

Financial Statements

  

Statements of Net Assets Available for Benefits

     5   

Statement of Changes in Net Assets Available for Benefits

     6   

Notes to Financial Statements

     7   

Supplemental Schedule

  

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

     15   

Signatures

     20   

 

 

3


 

Report of Independent Registered Public Accounting Firm

Plan Administrator

Devon Energy Corporation Incentive Savings Plan

We have audited the accompanying statements of net assets available for benefits of Devon Energy Corporation Incentive Savings Plan (the “Plan”) as of December 31, 2012 and 2011, and the related statement of changes in net assets available for benefits for the year ended December 31, 2012. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Devon Energy Corporation Incentive Savings Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the year ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2012 is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

June 27, 2013

 

4


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

 

     December 31,  
     2012     2011  

ASSETS

    

Investments, at fair value

   $ 638,987,799      $ 579,474,149   

Employer contributions receivable

     21,411,745        16,508,031   

Notes receivable from participants

     11,009,558        10,354,047   

Other receivables

     1,527,282        3,747,769   
  

 

 

   

 

 

 

Total assets

     672,936,384        610,083,996   
  

 

 

   

 

 

 

LIABILITIES

    

Other liabilities

     1,638,154        820,080   
  

 

 

   

 

 

 

Total liabilities

     1,638,154        820,080   
  

 

 

   

 

 

 

Net assets reflecting all investments at fair value

     671,298,230        609,263,916   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts held by a collective trust

     (120,975     198,924   
  

 

 

   

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS

   $ 671,177,255      $ 609,462,840   
  

 

 

   

 

 

 

See accompanying notes to financial statements

 

5


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

 

     Year Ended
December 31,
 
     2012  

Additions:

  

Investment income:

  

Net appreciation in fair value of investments

   $ 39,016,451   

Dividend income

     12,165,168   

Interest income

     59,517   
  

 

 

 

Net investment income

     51,241,136   
  

 

 

 

Contributions:

  

Participant, including rollovers

     34,142,684   

Employer, net of forfeitures

     37,992,147   
  

 

 

 

Total contributions

     72,134,831   
  

 

 

 

Interest income on notes receivable from participants

     454,072   
  

 

 

 

Total additions

     123,830,039   
  

 

 

 

Deductions:

  

Distributions to participants

     60,592,747   

Administrative expenses

     1,522,877   
  

 

 

 

Total deductions

     62,115,624   
  

 

 

 

Net increase in net assets available for benefits

     61,714,415   

Net assets available for benefits:

  

Beginning of year

     609,462,840   
  

 

 

 

End of year

   $ 671,177,255   
  

 

 

 

See accompanying notes to financial statements

 

6


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS

 

1. Description of Plan

The following description of the Devon Energy Corporation Incentive Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the plan agreement and respective amendments for a more complete description of the Plan’s provisions.

General

The Plan is a multiple employer defined contribution plan covering substantially all United States employees of Devon Energy Corporation (“Devon”) and Thunder Creek Gas Services, LLC and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Employees are eligible to participate in the Plan as soon as administratively possible following the completion of one hour of service. There is no minimum age requirement for employees to be eligible.

The plan administrator is a committee of Devon employees who are appointed by, and serve at the direction of Devon (the “Benefits Committee”). The Benefits Committee is responsible for administration of the Plan, except for the duties related to selecting and monitoring the Plan’s investment options. The selection and monitoring of investment options, and related functions, is the responsibility of a separate committee of Devon employees who are appointed by, and serve at the direction of Devon (the “Investments Committee”).

Devon’s Board of Directors, or a committee thereof, has the sole responsibility for appointing and removing the Plan’s trustee, which is currently Fidelity Management Trust Company (the “Trustee”). Under the terms of an agreement between the Trustee and the Plan, the Trustee administers the Plan’s trust in accordance with instructions provided by the Benefits Committee.

Contributions

As defined in the Plan, participants may elect to contribute from 1% to 50% of their compensation to the Plan on a pre-tax basis or on a designated Roth basis (after-tax contributions). The combined pre-tax and designated Roth contributions are subject to limitations under the Internal Revenue Code (IRC). Participants who have attained age 50 before the end of the Plan year are eligible to make pre-tax or designated Roth catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (“Rollover Contributions”). Participant Rollover Contributions were approximately $3,334,000 during 2012.

Participants may receive an employer match on their contribution to the Plan in an amount determined annually by Devon. The amount of the matching contribution will vary according to the participant’s years of service and whether the participant is eligible for enhanced contributions. Participants employed subsequent to October 1, 2007 and participants who opted out of a separate defined benefit plan sponsored by Devon are eligible for enhanced contributions. During 2012, for all participants with at least five years of service, Devon contributed amounts equal to 100% of each participant’s contributions to the Plan, with the matching contribution being limited to the lesser of 6% of the participant’s compensation, or $15,000. For participants with less than five years of service, Devon’s matching contributions in 2012 were limited to the lesser of 3% of the participant’s compensation, or $7,500 (except that participants who were employed prior to October 1, 2007 and elected to continue to participate in a separate defined benefit plan were not eligible for enhanced contributions and received the higher matching contribution described in the preceding sentence even if they had less than five years of service).

Participants eligible for enhanced contributions also receive additional, nondiscretionary contributions by Devon calculated as a percentage of their compensation, as defined in the Plan. In 2012, the enhanced contribution percentage ranged from 8% to 16%, depending upon a participant’s years of service.

 

 

7


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

Participant Accounts

Each participant’s account is credited with the participant’s contribution, Devon’s contribution and allocations of earnings or losses on the investments selected by the participant, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

Investments

Participants direct their account balances to be invested in a number of investment options. Participants may change their investment options on a daily basis. Investment options of the Plan as of December 31, 2012 consist of mutual funds, equity securities, Devon common stock, money market funds, collective trust funds, stable value fund and Brokerage Link. Brokerage Link is a self-directed brokerage account that allows participants to invest in a wide variety of funds.

Vesting and Forfeitures

Participants are vested immediately in their contributions, plus the associated investment income or losses. For each year of service up to four years, a participant becomes 25% vested in employer contributions to their account and the associated investment income or losses. Participants will become vested upon a change of control of Devon, as defined in the Plan, or if the participant dies, becomes totally disabled or reaches age 65 while employed by Devon or another participating employer.

Upon a termination of service that results in nonvested amounts in a participant’s account, the nonvested portion is forfeited and used to reduce Devon’s future contributions. Employer contributions were reduced by $1,264,000 in 2012. As of December 31, 2012 and 2011, there were approximately $976,000 and $1,515,000, respectively, of forfeitures available to reduce future employer contributions.

Notes Receivable from Participants

Participants may borrow from their fund accounts and may have up to two loans outstanding at any time. Total borrowings may not exceed the lesser of 50% of a participant’s vested balance or $50,000. The loans are secured by the balance in the participants’ accounts. The loans bear interest at a fixed rate, which approximates the rate generally charged for consumer loans secured by certificates of deposit or marketable securities. The interest rates ranged from 4.25% to 9.75% at December 31, 2012. The terms of the loans may not exceed five years, except for loans used to purchase a primary residence, in which case the loan term generally will not exceed 15 years. Maturity dates ranged from January 2013 to December 2022 at December 31, 2012. Principal and interest is repaid through biweekly payroll deductions from the participants’ wages.

Payment of Benefits

While still employed, a participant who is age 59 1/2 or older may withdraw all or part of the vested interest in their account at any time. Participants who are still employed also may withdraw their Rollover Contributions regardless of age. In addition, participants who are still employed and who have taken all other withdrawals and loans available under the Plan may also request a withdrawal in an amount necessary to satisfy an immediate and heavy financial need.

On termination of service due to death, disability or upon retirement, participants (or a beneficiary in the case of death) may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in their account or equal installments (monthly, quarterly, semi-annually or annually) for any period less than the life expectancy of the participant and their beneficiary. For termination of service for other reasons, participants may receive the value of the vested interest in their account as a lump-sum distribution. Depending on the value of the participant’s vested interest in their account at the time of their termination of service, the value of the participant’s vested interest may be automatically paid in a lump-sum distribution, paid in a direct rollover or automatically rolled over to an individual retirement account or annuity established in the participant’s (or beneficiary’s) name.

 

8


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

2. Summary of Significant Accounting Policies

The following are the significant accounting policies followed by the Plan in preparing the accompanying financial statements:

Basis of Presentation

The financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell the investment in an orderly transaction between market participants. This price is commonly referred to as the “exit price.” Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques. This hierarchy consists of three broad levels:

 

   

Level 1 – Inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority. When available, Level 1 inputs are used to measure fair value because they generally provide the most reliable evidence of fair value.

 

   

Level 2 – Inputs consist of quoted prices that are generally observable for the asset. Common examples of Level 2 inputs include quoted prices for similar assets in active markets or quoted prices for identical assets in markets not considered to be active.

 

   

Level 3 – Inputs are not observable from objective sources and have the lowest priority. The most common Level 3 fair value measurement is an internally developed cash flow model.

Realized gains or losses are calculated based on proceeds from the sale of investments and the fair value of the investments at the beginning of the plan year or at time of purchase if acquired during the current plan year. Unrealized appreciation or depreciation of the investments is calculated based on the fair value of the investments at the end of the plan year and the fair value of the investments at the beginning of the plan year or at time of purchase if acquired during the current plan year. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.

Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The accompanying statements of net assets available for benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The accompanying Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis for fully benefit-responsive investment contracts. Contract value represents the principal balance of the underlying investment contracts, plus accrued interest at the stated contract rates, less withdrawals and administrative charges by the financial institutions. There are no material reserves against contract value for credit risk of the contract issuers or otherwise.

 

9


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

Notes Receivable from Participants

Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. No allowance for credit losses has been recorded as of December 31, 2012 or 2011. Delinquent participant loans are reclassified as distributions based upon the terms of the plan document.

Payment of Benefits

Benefits are recorded when paid.

Administrative Expenses

Trustee, audit and certain other administrative fees are paid by Devon on behalf of the Plan and are excluded from these financial statements. Fees related to the administration of notes receivable from participants are charged directly to the participant’s account and are included in administrative expenses. Investment related expenses are included in net appreciation of fair value of investments.

 

3. Fair Value Measurements

The following tables provide the Plan’s investments at fair value according to the fair value hierarchy. The Plan had no Level 3 investments as of December 31, 2012 and 2011. There have been no changes in the methodologies used at December 31, 2012 and 2011.

 

     As of December 31, 2012  
            Fair Value Measurements Using:  
     Total      Level 1 Inputs      Level 2 Inputs  

Mutual funds:

        

Growth funds

   $ 33,431,939       $ 33,431,939       $ —     

Fixed income funds

     107,270,465         107,270,465         —     

Balanced funds

     28,098,073         28,098,073         —     

Other funds

     14,527,829         14,527,829         —     
  

 

 

    

 

 

    

 

 

 

Total mutual funds

     183,328,306         183,328,306         —     
  

 

 

    

 

 

    

 

 

 

Equity securities:

        

Employer stock

     57,229,169         57,229,169         —     

Domestic large cap value

     55,083,236         55,083,236         —     

Domestic large cap growth

     52,141,542         52,141,542         —     

Domestic small cap value

     35,592,002         35,592,002         —     

Domestic small cap growth

     24,838,748         24,838,748         —     
  

 

 

    

 

 

    

 

 

 

Total equity securities

     224,884,697         224,884,697         —     
  

 

 

    

 

 

    

 

 

 

Money market funds

     45,639,449         45,639,449         —     

Collective trust funds:

        

U.S. equity index (1)

     75,393,713         —           75,393,713   

Stable value (2)

     40,392,154         —           40,392,154   

International equity index (3)

     65,838,189         —           65,838,189   

Real estate investment trust (4)

     3,511,291         —           3,511,291   
  

 

 

    

 

 

    

 

 

 

Total collective trust funds

     185,135,347         —           185,135,347   
  

 

 

    

 

 

    

 

 

 

Total investments

   $  638,987,799       $  453,852,452       $  185,135,347   
  

 

 

    

 

 

    

 

 

 

 

10


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

 

     As of December 31, 2011  
            Fair Value Measurements Using:  
     Total      Level 1 Inputs      Level 2 Inputs  

Mutual funds:

        

Growth funds

   $ 50,680,396       $ 50,680,396       $ —     

Fixed income funds

     94,446,068         94,446,068         —     

Balanced funds

     14,867,287         14,867,287         —     

Other funds

     12,092,463         12,092,463         —     
  

 

 

    

 

 

    

 

 

 

Total mutual funds

     172,086,214         172,086,214         —     
  

 

 

    

 

 

    

 

 

 

Equity securities:

        

Employer stock

     72,388,968         72,388,968         —     

Domestic large cap value

     50,406,623         50,406,623         —     

Domestic large cap growth

     46,579,746         46,579,746         —     

Domestic small cap value

     32,577,849         32,577,849         —     

Domestic small cap growth

     23,643,043         23,643,043         —     
  

 

 

    

 

 

    

 

 

 

Total equity securities

     225,596,229         225,596,229         —     
  

 

 

    

 

 

    

 

 

 

Money market funds

     54,097,012         54,097,012         —     

Collective trust funds:

        

U.S. equity index (1)

     61,110,240         —           61,110,240   

Stable value (2)

     42,927,580         —           42,927,580   

International equity index (3)

     20,845,608         —           20,845,608   

Real estate investment trust (4)

     2,811,266         —           2,811,266   
  

 

 

    

 

 

    

 

 

 

Total collective trust funds

     127,694,694         —           127,694,694   
  

 

 

    

 

 

    

 

 

 

Total investments

   $ 579,474,149       $ 451,779,455       $ 127,694,694   
  

 

 

    

 

 

    

 

 

 

 

(1) Investment fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Russell 3000 index. This fund allows for daily redemptions with no unfunded commitments.
(2) Investment fund seeks preservation of principal and to earn current income while tracking interest rates over the intermediate term by investing in a diversified portfolio of stable value contracts, including wrap contracts issued by insurance companies, banks and other financial institutions. This fund allows for daily redemptions with no unfunded commitments.
(3) Investment fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI ACWI ex-U.S. IMI Index. This fund allows for daily redemptions with no unfunded commitments.
(4) Investment fund seeks results through active management that correspond generally to the price and yield performance, after fees and expenses, of the FRSE NAREIT Equity REITS Index. This fund allows for daily redemptions with no unfunded commitments.

The following methods and assumptions were used to estimate the fair values in the tables above.

Level 1 Fair Value Measurements

Amounts consist primarily of mutual funds, equity securities and money market funds that are actively traded and can be redeemed upon demand. The fair values of these instruments are based upon quoted market prices.

 

11


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

Level 2 Fair Value Measurements

Amounts consist primarily of collective trust funds. These funds can be redeemed upon demand. The fair values are based upon the net asset values (“NAV”) provided by investment managers. The NAV is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Participant transactions (purchases and sales) may occur daily. In the event the Plan initiates a full redemption of one of the collective trusts, the investment managers reserve the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations will be carried out in an orderly business manner.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although these valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

 

4. Stable Value Fund

The PIMCO Stable Income Fund (the “Fund”) is a collective trust fund sponsored by SEI Trust Company. The beneficial interest of each participant is represented by units. Units are issued and redeemed daily at the Fund’s constant NAV of approximately $100 per unit. Distribution to the Fund’s unit holders are declared daily from the net investment income and automatically reinvested in the Fund on a monthly basis. It is the policy of the Fund to use its best efforts to maintain a stable net asset value of approximately $100 per unit, although, there is no guarantee that the Fund will be able to maintain this value.

The Fund has certain restrictions on withdrawals and transfers as follows. Withdrawals directed by the Plan require written notice to the Trustee. The Trustee shall notify the Plan that such request will be fulfilled as either, (1) a deferred book value plan withdrawal, which the Trustee will act in good faith to complete by the fifth business day of the month that follows the date that is 24 months after the Trustee’s receipt of the Plan’s request for a withdrawal or (2) an ordinary plan withdrawal to be completed on or prior to the first business day that is within 45 days of the Plan’s request for withdrawal. The methodology chosen by the Trustee will depend on the value of the Fund’s portfolio, taking into account any adverse market value adjustments applicable to such withdrawal under the Fund’s investment contracts.

Withdrawals made in order to accommodate distribution to participants, whether in-service or following termination of employment may be made on any business day. Withdrawals made in order to accommodate a participant-directed exchange to another investment option may be made on any business day, provided that the exchange is not directed to a competing fund (the Vanguard Money Market Fund or Brokerage Link). Transferred amounts must be held in a non-competing investment option for 90 days before subsequent transfers to a competing fund can occur. The Trustee reserves the right to delay participant withdrawals up to 30 days in order to maintain liquidity for the Trust or if it determines that an immediate withdrawal would have an adverse impact on the Trust.

The average yield earned by the Trust at December 31, 2012, representing the annualized earnings of all investments in the Trust divided by the period-end fair value of all investments in the Trust was 1.05%. The average yield earned by the Trust at December 31, 2012, representing the annualized earnings credited to participants in the Trust as of the last day of the period, divided by the period-end fair value of all investments in the Trust was 1.04%. Certain events may limit the ability of the Fund to realize the contract value of investment contracts and may therefore result in payments to participants that reflect fair value rather than contract value. Such events include, but are not limited to, certain amendments to the Plan documents or the Fund’s investment guidelines that are not approved by issuers of investment contracts, failure to comply with certain contract provisions, complete or partial termination of the Plan or merger with another plan or bankruptcy of the Plan. The Benefits and Investments Committees believe that the occurrence of events that would cause the Fund to transact at less than contract value is not probable.

 

12


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

5. Plan Termination

Although Devon has not expressed any intent to terminate the Plan, it may do so at any time. Benefits owed to participants are not actuarially determined and the aggregate vested benefits are limited to the Plan’s net assets available for plan benefits. In the event of the Plan’s termination, participants would become 100% vested in their accounts.

 

6. Plan Investment Assets

Following is a schedule of the Plan’s investments that exceed 5% of the Plan’s net assets at December 31, 2012 and 2011, and the fair value of such investments:

 

     2012     2011  
     Number of
shares or units
    Fair value     Number of
shares or units
    Fair value  

PIMCO Total Return Fund

     6,857,697      $ 77,080,517        6,473,534      $ 70,367,314   

BlackRock, Inc. U.S. Equity Index

     5,174,586      $ 75,393,713        4,881,010      $ 61,110,241   

BlackRock, Inc. International Equity Index

     5,878,410      $ 65,838,189               

Devon Energy Corporation Common Stock

     1,099,715      $ 57,229,169        1,167,564      $ 72,388,968   

PIMCO Stable Income Fund

     401,067      $ 40,392,154        —        $ —     

Vanguard Prime Money Market Fund

     34,424,570      $ 34,424,570        37,574,748      $ 37,574,748   

SEI Stable Asset Fund

     —        $ —          42,927,580      $ 42,927,580   

Artisan International Fund

         $       1,580,116      $ 31,333,701   

 

* Investment did not represent five percent or more of the Plan’s net assets.

During 2012, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:

 

Mutual funds

   $ 16,018,250   

Collective trust funds

     17,811,735   

Equity securities

     5,186,466   
  

 

 

 
   $ 39,016,451   
  

 

 

 

 

7. Related Party Transactions

The Trustee and Devon are parties in interest as defined by ERISA. Certain plan investments are shares of mutual funds managed by Fidelity Management & Research Company, which is an affiliate of the Trustee. The Trustee also invests certain Plan assets in the Devon Stock Fund. Such transactions qualify as party-in-interest transactions permitted by the Department of Labor regulations.

 

8. Tax Status

The Internal Revenue Service has determined and informed Devon by a letter dated April 16, 2010, that the Plan and related trusts are designed in accordance with applicable sections of the Internal Revenue Code (the “Code”). Prior to April 16, 2010, the Plan operated under a determination letter dated August 1, 2002. Although the Plan has been amended since receiving the determination letter, the Benefits Committee believes that the Plan is designed and is currently being operated in compliance with the applicable provisions of the Code.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Benefits Committee has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2012, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.

 

13


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

The Plan is subject to routine audits by taxing jurisdictions. The Internal Revenue Service is currently conducting routine audits of Devon, including the Plan, for the 2008 and 2009 tax years. The Benefits Committee believes it is no longer subject to income tax examinations for years prior to 2008. The Internal Revenue Service has made no adverse findings regarding operation of the Plan.

 

9. Risk and Uncertainties

In general, the investments provided by the Plan are exposed to various risks, such as interest rate, credit and overall market volatility risks. Because of the risks associated with investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the participants’ account balances and the amounts reported in the statements of net assets available for benefits.

 

10. Reconciliation of Financial Statement to Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2012 and 2011 to Form 5500.

 

     2012      2011  

Net assets available for benefits per the financial statements

   $ 671,177,255       $ 609,462,840   

Adjustment from contract value to fair value for interest in collective trust relating to fully benefit-responsive investment contracts

     120,975         (198,924
  

 

 

    

 

 

 

Net assets available for benefits per Form 5500

   $ 671,298,230       $ 609,263,916   
  

 

 

    

 

 

 

The following is a reconciliation of investment income per the financial statements for 2012 to Form 5500:

 

     2012  

Net investment income per financial statements

   $ 51,241,136   

Interest income on notes receivable from participants

     454,072   

Adjustment from contract value to fair value for interest in collective trust relating to fully benefit-responsive investment contracts

     319,899   
  

 

 

 

Net investment income per Form 5500

   $ 52,015,107   
  

 

 

 

 

14


DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN

SCHEDULE H, LINE 4i-SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2012

 

Identity of issue, borrower, lessor or similar party

  

Description of investment

   Number of
Shares or Units
     Current Value  

Devon Energy Corporation**

   Common stock      1,099,715       $ 57,229,169   

Money Market Funds:

        

INTEREST-BEARING CASH

   Money-market securities         11,214,879   

THE VANGUARD GROUP

   Vanguard Money Market Fund      34,424,570         34,424,570   

Mutual Funds and Collective Trust Funds:

        

ABERDEEN

   Aberdeen Emerging Markets Fund      364,016         5,773,294   

ARTISAN PARTNERS GROUP LP

   Artisan International Fund      306         7,519   

BLACKROCK, INC.

   US Equity Index      5,174,586         75,393,713   

BLACKROCK, INC.

   International Equity Index      5,878,410         65,838,189   

CAPITAL RESEARCH & MANAGEMENT COMPANY

   Europacific Growth Fund      24,655         1,015,274   

HARBOR FUNDS

   Harbor International Fund      456,891         28,382,062   

INVESCO

   Invesco Equity Real Estate Securities Trust      38,679         3,511,291   

NEUBERGER BERMAN

   Neuberger Berman High Yield Bond Fund      1,754,056         16,628,443   

PIMCO FUNDS

   PIMCO Total Return Fund      6,857,697         77,080,517   

PIMCO FUNDS

   PIMCO All Asset All Authority      1,916,592         21,255,004   

SEI TRUST COMPANY

   PIMCO Stable Income Fund      401,067         40,392,154   

WESTERN ASSET

   Inflation Indexed Plus Bond Portfolio      901,468         11,024,951   

Equity Securities:

        

ADVISORY BOARD CO

   Common stock      18,259         854,339   

AERCAP HOLDINGS NV

   Common stock      14,300         196,196   

AKORN INC

   Common stock      49,733         664,433   

ALEXION PHARMACEUTICALS INC

   Common stock      12,813         1,201,988   

ALLIANT ENERGY CORPORATION

   Common stock      19,000         834,290   

AMAZON.COM INC

   Common stock      8,000         2,009,120   

AMDOCS LTD

   Common stock      19,600         666,204   

AMERICAN INTERNATIONAL GROUP

   Common stock      56,100         1,980,330   

ANGLOGOLD ASHANTI LTD SPON ADR

   Common stock      59,863         1,877,902   

AON PLC

   Common stock      32,400         1,801,440   

APACHE CORP

   Common stock      24,700         1,938,950   

APPLE INC

   Common stock      3,007         1,602,821   

APPLIED MATERIALS INC

   Common stock      62,200         711,568   

ASCENA RETAIL GROUP INC

   Common stock      14,600         269,954   

ASPEN INSURANCE HLDGS LTD

   Common stock      18,800         603,104   

ATHENAHEALTH INC

   Common stock      3,404         250,024   

AVIS BUDGET GROUP

   Common stock      9,600         190,272   

B/E AEROSPACE INC

   Common stock      17,028         841,183   

BARNES & NOBLE INC

   Common stock      18,500         279,165   

BARRICK GOLD CORP (USA)

   Common stock      37,400         1,309,374   

BIOGEN IDEC INC

   Common stock      5,178         759,457   

BJ’S RESTAURANTS INC

   Common stock      7,654         251,817   

BLOCK H & R INC

   Common stock      29,300         544,101   

BOEING CO

   Common stock      24,213         1,824,692   

BROADCOM CORP CL A

   Common stock      44,523         1,478,609   

BUFFALO WILD WINGS INC

   Common stock      4,545         330,967   

CA INC

   Common stock      106,900         2,349,662   

CABLEVISION SYS CORP NY GRP A

   Common stock      30,900         461,646   

CACI INTERNATIONAL INC CL A

   Common stock      8,600         473,258   

 

15


CANADIAN NATL RESOURCES LTD

   Common stock      68,050         1,964,604   

CAPITAL ONE FINANCIAL CORP

   Common stock      17,300         1,002,189   

CASH AMERICA INTERNATIONAL INC

   Common stock      12,100         480,007   

CATAMARAN CORP

   Common stock      21,017         990,111   

CATAMARAN CORP

   Common stock      19,334         910,825   

CAVIUM INC

   Common stock      10,862         339,003   

CELGENE CORP

   Common stock      21,396         1,684,293   

CENTENE CORP

   Common stock      15,027         616,107   

CENTERPOINT ENERGY INC

   Common stock      27,600         531,300   

CERNER CORP

   Common stock      6,781         526,477   

CHART INDUSTRIES INC

   Common stock      3,650         243,346   

CHEMED CORP

   Common stock      4,200         288,078   

CHICAGO BRIDGE & IRON (NY REG)

   Common stock      13,668         633,512   

CHURCHILL DOWNS INC

   Common stock      6,400         425,280   

CISCO SYSTEMS INC

   Common stock      91,800         1,803,870   

CITIGROUP INC

   Common stock      59,050         2,336,018   

CLEARWATER PAPER CORP

   Common stock      1,000         39,160   

CMS ENERGY CORP

   Common stock      42,000         1,023,960   

COINSTAR INC

   Common stock      10,800         561,708   

CONCUR TECHNOLOGIES INC

   Common stock      7,453         503,227   

CONNS INC

   Common stock      9,255         283,943   

COOPER TIRE & RUBBER COMPANY

   Common stock      13,200         334,752   

COSTCO WHOLESALE CORP

   Common stock      5,245         518,049   

CROWN HOLDINGS INC

   Common stock      14,800         544,788   

CVS CAREMARK CORP

   Common stock      23,200         1,121,720   

DEVRY INC

   Common stock      6,800         161,364   

DIGITALGLOBE INC

   Common stock      13,900         339,716   

DOLBY LABORATORIES INC CL A

   Common stock      15,900         466,347   

DOMTAR CORP

   Common stock      3,500         292,320   

DR HORTON INC

   Common stock      40,059         792,367   

DUN & BRADSTREET CORP DEL NEW

   Common stock      6,900         542,685   

EBAY INC

   Common stock      41,575         2,121,157   

EBIX INC

   Common stock      11,800         189,626   

ECHOSTAR CORP CL A

   Common stock      13,500         461,970   

EHEALTH INC

   Common stock      13,639         374,800   

ELLIE MAE INC

   Common stock      9,863         273,698   

EMC CORP

   Common stock      37,814         956,694   

EMULEX CORP

   Common stock      37,000         270,100   

ENDO HEALTH SOLUTIONS INC

   Common stock      28,700         753,949   

ENERGY XXI (USA)

   Common stock      12,600         405,594   

ENTROPIC COMMUNICATIONS INC

   Common stock      49,300         260,797   

EQUINIX INC

   Common stock      7,909         1,630,836   

EVEREST REINSURANCE GROUP LTD

   Common stock      5,900         648,705   

EXACTTARGET INC

   Common stock      24,245         484,900   

EXLSERVICE HOLDINGS INC

   Common stock      22,321         591,507   

FACEBOOK INC A

   Common stock      28,274         752,937   

FARO TECHNOLOGIES INC

   Common stock      6,703         239,163   

FASTENAL CO

   Common stock      12,427         580,217   

FEDEX CORP

   Common stock      11,090         1,017,175   

FIDELITY NATL FINL INC NEW

   Common stock      12,000         282,600   

FIRST REPUBLIC BANK

   Common stock      22,600         740,828   

FLEETCOR TECHNOLOGIES INC

   Common stock      4,000         214,600   

FLUOR CORP

   Common stock      8,833         518,850   

FRESH MARKET INC

   Common stock      11,810         567,943   

FTI CONSULTING INC

   Common stock      15,800         521,400   

GAMESTOP CORP CL A

   Common stock      13,400         336,206   

GENERAL MOTORS CO

   Common stock      58,650         1,690,880   

GILEAD SCIENCES INC

   Common stock      15,211         1,117,248   

GLOBAL CASH ACCESS HLDGS INC

   Common stock      35,900         281,456   

GLOBAL PAYMENTS INC

   Common stock      14,800         670,440   

 

16


GOLDMAN SACHS GROUP INC

   Common stock      11,400         1,454,184   

GOOGLE INC A

   Common stock      2,433         1,725,897   

GT ADVANCED TECHNOLOGIES INC

   Common stock      80,000         241,600   

GUIDEWIRE SOFTWARE INC

   Common stock      19,542         580,788   

HALLIBURTON CO

   Common stock      26,700         926,223   

HANOVER INSURANCE GROUP INC

   Common stock      16,400         635,336   

HARTFORD FINL SVCS GROUP INC

   Common stock      99,400         2,230,536   

HCC INSURANCE HOLDINGS INC

   Common stock      15,100         561,871   

HEALTHSTREAM INC

   Common stock      31,324         761,486   

HELIX ENERGY SOL GRP INC

   Common stock      13,600         280,704   

HENRY (JACK) & ASSOCIATES INC

   Common stock      9,900         388,674   

HHGREGG INC

   Common stock      15,200         106,704   

HOLLYFRONTIER CORP

   Common stock      8,700         404,985   

HOMEAWAY INC

   Common stock      23,745         522,390   

HUMANA INC

   Common stock      15,018         1,030,685   

HUNT J B TRANSPORT SERVICES IN

   Common stock      12,932         772,170   

ICONIX BRAND GROUP INC

   Common stock      17,900         399,528   

IDACORP INC

   Common stock      19,700         853,995   

INGERSOLL RAND PLC

   Common stock      21,400         1,026,344   

INTERPUBLIC GROUP OF COS INC

   Common stock      31,300         344,926   

INTUITIVE SURGICAL INC

   Common stock      1,009         494,783   

IPG PHOTONICS CORP

   Common stock      4,662         310,722   

JACK IN THE BOX INC

   Common stock      15,300         437,580   

JPMORGAN CHASE & CO

   Common stock      27,200         1,195,984   

KANSAS CITY SOUTHERN

   Common stock      18,894         1,577,271   

KANSAS CITY SOUTHERN

   Common stock      9,314         777,533   

KEMET CORP

   Common stock      40,400         203,212   

KULICKE & SOFFA INDUSTRIES INC

   Common stock      31,400         376,486   

LAM RESEARCH CORP

   Common stock      12,000         433,560   

LEAR CORP NEW

   Common stock      9,000         421,560   

LENNAR CORP CL A

   Common stock      19,408         750,507   

LEXMARK INTERNATIONAL INC CL A

   Common stock      19,600         454,524   

LINCOLN NATIONAL CORP

   Common stock      20,850         540,015   

LINKEDIN CORP CL A

   Common stock      13,399         1,538,473   

LIVE NATION ENTERTAINMENT INC

   Common stock      19,700         183,407   

LIVEPERSON INC

   Common stock      43,318         569,199   

LOEWS CORP

   Common stock      27,000         1,100,250   

LULULEMON ATHLETICA INC

   Common stock      8,770         668,537   

MARKEL CORP

   Common stock      1,100         476,762   

MASTERCARD INC CL A

   Common stock      3,596         1,766,643   

MEDNAX INC

   Common stock      6,900         548,688   

MERCK & CO INC NEW

   Common stock      25,100         1,027,594   

METLIFE INC

   Common stock      45,100         1,485,594   

MFA FINANCIAL INC

   Common stock      90,700         735,577   

MICHAEL KORS HOLDINGS LTD

   Common stock      29,784         1,519,878   

MICROSOFT CORP

   Common stock      48,050         1,284,377   

MKS INSTRUMENTS INC

   Common stock      18,500         476,930   

MOODYS CORP

   Common stock      23,573         1,186,193   

MOSAIC CO NEW

   Common stock      16,600         940,058   

NETSPEND HOLDINGS INC

   Common stock      16,300         192,666   

NETSUITE INC

   Common stock      13,846         931,836   

NEUSTAR INC CL A

   Common stock      6,900         289,317   

NOBLE ENERGY INC

   Common stock      5,900         600,266   

NOVO-NORDISK AS CL B ADR

   Common stock      9,373         1,529,767   

NRG ENERGY INC

   Common stock      27,700         636,823   

OCCIDENTAL PETROLEUM CORP

   Common stock      9,060         694,087   

PACCAR INC

   Common stock      12,004         542,701   

PACCAR INC

   Common stock      21,750         983,318   

PALO ALTO NETWORKS INC

   Common stock      8,723         466,855   

PAPA JOHNS INTL INC

   Common stock      3,400         186,796   

 

17


PFIZER INC

   Common stock      74,570         1,870,216   

PHILIP MORRIS INTL INC

   Common stock      6,750         564,570   

PITNEY-BOWES INC

   Common stock      42,400         451,136   

PITNEY-BOWES INC

   Common stock      27,650         294,196   

POLARIS INDUSTRIES INC

   Common stock      5,955         501,113   

PORTFOLIO RECOVERY ASSOC INC

   Common stock      6,361         679,736   

POWER-ONE INC

   Common stock      45,000         184,950   

PRECISION CASTPARTS CORP

   Common stock      9,306         1,762,743   

PRICELINE.COM INC

   Common stock      2,580         1,602,696   

QUALCOMM INC

   Common stock      25,421         1,576,610   

QUESTCOR PHARMACEUTICALS INC

   Common stock      10,300         275,216   

RALPH LAUREN CORP

   Common stock      8,860         1,328,291   

RAYTHEON CO

   Common stock      16,050         923,838   

REALOGY HOLDINGS CORP

   Common stock      26,138         1,096,750   

RENT A CTR INC

   Common stock      7,900         271,444   

RUE21 INC

   Common stock      6,100         173,179   

RUE21 INC

   Common stock      20,949         594,742   

SALESFORCE.COM INC

   Common stock      9,239         1,553,076   

SALIX PHARMACEUTICALS LTD

   Common stock      11,100         449,328   

SALIX PHARMACEUTICALS LTD

   Common stock      6,503         263,241   

SANOFI SPON ADR

   Common stock      56,000         2,653,280   

SCHOLASTIC CORP

   Common stock      10,000         295,600   

SEALED AIR CORP

   Common stock      21,900         383,469   

SELECT COMFORT CORP

   Common stock      9,467         247,751   

SERVICENOW INC

   Common stock      14,288         429,069   

SILICON IMAGE INC

   Common stock      41,500         205,840   

SOLARWINDS INC

   Common stock      12,521         656,726   

SPIRIT AIRLINES INC

   Common stock      33,200         588,304   

SPLUNK INC

   Common stock      17,309         502,307   

STARBUCKS CORP

   Common stock      30,827         1,652,944   

STRATASYS LTD

   Common stock      8,935         716,140   

SYNNEX CORP

   Common stock      7,900         271,602   

TALISMAN ENERGY INC (CANA)

   Common stock      181,900         2,060,927   

TELLABS INC

   Common stock      97,200         221,616   

TERADATA CORP

   Common stock      7,252         448,826   

TEREX CORP

   Common stock      18,601         522,874   

TEVA PHARMACEUTICAL IND ADR

   Common stock      33,200         1,239,688   

TIME WARNER INC

   Common stock      33,200         1,587,956   

TIVO INC

   Common stock      15,700         193,424   

TOTAL SYS SVCS INC

   Common stock      25,700         550,494   

ULTA SALON COSMETICS & FRG INC

   Common stock      8,931         877,560   

ULTIMATE SOFTWARE GROUP INC

   Common stock      8,719         823,161   

UNDER ARMOUR INC CL A

   Common stock      11,327         549,699   

UNION PACIFIC CORP

   Common stock      7,635         959,872   

UNION PACIFIC CORP

   Common stock      7,200         905,184   

UNITED THERAPEUTICS CORP DEL

   Common stock      7,500         400,650   

UNUM GROUP

   Common stock      86,900         1,809,258   

URS CORP NEW

   Common stock      13,800         541,788   

VALASSIS COMMUNICATIONS INC

   Common stock      10,300         265,534   

VIACOM INC CL B

   Common stock      33,150         1,748,331   

VISA INC CL A

   Common stock      13,757         2,085,286   

VMWARE INC CL A

   Common stock      16,965         1,597,085   

VONAGE HOLDINGS CORP

   Common stock      140,400         332,748   

WASHINGTON POST CO CL B

   Common stock      1,700         620,857   

WELLS FARGO & CO

   Common stock      41,300         1,411,634   

WESTAR ENERGY INC

   Common stock      25,700         735,534   

WESTERN REFINING INC

   Common stock      12,800         360,832   

WHITE MOUNTAINS INS GROUP LTD

   Common stock      1,100         566,500   

WHOLE FOODS MARKET INC

   Common stock      19,147         1,748,696   

WILEY (JOHN) & SONS INC CL A

   Common stock      9,800         381,514   

 

18


WILLIS GROUP HOLDINGS PLC

   Common stock      19,300         647,129   

WORKDAY INC

   Common stock      5,789         315,501   

Brokerage Link

   Participant directed accounts including certain Fidelity investment funds**         22,686,886   

Notes receivable from participants**

   Installment loans due from participants with maturity dates ranging from January 2013 to December 2022 and interest rates ranging from 4.25% to 9.75%.         11,009,558   
        

 

 

 
         $ 649,997,357   
        

 

 

 

 

** Represents party in interest to the Plan.

 

19


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Devon Energy Incentive Savings Plan
Date: June 27, 2013   /s/ Frank W. Rudolph
  Frank W. Rudolph
  Executive Vice President Human Resources

 

20