(The following statement was released by the rating agency)CHICAGO, November 08 (Fitch) Fitch Ratings has affirmed Devon Energy Corporation's (Devon) long-term Issuer Default Rating (IDR) and unsecured ratings at 'BBB+'. Additionally, Fitch has affirmed the company's short-term IDR and commercial paper ratings at 'F2'. The Rating Outlook remains Stable. See the full list of ratings at the end of this release. Approximately $10 billion in debt is affected by today's rating action.Rating DriversThe ratings reflect Devon's position as a large, diversified independent exploration and production company, its low-cost reserve position and production profile, its low net leverage, and conservative operational and financial strategy. The company's proven reserve base is nearly 3 billion barrels of oil equivalent (boe) located entirely onshore in North America and is approximately 72% proven developed. Devon's production profile is 691,000 boe/d split approximately 24% crude oil, 19% natural gas liquids (NGLs) and 57% natural gas. Net debt/EBITDA is roughly 1.0x as the company still benefits from large cash holdings, both domestic and overseas. Gross balance sheet debt totalled slightly over $10 billion at the end of the third quarter with cash on hand of $4.3 billion, most of which is held overseas. Gross debt peaked at approximately $12.1 billion earlier this year and Devon paid down $2 billion in the second quarter from cash balances. More overseas cash (~$2 billion) is expected to be repatriated before year-end 2013. These strengths are somewhat mitigated by the company's significant exposure to weak natural gas and natural gas liquids prices and discounts on heavy crude oil in Canada.In terms of operational debt metrics, Devon's gross debt/proven developed (PD) reserves are respectable at $4.72/PD and gross debt/flowing boe/d is approximately $14,500/boe/d. Net debt/PD is low at $2.70/PD and net debt/boe/d is very low at approximately $8,300/boe/d. These calculations do not adjust for asset retirement obligations (approximately $2 billion) nor do they give credit for the company's substantial midstream operations. The company's reserve life is strong at nearly 12 years and three-year average reserve replacement is consistently well above 100% year after year, with the latest three-year finding, development and replacement cost at a competitive $20.35/boe added.Operationally, the company's strategy has been to direct capital spending over the last few years towards increasing crude oil production as crude realizations and margins are substantially higher, particularly in the U.S. Free cash flow (FCF) deficits have resulted from this effort and largely been filled from asset divestitures and monetizations. The efforts thus far have been successful, as oil production volumes in the U.S. have doubled in the last two years to approximately 81,000 barrels per day and are expected to continue to increase. The largest driver of the increase is in the Permian Basin. Fitch expects that Devon will continue to be FCF negative in the near- to intermediate-term while emphasizing growth in U.S. crude oil production volumes.Liquidity is provided by the previously mentioned cash on hand and the company's $3 billion CP program, and its $3 billion revolving credit facility due 2018.  The credit facility contains one material financial covenant that requires the company's ratio of total funded debt-to total-capitalization to be less than 65%. As of the end of the third quarter, the company was in compliance with this covenant with a debt-to-capitalization ratio of 22.4%. Near-term maturities other than the $1.6 billion CP balance are $500 million in senior notes due in January of 2014 and $500 million in senior note due in July of 2016.Ratings SensitivitiesPositive: Future developments that could, individually or collectively, lead to positive rating actions include:-- Consistent positive FCF and sustained low gross debt balances;-- Consistently strong reserve replacement with competitive finding and development costs. Negative: Future developments that could, individually or collectively, lead to negative rating action include:-- A leveraging acquisition;-- Material and sustained negative FCF that results in higher leverage-- Significantly leveraging share repurchases or major dividend increases;-- Material disappointments in reserve replacement or production levels.Fitch affirms the following ratings: Devon Energy Corporation--Long-term IDR at 'BBB+';--Senior unsecured notes at 'BBB+';--Senior unsecured credit facility at 'BBB+';--Short-term IDR at 'F2';--Commercial paper (CP) at 'F2'.Devon Financing Corporation U.L.C.--Long-term IDR at 'BBB+';--Senior unsecured notes at 'BBB+'.Ocean Energy--Long-term IDR at 'BBB';--Senior unsecured notes at 'BBB'.The Rating Outlooks for Devon and Ocean are Stable.Contact: Primary AnalystSean T. Sexton, CFAManaging Director+1-312-368-3130 Fitch Ratings, Inc.70 W. Madison StreetChicago, IL 60602 Secondary AnalystMark C. Sadeghian, CFASenior Director+1-312-368-2090Committee ChairpersonStephen BrownSenior Director+1-312-368-3139 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.Additional information is available at '
  www.fitchratings.com'.
 Applicable Criteria and Relevant Research:-- 'Crossover Credits in Natural Resources-Migration Catalysts 2003-2013' (Oct. 31,2013)--'Corporate Rating Methodology Including Short-Term Ratings and Parent and Subsidiary Linkage' (Aug. 5, 2013);--'Full Cycle Cost Survey for E&P Producers-2012 Numbers Up, but Adjustments Tell a Different Story' (May 28, 2013);--Investor FAQs--Recent Questions on E&P, Refining, and Drilling and Services Sectors (Aug 12, 2013);--Updating Fitch's Oil & Gas Price Deck (July 29, 2013);--Energy Handbook--Upstream Oil & Gas (June 28, 2013).Applicable Criteria and Related Research: Energy Handbook ?? Upstream Oil & Gas
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=706481
 Investor FAQs: Recent Questions on the E&P, Refining, and Drilling and Services Sectors
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715859
 Full Cycle Cost Survey for E&P Companies (2012 Numbers Up, but Adjustments Tell a Different Story)
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708783
 Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
 Crossover Credits in Natural Resources ?? Migration Catalysts 2003??2013
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721741
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=807527
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