FILED BY DEVON ENERGY CORPORATION PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933 AND DEEMED FILED PURSUANT TO RULE 14a-12 OF THE SECURITIES EXCHANGE ACT OF 1934 SUBJECT COMPANY: MITCHELL ENERGY & DEVELOPMENT CORP. COMMISSION FILE NO. 333-68694 [DEVON ENERGY LETTERHEAD] NEWS RELEASE -------------------------------------------------------------------------------- FOR IMMEDIATE RELEASE INVESTOR CONTACTS: ZACK HAGER MANAGER, INVESTOR RELATIONS (405) 552-4526 MEDIA CONTACTS: MICHAEL BARRETT MANAGER, CORPORATE COMMUNICATIONS (405) 228-4252 DEVON ENERGY'S THIRD QUARTER 2001 RESULTS REFLECT RECORD OIL AND GAS PRODUCTION OKLAHOMA CITY, OKLAHOMA, NOVEMBER 1, 2001-- Devon Energy Corporation (AMEX: DVN, TSE: NSX) today reported third quarter and year-to-date 2001 financial results. Excluding the $5 million (four cents per diluted share) net after-tax effect of a non-recurring impairment charge and an increase in the fair value of derivatives, third quarter 2001 net earnings were $90 million or 69 cents per common share (68 cents per diluted common share). During the third quarter of 2001, the company impaired the carrying value of its assets in Thailand and recorded a non-cash gain attributable to a change in the fair value of derivatives. After the impairment charge and the non-cash gain, net earnings were $85 million or 65 cents per common share (64 cents per diluted common share). For the same period a year ago, net earnings were $165 million or $1.27 per common share ($1.22 per diluted common share). For the first nine months of 2001, earnings were $643 million or $4.96 per common share ($4.79 per diluted common share) before impairment charges, a decrease in the value of derivatives and the cumulative effect of a required change in accounting principle. Including the effects of the impairment charge and items related to accounting for derivatives, net earnings for the first nine months of 2001 were $621 million or $4.79 per common share ($4.63 per diluted common share). Net earnings for the first nine months of 2000 were $423 million or $3.27 per common share ($3.20 per diluted common share). Page 1 of 9 RECORD OIL AND GAS PRODUCTION OFFSET BY LOWER PRICES Devon increased total production of oil, gas and natural gas liquids by six percent to a record 31.3 million barrels of oil equivalent (Boe) in the third quarter of 2001. This compares to total production in the third quarter of 2000 of 29.5 million Boe and total production in the second quarter of 2001 of 29.7 million Boe. "We are extremely pleased with our third quarter operating performance," said J. Larry Nichols, Devon's Chairman, President and CEO. "The company increased total production by six percent to set an all time quarterly record. This was achieved before contributions from the properties we are acquiring with the Mitchell and Anderson transactions." In spite of record total quarterly production, revenues from the sales of oil, gas and natural gas liquids decreased 18 percent in the third quarter 2001, to $571 million. The decrease in third quarter revenues was due entirely to lower oil, gas and natural gas liquids prices. The average oil price received by Devon in the third quarter decreased 15 percent from $26.36 per barrel in 2000 to $22.49 in 2001. The average price Devon received for third quarter natural gas production decreased 27 percent from $3.70 per thousand cubic feet in 2000 to $2.70 per thousand cubic feet in 2001. The company's average price received for natural gas liquids decreased 25 percent from $21.01 per barrel in the third quarter of 2000 to $15.74 per barrel in the 2001 quarter. EXPENSES REFLECT HIGHER PRODUCTION AND SERVICE AND SUPPLY COSTS Third quarter production and operating expenses increased $11.3 million in 2001 to $161.9 million. Higher lease operating and transportation costs were partially offset by lower production taxes. Lease operating expenses increased $15.9 million or 15 percent to $124.8 million. This was due to the expenses associated with new wells added over the last twelve months and higher overall third party service costs. Oil and gas transportation costs increased $2.2 million or 16 percent to $16.1 million in the third quarter of 2001. Transportation costs increased primarily because of higher gas production in the Permian Basin and Rocky Mountain areas. Production taxes decreased $6.8 million or 25 percent to $21.0 million. The decrease in production taxes reflects lower oil and gas prices in the most recent quarter. Depreciation, depletion and amortization of property and equipment (DD&A) increased $35.2 million to $205.3 million in the third quarter of 2001. The increase reflects both higher overall production and an increase in Devon's DD&A rate. Amortization of goodwill decreased $1.9 million to $8.5 million in the third quarter of 2001. Interest expense decreased by $4.6 million in the third quarter of 2001 to $35.9 million. The decrease reflects both lower total indebtedness and a decline in interest rates. Income tax expense was $55.3 million or 39 percent of pre-tax earnings in the third quarter of 2001. Third quarter 2001 deferred income tax expenses of $81.0 million were partially offset by a $25.7 million current tax benefit. The current tax benefit reflects a change in the estimated amount Devon expects to pay to taxing authorities for earnings for the full year of 2001. Page 2 of 9 DEVON TO EXIT THAILAND During the third quarter of 2001, Devon recorded a non-recurring after-tax charge of $6.7 million associated with the impairment of the company's properties in Thailand. These were minor properties obtained in conjunction with the company's 2000 acquisition of Santa Fe Snyder Corporation. A subsequent evaluation of these properties resulted in Devon's decision during the third quarter 2001 to discontinue operations in Thailand. Devon's decision to exit Thailand follows the company's second quarter 2001 decision to exit Malaysia, Qatar and the majority of its operations in Brazil. BASIS OF PRESENTATION AND ACCOUNTING CHANGE The August 2000 merger of Devon and Santa Fe Snyder Corporation was accounted for as a "pooling-of-interests." As a result, financial statements for all periods presented represent the combined financial results of the two companies. The pooling-of-interests method of accounting requires that financial statements for all periods presented be restated as if the companies had always been merged. Devon adopted Financial Accounting Standards Board Statement 133 on January 1, 2001. Statement 133 establishes new accounting procedures for certain derivative instruments. As a result of the new accounting procedures, the company recognized an after tax gain of $1.7 million in the current period. Devon's nine months results also include the after tax cumulative effect of adopting the new accounting procedures. The cumulative effect was an after tax gain of $49.5 million recorded in the first quarter of 2001. RECENT DEVELOPMENTS On August 14, 2001, Devon announced plans to acquire Mitchell Energy & Development Corp. for stock and cash. On September 4, 2001 Devon announced plans to acquire Anderson Exploration Ltd. in an all cash transaction. In aggregate, the cash component of the two acquisitions is approximately $5 billion. Devon planned to fund the cash portion of these transactions with a combination of a five-year term loan and the private placement of long-term notes and debentures. The term loan was arranged prior to the announcement of the Anderson acquisition. On October 3, 2001, the company completed a $3 billion private placement of 10-year notes and 30-year debentures. Due to the structure of the indebtedness utilized to fund the two transactions, the first material amortization of principal does not occur until 2005. Devon acquired Anderson on October 15, 2001. Devon expects to complete the Mitchell acquisition around year-end. Following completion of the Anderson and Mitchell acquisitions, Devon will retain a high degree of financial flexibility. CONFERENCE CALL TO BE WEBCAST TODAY Devon will discuss its third quarter 2001 financial and operating results in a conference call webcast today. The webcast will begin at 10:00 am central time (11:00 am eastern time). The webcast may be accessed from Devon's internet home page at www.dvn.com. Page 3 of 9 Devon Energy Corporation is an independent energy company engaged in oil and gas exploration, production and property acquisitions. Devon ranks among the top five U.S.-based independent oil and gas producers and is included in the S&P 500 Index. Approximately 83 percent of the company's proved reserves are located in North America. Also, Devon has international operations in Azerbaijan, Southeast Asia, South America and West Africa. Shares of Devon Energy Corporation trade on the American Stock Exchange under the symbol DVN. In addition, Devon's exchangeable shares trade on the Toronto Stock Exchange under the symbol NSX. NOTICE TO INVESTORS CONCERNING DEVON'S PLANS TO ACQUIRE MITCHELL ENERGY Investors and security holders are advised to read the definitive joint proxy statement/prospectus that will be included in the Registration Statement on Form S-4 filed with the Securities and Exchange Commission in connection with the proposed transaction because it will contain important information. A preliminary joint proxy statement/prospectus has been filed with the SEC by Devon and Mitchell. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus and other documents filed by Devon and Mitchell with the SEC at the SEC's web site at www.sec.gov. The definitive joint proxy statement/prospectus and such other documents (relating to Devon) may also be obtained for free from Devon when they become available by directing such request to: Devon Energy Corporation, 20 North Broadway, Suite 1500, Oklahoma City, Oklahoma 73102-8260, Attention: Investor Relations, telephone: (405) 552-4570, e-mail: judy.roberts@dvn.com. The definitive joint proxy statement/prospectus and such other documents (relating to Mitchell) may also be obtained for free from Mitchell when they become available by directing such request to: Mitchell Energy & Development Corp., 2001 Timberloch Place, The Woodlands, Texas 77380, Attention: Investor Relations, telephone: (713) 377-6625, e-mail: mndpr@mitchellenergy.com. Devon, its directors, executive officers and certain members of management and employees may be considered "participants in the solicitation" of proxies from Devon's shareholders in connection with the transaction. Information regarding such persons and a description of their interests in the transaction is contained in Devon's Proxy Statements and Annual Reports on Form 10-K filed with the SEC. Additional information regarding the interests of those persons may be obtained by reading the definitive proxy statement/prospectus when it becomes available. Mitchell, its directors, executive officers and certain members of management and employees may be considered "participants in the solicitation" of proxies from Mitchell's shareholders in connection with the transaction. Information regarding such persons and a description of their interests in the transaction is contained in Mitchell's Proxy Statements and Annual Reports on Form 10-K filed with the SEC. Additional information regarding the interests of those persons may be obtained by reading the definitive proxy statement/prospectus when it becomes available. FINANCIAL INFORMATION FOLLOWS Page 4 of 9 DEVON ENERGY CORPORATION UNAUDITED FINANCIAL INFORMATION Page 5 of 9 QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ---------------------------------- PRODUCTION DATA 2001 2000 % CHANGE 2001 2000 % CHANGE ---- ---- -------- ---- ---- -------- (net of royalties) TOTAL PERIOD PRODUCTION Gas (Bcf) U.S.- Rocky Mountains 26.6 22.7 17% 84.2 63.8 32% U.S.- Permian/Mid-Continent 33.0 29.2 13% 88.9 87.2 2% U.S.- Gulf 35.8 37.5 (5)% 107.7 111.2 (3)% Canada 15.5 14.5 7% 46.2 47.3 (2)% Other International 2.7 2.2 22% 6.9 6.6 4% --------- --------- --------- --------- Total Gas 113.6 106.1 7% 333.9 316.1 6% ========= ========= ========= ========= Oil (MBbls) U.S.- Rocky Mountains 567 718 (21)% 1,720 2,185 (21)% U.S.- Permian/Mid-Continent 3,331 3,180 5% 9,568 10,858 (12)% U.S.- Gulf 2,724 2,740 (1)% 8,306 8,768 (5)% Canada 1,291 1,234 5% 3,912 3,598 9% Other International 2,497 2,275 10% 7,338 6,832 7% --------- --------- --------- --------- Total Oil 10,410 10,147 3% 30,844 32,241 (4)% ========= ========= ========= ========= Natural Gas Liquids (MBbls) U.S.- Rocky Mountains 173 179 (3)% 465 522 (11)% U.S.- Permian/Mid-Continent 1,029 987 4% 2,777 3,115 (11)% U.S.- Gulf 551 353 56% 1,112 1,232 (10)% Canada 145 162 (10)% 473 504 (6)% Other International 36 7 414% 54 11 391% --------- --------- --------- --------- Total Natural Gas Liquids 1,934 1,688 15% 4,881 5,384 (9)% ========= ========= ========= ========= AVERAGE DAILY PRODUCTION Gas (Mcf) U.S.- Rocky Mountains 289,130 246,902 17% 308,348 232,978 32% U.S.- Permian/Mid-Continent 358,272 317,533 13% 325,542 318,073 2% U.S.- Gulf 388,793 407,348 (5)% 394,586 406,004 (3)% Canada 168,554 157,359 7% 169,275 172,493 (2)% Other International 29,130 24,272 20% 25,150 24,051 5% --------- --------- --------- --------- Total Gas 1,233,879 1,153,414 7% 1,222,901 1,153,599 6% ========= ========= ========= ========= Oil (Bbls) U.S.- Rocky Mountains 6,163 7,804 (21)% 6,300 7,974 (21)% U.S.- Permian/Mid-Continent 36,207 34,565 5% 35,048 39,628 (12)% U.S.- Gulf 29,609 29,783 (1)% 30,425 32,000 (5)% Canada 14,033 13,413 5% 14,330 13,131 9% Other International 27,141 24,728 10% 26,879 24,934 8% --------- --------- --------- --------- Total Oil 113,153 110,293 3% 112,982 117,667 (4)% ========= ========= ========= ========= Natural Gas Liquids (Bbls) U.S.- Rocky Mountains 1,880 1,946 (3)% 1,703 1,905 (11)% U.S.- Permian/Mid-Continent 11,185 10,728 4% 10,172 11,369 (11)% U.S.- Gulf 5,989 3,837 56% 4,073 4,496 (9)% Canada 1,576 1,761 (11)% 1,733 1,839 (6)% Other International 391 76 415% 198 40 395% --------- --------- --------- --------- Total Natural Gas Liquids 21,021 18,348 15% 17,879 19,649 (9)% ========= ========= ========= ========= DEVON ENERGY CORPORATION UNAUDITED FINANCIAL INFORMATION Page 6 of 9 QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- -------------------------------- PRICE DATA 2001 2000 % CHANGE 2001 2000 % CHANGE ---- ---- -------- ---- ---- -------- AVERAGE REALIZED PRICES (US$) Gas ($/Mcf) U.S.- Rocky Mountains $ 2.46 $ 3.35 (27)% $ 4.09 $ 2.89 42% U.S.- Permian/Mid-Continent $ 2.69 $ 3.90 (31)% $ 4.57 $ 3.23 41% U.S.- Gulf $ 3.21 $ 4.30 (25)% $ 5.11 $ 3.41 50% Canada $ 2.16 $ 2.64 (18)% $ 3.57 $ 2.24 59% Other International $ 1.45 $ 1.41 3% $ 1.41 $ 1.33 6% All Gas $ 2.70 $ 3.70 (27)% $ 4.42 $ 3.04 45% Oil ($/Bbl) U.S.- Rocky Mountains $ 24.88 $ 32.53 (24)% $ 26.11 $ 27.51 (5)% U.S.- Permian/Mid-Continent $ 20.67 $ 22.63 (9)% $ 21.54 $ 23.79 (9)% U.S.- Gulf $ 23.78 $ 28.40 (16)% $ 24.99 $ 26.50 (6)% Canada $ 21.94 $ 25.82 (15)% $ 21.76 $ 24.74 (12)% Other International $ 23.24 $ 27.45 (15)% $ 24.38 $ 25.25 (3)% All Oil $ 22.49 $ 26.36 (15)% $ 23.43 $ 25.20 (7)% Natural Gas Liquids ($/Bbl) U.S.- Rocky Mountains $ 15.56 $ 22.93 (32)% $ 19.32 $ 19.24 0% U.S.- Permian/Mid-Continent $ 15.16 $ 20.56 (26)% $ 19.01 $ 18.44 3% U.S.- Gulf $ 15.34 $ 18.66 (18)% $ 17.64 $ 20.93 (16)% Canada $ 21.75 $ 26.89 (19)% $ 26.38 $ 25.60 3% Other International $ 15.37 $ 16.57 (7)% $ 16.38 $ 19.64 (17)% All Natural Gas Liquids $ 15.74 $ 21.01 (25)% $ 19.41 $ 19.76 (2)% AVERAGE BENCHMARK PRICES (US$) Gas ($/Mcf) - Henry Hub $ 2.90 $ 4.27 (32)% $ 4.87 $ 3.41 43% Oil ($/Bbl) - West Texas Intermediate (Cushing) $ 26.59 $ 31.66 (16)% $ 27.79 $ 29.70 (6)% DEVON ENERGY CORPORATION UNAUDITED FINANCIAL INFORMATION Page 7 of 9 QUARTER ENDED SEPTEMBER 30, ------------------------------------ STATEMENT OF OPERATIONS DATA (US$) 2001 2000 % CHANGE ---- ---- -------- (in thousands, except per share data) TOTAL REVENUES (NET OF ROYALTIES) $ 586,715 $ 725,141 (19)% Oil sales 234,116 267,430 (12)% Gas sales 306,808 392,588 (22)% Natural gas liquids sales 30,445 35,457 (14)% Other 15,346 29,666 (48)% TOTAL PRE-TAX EXPENSES $ 446,702 $ 454,079 (2)% Lease operating expenses 124,781 108,902 15% Transportation costs 16,113 13,907 16% Production taxes 20,967 27,773 (25)% --------- --------- Total production and operating expenses 161,861 150,582 7% Depreciation, depletion and amortization of property & equipment 205,345 170,151 21% Amortization of goodwill 8,461 10,364 (18)% General and administrative expenses 26,977 25,304 7% Expenses related to prior merger -- 57,233 (100)% Interest expense 35,885 40,445 (11)% Change in fair value of derivatives (2,738) -- NM Reduction of carrying value of oil and gas properties 10,911 -- NM EARNINGS BEFORE INCOME TAXES 140,013 271,062 (48)% TOTAL INCOME TAX EXPENSE 55,281 106,150 (48)% Current (25,679) 50,403 (151)% Deferred 80,960 55,747 45% NET EARNINGS $ 84,732 $ 164,912 (49)% Preferred stock dividends 2,433 2,433 0% --------- --------- NET EARNINGS APPLICABLE TO COMMON STOCKHOLDERS $ 82,299 $ 162,479 (49)% ========= ========= Net earnings per average common share outstanding BASIC $ 0.65 $ 1.27 (49)% ========= ========= DILUTED $ 0.64 $ 1.22 (48)% ========= ========= Weighted average shares outstanding Basic 126,335 127,857 (1)% Diluted 131,573 134,394 (2)% DEVON ENERGY CORPORATION UNAUDITED FINANCIAL INFORMATION Page 8 of 9 NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------- STATEMENT OF OPERATIONS DATA (US$) 2001 2000 % CHANGE ---- ---- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) TOTAL REVENUES (NET OF ROYALTIES) $2,335,464 $1,934,041 21% Oil sales 722,672 812,365 (11)% Gas sales 1,474,986 960,865 54% Natural gas liquids sales 94,746 106,373 (11)% Other 43,060 54,438 (21)% TOTAL PRE-TAX EXPENSES $1,378,557 $1,228,930 12% Lease operating expenses 362,884 326,709 11% Transportation costs 51,936 38,652 34% Production taxes 95,025 69,644 36% ---------- ---------- Total production and operating expenses 509,845 435,005 17% Depreciation, depletion and amortization of property & equipment 572,939 507,654 13% Amortization of goodwill 25,384 31,057 (18)% General and administrative expenses 73,867 74,177 0% Expenses related to prior merger -- 57,233 (100)% Interest expense 104,825 121,396 (14)% Deferred effects of change in currency rates on subsidiary's long-term debt -- 2,408 (100)% Change in fair value of derivatives 3,844 -- NM Reduction of carrying value of oil and gas properties 87,853 -- NM EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 956,907 705,111 36% TOTAL INCOME TAX EXPENSE 384,970 281,678 37% Current 117,213 122,908 (5)% Deferred 267,757 158,770 69% EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 571,937 423,433 35% Cumulative effect of change in accounting principle 49,452 -- NM NET EARNINGS $ 621,389 $ 423,433 47% Preferred stock dividends 7,301 7,301 0% ---------- ---------- NET EARNINGS APPLICABLE TO COMMON STOCKHOLDERS $ 614,088 $ 416,132 48% ========== ========== NET EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING AFTER CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE BASIC $ 4.79 $ 3.27 34% ========== ========== DILUTED $ 4.63 $ 3.20 33% ========== ========== Weighted average shares outstanding Basic 128,274 127,065 1% Diluted 133,982 130,628 3% DEVON ENERGY CORPORATION UNAUDITED FINANCIAL INFORMATION Page 9 of 9 BALANCE SHEET DATA (US$) SEPTEMBER 30, DECEMBER 31, (IN THOUSANDS, EXCEPT % CHANGE DATA) 2001 2000 % CHANGE ------------ ------------ -------- TOTAL ASSETS $7,732,490 $6,860,478 13% Cash and cash equivalents 239,265 228,050 5% Other current assets 580,637 706,087 (18)% ---------- ---------- Total current assets 819,902 934,137 (12)% Property and equipment (net) 5,743,523 4,909,536 17% Investment in Chevron Corporation common stock 601,083 598,867 0% Goodwill, net of amortization 269,305 289,489 (7)% Fair value of derivatives 151,415 -- NM Other assets 147,262 128,449 15% TOTAL LIABILITIES $3,963,485 $3,582,874 11% Current liabilities 561,798 628,987 (11)% Other liabilities 162,318 164,469 (1)% Debentures exchangeable into shares of Chevron Corporation common stock 645,461 760,313 (15)% Senior Convertible Debentures 370,209 359,689 3% Other long-term debt 969,107 928,834 4% Deferred revenue 65,330 113,756 (43)% Deferred income taxes 1,112,822 626,826 78% Fair value of derivatives 76,440 -- NM STOCKHOLDERS' EQUITY $3,769,005 $3,277,604 15% TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $7,732,490 $6,860,478 13% COMMON SHARES OUTSTANDING 126,014 128,638 (2)% STATEMENT OF CASH FLOWS DATA (US$) NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------- (IN THOUSANDS, EXCEPT % CHANGE DATA) 2001 2000 % CHANGE ---- ---- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 621,389 $ 423,433 47% Depreciation, depletion and amortization of property and equipment 572,939 507,654 13% Amortization of goodwill 25,384 31,057 (18)% Reduction of carrying value of oil and gas properties 87,853 -- NM Deferred income taxes 267,757 158,770 69% Other (26,668) (2,834) NM Changes in assets and liabilities net of effects of acquisitions of businesses (48,146) 15,310 NM ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,500,508 $ 1,133,390 32% CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (1,351,492) (947,974) 43% Other 41,395 56,640 (27)% ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES $(1,310,097) $ (891,334) 47% CASH FLOWS FROM FINANCING ACTIVITIES NET CASH USED IN FINANCING ACTIVITIES $ (178,336) $ (235,464) (24)% ###