Devon Energy Q3 2026 EPS falls to $0.88 as revenue rises
The proposed Eagle Ford sale is valued at $4.2 billion and covers assets associated with approximately 3% of post-merger proved reserves.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Devon Energy Corporation (DVN) reported third-quarter 2026 revenue of $6.860 billion, compared with $4.331 billion in 2025, and net earnings of $1.008 billion versus $693 million. Net cash from operating activities was $2.808 billion, compared with $1.690 billion; diluted earnings per share were $0.88 versus $1.09. The 2026 results include Coterra from the May 7 merger closing.
Devon completed an all-stock merger of equals with Coterra on May 7, 2026. Each Coterra common share converted into the right to receive 0.70 Devon common share, and Devon issued 531.6 million shares. During the second quarter, Devon also acquired approximately 16,300 net undeveloped acres in New Mexico for approximately $2.6 billion, funded with cash on hand.
On October 8, Devon agreed to sell its Eagle Ford assets to Crescent Energy Company for $4.2 billion in cash, subject to customary purchase price adjustments. The assets include approximately 90,000 net acres and represented approximately 3% of Devon’s post-merger proved reserves. The sale is expected to close in early 2027, subject to regulatory approvals and customary closing conditions; Devon expects to recognize a material gain upon closing.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue was $6.860 billion, compared with $4.331 billion in 2025.
- Moderate pointThird-quarter net earnings were $1.008 billion, versus $693 million in 2025.
- Moderate pointThird-quarter operating cash flow was $2.808 billion, versus $1.690 billion in 2025.
Negative
- Moderate pointThird-quarter diluted earnings per share were $0.88, compared with $1.09 in 2025.
Filing Explained
As of September thirtieth, Devon reported five point one billion dollars of merger-assumed, fixed-price gas sales obligations to be recognized over twelve years.
Devon reports that, at September 30, it had
At September 30, its balance sheet listed
Key Figures
Key Terms
acquisition method of accounting financial
purchase price allocation financial
three-way price collars financial
unsatisfied performance obligations financial
held for sale financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue and net income did DVN report in Q3 2026?
What are the terms of DVN’s Eagle Ford sale?
What exchange ratio did DVN use in its Coterra merger?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices, including zip code) |
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(Registrant’s telephone number, including area code) |
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Former name, former address and former fiscal year, if changed since last report: Not applicable |
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
On October 23, 2026,
Table of Contents
DEVON ENERGY CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Part I. Financial Information |
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Item 1. |
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Financial Statements |
7 |
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Consolidated Statements of Comprehensive Earnings |
7 |
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Consolidated Balance Sheets |
8 |
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Consolidated Statements of Cash Flows |
9 |
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Consolidated Statements of Equity |
10 |
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Notes to Consolidated Financial Statements |
11 |
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Note 1 – Summary of Significant Accounting Policies |
11 |
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Note 2 – Acquisitions and Divestitures |
12 |
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Note 3 – Derivative Financial Instruments |
15 |
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Note 4 – Share-Based Compensation |
17 |
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Note 5 – Asset Impairments |
18 |
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Note 6 – Restructuring and Transaction Costs |
18 |
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Note 7 – Income Taxes |
19 |
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Note 8 – Net Earnings Per Share |
20 |
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Note 9 – Other Comprehensive Earnings (Loss) |
20 |
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Note 10 – Supplemental Information to Statements of Cash Flows |
20 |
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Note 11 – Accounts Receivable |
21 |
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Note 12 – Property and Equipment |
21 |
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Note 13 – Investments |
21 |
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Note 14 – Debt and Related Expenses |
22 |
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Note 15 – Leases |
24 |
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Note 16 – Asset Retirement Obligations |
24 |
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Note 17 – Stockholders’ Equity |
25 |
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Note 18 – Commitments and Contingencies |
26 |
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Note 19 – Fair Value Measurements |
28 |
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Note 20 – Reportable Segments |
29 |
Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 |
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Executive Overview |
30 |
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Results of Operations |
32 |
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Capital Resources, Uses and Liquidity |
40 |
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Critical Accounting Estimates |
46 |
Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
47 |
Item 4. |
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Controls and Procedures |
47 |
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Part II. Other Information |
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Item 1. |
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Legal Proceedings |
48 |
Item 1A. |
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Risk Factors |
48 |
Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
48 |
Item 3. |
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Defaults Upon Senior Securities |
48 |
Item 4. |
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Mine Safety Disclosures |
48 |
Item 5. |
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Other Information |
48 |
Item 6. |
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Exhibits |
50 |
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Signatures |
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51 |
2
Table of Contents
DEFINITIONS
Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Devon,” the “Company” and “Registrant” refer to Devon Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:
“ASU” means Accounting Standards Update.
“Bbl” or “Bbls” means barrel or barrels.
“Boe” means barrel of oil equivalent. Gas proved reserves and production are converted to Boe, at the pressure and temperature base standard of each respective state in which the gas is produced, at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of gas and oil. NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.
“Btu” means British thermal units, a measure of heating value.
“CAMT” means Corporate Alternative Minimum Tax.
“Catalyst” means Catalyst Midstream Partners, LLC.
“CDM” means Cotton Draw Midstream, L.L.C.
“Coterra” means Coterra Energy Inc.
“DD&A” means depreciation, depletion and amortization expenses.
“EPA” means the United States Environmental Protection Agency.
“FASB” means Financial Accounting Standards Board.
“Fervo” means Fervo Energy Company.
“G&A” means general and administrative expenses.
“GAAP” means U.S. generally accepted accounting principles.
“Grayson Mill” means Grayson Mill Intermediate HoldCo II, LLC and Grayson Mill Intermediate HoldCo III, LLC.
“Inside FERC” refers to the publication Inside F.E.R.C.’s Gas Market Report.
“LOE” means lease operating expenses.
“Matterhorn” refers to Matterhorn Express Pipeline, LLC and, as applicable, its direct parent, MXP Parent, LLC.
“MBbls” means thousand barrels.
“MBoe” means thousand Boe.
“Mcf” means thousand cubic feet.
“Merger” means the merger of Merger Sub with and into Coterra, with Coterra continuing as the surviving corporation and a wholly-owned subsidiary of the Company, pursuant to the terms of the Merger Agreement.
“Merger Agreement” means that certain Agreement and Plan of Merger, dated February 1, 2026, by and among the Company, Merger Sub and Coterra.
3
Table of Contents
“Merger Sub” means Cubs Merger Sub, Inc., a wholly-owned subsidiary of the Company.
“MMBoe” means million Boe.
“MMBtu” means million Btu.
“MMcf” means million cubic feet.
“N/M” means not meaningful.
“NGL” or “NGLs” means natural gas liquids.
“NOV” means notice of violation.
“NYMEX” means New York Mercantile Exchange.
“OBBB” means One Big Beautiful Bill Act.
“OPEC” means Organization of the Petroleum Exporting Countries.
“Producers Midstream” means Producers Midstream II, LLC.
“SEC” means United States Securities and Exchange Commission.
“Senior Credit Facility” means Devon’s syndicated unsecured revolving line of credit, effective as of March 24, 2023.
“Solitude” means SPS Parent, LLC.
“TSR” means total shareholder return.
“U.S.” means United States of America.
“VIE” means variable interest entity.
“WaterBridge” means WaterBridge Infrastructure LLC and WBI Operating LLC. Any references to WaterBridge as a public company or its publicly-traded equity are to WaterBridge Infrastructure LLC individually.
“WTI” means West Texas Intermediate.
“/Bbl” means per barrel.
“/d” means per day.
“/MMBtu” means per MMBtu.
4
Table of Contents
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This report includes “forward-looking statements” within the meaning of the federal securities laws. Such statements include those concerning strategic plans, our expectations and objectives for future operations, as well as other future events or conditions, and are often identified by use of the words and phrases “expects,” “believes,” “will,” “would,” “could,” “continue,” “may,” “aims,” “likely to be,” “intends,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this report that address activities, events or developments that Devon expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Consequently, actual future results could differ materially and adversely from our expectations due to a number of factors, including, but not limited to:
5
Table of Contents
The forward-looking statements included in this filing speak only as of the date of this report, represent management’s current reasonable expectations as of the date of this filing and are subject to the risks and uncertainties identified above as well as those described elsewhere in this report and in other documents we file from time to time with the SEC. We cannot guarantee the accuracy of our forward-looking statements, and readers are urged to carefully review and consider the various disclosures made in this report and in other documents we file from time to time with the SEC. All subsequent written and oral forward-looking statements attributable to Devon, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements above. We do not undertake, and expressly disclaim, any duty to update or revise our forward-looking statements based on new information, future events or otherwise. Based on guidance from the SEC, Devon may use the investors section of its website to communicate with investors about Devon. It is possible that the financial and other information posted there could be deemed to be material information. The information on Devon’s website is not part of this Form 10-Q.
6
Table of Contents
Part I. Financial Information
Item 1. Financial Statements
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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(Unaudited) |
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Oil, gas and NGL sales |
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$ |
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$ |
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$ |
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$ |
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Oil, gas and NGL derivatives |
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( |
) |
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( |
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Marketing and midstream revenues |
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Total revenues |
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Production expenses |
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Exploration expenses |
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Marketing and midstream expenses |
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Depreciation, depletion and amortization |
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Asset impairments |
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Asset dispositions |
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( |
) |
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( |
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( |
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General and administrative expenses |
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Financing costs, net |
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Restructuring and transaction costs |
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Other, net |
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( |
) |
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( |
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Total expenses |
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Earnings before income taxes |
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Income tax expense |
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Net earnings |
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Net earnings attributable to noncontrolling interests |
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Net earnings attributable to Devon |
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$ |
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$ |
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$ |
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$ |
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||||
Net earnings per share: |
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Basic net earnings per share |
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$ |
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$ |
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$ |
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$ |
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Diluted net earnings per share |
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$ |
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$ |
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$ |
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$ |
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Comprehensive earnings: |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive earnings, net of tax: |
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Pension and postretirement plans |
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Other comprehensive earnings, net of tax |
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Comprehensive earnings: |
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$ |
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$ |
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$ |
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$ |
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Comprehensive earnings attributable to noncontrolling interests |
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Comprehensive earnings attributable to Devon |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
7
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30, 2026 |
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December 31, 2025 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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Accounts receivable |
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Inventory |
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Other current assets |
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Total current assets |
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Oil and gas property and equipment, based on successful efforts accounting, net |
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Other property and equipment, net |
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Total property and equipment, net |
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Goodwill |
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Right-of-use assets |
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Investments |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Revenues and royalties payable |
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Short-term debt |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Lease liabilities |
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Asset retirement obligations |
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Other long-term liabilities |
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Deferred income taxes |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Treasury stock, at cost, |
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( |
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Total stockholders’ equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
8
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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||||||||||
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2026 |
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2025 |
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2026 |
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2025 |
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(Unaudited) |
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Cash flows from operating activities: |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash from operating activities: |
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Depreciation, depletion and amortization |
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Asset impairments |
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Leasehold impairments |
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Accretion of liabilities |
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Total (gains) losses on commodity derivatives |
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( |
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( |
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Cash settlements on commodity derivatives |
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( |
) |
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( |
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Gains on asset dispositions |
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( |
) |
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( |
) |
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( |
) |
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Deferred income tax expense (benefit) |
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( |
) |
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Share-based compensation |
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Other |
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( |
) |
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( |
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( |
) |
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Changes in assets and liabilities, net |
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( |
) |
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( |
) |
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( |
) |
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Net cash from operating activities |
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Cash flows from investing activities: |
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Cash acquired in Merger |
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||||
Capital expenditures |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Acquisitions of property and equipment |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Divestitures of property, equipment and investments |
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Distributions from investments |
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||||
Contributions to investments and other |
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|
( |
) |
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( |
) |
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|
( |
) |
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( |
) |
Net cash from investing activities |
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|
( |
) |
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|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Dividends paid on common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Acquisition of noncontrolling interests |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Repayment of finance leases |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Shares exchanged for tax withholdings and other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash from financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying notes to consolidated financial statements.
9
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Comprehensive |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Retained |
|
|
Earnings |
|
|
Treasury |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) |
|
|
Stock |
|
|
Interests |
|
|
Equity |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||||||||||||||
Three Months Ended September 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Restricted stock grants, net of cancellations |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Three Months Ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Acquisition of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||||
Nine Months Ended September 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Restricted stock grants, net of cancellations |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Nine Months Ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Other comprehensive earnings, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Restricted stock grants, net of cancellations |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Common stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Acquisition of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||
See accompanying notes to consolidated financial statements.
10
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited interim financial statements and notes of Devon have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures previously included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying unaudited interim financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s 2025 Annual Report on Form 10-K. The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month and nine-month periods ended September 30, 2026 and 2025 and Devon’s financial position as of September 30, 2026. Such adjustments are considered to be of a normal recurring nature unless otherwise noted.
Devon and Coterra completed an all-stock merger of equals on May 7, 2026. On the closing date of the Merger, each share of Coterra common stock was automatically converted into the right to receive
Variable Interest Entity
CDM was a joint venture entity formed by Devon and an affiliate of QL Capital Partners, LP (“QLCP”). Devon held a controlling interest in CDM and the portions of CDM’s net earnings and equity not attributable to Devon’s controlling interest were shown separately as noncontrolling interests in the accompanying consolidated statements of comprehensive earnings and consolidated balance sheets. CDM was considered a VIE to Devon. On August 1, 2025, Devon completed the acquisition of all outstanding noncontrolling interests in CDM for $
Disaggregation of Revenue
The following table presents revenue from contracts with customers that are disaggregated based on the type of good or service.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Oil |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NGL |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oil, gas and NGL sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NGL |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketing and midstream revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from contracts with customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Transaction Price Allocated to Remaining Performance Obligations
As of September 30, 2026, Devon had $
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosures about specific types of expenses included in the expense captions presented on the face of the statement of operations as well as disclosures about selling expenses. This ASU will result in additional disclosures for Devon beginning with its 2027 annual reporting and interim periods beginning in 2028. Devon is evaluating the impact this ASU will have on the disclosures that accompany its consolidated financial statements.
11
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Acquisitions
Coterra Merger
On May 7, 2026, Devon completed an all-stock merger of equals with Coterra, an oil and gas exploration and production company with assets in the Permian Basin in Texas and New Mexico, the Marcellus Shale in Pennsylvania and the Anadarko Basin in Oklahoma. On the closing date of the Merger, each share of Coterra common stock was converted into the right to receive
Purchase Price Allocation
This transaction has been accounted for using the acquisition method of accounting, with Devon as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of Coterra have been recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s assets and liabilities. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the acquisition. Determining the fair value of the assets and liabilities of Coterra requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of Coterra’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as Level 3 in the fair value hierarchy.
12
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table represents the allocation of the total purchase price of Coterra to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.
|
Preliminary Purchase |
|
|
|
Price Allocation |
|
|
Consideration: |
|
|
|
Coterra common stock outstanding |
|
|
|
Exchange Ratio |
|
|
|
Devon common stock issued |
|
|
|
Devon closing price on May 6, 2026 |
$ |
|
|
Total common equity consideration |
$ |
|
|
Share-based replacement awards |
|
|
|
Total consideration |
$ |
|
|
Assets acquired: |
|
|
|
Cash, cash equivalents and restricted cash |
$ |
|
|
Accounts receivable |
|
|
|
Inventory |
|
|
|
Other current assets |
|
|
|
Proved oil and gas property and equipment |
|
|
|
Unproved and properties under development |
|
|
|
Other property and equipment, net |
|
|
|
Right-of-use assets |
|
|
|
Investments |
|
|
|
Other long-term assets |
|
|
|
Total assets acquired |
$ |
|
|
Liabilities assumed: |
|
|
|
Accounts payable |
$ |
|
|
Revenues and royalties payable |
|
|
|
Short-term debt |
|
|
|
Income taxes payable |
|
|
|
Other current liabilities |
|
|
|
Long-term debt |
|
|
|
Lease liabilities |
|
|
|
Asset retirement obligations |
|
|
|
Other long-term liabilities |
|
|
|
Deferred income taxes |
|
|
|
Total liabilities assumed |
$ |
|
|
Net assets acquired |
$ |
|
|
Coterra Revenues and Net Earnings
The following table represents Coterra’s revenues and net earnings included in Devon’s consolidated statements of comprehensive earnings from the closing date of the Merger through the three and nine months ended September 30, 2026.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||
|
|
2026 |
|
|
2026 |
|
||
|
|
(Unaudited) |
|
|||||
Total revenues |
|
$ |
|
|
$ |
|
||
Net earnings |
|
$ |
|
|
$ |
|
||
13
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Pro Forma Financial Information
The following unaudited pro forma financial information is based on Devon’s historical consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2025. The information below reflects pro forma adjustments to conform Coterra’s historical financial information to Devon’s financial statement presentation.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|||||||||||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net earnings |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lease Acquisition
During the second quarter of 2026, Devon acquired approximately
Divestitures
Eagle Ford Divestiture
On October 8, 2026, Devon entered into an agreement to sell its Eagle Ford assets, consisting of approximately
As of September 30, 2026, the Eagle Ford assets did not meet the criteria to be classified as held for sale. Upon execution of the purchase and sale agreement on October 8, 2026, the Eagle Ford assets subsequently met those criteria. Devon expects to recognize a material gain upon closing of the transaction.
Divestiture of Matterhorn Investment
During the second quarter of 2025, Devon sold its investment in Matterhorn for $
Contingent Earnout Payments
Devon was entitled to contingent earnout payments associated with the sale of its Barnett Shale assets in 2020 with upside participation beginning at a $
Asset Exchange
On April 1, 2025, Devon and BPX Energy dissolved their partnership and divided their acreage in the Eagle Ford Blackhawk field located in Texas’ DeWitt County, resulting in increased operational flexibility for both parties. The assets exchanged were in close proximity and shared similar geological characteristics. The transaction was accounted for as an equal, non-monetary exchange, as it did not result in a significant change to the risks, expected future cash flows or the timing of those cash flows, and therefore was determined to lack commercial substance. As a result, the new acreage and underlying property costs were recorded at the historical cost of the assets exchanged.
14
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Objectives and Strategies
Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars.
Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.
Counterparty Credit Risk
By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of September 30, 2026, Devon neither held cash collateral of its counterparties
Commodity Derivatives
As of September 30, 2026, Devon had the following open oil derivative positions. The first two tables present Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The third table presents Devon’s oil derivatives that settle against the respective indices noted within the table.
|
|
Price Swaps |
|
|
Price Collars |
|
||||||||||||||
Period |
|
Volume |
|
|
Weighted |
|
|
Volume |
|
|
Weighted |
|
|
Weighted |
|
|||||
Q4 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
Q1-Q4 2027 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
Q1-Q4 2028 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
|
|
Three-Way Price Collars |
|
|||||||||||||
Period |
|
Volume |
|
|
Weighted |
|
|
Weighted |
|
|
Weighted |
|
||||
Q4 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Q1-Q4 2027 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
|
|
Oil Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume |
|
|
Weighted Average |
|
||
Q4 2026 |
|
WTI/NYMEX |
|
|
|
|
$ |
|
||
Q4 2026 |
|
Midland Sweet |
|
|
|
|
$ |
|
||
Q4 2026 |
|
WTI/Brent |
|
|
|
|
$ |
( |
) |
|
Q4 2026 |
|
NYMEX Roll |
|
|
|
|
$ |
|
||
Q1-Q4 2027 |
|
WTI/NYMEX |
|
|
|
|
$ |
|
||
Q1-Q4 2027 |
|
Magellan East Houston |
|
|
|
|
$ |
|
||
Q1-Q4 2027 |
|
Midland Sweet |
|
|
|
|
$ |
|
||
Q1-Q4 2027 |
|
NYMEX Roll |
|
|
|
|
$ |
|
||
As of September 30, 2026, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.
|
|
Price Swaps (1) |
|
|
Price Collars (2) |
|
||||||||||||||
Period |
|
Volume (MMBtu/d) |
|
|
Weighted Average Price ($/MMBtu) |
|
|
Volume (MMBtu/d) |
|
|
Weighted Average Floor Price ($/MMBtu) |
|
|
Weighted Average |
|
|||||
Q4 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
Q1-Q4 2027 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
|
|
Natural Gas Basis Swaps |
|
|||||||
Period |
|
Index |
|
Volume |
|
|
Weighted Average |
|
||
Q4 2026 |
|
Houston Ship Channel |
|
|
|
|
$ |
( |
) |
|
Q4 2026 |
|
Transco Leidy |
|
|
|
|
$ |
( |
) |
|
Q4 2026 |
|
Transco Zone 6 Non-NY |
|
|
|
|
$ |
( |
) |
|
Q4 2026 |
|
WAHA |
|
|
|
|
$ |
( |
) |
|
Q1-Q4 2027 |
|
Transco Leidy |
|
|
|
|
$ |
( |
) |
|
Q1-Q4 2027 |
|
Transco Zone 6 Non-NY |
|
|
|
|
$ |
|
||
Q1-Q4 2027 |
|
WAHA |
|
|
|
|
$ |
( |
) |
|
16
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Financial Statement Presentation
All derivative financial instruments are recognized at their current fair value as either assets or liabilities on the consolidated balance sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis on the consolidated balance sheets.
|
September 30, 2026 |
|
December 31, 2025 |
|
|
||||||||||||||
|
Gross Fair Value |
|
Amounts Netted |
|
Net Fair Value |
|
Gross Fair Value |
|
Amounts Netted |
|
Net Fair Value |
|
Balance Sheet Classification |
||||||
Commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Short-term derivative asset |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
Other current assets |
||||
Long-term derivative asset |
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets |
||||||
Short-term derivative liability |
|
( |
) |
|
|
|
( |
) |
|
( |
) |
|
|
|
( |
) |
Other current liabilities |
||
Long-term derivative liability |
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
Other long-term liabilities |
||||
Total derivative asset (liability) |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|
||||
The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings.
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
G&A |
|
$ |
|
|
$ |
|
||
Exploration expenses |
|
|
|
|
|
|
||
Restructuring and transaction costs |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Related income tax benefit |
|
$ |
|
|
$ |
|
||
Under its approved long-term incentive plans, Devon grants share-based awards to its employees.
|
|
Restricted Stock Awards & Units |
|
|
Performance Share Units |
|
||||||||||
|
|
Awards/Units |
|
|
Weighted |
|
|
Units |
|
|
Weighted |
|
||||
|
|
(Thousands, except fair value data) |
|
|||||||||||||
Unvested at 12/31/25 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted (1) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Unvested at 9/30/26 |
|
|
|
|
$ |
|
|
|
|
(2) |
$ |
|
||||
17
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table presents the assumptions related to the performance share units granted in 2026, as indicated in the previous summary table.
|
|
2026 |
|
|
Grant-date fair value |
|
$ |
|
|
Risk-free interest rate |
|
|
% |
|
Volatility factor |
|
|
% |
|
Contractual term (years) |
|
|
|
|
The following table presents a summary of the unrecognized compensation cost and the related weighted average recognition period associated with unvested awards and units as of September 30, 2026.
|
|
Restricted Stock |
|
|
Performance |
|
||
|
|
Awards/Units |
|
|
Share Units |
|
||
Unrecognized compensation cost |
|
$ |
|
|
$ |
|
||
Weighted average period for recognition (years) |
|
|
|
|
|
|
||
The following table summarizes Devon’s restructuring and transaction costs.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Restructuring |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In conjunction with the Merger closing, Devon recognized $
The following table summarizes Devon’s restructuring liabilities.
|
|
Other |
|
|
Other |
|
|
|
|
|||
|
|
Current |
|
|
Long-term |
|
|
|
|
|||
|
|
Liabilities |
|
|
Liabilities |
|
|
Total |
|
|||
Balance as of December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Changes related to 2026 merger-related employee costs |
|
|
|
|
|
|
|
|
|
|||
Changes related to prior years’ restructurings |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance as of September 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
18
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table presents Devon’s total income tax expense and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Earnings before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current income tax expense (benefit) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Deferred income tax expense (benefit) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total income tax expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. statutory income tax rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
State income taxes |
|
|
% |
|
|
% |
|
|
|
|
|
% |
||||
Changes in unrecognized tax benefits |
|
|
( |
%) |
|
|
|
|
|
( |
%) |
|
|
|
||
Other |
|
|
|
|
|
% |
|
|
|
|
|
( |
%) |
|||
Effective income tax rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
In the third quarter of 2026, income tax expense included a $
In the second quarter of 2026, state income taxes included a $
On February 18, 2026, the IRS issued additional interim CAMT guidance through Notice 2026-7 (the “Notice”). In addition to other provisions, the Notice includes a new Adjusted Financial Statement Income (“AFSI”) adjustment beginning in 2025 for amortization of domestic research costs, including accelerated amortization under the OBBB transition rule. Accordingly, Devon’s nine months ended September 30, 2026 income tax expense included a current tax benefit of approximately $
On July 4, 2025, OBBB was signed into law. In addition to other provisions, OBBB includes permanent reinstatement of
19
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table reconciles net earnings available to common shareholders and weighted-average common shares outstanding used in the calculations of basic and diluted net earnings per share.
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net earnings available to common shareholders – basic and diluted |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Common shares: |
|
|
|
|
|
|
|
|
|
|
|
||||
Average common shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of potential common shares issuable |
|
|
|
|
|
|
|
|
|
|
|
||||
Average common shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings per share available to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Components of other comprehensive earnings (loss) consist of the following:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Pension and postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning accumulated pension and postretirement benefits |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Recognition of net actuarial loss and prior service cost in earnings (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Accumulated other comprehensive loss, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Changes in assets and liabilities, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts receivable |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Other current assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other long-term assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accounts payable and revenues and royalties payable |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other long-term liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Supplementary cash flow data: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest paid |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income taxes paid |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026, Devon had approximately $
20
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
consolidated balance sheets. As of May 7, 2026, Devon assumed approximately $
Components of accounts receivable include the following:
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Oil, gas and NGL sales |
|
$ |
|
|
$ |
|
||
Joint interest billings |
|
|
|
|
|
|
||
Marketing and midstream revenues |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Gross accounts receivable |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Net accounts receivable |
|
$ |
|
|
$ |
|
||
The following table presents the aggregate capitalized costs related to Devon’s oil and gas and non-oil and gas activities.
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Property and equipment: |
|
|
|
|
|
|
||
Proved |
|
$ |
|
|
$ |
|
||
Unproved and properties under development |
|
|
|
|
|
|
||
Total oil and gas |
|
|
|
|
|
|
||
Less accumulated DD&A |
|
|
( |
) |
|
|
( |
) |
Oil and gas property and equipment, net |
|
|
|
|
|
|
||
Other property and equipment |
|
|
|
|
|
|
||
Less accumulated DD&A |
|
|
( |
) |
|
|
( |
) |
Other property and equipment, net |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
The following table presents Devon’s investments shown on the consolidated balance sheets.
|
|
% Interest |
|
Carrying Amount |
|
|||||
Investments |
|
September 30, 2026 |
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Fervo |
|
|
$ |
|
|
$ |
|
|||
WaterBridge |
|
|
|
|
|
|
|
|||
Catalyst |
|
|
|
|
|
|
|
|||
Producers Midstream |
|
|
|
|
|
|
|
|||
Solitude |
|
|
|
|
|
|
— |
|
||
Other |
|
Various |
|
|
|
|
|
|
||
Total |
|
|
|
$ |
|
|
$ |
|
||
During the second quarter of 2026, Fervo completed its initial public offering, which diluted Devon’s equity interest in Fervo from
21
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
In conjunction with the Merger, Devon acquired an investment in Producers Midstream, a joint venture that provides natural gas gathering and processing services in Lea County, New Mexico, in the Permian Basin. Devon’s investment does not give it the ability to exercise significant influence over Producers Midstream.
During the third quarter of 2026, Devon contributed approximately $
See below for a summary of debt instruments and balances. The notes and debentures reflected below are senior, unsecured obligations of Devon.
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
Term Loan due |
|
|
|
|
|
|
||
Net premium on debentures and notes |
|
|
|
|
|
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
$ |
|
|
$ |
|
||
Less amount classified as short-term debt |
|
|
|
|
|
|
||
Total long-term debt |
|
$ |
|
|
$ |
|
||
22
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following schedule includes the summary of the Coterra debt Devon assumed upon closing of the Merger on May 7, 2026.
|
|
Face Value |
|
|
Fair Value |
|
||
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
||
Exchange Offers
In connection with the completed Merger, Devon commenced private exchange offers (the “Exchange Offers”) in May 2026 to exchange any and all of certain outstanding notes previously issued by Coterra and Coterra Energy Operating Co. (collectively, the “Existing Coterra Notes”) for newly issued Devon notes (the “New Devon Notes”) with the same stated interest rates, interest payment dates, maturity dates and redemption provisions as the corresponding series of Existing Coterra Notes.
On June 25, 2026, Devon issued $
Credit Lines
Devon has a $
Commercial Paper
Devon’s Senior Credit Facility supports its $
Term Loan Credit Agreement and Repayment
In August 2024, Devon entered into a delayed draw term loan credit agreement (the “Term Loan Credit Agreement”), providing for delayed draw term loans in an aggregate principal amount not to exceed $
23
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Retirement of Senior Notes
In June 2026, Devon early redeemed the $
Net Financing Costs
The following schedule includes the components of net financing costs.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest based on debt outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net financing costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Devon’s operating lease right-of-use assets relate to real estate and other equipment related to the exploration, development and production of oil and gas. Devon’s financing lease right-of-use assets primarily relate to equipment related to the exploration, development and production of oil and gas.
The following table presents Devon’s right-of-use assets and lease liabilities as of September 30, 2026 and December 31, 2025.
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||
|
|
Finance |
|
|
Operating |
|
|
Total |
|
|
Finance |
|
|
Operating |
|
|
Total |
|
||||||
Right-of-use assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current lease liabilities (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Long-term lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total lease liabilities (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following table presents the changes in Devon’s asset retirement obligations.
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Asset retirement obligations as of beginning of period |
|
$ |
|
|
$ |
|
||
Assumed Coterra obligations |
|
|
|
|
|
|
||
Liabilities incurred |
|
|
|
|
|
|
||
Liabilities settled and divested |
|
|
( |
) |
|
|
( |
) |
Revision and reclassification of estimated obligation |
|
|
|
|
|
|
||
Accretion expense on discounted obligation |
|
|
|
|
|
|
||
Asset retirement obligations as of end of period |
|
|
|
|
|
|
||
Less current portion |
|
|
|
|
|
|
||
Asset retirement obligations, long-term |
|
$ |
|
|
$ |
|
||
During the first nine months of 2026 and 2025, Devon increased its asset retirement obligations by approximately $
24
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
On May 4, 2026, Devon’s shareholders approved an amendment to Devon’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from
Coterra Merger
On May 7, 2026, Devon completed an all-stock merger of equals with Coterra. On the closing date of the Merger, each share of Coterra common stock was converted into the right to receive
Share Repurchases
On May 7, 2026, Devon’s Board of Directors authorized an $
|
|
Total Number of |
|
|
Dollar Value of |
|
|
Average Price Paid |
|
|||
2026: |
|
|
|
|
|
|
|
|
|
|||
First quarter (1) |
|
|
|
|
$ |
|
|
$ |
|
|||
Second quarter |
|
|
|
|
|
|
|
$ |
|
|||
Third quarter |
|
|
|
|
|
|
|
$ |
|
|||
Total year-to-date |
|
|
|
|
$ |
|
|
$ |
|
|||
2025: |
|
|
|
|
|
|
|
|
|
|||
First quarter |
|
|
|
|
$ |
|
|
$ |
|
|||
Second quarter |
|
|
|
|
|
|
|
$ |
|
|||
Third quarter |
|
|
|
|
|
|
|
$ |
|
|||
Total year-to-date |
|
|
|
|
$ |
|
|
$ |
|
|||
Dividends
Devon pays a quarterly fixed dividend. In connection with the Merger, Devon most recently raised its fixed dividend by approximately
|
|
Dividends |
|
|
Rate Per Share |
|
||
2026: |
|
|
|
|
|
|
||
First quarter |
|
$ |
|
|
$ |
|
||
Second quarter |
|
|
|
|
$ |
|
||
Third quarter |
|
|
|
|
$ |
|
||
Total year-to-date |
|
$ |
|
|
|
|
||
2025: |
|
|
|
|
|
|
||
First quarter |
|
$ |
|
|
$ |
|
||
Second quarter |
|
|
|
|
$ |
|
||
Third quarter |
|
|
|
|
$ |
|
||
Total year-to-date |
|
$ |
|
|
|
|
||
25
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Devon is party to various legal actions arising in connection with its business. Matters that are probable of unfavorable outcome to Devon and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to likely involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.
Royalty Matters
Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently named as a defendant in a number of such lawsuits, including some lawsuits in which the plaintiffs seek to certify classes of similarly situated plaintiffs. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, paid royalty proceeds in an untimely manner without including required interest, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with oil, natural gas and NGLs produced and sold. Devon is also involved in governmental agency proceedings and royalty audits and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims.
Environmental and Climate Change Matters
Devon’s business is subject to numerous federal, state, tribal and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal fines and penalties, as well as remediation costs. Although Devon believes that it is in substantial compliance with applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on its business, there can be no assurance that this will continue in the future.
Devon has previously received separate NOVs from the EPA alleging emissions and permitting violations relating to certain of Devon’s historic operations in North Dakota, western Texas and New Mexico, as applicable. Devon has been engaging with the EPA to resolve each of these matters, and Devon is actively negotiating a draft consent decree with the EPA and the U.S. Department of Justice with respect to the North Dakota NOV matter. If finalized, the consent decree may include monetary sanctions and obligations to complete mitigation projects and implement specific injunctive relief. Given that negotiations of the draft consent decree are ongoing and the uncertainty as to the ultimate result of the North Dakota NOV matter, Devon is currently unable to provide an estimate of potential loss; however, the costs associated with the resolution of the North Dakota NOV matter or any of the other NOV matters could be significant in amount and may include monetary penalties.
Beginning in 2013, various parishes in Louisiana filed suit against numerous oil and gas companies, including Devon, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused substantial environmental contamination, subsidence and other environmental damages to land and water bodies located in the coastal zone of Louisiana. The plaintiffs’ claims against Devon relate primarily to the operations of several of Devon’s corporate predecessors. The plaintiffs seek, among other things, payment of the costs necessary to clear, re-vegetate and otherwise restore the allegedly impacted areas. Although Devon cannot predict the ultimate outcome of these matters, Devon denies the allegations in these lawsuits and intends to vigorously defend against these claims.
The State of Delaware has filed legal proceedings against numerous oil and gas companies, including Devon, seeking relief to abate alleged impacts of climate change. These proceedings include far-reaching claims for monetary damages and injunctive relief. Although Devon cannot predict the ultimate outcome of this matter, Devon denies the allegations asserted in this lawsuit and intends to vigorously defend against these claims.
Other Indemnifications and Legacy Matters
Pursuant to various sale agreements relating to divested businesses and assets, Devon has indemnified various purchasers against liabilities that they may incur with respect to the businesses and assets acquired from Devon. Additionally, federal, state and other laws in areas of former operations may require previous operators (including corporate successors of previous operators) to perform or make payments in certain circumstances where the current operator may no longer be able to satisfy the applicable obligation. Such obligations may include plugging and abandoning wells, removing production facilities, undertaking other restorative actions or performing requirements under surface agreements in existence at the time of disposition. For example, a predecessor entity of a Devon subsidiary previously sold certain private, state and federal oil and gas leases covering properties in shallow waters off the
26
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
coast of Louisiana in the Gulf of America. These assets are generally referred to as the East Bay Field. The current operator of the East Bay Field filed for protection under Chapter 11 of the U.S. Bankruptcy Code and was unable to satisfy the eventual decommissioning obligations associated with the East Bay Field. Other companies in the chain of title of the East Bay Field have also sought bankruptcy protection and will also likely be unable to satisfy the eventual decommissioning obligations associated with the East Bay Field.
In March 2025, Devon received an order from the Department of the Interior, Bureau of Safety and Environmental Enforcement (“BSEE”) to decommission assets located on certain federal leases in the East Bay Field (the “Federal Assets”). As a result, during the first quarter of 2025, Devon recorded a contingent liability of $
Devon may be required to perform or fund decommissioning obligations associated with the East Bay Field under state and federal regulations applicable to predecessor operators beyond amounts accrued. Factors impacting this contingency include, among others: (i) the ultimate outcome of the ongoing bankruptcy proceedings, including with respect to state lease assets included in the East Bay Field, (ii) the actual costs to decommission the Federal Assets relative to the estimates, which are subject to numerous assumptions and uncertainties, and (iii) Devon’s ability to successfully access additional funds under decommissioning bonds and other sources.
27
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other current payables, accrued expenses and lease liabilities included in the accompanying consolidated balance sheets approximated fair value at September 30, 2026 and December 31, 2025, as applicable.
|
|
|
|
|
|
|
|
Fair Value Measurements Using: |
|
|||||||||||
|
|
Carrying |
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
Amount |
|
|
Value |
|
|
Inputs |
|
|
Inputs |
|
|
Inputs |
|
|||||
September 30, 2026 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Commodity derivatives |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|||
Commodity derivatives |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
Debt |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
December 31, 2025 assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Commodity derivatives |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|||
Commodity derivatives |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
Debt |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
The following methods and assumptions were used to estimate the fair values in the table above.
Level 1 Fair Value Measurements
Cash equivalents – Amounts consist primarily of money market investments and the fair value approximates the carrying value.
Level 2 Fair Value Measurements
Commodity derivatives – The fair value of commodity derivatives is estimated using internal discounted cash flow calculations based upon forward curves and data obtained from independent third parties for contracts with similar terms or data obtained from counterparties to the agreements.
Debt – Devon’s debt instruments do not consistently trade actively in an established market. The fair values of Devon’s debt are estimated based on rates available for debt with similar terms and maturity when active trading is not available.
Level 3 Fair Value Measurements
Devon had no fair value measurements using Level 3 inputs at September 30, 2026 or December 31, 2025.
28
Table of Contents
DEVON ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Devon is a leading independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Devon’s oil and gas exploration and production activities are solely focused in the U.S. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of these operations.
Devon’s chief operating decision maker is an executive committee, which includes, among others, the Chief Executive Officer, Chief Financial Officer, Chief Corporate Development Officer and the Executive Vice Presidents, Exploration and Production. To assess the performance of its assets, Devon uses net earnings. Devon believes net earnings provides information useful in assessing its operating and financial performance across periods.
The following table reflects Devon’s net earnings, assets and capital expenditures for the time periods presented below.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
LOE |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gathering, processing & transportation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production and property taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total significant expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketing and midstream expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DD&A |
|
|
|
|
|
|
|
|
|
|
|
|
||||
G&A |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital expenditures, including acquisitions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
29
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis addresses material changes in our results of operations for the three-month and nine-month periods ended September 30, 2026 compared to previous periods, and in our financial condition and liquidity since December 31, 2025. For information regarding our critical accounting policies and estimates, see our 2025 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Executive Overview
We are a leading independent oil and natural gas exploration and production company whose operations are focused onshore in the United States. Our operations are currently focused in five core areas: Permian Basin, Rockies, Eagle Ford, Anadarko Basin and Marcellus Shale. Our asset base is underpinned by premium acreage in the economic core of the Permian Basin and our diverse, top-tier resource plays, providing a deep inventory of opportunities for years to come.
On February 1, 2026, we entered into the Merger Agreement providing for an all-stock merger of equals with Coterra, which successfully closed on May 7, 2026. The Merger created a leading large-cap shale operator with an asset base anchored by a premier position in the Permian Basin. We expect the combination to unlock substantial value for shareholders by leveraging enhanced scale to improve margins, increase free cash flow and accelerate cash returns through the capture of at least $1.0 billion in sustainable annual pre-tax synergies to be attained through an optimized capital program, operating margin improvements and streamlined corporate costs.
In connection with the Merger, we also initiated a review of our combined asset portfolio. On October 8, 2026, we entered into an agreement to sell our Eagle Ford assets for $4.2 billion in cash, subject to customary purchase price adjustments. The transaction furthers our strategy of focusing on our highest-return, longest-duration assets.
As a company, we remain focused on building economic value by executing on our strategic priorities of moderating production growth, emphasizing capital and operational efficiencies, optimizing reinvestment rates to maximize free cash flow, maintaining low leverage, delivering cash returns to our shareholders and pursuing operational excellence. Our recent performance highlights for these priorities include the following items for the third quarter of 2026:
30
Table of Contents
Our net earnings and operating cash flow are highly dependent upon oil, gas and NGL prices, which can be volatile due to several varying factors. As shown in the graph below, during the first nine months of 2026, commodity prices have experienced heightened volatility, driven primarily by significant geopolitical events, including conflict in the Middle East and disruptions to global oil supply, along with continued uncertainty in global trade policy and OPEC+ production decisions.
Despite the potential negative impacts of higher inflation rates and supply chain disruptions created by these developments, we remain committed to capital discipline and delivering the objectives that underpin our current plan. Our disciplined, returns-driven strategy is designed to adapt to market fluctuations by reducing activity when necessary to maximize free cash flow generation. We will continue to prioritize value creation through moderated capital investment and production growth, particularly with a view of the volatility in commodity prices, supply chain constraints and the economic uncertainty arising from inflation and geopolitical events. Our cash-return objectives remain focused on opportunistic share repurchases, funding our dividends, repaying debt at upcoming maturities and building cash balances. To emphasize our commitment to maximizing free cash flow and creating value for shareholders, we remain on track to deliver at least $1.0 billion of annual pre-tax run-rate synergies by year end 2027, with approximately $700 million of synergies expected to be captured in 2027. We are driving progress on capital optimization, operating margin improvements and a reduced corporate cost structure through the sharing of best practices and technology across the combined company.
31
Table of Contents
Results of Operations
The following graphs, discussion and analysis are intended to provide an understanding of our results of operations and current financial condition. To facilitate the review, these numbers are being presented before consideration of noncontrolling interests.
Q3 2026 vs. Q2 2026
Our third quarter 2026 and second quarter 2026 net earnings were $1.0 billion and $1.9 billion, respectively. The graph below shows the change in net earnings from the second quarter of 2026 to the third quarter of 2026. The material changes are further discussed by category on the following pages.
Production Volumes
|
|
Q3 2026 |
|
|
% of Total |
|
|
Q2 2026 |
|
|
Change |
|
||||
Oil (MBbls/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
389 |
|
|
|
70 |
% |
|
|
329 |
|
|
|
18 |
% |
Rockies |
|
|
101 |
|
|
|
18 |
% |
|
|
105 |
|
|
|
-4 |
% |
Eagle Ford |
|
|
37 |
|
|
|
7 |
% |
|
|
48 |
|
|
|
-23 |
% |
Anadarko |
|
|
22 |
|
|
|
4 |
% |
|
|
17 |
|
|
|
34 |
% |
Other |
|
|
4 |
|
|
|
1 |
% |
|
|
4 |
|
|
N/M |
|
|
Total |
|
|
553 |
|
|
|
100 |
% |
|
|
503 |
|
|
|
10 |
% |
|
|
Q3 2026 |
|
|
% of Total |
|
|
Q2 2026 |
|
|
Change |
|
||||
Gas (MMcf/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
1,543 |
|
|
|
35 |
% |
|
|
1,274 |
|
|
|
21 |
% |
Rockies |
|
|
230 |
|
|
|
5 |
% |
|
|
237 |
|
|
|
-3 |
% |
Eagle Ford |
|
|
69 |
|
|
|
2 |
% |
|
|
85 |
|
|
|
-19 |
% |
Anadarko |
|
|
538 |
|
|
|
12 |
% |
|
|
396 |
|
|
|
36 |
% |
Marcellus |
|
|
2,018 |
|
|
|
46 |
% |
|
|
1,258 |
|
|
|
60 |
% |
Other |
|
|
2 |
|
|
|
0 |
% |
|
|
2 |
|
|
N/M |
|
|
Total |
|
|
4,400 |
|
|
|
100 |
% |
|
|
3,252 |
|
|
|
35 |
% |
|
|
Q3 2026 |
|
|
% of Total |
|
|
Q2 2026 |
|
|
Change |
|
||||
NGLs (MBbls/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
256 |
|
|
|
67 |
% |
|
|
206 |
|
|
|
24 |
% |
Rockies |
|
|
48 |
|
|
|
13 |
% |
|
|
47 |
|
|
|
1 |
% |
Eagle Ford |
|
|
13 |
|
|
|
3 |
% |
|
|
15 |
|
|
|
-12 |
% |
Anadarko |
|
|
65 |
|
|
|
17 |
% |
|
|
45 |
|
|
|
44 |
% |
Other |
|
|
— |
|
|
|
0 |
% |
|
|
1 |
|
|
N/M |
|
|
Total |
|
|
382 |
|
|
|
100 |
% |
|
|
314 |
|
|
|
22 |
% |
32
Table of Contents
|
|
Q3 2026 |
|
|
% of Total |
|
|
Q2 2026 |
|
|
Change |
|
||||
Combined (MBoe/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
901 |
|
|
|
54 |
% |
|
|
748 |
|
|
|
21 |
% |
Rockies |
|
|
187 |
|
|
|
11 |
% |
|
|
192 |
|
|
|
-3 |
% |
Eagle Ford |
|
|
61 |
|
|
|
4 |
% |
|
|
77 |
|
|
|
-20 |
% |
Anadarko |
|
|
177 |
|
|
|
11 |
% |
|
|
128 |
|
|
|
39 |
% |
Marcellus |
|
|
336 |
|
|
|
20 |
% |
|
|
210 |
|
|
|
60 |
% |
Other |
|
|
6 |
|
|
|
0 |
% |
|
|
4 |
|
|
N/M |
|
|
Total |
|
|
1,668 |
|
|
|
100 |
% |
|
|
1,359 |
|
|
|
23 |
% |
From the second quarter of 2026 to the third quarter of 2026, the change in volumes contributed to a $669 million increase in earnings. The increase in volumes was primarily due to a full quarter of production from the Coterra legacy assets in the Permian, Anadarko and Marcellus acquired in the Merger, which closed on May 7, 2026, partially offset by natural well declines and the timing of completions in the Eagle Ford.
Realized Prices
|
|
Q3 2026 |
|
|
Realization |
|
Q2 2026 |
|
|
Change |
|
|||
Oil (per Bbl) |
|
|
|
|
|
|
|
|
|
|
|
|||
WTI index |
|
$ |
85.63 |
|
|
|
|
$ |
92.47 |
|
|
|
-7 |
% |
Realized price, unhedged |
|
$ |
84.69 |
|
|
99% |
|
$ |
95.10 |
|
|
|
-11 |
% |
Cash settlements |
|
$ |
(5.15 |
) |
|
|
|
$ |
(7.01 |
) |
|
|
|
|
Realized price, with hedges |
|
$ |
79.54 |
|
|
93% |
|
$ |
88.09 |
|
|
|
-10 |
% |
|
|
Q3 2026 |
|
|
Realization |
|
Q2 2026 |
|
|
Change |
|
|||
Gas (per Mcf) |
|
|
|
|
|
|
|
|
|
|
|
|||
Henry Hub index |
|
$ |
2.96 |
|
|
|
|
$ |
2.90 |
|
|
|
2 |
% |
Realized price, unhedged |
|
$ |
1.97 |
|
|
66% |
|
$ |
0.35 |
|
|
|
459 |
% |
Cash settlements |
|
$ |
0.19 |
|
|
|
|
$ |
0.70 |
|
|
|
|
|
Realized price, with hedges |
|
$ |
2.16 |
|
|
73% |
|
$ |
1.05 |
|
|
|
106 |
% |
|
|
Q3 2026 |
|
|
Realization |
|
Q2 2026 |
|
|
Change |
|
|||
NGLs (per Bbl) |
|
|
|
|
|
|
|
|
|
|
|
|||
WTI index |
|
$ |
85.63 |
|
|
|
|
$ |
92.47 |
|
|
|
-7 |
% |
Realized price, unhedged |
|
$ |
23.81 |
|
|
28% |
|
$ |
22.70 |
|
|
|
5 |
% |
Cash settlements |
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
|
Realized price, with hedges |
|
$ |
23.81 |
|
|
28% |
|
$ |
22.70 |
|
|
|
5 |
% |
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change |
|
|||
Combined (per Boe) |
|
|
|
|
|
|
|
|
|
|||
Realized price, unhedged |
|
$ |
38.70 |
|
|
$ |
41.30 |
|
|
|
-6 |
% |
Cash settlements |
|
$ |
(1.20 |
) |
|
$ |
(0.94 |
) |
|
|
|
|
Realized price, with hedges |
|
$ |
37.50 |
|
|
$ |
40.36 |
|
|
|
-7 |
% |
From the second quarter of 2026 to the third quarter of 2026, realized prices contributed to a $164 million increase in earnings. Unhedged gas prices increased due to a full quarter of Coterra legacy Marcellus production, which shifted our gas mix away from the Permian, where negative Waha spot pricing impacted the second quarter of 2026. The increase was partially offset by lower unhedged oil prices due to lower WTI index prices.
We currently have approximately 45% and 30% of our remaining anticipated 2026 oil and gas production hedged, respectively. For 2027, we currently have approximately 35% and 10% of our anticipated oil and gas production hedged, respectively, excluding production from our Eagle Ford assets, which we expect to divest in early 2027. For additional information regarding the Eagle Ford divestiture, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
33
Table of Contents
Hedge Settlements
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change |
|
|||
Oil |
|
$ |
(262 |
) |
|
$ |
(321 |
) |
|
|
-18 |
% |
Natural gas |
|
|
77 |
|
|
|
205 |
|
|
N/M |
|
|
Total cash settlements (1) |
|
$ |
(185 |
) |
|
$ |
(116 |
) |
|
|
59 |
% |
Cash settlements as presented in the tables above represent realized gains or losses related to the instruments described in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Production Expenses
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change |
|
|||
LOE |
|
$ |
764 |
|
|
$ |
626 |
|
|
|
22 |
% |
Gathering, processing & transportation |
|
|
490 |
|
|
|
391 |
|
|
|
25 |
% |
Production taxes |
|
|
376 |
|
|
|
357 |
|
|
|
5 |
% |
Property taxes |
|
|
21 |
|
|
|
19 |
|
|
|
11 |
% |
Total |
|
$ |
1,651 |
|
|
$ |
1,393 |
|
|
|
19 |
% |
Per Boe: |
|
|
|
|
|
|
|
|
|
|||
LOE |
|
$ |
4.98 |
|
|
$ |
5.06 |
|
|
|
-2 |
% |
Gathering, processing & transportation |
|
$ |
3.20 |
|
|
$ |
3.16 |
|
|
|
1 |
% |
Percent of oil, gas and NGL sales: |
|
|
|
|
|
|
|
|
|
|||
Production taxes |
|
|
6.3 |
% |
|
|
7.0 |
% |
|
|
-9 |
% |
Production expenses increased primarily due to a full quarter of expenses associated with the Coterra legacy assets acquired in the Merger. Production taxes as a percentage of oil, gas and NGL sales decreased primarily due to a different post-merger asset and product mix.
DD&A
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change |
|
|||
Oil and gas per Boe |
|
$ |
10.72 |
|
|
$ |
11.19 |
|
|
|
-4 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Oil and gas |
|
$ |
1,647 |
|
|
$ |
1,383 |
|
|
|
19 |
% |
Other property and equipment |
|
|
37 |
|
|
|
33 |
|
|
|
13 |
% |
Total DD&A |
|
$ |
1,684 |
|
|
$ |
1,416 |
|
|
|
19 |
% |
DD&A increased in the third quarter of 2026 primarily due to a full quarter of DD&A associated with the Coterra legacy assets acquired in the Merger. For additional information regarding the Merger, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
34
Table of Contents
G&A
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change |
|
|||
G&A per Boe |
|
$ |
1.18 |
|
|
$ |
1.41 |
|
|
|
-17 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Labor and benefits |
|
$ |
107 |
|
|
$ |
95 |
|
|
|
13 |
% |
Non-labor |
|
|
73 |
|
|
|
80 |
|
|
|
-9 |
% |
Total |
|
$ |
180 |
|
|
$ |
175 |
|
|
|
3 |
% |
G&A increased primarily due to a full quarter of labor and benefits costs associated with the Merger. However, our G&A per Boe rate decreased due to a shift in asset mix following the Merger, as increased production volumes drove Boe growth at a faster rate than the corresponding increase in G&A.
Other Items
|
|
Q3 2026 |
|
|
Q2 2026 |
|
|
Change in earnings |
|
|||
Commodity hedge valuation changes (1) |
|
$ |
(729 |
) |
|
$ |
530 |
|
|
$ |
(1,259 |
) |
Marketing and midstream operations |
|
|
(20 |
) |
|
|
23 |
|
|
|
(43 |
) |
Exploration expenses |
|
|
14 |
|
|
|
16 |
|
|
|
2 |
|
Asset dispositions |
|
|
— |
|
|
|
(25 |
) |
|
|
(25 |
) |
Net financing costs |
|
|
147 |
|
|
|
125 |
|
|
|
(22 |
) |
Restructuring and transaction costs |
|
|
69 |
|
|
|
246 |
|
|
|
177 |
|
Other, net |
|
|
8 |
|
|
|
(187 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
$ |
(1,365 |
) |
||
We recognize fair value changes on our oil, gas and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationship between contract prices and the associated forward curves. For additional information, see Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Restructuring and transaction costs reflect employee related costs and various transaction costs related to the Merger. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
During the second quarter of 2026, we recognized a gain on our Fervo investment of approximately $201 million in other, net. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Income Taxes
|
|
Q3 2026 |
|
|
Q2 2026 |
|
||
Current expense |
|
$ |
276 |
|
|
$ |
378 |
|
Deferred expense (benefit) |
|
|
(32 |
) |
|
|
95 |
|
Total expense |
|
$ |
244 |
|
|
$ |
473 |
|
Current tax rate |
|
|
22 |
% |
|
|
16 |
% |
Deferred tax rate |
|
|
-3 |
% |
|
|
4 |
% |
Effective income tax rate |
|
|
19 |
% |
|
|
20 |
% |
For discussion on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
35
Table of Contents
September 30, 2026 YTD vs. September 30, 2025 YTD
Our nine months ended September 30, 2026 net earnings were $3.0 billion, compared to net earnings of $2.1 billion for the nine months ended September 30, 2025. The graph below shows the change in net earnings from the nine months ended September 30, 2025 to the nine months ended September 30, 2026. The material changes are further discussed by category on the following pages.
Production Volumes
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
% of Total |
|
|
2025 |
|
|
Change |
|
||||
Oil (MBbls/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
315 |
|
|
|
65 |
% |
|
|
222 |
|
|
|
42 |
% |
Rockies |
|
|
103 |
|
|
|
21 |
% |
|
|
109 |
|
|
|
-5 |
% |
Eagle Ford |
|
|
43 |
|
|
|
9 |
% |
|
|
42 |
|
|
|
2 |
% |
Anadarko |
|
|
17 |
|
|
|
4 |
% |
|
|
12 |
|
|
|
43 |
% |
Other |
|
|
3 |
|
|
|
1 |
% |
|
|
3 |
|
|
N/M |
|
|
Total |
|
|
481 |
|
|
|
100 |
% |
|
|
388 |
|
|
|
24 |
% |
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
% of Total |
|
|
2025 |
|
|
Change |
|
||||
Gas (MMcf/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
1,219 |
|
|
|
40 |
% |
|
|
801 |
|
|
|
52 |
% |
Rockies |
|
|
232 |
|
|
|
8 |
% |
|
|
235 |
|
|
|
-1 |
% |
Eagle Ford |
|
|
76 |
|
|
|
3 |
% |
|
|
83 |
|
|
|
-8 |
% |
Anadarko |
|
|
391 |
|
|
|
13 |
% |
|
|
262 |
|
|
|
49 |
% |
Marcellus |
|
|
1,100 |
|
|
|
36 |
% |
|
|
— |
|
|
N/M |
|
|
Other |
|
|
1 |
|
|
|
0 |
% |
|
|
— |
|
|
N/M |
|
|
Total |
|
|
3,019 |
|
|
|
100 |
% |
|
|
1,381 |
|
|
|
119 |
% |
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
% of Total |
|
|
2025 |
|
|
Change |
|
||||
NGLs (MBbls/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
200 |
|
|
|
66 |
% |
|
|
129 |
|
|
|
56 |
% |
Rockies |
|
|
47 |
|
|
|
15 |
% |
|
|
48 |
|
|
|
-2 |
% |
Eagle Ford |
|
|
13 |
|
|
|
4 |
% |
|
|
12 |
|
|
|
5 |
% |
Anadarko |
|
|
45 |
|
|
|
15 |
% |
|
|
29 |
|
|
|
55 |
% |
Other |
|
|
— |
|
|
|
0 |
% |
|
|
— |
|
|
N/M |
|
|
Total |
|
|
305 |
|
|
|
100 |
% |
|
|
218 |
|
|
|
40 |
% |
36
Table of Contents
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
% of Total |
|
|
2025 |
|
|
Change |
|
||||
Combined (MBoe/d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Permian |
|
|
718 |
|
|
|
56 |
% |
|
|
484 |
|
|
|
48 |
% |
Rockies |
|
|
189 |
|
|
|
15 |
% |
|
|
196 |
|
|
|
-4 |
% |
Eagle Ford |
|
|
68 |
|
|
|
5 |
% |
|
|
68 |
|
|
N/M |
|
|
Anadarko |
|
|
127 |
|
|
|
10 |
% |
|
|
84 |
|
|
|
50 |
% |
Marcellus |
|
|
183 |
|
|
|
14 |
% |
|
|
— |
|
|
N/M |
|
|
Other |
|
|
5 |
|
|
|
0 |
% |
|
|
4 |
|
|
N/M |
|
|
Total |
|
|
1,290 |
|
|
|
100 |
% |
|
|
836 |
|
|
|
54 |
% |
From the nine months ended September 30, 2025 to the nine months ended September 30, 2026, the change in volumes contributed to a $2.9 billion increase in earnings. Due to the Merger closing on May 7, 2026, volumes now include Coterra legacy assets in the Permian, Anadarko and Marcellus. Volumes associated with these Coterra legacy assets were approximately 431 MBoe/d in the nine months ended September 30, 2026.
Realized Prices
|
|
Nine Months Ended September 30, |
|
|||||||||||
|
|
2026 |
|
|
Realization |
|
2025 |
|
|
Change |
|
|||
Oil (per Bbl) |
|
|
|
|
|
|
|
|
|
|
|
|||
WTI index |
|
$ |
83.40 |
|
|
|
|
$ |
66.79 |
|
|
|
25 |
% |
Realized price, unhedged |
|
$ |
84.34 |
|
|
101% |
|
$ |
64.66 |
|
|
|
30 |
% |
Cash settlements |
|
$ |
(4.89 |
) |
|
|
|
$ |
0.69 |
|
|
|
|
|
Realized price, with hedges |
|
$ |
79.45 |
|
|
95% |
|
$ |
65.35 |
|
|
|
22 |
% |
|
|
Nine Months Ended September 30, |
|
|||||||||||
|
|
2026 |
|
|
Realization |
|
2025 |
|
|
Change |
|
|||
Gas (per Mcf) |
|
|
|
|
|
|
|
|
|
|
|
|||
Henry Hub index |
|
$ |
3.64 |
|
|
|
|
$ |
3.39 |
|
|
|
7 |
% |
Realized price, unhedged |
|
$ |
1.34 |
|
|
37% |
|
$ |
1.78 |
|
|
|
-24 |
% |
Cash settlements |
|
$ |
0.35 |
|
|
|
|
$ |
0.08 |
|
|
|
|
|
Realized price, with hedges |
|
$ |
1.69 |
|
|
46% |
|
$ |
1.86 |
|
|
|
-9 |
% |
|
|
Nine Months Ended September 30, |
|
|||||||||||
|
|
2026 |
|
|
Realization |
|
2025 |
|
|
Change |
|
|||
NGLs (per Bbl) |
|
|
|
|
|
|
|
|
|
|
|
|||
WTI index |
|
$ |
83.40 |
|
|
|
|
$ |
66.79 |
|
|
|
25 |
% |
Realized price, unhedged |
|
$ |
22.01 |
|
|
26% |
|
$ |
18.79 |
|
|
|
17 |
% |
Cash settlements |
|
$ |
— |
|
|
|
|
$ |
0.07 |
|
|
|
|
|
Realized price, with hedges |
|
$ |
22.01 |
|
|
26% |
|
$ |
18.86 |
|
|
|
17 |
% |
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
Combined (per Boe) |
|
|
|
|
|
|
|
|
|
|||
Realized price, unhedged |
|
$ |
39.83 |
|
|
$ |
37.86 |
|
|
|
5 |
% |
Cash settlements |
|
$ |
(1.02 |
) |
|
$ |
0.47 |
|
|
|
|
|
Realized price, with hedges |
|
$ |
38.81 |
|
|
$ |
38.33 |
|
|
|
1 |
% |
From the nine months ended September 30, 2025 to the nine months ended September 30, 2026, realized prices contributed to a $2.5 billion increase in earnings. This increase was primarily due to higher unhedged realized oil and NGL prices. This increase was partially offset by lower unhedged realized gas prices and oil hedge cash settlements.
37
Table of Contents
Hedge Settlements
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
Oil |
|
$ |
(643 |
) |
|
$ |
73 |
|
|
|
-981 |
% |
Natural gas |
|
|
285 |
|
|
|
30 |
|
|
|
850 |
% |
NGL |
|
|
— |
|
|
|
4 |
|
|
N/M |
|
|
Total cash settlements (1) |
|
$ |
(358 |
) |
|
$ |
107 |
|
|
|
-435 |
% |
Cash settlements as presented in the tables above represent realized gains or losses related to the instruments described in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Production Expenses
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
LOE |
|
$ |
1,876 |
|
|
$ |
1,443 |
|
|
|
30 |
% |
Gathering, processing & transportation |
|
|
1,072 |
|
|
|
636 |
|
|
|
69 |
% |
Production taxes |
|
|
938 |
|
|
|
576 |
|
|
|
63 |
% |
Property taxes |
|
|
52 |
|
|
|
51 |
|
|
|
2 |
% |
Total |
|
$ |
3,938 |
|
|
$ |
2,706 |
|
|
|
46 |
% |
Per Boe: |
|
|
|
|
|
|
|
|
|
|||
LOE |
|
$ |
5.33 |
|
|
$ |
6.32 |
|
|
|
-16 |
% |
Gathering, processing & transportation |
|
$ |
3.05 |
|
|
$ |
2.78 |
|
|
|
9 |
% |
Percent of oil, gas and NGL sales: |
|
|
|
|
|
|
|
|
|
|||
Production taxes |
|
|
6.7 |
% |
|
|
6.7 |
% |
|
|
0 |
% |
Production expenses increased primarily due to the Merger closing on May 7, 2026, partially offset by positive results from the recently completed pre-merger business optimization plan. LOE per Boe decreased and gathering, processing & transportation per Boe increased due to a different post-merger asset and product mix. Production taxes increased primarily due to higher oil, gas and NGL sales, on which production taxes are assessed, driven by higher production volumes following the Merger.
DD&A and Asset Impairments
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
Oil and gas per Boe |
|
$ |
11.10 |
|
|
$ |
11.52 |
|
|
|
-4 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Oil and gas |
|
$ |
3,908 |
|
|
$ |
2,630 |
|
|
|
49 |
% |
Other property and equipment |
|
|
96 |
|
|
|
75 |
|
|
|
27 |
% |
Total DD&A |
|
$ |
4,004 |
|
|
$ |
2,705 |
|
|
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Asset impairments |
|
$ |
— |
|
|
$ |
254 |
|
|
N/M |
|
|
DD&A increased in the first nine months of 2026 primarily due to higher volumes driven by the Merger and new well activity in the Permian.
In the first quarter of 2025, we rationalized two headquarters-related real estate assets resulting in total asset impairments of $254 million. See Note 5 in “Part I. Financial Information – Item 1. Financial Statements” of this report for further discussion.
38
Table of Contents
G&A
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
G&A per Boe |
|
$ |
1.36 |
|
|
$ |
1.56 |
|
|
|
-13 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Labor and benefits |
|
$ |
266 |
|
|
$ |
189 |
|
|
|
41 |
% |
Non-labor |
|
|
214 |
|
|
|
168 |
|
|
|
27 |
% |
Total |
|
$ |
480 |
|
|
$ |
357 |
|
|
|
34 |
% |
G&A increased primarily due to the Merger closing on May 7, 2026. However, our G&A per Boe rate decreased due to a shift in asset mix following the Merger, as increased production volumes drove Boe growth at a faster rate than the corresponding increase in G&A.
Other Items
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change in earnings |
|
|||
Commodity hedge valuation changes (1) |
|
$ |
(843 |
) |
|
$ |
111 |
|
|
$ |
(954 |
) |
Marketing and midstream operations |
|
|
(13 |
) |
|
|
(42 |
) |
|
|
29 |
|
Exploration expenses |
|
|
55 |
|
|
|
38 |
|
|
|
(17 |
) |
Asset dispositions |
|
|
(24 |
) |
|
|
(342 |
) |
|
|
(318 |
) |
Net financing costs |
|
|
381 |
|
|
|
348 |
|
|
|
(33 |
) |
Restructuring and transaction costs |
|
|
334 |
|
|
|
36 |
|
|
|
(298 |
) |
Other, net |
|
|
(162 |
) |
|
|
— |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
$ |
(1,429 |
) |
||
We recognize fair value changes on our oil, gas and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationship between contract prices and the associated forward curves. For additional information, see Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
During the second quarter of 2025, we sold our investment in Matterhorn for $372 million and recognized a pre-tax gain of $307 million ($239 million, net of tax), which was recorded to asset dispositions. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Restructuring and transaction costs reflect employee related costs and various transaction costs related to the Merger. The majority of these costs were recorded in the second quarter of 2026. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
During the first nine months of 2026, we recognized a gain on our Fervo investment of approximately $201 million in other, net. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Income Taxes
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Current expense |
|
$ |
466 |
|
|
$ |
278 |
|
Deferred expense |
|
|
297 |
|
|
|
322 |
|
Total expense |
|
$ |
763 |
|
|
$ |
600 |
|
Current tax rate |
|
|
12 |
% |
|
|
10 |
% |
Deferred tax rate |
|
|
8 |
% |
|
|
12 |
% |
Effective income tax rate |
|
|
20 |
% |
|
|
22 |
% |
For information on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
39
Table of Contents
Capital Resources, Uses and Liquidity
Sources and Uses of Cash
The following table presents the major changes in cash, cash equivalents and restricted cash for the three and nine months ended September 30, 2026 and 2025.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Operating cash flow |
|
$ |
2,808 |
|
|
$ |
1,690 |
|
|
$ |
8,137 |
|
|
$ |
5,177 |
|
Cash acquired in Merger |
|
|
— |
|
|
|
— |
|
|
|
581 |
|
|
|
— |
|
Capital expenditures |
|
|
(1,464 |
) |
|
|
(870 |
) |
|
|
(3,621 |
) |
|
|
(2,760 |
) |
Acquisitions of property and equipment |
|
|
(320 |
) |
|
|
(197 |
) |
|
|
(3,239 |
) |
|
|
(221 |
) |
Divestitures of property, equipment and investments |
|
|
6 |
|
|
|
38 |
|
|
|
96 |
|
|
|
543 |
|
Investment activity, net |
|
|
(85 |
) |
|
|
5 |
|
|
|
(75 |
) |
|
|
15 |
|
Debt activity |
|
|
(750 |
) |
|
|
(485 |
) |
|
|
(1,250 |
) |
|
|
(485 |
) |
Repurchases of common stock |
|
|
(414 |
) |
|
|
(250 |
) |
|
|
(680 |
) |
|
|
(800 |
) |
Common stock dividends |
|
|
(366 |
) |
|
|
(151 |
) |
|
|
(887 |
) |
|
|
(470 |
) |
Noncontrolling interest activity, net |
|
|
— |
|
|
|
(260 |
) |
|
|
— |
|
|
|
(269 |
) |
Repayment of finance leases |
|
|
(3 |
) |
|
|
— |
|
|
|
(8 |
) |
|
|
(274 |
) |
Other |
|
|
(8 |
) |
|
|
(1 |
) |
|
|
(75 |
) |
|
|
(24 |
) |
Net change in cash, cash equivalents and restricted cash |
|
$ |
(596 |
) |
|
$ |
(481 |
) |
|
$ |
(1,021 |
) |
|
$ |
432 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
413 |
|
|
$ |
1,278 |
|
|
$ |
413 |
|
|
$ |
1,278 |
|
Operating Cash Flow and Cash Acquired in Merger
As presented in the table above, net cash provided by operating activities continued to be a significant source of capital and liquidity. Operating cash flow grew approximately 57% during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was due to the Merger and significantly higher prices in the first nine months of 2026. Operating cash flow funded our capital expenditures, and we continued to return value to our shareholders by utilizing cash flow and cash balances for share repurchases, dividends and debt retirements.
Capital Expenditures
The amounts in the table below reflect cash payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Permian |
|
$ |
859 |
|
|
$ |
462 |
|
|
$ |
2,094 |
|
|
$ |
1,418 |
|
Rockies |
|
|
199 |
|
|
|
197 |
|
|
|
619 |
|
|
|
652 |
|
Eagle Ford |
|
|
105 |
|
|
|
138 |
|
|
|
338 |
|
|
|
431 |
|
Anadarko |
|
|
126 |
|
|
|
34 |
|
|
|
264 |
|
|
|
118 |
|
Marcellus |
|
|
121 |
|
|
|
— |
|
|
|
185 |
|
|
|
— |
|
Other |
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
Total oil and gas |
|
|
1,410 |
|
|
|
832 |
|
|
|
3,502 |
|
|
|
2,622 |
|
Midstream |
|
|
38 |
|
|
|
29 |
|
|
|
84 |
|
|
|
95 |
|
Other |
|
|
16 |
|
|
|
9 |
|
|
|
35 |
|
|
|
43 |
|
Total capital expenditures |
|
$ |
1,464 |
|
|
$ |
870 |
|
|
$ |
3,621 |
|
|
$ |
2,760 |
|
Capital expenditures consist primarily of amounts related to our oil and gas exploration and development operations, midstream operations and other corporate activities. Our capital investment program is driven by a disciplined allocation process focused on moderating our production growth and maximizing our returns. As such, our capital expenditures for the first nine months of 2026 represented approximately 45% of our operating cash flow. Capital expenditures increased in 2026 primarily due to the Merger closing on May 7, 2026 and results now include activity related to Coterra legacy assets in the Permian, Anadarko and Marcellus.
40
Table of Contents
Acquisitions of Property and Equipment
During the first nine months of 2026, we completed acquisitions of property primarily related to state and federal land sales in the Permian for approximately $2.8 billion. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Divestitures of Property, Equipment and Investments
During the first nine months of 2026, we received proceeds of $96 million from asset dispositions.
During the first nine months of 2025, we generated additional cash flow by monetizing our investment in Matterhorn for $372 million and divesting headquarters-related real estate assets for $134 million as part of our real estate rationalization initiatives. For additional information regarding these divestitures, see Note 2 and Note 5, respectively, in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Investment Activity
During the first nine months of 2026 and 2025, we received distributions from our investments of $32 million and $27 million, respectively. We contributed $107 million and $12 million to our investments during the first nine months of 2026 and 2025, respectively. The 2026 contributions primarily relate to our investment in Solitude. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Debt Activity
During the first nine months of 2026, we retired $1.25 billion of debt, including repayment of the $1.0 billion Term Loan. For additional information, see Note 14 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
During the first nine months of 2025, we early redeemed the $485 million of 5.85% senior notes due in December 2025 pursuant to the “par-call” rights set forth in the indenture document.
Shareholder Distributions and Stock Activity
We repurchased approximately 15.1 million shares of common stock for $686 million and approximately 23.7 million shares of common stock for $800 million under the share repurchase programs authorized by our Board of Directors in the first nine months of 2026 and 2025, respectively. For additional information, see Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
The following table summarizes our common stock dividends during the third quarter and total for the first nine months of 2026 and 2025. In connection with the Merger, Devon most recently raised its fixed dividend by approximately 33% from $0.24 to $0.32 per share in the second quarter of 2026.
|
|
Dividends |
|
|
Rate Per Share |
|
||
2026: |
|
|
|
|
|
|
||
First quarter |
|
$ |
155 |
|
|
$ |
0.24 |
|
Second quarter |
|
|
366 |
|
|
$ |
0.32 |
|
Third quarter |
|
|
366 |
|
|
$ |
0.32 |
|
Total year-to-date |
|
$ |
887 |
|
|
|
|
|
2025: |
|
|
|
|
|
|
||
First quarter |
|
$ |
163 |
|
|
$ |
0.24 |
|
Second quarter |
|
|
156 |
|
|
$ |
0.24 |
|
Third quarter |
|
|
151 |
|
|
$ |
0.24 |
|
Total year-to-date |
|
$ |
470 |
|
|
|
|
|
41
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Noncontrolling Interest Activity, net
On August 1, 2025, Devon completed the acquisition of all outstanding noncontrolling interests in CDM for $260 million. Accordingly, all future net income and cash flows from CDM are fully attributable to Devon and there will be no further distributions to or contributions from noncontrolling interest holders.
During the first nine months of 2025, we distributed $23 million to, and received $14 million in contributions from, our noncontrolling interests in CDM.
Repayment of Finance Lease
During the first nine months of 2025, we paid $274 million in cash to extinguish a finance lease related to a headquarters-related real estate asset as part of our real estate rationalization initiatives.
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Liquidity
The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, we, like all upstream operators, must continually make capital investments to grow and even sustain production. Generally, our capital investments are focused on drilling and completing new wells and maintaining production from existing wells. At opportunistic times, we also acquire operations and properties from other operators or landowners to enhance our existing portfolio of assets.
On May 7, 2026, Devon and Coterra completed an all-stock merger of equals transaction. The strategic combination is expected to unlock substantial value for shareholders by leveraging enhanced scale to improve margins, increase free cash flow and accelerate cash returns through the capture of at least $1.0 billion in sustainable annual pre-tax synergies. Following the successful completion of the Merger, we announced an $8.0 billion share repurchase program that expires on June 30, 2029. We also raised our fixed dividend by approximately 33% from $0.24 to $0.32 per share in the second quarter of 2026. In connection with the Merger, we initiated a review of our combined asset portfolio. As a result of this review, in October 2026, we entered into an agreement to sell our Eagle Ford assets. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Historically, our primary sources of capital funding and liquidity have been our operating cash flow and cash on hand. Additionally, we maintain a commercial paper program, supported by our revolving line of credit, which can be accessed as needed to supplement operating cash flow and cash balances. If needed, we can also issue debt and equity securities, including through transactions under our shelf registration statement filed with the SEC. We estimate the combination of our sources of capital will continue to be adequate to fund our planned capital requirements, as discussed in this section, as well as execute our cash-return business model.
Operating Cash Flow
Key inputs into determining our planned capital investment are the amount of cash we hold and operating cash flow we expect to generate over the next one to three or more years. At the end of the third quarter of 2026, we held approximately $413 million of cash. Our operating cash flow forecasts are sensitive to many variables and include a measure of uncertainty as actual results may differ from our expectations.
Commodity Prices – The most uncertain and volatile variables for our operating cash flow are the prices of the oil, gas and NGLs we produce and sell. Prices are determined primarily by prevailing market conditions. Regional and worldwide economic uncertainty arising from geopolitical events, including conflict in the Middle East and related disruptions to global oil supply, weather, changes in public policy and other highly variable factors influence market conditions for these products. These factors, which are difficult to predict, create volatility in prices and are beyond our control.
To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. The key terms of our oil, gas and NGL derivative financial instruments as of September 30, 2026 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.
Further, when considering the current commodity price environment and our current hedge position, we expect to achieve our capital investment priorities. We remain committed to capital discipline and focused on delivering the objectives that underpin our capital plan for 2026.
Operating Expenses – Commodity prices can also affect our operating cash flow through an indirect effect on operating expenses. Significant commodity price decreases can lead to a decrease in drilling and development activities. As a result, the demand and cost for people, services, equipment and materials may also decrease, causing a positive impact on our cash flow as the prices paid for services and equipment decline. However, the inverse is also generally true during periods of rising commodity prices.
Cost savings and synergies resulting from the Merger are expected to be attained through an optimized capital program, operating margin improvements and streamlined corporate costs. We remain on track to deliver at least $1.0 billion of annual pre-tax run-rate synergies by year-end 2027, with approximately $700 million of synergies expected to be captured in 2027. Shared best practices and technology are driving progress across these initiatives, strengthening margins and maximizing capital efficiency across the combined portfolio.
Additionally, the economic uncertainty arising from geopolitical events, including conflict in the Middle East and related disruptions to global oil supply, as well as evolving U.S. trade policies and tariff actions, may contribute to higher inflation rates and disrupt supply chains, negatively impacting our cash flow. While we actively work to mitigate the impact of these potential risks
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through operational efficiencies gained from the scale of our operations, as well as by leveraging long-standing relationships with our suppliers, the ultimate impacts remain uncertain.
Restructuring and Transaction Related Costs – Merger-related restructuring and transaction cost cash outflows were paid in the first nine months of 2026, with additional costs expected to be paid primarily through the end of 2027. Payments extending beyond 2026 relate primarily to employee costs and the associated employee severance benefits, costs to modify or abandon vendor contracts and the acceleration of certain employee benefits triggered by the Merger.
Credit Losses – Our operating cash flow is also exposed to credit risk in a variety of ways. This includes the credit risk related to customers who purchase our oil, gas and NGL production, the collection of receivables from our joint interest owners for their proportionate share of expenditures made on projects we operate and counterparties to our derivative financial contracts. We utilize a variety of mechanisms to limit our exposure to the credit risks of our customers, joint interest owners and counterparties. Such mechanisms include, under certain conditions, requiring letters of credit, prepayments or cash collateral postings.
Assumption of Coterra Debt
In conjunction with the Merger closing on May 7, 2026, we assumed a principal value of approximately $3.5 billion of Coterra debt.
Repayment of Debt
During the first nine months of 2026, we retired $1.25 billion of debt, including repayment of the $1.0 billion Term Loan. Following these repayments, we have no outstanding debt maturities until the second quarter of 2027. We expect these repayments to lower our annual cash net financing costs by approximately $60 million.
Credit Availability
As of September 30, 2026, we had approximately $3.0 billion of available borrowing capacity under our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At September 30, 2026, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.
Debt Ratings
We receive debt ratings from the major ratings agencies in the U.S. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels, cost structure, planned asset sales and the size and scale of our production. Our credit rating from Standard and Poor’s Financial Services is BBB+ with a stable outlook. Our credit rating from Fitch is BBB+ with a positive outlook. Our credit rating from Moody’s Investor Service is Baa2 with a positive outlook. Any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.
There are no “rating triggers” in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. However, a downgrade could adversely impact our interest rate on any credit facility borrowings and the ability to economically access debt markets in the future.
Cash Returns to Shareholders
We are committed to returning cash to shareholders through dividends and share repurchases. Our Board of Directors will consider a number of factors when setting the quarterly dividend, if any, including a general target of paying out approximately 10% to 15% of operating cash flow through the fixed dividend. In addition to the fixed quarterly dividend, we may pay a variable dividend or complete share repurchases. The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of our Board of Directors and will depend on our financial results, cash requirements, future prospects and other factors deemed relevant by the Board.
In November 2026, Devon announced a cash dividend in the amount of $0.32 per share payable in the fourth quarter of 2026 and will total approximately $363 million.
Following the completion of the Merger, we announced an $8.0 billion share repurchase program that expires on June 30, 2029. Through October 2026, we had executed approximately $725 million of the authorized program.
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Capital Expenditures
Our capital expenditures budget for the remainder of 2026 is expected to be approximately $1.3 billion to $1.4 billion. Our budget includes the Eagle Ford assets through the expected closing of the sale.
Contractual Obligations
As a result of the Merger, we increased our material contractual obligations, which include debt and related interest expense, asset retirement obligations, lease obligations, operational agreements, drilling and facility obligations, various tax obligations and other obligations. As discussed above, we estimate the combination of our sources of capital will continue to be adequate to fund our short- and long-term contractual obligations.
Tax Contingencies
As we are regularly audited by tax authorities, we have and will continue to have our tax positions challenged. Certain tax authorities require material cash deposits be made to further dispute and respond to any of our challenged tax positions. The Canada Revenue Agency (“CRA”) proposed several material adjustments to prior tax years relating to our legacy Canadian business. We have been engaging with the CRA to resolve these matters, and the CRA has issued formal assessments for certain of such adjustments. We disagree with the adjustments and intend to vigorously contest the assessments, which may require us to make material cash deposits while the matters are being resolved.
Divestitures of Property and Equipment
In October 2026, we entered into an agreement to sell our Eagle Ford assets for $4.2 billion in cash, subject to customary purchase price adjustments. The transaction is expected to close in early 2027, subject to regulatory approvals and customary closing conditions. We intend to use the proceeds to accelerate share repurchases and to strengthen the balance sheet through debt reduction. Additional information is included in Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
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Critical Accounting Estimates
Purchase Accounting
Periodically, we acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Merger with Coterra. In connection with the Merger, we allocated the $24.9 billion of purchase price consideration to the assets acquired and liabilities assumed based on estimated fair values as of the date of the acquisition.
We made a number of assumptions in estimating the fair value of assets acquired and liabilities assumed in the Merger. The most significant assumptions relate to the estimated fair values of proved and unproved oil and gas properties. Since sufficient market data was not available regarding the fair values of proved and unproved oil and gas properties, we prepared estimates and engaged third-party valuation experts. Significant judgments and assumptions are inherent in these estimates and include, among other things, estimates of reserve quantities, estimates of future commodity prices, drilling plans, expected development costs, lease operating costs, reserve risk adjustment factors and an estimate of an applicable market participant discount rate that reflects the risk of the underlying cash flow estimates.
Estimated fair values ascribed to assets acquired can have a significant impact on future results of operations presented in Devon’s financial statements. A higher fair value ascribed to a property results in higher DD&A expense, which results in lower net earnings. Fair values are based on estimates of future commodity prices, reserve quantities, development costs and operating costs. In the event that future commodity prices or reserve quantities are lower than those used as inputs to determine estimates of acquisition date fair values, the likelihood increases that certain costs may be determined to not be recoverable.
Income Taxes
The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized.
On July 4, 2025, OBBB was signed into law. In addition to other provisions, OBBB includes permanent reinstatement of 100% bonus depreciation and the expensing of domestic research costs beginning in 2025 and allows for deduction of intangible drilling costs as part of the computation of the CAMT beginning in 2026. On February 18, 2026, the IRS issued additional interim CAMT guidance through Notice 2026-7. In addition to other provisions, the Notice includes a new AFSI adjustment beginning in 2025 for amortization of domestic research costs, including accelerated amortization under the OBBB transition rule, the impact of which was recorded in the first quarter of 2026. We continue to monitor for additional OBBB guidance.
Further, in the event we were to undergo an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended), our ability to use net operating losses and tax credits generated prior to the ownership change may be limited. Generally, an “ownership change” occurs if one or more shareholders, each of whom owns five percent or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50 percent over the lowest percentage of stock owned by those shareholders at any time during the preceding three-year period. Based on currently available information, we do not believe an ownership change has occurred during the third quarter of 2026 for Devon; however, the Merger resulted in an ownership change for Coterra, which increases the likelihood Devon could experience an ownership change over the next three years.
For additional information regarding our critical accounting policies and estimates, see our 2025 Annual Report on Form 10-K.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
As of September 30, 2026, we have commodity derivatives that pertain to a portion of our estimated production for the last three months of 2026, as well as for 2027 and 2028. The key terms of our open oil, gas and NGL derivative financial instruments are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
The fair values of our commodity derivatives are largely determined by the forward curves of the relevant price indices. At September 30, 2026, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately $625 million.
Interest Rate Risk
At September 30, 2026, we had total debt of $10.6 billion, comprised of debentures and notes with fixed interest rates that averaged 5.49%.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to Devon, including its consolidated subsidiaries, is made known to the officers who certify Devon’s financial reports and to other members of senior management and the Board of Directors.
Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of September 30, 2026 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
Changes in Internal Control Over Financial Reporting
In connection with the Merger, we are in the process of integrating Coterra’s operations, processes and systems into our internal control structure. As this integration progresses, we anticipate changes to our combined internal control environment that may affect our internal control over financial reporting. For additional information regarding the Merger, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Other than as described above in connection with the Merger, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the environmental matters noted in Part I, Item 3. Legal Proceedings of our 2025 Annual Report on Form 10-K and in Part II, Item 1. Legal Proceedings of our Second Quarter 2026 Quarterly Report on Form 10-Q, there were no material pending legal proceedings to which we are a party or to which any of our property is subject. For more information on our legal contingencies, see Note 18 in “Part I. Financial Information – Item 1. Financial Statements” of this report.
Devon has elected to use a $1 million threshold for disclosing certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party. Devon believes proceedings under this threshold are not material to Devon’s business, financial condition and results of operations.
Please see our 2025 Annual Report on Form 10-K and other SEC filings for additional information.
Item 1A. Risk Factors
There have been no material changes to the information included in Item 1A. “Risk Factors” in our 2025 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding purchases of our common stock that were made by us during the third quarter of 2026 (shares in thousands).
Period |
|
Total Number of |
|
|
Average Price |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
|
||||
July 1 – July 31 |
|
|
2,388 |
|
|
$ |
43.13 |
|
|
|
2,346 |
|
|
$ |
7,697 |
|
August 1 – August 31 |
|
|
1,510 |
|
|
$ |
46.30 |
|
|
|
1,431 |
|
|
$ |
7,631 |
|
September 1 – September 30 |
|
|
5,167 |
|
|
$ |
48.81 |
|
|
|
5,074 |
|
|
$ |
7,383 |
|
Total |
|
|
9,065 |
|
|
$ |
46.89 |
|
|
|
8,851 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2026, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
On
48
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for the potential sale of up to
49
Table of Contents
Item 6. Exhibits
Exhibit Number |
|
Description |
|
|
|
10.1* |
2026 Amendment to the Devon Energy Corporation 2022 Long-Term Incentive Plan (amended and restated effective as of November 19, 2025). |
|
|
|
|
10.2* |
Amendment, dated August 10, 2026, to the Severance Agreement, dated March 4, 2014, between Devon Energy Corporation and John Raines. |
|
|
|
|
10.3* |
Form of Notice of Grant of Restricted Stock Award and Award Agreement under the 2022 Long-Term Incentive Plan (three-year cliff vesting). |
|
|
|
|
31.1 |
Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
31.2 |
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
32.1 |
Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
32.2 |
Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
101.INS |
Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents. |
|
|
|
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
|
*Indicates management contract or compensatory plan or arrangement.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
DEVON ENERGY CORPORATION |
|
|
|
||
Date: November 6, 2026 |
|
|
|
/s/ Gregory F. Conaway |
|
|
|
|
Gregory F. Conaway |
|
|
|
|
Vice President and Chief Accounting Officer |
51