Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2026
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-32318
DEVON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
73-1567067
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Three Memorial City Plaza
840 Gessner Road, Suite 1400, Houston, Texas 77024
(Address of principal executive offices, including zip code)
(281) 589-4600
(Registrant’s telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report: Not applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.10 per share
DVN
New York Stock Exchange
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. Yes ☑ No ☐
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). Yes ☑ No ☐
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.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
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, 1,139,714,310 shares of common stock were outstanding.
FORM 10-Q
TABLE OF CONTENTS
Part I. Financial Information
Item 1.
Financial Statements
7
Consolidated Statements of Comprehensive Earnings
Consolidated Balance Sheets
8
Consolidated Statements of Cash Flows
9
Consolidated Statements of Equity
10
Notes to Consolidated Financial Statements
11
Note 1 – Summary of Significant Accounting Policies
Note 2 – Acquisitions and Divestitures
12
Note 3 – Derivative Financial Instruments
15
Note 4 – Share-Based Compensation
17
Note 5 – Asset Impairments
18
Note 6 – Restructuring and Transaction Costs
Note 7 – Income Taxes
19
Note 8 – Net Earnings Per Share
20
Note 9 – Other Comprehensive Earnings (Loss)
Note 10 – Supplemental Information to Statements of Cash Flows
Note 11 – Accounts Receivable
21
Note 12 – Property and Equipment
Note 13 – Investments
Note 14 – Debt and Related Expenses
22
Note 15 – Leases
24
Note 16 – Asset Retirement Obligations
Note 17 – Stockholders’ Equity
25
Note 18 – Commitments and Contingencies
26
Note 19 – Fair Value Measurements
28
Note 20 – Reportable Segments
29
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
30
Executive Overview
Results of Operations
32
Capital Resources, Uses and Liquidity
40
Critical Accounting Estimates
46
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
47
Item 4.
Controls and Procedures
Part II. Other Information
Legal Proceedings
48
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
50
Signatures
51
2
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
“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
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
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
Item 1. Financial Statements
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Three Months Ended September 30,
Nine Months Ended September 30,
2026
2025
(Unaudited)
Oil, gas and NGL sales
$
5,939
2,809
14,022
8,645
Oil, gas and NGL derivatives
(914
)
80
(1,201
218
Marketing and midstream revenues
1,835
1,442
5,263
4,204
Total revenues
6,860
4,331
18,084
13,067
Production expenses
1,651
895
3,938
2,706
Exploration expenses
14
55
38
Marketing and midstream expenses
1,855
1,453
5,276
4,246
Depreciation, depletion and amortization
1,684
879
4,004
2,705
Asset impairments
—
254
Asset dispositions
(37
(24
(342
General and administrative expenses
180
114
480
357
Financing costs, net
147
109
381
348
Restructuring and transaction costs
69
334
36
Other, net
(11
(162
Total expenses
5,608
3,419
14,282
10,348
Earnings before income taxes
1,252
912
3,802
2,719
Income tax expense
244
219
763
600
Net earnings
1,008
693
3,039
2,119
Net earnings attributable to noncontrolling interests
39
Net earnings attributable to Devon
687
2,080
Net earnings per share:
Basic net earnings per share
0.88
1.09
3.37
3.27
Diluted net earnings per share
3.36
Comprehensive earnings:
Other comprehensive earnings, net of tax:
Pension and postretirement plans
1
Other comprehensive earnings, net of tax
1,009
694
3,042
2,122
Comprehensive earnings attributable to noncontrolling interests
Comprehensive earnings attributable to Devon
688
2,083
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
September 30, 2026
December 31, 2025
ASSETS
Current assets:
Cash, cash equivalents and restricted cash
413
1,434
Accounts receivable
3,539
1,792
Inventory
382
336
Other current assets
490
444
Total current assets
4,824
4,006
Oil and gas property and equipment, based on successful efforts accounting, net
60,970
23,731
Other property and equipment, net
2,212
1,688
Total property and equipment, net
63,182
25,419
Goodwill
753
Right-of-use assets
566
299
Investments
1,074
727
Other long-term assets
415
395
Total assets
70,814
31,599
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
1,637
790
Revenues and royalties payable
2,375
1,491
Short-term debt
822
998
Other current liabilities
2,015
807
Total current liabilities
6,849
4,086
Long-term debt
9,814
7,391
Lease liabilities
404
197
Asset retirement obligations
1,188
863
Other long-term liabilities
931
907
Deferred income taxes
9,615
2,627
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, $0.10 par value. Authorized 2.0 billion shares; issued 1,141 million and 622 million shares in 2026 and 2025, respectively
62
Additional paid-in capital
29,673
5,388
Retained earnings
12,352
10,200
Accumulated other comprehensive loss
(119
(122
Treasury stock, at cost, 0.1 million shares in 2026
(7
Total stockholders’ equity
42,013
15,528
Total liabilities and equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Adjustments to reconcile net earnings to net cash from operating activities:
Leasehold impairments
13
Accretion of liabilities
Total (gains) losses on commodity derivatives
914
(80
1,201
(218
Cash settlements on commodity derivatives
(185
(358
107
Gains on asset dispositions
Deferred income tax expense (benefit)
(32
263
297
322
Share-based compensation
144
77
Other
(45
(172
(62
Changes in assets and liabilities, net
(657
189
Net cash from operating activities
2,808
1,690
8,137
5,177
Cash flows from investing activities:
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
96
543
Distributions from investments
27
Contributions to investments and other
(95
(2
(107
(12
Net cash from investing activities
(1,863
(1,024
(6,258
(2,423
Cash flows from financing activities:
Repayments of long-term debt
(750
(485
(1,250
Repurchases of common stock
(414
(250
(680
(800
Dividends paid on common stock
(366
(151
(887
(470
Contributions from noncontrolling interests
Distributions to noncontrolling interests
(23
Acquisition of noncontrolling interests
(260
Repayment of finance leases
(3
(8
(274
Shares exchanged for tax withholdings and other
(9
(1
(25
Net cash from financing activities
(1,542
(1,147
(2,905
(2,323
Effect of exchange rate changes on cash
Net change in cash, cash equivalents and restricted cash
(596
(481
(1,021
432
Cash, cash equivalents and restricted cash at beginning of period
1,759
846
Cash, cash equivalents and restricted cash at end of period
1,278
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
352
1,229
Restricted cash
61
49
Total cash, cash equivalents and restricted cash
CONSOLIDATED STATEMENTS OF EQUITY
Additional
Comprehensive
Common Stock
Paid-In
Retained
Earnings
Treasury
Noncontrolling
Total
Shares
Amount
Capital
(Loss)
Stock
Interests
Equity
Three Months Ended September 30, 2026
Balance as of June 30, 2026
1,150
115
30,045
11,712
(120
(5
41,747
Restricted stock grants, net of cancellations
Common stock repurchased
(425
(426
Common stock retired
(10
(422
423
Common stock dividends
(368
Balance as of September 30, 2026
1,141
Three Months Ended September 30, 2025
Balance as of June 30, 2025
636
64
5,864
9,252
232
15,292
(251
(254
251
(17
(238
(255
Balance as of September 30, 2025
629
63
5,618
9,788
15,350
Nine Months Ended September 30, 2026
Balance as of December 31, 2025
622
(759
(760
(751
752
Common stock issued
532
53
24,893
24,946
Nine Months Ended September 30, 2025
Balance as of December 31, 2024
651
65
6,387
8,166
208
14,704
(824
(831
(822
824
(458
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 0.70 of a share of Devon common stock. The transaction has been accounted for using the acquisition method of accounting, with Devon as the accounting acquirer. See Note 2 for further discussion.
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 $260 million. As a result of this transaction, Devon owns 100% of the equity interests in CDM.
Disaggregation of Revenue
The following table presents revenue from contracts with customers that are disaggregated based on the type of good or service.
Oil
4,307
2,267
11,084
6,855
Gas
796
186
1,105
673
NGL
836
356
1,833
1,117
1,268
932
3,680
2,709
266
252
676
769
301
258
726
Total revenues from contracts with customers
7,774
4,251
19,285
12,849
Transaction Price Allocated to Remaining Performance Obligations
As of September 30, 2026, Devon had $5.1 billion of unsatisfied performance obligations related to natural gas sales that have a fixed pricing component and a contract term greater than one year. These obligations were assumed by Devon in connection with the Merger and are expected to be recognized ratably over the next 12 years.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 0.70 of a share of Devon common stock. No fractional shares of Devon’s common stock were issued in the Merger, and holders of shares of Coterra common stock instead received cash in lieu of fractional shares of Devon common stock. Based on the closing price of Devon’s common stock on May 6, 2026, the total value of Devon common stock issued to holders of Coterra common stock as part of this transaction was approximately $24.8 billion.
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.
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
759.4
Exchange Ratio
0.70
Devon common stock issued
531.6
Devon closing price on May 6, 2026
46.60
Total common equity consideration
24,772
Share-based replacement awards
174
Total consideration
Assets acquired:
1,102
31
204
Proved oil and gas property and equipment
20,406
Unproved and properties under development
14,002
505
131
100
133
Total assets acquired
37,195
Liabilities assumed:
710
478
249
Income taxes payable
414
3,256
164
161
6,690
Total liabilities assumed
12,249
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.
2,157
3,431
561
791
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. The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the acquisition had been completed as of the beginning of the periods presented, nor is it indicative of future results.
6,133
20,754
18,719
917
3,472
3,056
0.79
3.03
2.61
3.02
Lease Acquisition
During the second quarter of 2026, Devon acquired approximately 16,300 net undeveloped acres in the core of the Permian Basin in Lea and Eddy counties, New Mexico, through the Bureau of Land Management (“BLM”) oil and gas lease sale for approximately $2.6 billion, which was funded with cash on hand.
Divestitures
Eagle Ford Divestiture
On October 8, 2026, Devon entered into an agreement to sell its Eagle Ford assets, consisting of approximately 90,000 net acres in Karnes, DeWitt and Gonzales counties, Texas, to Crescent Energy Company for $4.2 billion in cash, subject to customary purchase price adjustments. Estimated proved reserves associated with Devon’s Eagle Ford assets are approximately 3% of total proved reserves post-merger. The transaction is expected to close in early 2027, subject to regulatory approvals and customary closing conditions.
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 $372 million and recognized a pre-tax gain of $307 million ($239 million, net of tax), which was recorded to asset dispositions on the accompanying consolidated statements of comprehensive earnings.
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 $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commenced on January 1, 2021, and had a term of four years. Devon received $20 million in contingent earnout payments related to this transaction in the first nine months of 2025. As of September 30, 2026, Devon had no open contingent earnout arrangements.
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.
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 nor posted cash collateral to its counterparties. Given Devon’s current credit ratings and the terms of the underlying contracts, Devon is not required to post collateral to its counterparties with respect to its open derivative positions and would not be required to post any such collateral as a result of any change to the amount of Devon’s net liability for such positions.
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(Bbls/d)
WeightedAveragePrice ($/Bbl)
WeightedAverage FloorPrice ($/Bbl)
WeightedAverageCeiling Price($/Bbl)
Q4 2026
47,000
72.01
87,000
56.38
73.98
Q1-Q4 2027
37,000
73.59
94,466
59.61
88.38
Q1-Q4 2028
9,250
Three-Way Price Collars
WeightedAverage Floor SoldPrice ($/Bbl)
WeightedAverage Floor PurchasedPrice ($/Bbl)
113,000
49.36
59.36
72.36
57,397
47.25
57.25
73.14
Oil Basis Swaps
Index
Weighted AverageDifferential to WTI($/Bbl)
WTI/NYMEX
0.96
Midland Sweet
46,000
1.10
WTI/Brent
8,000
(5.66
NYMEX Roll
2.03
32,466
1.04
Magellan East Houston
43,000
1.83
78,000
1.05
16,575
1.14
As of September 30, 2026, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.
Price Swaps (1)
Price Collars (2)
Volume (MMBtu/d)
Weighted Average Price ($/MMBtu)
Weighted Average Floor Price ($/MMBtu)
Weighted AverageCeiling Price ($/MMBtu)
247,500
3.80
1,130,000
5.47
490,000
3.17
5.33
Natural Gas Basis Swaps
Volume(MMBtu/d)
Weighted AverageDifferential toHenry Hub($/MMBtu)
Houston Ship Channel
50,000
(0.29
Transco Leidy
250,000
(0.78
Transco Zone 6 Non-NY
(0.16
WAHA
350,000
(1.86
47,500
(0.65
150,000
0.35
135,041
(1.30
16
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. The table below presents a summary of these positions as of September 30, 2026 and December 31, 2025.
Gross Fair Value
Amounts Netted
Net Fair Value
Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset
128
(30
98
199
192
Long-term derivative asset
Short-term derivative liability
(801
Long-term derivative liability
(42
Total derivative asset (liability)
(724
193
The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings.
G&A
67
Related income tax benefit
Under its approved long-term incentive plans, Devon grants share-based awards to its employees. The following table presents a summary of Devon’s unvested restricted stock awards and units and performance share units granted under the plans.
Restricted Stock Awards & Units
Performance Share Units
Awards/Units
WeightedAverageGrant-DateFair Value
Units
(Thousands, except fair value data)
Unvested at 12/31/25
4,653
40.79
1,293
58.82
Granted (1)
9,354
45.95
439
61.73
Vested
(4,400
45.53
(200
81.70
Forfeited
(376
43.32
(155
76.81
Unvested at 9/30/26
9,231
43.65
1,377
(2)
54.39
The following table presents the assumptions related to the performance share units granted in 2026, as indicated in the previous summary table.
Grant-date fair value
Risk-free interest rate
3.52
%
Volatility factor
33.80
Contractual term (years)
2.89
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
Share Units
Unrecognized compensation cost
Weighted average period for recognition (years)
2.4
2.0
In the first quarter of 2025, Devon rationalized two headquarters-related real estate assets, triggering assets held for sale and recording asset impairments of $254 million. Both transactions closed in the first quarter of 2025 and generated aggregate sales proceeds of $120 million.
The following table summarizes Devon’s restructuring and transaction costs.
Restructuring
60
Transaction costs
76
In conjunction with the Merger closing, Devon recognized $258 million of restructuring expenses during the first nine months of 2026 primarily related to employee severance, termination and relocation benefits and contract terminations. Of these expenses, $48 million resulted from accelerated vesting of share-based grants, which are non-cash charges. Additionally, in conjunction with the Merger closing, Devon recognized $76 million of transaction costs primarily comprised of bank, legal and advisory fees associated with the Merger.
The following table summarizes Devon’s restructuring liabilities.
Current
Long-term
Liabilities
Changes related to 2026 merger-related employee costs
90
41
Changes related to prior years’ restructurings
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.
Current income tax expense (benefit)
276
(44
466
278
Total income tax expense
U.S. statutory income tax rate
State income taxes
Changes in unrecognized tax benefits
(4
%)
Effective income tax rate
In the third quarter of 2026, income tax expense included a $50 million benefit from the release of previously unrecognized tax benefits and related interest due to the expiration of the statute of limitations.
In the second quarter of 2026, state income taxes included a $56 million deferred tax benefit from the release of valuation allowances against legacy Devon state deferred tax assets in connection with the Merger. The release reflected a change in judgment regarding the realizability of legacy Devon state deferred tax assets, driven by increased forecasted future state taxable income of the combined company.
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 $218 million and a corresponding deferred tax expense associated with the deferral of income taxes resulting from the Notice.
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 the deduction of intangible drilling costs as part of the computation of the CAMT beginning in 2026. Accordingly, Devon’s third quarter 2025 income tax expense included a current tax benefit of approximately $155 million and a corresponding deferred tax expense associated with the deferral of income taxes resulting from the enactment of OBBB.
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.
Net earnings available to common shareholders – basic and diluted
Common shares:
Average common shares outstanding – basic
1,142
628
900
Dilutive effect of potential common shares issuable
Average common shares outstanding – diluted
1,146
903
637
Net earnings per share available to common shareholders:
Basic
Diluted
Components of other comprehensive earnings (loss) consist of the following:
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits
Recognition of net actuarial loss and prior service cost in earnings (1)
Accumulated other comprehensive loss, net of tax
Changes in assets and liabilities, net:
(384
(649
140
(36
(51
(40
(71
33
75
(118
Accounts payable and revenues and royalties payable
(84
93
562
179
(93
(86
172
(21
(152
Supplementary cash flow data:
Interest paid
212
162
467
Income taxes paid
472
433
183
As of September 30, 2026, Devon had approximately $650 million of accrued capital expenditures included in total property and equipment, net and accounts payable on the consolidated balance sheets. As of December 31, 2025 (pre-merger), Devon had approximately $360 million of accrued capital expenditures included in total property and equipment, net and accounts payable on the
consolidated balance sheets. As of May 7, 2026, Devon assumed approximately $320 million of accrued capital expenditures included in accounts payable.
Components of accounts receivable include the following:
2,161
865
Joint interest billings
558
245
792
669
37
Gross accounts receivable
3,548
1,799
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.
Property and equipment:
Proved
85,032
58,573
16,598
1,910
Total oil and gas
101,630
60,483
Less accumulated DD&A
(40,660
(36,752
Oil and gas property and equipment, net
Other property and equipment
3,003
2,624
(791
(936
Property and equipment, net
The following table presents Devon’s investments shown on the consolidated balance sheets.
% Interest
Carrying Amount
Fervo
12%
353
WaterBridge
13%
268
Catalyst
50%
226
247
Producers Midstream
15%
102
Solitude
25%
83
Various
During the second quarter of 2026, Fervo completed its initial public offering, which diluted Devon’s equity interest in Fervo from 15% to approximately 12%. Devon accounts for its investment in Fervo under the equity method, and because the offering price per share exceeded Devon’s per share carrying value, Devon’s investment increased by approximately $201 million, which was recorded to other, net in the accompanying consolidated statements of comprehensive earnings.
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 $83 million for a 25% ownership interest in Solitude, a joint venture formed to construct and operate two natural gas pipelines from the Permian Basin to the Texas Gulf Coast. In connection with the investment, Devon secured firm transportation capacity on the system. Solitude is a variable interest entity that Devon does not consolidate because Devon is not the primary beneficiary, as it does not have the power to direct activities that most significantly affect Solitude’s economic performance. Devon accounts for the investment under the equity method. Devon expects its total investment in Solitude to be approximately $500 million, including amounts contributed to date. As of September 30, 2026, Devon’s maximum exposure to loss under the terms of the joint venture agreement is approximately $900 million, including its current investment and future unfunded capital commitments.
See below for a summary of debt instruments and balances. The notes and debentures reflected below are senior, unsecured obligations of Devon.
3.90% due May 15, 2027 (1)
750
7.50% due September 15, 2027
73
5.25% due October 15, 2027
390
5.875% due June 15, 2028
325
4.375% due March 15, 2029 (1)
500
4.50% due January 15, 2030
585
7.875% due September 30, 2031
675
7.95% due April 15, 2032
366
5.60% due March 15, 2034 (1)
5.20% due September 15, 2034
1,250
5.40% due February 15, 2035 (1)
5.60% due July 15, 2041
4.75% due May 15, 2042
5.00% due June 15, 2045
5.75% due September 15, 2054
1,000
5.90% due February 15, 2055 (1)
Term Loan due September 25, 2026
Net premium on debentures and notes
23
Debt issuance costs
(46
(48
Total debt
10,636
8,389
Less amount classified as short-term debt
Total long-term debt
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
3.77% due September 18, 2026
250
3.90% due May 15, 2027
747
4.375% due March 15, 2029
499
5.60% due March 15, 2034
516
5.40% due February 15, 2035
762
5.90% due February 15, 2055
732
3,500
3,505
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 $2.95 billion aggregate principal amount of New Devon Notes in exchange for a like amount of Existing Coterra Notes validly tendered. The New Devon Notes are general unsecured obligations of Devon and rank equally with Devon’s other unsecured and unsubordinated indebtedness. Following settlement, approximately $277 million and $27 million aggregate principal amount of Existing Coterra Notes remained outstanding as obligations of Coterra and Coterra Energy Operating Co., respectively. The New Devon Notes were issued as unregistered securities subject to a registration rights agreement.
Credit Lines
Devon has a $3.0 billion revolving Senior Credit Facility. In the first quarter of 2026, Devon amended the credit agreement governing the Senior Credit Facility to, among other things, extend the maturity date from March 24, 2030 to March 24, 2031, with the option to extend the maturity date by three additional one-year periods, subject to lender consent. As of September 30, 2026, Devon had no outstanding borrowings under the Senior Credit Facility and had less than $1.0 million in outstanding letters of credit under this facility. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back non-cash financial write-downs such as impairments. As of September 30, 2026, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 17.1%.
Commercial Paper
Devon’s Senior Credit Facility supports its $3.0 billion of short-term credit under its commercial paper program. Commercial paper debt generally has a maturity of between 1 and 90 days, although it can have a maturity of up to 365 days, and bears interest at rates agreed to at the time of the borrowing. As of September 30, 2026, Devon had no outstanding commercial paper borrowings.
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 $2.0 billion, including a 364-day tranche of $500 million and a two-year tranche of $1.5 billion. On September 27, 2024, Devon borrowed $1.0 billion on the two-year tranche (the “Term Loan”) to partially fund the closing of the Grayson Mill acquisition. In June 2026, Devon repaid $250 million of the outstanding principal on the Term Loan, and in July 2026, Devon repaid the remaining $750 million of outstanding principal.
Retirement of Senior Notes
In June 2026, Devon early redeemed the $250 million of 3.77% senior notes due in September 2026 pursuant to the “make-whole” provisions in the governing document.
Net Financing Costs
The following schedule includes the components of net financing costs.
Net financing costs:
Interest based on debt outstanding
150
125
412
378
Interest income
(18
(43
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.
Finance
Operating
515
Lease liabilities:
Current lease liabilities (1)
149
95
Long-term lease liabilities
374
181
Total lease liabilities (2)
42
523
565
The following table presents the changes in Devon’s asset retirement obligations.
Asset retirement obligations as of beginning of period
906
Assumed Coterra obligations
177
Liabilities incurred
Liabilities settled and divested
(39
(54
Revision and reclassification of estimated obligation
Accretion expense on discounted obligation
Asset retirement obligations as of end of period
1,241
Less current portion
45
Asset retirement obligations, long-term
850
During the first nine months of 2026 and 2025, Devon increased its asset retirement obligations by approximately $107 million and $55 million, respectively, primarily due to changes in current cost estimates for its oil and gas assets.
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 1.0 billion to 2.0 billion. The amendment became effective on May 7, 2026. The par value of Devon’s common stock remains $0.10 per share.
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 0.70 of a share of Devon common stock. Consequently, Devon issued approximately 532 million shares of Devon common stock to holders of Coterra common stock to effect the Merger on May 7, 2026.
Share Repurchases
On May 7, 2026, Devon’s Board of Directors authorized an $8.0 billion share repurchase program, which expires on June 30, 2029. The table below provides information regarding purchases of Devon’s common stock in the first nine months of 2026 and 2025, respectively (shares in thousands).
Total Number ofShares Purchased
Dollar Value ofShares Purchased
Average Price Paidper Share
2026:
First quarter (1)
1,850
37.39
Second quarter
4,434
202
45.48
Third quarter
8,851
46.96
Total year-to-date
15,135
686
45.36
2025:
First quarter
8,505
35.33
7,866
31.78
7,324
34.06
23,695
800
33.76
Dividends
Devon pays a quarterly fixed dividend. 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. The following table summarizes Devon’s dividends for the first nine months of 2026 and 2025, respectively.
Rate Per Share
155
0.24
0.32
887
163
156
151
470
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
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 $125 million within other liabilities in the consolidated balance sheet, reflecting the estimated costs of decommissioning the Federal Assets. Devon expects to be able to access funds available under certain bonds and a cash security account as and when Devon performs and pays these decommissioning obligations. Devon believes the funds will likely cover approximately $100 million of the estimated decommissioning costs for the Federal Assets. Accordingly, during the first quarter of 2025, Devon recorded an approximately $100 million receivable related to these sources of funds within other assets in the consolidated balance sheet. The remaining $25 million difference between the recorded decommissioning obligation and such sources of funds was recognized in the first quarter of 2025 in other, net on the consolidated statement of comprehensive earnings. In April 2026, Devon entered into a decommissioning agreement with BSEE and the surety for certain of these bonds, pursuant to which Devon commenced decommissioning activities on the Federal Assets and, in the third quarter of 2026, began receiving reimbursement for the associated costs under applicable bonds.
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.
As of September 30, 2026, Devon has accrued approximately $120 million of contingent liabilities related to such decommissioning legacy matters, including liabilities associated with the East Bay Field.
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. Therefore, such financial assets and liabilities are not presented in the following table.
Fair Value Measurements Using:
Carrying
Total Fair
Level 1
Level 2
Level 3
Value
Inputs
September 30, 2026 assets (liabilities):
Cash equivalents
Commodity derivatives
119
(843
Debt
(10,636
(10,088
December 31, 2025 assets (liabilities):
764
194
(8,389
(8,290
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.
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.
LOE
481
1,876
1,443
Gathering, processing & transportation
213
1,072
Production and property taxes
397
201
990
627
Total significant expenses
DD&A
Other segment items (1)
91
(31
203
(14
5,852
3,638
15,045
10,948
31,221
Capital expenditures, including acquisitions
1,816
1,056
6,813
2,976
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.”
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:
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.
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
Rockies
101
105
-4
Eagle Ford
-23
Anadarko
34
N/M
553
503
Gas (MMcf/d)
1,543
35
1,274
230
237
-3
85
-19
538
396
Marcellus
2,018
1,258
0
4,400
3,252
NGLs (MBbls/d)
256
206
-12
44
314
Combined (MBoe/d)
901
54
748
187
-20
210
1,668
1,359
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
Realization
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
Gas (per Mcf)
Henry Hub index
2.96
2.90
1.97
66%
459
0.19
2.16
73%
106
NGLs (per Bbl)
23.81
28%
22.70
Combined (per Boe)
38.70
41.30
-6
(1.20
(0.94
37.50
40.36
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.
Hedge Settlements
(262
(321
-18
Natural gas
205
Total cash settlements (1)
(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
626
391
Production taxes
376
Property taxes
1,393
Per Boe:
4.98
5.06
-2
3.20
3.16
Percent of oil, gas and NGL sales:
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.
Oil and gas per Boe
10.72
11.19
Oil and gas
1,647
1,383
Total DD&A
1,416
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.
G&A per Boe
1.18
1.41
-17
Labor and benefits
Non-labor
175
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
Change in earnings
Commodity hedge valuation changes (1)
(729
530
(1,259
Marketing and midstream operations
(20
Net financing costs
(22
246
(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
Current expense
Deferred expense (benefit)
Total expense
473
Current tax rate
Deferred tax rate
For discussion on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
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.
315
222
103
-5
43
388
1,219
801
52
235
-1
-8
262
1,100
3,019
1,381
200
66
129
56
305
718
484
196
68
127
84
1,290
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.
83.40
66.79
84.34
101%
64.66
(4.89
0.69
79.45
95%
65.35
3.64
3.39
1.34
37%
1.78
-24
0.08
1.69
46%
1.86
22.01
26%
18.79
0.07
18.86
39.83
37.86
(1.02
0.47
38.81
38.33
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.
(643
-981
285
-435
938
576
6.32
-16
3.05
2.78
6.7
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
11.10
11.52
3,908
2,630
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.
1.36
1.56
-13
214
168
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.
111
(954
(13
(318
(33
(298
(1,429
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.
Deferred expense
For information on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
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.
Operating cash flow
Investment activity, net
(85
(75
Debt activity
Noncontrolling interest activity, net
(269
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.
859
462
2,094
1,418
619
652
138
338
431
126
264
118
121
185
1,410
832
3,502
2,622
Midstream
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.
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.
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.
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
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.
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.
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.
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.
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.
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).
Total Number ofShares Purchased (1)
Average Price Paid per Share
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
9,065
46.89
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
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”)) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K), except as described below.
On September 13, 2026, Thomas E. Jorden, chair of Devon’s Board of Directors, as trustee of the Thomas E. and Tamara Jacks Jorden Revocable Trust, terminated a previously disclosed Rule 10b5-1 trading arrangement that was originally adopted on June 12, 2026 and intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The terminated arrangement provided
for the potential sale of up to 250,000 shares of Devon common stock, subject to certain conditions, during the period from September 14, 2026 through March 15, 2027.
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.
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.
Date: November 6, 2026
/s/ Gregory F. Conaway
Gregory F. Conaway
Vice President and Chief Accounting Officer