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 March 31, 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.)
333 West Sheridan Avenue, Oklahoma City, Oklahoma
73102-5015
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (405) 235-3611
Former name, address and former fiscal year, if changed from 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
The 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 April 22, 2026, 621.4 million 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
Note 4 – Share-Based Compensation
14
Note 5 – Asset Impairments
15
Note 6 – Income Taxes
Note 7 – Net Earnings Per Share
16
Note 8 – Other Comprehensive Earnings (Loss)
Note 9 – Supplemental Information to Statements of Cash Flows
Note 10 – Accounts Receivable
17
Note 11 – Property and Equipment
Note 12 – Investments
Note 13 – Debt and Related Expenses
18
Note 14 – Leases
19
Note 15 – Asset Retirement Obligations
20
Note 16 – Stockholders’ Equity
Note 17 – Commitments and Contingencies
21
Note 18 – Fair Value Measurements
23
Note 19 – Reportable Segments
24
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Executive Overview
Results of Operations
27
Capital Resources, Uses and Liquidity
35
Critical Accounting Estimates
39
Non-GAAP Measures
40
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
42
Item 4.
Controls and Procedures
Part II. Other Information
Legal Proceedings
43
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
44
Signatures
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.
“MBbls” means thousand barrels.
“MBoe” means thousand Boe.
“Mcf” means thousand cubic feet.
“Merger” means the merger of Merger Sub with and into Coterra, 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.
“Merger Sub” means Cubs Merger Sub, Inc., a wholly-owned subsidiary of the Company.
3
“MMBoe” means million Boe.
“MMBtu” means million Btu.
“MMcf” means million cubic feet.
“N/M” means not meaningful.
“NCI” means noncontrolling interests.
“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.
“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.
“SOFR” means secured overnight financing rate.
“Term Loan” means Term Loan Credit Agreement.
“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:
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
5
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.
6
Item 1. Financial Statements
DEVON ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Three Months Ended March 31,
2026
2025
(Unaudited)
Oil, gas and NGL sales
$
2,977
3,126
Oil, gas and NGL derivatives
(701
)
(98
Marketing and midstream revenues
1,531
1,424
Total revenues
3,807
4,452
Production expenses
894
912
Exploration expenses
Marketing and midstream expenses
1,547
1,436
Depreciation, depletion and amortization
904
Asset impairments
—
254
Asset dispositions
1
General and administrative expenses
125
130
Financing costs, net
109
123
Restructuring and transaction costs
Other, net
Total expenses
3,641
3,806
Earnings before income taxes
166
646
Income tax expense
46
137
Net earnings
120
509
Net earnings attributable to noncontrolling interests
Net earnings attributable to Devon
494
Net earnings per share:
Basic net earnings per share
0.19
0.77
Diluted net earnings per share
Comprehensive earnings:
Other comprehensive earnings, net of tax:
Pension and postretirement plans
Other comprehensive earnings, net of tax
121
510
Comprehensive earnings attributable to noncontrolling interests
Comprehensive earnings attributable to Devon
495
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
March 31, 2026
December 31, 2025
ASSETS
Current assets:
Cash, cash equivalents and restricted cash
1,815
1,434
Accounts receivable
2,250
1,792
Inventory
319
336
Other current assets
378
444
Total current assets
4,762
4,006
Oil and gas property and equipment, based on successful efforts accounting, net
23,912
23,731
Other property and equipment, net
1,686
1,688
Total property and equipment, net
25,598
25,419
Goodwill
753
Right-of-use assets
312
299
Investments
715
727
Other long-term assets
403
395
Total assets
32,543
31,599
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
975
790
Revenues and royalties payable
1,678
1,491
Short-term debt
999
998
Other current liabilities
1,082
807
Total current liabilities
4,734
4,086
Long-term debt
7,387
7,391
Lease liabilities
206
197
Asset retirement obligations
986
863
Other long-term liabilities
940
907
Deferred income taxes
2,862
2,627
Stockholders' equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 621 million and 622 million shares in 2026 and 2025, respectively
62
Additional paid-in capital
5,316
5,388
Retained earnings
10,171
10,200
Accumulated other comprehensive loss
(121
(122
Total stockholders’ equity
15,428
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
Accretion of liabilities
Total losses on commodity derivatives
701
98
Cash settlements on commodity derivatives
(57
(10
Losses on asset dispositions
Deferred income tax expense
234
41
Share-based compensation
22
30
Other
(22
Changes in assets and liabilities, net
(299
117
Net cash from operating activities
1,655
1,942
Cash flows from investing activities:
Capital expenditures
(839
(934
Acquisitions of property and equipment
(190
(8
Divestitures of property and equipment
133
Distributions from investments
Contributions to investments and other
(2
Net cash from investing activities
(1,020
(802
Cash flows from financing activities:
Repurchases of common stock
(69
(301
Dividends paid on common stock
(155
(163
Contributions from noncontrolling interests
Distributions to noncontrolling interests
(9
Repayment of finance leases
(3
(274
Shares exchanged for tax withholdings and other
(27
(19
Net cash from financing activities
(254
(752
Net change in cash, cash equivalents and restricted cash
381
388
Cash, cash equivalents and restricted cash at beginning of period
846
Cash, cash equivalents and restricted cash at end of period
1,234
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
1,763
1,198
Restricted cash
52
36
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 March 31, 2026
Balance as of December 31, 2025
622
Restricted stock grants, net of cancellations
Common stock repurchased
(94
Common stock retired
94
Common stock dividends
(149
Balance as of March 31, 2026
621
Three Months Ended March 31, 2025
Balance as of December 31, 2024
651
65
6,387
8,166
208
14,704
(319
(322
(1
(318
(154
Balance as of March 31, 2025
644
64
6,096
8,506
228
14,773
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 normally 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 periods ended March 31, 2026 and 2025 and Devon’s financial position as of March 31, 2026.
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
2,423
2,414
Gas
205
309
NGL
349
1,001
918
272
276
Total revenues from contracts with customers
4,508
4,550
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Pending Merger
On February 1, 2026, Devon, Coterra and Merger Sub entered into the Merger Agreement, providing for an all-stock merger of equals. Coterra is an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico, Marcellus Shale in Pennsylvania and the Anadarko Basin in Oklahoma. On the closing date of the Merger, each share of Coterra common stock will be automatically converted into the right to receive 0.70 of a share of Devon common stock. No fractional shares of Devon’s common stock will be issued in the Merger, and holders of shares of Coterra common stock will instead receive cash in lieu of fractional shares of Devon common stock, if any. The Merger has been unanimously approved by the boards of directors of Devon and Coterra.
On May 4, 2026, the shareholders of Devon and Coterra each approved the Merger at their respective special meetings. The Merger is expected to close on May 7, 2026, subject to other customary closing conditions.
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.
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 quarter of 2025.
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 March 31, 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 we 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 March 31, 2026, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.
Three-Way Price Collars
Period
Volume(Bbls/d)
WeightedAverage Floor SoldPrice ($/Bbl)
WeightedAverage Floor PurchasedPrice ($/Bbl)
WeightedAverageCeiling Price($/Bbl)
Q2-Q4 2026
108,698
49.51
59.59
71.22
Q1-Q4 2027
37,397
45.78
55.78
71.89
Oil Basis Swaps
Index
Weighted AverageDifferential to WTI($/Bbl)
Midland Sweet
46,000
1.10
WTI/Brent
8,625
(5.61
NYMEX Roll
86,051
1.24
Magellan East Houston
20,000
1.77
1.00
As of March 31, 2026, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.
Price Swaps
Price Collars
Volume (MMBtu/d)
Weighted Average Price ($/MMBtu)
Weighted Average Floor Price ($/MMBtu)
Weighted AverageCeiling Price ($/MMBtu)
247,500
3.80
230,000
3.26
4.90
90,000
3.50
4.31
Natural Gas Basis Swaps
Volume(MMBtu/d)
Weighted AverageDifferential toHenry Hub($/MMBtu)
Houston Ship Channel
50,000
(0.29
WAHA
150,000
(1.79
13
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 March 31, 2026 and December 31, 2025.
Gross Fair Value
Amounts Netted
Net Fair Value
Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset
126
(4
122
199
(7
192
Long-term derivative asset
Short-term derivative liability
(526
(522
Long-term derivative liability
(55
Total derivative asset (liability)
(451
193
The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings.
G&A
Related income tax benefit
Under its approved long-term incentive plan, 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 plan.
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
1,931
43.48
439
61.73
Vested
(1,468
44.54
(200
81.70
Forfeited
(42
41.03
(117
Unvested at 3/31/26
5,074
40.73
1,415
(1)
54.59
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 March 31, 2026.
Restricted Stock
Performance
Share Units
Unrecognized compensation cost
169
Weighted average period for recognition (years)
3.0
2.3
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 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)
(188
96
Total income tax expense
U.S. statutory income tax rate
State income taxes
%)
Effective income tax rate
28
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 first quarter 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.
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
616
643
Dilutive effect of potential common shares issuable
Average common shares outstanding - diluted
618
645
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:
(462
(63
(35
(85
Accounts payable and revenues and royalties payable
379
248
(212
Supplementary cash flow data:
Interest paid
152
160
Income taxes paid
Components of accounts receivable include the following:
1,210
865
Joint interest billings
281
245
754
669
Gross accounts receivable
2,257
1,799
Allowance for doubtful accounts
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
59,690
58,573
Unproved and properties under development
1,852
1,910
Total oil and gas
61,542
60,483
Less accumulated DD&A
(37,630
(36,752
Oil and gas property and equipment, net
Other property and equipment
2,412
2,624
(726
(936
Property and equipment, net
The following table presents Devon's investments shown on the consolidated balance sheets.
% Interest
Carrying Amount
WaterBridge
14%
267
268
Catalyst
50%
240
247
Fervo
15%
163
162
Various
45
50
See below for a summary of debt instruments and balances. The notes, debentures and Term Loan reflected below are senior, unsecured obligations of Devon.
7.50% due September 15, 2027
73
5.25% due October 15, 2027
390
5.875% due June 15, 2028
325
4.50% due January 15, 2030
585
7.875% due September 30, 2031
675
7.95% due April 15, 2032
366
5.20% due September 15, 2034
1,250
5.60% due July 15, 2041
4.75% due May 15, 2042
750
5.00% due June 15, 2045
5.75% due September 15, 2054
1,000
Term Loan due September 25, 2026
Net premium on debentures and notes
Debt issuance costs
(49
(48
Total debt
8,386
8,389
Less amount classified as short-term debt
Total long-term debt
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 March 31, 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 March 31, 2026, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 24.9%.
Term Loan Credit Agreement
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. The Term Loan bears interest at a rate based on term SOFR plus a spread adjustment that varies based on Devon's credit ratings. The interest rate on the Term Loan was 5.2% as of March 31, 2026.
The Term Loan Credit Agreement contains substantially the same financial covenant as the Senior Credit Facility. As of March 31, 2026, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 24.9%.
Retirement of Senior Notes
On September 15, 2025, Devon 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.
Net Financing Costs
The following schedule includes the components of net financing costs.
Net financing costs:
Interest based on debt outstanding
118
127
Interest income
(14
Total net financing costs
Devon’s operating lease right-of-use assets relate to real estate, drilling rigs and other equipment related to the exploration, development and production of oil and gas. As of March 31, 2026, Devon’s financing lease right-of-use assets primarily relate to equipment related to the exploration, development and production of oil and gas. During the first quarter of 2025, Devon extinguished an approximately $300 million real estate finance lease by making a cash payment of $274 million and recognized a gain on early lease extinguishment in other, net related to the difference on the accompanying consolidated statement of comprehensive earnings. For additional information, see Note 5.
The following table presents Devon’s right-of-use assets and lease liabilities as of March 31, 2026 and December 31, 2025.
Finance
Operating
32
280
Lease liabilities:
Current lease liabilities (1)
95
103
102
Long-term lease liabilities
185
181
Total lease liabilities (2)
29
The following table presents the changes in Devon’s asset retirement obligations.
Asset retirement obligations as of beginning of period
906
Liabilities incurred
Liabilities settled and divested
(11
Revision and reclassification of estimated obligation
107
55
Accretion expense on discounted obligation
Asset retirement obligations as of end of period
1,027
877
Less current portion
Asset retirement obligations, long-term
835
During the first quarters 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.
Share Repurchases
Devon’s Board of Directors has authorized a $5.0 billion share repurchase program with a June 30, 2026 expiration date. Pursuant to the terms of the Merger Agreement, Devon’s share repurchase activity has been suspended and is expected to remain suspended through the completion of the Merger. The table below provides information regarding purchases of Devon’s common stock under the $5.0 billion share repurchase program (shares in thousands).
Total Number ofShares Purchased
Dollar Value ofShares Purchased
Average Price Paidper Share
$5.0 Billion Plan
2021
13,983
589
42.15
2022
11,708
718
61.36
2023
19,350
992
51.23
2024
23,944
1,044
43.61
2025:
First quarter
8,505
301
35.33
Second quarter
7,866
249
31.78
Third quarter
7,324
250
34.06
Fourth quarter
7,118
35.12
2025 Total
30,813
1,050
34.07
2026:
1,850
69
37.39
Total plan
101,648
4,462
43.90
Dividends
Devon pays a quarterly dividend which can be comprised of a fixed dividend and a variable dividend. The variable dividend is dependent on quarterly cash flows, among other factors. The following table summarizes Devon’s dividends paid for the first quarter of 2026 and 2025, respectively.
Rate Per Share
155
0.24
Noncontrolling Interests
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. For additional information, see Note 1.
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. As of March 31, 2026, Devon has accrued approximately $60 million in other current liabilities pertaining to such royalty matters.
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.
The Company has previously received separate NOVs from the EPA alleging emissions and permitting violations relating to certain of our historic operations in North Dakota, western Texas and New Mexico, respectively. The Company 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 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, we are 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 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. The Company 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 of 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. Devon may also 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 funds under decommissioning bonds and other sources.
As of March 31, 2026, Devon has accrued approximately $175 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 March 31, 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
March 31, 2026 assets (liabilities):
Cash equivalents
1,021
Commodity derivatives
(577
Debt
(8,386
(8,292
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 our debt are estimated based on rates available for debt with similar terms and maturity when active trading is not available. Our variable rate debt is non-public and consists of our Term Loan. The fair value of our variable rate debt approximates the carrying value as the underlying SOFR resets every month based on the prevailing market rate.
Level 3 Fair Value Measurements
Devon had no fair value measurements using Level 3 inputs at March 31, 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 the executive committee, which includes, among others, the chief executive officer, chief operating officers and chief financial officer. 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
486
479
Gathering, processing & transportation
191
204
Production and property taxes
217
229
Total significant expenses
DD&A
Other segment items (1)
293
3,687
3,943
30,928
Capital expenditures, including acquisitions
972
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 period ended March 31, 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 four core areas: the Delaware Basin, Rockies, Eagle Ford and Anadarko Basin. Our asset base is underpinned by premium acreage in the economic core of the Delaware 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. The Merger will create a leading large-cap shale operator with an asset base anchored by a premier position in the economic core of the Delaware Basin. The Merger 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 $1.0 billion in sustainable annual synergies. 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 first 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 quarter 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. As a result, our net earnings were reduced by a $0.6 billion non-cash valuation loss on our commodity derivatives.
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 implemented a business optimization plan early in 2025 targeting a $1.0 billion improvement in annual pre-tax cash flow. The plan included actions to achieve more efficient field-level operations and improvements in drilling and completion costs, along with enhanced operating margins and reduced corporate costs. We are on track to achieve the full $1.0 billion target ahead of our original year-end 2026 timeline.
26
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.
Q1 2026 vs. Q4 2025
Our first quarter 2026 and fourth quarter 2025 net earnings were $120 million and $562 million, respectively. The graph below shows the change in net earnings from the fourth quarter of 2025 to the first quarter of 2026. The material changes are further discussed by category on the following pages.
Production Volumes
Q1 2026
% of Total
Q4 2025
Change
Oil (MBbls/d)
Delaware Basin
225
58
-4
Rockies
Eagle Ford
Anadarko Basin
0
N/M
387
100
-1
Gas (MMcf/d)
831
60
848
-2
230
76
56
235
246
1,373
1,385
NGLs (MBbls/d)
63
146
-7
51
-10
218
231
-6
Combined (MBoe/d)
501
521
187
66
57
75
77
833
851
From the fourth quarter of 2025 to the first quarter of 2026, the change in volumes contributed to a $94 million decrease in earnings. The decrease in volumes was driven by natural declines and winter weather-related downtime, primarily in the Delaware Basin.
Realized Prices
Realization
Oil (per Bbl)
WTI index
72.10
59.09
Realized price, unhedged
69.66
97%
57.19
Cash settlements
(1.72
2.47
Realized price, with hedges
67.94
94%
59.66
Gas (per Mcf)
Henry Hub index
5.05
3.55
1.66
33%
1.33
0.02
0.25
1.68
1.58
NGLs (per Bbl)
17.80
25%
16.86
0.23
17.09
Combined (per Boe)
39.70
32.92
(0.76
1.60
38.94
34.52
From the fourth quarter of 2025 to the first quarter of 2026, realized prices contributed to a $493 million increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices.
We currently have approximately 30% and 35% of our remaining anticipated 2026 oil and gas production hedged, respectively.
Hedge Settlements
Q
(60
89
-167
Natural gas
31
-90
Total cash settlements (1)
-146
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
195
Production taxes
172
Property taxes
-20
861
Per Boe:
6.48
6.11
2.54
2.49
Percent of oil, gas and NGL sales:
6.9
6.7
Production expenses increased during the first quarter of 2026 primarily due to higher production taxes resulting from an increase in WTI, Henry Hub and Mont Belvieu index prices.
Field-Level Cash Margin
The table below presents the field-level cash margin for each of our operating areas. Field-level cash margin is computed as oil, gas and NGL sales less production expenses and is not a measure defined by GAAP. A reconciliation to the comparable GAAP measures is found in “Non-GAAP Measures” in this Item 2. The changes in production volumes, realized prices and production expenses, shown above, had the following impact on our field-level cash margins by asset.
$ per BOE
Field-level cash margin (Non-GAAP)
1,253
27.77
1,083
22.60
451
26.80
341
19.32
238
40.18
177
33.51
129
19.18
106
15.02
2,083
27.78
1,717
21.93
Oil and gas per Boe
11.71
10.85
Oil and gas
878
850
-35
Total DD&A
890
DD&A increased in the first quarter of 2026 primarily due to an increase in the oil and gas DD&A rate. The largest contributor to the higher rate was our 2025 drilling and development activity.
G&A per Boe
1.67
1.72
-3
Labor and benefits
70
-9
Non-labor
61
135
Other Items
Change in earnings
Commodity hedge valuation changes (1)
(644
59
(703
Marketing and midstream operations
(16
(30
(20
Net financing costs
(12
(29
(761
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.
In the first quarter of 2026, we incurred transaction costs of approximately $19 million, which included various legal, advisory and other consulting costs associated with the Merger.
Income Taxes
Current expense (benefit)
Deferred expense
Total expense
Current tax rate
-114
Deferred tax rate
142
For discussion on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Q1 2026 vs. Q1 2025
Our first quarter 2026 and first quarter 2025 net earnings were $120 million and $509 million, respectively. The graph below shows the change in net earnings from the first quarter of 2025 to the first quarter of 2026. The material changes are further discussed by category on the following pages.
Q1 2025
216
112
-8
-5
744
233
252
1,346
-29
203
458
79
-17
815
From the first quarter of 2025 to the first quarter of 2026, the change in volumes contributed to a $26 million increase in earnings. Volumes increased primarily due to new well activity in the Delaware Basin.
71.50
69.13
69.15
3.65
38
2.55
(0.07
2.48
-32
22.03
-19
(0.10
42.58
(0.13
42.45
From the first quarter of 2025 to the first quarter of 2026, realized prices contributed to a $175 million decrease in earnings. This decrease was primarily due to lower unhedged realized gas and NGL prices. This decrease was partially offset by an increase in unhedged realized oil prices. Realized prices were also negatively impacted by oil hedge cash settlements.
138
-470
212
6.53
2.78
6.8
1,283
31.13
29.01
270
37.98
136
19.13
2,214
30.16
DD&A and Asset Impairments
12.07
886
In the first quarter of 2025, Devon 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.
33
(88
(556
(15
(569
Current expense
For information on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
34
Sources and Uses of Cash
The following table presents the major changes in cash and cash equivalents for the three months ended March 31, 2026 and 2025.
Operating cash flow
Divestitures of property, equipment and investments
Investment activity, net
Noncontrolling interest activity, net
Operating Cash Flow
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 funded our capital expenditures, and we continued to return value to our shareholders by utilizing cash flow and cash balances for share repurchases and dividends.
Capital Expenditures
The amounts in the table below reflect cash payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.
449
468
223
222
116
151
818
887
Midstream
Total capital expenditures
839
934
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 three months of 2026 represented approximately 51% of our operating cash flow.
Acquisitions of Property and Equipment
During the first three months of 2026, we completed acquisitions of property primarily related to state and federal land sales in the Delaware Basin.
Divestitures of Property and Equipment
During the first three months of 2025, we generated $133 million in proceeds primarily from the sale of headquarters-related real estate assets as part of our real estate rationalization initiatives. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Investment Activity
During the first three months of 2026 and 2025, we received distributions from our investments of $9 million and $9 million, respectively. We contributed $2 million and $2 million to our investments during the first three months of 2026 and 2025, respectively.
Shareholder Distributions and Stock Activity
We repurchased approximately 1.9 million shares of common stock for $69 million and approximately 8.5 million shares of common stock for $301 million under the share repurchase program authorized by our Board of Directors in the first three months of 2026 and 2025, respectively. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
The following table summarizes our common stock dividends during the first quarter of 2026 and 2025.
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 three months of 2025, we distributed $9 million to our noncontrolling interests in CDM. During the first three months of 2025, we received $14 million in contributions from our noncontrolling interests.
Repayment of Finance Lease
During the first three 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. For additional information, see Note 14 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
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.
To emphasize our commitment to maximizing free cash flow and creating value for shareholders, we implemented a business optimization plan targeting a $1.0 billion improvement in annual pre-tax cash flow. The optimization initiatives were primarily focused on capital efficiencies, production optimization, commercial opportunities and corporate cost reductions. We are on track to achieve 100% of our $1.0 billion optimization plan ahead of our original year-end 2026 timeline.
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.
Strategic Merger of Equals
On February 1, 2026, Devon and Coterra entered into the Merger Agreement to combine in an all-stock merger of equals transaction expected to close on May 7, 2026. 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 $1.0 billion in sustainable annual synergies. Following the Merger and subject to the approval of the board of directors of the combined company, we expect to enhance cash returns to shareholders through a planned quarterly dividend of $0.315 per share and a new share repurchase authorization exceeding $5 billion.
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 first quarter of 2026, we held approximately $1.8 billion 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 to our oil, gas and NGL derivative financial instruments as of March 31, 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.
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
37
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.
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.
Credit Availability
As of March 31, 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 March 31, 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 positive 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 our Term Loan or 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% 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.
Our Board of Directors has authorized a $5.0 billion share repurchase program that expires on June 30, 2026. Through April 2026, we had executed $4.5 billion of the authorized program. Pursuant to the terms of the Merger Agreement, our share repurchase activity has been suspended and is expected to remain suspended through the completion of the Merger.
Our capital expenditures budget for the remainder of 2026 is expected to be consistent with our current operating plans, exclusive of merger-related impacts. Our capital expenditures budget reflecting the combined company will be finalized and communicated following the close of the Merger.
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, but, based on recent communications, we expect the CRA to make formal assessments for such adjustments. We disagree with the proposed adjustments and intend to vigorously contest any related assessments, which may require us to make material cash deposits while the matters are being resolved.
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 first quarter 2026 for Devon.
For additional information regarding our critical accounting policies and estimates, see our 2025 Annual Report on Form 10-K.
We utilize “core earnings attributable to Devon” and “core earnings per share attributable to Devon” that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings attributable to Devon, as well as the per share amount, represent net earnings excluding certain non-cash and other items that are typically excluded by securities analysts in their published estimates of our financial results. Our non-GAAP measures are typically used as a quarterly performance measure. Amounts excluded relate to asset dispositions, non-cash asset impairments (including unproved asset impairments), fair value changes in derivative financial instruments and restructuring and transaction costs.
We believe these non-GAAP measures facilitate comparisons of our performance to earnings estimates published by securities analysts. We also believe these non-GAAP measures can facilitate comparisons of our performance between periods and to the performance of our peers.
Below are reconciliations of core earnings and core earnings per share attributable to Devon to comparable GAAP measures.
Before Tax
After Tax
After NCI
Per Diluted Share
Earnings attributable to Devon (GAAP)
Adjustments:
Asset and exploration impairments
0.01
Fair value changes in financial instruments
499
0.81
0.03
Core earnings attributable to Devon (Non-GAAP)
832
641
1.04
259
202
0.31
88
68
0.11
1,013
794
779
1.21
EBITDAX and Field-Level Cash Margin
To assess the performance of our assets, we use EBITDAX and Field-Level Cash Margin. We compute EBITDAX as net earnings before income tax expense; financing costs, net; exploration expenses; DD&A; asset impairments; asset disposition gains and losses; non-cash share-based compensation; non-cash valuation changes for derivatives and financial instruments; restructuring and transaction costs; accretion on discounted liabilities; and other items not related to our normal operations. Field-Level Cash Margin is computed as oil, gas and NGL sales less production expenses. Production expenses consist of lease operating, gathering, processing and transportation expenses, as well as production and property taxes.
We exclude financing costs from EBITDAX to assess our operating results without regard to our financing methods or capital structure. Exploration expenses and asset disposition gains and losses are excluded from EBITDAX because they generally are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from EBITDAX because capital expenditures are evaluated at the time capital costs are incurred. We exclude share-based compensation, valuation changes, restructuring and transaction costs, accretion on discounted liabilities and other items from EBITDAX because they are not considered a measure of asset operating performance.
We believe EBITDAX and Field-Level Cash Margin provide information useful in assessing our operating and financial performance across periods. EBITDAX and Field-Level Cash Margin as defined by Devon may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net earnings from operations.
Below are reconciliations of net earnings to EBITDAX and a further reconciliation to Field-Level Cash Margin.
Net earnings (GAAP)
Derivative and financial instrument non-cash valuation changes
Accretion on discounted liabilities and other
EBITDAX (Non-GAAP)
1,907
2,086
Marketing and midstream revenues and expenses, net
Commodity derivative cash settlements
General and administrative expenses, cash-based
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
As of March 31, 2026, we have commodity derivatives that pertain to a portion of our estimated production for the last nine months of 2026, as well as for 2027. The key terms to 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 March 31, 2026, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately $300 million.
Interest Rate Risk
At March 31, 2026, we had total debt of $8.4 billion. Of this debt, $7.4 billion was comprised of debentures and notes that have fixed interest rates which averaged 5.7%. We also have a $1.0 billion Term Loan which has a variable interest rate that is adjusted monthly. The interest rate on the Term Loan was 5.2% at March 31, 2026.
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 March 31, 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
On January 1, 2026, Devon completed the implementation of an upgraded enterprise resource planning software. As a result of this implementation, corresponding changes to our business processes and information systems have been made, updating applicable internal controls over financial reporting where necessary.
Except as described above, there were no other changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the environmental matters noted in Part I, Item 3. Legal Proceedings of our 2025 Annual Report on Form 10-K, 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 17 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 first 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)
January 1 - January 31
1,851
538
February 1 - February 28
577
March 1 - March 31
43.76
2,430
38.84
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Item 5. Other Information
During the three months ended March 31, 2026, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) 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).
Item 6. Exhibits
Exhibit
Number
Description
2.1
Agreement and Plan of Merger, dated as of February 1, 2026, by and among Devon Energy Corporation, Cubs Merger Sub, Inc., and Coterra Energy Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, filed February 2, 2026; File No. 001-32318).
10.1
First Amendment to Amended and Restated Credit Agreement, dated as of March 24, 2026, by and among Devon Energy Corporation, as borrower, the lenders and letter of credit issuers party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed March 24, 2026; File No. 001-32318).
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).
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: May 6, 2026
/s/ John B. Sherrer
John B. Sherrer
Vice President, Accounting and Controller