Form 8-K - Current report

DEVON ENERGY CORP/DE DE OK false 0001090012 0001090012 2024-11-05 2024-11-05

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2024

 

 

Devon Energy Corporation

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE		001-32318		73-1567067
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

333 W. SHERIDAN AVE., OKLAHOMA CITY, OKLAHOMA				73102-5015
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: [phone]

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On November 5, 2024, Devon Energy Corporation (the “Company”) announced its financial and operational results for the quarterly period ended September 30, 2024. In connection with this announcement, the Company provided an earnings release and certain supplemental financial information (including guidance and hedging information). Copies of these documents are furnished as Exhibits 99.1 and 99.2, respectively, to this report and, along with certain other materials, will be available on the Company’s website at www.devonenergy.com.

The information contained in this report and the exhibits hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit  No.		Description of Exhibits
99.1		Earnings release, dated November 5, 2024.
99.2		Supplemental financial information (including guidance and hedging information).
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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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 hereunto duly authorized.

 

DEVON ENERGY CORPORATION
By:		/s/ Jeffrey L. Ritenour
		Jeffrey L. Ritenour
		Executive Vice President and Chief Financial Officer

Date: November 5, 2024

Exhibit 99.1

 

						Devon Energy Corporation  333 West Sheridan Avenue  Oklahoma City, OK 73102-5015

Devon Energy Reports Third-Quarter 2024 Results and Declares Quarterly Dividend

OKLAHOMA CITY – Nov. 5, 2024 – Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the third-quarter 2024. Supplemental financial tables and forward-looking guidance are available on the company’s website at www.devonenergy.com.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

•

Delivered $812 million of net earnings, or $1.30 per share; $683 million of core earnings, or $1.10 per share

 

•

Achieved 335,000 barrels of oil production per day during the quarter, exceeding guidance by 4 percent

 

•

Generated $1.7 billion of operating cash flow and $786 million of free cash flow for the third quarter

 

•

Repurchased $295 million of common stock during the quarter

 

•

Declared a $0.22 per share quarterly fixed dividend payout

 

•

Closed strategic acquisition on Sept. 27, enhancing scale and transforming Williston Basin business

CEO PERSPECTIVE

“Devon delivered another quarter of strong operational and financial results, showcasing the strength of our disciplined strategy,” said Rick Muncrief, president and CEO. “The Delaware Basin continues to be a great contributor to our success. The exceptional well productivity and cycle time improvements we continue to see in this basin contributed to production volumes surpassing our guidance while keeping capital expenditures below forecasted levels.

“Importantly, our reliable operating performance led to another quarter of significant free cash flow generation. This enabled us to return value to our shareholders through our ongoing share buyback program and to take the first step in our debt reduction plan by retiring nearly $500 million of debt at maturity.

“Looking ahead to the remainder of 2024 and into 2025, we enhanced the quality and depth of our asset portfolio with the recent acquisition of Grayson Mill Energy. This transaction marks a major milestone, increasing our operating scale and strengthening our outlook for the fourth quarter and beyond. Coupled with the operational momentum of our legacy business, this acquisition positions Devon to deliver strong returns through the cycle and underscores our commitment to generating long-term value for our shareholders,” Muncrief concluded.

FINANCIAL RESULTS

Devon reported net earnings of $812 million, or $1.30 per diluted share, in the third quarter of 2024. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $683 million, or $1.10 per diluted share.

Devon’s operating cash flow totaled $1.7 billion in the third quarter, an 8 percent increase versus the prior quarter. The company funded its capital requirements and had $786 million of free cash flow for the quarter.

In the third quarter, Devon issued $2.25 billion of senior notes through a combination of 10- and 30-year offerings and entered into a $1 billion term loan. Proceeds from the senior notes, the term loan and a portion of the company’s cash on hand funded the cash portion of Devon’s previously announced Grayson Mill acquisition.

The company also took the initial step on its debt reduction program by retiring $472 million of outstanding debt at maturity. Overall, Devon’s financial position remained strong with investment-grade credit ratings and cash balances of $676 million. At September 30, 2024, the company’s outstanding debt totaled $8.9 billion with a net debt-to-EBITDAX ratio of 1.1 times.

 

1

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RETURN OF CAPITAL

Devon declared its fixed quarterly cash dividend of $0.22 per share, payable on Dec. 30, 2024, to shareholders of record at the close of business on Dec. 13, 2024.

With the recent pull back in commodity prices and equities, as well as the additional leverage taken on by the company, Devon has elected not to declare a variable dividend in the current quarter. Capital allocation will focus on strengthening the balance sheet and returning capital to shareholders through the fixed dividend and share buybacks.

In the third quarter, the company repurchased $295 million of common stock. Since program inception in late 2021, Devon has repurchased $3.0 billion of common stock.

OPERATING RESULTS

Devon’s capital activity in the third quarter averaged 20 operated drilling rigs and 5 completion crews across its asset portfolio. This level of activity resulted in 108 gross operated wells being placed online, with an average lateral length of 10,000 feet. Upstream capital spending in the third quarter was $817 million. Midstream, carbon and corporate capital totaled $61 million in the quarter.

Devon’s oil production in the third quarter reached 335,000 barrels per day, exceeding guidance by 4 percent. Total companywide production averaged 728,000 oil-equivalent barrels (Boe) per day in the third quarter. This represents a 3 percent increase in production compared to the previous quarter. Production in the quarter benefited from the closing of Grayson Mill in late September, which contributed approximately 5,000 Boe per day and 3,000 barrels of oil per day to the quarterly average.

Devon’s growth and outperformance in the third quarter was primarily driven by its Delaware Basin asset, which accounted for 67 percent of companywide volumes at 488,000 Boe per day. This production result represents a growth rate of 6 percent quarter-over-quarter, driven by 55 gross operated wells being placed online during the quarter. The outperformance was driven by strong well productivity and base production that continued to exceed expectations.

Capital activity in the Delaware was headlined by the CBR 12-1 project, which was brought online during the second and third quarters of 2024. This 21-well project in the Stateline area targeted 6 different landing zones within the Bone Spring and Wolfcamp formations. Initial 30-day rates from this multi-zone development averaged 3,300 Boe per day, with per well recoveries exceeding 2 million oil-equivalent barrels.

For the third quarter, Devon’s upstream revenues totaled $2.7 billion. The company’s realized price during the period, including commodity hedges, was $40.71 per Boe, compared with the prior quarter of $44.29 per Boe. The lower price realization was primarily driven by reduced crude and natural gas liquids benchmark pricing. Also contributing to the lower pricing was the expanded regional gas price differential in the Delaware Basin driven by infrastructure constraints.

Production costs, including taxes, averaged $11.39 per Boe in the third quarter, a decline of 7 percent from the prior period. The improved cost structure was driven by lower lease operating expenses resulting from more efficient field-level operations, lower well workovers and a decrease in production tax due to lower commodity prices.

Financing cost, net totaled $88 million in the quarter, a $12 million increase from the prior quarter. The higher expense is primarily related to the debt issued in the quarter related to the Grayson Mill acquisition.

Devon’s third quarter effective income tax rate was 22 percent, with a 7 percent current rate and 15 percent deferred rate. The lower-than-expected current tax rate was driven by accelerated income tax depreciation related to the closing of the Grayson Mill acquisition.

STRATEGIC ACQUISITION IN THE WILLISTON BASIN

On Sept. 27, 2024, Devon closed its previously announced acquisition of Grayson Mill Energy. The company issued 37.3 million shares and funded the remainder of the transaction through a combination of senior notes, a term loan and cash on hand. The acquisition adds a high-margin production mix that enhances Devon’s position as one of the largest oil producers in the U.S. The acquisition also transforms the company’s Williston Basin business, with the addition of 307,000 net acres, 500 undrilled gross locations and 300 high-quality refrac candidates.

 

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FOURTH-QUARTER 2024 OUTLOOK

Due to the impact of the Grayson Mill acquisition and strong year-to-date performance, Devon is revising its production forecast higher in the fourth quarter to a range of 811,000 to 830,000 Boe per day, a 13 percent increase compared to the third quarter. This fourth-quarter volume growth will be driven by an estimated 110,000 Boe per day of incremental production from the company’s Williston Basin acquisition. Beginning with the fourth quarter, the Williston Basin will be combined with the Powder River Basin and reported as the Rockies business unit.

The company also adjusted the midpoint of its capital outlook to $950 million for the upcoming quarter. This guidance incorporates $150 million of incremental capital requirements related to the acquisition in the Williston Basin.

Additional details of Devon’s forward-looking guidance are available on the company’s website at www.devonenergy.com.

CONFERENCE CALL WEBCAST AND SUPPLEMENTAL EARNINGS MATERIALS

Also provided with today’s release is the company’s detailed earnings presentation that is available on the company’s website at www.devonenergy.com. The company’s third-quarter conference call will be held at 10:00 a.m. Central (11:00 a.m. Eastern) on Wednesday, Nov. 6, 2024, and will serve primarily as a forum for analyst and investor questions and answers.

ABOUT DEVON ENERGY

Devon Energy is a leading oil and gas producer in the U.S. with a premier multi-basin portfolio headlined by a world-class acreage position in the Delaware Basin. Devon’s disciplined cash-return business model is designed to achieve strong returns, generate free cash flow and return capital to shareholders, while focusing on safe and sustainable operations. For more information, please visit www.devonenergy.com.

 

Investor Contacts		Media Contact
Rosy Zuklic, 405-552-7802		Michelle Hindmarch, 405-552-7460
Chris Carr, 405-228-2496

NON-GAAP DISCLOSURES

This press release includes non-GAAP (generally accepted accounting principles) financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of results as reported under GAAP. Reconciliations of these non-GAAP measures and other disclosures are provided within the supplemental financial tables that are available on the company’s website and in the related Form 10-Q filed with the Securities and Exchange Commission (the “SEC”).

FORWARD LOOKING STATEMENTS

This press release 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 press release 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 volatility of oil, gas and NGL prices; uncertainties inherent in estimating oil, gas and NGL reserves; the extent to which we are successful in acquiring and discovering additional reserves; the uncertainties, costs and risks involved in our operations; risks related to our hedging activities; our limited control over third parties who operate some of our oil and gas properties; midstream capacity constraints and potential interruptions in production, including from limits to the build out of midstream infrastructure; competition for assets, materials, people and capital; regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to federal lands, environmental matters and seismicity; climate change and risks related to regulatory, social and market efforts to address climate change; governmental interventions in energy markets; counterparty credit risks; risks relating to our indebtedness; cybersecurity risks; risks relating to global pandemics; the extent to which insurance covers any losses we may experience; risks related to shareholder activism; our ability to successfully complete mergers, acquisitions and divestitures; our ability to pay dividends and make share repurchases; and any of the other risks and uncertainties discussed in Devon’s 2023 Annual Report on Form 10-K (the “2023 Form 10-K”) or other filings with the SEC.

The forward-looking statements included in this press release speak only as of the date of this press release, represent management’s current reasonable expectations as of the date of this press release and are subject to the risks and uncertainties identified above as well as those described elsewhere in the 2023 Form 10-K 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 the 2023 Form 10-K 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.

 

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Exhibit 99.2

Devon Energy Third-Quarter 2024

Supplemental Tables

 

TABLE OF CONTENTS:		PAGE:
Consolidated Statements of Earnings			2
Supplemental Information for Consolidated Statements of Earnings			3
Consolidated Balance Sheets			4
Consolidated Statements of Cash Flows			5
Production			6
Capital Expenditures and Supplemental Information for Capital Expenditures			7
Realized Pricing			8
Asset Margins			9
Core Earnings and EBITDAX			10
Net Debt, Net Debt-to-EBITDAX, Free Cash Flow, Adjusted Free Cash Flow and Reinvestment Rate			11

 

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CONSOLIDATED STATEMENTS OF EARNINGS

 

 

(in millions, except per share amounts)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Oil, gas and NGL sales		$	2,665			$	2,796			$	2,629			$	2,737			$	2,882
Oil, gas and NGL derivatives (1)			227				23				(145	)			324				(194	)
Marketing and midstream revenues			1,132				1,098				1,112				1,084				1,148
Total revenues			4,024				3,917				3,596				4,145				3,836
Production expenses (2)			763				788				751				759				757
Exploration expenses			4				3				9				4				3
Marketing and midstream expenses			1,149				1,108				1,133				1,093				1,160
Depreciation, depletion and amortization			794				768				722				650				651
Asset dispositions			—				15				1				11				—
General and administrative expenses			117				114				114				111				99
Financing costs, net (3)			88				76				76				77				81
Restructuring and transaction costs			8				—				—				—				—
Other, net			37				5				22				10				13
Total expenses			2,960				2,877				2,828				2,715				2,764
Earnings before income taxes			1,064				1,040				768				1,430				1,072
Income tax expense (4)			239				185				159				269				152
Net earnings			825				855				609				1,161				920
Net earnings attributable to noncontrolling interests			13				11				13				9				10
Net earnings attributable to Devon		$	812			$	844			$	596			$	1,152			$	910
Net earnings per share:
Basic net earnings per share		$	1.31			$	1.35			$	0.95			$	1.81			$	1.43
Diluted net earnings per share		$	1.30			$	1.34			$	0.94			$	1.81			$	1.42
Weighted average common shares outstanding:
Basic			622				626				629				635				637
Diluted			623				628				632				638				639

 

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SUPPLEMENTAL INFORMATION FOR CONSOLIDATED STATEMENTS OF EARNINGS

 

 

(1) OIL, GAS AND NGL DERIVATIVES
(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Derivative cash settlements		$	61			$	54			$	24			$	8			$	(11	)
Derivative valuation changes			166				(31	)			(169	)			316				(183	)
Oil, gas and NGL derivatives		$	227			$	23			$	(145	)		$	324			$	(194	)
(2) PRODUCTION EXPENSES
(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Lease operating expense		$	366			$	383			$	380			$	381			$	367
Gathering, processing & transportation			200				197				180				181				178
Production taxes			179				188				175				182				191
Property taxes			18				20				16				15				21
Production expenses		$	763			$	788			$	751			$	759			$	757
(3) FINANCING COSTS, NET
(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Interest based on outstanding debt		$	98			$	88			$	87			$	87			$	93
Interest income			(19	)			(14	)			(13	)			(12	)			(11	)
Other			9				2				2				2				(1	)
Financing costs, net		$	88			$	76			$	76			$	77			$	81
(4) INCOME TAX EXPENSE
(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Current expense		$	75			$	146			$	119			$	105			$	139
Deferred expense			164				39				40				164				13
Income tax expense		$	239			$	185			$	159			$	269			$	152

 

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CONSOLIDATED BALANCE SHEETS

 

 

(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Current assets:
Cash, cash equivalents and restricted cash		$	676			$	1,169			$	1,149			$	875			$	761
Accounts receivable			1,779				1,589				1,670				1,573				1,853
Inventory			293				258				234				249				233
Other current assets			484				343				345				460				365
Total current assets			3,232				3,359				3,398				3,157				3,212
Oil and gas property and equipment, based on successful efforts accounting, net			23,155				18,216				18,033				17,825				17,563
Other property and equipment, net			1,795				1,569				1,551				1,503				1,468
Total property and equipment, net			24,950				19,785				19,584				19,328				19,031
Goodwill			753				753				753				753				753
Right-of-use assets			317				297				276				267				261
Investments			718				704				713				666				671
Other long-term assets			293				264				254				319				313
Total assets		$	30,263			$	25,162			$	24,978			$	24,490			$	24,241
Current liabilities:
Accounts payable		$	995			$	754			$	879			$	760			$	812
Revenues and royalties payable			1,423				1,363				1,268				1,222				1,434
Short-term debt			—				475				479				483				487
Other current liabilities			488				424				640				484				597
Total current liabilities			2,906				3,016				3,266				2,949				3,330
Long-term debt			8,884				5,665				5,668				5,672				5,675
Lease liabilities			328				315				301				295				290
Asset retirement obligations			765				691				683				643				641
Other long-term liabilities			820				829				841				876				850
Deferred income taxes			2,082				1,917				1,878				1,838				1,676
Stockholders’ equity:
Common stock			66				63				63				64				64
Additional paid-in capital			6,662				5,478				5,718				5,939				6,153
Retained earnings			7,670				7,132				6,509				6,195				5,535
Accumulated other comprehensive loss			(121	)			(122	)			(123	)			(124	)			(113	)
Treasury stock			—				—				—				(13	)			—
Total stockholders’ equity attributable to Devon			14,277				12,551				12,167				12,061				11,639
Noncontrolling interests			201				178				174				156				140
Total equity			14,478				12,729				12,341				12,217				11,779
Total liabilities and equity		$	30,263			$	25,162			$	24,978			$	24,490			$	24,241

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Cash flows from operating activities:
Net earnings		$	825			$	855			$	609			$	1,161			$	920
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation, depletion and amortization			794				768				722				650				651
Leasehold impairments			1				1				—				1				1
Accretion (amortization) of liabilities			2				—				—				1				(2	)
Total (gains) losses on commodity derivatives			(227	)			(23	)			145				(324	)			194
Cash settlements on commodity derivatives			61				54				24				8				(11	)
Losses on asset dispositions			—				15				1				11				—
Deferred income tax expense			164				39				40				164				13
Share-based compensation			24				27				24				23				22
Other			3				—				3				(3	)			(2	)
Changes in assets and liabilities, net			16				(201	)			170				45				(61	)
Net cash from operating activities			1,663				1,535				1,738				1,737				1,725
Cash flows from investing activities:
Capital expenditures			(877	)			(948	)			(894	)			(910	)			(882	)
Acquisitions of property and equipment			(3,602	)			(82	)			(8	)			(10	)			(23	)
Divestitures of property and equipment			—				1				17				3				1
Grayson Mill acquired cash			147				—				—				—				—
Distributions from investments			13				11				11				8				7
Contributions to investments and other			(30	)			(1	)			(47	)			(1	)			—
Net cash from investing activities			(4,349	)			(1,019	)			(921	)			(910	)			(897	)
Cash flows from financing activities:
Borrowings of long-term debt, net of issuance costs			3,219				—				—				—				—
Repayments of long-term debt			(472	)			—				—				—				(242	)
Repurchases of common stock			(295	)			(256	)			(205	)			(234	)			—
Dividends paid on common stock			(272	)			(223	)			(299	)			(488	)			(312	)
Contributions from noncontrolling interests			20				12				12				19				10
Distributions to noncontrolling interests			(10	)			(19	)			(7	)			(12	)			(9	)
Shares exchanged for tax withholdings and other			2				(9	)			(42	)			(1	)			—
Net cash from financing activities			2,192				(495	)			(541	)			(716	)			(553	)
Effect of exchange rate changes on cash			1				(1	)			(2	)			3				(2	)
Net change in cash, cash equivalents and restricted cash			(493	)			20				274				114				273
Cash, cash equivalents and restricted cash at beginning of period			1,169				1,149				875				761				488
Cash, cash equivalents and restricted cash at end of period		$	676			$	1,169			$	1,149			$	875			$	761
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		$	645			$	1,140			$	1,126			$	853			$	654
Restricted cash			31				29				23				22				107
Total cash, cash equivalents and restricted cash		$	676			$	1,169			$	1,149			$	875			$	761

 

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PRODUCTION

 

 

		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Oil (MBbls/d)
Delaware Basin			227				221				208				208				215
Eagle Ford			44				46				43				43				40
Anadarko Basin			13				14				11				13				14
Williston Basin (1)			34				37				40				36				35
Powder River Basin (1)			14				13				13				13				13
Other			3				4				4				4				4
Total			335				335				319				317				321
Natural gas liquids (MBbls/d)
Delaware Basin			134				121				113				112				112
Eagle Ford			16				17				14				15				15
Anadarko Basin			29				30				26				29				27
Williston Basin (1)			13				12				10				10				9
Powder River Basin (1)			2				2				2				3				2
Other			—				—				—				—				1
Total			194				182				165				169				166
Gas (MMcf/d)
Delaware Basin			764				712				695				673				680
Eagle Ford			93				92				79				81				78
Anadarko Basin			241				244				223				225				235
Williston Basin (1)			77				71				63				61				58
Powder River Basin (1)			19				18				18				20				18
Other			—				—				1				1				1
Total			1,194				1,137				1,079				1,061				1,070
Total oil equivalent (MBoe/d)
Delaware Basin			488				461				437				433				440
Eagle Ford			75				79				70				72				68
Anadarko Basin			82				84				74				79				80
Williston Basin (1)			60				61				61				55				54
Powder River Basin (1)			19				18				18				19				19
Other			4				4				4				4				4
Total			728				707				664				662				665

 

(1)	Beginning with Q4 2024, the Williston Basin and Powder River Basin will be combined and presented as Rockies.

 

6

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CAPITAL EXPENDITURES

 

 

(in millions)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin		$	495			$	505			$	555			$	506			$	503
Eagle Ford			173				180				156				194				198
Anadarko Basin			56				56				59				51				13
Williston Basin			38				38				27				55				69
Powder River Basin			51				46				43				55				45
Other			4				3				2				3				2
Total upstream capital		$	817			$	828			$	842			$	864			$	830
Carbon capital			26				24				32				31				25
Midstream and Corporate			35				38				63				45				41
Capital expenditures (excluding acquisitions)		$	878			$	890			$	937			$	940			$	896
Acquisitions (1)			38				81				8				11				23
Total capital		$	916			$	971			$	945			$	951			$	918
(1)   Q3 2024 excludes $5,045 million related to the Grayson Mill acquisition.
SUPPLEMENTAL INFORMATION FOR CAPITAL EXPENDITURES
GROSS OPERATED SPUDS
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin			75				73				76				60				64
Eagle Ford			28				28				30				26				28
Anadarko Basin			9				13				4				17				10
Williston Basin			3				6				1				—				7
Powder River Basin			5				6				3				5				4
Total			120				126				114				108				113
GROSS OPERATED WELLS TIED-IN
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin			55				62				59				62				59
Eagle Ford			31				23				26				24				13
Anadarko Basin			15				26				5				4				—
Williston Basin			—				—				10				6				6
Powder River Basin			7				3				2				4				3
Total			108				114				102				100				81
NET OPERATED WELLS TIED-IN
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin			39				44				50				47				49
Eagle Ford			24				15				21				20				12
Anadarko Basin			6				14				2				1				—
Williston Basin			—				—				10				3				4
Powder River Basin			6				2				2				4				3
Total			75				75				85				75				68
AVERAGE LATERAL LENGTH
(based on wells tied-in)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin			10,500’				10,200’				10,300’				10,300’				9,700’
Eagle Ford			7,600’				6,800’				6,700’				7,900’				5,000’
Anadarko Basin			11,000’				8,700’				10,000’				12,500’				—
Williston Basin			—				—				9,600’				12,300’				12,300’
Powder River Basin			14,500’				15,500’				9,600’				9,600’				13,300’
Total			10,000’				9,300’				9,300’				9,900’				9,300’

 

7

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REALIZED PRICING

 

 

BENCHMARK PRICES
(average prices)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Oil ($/Bbl) - West Texas Intermediate (Cushing)		$	75.20			$	80.62			$	77.01			$	78.48			$	82.06
Natural Gas ($/Mcf) - Henry Hub		$	2.15			$	1.89			$	2.25			$	2.88			$	2.54
NGL ($/Bbl) - Mont Belvieu Blended		$	25.20			$	26.33			$	27.51			$	25.52			$	26.62
REALIZED PRICES
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Oil (Per Bbl)
Delaware Basin		$	74.24			$	79.62			$	76.23			$	77.75			$	80.72
Eagle Ford			74.92				80.45				76.51				78.51				80.85
Anadarko Basin			73.13				78.36				74.91				77.09				79.86
Williston Basin			69.86				75.81				71.13				74.26				79.50
Powder River Basin			71.73				75.48				71.93				74.58				78.51
Realized price without hedges			73.74				79.10				75.40				77.32				80.48
Cash settlements			0.52				(0.15	)			(0.25	)			(0.34	)			(0.67	)
Realized price, including cash settlements		$	74.26			$	78.95			$	75.15			$	76.98			$	79.81
Natural gas liquids (Per Bbl)
Delaware Basin		$	19.21			$	19.59			$	20.55			$	19.93			$	20.76
Eagle Ford			24.18				23.07				23.67				22.67				23.70
Anadarko Basin			22.35				22.16				24.77				21.44				23.37
Williston Basin			4.76				5.49				6.27				2.95				4.09
Powder River Basin			27.30				30.75				32.91				28.80				29.63
Realized price without hedges			19.25				19.60				20.81				19.67				20.72
Cash settlements			0.11				0.11				(0.08	)			—				—
Realized price, including cash settlements		$	19.36			$	19.71			$	20.73			$	19.67			$	20.72
Gas (Per Mcf)
Delaware Basin		$	0.04			$	0.17			$	1.19			$	1.76			$	1.94
Eagle Ford			1.80				1.48				1.89				2.44				2.31
Anadarko Basin			1.74				1.70				1.92				2.38				2.17
Williston Basin			N/M				N/M				N/M				N/M				N/M
Powder River Basin			1.83				1.64				2.29				2.52				2.53
Realized price without hedges			0.45				0.55				1.30				1.83				1.92
Cash settlements			0.39				0.55				0.32				0.19				0.09
Realized price, including cash settlements		$	0.84			$	1.10			$	1.62			$	2.02			$	2.01
Total oil equivalent (Per Boe)
Delaware Basin		$	39.85			$	43.63			$	43.55			$	45.38			$	47.68
Eagle Ford			50.89				54.03				53.81				54.64				55.71
Anadarko Basin			24.69				25.53				25.48				26.96				27.88
Williston Basin			38.96				46.32				47.37				47.77				52.64
Powder River Basin			56.34				58.99				57.60				57.99				62.21
Realized price without hedges			39.80				43.44				43.52				44.93				47.10
Cash settlements			0.91				0.85				0.39				0.14				(0.18	)
Realized price, including cash settlements		$	40.71			$	44.29			$	43.91			$	45.07			$	46.92

 

8

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ASSET MARGINS

 

 

BENCHMARK PRICES
(average prices)		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Oil ($/Bbl) - West Texas Intermediate (Cushing)		$	75.20			$	80.62			$	77.01			$	78.48			$	82.06
Natural Gas ($/Mcf) - Henry Hub		$	2.15			$	1.89			$	2.25			$	2.88			$	2.54
NGL ($/Bbl) - Mont Belvieu Blended		$	25.20			$	26.33			$	27.51			$	25.52			$	26.62
PER-UNIT CASH MARGIN BY ASSET (per Boe)
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Delaware Basin
Realized price		$	39.85			$	43.63			$	43.55			$	45.38			$	47.68
Lease operating expenses			(4.69	)			(5.31	)			(5.54	)			(5.46	)			(5.03	)
Gathering, processing & transportation			(2.79	)			(2.89	)			(2.79	)			(2.75	)			(2.63	)
Production & property taxes			(2.99	)			(3.31	)			(3.16	)			(3.24	)			(3.48	)
Field-level cash margin		$	29.38			$	32.12			$	32.06			$	33.93			$	36.54
Eagle Ford
Realized price		$	50.89			$	54.03			$	53.81			$	54.64			$	55.71
Lease operating expenses			(6.57	)			(7.03	)			(7.59	)			(7.05	)			(7.52	)
Gathering, processing & transportation			(2.02	)			(2.03	)			(1.67	)			(1.62	)			(1.63	)
Production & property taxes			(2.79	)			(2.82	)			(2.73	)			(2.95	)			(3.18	)
Field-level cash margin		$	39.51			$	42.15			$	41.82			$	43.02			$	43.38
Anadarko Basin
Realized price		$	24.69			$	25.53			$	25.48			$	26.96			$	27.88
Lease operating expenses			(2.92	)			(3.16	)			(3.33	)			(3.26	)			(3.43	)
Gathering, processing & transportation			(5.78	)			(5.70	)			(6.27	)			(5.98	)			(6.11	)
Production & property taxes			(1.17	)			(1.19	)			(1.24	)			(1.40	)			(1.36	)
Field-level cash margin		$	14.82			$	15.48			$	14.64			$	16.32			$	16.98
Williston Basin
Realized price		$	38.96			$	46.32			$	47.37			$	47.77			$	52.64
Lease operating expenses			(11.81	)			(10.71	)			(10.88	)			(13.07	)			(13.04	)
Gathering, processing & transportation			(2.13	)			(2.29	)			(2.03	)			(2.34	)			(2.31	)
Production & property taxes			(3.86	)			(4.70	)			(4.72	)			(4.78	)			(5.13	)
Field-level cash margin		$	21.16			$	28.62			$	29.74			$	27.58			$	32.16
Powder River Basin
Realized price		$	56.34			$	58.99			$	57.60			$	57.99			$	62.21
Lease operating expenses			(7.71	)			(9.49	)			(11.66	)			(8.65	)			(8.45	)
Gathering, processing & transportation			(2.96	)			(3.07	)			(3.03	)			(3.17	)			(3.02	)
Production & property taxes			(6.79	)			(6.99	)			(6.91	)			(6.75	)			(7.45	)
Field-level cash margin		$	38.88			$	39.44			$	36.00			$	39.42			$	43.29
Devon - Total
Realized price		$	39.80			$	43.44			$	43.52			$	44.93			$	47.10
Lease operating expenses			(5.46	)			(5.95	)			(6.29	)			(6.25	)			(6.00	)
Gathering, processing & transportation			(2.98	)			(3.07	)			(2.98	)			(2.97	)			(2.91	)
Production & property taxes			(2.95	)			(3.23	)			(3.16	)			(3.24	)			(3.46	)
Field-level cash margin		$	28.41			$	31.19			$	31.09			$	32.47			$	34.73

 

9

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NON-GAAP MEASURES

 

 

(all monetary values in millions, except per share amounts)

Devon’s earnings materials include non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in the earnings materials, including reconciliations to their most directly comparable GAAP measure.

The earnings materials may include forward-looking non-GAAP measures. The company is unable to provide reconciliations of these forward-looking non-GAAP measures, because components of the calculations are inherently unpredictable, such as changes to current assets and liabilities, the timing of changes in capital accruals, unknown future events and estimating certain future GAAP measures. The inability to reliably quantify certain components of the calculation would significantly affect the usefulness and accuracy of a reconciliation.

CORE EARNINGS

Devon’s reported net earnings include items of income and expense that are typically excluded by securities analysts in their published estimates of the company’s financial results. Accordingly, the company also uses the measures of core earnings and core earnings per share attributable to Devon. Devon believes these non-GAAP measures facilitate comparisons of its performance to earnings estimates published by securities analysts. Devon also believes these non-GAAP measures can facilitate comparisons of its performance between periods and to the performance of its peers. The following table summarizes the effects of these items on second-quarter and third-quarter 2024 earnings.

 

		Quarter Ended September 30, 2024
		Before-tax				After-tax				After NCI				Per Diluted Share
Total
Earnings (GAAP)		$	1,064			$	825			$	812			$	1.30
Adjustments:
Asset and exploration impairments			1				1				1				—
Deferred tax asset valuation allowance			—				(7	)			(7	)			(0.01	)
Fair value changes in financial instruments			(167	)			(129	)			(129	)			(0.20	)
Restructuring and transaction costs			8				6				6				0.01
Core earnings (Non-GAAP)		$	906			$	696			$	683			$	1.10
		Quarter Ended June 30, 2024
		Before-tax				After-tax				After NCI				Per Diluted Share
Total
Earnings (GAAP)		$	1,040			$	855			$	844			$	1.34
Adjustments:
Asset dispositions			15				11				11				0.02
Asset and exploration impairments			1				1				1				—
Deferred tax asset valuation allowance			—				4				4				0.01
Fair value changes in financial instruments			32				25				25				0.04
Core earnings (Non-GAAP)		$	1,088			$	896			$	885			$	1.41

EBITDAX

Devon believes EBITDAX provides information useful in assessing operating and financial performance across periods. Devon computes EBITDAX as net earnings before financing costs, net; income tax expense; exploration expenses; depreciation, depletion and amortization; 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 normal operations. EBITDAX as defined by Devon may not be comparable to similarly titled measures used by other companies.

 

		Q3 ‘24				Q2 ‘24				Q1 ‘24				Q4 ‘23				TTM				Q3 ‘23
Net earnings (GAAP)		$	825			$	855			$	609			$	1,161			$	3,450			$	920
Financing costs, net			88				76				76				77				317				81
Income tax expense			239				185				159				269				852				152
Exploration expenses			4				3				9				4				20				3
Depreciation, depletion and amortization			794				768				722				650				2,934				651
Asset dispositions			—				15				1				11				27				—
Share-based compensation			24				26				24				22				96				22
Derivative & financial instrument non-cash val. changes			(166	)			31				169				(316	)			(282	)			183
Restructuring and transaction costs			8				—				—				—				8				—
Accretion on discounted liabilities and other			37				5				22				10				74				13
EBITDAX (Non-GAAP)		$	1,853			$	1,964			$	1,791			$	1,888			$	7,496			$	2,025

 

10

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NET DEBT

Devon defines net debt as debt (includes short-term and long-term debt) less cash, cash equivalents and restricted cash. Devon believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash from Devon to repay debt.

 

		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Total debt (GAAP)		$	8,884			$	6,140			$	6,147			$	6,155			$	6,162
Less:
Cash, cash equivalents and restricted cash			(676	)			(1,169	)			(1,149	)			(875	)			(761	)
Net debt (Non-GAAP)		$	8,208			$	4,971			$	4,998			$	5,280			$	5,401
NET DEBT-TO-EBITDAX
Devon defines net debt-to-EBITDAX as net debt divided by an annualized EBITDAX measure. Devon believes this ratio provides information useful to investors in assessing the company’s credit position and debt leverage.
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Net debt (Non-GAAP)		$	8,208			$	4,971			$	4,998			$	5,280			$	5,401
EBITDAX (Non-GAAP) (1)		$	7,496			$	7,668			$	7,434			$	7,534			$	7,776
Net debt-to-EBITDAX (Non-GAAP)			1.1				0.6				0.7				0.7				0.7
(1)   EBITDAX is an annualized measure using a trailing twelve-month calculation.
FREE CASH FLOW
Devon defines free cash flow as total operating cash flow less capital expenditures. Devon believes free cash flow provides a useful measure of available cash generated by operating activities for other investing and financing activities.
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Total operating cash flow (GAAP)		$	1,663			$	1,535			$	1,738			$	1,737			$	1,725
Less capital expenditures:			(877	)			(948	)			(894	)			(910	)			(882	)
Free cash flow (Non-GAAP)		$	786			$	587			$	844			$	827			$	843
ADJUSTED FREE CASH FLOW
Devon is committed to returning cash flow to shareholders through dividends and share repurchases. Adjusted free cash flow is calculated as total operating cash flow before balance sheet changes less accrued capital expenditures.
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Total operating cash flow (GAAP)		$	1,663			$	1,535			$	1,738			$	1,737			$	1,725
Changes in assets and liabilities			(16	)			201				(170	)			(45	)			61
Cash flow before balance sheet changes (Non-GAAP)			1,647				1,736				1,568				1,692				1,786
Capital expenditures (Accrued) (1)			(916	)			(971	)			(945	)			(951	)			(919	)
Adjusted free cash flow (Non-GAAP)		$	731			$	765			$	623			$	741			$	867
(1)   Q3 2024 excludes $5,045 million related to the Grayson Mill acquisition.
REINVESTMENT RATE
Devon defines reinvestment rate as accrued capital expenditures divided by operating cash flow. Devon believes this measure provides useful information to our investors as an indicator of the capital demands of our business relative to the cash flow generated from normal business operations.
		2024												2023
		Quarter 3				Quarter 2				Quarter 1				Quarter 4				Quarter 3
Capital expenditures (Accrued) (1)		$	916			$	971			$	945			$	951			$	919
Operating cash flow		$	1,663			$	1,535			$	1,738			$	1,737			$	1,725
Reinvestment rate (Non-GAAP)			55	%			63	%			54	%			55	%			53	%

 

(1)	Q3 2024 excludes $5,045 million related to the Grayson Mill acquisition.

 

11

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FOURTH-QUARTER 2024 GUIDANCE

 

PRODUCTION GUIDANCE

 

		Quarter 4
		Low				High
Oil (MBbls/d)			382				388
Natural gas liquids (MBbls/d)			214				219
Gas (MMcf/d)			1,290				1,340
Total oil equivalent (MBoe/d)			811				830
CAPITAL EXPENDITURES GUIDANCE
		Quarter 4
(in millions)		Low				High
Upstream capital		$	870			$	920
Carbon capital			20				30
Midstream and other capital			25				35
Total capital		$	915			$	985
PRICE REALIZATIONS GUIDANCE
		Quarter 4
		Low				High
Oil - % of WTI			95	%			100	%
NGL - % of WTI			20	%			30	%
Natural gas - % of Henry Hub			20	%			30	%
OTHER GUIDANCE ITEMS
		Quarter 4
($ millions, except Boe and %)		Low				High
Marketing and midstream operating profit		$	(20	)		$	(10	)
LOE and GP&T per BOE		$	9.20			$	9.60
Production and property taxes as % of upstream sales			7.0	%			8.0	%
Exploration expenses		$	5			$	15
Depreciation, depletion and amortization		$	950			$	1,000
General and administrative expenses		$	125			$	135
Financing costs, net		$	120			$	130
Other expenses		$	—			$	5
INCOME TAX GUIDANCE
		Quarter 4
(% of pre-tax earnings)		Low				High
Current income tax rate			11	%			13	%
Deferred income tax rate			9	%			11	%
Total income tax rate			~22%

 

1

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CONTINGENT PAYMENTS FOR BARNETT SHALE DIVESTITURE (through 2024)

 

 

WTI Threshold		WTI Annual Earnout Amount				Henry Hub Threshold				Henry Hub Annual Earnout Amount
$   50.00		$	10,000,000			$	2.75			$	20,000,000
$   55.00		$	12,500,000			$	3.00			$	25,000,000
$   60.00		$	15,000,000			$	3.25			$	35,000,000
$   65.00		$	20,000,000			$	3.50			$	45,000,000

2024 & 2025 HEDGING POSITIONS

 

Oil Commodity Hedges

 

		Price Swaps								Price Collars
Period		Volume (Bbls/d)				Weighted Average Price ($/Bbl)				Volume (Bbls/d)				Weighted Average Floor Price ($/Bbl)				Weighted Average Ceiling Price ($/Bbl)
Q4 2024			33,000			$	78.38				98,000			$	68.64			$	83.73
Q1-Q4 2025			8,468			$	71.90				26,992			$	70.00			$	76.58

Oil Basis Swaps

 

Period		Index		Volume (Bbls/d)				Weighted Average Differential to WTI ($/Bbl)
Q4 2024		Midland Sweet			69,500			$	1.17
Q4 2024		NYMEX Roll			26,000			$	0.82
Q1-Q4 2025		Midland Sweet			63,000			$	1.00

Natural Gas Commodity Hedges - Henry Hub

 

		Price Swaps								Price Collars
Period		Volume (MMBtu/d)				Weighted Average Price ($/MMBtu)				Volume (MMBtu/d)				Weighted Average Floor Price ($/MMBtu)				Weighted Average Ceiling Price ($/MMBtu)
Q4 2024			252,000			$	3.16				15,000			$	3.00			$	3.65
Q1-Q4 2025			220,537			$	3.34				55,000			$	3.00			$	3.69

Natural Gas Basis Swaps

 

Period		Index		Volume (MMBtu/d)				Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2024		El Paso Permian			10,000			$	(1.00	)
Q4 2024		Houston Ship Channel			160,000			$	(0.28	)
Q4 2024		WAHA			80,000			$	(0.74	)
Q1–Q4 2025		WAHA			50,000			$	(1.04	)
Q1–Q4 2025		Houston Ship Channel			170,000			$	(0.36	)

NGL Commodity Hedges

 

				Price Swaps
Period		Product		Volume (Bbls/d)				Weighted Average Price ($/Bbl)
Q4 2024		Natural Gasoline			3,000			$	69.11
Q4 2024		Normal Butane			3,350			$	37.58
Q4 2024		Propane			5,250			$	33.01

Devon’s oil derivatives settle against the average of the prompt month NYMEX West Texas Intermediate futures price. Devon’s natural gas derivatives settle against the Inside FERC first of the month Henry Hub index. Devon’s NGL derivatives settle against the average of the prompt month OPIS Mont Belvieu, Texas index. Commodity hedge positions are shown as of September 30, 2024.

 

2

Document and Entity Information	Nov. 05, 2024
Cover [Abstract]
Entity Registrant Name	DEVON ENERGY CORP/DE
Entity Incorporation State Country Code	DE
Entity Address, State or Province	OK
Amendment Flag	false
Entity Central Index Key	0001090012
Document Type	8-K
Document Period End Date	Nov. 05, 2024
Entity File Number	001-32318
Entity Tax Identification Number	73-1567067
Entity Address, Address Line One	333 W. SHERIDAN AVE.
Entity Address, City or Town	OKLAHOMA CITY
Entity Address, Postal Zip Code	73102-5015
City Area Code	405
Local Phone Number	235-3611
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, par value $0.10 per share
Trading Symbol	DVN
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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