DEVON ENERGY CORPDE
For the period ended Mar 31, 2024. Filed May 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
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Item 2. Results of Operations
Results of Operations
The following graphs, discussion and analysis are intended to provide an understanding of our results of operations and current financial condition. To facilitate the review, these numbers are being presented before consideration of noncontrolling interests.
Q1 2024 vs. Q4 2023
Our first quarter 2024 and fourth quarter 2023 net earnings were $0.6 billion and $1.2 billion, respectively. The graph below shows the change in net earnings from the fourth quarter of 2023 to the first quarter of 2024. The material changes are further discussed by category on the following pages.
Production Volumes
| Q1 2024 | % of Total | Q4 2023 | Change | |
|---|---|---|---|---|
| Oil (MBbls/d) | ||||
| Delaware Basin | 208 | 65% | 208 | 0% |
| Eagle Ford | 43 | 14% | 43 | 0% |
| Anadarko Basin | 11 | 3% | 13 | -14% |
| Williston Basin | 40 | 13% | 36 | 12% |
| Powder River Basin | 13 | 4% | 13 | -2% |
| Other | 4 | 1% | 4 | -1% |
| Total | 319 | 100% | 317 | 1% |
| Q1 2024 | % of Total | Q4 2023 | Change | |
|---|---|---|---|---|
| Gas (MMcf/d) | ||||
| Delaware Basin | 695 | 64% | 673 | 3% |
| Eagle Ford | 79 | 7% | 81 | -2% |
| Anadarko Basin | 223 | 21% | 225 | -1% |
| Williston Basin | 63 | 6% | 61 | 2% |
| Powder River Basin | 18 | 2% | 20 | -9% |
| Other | 1 | 0% | 1 | -6% |
| Total | 1,079 | 100% | 1,061 | 2% |
| Q1 2024 | % of Total | Q4 2023 | Change | |
|---|---|---|---|---|
| NGLs (MBbls/d) | ||||
| Delaware Basin | 113 | 68% | 112 | 1% |
| Eagle Ford | 14 | 9% | 15 | -10% |
| Anadarko Basin | 26 | 16% | 29 | -10% |
| Williston Basin | 10 | 6% | 10 | 5% |
| Powder River Basin | 2 | 1% | 3 | -19% |
| Other | — | 0% | — | N/M |
| Total | 165 | 100% | 169 | -2% |
| Q1 2024 | % of Total | Q4 2023 | Change | |
|---|---|---|---|---|
| Combined (MBoe/d) | ||||
| Delaware Basin | 437 | 66% | 433 | 1% |
| Eagle Ford | 70 | 10% | 72 | -3% |
| Anadarko Basin | 74 | 11% | 79 | -6% |
| Williston Basin | 61 | 9% | 55 | 9% |
| Powder River Basin | 18 | 3% | 19 | -6% |
| Other | 4 | 1% | 4 | -2% |
| Total | 664 | 100% | 662 | 0% |
From the fourth quarter of 2023 to the first quarter of 2024, the change in volumes contributed to an $18 million decrease in earnings. Volumes per day increased slightly primarily due to new well activity in the Delaware Basin and Williston Basin which was partially offset by natural well declines in the Anadarko Basin. However, overall volumes declined slightly due to one less day in the first quarter of 2024 compared to the fourth quarter of 2023.
Realized Prices
| Q1 2024 | Realization | Q4 2023 | Change | |
|---|---|---|---|---|
| Oil (per Bbl) | ||||
| WTI index | $77.01 | $78.48 | -2% | |
| Realized price, unhedged | $75.40 | 98% | $77.32 | -2% |
| Cash settlements | $(0.25) | $(0.34) | ||
| Realized price, with hedges | $75.15 | 98% | $76.98 | -2% |
| Q1 2024 | Realization | Q4 2023 | Change | |
|---|---|---|---|---|
| Gas (per Mcf) | ||||
| Henry Hub index | $2.25 | $2.88 | -22% | |
| Realized price, unhedged | $1.30 | 58% | $1.83 | -29% |
| Cash settlements | $0.32 | $0.19 | ||
| Realized price, with hedges | $1.62 | 72% | $2.02 | -20% |
| Q1 2024 | Realization | Q4 2023 | Change | |
|---|---|---|---|---|
| NGLs (per Bbl) | ||||
| WTI index | $77.01 | $78.48 | -2% | |
| Realized price, unhedged | $20.81 | 27% | $19.67 | 6% |
| Cash settlements | $(0.08) | $— | ||
| Realized price, with hedges | $20.73 | 27% | $19.67 | 5% |
| Q1 2024 | Q4 2023 | Change | |
|---|---|---|---|
| Combined (per Boe) | |||
| Realized price, unhedged | $43.52 | $44.93 | -3% |
| Cash settlements | $0.39 | $0.14 | |
| Realized price, with hedges | $43.91 | $45.07 | -3% |
From the fourth quarter of 2023 to the first quarter of 2024, realized prices contributed to a $90 million decrease in earnings. Unhedged realized oil and gas prices decreased primarily due to lower WTI and Henry Hub index prices. These were partially offset by hedge cash settlements primarily related to gas commodities.
We currently have approximately 30% and 25% of our remaining anticipated 2024 oil and gas production hedged, respectively.
Hedge Settlements
| Q1 2024 · Q4 2023 · Change | ||||
|---|---|---|---|---|
| Q | ||||
| Oil | $(7) | $(10) | 30% | |
| Natural gas | 32 | 18 | 78% | |
| NGL | (1) | — | N/M | |
| Total cash settlements (1) | $24 | $8 | 200% | |
(1)
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
| Q1 2024 | Q4 2023 | Change | |
|---|---|---|---|
| LOE | $380 | $381 | 0% |
| Gathering, processing & transportation | 180 | 181 | -1% |
| Production taxes | 175 | 182 | -4% |
| Property taxes | 16 | 15 | 7% |
| Total | $751 | $759 | -1% |
| Per Boe: | |||
| LOE | $6.29 | $6.25 | 1% |
| Gathering, processing & transportation | $2.98 | $2.97 | 0% |
| Percent of oil, gas and NGL sales: | |||
| Production taxes | 6.7% | 6.6% | 0% |
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.
| Q1 2024 | $ per BOE | Q4 2023 | $ per BOE | |
|---|---|---|---|---|
| Field-level cash margin (Non-GAAP) | ||||
| Delaware Basin | $1,275 | $32.06 | $1,350 | $33.93 |
| Eagle Ford | 266 | $41.82 | 285 | $43.02 |
| Anadarko Basin | 98 | $14.64 | 118 | $16.32 |
| Williston Basin | 164 | $29.74 | 141 | $27.58 |
| Powder River Basin | 60 | $36.00 | 70 | $39.42 |
| Other | 15 | N/M | 14 | N/M |
| Total | $1,878 | $31.09 | $1,978 | $32.47 |
DD&A
| Q1 2024 | Q4 2023 | Change | |
|---|---|---|---|
| Oil and gas per Boe | $11.57 | $10.31 | 12% |
| Oil and gas | $699 | $628 | 11% |
| Other property and equipment | 23 | 22 | 3% |
| Total | $722 | $650 | 11% |
DD&A increased $72 million primarily due to a 12% increase in the oil and gas DD&A rate. The largest contributor to the higher rate was our 2023 drilling and development activity.
G&A
| Q1 2024 | Q4 2023 | Change | |
|---|---|---|---|
| G&A per Boe | $1.89 | $1.83 | 3% |
| Labor and benefits | $63 | $53 | 19% |
| Non-labor | 51 | 58 | -12% |
| Total | $114 | $111 | 3% |
G&A increased marginally in the first quarter of 2024 primarily due to higher labor and benefit costs which was partially offset by lower non-labor costs.
Other Items
| Q1 2024 · Q4 2023 · Change in earnings | ||||
|---|---|---|---|---|
| Commodity hedge valuation changes (1) | $(169) | $316 | $(485) | |
| Marketing and midstream operations | (21) | (9) | (12) | |
| Exploration expenses | 9 | 4 | (5) | |
| Asset dispositions | 1 | 11 | 10 | |
| Net financing costs | 76 | 77 | 1 | |
| Other, net | 22 | 10 | (12) | |
| $(503) | ||||
(1)
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.
Income Taxes
| Q1 2024 | Q4 2023 | |
|---|---|---|
| Current expense | $119 | $105 |
| Deferred expense | 40 | 164 |
| Total expense | $159 | $269 |
| Current tax rate | 16% | 7% |
| Deferred tax rate | 5% | 12% |
| Effective income tax rate | 21% | 19% |
For discussion on income taxes, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
Q1 2024 vs. Q1 2023
Our first quarter 2024 and first quarter 2023 net earnings were $0.6 billion and $1.0 billion, respectively. The graph below shows the change in net earnings from the first quarter of 2023 to the first quarter of 2024. The material changes are further discussed by category on the following pages.
Production Volumes
| Q1 2024 | % of Total | Q1 2023 | Change | |
|---|---|---|---|---|
| Oil (MBbls/d) | ||||
| Delaware Basin | 208 | 65% | 211 | -1% |
| Eagle Ford | 43 | 14% | 40 | 7% |
| Anadarko Basin | 11 | 3% | 15 | -29% |
| Williston Basin | 40 | 13% | 36 | 12% |
| Powder River Basin | 13 | 4% | 14 | -7% |
| Other | 4 | 1% | 4 | -5% |
| Total | 319 | 100% | 320 | 0% |
| Q1 2024 | % of Total | Q1 2023 | Change | |
|---|---|---|---|---|
| Gas (MMcf/d) | ||||
| Delaware Basin | 695 | 64% | 640 | 9% |
| Eagle Ford | 79 | 7% | 82 | -3% |
| Anadarko Basin | 223 | 21% | 237 | -6% |
| Williston Basin | 63 | 6% | 54 | 16% |
| Powder River Basin | 18 | 2% | 16 | 13% |
| Other | 1 | 0% | 1 | -24% |
| Total | 1,079 | 100% | 1,030 | 5% |
| Q1 2024 | % of Total | Q1 2023 | Change | |
|---|---|---|---|---|
| NGLs (MBbls/d) | ||||
| Delaware Basin | 113 | 68% | 97 | 16% |
| Eagle Ford | 14 | 9% | 15 | -6% |
| Anadarko Basin | 26 | 16% | 26 | -1% |
| Williston Basin | 10 | 6% | 8 | 22% |
| Powder River Basin | 2 | 1% | 2 | 1% |
| Other | — | 0% | 1 | N/M |
| Total | 165 | 100% | 149 | 11% |
| Q1 2024 | % of Total | Q1 2023 | Change | |
|---|---|---|---|---|
| Combined (MBoe/d) | ||||
| Delaware Basin | 437 | 66% | 415 | 5% |
| Eagle Ford | 70 | 10% | 68 | 2% |
| Anadarko Basin | 74 | 11% | 81 | -9% |
| Williston Basin | 61 | 9% | 53 | 14% |
| Powder River Basin | 18 | 3% | 19 | -4% |
| Other | 4 | 1% | 5 | -9% |
| Total | 664 | 100% | 641 | 4% |
From the first quarter 2023 to the first quarter of 2024, the change in volumes contributed to a $67 million increase in earnings. Volumes increased primarily due to new well activity in the Delaware Basin and Williston Basin which was partially offset by natural well declines in the Anadarko Basin.
Realized Prices
| Q1 2024 | Realization | Q1 2023 | Change | |
|---|---|---|---|---|
| Oil (per Bbl) | ||||
| WTI index | $77.01 | $76.17 | 1% | |
| Realized price, unhedged | $75.40 | 98% | $74.32 | 1% |
| Cash settlements | $(0.25) | $(0.10) | ||
| Realized price, with hedges | $75.15 | 98% | $74.22 | 1% |
| Q1 2024 | Realization | Q1 2023 | Change | |
|---|---|---|---|---|
| Gas (per Mcf) | ||||
| Henry Hub index | $2.25 | $3.44 | -35% | |
| Realized price, unhedged | $1.30 | 58% | $2.29 | -43% |
| Cash settlements | $0.32 | $0.18 | ||
| Realized price, with hedges | $1.62 | 72% | $2.47 | -34% |
| Q1 2024 | Realization | Q1 2023 | Change | |
|---|---|---|---|---|
| NGLs (per Bbl) | ||||
| WTI index | $77.01 | $76.17 | 1% | |
| Realized price, unhedged | $20.81 | 27% | $24.12 | -14% |
| Cash settlements | $(0.08) | $— | ||
| Realized price, with hedges | $20.73 | 27% | $24.12 | -14% |
| Q1 2024 | Q1 2023 | Change | |
|---|---|---|---|
| Combined (per Boe) | |||
| Realized price, unhedged | $43.52 | $46.44 | -6% |
| Cash settlements | $0.39 | $0.22 | |
| Realized price, with hedges | $43.91 | $46.66 | -6% |
From the first quarter of 2023 to the first quarter of 2024, realized prices contributed to a $117 million decrease in earnings. This decrease was due to lower unhedged realized gas and NGL prices which decreased primarily due to lower Henry Hub and Mont Belvieu index prices. This decrease was partially offset by a slight increase in unhedged realized oil prices which was primarily due to higher WTI index prices. Realized prices were strengthened by hedge cash settlements related primarily to gas commodities in the first quarter of 2024.
Hedge Settlements
| Q1 2024 · Q1 2023 · Change | ||||
|---|---|---|---|---|
| Oil | $(7) | $(3) | -133% | |
| Natural gas | 32 | 16 | 100% | |
| NGL | (1) | — | N/M | |
| Total cash settlements (1) | $24 | $13 | 85% | |
(1)
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
| Q1 2024 | Q1 2023 | Change | |
|---|---|---|---|
| LOE | $380 | $327 | 16% |
| Gathering, processing & transportation | 180 | 166 | 8% |
| Production taxes | 175 | 175 | 0% |
| Property taxes | 16 | 25 | -36% |
| Total | $751 | $693 | 8% |
| Per Boe: | |||
| LOE | $6.29 | $5.67 | 11% |
| Gathering, processing & transportation | $2.98 | $2.88 | 4% |
| Percent of oil, gas and NGL sales: | |||
| Production taxes | 6.7% | 6.5% | 2% |
LOE and gathering, processing and transportation expenses increased in the first quarter of 2024 primarily due to increased activity.
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.
| Q1 2024 | $ per BOE | Q1 2023 | $ per BOE | |
|---|---|---|---|---|
| Field-level cash margin (Non-GAAP) | ||||
| Delaware Basin | $1,275 | $32.06 | $1,334 | $35.71 |
| Eagle Ford | 266 | $41.82 | 257 | $41.75 |
| Anadarko Basin | 98 | $14.64 | 154 | $21.09 |
| Williston Basin | 164 | $29.74 | 156 | $32.65 |
| Powder River Basin | 60 | $36.00 | 70 | $41.43 |
| Other | 15 | N/M | 15 | N/M |
| Total | $1,878 | $31.09 | $1,986 | $34.42 |
DD&A
| Q1 2024 | Q1 2023 | Change | |
|---|---|---|---|
| Oil and gas per Boe | $11.57 | $10.25 | 13% |
| Oil and gas | $699 | $591 | 18% |
| Other property and equipment | 23 | 24 | -5% |
| Total | $722 | $615 | 17% |
DD&A increased $107 million primarily due to a 13% increase in the oil and gas DD&A rate. The largest contributor to the higher rate was our 2023 drilling and development activity.
G&A
| Q1 2024 | Q1 2023 | Change | |
|---|---|---|---|
| G&A per Boe | $1.89 | $1.85 | 2% |
| Labor and benefits | $63 | $56 | 13% |
| Non-labor | 51 | 50 | 2% |
| Total | $114 | $106 | 8% |
G&A increased in the first quarter of 2024 due to higher labor and benefit costs.
Other Items
| Q1 2024 · Q1 2023 · Change in earnings | ||||
|---|---|---|---|---|
| Commodity hedge valuation changes (1) | $(169) | $51 | $(220) | |
| Marketing and midstream operations | (21) | (25) | 4 | |
| Exploration expenses | 9 | 3 | (6) | |
| Asset dispositions | 1 | — | (1) | |
| Net financing costs | 76 | 72 | (4) | |
| Other, net | 22 | 5 | (17) | |
| $(244) | ||||
(1)
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.
Income Taxes
| Q1 2024 | Q1 2023 | |
|---|---|---|
| Current expense | $119 | $141 |
| Deferred expense | 40 | 80 |
| Total expense | $159 | $221 |
| Current tax rate | 16% | 12% |
| Deferred tax rate | 5% | 6% |
| Effective income tax rate | 21% | 18% |
For discussion on income taxes, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.
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