DEVON ENERGY CORPDE

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.

Q2 2024 vs. Q1 2024

Our second quarter 2024 and first quarter 2024 net earnings were $855 million and $609 million, respectively. The graph below shows the change in net earnings from the first quarter of 2024 to the second quarter of 2024. The material changes are further discussed by category on the following pages.

Production Volumes

From the first quarter of 2024 to the second quarter of 2024, the change in volumes contributed to a $151 million increase in earnings. The increase in volumes was primarily due to new well activity in the Delaware Basin, Anadarko Basin and Eagle Ford.

Realized Prices

From the first quarter of 2024 to the second quarter of 2024, realized prices contributed to a $16 million increase in earnings. Unhedged oil prices increased primarily due to higher WTI index prices, while unhedged gas and NGL prices decreased primarily due to lower Henry Hub and Mont Belvieu index prices. The decrease in the Henry Hub index price was 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

(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

Production expenses increased during the second quarter of 2024 primarily due to increased activity as well as higher production taxes resulting from an increase in oil 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.

DD&A

DD&A increased in the second quarter of 2024 primarily due to higher volumes.

G&A

Other Items

(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

For discussion on income taxes, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

June 30, 2024 YTD vs. June 30, 2023 YTD

Our six months ended June 30, 2024 net earnings were $1.5 billion, compared to net earnings of $1.7 billion for the first six months ended June 30, 2023. The graph below shows the change in net earnings from the six months ended June 30, 2023 to the six months ended June 30, 2024. The material changes are further discussed by category on the following pages.

Production Volumes

From the six months ended June 30, 2023 to the six months ended June 30, 2024, the change in volumes contributed to a $190 million increase in earnings. Volumes increased primarily due to new well activity in the Delaware Basin, Williston Basin and Eagle Ford, which was partially offset by natural well declines in the Anadarko Basin.

Realized Prices

From the six months ended June 30, 2023 to the six months ended June 30, 2024, realized prices contributed to a $63 million increase in earnings. This increase was due to higher unhedged realized oil prices which increased primarily due to higher WTI index prices. This increase was partially offset by a decrease in unhedged realized gas prices which was primarily due to lower Henry Hub index prices. Realized prices were strengthened by hedge cash settlements related primarily to gas commodities in the first six months of 2024.

Hedge Settlements

(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

LOE and gathering, processing and transportation expenses increased for the first six months 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.

DD&A

DD&A increased in the first six months of 2024 primarily due to an increase in the oil and gas DD&A rate. The largest contributor to the higher rate was our 2023 drilling and development activity. DD&A also increased in the first six months of 2024 due to higher volumes.

G&A

G&A increased for the six months ended 2024 due to higher labor and non-labor costs.

Other Items

(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.

In the second quarter of 2023, we recorded a $64 million gain within asset dispositions related to the difference between the fair market value and book value of assets contributed to the Water JV. For additional information, see Note 1 in "Part I. Financial Information - Item 1. Financial Statements" in this report.

Income Taxes

For discussion on income taxes, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.