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.

Q1 2025 vs. Q4 2024

Our first quarter 2025 and fourth quarter 2024 net earnings were $509 million and $653 million, respectively. The graph below shows the change in net earnings from the fourth quarter of 2024 to the first quarter of 2025. The material changes are further discussed by category on the following pages.

Production Volumes

From the fourth quarter of 2024 to the first quarter of 2025, the change in volumes contributed to a $165 million decrease in earnings. The decrease in volumes was primarily due to natural well declines in the Delaware Basin, Eagle Ford and Anadarko Basin, as well as winter weather impacts in the Delaware and Anadarko Basins.

Realized Prices

From the fourth quarter of 2024 to the first quarter of 2025, realized prices contributed to a $205 million increase in earnings. Unhedged oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices, respectively. The increase in unhedged prices was partially offset by unfavorable gas and NGL hedge cash settlements.

We currently have approximately 30% and 35% of our remaining anticipated 2025 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 primarily due to the timing of new well activity in the Delaware Basin and Rockies, which led to higher LOE in the first quarter of 2025.

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 and Asset Impairments

In the first quarter of 2025, Devon rationalized two headquarters-related real estate assets resulting in total asset impairments of $254 million. As a result, our annual DD&A will be reduced by approximately $15 million and our net financing costs will be reduced by approximately $20 million due to the extinguishment of the associated financing lease. See Note 5 in "Part I. Financial Information – Item 1. Financial Statements" of this report for further discussion.

G&A

G&A costs were lower in the first quarter of 2025 primarily due to lower labor and benefit 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.

Income Taxes

For additional information on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Q1 2025 vs. Q1 2024

Our first quarter 2025 and first quarter 2024 net earnings were $509 million and $609 million, respectively. The graph below shows the change in net earnings from the first quarter of 2024 to the first quarter of 2025. The material changes are further discussed by category on the following pages.

Production Volumes

From the first quarter of 2024 to the first quarter of 2025, the change in volumes contributed to a $542 million increase in earnings. Volumes increased primarily due to the Grayson Mill acquisition in the Rockies, which closed in the third quarter of 2024 as well as new well activity across our portfolio, particularly in the Delaware Basin.

Realized Prices

From the first quarter of 2024 to the first quarter of 2025, realized prices contributed to a $45 million decrease in earnings. This decrease was due to lower unhedged realized oil prices which decreased primarily due to lower WTI index prices. This decrease was partially offset by an increase in unhedged realized gas and NGL prices which were primarily due to higher Henry Hub and Mont Belvieu index prices. Realized prices were also negatively impacted by unfavorable gas and NGL hedge cash settlements.

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 in the first quarter of 2025 primarily due to increased activity in the Rockies related to the Grayson Mill acquisition as well as new well activity across the portfolio.

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 and Asset Impairments

DD&A increased in the first quarter of 2025 primarily due to higher volumes driven by the Grayson Mill acquisition and new well activity across our portfolio.

In the first quarter of 2025, Devon rationalized two headquarters-related real estate assets resulting in total asset impairments of $254 million. As a result, our annual DD&A will be reduced by approximately $15 million and our net financing costs will be reduced by approximately $20 million due to the extinguishment of the associated financing lease. See Note 5 in "Part I. Financial Information – Item 1. Financial Statements" of this report for further discussion.

G&A

G&A increased in the first quarter of 2025 primarily due to higher employee compensation, driven in part by inflationary adjustments and the Grayson Mill acquisition. However, our G&A per Boe rate decreased due to the Grayson Mill acquisition efficiently expanding our operating scale and production.

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.

During the third quarter of 2024, we issued $3.25 billion of debt to partially fund the Grayson Mill acquisition. Additionally, we retired $472 million of debt in the third quarter of 2024. For additional information, see Note 13 in "Part I. Financial Information - Item 1. Financial Statements" in this report.

Income Taxes

For information on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.