DEVON ENERGY CORP/DE

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.

Q3 2025 vs. Q2 2025

Our third quarter 2025 and second quarter 2025 net earnings were $693 million and $917 million, respectively. The graph below shows the change in net earnings from the second quarter of 2025 to the third quarter of 2025. The material changes are further discussed by category on the following pages.

Production Volumes

From the second quarter of 2025 to the third quarter of 2025, the change in volumes contributed to a $57 million increase in earnings. The increase in volumes was primarily due to new well activity in the Rockies, which was partially offset by natural well declines in the Anadarko Basin.

Realized Prices

From the second quarter of 2025 to the third quarter of 2025, realized prices contributed to a $42 million increase in earnings. Unhedged oil and gas prices increased primarily due to higher WTI index prices. The increase was partially offset by lower gas and NGL prices primarily due to lower Henry Hub and Mont Belvieu index prices, respectively.

We currently have approximately 30% and 35% of our remaining anticipated 2025 oil and gas production hedged, respectively. For 2026, we currently have approximately 20% and 30% of our anticipated 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

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

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.

During the second quarter of 2025, Devon sold its investment in Matterhorn for $372 million and recognized a pre-tax gain of $307 million ($239 million, net of tax), which was recorded to asset dispositions. The monetization of this investment did not change the terms or conditions of Devon's secured capacity on the pipeline. For additional information, see Note 12 in "Part I. Financial Information - Item 1. Financial Statements" in this report.

On July 4, 2025, OBBB was signed into law. As a result, Devon’s third quarter 2025 income tax expense included a current tax benefit of approximately $155 million and corresponding deferred tax expense associated with the deferral of income taxes resulting from OBBB. We expect continued current tax benefits from OBBB in the fourth quarter of 2025, and, due to the deduction of intangible drilling costs as part of the CAMT computation, we expect the impacts to be more significant in 2026 and beyond. For additional information on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

September 30, 2025 YTD vs. September 30, 2024 YTD

Our nine months ended September 30, 2025 net earnings were $2.1 billion, compared to net earnings of $2.3 billion for the first nine months ended September 30, 2024. The graph below shows the change in net earnings from the nine months ended September 30, 2024 to the nine months ended September 30, 2025. The material changes are further discussed by category on the following pages.

Production Volumes

From the nine months ended September 30, 2024 to the nine months ended September 30, 2025, the change in volumes contributed to a $1.4 billion 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 in the Delaware and Anadarko Basins.

Realized Prices

From the nine months ended September 30, 2024 to the nine months ended September 30, 2025, realized prices contributed to a $884 million decrease in earnings. This decrease was primarily due to lower unhedged realized oil and NGL prices which decreased primarily due to lower WTI and Mont Belvieu index prices, respectively. This decrease was partially offset by an increase in unhedged realized gas prices which was primarily due to higher Henry Hub index prices. Realized prices were also positively impacted by oil, 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 nine months of 2025 primarily due to increased activity in the Rockies related to the Grayson Mill acquisition in addition to new well activity in the Delaware Basin.

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 nine months of 2025 primarily due to higher volumes driven by the Grayson Mill acquisition and new well activity in the Delaware Basin.

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.

G&A

While our G&A increased in the first nine months of 2025, our G&A per BOE rate has 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 second quarter of 2025, Devon sold its investment in Matterhorn for $372 million and recognized a pre-tax gain of $307 million ($239 million, net of tax), which was recorded to asset dispositions. The monetization of this investment did not change the terms or conditions of Devon's secured capacity on the pipeline. For additional information, see Note 12 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. During the third quarter of 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. For additional information, see Note 13 in "Part I. Financial Information - Item 1. Financial Statements" in this report.

On July 4, 2025, OBBB was signed into law. As a result, Devon’s third quarter 2025 income tax expense included a current tax benefit of approximately $155 million and corresponding deferred tax expense associated with the deferral of income taxes resulting from OBBB. We expect continued current tax benefits from OBBB in the fourth quarter of 2025, and, due to the deduction of intangible drilling costs as part of the CAMT computation, we expect the impacts to be more significant in 2026 and beyond. For information on income taxes, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.