Former name, address and former fiscal year, if changed from last report: Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

On ~~October~~July 20, ~~2021, 677.0~~2022, 654.8 million shares of common stock were outstanding.

Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Devon,” the “Company” and “Registrant” refer to Devon Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within ~~thi~~sthis Quarterly Report on Form 10-Q:

“Boe” means barrel of oil equivalent. Gas proved reserves and production are converted to Boe, at the pressure and temperature base standard of each respective state in which the gas is produced, at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of gas and oil. NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.

“Canada” means the division of Devon encompassing oil and gas properties located in Canada. On June 27, 2019, all of Devon’s Canadian operating assets and operations were divested. All dollar amounts associated with Canada are in U.S. dollars, unless stated otherwise.

“Merger” means the merger of Merger Sub with and into WPX, with WPX continuing as the surviving corporation and a wholly-owned subsidiary of the Company, pursuant to the terms of the Merger Agreement.

“Merger Agreement” means that certain Agreement and Plan of Merger, dated September 26, 2020, by and among the Company, Merger Sub and WPX.

“Merger Sub” means East Merger Sub, Inc., a wholly-owned subsidiary of the Company.

“Senior Credit Facility” means Devon’s syndicated unsecured revolving line of credit, effective as of October 5, 2018.

This report includes “forward-looking statements” as defined by the SEC. 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 report 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:

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 assume no duty to update or revise our forward-looking statements based on new information, future events or otherwise.

												Other
						Additional						Comprehensive																								Other
	Common Stock					Paid-In			Retained			Earnings			Treasury			Noncontrolling			Total									Additional						Comprehensive
	Shares			Amount		Capital			Earnings			(Loss)			Stock			Interests			Equity			Common Stock						Paid-In			Retained			Earnings			Treasury			Noncontrolling			Total
	(Unaudited)																							Shares			Amount			Capital			Earnings			(Loss)			Stock			Interests			Equity
Three Months Ended September 30, 2021
Balance as of June 30, 2021		677		$	68	$	8,189		$	243		$	(101	)	$	—		$	136		$	8,535
																								(Unaudited)
Three Months Ended June 30, 2022
Balance as of March 31, 2022																									661		$	66		$	7,371		$	2,013		$	(131	)	$	(19	)	$	135		$	9,435
Net earnings																									—			—			—			1,932			—			—			6			1,938
Other comprehensive earnings, net of tax																									—			—			—			—			1			—			—			1
Restricted stock grants, net of cancellations																									—			1			—			—			—			—			—			1
Common stock repurchased																									—			—			—			—			—			(329	)		—			(329	)
Common stock retired																									(5	)		(1	)		(334	)		—			—			335			—			—
Common stock dividends																									—			—			—			(838	)		—			—			—			(838	)
Share-based compensation																									—			—			23			—			—			—			—			23
Distributions to noncontrolling interests																									—			—			—			—			—			—			(5	)		(5	)
Balance as of June 30, 2022																									656		$	66		$	7,060		$	3,107		$	(130	)	$	(13	)	$	136		$	10,226
Three Months Ended June 30, 2021
Balance as of March 31, 2021																									675		$	67		$	8,172		$	218		$	(104	)	$	0		$	133		$	8,486
Net earnings		—			—		—			838			—			—			6			844			—			—			—			256			—			—			5			261
Other comprehensive earnings, net of tax		—			—		—			—			1			—			—			1			—			—			—			—			3			—			—			3
Restricted stock grants, net of cancellations		—			—		(1	)		—			—			—			—			(1	)		2			1			(1	)		—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(1	)		—			(1	)		—			—			—			—			—			(2	)		—			(2	)
Common stock retired		—			—		(1	)		—			—			1			—			—			—			—			(2	)		—			—			2			—			—
Common stock dividends		—			—		—			(331	)		—			—			—			(331	)		—			—			—			(231	)		—			—			—			(231	)
Share-based compensation		—			—		19			—			—			—			—			19			—			—			20			—			—			—			—			20
Contributions from noncontrolling interests		—			—		—			—			—			—			1			1			—			—			—			—			—			—			2			2
Distributions to noncontrolling interests		—			—		—			—			—			—			(6	)		(6	)		—			—			—			—			—			—			(4	)		(4	)
Balance as of September 30, 2021		677		$	68	$	8,206		$	750		$	(100	)	$	—		$	137		$	9,061
Three Months Ended September 30, 2020
Balance as of June 30, 2020		383		$	38	$	2,720		$	586		$	(117	)	$	—		$	126		$	3,353
Net earnings (loss)		—			—		—			(92	)		—			—			2			(90	)
Balance as of June 30, 2021																									677		$	68		$	8,189		$	243		$	(101	)	$	0		$	136		$	8,535
Six Months Ended June 30, 2022
Balance as of December 31, 2021																									663		$	66		$	7,636		$	1,692		$	(132	)	$	0		$	137		$	9,399
Net earnings																									—			—			—			2,921			—			—			12			2,933
Other comprehensive earnings, net of tax		—			—		—			—			1			—			—			1			—			—			—			—			2			—			—			2
Restricted stock grants, net of cancellations																									2			1			1			—			—			—			—			2
Common stock repurchased		—			—		—			—			—			(1	)		—			(1	)		—			—			—			—			—			(634	)		—			(634	)
Common stock retired		—			—		(1	)		—			—			1			—			—			(10	)		(1	)		(620	)		—			—			621			—			—
Common stock dividends		—			—		—			(143	)		—			—			—			(143	)		—			—			—			(1,506	)		—			—			—			(1,506	)
Share-based compensation		—			—		31			—			—			—			—			31			1			—			43			—			—			—			—			43
Contributions from noncontrolling interests		—			—		—			—			—			—			1			1
Distributions to noncontrolling interests		—			—		—			—			—			—			(4	)		(4	)		—			—			—			—			—			—			(13	)		(13	)
Balance as of September 30, 2020		383		$	38	$	2,750		$	351		$	(116	)	$	—		$	125		$	3,148
Nine Months Ended September 30, 2021
Balance as of June 30, 2022																									656		$	66		$	7,060		$	3,107		$	(130	)	$	(13	)	$	136		$	10,226
Six Months Ended June 30, 2021
Balance as of December 31, 2020		382		$	38	$	2,766		$	208		$	(127	)	$	—		$	134		$	3,019			382		$	38		$	2,766		$	208		$	(127	)	$	—		$	134		$	3,019
Net earnings		—			—		—			1,307			—			—			14			1,321			—			—			—			469			—			—			8			477
Other comprehensive earnings, net of tax		—			—		—			—			27			—			—			27			—			—			—			—			26			—			—			26
Restricted stock grants, net of cancellations		6			1		(2	)		—			—			—			—			(1	)		6			1			(1	)		—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(41	)		—			(41	)		—			—			—			—			—			(40	)		—			(40	)
Common stock retired		(2	)		—		(41	)		—			—			41			—			—			(2	)		—			(40	)		—			—			40			—			—
Common stock dividends		—			—		—			(765	)		—			—			—			(765	)		—			—			—			(434	)		—			—			—			(434	)
Common stock issued		290			29		5,403			—			—			—			—			5,432			290			29			5,403			—			—			—			—			5,432
Share-based compensation		1			—		80			—			—			—			—			80			1			—			61			—			—			—			—			61
Contributions from noncontrolling interests		—			—		—			—			—			—			3			3			—			—			—			—			—			—			2			2
Distributions to noncontrolling interests		—			—		—			—			—			—			(14	)		(14	)		—			—			—			—			—			—			(8	)		(8	)
Balance as of September 30, 2021		677		$	68	$	8,206		$	750		$	(100	)	$	—		$	137		$	9,061
Nine Months Ended September 30, 2020
Balance as of December 31, 2019		382		$	38	$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920
Net earnings (loss)		—			—		—			(2,578	)		—			—			5			(2,573	)
Other comprehensive earnings, net of tax		—			—		—			—			3			—			—			3
Restricted stock grants, net of cancellations		3			—		—			—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(55	)		—			(55	)
Common stock retired		(3	)		—		(55	)		—			—			55			—			—
Common stock dividends		—			—		—			(219	)		—			—			—			(219	)
Share-based compensation		1			—		70			—			—			—			—			70
Contributions from noncontrolling interests		—			—		—			—			—			—			12			12
Distributions to noncontrolling interests		—			—		—			—			—			—			(10	)		(10	)
Balance as of September 30, 2020		383		$	38	$	2,750		$	351		$	(116	)	$	—		$	125		$	3,148
Balance as of June 30, 2021																									677		$	68		$	8,189		$	243		$	(101	)	$	0		$	136		$	8,535

The accompanying unaudited interim financial statements and notes of Devon have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying unaudited interim financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s ~~2020~~2021 Annual Report on Form 10-K. The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 and Devon’s financial position as of ~~September~~June 30, ~~2021.~~2022.

Devon and WPX completed an all-stock merger of equals on January 7, 2021.On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. See Note 2 for further discussion.

The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it indicative of future results.

~~The following table presents a summary of Devon’s asset impairments. Unproved impairments shown below are included in exploration expenses in the consolidated statements of comprehensive earnings.~~

The following table reconciles net earnings ~~(loss) from continuing operations~~ and weighted-average common shares outstanding used in the calculations of basic and diluted net earnings ~~(loss)~~ per ~~share from continuing operations.~~share.

As of September 30, 2021, Devon had approximately $200 million of accrued capital expenditures included in total property and equipment, net and accounts payable on the consolidated balance sheets. As of December 31, 2020 (pre-merger), Devon had approximately $100 million of accrued capital expenditures in total property and equipment, net and accounts payable on the consolidated balance sheets. As of January 7, 2021 (date of Merger closing), Devon assumed approximately $150 million of accrued capital expenditures included in accounts payable.

The following table presents the changes in Devon’s asset retirement obligations.

During the first six months of 2022, Devon reduced its asset retirement obligations by $35 million primarily due to extended retirement dates for oil and gas assets, partially offset by inflation-driven increases to current settlement costs.

On October 1, 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, of $490 million. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commenced on January 1, 2021 and has a term of four years.

~~The following table presents the amounts reported in the consolidated statements of comprehensive earnings as discontinued operations.~~

Devon is party to various legal ~~proceedings and other matters that may result~~actions arising in ~~future payment obligations or other adverse consequences to~~connection with its business. Matters that are probable of an unfavorable outcome to Devon and which ~~any related potential payment obligation or other liability~~ can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. ~~While~~None of the actions are believed by management ~~does not believe any current matter is~~to likely to involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded ~~accruals, the ultimate outcome of such matters and the~~accruals. Actual amounts ~~involved~~ could differ materially from management’s ~~estimates~~estimates.

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently ~~defending against~~named as a defendant in a number of such lawsuits, ~~either as a named defendant~~including some lawsuits in which the ~~action or pursuant~~plaintiffs seek to ~~indemnity obligations for the benefit~~certify classes of ~~a third party. Plaintiffs in some of these lawsuits are seeking class certification.~~similarly situated plaintiffs. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, ~~failed to “enhance” the value of gas through processing,~~paid royalty proceeds in an untimely manner without including required interest, used improper measurement techniques and entered into gas purchase and ~~midstream~~processing arrangements with affiliates that resulted in underpayment of royalties ~~or otherwise failed to prudently market~~in connection with oil, natural gas and NGLs produced and ~~sold and pay royalties on the highest obtainable price.~~sold. Devon is also involved in governmental agency proceedings and royalty audits and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims. As of June 30, 2022, Devon ~~does not currently believe that it is subject to material exposure with respect~~has accrued approximately $25 million in other current liabilities pertaining to such royalty matters.

Devon’s business is subject to numerous federal, state, ~~local~~tribal and ~~Native American tribal~~local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal fines and penalties, as well as remediation costs. Although Devon believes that it is in substantial compliance with applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on its business, there can be no assurance that this will continue in the future.

Beginning in 2013, various parishes in Louisiana filed suit against numerous oil and gas companies, including Devon, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused substantial environmental contamination, subsidence and other environmental damages to land and water

bodies located in the coastal zone of Louisiana. The plaintiffs’ claims against Devon relate primarily to the operations of several of Devon’s corporate predecessors. The plaintiffs seek, among other things, ~~the~~ payment of the costs necessary to clear, re-vegetate and otherwise restore the allegedly impacted areas. Although Devon cannot predict the ultimate outcome of these matters, Devon ~~believes these claims~~intends to ~~be baseless and is~~ vigorously ~~defending~~defend against these claims.

The State of Delaware and various municipalities and other governmental and private parties in California have filed legal proceedings against numerous oil and gas companies, including Devon, seeking relief to abate alleged impacts of climate change. These proceedings include far-reaching claims for monetary damages and injunctive relief. Although Devon cannot predict the ultimate outcome of these matters,Devon ~~believes these claims to be baseless and~~ intends to vigorously defend against the proceedings.

Direct and indirect purchasers of natural gas in various states filed individual and class action lawsuits against The Williams Companies, Inc. (“Williams”) and other parties alleging the manipulation of published gas price indices and seeking unspecified amounts of damages. WPX and certain of its subsidiaries, which were then affiliates of Williams, were also named as defendants in these actions.

Devon cannot reasonably estimate a range of potential exposure at this time for these matters. In connection with its spin-off from Williams in 2011, WPX entered into a separation and distribution agreement with Williams, pursuant to which Williams agreed to indemnify and hold WPX and its subsidiaries harmless from any losses arising out of these matters.

Pursuant to various sale agreements relating to divested businesses and assets, Devon has indemnified various purchasers against liabilities that they may incur with respect to the businesses and assets acquired from Devon. Additionally, federal, state and other laws in areas of former operations may require previous operators (including corporate successors of previous operators) to perform or make payments in certain circumstances where the current operator may no longer be able to satisfy the applicable obligation. Such obligations may include plugging and abandoning wells, removing production facilities or performing requirements under surface agreements in existence at the time of disposition.

In November 2020, the Department of the Interior, Bureau of Safety and Environmental Enforcement, ordered several oil and gas operators, including Devon, to perform decommissioning and reclamation activities related to two California offshore oil and gas production platforms and related facilities. The current operator and owner of the platforms contends that it does not have the financial ability to perform these obligations and relinquished the related federal lease in October 2020. In response to the apparent insolvency of the current operator, the government has ordered the former operators and alleged former lease record title owners to decommission the ~~platforms.~~platforms and related facilities. The government contends that an alleged corporate predecessor of Devon owned a partial interest in the subject lease and platforms. Although Devon cannot predict the ultimate outcome of this matter, Devon denies any obligation to decommission the subject platforms, has appealed the order, and believes any decommissioning obligation related to the subject platforms should be assumed by others.

The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other current payables, accrued expenses and lease liabilities included in the accompanying consolidated balance sheets approximated fair value at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, as applicable. Therefore, such financial assets and liabilities are not presented in the following ~~table. Additionally, information regarding the fair values of oil and gas assets is provided in~~ table.~~Note 5~~.

The following methods and assumptions were used to estimate the fair values in the table above.

Cash equivalents – Amounts consist primarily of money market investments and the fair value approximates the carrying value.

Commodity derivatives – The fair value of commodity derivatives is estimated using internal discounted cash flow calculations based upon forward curves and data obtained from independent third parties for contracts with similar terms or data obtained from counterparties to the agreements.

Debt – Devon’s debt instruments do not consistently trade actively in an established market. The fair values of its debt are estimated based on rates available for debt with similar terms and maturity when active trading is not available.

Contingent Earnout Payments – Devon has the right to receive contingent consideration related to the Barnett and non-core Rockies asset divestitures based on future oil and gas prices. These values were derived using a Monte Carlo valuation model and qualify as a level 3 fair value measurement. For additional information, see Note 2.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis addresses material changes in our results of operations for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021~~2022, compared to previous periods and in our financial condition and liquidity since December 31, ~~2020. To help facilitate comparisons to the three-month period ended June 30, 2021, information regarding our second quarter 2021 financial results can be found in our~~ ~~Second Quarter 2021 Quarterly Report on Form 10-Q~~ ~~. Additionally, for~~2021. For information regarding our critical accounting policies and estimates, see our ~~2020~~2021 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

~~On September 26, 2020, we entered into the Merger Agreement, providing for an all-stock merger of equals with WPX which successfully closed on January 7, 2021.~~ The Merger has ~~created~~helped us become a leading unconventional oil producer in the U.S., with an asset base underpinned by premium acreage in the economic core of the Delaware Basin. This strategic combination ~~accelerates~~accelerated our transition to a cash-return business model, including the implementation of a fixed plus variable dividend strategy. In July 2022, we acquired additional producing properties and leasehold interests in the Williston Basin that are complementary to our existing acreage, offer operational synergies and add high-quality inventory. We remain focused on building economic value by executing on our strategic priorities of ~~disciplined oil volume~~moderating growth, ~~while capturing~~emphasizing capital efficiencies, maintaining and improving operational and corporate synergies, reducing reinvestment rates to maximize free cash flow, maintaining low leverage, delivering cash returns to our shareholders and pursuing ESG excellence. Our recent performance highlights for these priorities include the following items:

•

~~Third quarter oil production totaled 303 MBbls/d, exceeding our plan by 3%.~~

•

Second quarter oil production totaled 300 MBbls/d, exceeding our plan by 3%.

•

~~On pace to achieve approximately $600 million in annual cost savings by the end of 2021.~~

•

As of June 30, 2022, completed approximately 57% of our authorized $2.0 billion share repurchase program, with approximately 23 million of our common shares repurchased for approximately $1.1 billion, or $49.44 per share since inception of the plan.

•

~~Redeemed approximately $1.2 billion of senior notes in 2021.~~

•

Exited the second quarter with $6.5 billion of liquidity, including $3.5 billion of cash, with no debt maturities until the third quarter of 2023.

•

~~Exited the third quarter with $5.3 billion of liquidity, including $2.3 billion of cash, with no debt maturities until 2023.~~

•

Generated $2.7 billion of operating cash flow in the second quarter of 2022 and $4.5 billion in the first six months of 2022.

•

~~Generated $3.3 billion of operating cash flow through the first three quarters of 2021.~~

•

Announced a 13% increase to the fixed dividend beginning in the third quarter of 2022.

•

~~Including variable dividends, paid dividends of approximately $761 million in the first nine months of 2021 and have declared $568 million of dividends to be paid in the fourth quarter of 2021.~~

•

Including variable dividends, paid dividends of approximately $1.5 billion in the first six months of 2022 and have declared $1.0 billion of dividends to be paid in the third quarter of 2022.

•

~~Authorized a $1.0 billion share repurchase program, representing 4% of outstanding shares at the time of announcement.~~

We ~~operate under a disciplined returns-driven strategy focused on delivering strong operational results, financial strength and value to our shareholders and continuing our commitment to ESG excellence,~~ ~~which~~ ~~provides us with a strong foundation to grow returns, margin and profitability.~~

We ~~continue to execute on our strategy and navigate through various economic environments by protecting our financial strength, maintaining a commitment~~remain committed to capital discipline ~~improving~~and delivering the objectives that underpin our ~~cash cost structure~~current plan. Those objectives prioritize value creation through moderated capital investment and ~~preserving operational continuity.~~production growth, particularly with a view of the steep backwardation in commodity prices, supply chain constraints and the economic uncertainty arising from recent geopolitical events.

Commodity prices ~~have~~ strengthened throughout 2021 and oil prices have continued to remain high in the first six months of 2022, which has significantly improved our earnings and cash flow generation. The increase in commodity prices ~~has been~~during 2021 was primarily driven by increased demand resulting from the initial recovery from the COVID-19 pandemic, as well as OPEC+ and other oil and natural gas producers not rapidly increasing ~~current~~ production levels. The military conflict between Russia and Ukraine and related economic sanctions imposed on Russia has further exacerbated supply shortages, causing oil prices to increase even more during the first six months of 2022.

Table of Contents

Trends of our quarterly earnings, operating cash flow, EBITDAX and capital expenditures are shown below. ~~The quarterly earnings chart and cash flow chart present amounts pertaining to Devon’s continuing operations.~~ “Core earnings” and “EBITDAX” are financial measures not prepared in accordance with GAAP. For a description of these measures, including reconciliations to the comparable GAAP measures, see “Non-GAAP Measures” in this Item 2.

~~Table of Contents~~

Our earnings increased from the first quarter of 2022 to the second quarter of ~~2021 to the third quarter of 2021~~2022 primarily due to ~~an increase in overall~~higher commodity prices as well as higher sold ~~volumes. Led by a 42%~~volumes resulting from winter weather downtime experienced in the first quarter of 2022. WTI and ~~7% increase in~~ Henry Hub increased 15% and ~~WTI~~45%, respectively, from the first quarter of 2022 to the second quarter of ~~2021~~2022. This contributed to ~~the third quarter of 2021, respectively,~~a 19% increase in our unhedged combined realized ~~price rose 13%. Volumes increased due to new well activity in the Delaware Basin and Eagle Ford.~~prices.

Our net earnings in recent quarters have been significantly impacted by non-cash adjustments to the value of our commodity hedges. Net earnings in the second quarter of 2021 and the first quarter of ~~2021, the fourth quarter of 2020 and the third quarter of 2020~~2022 each included a hedge valuation loss, net of tax of $0.3 ~~billion, $0.2 billion, $0.1~~billion. Net earnings in the fourth quarter of 2021 and second quarter of 2022 each included a hedge valuation gain, net of tax of $0.4 billion and ~~$0.1~~$0.2 billion, respectively. Excluding these amounts, our core earnings have been more stable over recent quarters ~~but~~and continue to ~~be heavily influenced by~~trend upward while remaining sensitive to volatile commodity prices.

Like earnings, our operating cash flow is sensitive to volatile commodity prices. Our cash flow and EBITDAX ~~increased during the first, second and third quarters of 2021~~have continued to trend upward primarily due to ~~higher~~improved commodity prices and ~~an increase in sold volumes driven by our WPX merger and improved post-merger~~overall market conditions as well as strong operating performance.

We exited the ~~third~~second quarter of ~~2021~~2022 with ~~$5.3~~$6.5 billion of liquidity, comprised of ~~$2.3~~$3.5 billion of cash and $3.0 billion of available credit under our Senior Credit Facility. We currently have $6.5 billion of debt outstanding with no maturities until August 2023. We currently have approximately ~~45% and 50% of our remaining 2021 oil and gas production hedged, respectively, and 20%~~25% and 30% of our anticipated remaining 2022 oil and gas production hedged, respectively.

Table of Contents

These contracts consist of collars and swaps based off the WTI oil benchmark and the Henry Hub and NYMEX last day natural gas indices. Additionally, we have entered into regional basis swaps in an effort to protect price realizations across our portfolio.

As commodity prices and our operating performance strengthen and bolster our financial condition, we have authorized opportunistic repurchases of up to ~~$1.0~~$2.0 billion of our common shares ~~through~~with an expiration date of May 4, 2023. We repurchased approximately 5.1 million shares in the ~~end~~second quarter of ~~2022.~~2022 for approximately $318 million, or $63.07 per share. As of June 30, 2022, we have repurchased approximately 23.0 million shares for approximately $1.1 billion, or $49.44 per share, since the inception of the program. Additionally, we continue funding our fixed plus variable dividends, which ~~have grown 13%, 44% and 71% over~~totaled $1.5 billion in the ~~past three quarters, respectively, including the~~first six months of 2022. We recently declared a dividend payable in the ~~fourth~~third quarter of ~~2021.~~ 2022 for $1.0 billion and increased our fixed dividend by 13% beginning in the third quarter of 2022.

~~Table of Contents~~

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 ~~earnings attributable to discontinued operations or~~ noncontrolling interests.

~~Q3 2021~~Q2 2022 vs. ~~Q2 2021~~Q1 2022

Our ~~third~~second quarter ~~2021~~2022 net earnings were ~~$844 million,~~$1.9 billion, compared to net earnings of ~~$261 million~~$1.0 billion for the ~~second~~first quarter of ~~2021.~~2022. The graph below shows the change in net earnings from the first quarter of 2022 to the second quarter of ~~2021 to the third quarter of 2021.~~2022. The material changes are further discussed by category on the following pages.

30Production Volumes


	Q2 2022		% of Total			Q1 2022		Change
Oil (MBbls/d)
Delaware Basin		222		74	%		209		6	%
Anadarko Basin		14		5	%		14		-5	%
Williston Basin		27		9	%		32		-13	%
Eagle Ford		19		6	%		17		9	%
Powder River Basin		14		5	%		12		12	%
Other		4		1	%		4		11	%
Total		300		100	%		288		4	%


	Q2 2022		% of Total			Q1 2022		Change
Gas (MMcf/d)
Delaware Basin		618		64	%		561		10	%
Anadarko Basin		212		22	%		210		1	%
Williston Basin		52		6	%		54		-4	%
Eagle Ford		60		6	%		61		-2	%
Powder River Basin		18		2	%		19		-3	%
Other		1		0	%		1		13	%
Total		961		100	%		906		6	%

Table of Contents

~~Production Volumes~~

	Q3 2021		% of Total			Q2 2021		Change
Oil (MBbls/d)
											Q2 2022		% of Total			Q1 2022		Change
NGLs (MBbls/d)
Delaware Basin		213		70	%		191		+11	%		111		71	%		92		21	%
Anadarko Basin		14		5	%		17		- 15	%		25		16	%		25		-2	%
Williston Basin		39		13	%		46		- 15	%		9		6	%		8		17	%
Eagle Ford		20		6	%		18		+11	%		9		6	%		9		10	%
Powder River Basin		14		5	%		16		- 13	%		2		1	%		2		2	%
Other		3		1	%		3		+1	%		—		0	%		—	N/M
Total		303		100	%		291		+4	%		156		100	%		136		15	%

	Q3 2021		% of Total			Q2 2021		Change
Gas (MMcf/d)
											Q2 2022		% of Total			Q1 2022		Change
Combined (MBoe/d)
Delaware Basin		578		62	%		513		+13	%		436		71	%		394		11	%
Anadarko Basin		219		23	%		225		- 3	%		74		12	%		75		-1	%
Williston Basin		59		6	%		61		- 4	%		45		7	%		48		-6	%
Eagle Ford		67		7	%		59		+14	%		38		6	%		36		6	%
Powder River Basin		19		2	%		21		- 10	%		19		3	%		18		8	%
Other		1		0	%		2		- 45	%		4		1	%		4		-4	%
Total		943		100	%		881		+7	%		616		100	%		575		7	%

Q3 2021

% of Total

Q2 2021

Change

NGLs (MBbls/d)

Delaware Basin

100

68
%

82

+23
%
Anadarko Basin

25

17
%

26

- 4
%
Williston Basin

9

6
%

9

- 3
%
Eagle Ford

11

7
%

9

+25
%
Powder River Basin

3

2
%

3

- 4
%
Other

—

0
%

—

N/M

Total

148

100
%

129

+15
%

Q3 2021

% of Total

Q2 2021

Change

Combined (MBoe/d)

Delaware Basin

409

67
%

358

+14
%
Anadarko Basin

75

12
%

80

- 6
%
Williston Basin

58

10
%

66

- 12
%
Eagle Ford

42

7
%

37

+15
%
Powder River Basin

20

3
%

22

- 12
%
Other

4

1
%

4

+0
%
Total

608

100
%

567

+7
%

From the first quarter of 2022 to the second quarter of ~~2021 to the third quarter of 2021,~~2022, the change in volumes contributed to a ~~$149~~$224 million increase in earnings. The increase in volumes was primarily due to new well activity in the Delaware Basin ~~and Eagle Ford which was partially offset by lower volumes~~as well as winter weather downtime experienced in the ~~Anadarko,~~first quarter of 2022. We expect volumes to increase approximately 15 MBoe/d in the third quarter of 2022 due to the acquired Williston ~~and Powder River Basins.~~Basin assets in July 2022.

Realized Prices

Q3 2021

Realization

Q2 2021

Change

Oil (per Bbl)

WTI index

$
70.64

$
66.04

+7
%
Realized price, unhedged

$
68.19

97%

$
63.63

+7
%
Cash settlements

$
(10.60
)

$
(13.29
)

Realized price, with hedges

$
57.59

82%

$
50.34

+14
%

	Q3 2021			Realization	Q2 2021			Change
Gas (per Mcf)
Henry Hub index	$	4.02			$	2.83			+42	%
											Q2 2022			Realization	Q1 2022			Change
Oil (per Bbl)
WTI index											$	108.70			$	94.45			15	%
Realized price, unhedged	$	3.55		88%	$	2.35			+51	%	$	108.93		100%	$	92.94			17	%
Cash settlements	$	(0.78	)		$	(0.15	)				$	(13.13	)		$	(11.32	)
Realized price, with hedges	$	2.77		69%	$	2.20			+26	%	$	95.80		88%	$	81.62			17	%

	Q3 2021			Realization	Q2 2021			Change
NGLs (per Bbl)
WTI index	$	70.64			$	66.04			+7	%
											Q2 2022			Realization	Q1 2022			Change
Gas (per Mcf)
Henry Hub index											$	7.17			$	4.96			45	%
Realized price, unhedged	$	31.25		44%	$	23.89			+31	%	$	6.37		89%	$	3.77			69	%
Cash settlements	$	(0.45	)		$	(0.25	)				$	(1.31	)		$	(0.62	)
Realized price, with hedges	$	30.80		44%	$	23.64			+30	%	$	5.06		71%	$	3.15			61	%

	Q3 2021			Q2 2021			Change
Combined (per Boe)
										Q2 2022		Realization	Q1 2022		Change
NGLs (per Bbl)
WTI index										$	108.70		$	94.45		15	%
Realized price, unhedged	$	47.08		$	41.75			+13	%	$	40.28	37%	$	37.76		7	%
Cash settlements	$	(6.60	)	$	(7.11	)				$	—		$	—
Realized price, with hedges	$	40.48		$	34.64			+17	%	$	40.28	37%	$	37.76		7	%


	Q2 2022			Q1 2022			Change
Combined (per Boe)
Realized price, unhedged	$	73.13		$	61.40			19	%
Cash settlements	$	(8.43	)	$	(6.65	)
Realized price, with hedges	$	64.70		$	54.75			18	%

From the first quarter of 2022 to the second quarter of ~~2021 to the third quarter of 2021,~~2022, realized prices contributed to a ~~$332~~$701 million increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices. The increase in index prices was partially offset by hedge cash settlements related to oil and gas commodities.

~~We currently have~~ approximately 45% of our remaining 2021 oil production hedged with an average floor price of $40/Bbl and approximately 50% of our remaining 2021 gas production hedged with an average floor price of $2.60/Mcf. We currently have approximately ~~20% of our 2022 oil production hedged with an average floor price of $45/Bbl~~25% and ~~approximately~~ 30% of our anticipated remaining 2022 oil and gas production hedged, ~~with an average floor price~~respectively.

Table of ~~$2.70/Mcf.~~Contents

Hedge Settlements


	Q2 2022			Q1 2022			Change
	Q
Oil	$	(358	)	$	(293	)		-22	%
Natural gas		(114	)		(51	)		-124	%
Total cash settlements (1)	$	(472	)	$	(344	)		-37	%

(1)

Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

~~Hedge Settlements~~

Q3 2021

Q2 2021

Change

Q

Oil

$
(296
)

$
(352
)

+16
%
Natural gas

(68
)

(12
)

N/M

NGL

(6
)

(3
)

- 100
%
Total cash settlements ⁽¹⁾

$
(370
)

$
(367
)

- 1
%

~~(1)~~

~~Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.~~

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.

~~Table of Contents~~

Production Expenses


	Q3 2021			Q2 2021			Change			Q2 2022			Q1 2022			Change
LOE	$	215		$	210			+2	%	$	255		$	224			14	%
Gathering, processing & transportation		157			147			+7	%		177			161			10	%
Production taxes		176			143			+23	%		278			214			30	%
Property taxes		7			13			- 46	%		19			19			0	%
Total	$	555		$	513			+8	%	$	729		$	618			18	%
Per Boe:
LOE	$	3.85		$	4.06			- 5	%	$	4.56		$	4.33			5	%
Gathering, processing & transportation	$	2.81		$	2.85			- 1	%	$	3.15		$	3.11			2	%
Percent of oil, gas and NGL sales:
Production taxes		6.7	%		6.7	%		- 0	%		6.8	%		6.7	%		0	%

Production expenses increased from the first quarter of 2022 to the second quarter of ~~2021 to the third quarter of 2021~~2022 primarily due to ~~new well activity in the Delaware Basin.~~higher volumes. Production taxes also increased due to ~~the rise in~~higher commodity 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.


	Q3 2021		$ per BOE		Q2 2021		$ per BOE		Q2 2022		$ per BOE		Q1 2022		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	1,480	$	39.28	$	1,102	$	33.79	$	2,511	$	63.32	$	1,877	$	52.99
Anadarko Basin		174	$	25.20		145	$	19.86		277	$	41.15		204	$	30.31
Williston Basin		192	$	36.12		197	$	32.98		224	$	54.56		207	$	47.65
Eagle Ford		147	$	37.81		106	$	31.88		206	$	59.71		158	$	48.92
Powder River Basin		69	$	38.18		74	$	36.78		119	$	68.41		86	$	54.32
Other		18	$	49.53		17	$	42.85		34	N/M			25	N/M
Total	$	2,080	$	37.17	$	1,641	$	31.79	$	3,371	$	60.12	$	2,557	$	49.45

DD&A ~~and Asset Impairments~~


	Q3 2021		Q2 2021		Change			Q2 2022		Q1 2022		Change
Oil and gas per Boe	$	9.85	$	9.88		- 0	%	$	9.02	$	8.95		1	%

Oil and gas	$	551	$	510		+8	%	$	506	$	463		9	%
Other property and equipment		27		26		+4	%		22		26		-16	%
Total	$	578	$	536		+8	%	$	528	$	489		8	%

DD&A increased in the ~~third~~second quarter of ~~2021~~2022 primarily due to higher ~~volumes.~~volumes resulting from new well activity and winter weather downtime experienced in the first quarter of 2022.

Table of Contents

General and Administrative Expense


	Q2 2022		Q1 2022		Change
G&A per Boe	$	1.51	$	1.82		-17	%

Labor and benefits	$	44	$	58		-24	%
Non-labor		40		36		11	%
Total	$	84	$	94		-11	%

G&A decreased in the second quarter of 2022 due to lower labor and benefit costs. The G&A per BOE rate also decreased in the second quarter of 2022 due to higher volumes resulting from new well activity and winter weather downtime experienced in the first quarter of 2022.

Other Items


	Q2 2022			Q1 2022			Change in earnings
Commodity hedge valuation changes (1)	$	302		$	(339	)	$	641
Marketing and midstream operations		(4	)		(4	)		—
Exploration expenses		10			2			(8	)
Asset dispositions		(14	)		(1	)		13
Net financing costs		84			85			1
Other, net		10			(61	)		(71	)
							$	576

Q3 2021

Q2 2021

Change in earnings

Commodity hedge valuation changes ⁽¹⁾

$
35

$
(336
)

$
371

Marketing and midstream operations

1

1

—

Exploration expenses

3

3

—

Asset dispositions

—

(87
)

(87
)
Net financing costs

86

80

(6
)
Restructuring and transaction costs

18

23

5

Other, net

2

(14
)

(16
)

$
267

(1)

Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

~~(1)~~

~~Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.~~

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.

~~Asset dispositions in the second quarter of 2021 includes $65 million related to the re-valuation of contingent earnout payments associated with our divested Barnett Shale assets.~~ For ~~additional information,~~discussion on other, net, see Note 26 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

Q3 2021

Q2 2021

Current expense

$
1

$
19

Deferred expense

119

24

Total expense

$
120

$
43

Effective income tax rate

12
%

14
%


	Q2 2022			Q1 2022
Current expense	$	252		$	103
Deferred expense		305			164
Total expense	$	557		$	267
Effective income tax rate		22	%		21	%

For discussion on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

3229

Table of Contents

~~September~~June 30, ~~2021~~ YTD 2022 vs. ~~September~~June 30, ~~2020~~ YTD 2021

Our ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 net earnings were ~~$1.3~~$2.9 billion, compared to a net ~~loss~~earnings of ~~$2.5 billion (excludes discontinued operations)~~$477 million for the ~~nine~~first six months ended ~~September~~June 30, ~~2020.~~2021. The graph below shows the change in ~~the~~ net earnings ~~(loss)~~ from the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The material changes are further discussed by category on the following pages.

Production Volumes


	Six Months Ended June 30,
	2022		% of Total			2021		Change
Oil (MBbls/d)
Delaware Basin		216		74	%		181		19	%
Anadarko Basin		14		5	%		15		-5	%
Williston Basin		29		10	%		45		-35	%
Eagle Ford		18		6	%		17		5	%
Powder River Basin		13		4	%		16		-21	%
Other		4		1	%		5		-15	%
Total		294		100	%		279		5	%


	Six Months Ended June 30,
	2022		% of Total			2021		Change
Gas (MMcf/d)
Delaware Basin		589		63	%		492		20	%
Anadarko Basin		211		23	%		213		-1	%
Williston Basin		53		6	%		55		-4	%
Eagle Ford		61		6	%		53		16	%
Powder River Basin		19		2	%		21		-12	%
Other		1		0	%		2		-64	%
Total		934		100	%		836		12	%


	Six Months Ended June 30,
	2022		% of Total			2021		Change
NGLs (MBbls/d)
Delaware Basin		101		69	%		71		43	%
Anadarko Basin		25		17	%		23		7	%
Williston Basin		9		6	%		9		-2	%
Eagle Ford		9		6	%		8		17	%
Powder River Basin		2		2	%		3		-19	%
Other		—		0	%		—	N/M
Total		146		100	%		114		28	%

3330

Table of Contents


	Six Months Ended June 30,
	2022		% of Total			2021		Change
Combined (MBoe/d)
Delaware Basin		415		70	%		334		24	%
Anadarko Basin		74		12	%		74		1	%
Williston Basin		47		8	%		63		-26	%
Eagle Ford		37		6	%		33		10	%
Powder River Basin		18		3	%		23		-19	%
Other		4		1	%		6		-23	%
Total		595		100	%		533		12	%

~~Production Volumes~~

Nine Months Ended September 30,

2021

% of Total

2020

Change

Oil (MBbls/d)

Delaware Basin

192

67
%

80

+140
%
Anadarko Basin

14

5
%

21

- 32
%
Williston Basin

43

15
%

—

N/M

Eagle Ford

18

6
%

25

- 29
%
Powder River Basin

16

5
%

20

- 23
%
Other

4

2
%

8

- 42
%
Total

287

100
%

154

+87
%

Nine Months Ended September 30,

2021

% of Total

2020

Change

Gas (MMcf/d)

Delaware Basin

521

60
%

241

+116
%
Anadarko Basin

215

25
%

258

- 17
%
Williston Basin

56

6
%

—

N/M

Eagle Ford

57

7
%

82

- 30
%
Powder River Basin

21

2
%

24

- 14
%
Other

2

0
%

4

- 48
%
Total

872

100
%

609

+43
%

Nine Months Ended September 30,

2021

% of Total

2020

Change

NGLs (MBbls/d)

Delaware Basin

81

65
%

35

+132
%
Anadarko Basin

24

19
%

28

- 16
%
Williston Basin

9

7
%

—

N/M

Eagle Ford

9

7
%

11

- 18
%
Powder River Basin

3

2
%

3

+0
%
Other

—

0
%

1

- 100
%
Total

126

100
%

78

+62
%

Nine Months Ended September 30,

2021

% of Total

2020

Change

Combined (MBoe/d)

Delaware Basin

360

64
%

155

+132
%
Anadarko Basin

74

13
%

92

- 20
%
Williston Basin

61

11
%

—

N/M

Eagle Ford

36

7
%

50

- 27
%
Powder River Basin

22

4
%

27

- 19
%
Other

5

1
%

9

- 43
%
Total

558

100
%

333

+68
%

From the ~~nine months ended 2020 to the nine~~six months ended 2021 to the six months ended 2022, the change in volumes contributed to a ~~$1.5 billion~~$341 million increase in earnings. ~~Due~~The increase in volumes was primarily due to ~~the Merger closing on January 7, 2021, volumes now include WPX legacy assets~~continued development in the Delaware Basin as well as increased activity in Texas and New Mexico and the Williston Basin in North Dakota. Volumes associated with these WPX legacy assets were approximately 225 MBoe/d for the nine months ended 2021. Continued development of Devon legacy assets in the Delaware Basin also increased volumes.Eagle Ford. These increases were partially offset by ~~reduced activity across Devon’s remaining legacy assets.~~lower volumes in the Williston Basin and Powder River Basin primarily due to natural declines.

Realized Prices


	Nine Months Ended September 30,									Six Months Ended June 30,
	2021			Realization	2020		Change			2022			Realization	2021			Change
Oil (per Bbl)
WTI index	$	64.85			$	38.57		+68	%	$	101.57			$	61.95			64	%
Realized price, unhedged	$	62.69		97%	$	34.63		+81	%	$	101.14		100%	$	59.65			70	%
Cash settlements	$	(11.06	)		$	7.06				$	(12.25	)		$	(11.30	)
Realized price, with hedges	$	51.63		80%	$	41.69		+24	%	$	88.89		88%	$	48.35			84	%


	Nine Months Ended September 30,									Six Months Ended June 30,
	2021			Realization	2020		Change			2022			Realization	2021			Change
Gas (per Mcf)
Henry Hub index	$	3.19			$	1.88		+70	%	$	6.06			$	2.77			119	%
Realized price, unhedged	$	2.93		92%	$	1.32		+122	%	$	5.11		84%	$	2.58			98	%
Cash settlements	$	(0.38	)		$	0.24				$	(0.97	)		$	(0.15	)
Realized price, with hedges	$	2.55		80%	$	1.56		+63	%	$	4.14		68%	$	2.43			70	%


	Nine Months Ended September 30,									Six Months Ended June 30,
	2021			Realization	2020		Change			2022		Realization	2021			Change
NGLs (per Bbl)
WTI index	$	64.85			$	38.57		+68	%	$	101.57		$	61.95			64	%
Realized price, unhedged	$	27.11		42%	$	10.66		+154	%	$	39.11	39%	$	24.37			60	%
Cash settlements	$	(0.32	)		$	0.25				$	—		$	(0.23	)
Realized price, with hedges	$	26.79		41%	$	10.91		+146	%	$	39.11	39%	$	24.14			62	%


	Nine Months Ended September 30,								Six Months Ended June 30,
	2021			2020		Change			2022			2021			Change
Combined (per Boe)
Realized price, unhedged	$	42.94		$	20.91		+105	%	$	67.50		$	40.54			67	%
Cash settlements	$	(6.35	)	$	3.76				$	(7.57	)	$	(6.21	)
Realized price, with hedges	$	36.59		$	24.67		+48	%	$	59.93		$	34.33			75	%

From the ~~nine~~six months ended ~~2020~~2021 to the ~~nine~~six months ended ~~2021,~~2022, realized prices contributed to a ~~$3.1~~$3.0 billion increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices. The increase in index prices was partially offset by hedge cash settlements related to ~~all products in~~oil and gas commodities.

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Hedge Settlements


	Six Months Ended June 30,
	2022			2021			Change
Oil	$	(651	)	$	(572	)		-14	%
Natural gas		(165	)		(22	)		-650	%
NGL		—			(5	)	N/M
Total cash settlements (1)	$	(816	)	$	(599	)		-36	%

(1)

Included as a component of oil, gas and NGL derivatives on the ~~first nine months~~consolidated statements of ~~2021.~~

~~Hedge Settlements~~

Nine Months Ended September 30,

2021

2020

Change
Oil

$
(868
)

$
298

N/M
Natural gas

(90
)

40

N/M
NGL

(11
)

5

N/M
Total cash settlements ⁽¹⁾

$
(969
)

$
343

N/M
comprehensive earnings.

~~(1)~~

~~Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.~~

~~Table of Contents~~

Production Expenses


	Nine Months Ended September 30,									Six Months Ended June 30,
	2021			2020			Change			2022			2021			Change
LOE	$	624		$	334			+87	%	$	479		$	409			17	%
Gathering, processing & transportation		433			378			+15	%		338			276			22	%
Production taxes		436			123			+254	%		492			260			89	%
Property taxes		33			17			+94	%		38			26			46	%
Total	$	1,526		$	852			+79	%	$	1,347		$	971			39	%
Per Boe:
LOE	$	4.09		$	3.66			+12	%	$	4.45		$	4.24			5	%
Gathering, processing & transportation	$	2.84		$	4.15			- 31	%	$	3.13		$	2.86			9	%
Percent of oil, gas and NGL sales:
Production taxes		6.7	%		6.4	%		+4	%		6.8	%		6.7	%		1	%

Production expenses increased primarily due to ~~the Merger closing on January 7, 2021. For additional information, see~~ ~~Note 2~~higher volumes as well as an increase in “Part I. Financial Information – Item 1. Financial Statements” in this report. Partially offsetting increases to gathering, processing and transportation costs were approximately $39 million of Anadarko volume commitments which expired at the end of 2020. Productionproduction taxes ~~also increased due to the rise in~~resulting from higher commodity prices.

Field-Level Cash Margin

Nine Months Ended September 30,

2021

$ per BOE

2020

$ per BOE

Field-level cash margin (Non-GAAP)

Delaware Basin

$
3,477

$
35.41

$
602

$
14.16

Anadarko Basin

404

$
19.93

143

$
5.62

Williston Basin

550

$
32.91

—

N/M

Eagle Ford

325

$
32.74

170

$
12.54

Powder River Basin

210

$
35.53

121

$
16.45

Other

54

$
37.69

21

$
8.77

Total

$
5,020

$
32.93

$
1,057

$
11.58

~~DD&A and Asset Impairments~~

Nine Months Ended September 30,

2021

2020

Change

Oil and gas per Boe

$
9.84

$
10.19

- 3
%

Oil and gas

$
1,500

$
929

+61
%
Other property and equipment

81

70

+16
%
Total

$
1,581

$
999

+58
%

Asset impairments

$
—

$
2,666

N/M

~~DD&A increased in 2021 primarily due to the Merger closing on January 7, 2021. For additional information, see~~ ~~Note 2~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~


	Six Months Ended June 30,
	2022		$ per BOE		2021		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	4,388	$	58.45	$	1,997	$	33.00
Anadarko Basin		481	$	35.73		230	$	17.20
Williston Basin		431	$	51.01		358	$	31.42
Eagle Ford		364	$	54.49		178	$	29.50
Powder River Basin		205	$	61.67		141	$	34.36
Other		59	N/M			36	N/M
Total	$	5,928	$	55.00	$	2,940	$	30.48

~~Asset impairments were $2.7 billion for the nine months ended 2020 due to significant decreases in commodity prices resulting primarily from the COVID-19 pandemic. For additional information, see~~ ~~Note 5~~

~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~DD&A


	Six Months Ended June 30,
	2022		2021		Change
Oil and gas per Boe	$	8.99	$	9.83		-9	%

Oil and gas	$	969	$	949		2	%
Other property and equipment		48		54		-12	%
Total	$	1,017	$	1,003		1	%

~~General and Administrative Expense~~

Nine Months Ended September 30,

2021

2020

Change

G&A per Boe

$
1.94

$
2.81

- 31
%

Labor and benefits

$
197

$
157

+25
%
Non-labor

99

99

+0
%
Total

$
296

$
256

+16
%

~~Labor and benefits~~DD&A increased primarily due to ~~the Merger closing on January 7, 2021. However, Devon’s G~~higher volumes which was partially offset by lower DD&A ~~per Boe rate~~rates. The decrease in DD&A

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rates was primarily due to increases to oil, gas and NGL reserve estimates at December 31, 2021, resulting from higher prices.

General and Administrative Expense


	Six Months Ended June 30,
	2022		2021		Change
G&A per Boe	$	1.66	$	2.08		-20	%

Labor and benefits	$	102	$	132		-23	%
Non-labor		76		69		10	%
Total	$	178	$	201		-11	%

General and administrative expenses decreased ~~31%~~ primarily due to synergies resulting from the Merger.

Other Items


	Six Months Ended June 30,
	2022			2021			Change in earnings
Commodity hedge valuation changes (1)	$	(37	)	$	(632	)	$	595
Marketing and midstream operations		(8	)		(20	)		12
Exploration expenses		12			6			(6	)
Asset dispositions		(15	)		(119	)		(104	)
Net financing costs		169			157			(12	)
Restructuring and transaction costs		—			212			212
Other, net		(51	)		(43	)		8
							$	705

Nine Months Ended September 30,

2021

2020

Change in earnings

Commodity hedge valuation changes ⁽¹⁾

$
(597
)

$
(71
)

$
(526
)
Marketing and midstream operations

(19
)

(28
)

9

Exploration expenses

9

163

154

Asset dispositions

(119
)

—

119

Net financing costs

243

200

(43
)
Restructuring and transaction costs

230

32

(198
)
Other, net

(41
)

(35
)

6

$
(479
)
(1)

Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

~~(1)~~

~~Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.~~

~~Table of Contents~~

information, see Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~Exploration expenses decreased primarily due to unproved asset impairments of $149~~Asset dispositions include $65 million and $35 million in the first ~~nine~~six months of ~~2020. For additional information, see~~ ~~Note 5~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~

~~Asset dispositions includes $65 million~~2021 related to the re-valuation of contingent earnout payments associated with our divested Barnett Shale assets and ~~$35 million related to~~ the sale of non-core assets in the ~~Rockies.~~Rockies, respectively. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Net financing costs ~~increased as a result of WPX debt assumed in the Merger, partially offset by~~include a $30 million gain ~~associated with our debt retirements~~ in the first ~~nine~~six months of ~~2021.~~2021 related to debt retirements. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Restructuring and transaction costs in the first six months of 2021 reflect workforce reductions in conjunction with the Merger, as well as various transaction costs related to the Merger. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

For discussion on other, net, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

Nine Months Ended September 30,

2021

2020

Current expense (benefit)

$
15

$
(199
)
Deferred benefit

(100
)

(311
)
Total benefit

$
(85
)

$
(510
)
Effective income tax rate

(7
%)

17
%


	Six Months Ended June 30,
	2022			2021
Current expense	$	355		$	14
Deferred expense (benefit)		469			(219	)
Total expense (benefit)	$	824		$	(205	)
Effective income tax rate		22	%		(75	%)

For discussion on income taxes, see Note 7 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

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Capital Resources, Uses and Liquidity

Sources and Uses of Cash

The following table presents the major changes in cash and cash equivalents for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			Three Months Ended June 30,						Six Months Ended June 30,
Operating cash flow from continuing operations	$	1,598		$	427		$	3,283		$	1,106
													2022			2021			2022			2021
Operating cash flow													$	2,678		$	1,093		$	4,515		$	1,685
WPX acquired cash		—			—			344			—			—			—			—			344
Acquisitions of property and equipment														(100	)		(5	)		(101	)		(5	)
Divestitures of property and equipment		1			1			65			29			9			49			35			64
Capital expenditures		(474	)		(204	)		(1,477	)		(936	)		(573	)		(504	)		(1,110	)		(1,003	)
Equity method investment activity, net														(6	)		8			(20	)		18
Debt activity, net		—			—			(1,302	)		—			—			(742	)		—			(1,302	)
Repurchases of common stock		—			—			—			(38	)		(324	)		—			(535	)		—
Common stock dividends		(329	)		(43	)		(761	)		(119	)		(830	)		(229	)		(1,497	)		(432	)
Noncontrolling interest activity, net		(5	)		(3	)		(35	)		2			(5	)		(2	)		(13	)		(30	)
Other		(9	)		—			(33	)		(22	)		(17	)		(7	)		(88	)		(37	)
Net change in cash, cash equivalents and restricted cash from discontinued operations		—			50			—			31
Net change in cash, cash equivalents and restricted cash	$	782		$	228		$	84		$	53		$	832		$	(339	)	$	1,186		$	(698	)
Cash, cash equivalents and restricted cash at end of period	$	2,321		$	1,897		$	2,321		$	1,897		$	3,457		$	1,539		$	3,457		$	1,539

Operating Cash Flow and WPX Acquired Cash

As presented in the table above, net cash provided by operating activities continued to be a significant source of capital and liquidity. Operating cash flow ~~nearly tripled~~more than doubled during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase was primarily due to ~~the Merger and~~significantly increased commodity prices ~~significantly increasing in~~as well as higher volumes for the first ~~nine~~six months of 2022 compared to 2021. Additionally, despite our portfolio enhancements, aggressive cost reductions and operational advancements, our 2020 financial results were challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 pandemic.

~~Divestitures~~Acquisitions of Property and Equipment

During the first ~~nine~~six months of ~~2021,~~2022, we ~~sold non-core assets for approximately $65~~paid an $87 million ~~net~~deposit towards the acquisition of ~~customary purchase price adjustments.~~producing properties and leasehold interests located in the Williston Basin, which was completed in July 2022. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Divestitures of Property and Equipment

During the first six months of 2022 and 2021, we received contingent consideration related to asset divestitures and sold non-core assets, respectfully. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Capital Expenditures

The amounts in the table below reflect cash payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Delaware Basin	$	375	$	147	$	1,150	$	560	$	412	$	378	$	807	$	775
Anadarko Basin		11		2		29		20		32		9		42		18
Williston Basin		13		—		59		—		16		18		39		46
Eagle Ford		45		17		88		153		33		29		59		43
Powder River Basin		13		24		53		155		28		7		61		40
Other		1		3		1		9		3		—		6		—
Total oil and gas		458		193		1,380		897		524		441		1,014		922
Midstream		5		7		53		26		28		43		57		48
Other		11		4		44		13		21		20		39		33
Total capital expenditures	$	474	$	204	$	1,477	$	936	$	573	$	504	$	1,110	$	1,003

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Capital expenditures consist primarily of amounts related to our oil and gas exploration and development operations, midstream operations and other corporate activities. ~~Capital expenditures increased in 2021 primarily due to the Merger closing on January 7,~~

~~Table of Contents~~

2021 and results now include activity related to WPX legacy assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. Our capital program is designed to operate within operating cash flow. This is evidenced by our operating cash flow funding all of our capital expenditures for the nine months ended September 30, 2021. Our capital investment program is driven by a disciplined allocation process focused on moderating our production growth and maximizing our returns. As such, our 2022 capital expenditures represent approximately 25% of our operating cash flow.

Equity Method Investments

During the first six months of 2022 and 2021, Devon received distributions from our equity method investments of $23 million and $18 million, respectively. Devon contributed $43 million to our equity method investments during the first six months of 2022.

Debt Activity

Subsequent to the Merger closing, we redeemed $1.2 billion of senior notes in the first ~~nine months~~half of 2021. We also paid $59 million of cash retirement costs related to these redemptions.

Shareholder Distributions and Stock Activity

We repurchased approximately 9.0 million shares of common stock for $548 million in the first half of 2022 under the share repurchase program authorized by our Board of Directors. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The following table summarizes our common stock dividends during the ~~third~~second quarter and total for the first ~~nine~~six months of ~~2021~~2022 and ~~2020. We raised~~2021. In February 2022, our ~~quarterly~~Board of Directors increased our fixed dividend rate by ~~22%~~45% to ~~$0.11~~$0.16 per share and again by 13% to $0.18 per share beginning in the ~~second~~third quarter of ~~2020.~~2022. In addition to the fixed quarterly dividend, we paid a variable dividend in ~~each quarter of 2021.~~

Fixed

Variable

Total

Rate Per Share

2021:

First quarter
$
76

$
127

$
203

$
0.30

Second quarter

75

154

229

$
0.34

Third quarter

74

255

329

$
0.49

Total year-to-date
$
225

$
536

$
761

2020:

First quarter
$
34

$
—

$
34

$
0.09

Second quarter

42

—

42

$
0.11

Third quarter

43

—

43

$
0.11

Total year-to-date
$
119

$
—

$
119

We ~~repurchased 2.2 million shares of common stock for $38 million in~~ the first ~~nine months~~and second quarters of ~~2020. For additional information, see~~ ~~Note 16in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~2022 and 2021.


	Fixed		Variable		Total		Rate Per Share
2022:
First quarter	$	109	$	558	$	667	$	1.00
Second quarter		105		725		830	$	1.27
Total year-to-date	$	214	$	1,283	$	1,497
2021:
First quarter	$	76	$	127	$	203	$	0.30
Second quarter		75		154		229	$	0.34
Total year-to-date	$	151	$	281	$	432

Noncontrolling Interest Activity, net

During the first ~~nine~~six months of 2022 and 2021, we ~~received $4~~distributed $13 million ~~of contributions from our noncontrolling interests in CDM~~ and ~~distributed $15~~$9 million, respectively, to our noncontrolling interests in CDM. During the first six months of 2021, we received contributions of $3 million related to our noncontrolling interests in CDM.

In the first quarter of 2021, we paid $24 million to purchase the noncontrolling interest portion of a partnership that WPX had formed to acquire minerals in the Delaware Basin.

~~During the first nine months of 2020, we received $12 million in contributions from our noncontrolling interests in CDM and distributed $10 million to our noncontrolling interests in CDM.~~Liquidity

~~Liquidity~~

The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, we, like all upstream operators, must continually make capital investments to grow and even sustain production. Generally, our capital investments are focused on drilling and completing new wells and maintaining production from existing wells. At opportunistic times, we also acquire operations and properties from other operators or ~~land owners~~landowners to enhance our existing portfolio of assets.

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. With the Merger, we accelerated our transition to a cash-return business model, which moderates growth, emphasizes capital efficiencies and prioritizes cash returns to shareholders. These principles will position Devon to be a consistent builder of economic value through the cycle. The post-merger scalability enhanced Devon’s free cash flow, credit profile and decreased the overall cost of capital.

Historically, our primary sources of capital funding and liquidity have been our operating cash flow, cash on hand and asset divestiture proceeds. Additionally, we maintain a commercial paper program, supported by our revolving line of credit, which can be accessed as needed to supplement operating cash flow and cash balances. If needed, we can also issue debt and equity securities, including through transactions under our shelf registration statement filed with the SEC. We estimate the combination of our sources of capital will continue to be adequate to fund our planned ~~post-merger~~ capital requirements as discussed in this section as well as accelerate our cash-return business model.

3835

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Operating Cash Flow

Key inputs into determining our planned capital investment are the amount of cash we hold and operating cash flow we expect to generate over the next one to three or more years. At the end of the ~~third~~second quarter of ~~2021,~~2022, we held approximately ~~$2.3~~$3.5 billion of cash, inclusive of ~~$177~~approximately $140 million of cash restricted primarily for retained obligations related to divested assets. Our operating cash flow forecasts are sensitive to many variables and include a measure of uncertainty as ~~these variables~~actual results may differ from our expectations.

Commodity Prices – The most uncertain and volatile variables for our operating cash flow are the prices of the oil, gas and NGLs we produce and sell. Prices are determined primarily by prevailing market conditions. Regional and worldwide economic activity, weather and other highly variable factors influence market conditions for these products. These factors, which are difficult to predict, create volatility in prices and are beyond our control.

To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. We hedge our production in a manner that systematically places hedges for several quarters in advance, allowing us to maintain a disciplined risk management program as it relates to commodity price volatility. We supplement the systematic hedging program with discretionary hedges that take advantage of favorable market conditions. The key terms to our oil, gas and NGL derivative financial instruments as of ~~September~~June 30, ~~2021~~2022 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

Further, when considering the current commodity price environment and our current hedge position, we expect to achieve our capital investment priorities. Additionally, ~~as commodity prices have increased,~~ we remain committed to ~~a maintenance~~ capital ~~program~~discipline and focused on delivering the objectives that underpin our capital plan for ~~the foreseeable future.~~2022. We ~~do not intend~~will continue to ~~add any growth projects until market fundamentals recover, excess inventory clears up~~prioritize economic value over growing volumes, which is driven partially by current commodity price backwardation, supply chain constraints and ~~OPEC+ curtailed volumes are effectively absorbed by the world markets.~~economic uncertainty arising from recent geopolitical events.

Operating Expenses – Commodity prices can also affect our operating cash flow through an indirect effect on operating expenses. Significant commodity price decreases can lead to a decrease in drilling and development activities. As a result, the demand and cost for people, services, equipment and materials may also decrease, causing a positive impact on our cash flow as the prices paid for services and equipment decline. However, the inverse is also generally true during periods of rising commodity prices.

~~Merger Synergies –~~ ~~Cost savings from synergies resulting from~~ Furthermore, the ~~Merger are expected~~COVID-19 pandemic has contributed to ~~be attained through cost reductions~~disruption and ~~efficiencies related~~volatility in our supply chain, which has resulted, and may continue to ~~our capital programs, G&A, financing~~result in labor shortages, increased costs and ~~production expenses. We anticipate the planned $600 million reduction of annualized costs will occur by year-end 2021. Approximately 35% of the reduced costs are related to~~delays for pipe and other materials needed for our ~~capital programs and the remainder relate to our operating expenses, including G&A, interest expense and production expenses.~~operations.

~~Restructuring and Transaction Related Costs –~~ The majority of the Merger-related restructuring and transaction cost cash outflows were paid in the first nine months of 2021 and the remaining costs will be paid mostly over the remaining three months of 2021. These payments relate to workforce reductions and the associated employee severance benefits, costs to modify or abandon vendor contracts and the acceleration of certain employee benefits triggered by the Merger.

Credit Losses – Our operating cash flow is also exposed to credit risk in a variety of ways. This includes the credit risk related to customers who purchase our oil, gas and NGL production, the collection of receivables from our joint interest ~~partners~~owners for their proportionate share of expenditures made on projects we operate and counterparties to our derivative financial contracts. We utilize a variety of mechanisms to limit our exposure to the credit risks of our customers, partners and counterparties. Such mechanisms include, under certain conditions, requiring letters of credit, prepayments or cash collateral postings.

~~Assumption and Repayment of WPX Debt~~

In conjunction with the Merger closing on January 7, 2021, we assumed a principal value of $3.3 billion of WPX debt. Subsequent to the Merger closing, we have reduced our debt by approximately $1.2 billion in the first half of 2021. We expect these redemptions to lower our annual cash net financing costs by approximately $70 million.

Credit Availability

As of ~~September~~June 30, ~~2021,~~2022, we had approximately $3.0 billion of available borrowing capacity under our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At ~~September~~June 30, ~~2021,~~2022, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

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Debt Ratings

We receive debt ratings from the major ratings agencies in the U.S. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels, cost structure, planned asset sales and production growth opportunities. Our credit rating from Standard and Poor’s Financial Services is ~~BBB-~~BBB with a ~~positive~~stable outlook. Our credit rating from Fitch is BBB+ with a stable outlook. Our credit rating from Moody’s Investor Service is ~~Ba1~~Baa3 with a ~~positive~~stable outlook. Any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.

There are no “rating triggers” in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. However, a downgrade could adversely impact our interest rate on any credit facility borrowings and the ability to economically access debt markets in the future.

Fixed Plus Variable Dividend

~~Following the closing of the Merger, we initiated~~We are committed to a ~~new~~ “fixed plus variable” dividend strategy. ~~The fixed dividend is currently paid quarterly at a rate of $0.11 per share, and our~~Our Board of Directors will consider a number of factors when setting the quarterly dividend, if any, including a general target of paying out approximately 10% of operating cash flow through the

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fixed dividend. In February 2022, our Board of Directors increased our quarterly fixed dividend rate by 45% to $0.16 per share. We will raise it again by 13% to $0.18 per share beginning in the third quarter of 2022. In addition to the fixed quarterly dividend, we may pay a variable dividend up to 50% of our excess free cash flow, which is a non-GAAP measure. Each quarter’s excess free cash flow is computed as operating cash flow (a GAAP measure) before balance sheet changes, less capital expenditures and the fixed dividend. The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of our Board of Directors and will depend on our financial results, cash requirements, future prospects ~~COVID-19 impacts~~ and other factors deemed relevant by the Board.

In ~~November 2021,~~August 2022, Devon announced a cash dividend in the amount of ~~$0.84~~$1.55 per share payable in the ~~fourth~~third quarter of ~~2021.~~2022. The dividend consists of aan $0.18 per share fixed quarterly dividend ~~in the amount of approximately $74 million (or $0.11~~and a $1.37 per ~~share) and a~~share variable quarterly dividend and will total approximately $1.0 billion.

Share Repurchases

In May 2022, our Board of Directors increased our share repurchase program by $0.4 billion to a total authorized amount of $2.0 billion, and extended the expiration date to May 4, 2023. Through July 2022, we had executed $1.2 billion of the authorized program.

Acquisitions

In July 2022, Devon completed our acquisition of producing properties and leasehold interest in the ~~amount~~Williston Basin for cash consideration of approximately ~~$494~~$830 million, ~~(or $0.73 per share).~~net of purchase price adjustments.

Capital Expenditures

Our ~~2021~~2022 exploration and development budget for the ~~fourth quarter~~remainder of ~~2021~~2022 is expected to range from approximately ~~$440 million~~$1.2 billion to ~~$490 million.~~$1.4 billion.

~~Share Repurchases~~

~~In November 2021, our Board of Directors authorized a $1.0 billion share repurchase program, which expires December 31, 2022.~~

Critical Accounting Estimates

Income Taxes

The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due primarily to significant cumulative losses, we recorded a full valuation allowance against U.S. deferred tax assets in 2020 and remain in a partial valuation allowance position at September 30, 2021.Subject to any additional objective negative evidence or the addition of subjective evidence such as forecasted income, Devon may continue to adjust the valuation allowance on its deferred tax assets in future periods.

Further, in the event we were to undergo an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended), our ability to use net operating losses and tax credits generated prior to the ownership change may be limited. Generally, an “ownership change” occurs if one or more shareholders, each of whom owns five percent or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50 percent over the lowest percentage of stock owned by those shareholders at any time during the preceding three-year period. Based on currently available information, we do not believe an ownership change has occurred during ~~2021~~2022 for Devon, but the Merger did cause an ownership change for WPX and increased the likelihood Devon could experience an ownership change over the next ~~three~~two years.

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~~Purchase Accounting~~

Periodically we acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Merger with WPX. In connection with the Merger, as the accounting acquirer, we allocated the $5.4 billion of purchase price consideration to the assets acquired and liabilities assumed based on estimated fair values as of the date of the Merger. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Merger.

We made a number of assumptions in estimating the fair value of assets acquired and liabilities assumed in the Merger. The most significant assumptions relate to the estimated fair values of proved and unproved oil and gas properties. Since sufficient market data was not available regarding the fair values of proved and unproved oil and gas properties, we prepared estimates and engaged third party valuation experts. Significant judgments and assumptions are inherent in these estimates and include, among other things, estimates of reserve quantities, estimates of future commodity prices, drilling plans, expected development costs, lease operating costs, reserve risk adjustment factors and an estimate of an applicable market participant discount rate that reflects the risk of the underlying cash flow estimates.

Estimated fair values ascribed to assets acquired can have a significant impact on future results of operations presented in Devon’s financial statements. A higher fair value ascribed to a property results in higher DD&A expense, which results in lower net earnings. Fair values are based on estimates of future commodity prices, reserve quantities, development costs and operating costs. In the event that future commodity prices or reserve quantities are lower than those used as inputs to determine estimates of acquisition date fair values, the likelihood increases that certain costs may be determined to not be recoverable.

In addition to the fair value of proved and unproved oil and gas properties, other significant fair value assessments for the assets acquired and liabilities assumed in the Merger relate to debt, the equity method investment in Catalyst and out-of-market contract assets and liabilities. The fair value of the assumed WPX publicly traded debt was based on available third party quoted prices. We prepared estimates and engaged third party valuation experts to assist in the valuation of the equity method investment in Catalyst. Significant judgments and assumptions inherent in this estimate included projected Catalyst cash flows, comparable companies cash flow multiples and an estimate of an applicable market participant discount rate. The fair value of assumed out-of-market contract assets and liabilities associated with longer-term marketing, gathering, processing and transportation contracts included significant judgments and assumptions related to determining the market rates, estimates of future reserves and production associated with the respective contracts and applying an applicable market participant discount rate.

For additional information regarding our critical accounting policies and estimates, see our ~~2020~~2021 Annual Report on Form 10-K.

Non-GAAP Measures

We make reference to “core earnings ~~(loss)~~ attributable to Devon” and “core earnings ~~(loss)~~ per share attributable to Devon” in ~~“Overview of 2021 Results”~~“Executive Overview” in this Item 2 that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings ~~(loss)~~ attributable to Devon, as well as the per share amount, represent net earnings excluding certain non-cash and other items that are typically excluded by securities analysts in their published estimates of our financial results. Our non-GAAP measures are typically used as a quarterly performance measure. Amounts excluded relate to asset dispositions, non-cash asset impairments (including non-cash unproved asset impairments), deferred tax asset valuation allowance, changes in tax legislation, fair~~fair~~

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value changes in derivative financial instruments and foreign currency, costs associated with early retirement of debt and restructuring and transaction costs associated with the workforce reductions described further in Note 65.

We believe these non-GAAP measures facilitate comparisons of our performance to earnings estimates published by securities analysts. We also believe these non-GAAP measures can facilitate comparisons of our performance between periods and to the performance of our peers.

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Below are reconciliations of core earnings and core earnings per share attributable to Devon to comparable GAAP measures.

	Three Months Ended September 30,												Nine Months Ended September 30,
	Before Tax			After Tax			After Noncontrolling Interests			Per Diluted Share			Before Tax			After Tax			After Noncontrolling Interests			Per Diluted Share			Three Months Ended June 30,												Six Months Ended June 30,
																									Before Tax			After Tax			After NCI			Per Diluted Share			Before Tax			After Tax			After NCI			Per Diluted Share
2022
Earnings attributable to Devon (GAAP)																									$	2,495		$	1,938		$	1,932		$	2.93		$	3,757		$	2,933		$	2,921		$	4.40
Adjustments:
Asset dispositions																										(14	)		(11	)		(11	)		(0.02	)		(15	)		(11	)		(11	)		(0.02	)
Asset and exploration impairments																										8			6			6			0.01			8			6			6			0.01
Deferred tax asset valuation allowance																										—			10			10			0.02			—			16			16			0.02
Fair value changes in financial instruments																										(299	)		(230	)		(230	)		(0.35	)		39			30			30			0.05
Core earnings attributable to Devon (Non-GAAP)																									$	2,190		$	1,713		$	1,707		$	2.59		$	3,789		$	2,974		$	2,962		$	4.46
2021
Total
Earnings attributable to Devon (GAAP)	$	964		$	844		$	838		$	1.24		$	1,236		$	1,321		$	1,307		$	1.95		$	304		$	261		$	256		$	0.38		$	272		$	477		$	469		$	0.70
Adjustments:
Asset dispositions		—			—			—			—			(119	)		(91	)		(91	)		(0.13	)		(87	)		(67	)		(67	)		(0.10	)		(119	)		(91	)		(91	)		(0.13	)
Asset and exploration impairments		1			1			1			0.00			3			2			2			0.00			1			1			1			—			2			1			1			—
Deferred tax asset valuation allowance		—			(101	)		(101	)		(0.15	)		—			(479	)		(479	)		(0.71	)		—			(115	)		(115	)		(0.17	)		—			(378	)		(378	)		(0.57	)
Change in tax legislation		—			—			—			—			—			62			62			0.09			—			62			62			0.09			—			62			62			0.09
Fair value changes in financial instruments and foreign currency		(31	)		(23	)		(23	)		(0.04	)		597			460			460			0.68			334			258			258			0.38			628			483			483			0.72
Restructuring and transaction costs		18			18			18			0.03			230			201			201			0.29			23			21			21			0.03			212			183			183			0.28
Early retirement of debt		—			—			—			—			(30	)		(23	)		(23	)		(0.03	)		(10	)		(8	)		(8	)		(0.01	)		(30	)		(23	)		(23	)		(0.03	)
Core earnings attributable to Devon (Non-GAAP)	$	952		$	739		$	733		$	1.08		$	1,917		$	1,453		$	1,439		$	2.14		$	565		$	413		$	408		$	0.60		$	965		$	714		$	706		$	1.06
2020
Continuing Operations
Loss attributable to Devon (GAAP)	$	(193	)	$	(103	)	$	(105	)	$	(0.29	)	$	(2,980	)	$	(2,470	)	$	(2,475	)	$	(6.58	)
Adjustments:
Asset and exploration impairments		36			29			29			0.08			2,816			2,178			2,178			5.80
Deferred tax asset valuation allowance		—			(5	)		(5	)		(0.01	)		—			252			252			0.65
Fair value changes in financial instruments		97			74			74			0.19			71			55			55			0.14
Change in tax legislation		—			(43	)		(43	)		(0.11	)		—			(105	)		(105	)		(0.27	)
Restructuring and transaction costs		32			25			25			0.07			32			25			25			0.06
Core loss attributable to Devon (Non-GAAP)	$	(28	)	$	(23	)	$	(25	)	$	(0.07	)	$	(61	)	$	(65	)	$	(70	)	$	(0.20	)
Discontinued Operations
Earnings (loss) attributable to Devon (GAAP)	$	(2	)	$	13		$	13		$	0.04		$	(150	)	$	(103	)	$	(103	)	$	(0.27	)
Adjustments:
Asset dispositions		—			—			—			—			(2	)		(1	)		(1	)		(0.00	)
Asset impairments		3			3			3			0.00			182			143			143			0.37
Fair value changes in foreign currency and other		(2	)		(3	)		(3	)		(0.01	)		4			2			2			0.01
Core earnings (loss) attributable to Devon (Non-GAAP)	$	(1	)	$	13		$	13		$	0.03		$	34		$	41		$	41		$	0.11
Total
Loss attributable to Devon (GAAP)	$	(195	)	$	(90	)	$	(92	)	$	(0.25	)	$	(3,130	)	$	(2,573	)	$	(2,578	)	$	(6.85	)
Adjustments:
Continuing Operations		165			80			80			0.22			2,919			2,405			2,405			6.38
Discontinued Operations		1			—			—			(0.01	)		184			144			144			0.38
Core loss attributable to Devon (Non-GAAP)	$	(29	)	$	(10	)	$	(12	)	$	(0.04	)	$	(27	)	$	(24	)	$	(29	)	$	(0.09	)

EBITDAX and Field-Level Cash Margin

To assess the performance of our assets, we use EBITDAX and Field-Level Cash Margin. We compute EBITDAX as net earnings ~~from continuing operations~~ before income tax expense; financing costs, net; exploration expenses; DD&A; asset impairments; 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 our normal operations. Field-Level Cash Margin is computed as oil, gas and NGL sales less production expenses. Production expenses consist of lease operating, gathering, processing and transportation expenses, as well as production and property taxes.

We exclude financing costs from EBITDAX to assess our operating results without regard to our financing methods or capital structure. Exploration expenses and asset disposition gains and losses are excluded from EBITDAX because they generally are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from EBITDAX because capital expenditures are evaluated at the time capital costs are incurred. We exclude share-based compensation, valuation changes,

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restructuring and transaction costs, accretion on discounted liabilities and other items from EBITDAX because they are not considered a measure of asset operating performance.

We believe EBITDAX and Field-Level Cash Margin provide information useful in assessing our operating and financial performance across periods. EBITDAX and Field-Level Cash Margin as defined by Devon may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net earnings from ~~continuing~~ operations.

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Below are reconciliations of net earnings to EBITDAX and a further reconciliation to Field-Level Cash Margin.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			Three Months Ended June 30,						Six Months Ended June 30,
Net earnings (loss) (GAAP)	$	844		$	(90	)	$	1,321		$	(2,573	)
Net (earnings) loss from discontinued operations, net of tax		—			(13	)		—			103
													2022			2021			2022			2021
Net earnings (GAAP)													$	1,938		$	261		$	2,933		$	477
Financing costs, net		86			66			243			200			84			80			169			157
Income tax expense (benefit)		120			(90	)		(85	)		(510	)		557			43			824			(205	)
Exploration expenses		3			39			9			163			10			3			12			6
Depreciation, depletion and amortization		578			299			1,581			999			528			536			1,017			1,003
Asset impairments		—			—			—			2,666
Asset dispositions		—			—			(119	)		—			(14	)		(87	)		(15	)		(119	)
Share-based compensation		18			19			58			58			22			20			42			40
Derivative and financial instrument non-cash valuation changes		(35	)		97			597			71			(302	)		336			37			632
Restructuring and transaction costs		18			32			230			32			—			23			—			212
Accretion on discounted liabilities and other		2			—			(41	)		(35	)		10			(14	)		(51	)		(43	)
EBITDAX (Non-GAAP)		1,634			359			3,794			1,174			2,833			1,201			4,968			2,160
Marketing and midstream revenues and expenses, net		(1	)		2			19			28			4			(1	)		8			20
Commodity derivative cash settlements		370			(10	)		969			(343	)		472			367			816			599
General and administrative expenses, cash-based		77			56			238			198			62			74			136			161
Field-level cash margin (Non-GAAP)	$	2,080		$	407		$	5,020		$	1,057		$	3,371		$	1,641		$	5,928		$	2,940

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

As of ~~September~~June 30, ~~2021,~~2022, we have commodity derivatives that pertain to a portion of our estimated production for the last ~~three~~six months of ~~2021,~~2022, as well as for ~~2022,~~ 2023 and 2024. The key terms to our open oil, gas and NGL derivative financial instruments are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The fair values of our commodity derivatives are largely determined by the forward curves of the relevant price indices. At ~~September~~June 30, ~~2021,~~2022, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately ~~$280~~$155 million.

Interest Rate Risk

As of ~~September~~June 30, ~~2021,~~2022, we had total debt of $6.5 billion. All of our debt is based on fixed interest rates averaging ~~5.7%~~5.8%.

Foreign Currency Risk

We had no material foreign currency risk at ~~September~~June 30, ~~2021.~~2022.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to Devon, including its consolidated subsidiaries, is made known to the officers who certify Devon’s financial reports and to other members of senior management and the Board of Directors.

Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of ~~September~~June 30, ~~2021~~2022 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Changes in Internal Control Over Financial Reporting

In conjunction with the Merger closing, we have integrated WPX’s operations into our overall system of internal controls over financial reporting and they are now included in our assessment of the effectiveness of our internal controls over financial reporting. For additional information regarding the Merger, see ~~Note 2~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~

There were no ~~other~~ changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. Other Information

Item 1. Legal Proceedings

We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the environmental matters noted in Part ~~II,~~I, Item 1.3. Legal Proceedings of our ~~Second Quarter~~ 2021 ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K, there were no material pending legal proceedings to which we are a party or to which any of our property is subject.

Please see our ~~2020~~2021 Annual Report on Form 10-K and other SEC filings for additional information.

Item 1A. Risk Factors

There have been no material changes to the information included in Item 1A. “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding purchases of our common stock that were made by us during the ~~third~~second quarter of ~~2021~~2022 (shares in thousands).


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - April 30		1,352	$	60.47		1,187	$	709
May 1 - May 31		2,114	$	65.27		2,104	$	972
June 1 - June 30		1,762	$	62.15		1,761	$	862
Total		5,228	$	62.97		5,052

Period

Total Number of
Shares Purchased ⁽¹⁾

Average Price
Paid per Share

July 1 - July 31

16

$
27.64

August 1 - August 31

41

$
25.65

September 1 - September 30

18

$
29.29

Total

75

$
26.95

(1)

In addition to shares purchased under the share repurchase program described below, these amounts also include approximately 0.2 million shares received by us from employees for the payment of personal income tax withholdings on vesting transactions.

(2)

On November 2, 2021, we announced a $1.0 billion share repurchase program with an expiration date of December 31, 2022. In February 2022, we announced the expansion of this program to $1.6 billion, and in May 2022, we announced a further expansion to $2.0 billion and extended the expiration date to May 4, 2023. In the second quarter of 2022, we repurchased 5.1 million common shares for $318 million, or $63.07 per share, under this share repurchase program. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~(1)~~

~~These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions.~~

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits


Exhibit Number		Description

10.1*	Devon Energy Corporation 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 to Registrant’s Registration Statement on Form S-8, filed June 8, 2022; File No. 333-265472).

10.2*	2022 Form of Notice of Grant of Restricted Stock Award and Award Agreement under the 2022 Long-Term Incentive Plan between the Company and all non-management directors for restricted stock awarded.

31.1	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*







	Indicates management contract or compensatory plan or arrangement.

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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 thereunto duly authorized.


				DEVON ENERGY CORPORATION

Date: ~~November 3, 2021~~August 2, 2022				/s/ Jeremy D. Humphers
				Jeremy D. Humphers
				Senior Vice President and Chief Accounting Officer


Delaware		73-1567067
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer identification No.)

333 West Sheridan Avenue, Oklahoma City, Oklahoma		73102-5015
(Address of principal executive offices)		(Zip code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.10 per share	DVN	The New York Stock Exchange


Part I. Financial Information
Item 1.	Financial Statements	6
	Consolidated Statements of Comprehensive Earnings	6
	Consolidated Statements of Cash Flows	7
	Consolidated Balance Sheets	8
	Consolidated Statements of Equity	9
	Notes to Consolidated Financial Statements	10
	Note 1 – Summary of Significant Accounting Policies	10
	Note 2 – Acquisitions and Divestitures	11
	Note 3 – Derivative Financial Instruments	1312
	Note 4 – Share-Based Compensation	1513
	Note 5 – ~~Asset Impairments~~Restructuring and Transaction Costs	1615
	Note 6 – ~~Restructuring and Transaction Costs~~ Other, Net	1715
	Note 7 – Income Taxes	1816
	Note 8 – Net Earnings ~~(Loss)~~ Per Share ~~From Continuing Operations~~	1917
	Note 9 – Other Comprehensive Earnings (Loss)	1917
	Note 10 – Supplemental Information to Statements of Cash Flows	2018
	Note 11 – Accounts Receivable	2018
	Note 12 – Property, Plant and Equipment	2018
	Note 13 – Debt and Related Expenses	2119
	Note 14 – Leases	2220
	Note 15 – Asset Retirement Obligations	2320
	Note 16 – Stockholders’ Equity	2320
	Note 17 – ~~Discontinued Operations~~Commitments and Contingencies	2421
	Note 18 – ~~Commitments and Contingencies~~	25
	~~Note 19 –~~ Fair Value Measurements	2623
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2824
	Executive Overview	2824
	Results of Operations	3026
	Capital Resources, Uses and Liquidity	3734
	Critical Accounting Estimates	4037
	Non-GAAP Measures	4137
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4440
Item 4.	Controls and Procedures	4440

Part II. Other Information
Item 1.	Legal Proceedings	4541
Item 1A.	Risk Factors	4541
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4541
Item 3.	Defaults Upon Senior Securities	4541
Item 4.	Mine Safety Disclosures	4541
Item 5.	Other Information	4541
Item 6.	Exhibits	4642

Signatures		4743


	September 30, 2021			December 31, 2020				June 30, 2022			December 31, 2021
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	2,321		$	2,237			$	3,457		$	2,271
Accounts receivable		1,517			601				2,348			1,543
Income taxes receivable		80			174
Other current assets		309			248				546			435
Total current assets		4,227			3,260				6,351			4,249
Oil and gas property and equipment, based on successful efforts accounting, net		13,613			4,436				13,588			13,536
Other property and equipment, net ($106 million and $102 million related to CDM in 2021 and 2020, respectively)		1,465			957
Other property and equipment, net ($122 million and $111 million related to CDM in 2022 and 2021, respectively)									1,525			1,472
Total property and equipment, net		15,078			5,393				15,113			15,008
Goodwill		753			753				753			753
Right-of-use assets		244			223				236			235
Investments		388			12				423			402
Other long-term assets		367			271				318			378
Total assets	$	21,057		$	9,912			$	23,194		$	21,025
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	537		$	242			$	668		$	500
Revenues and royalties payable		1,443			662				2,108			1,456
Other current liabilities		1,525			536				1,318			1,131
Total current liabilities		3,505			1,440				4,094			3,087
Long-term debt		6,492			4,298				6,461			6,482
Lease liabilities		256			246				259			252
Asset retirement obligations		462			358				452			468
Other long-term liabilities		1,281			551				949			1,050
Deferred income taxes									753			287
Stockholders' equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 677 million and 382 million shares in 2021 and 2020, respectively		68			38
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 656 million and 663 million shares in 2022 and 2021, respectively									66			66
Additional paid-in capital		8,206			2,766				7,060			7,636
Retained earnings		750			208				3,107			1,692
Accumulated other comprehensive loss		(100	)		(127	)			(130	)		(132	)
Treasury stock, at cost, 0.2 million shares in 2022									(13	)		0
Total stockholders’ equity attributable to Devon		8,924			2,885				10,090			9,262
Noncontrolling interests		137			134				136			137
Total equity		9,061			3,019				10,226			9,399
Total liabilities and equity	$	21,057		$	9,912			$	23,194		$	21,025


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Oil	$	1,900	$	504	$	4,917	$	1,462	$	2,970	$	1,686	$	5,376	$	3,017
Gas		309		79		699		221		557		188		864		390
NGL		426		95		930		226		573		280		1,035		504
Oil, gas and NGL sales		2,635		678		6,546		1,909		4,100		2,154		7,275		3,911

Oil		649		233		1,758		702		952		610		1,728		1,109
Gas		196		100		477		275		322		134		531		281
NGL		321		143		718		390		422		222		757		397
Marketing and midstream revenues		1,166		476		2,953		1,367		1,696		966		3,016		1,787
Total revenues from contracts with customers	$	3,801	$	1,154	$	9,499	$	3,276	$	5,796	$	3,120	$	10,291	$	5,698


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐


		Carrying Amount
Investments	% Interest	June 30, 2022		December 31, 2021
Catalyst	50%	$	354	$	368
Other	Various		69		34
Total		$	423	$	402

	Preliminary Purchase
	Price Allocation
	as of September 30, 2021
Consideration:
WPX Common Stock outstanding		561.2
Exchange Ratio		0.5165
Devon common stock issued		289.9
Devon closing price on January 7, 2021	$	18.57
Total common equity consideration		5,383
Share-based replacement awards		49
Total consideration	$	5,432
Assets acquired:
Cash, cash equivalents and restricted cash	$	344
Accounts receivable		425
Other current assets		49
Right-of-use assets		38
Proved oil and gas property and equipment		7,017
Unproved and properties under development		2,362
Other property and equipment		485
Investments		400
Other long-term assets		43
Total assets acquired	$	11,163
Liabilities assumed:
Accounts payable	$	346
Revenue and royalties payable		223
Other current liabilities		454
Debt		3,562
Lease liabilities		38
Asset retirement obligations		94
Deferred income taxes		249
Other long-term liabilities		765
Total liabilities assumed		5,731
Net assets acquired	$	5,432

	Three Months Ended September 30,			Nine Months Ended September 30,
Continuing operations:	2020			2020
Total revenues	$	1,540		$	5,452
Net loss	$	(281	)	$	(3,247	)
Basic net loss per share	$	(0.42	)	$	(4.87	)

	Price Swaps				Price Swaptions				Price Collars						Call Options Sold
Period	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q4 2021		66,460	$	41.24		—	$	—		48,250	$	38.82	$	48.82		5,000	$	39.50
Q1-Q4 2022		26,112	$	43.75		10,000	$	46.67		20,233	$	46.41	$	56.41		—	$	—


	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q3-Q4 2022	BRENT		1,000	$	(7.75	)
Q3-Q4 2022	NYMEX Roll		29,000	$	0.45
Q1-Q4 2023	Midland Sweet		12,296	$	0.52

	Price Swaps ⁽¹⁾				Price Swaptions ⁽²⁾				Price Collars ⁽²⁾						Call Options Sold ⁽²⁾
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)
Q4 2021		254,000	$	2.63		—	$	—		133,000	$	2.55	$	3.05		50,000	$	2.68
Q1-Q4 2022		3,452	$	2.85		100,000	$	2.70		145,507	$	2.69	$	3.40		—	$	—
Q1-Q4 2023		—	$	—		—	$	—		10,603	$	3.11	$	4.56		—	$	—

	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2021	El Paso Natural Gas		35,000	$	(0.92	)
Q4 2021	WAHA		80,000	$	(0.65	)
Q1-Q4 2022	WAHA		70,000	$	(0.57	)
Q1-Q4 2023	WAHA		70,000	$	(0.51	)
Q1-Q4 2024	WAHA		40,000	$	(0.51	)


	Price Swaps (1)				Price Collars (2)
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q3-Q4 2022		117,500	$	3.08		193,000	$	3.05	$	4.55
Q1-Q4 2023		8,658	$	5.24		96,436	$	3.55	$	7.63

		Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q4 2021	Natural Gasoline		1,000	$	47.57
Q4 2021	Normal Butane		1,000	$	31.40
Q4 2021	Propane		1,000	$	27.88


	June 30, 2022									December 31, 2021
	Gross Fair Value			Amounts Netted			Net Fair Value			Gross Fair Value			Amounts Netted			Net Fair Value			Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset	$	37		$	(26	)	$	11		$	6		$	(4	)	$	2		Other current assets
Long-term derivative asset		31			(1	)		30			6			—			6		Other long-term assets
Short-term derivative liability		(672	)		26			(646	)		(579	)		4			(575	)	Other current liabilities
Long-term derivative liability		(2	)		1			(1	)		(2	)		—			(2	)	Other long-term liabilities
Total derivative liability	$	(606	)	$	—		$	(606	)	$	(569	)	$	—		$	(569	)

								Performance-Based					Performance
	Restricted Stock Awards & Units							Restricted Stock Awards					Share Units							Restricted Stock Awards & Units					Performance Share Units
	Awards/Units					Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Units					Weighted Average Grant-Date Fair Value		Awards/Units			Weighted Average Grant-Date Fair Value		Units				Weighted Average Grant-Date Fair Value
	(Thousands, except fair value data)																			(Thousands, except fair value data)
Unvested at 12/31/20		5,316				$	25.82		44		$	44.70		1,994				$	31.89
Unvested at 12/31/21																					7,656		$	22.15		2,076			$	24.12
Granted		7,711		⁽¹	⁾	$	19.69		—		$	—		861				$	18.08		1,296		$	52.98		964			$	44.05
Vested		(5,006	)			$	22.35		(44	)	$	44.70		(754	)			$	37.40		(3,104	)	$	23.00		(1,194	)		$	28.91
Forfeited		(126	)			$	23.21		—		$	—		(25	)			$	36.04		(59	)	$	33.03		(5	)		$	68.68
Unvested at 9/30/21		7,895				$	22.08		—		$	—		2,076		⁽²	⁾	$	24.12
Unvested at 6/30/22																					5,789		$	28.49		1,841		(1)	$	31.33


	2021		2022
Grant-date fair value	$	18.08	$	68.68
Risk-free interest rate	0.18%			1.81	%
Volatility factor	67.8%			70.1	%
Contractual term (years)	2.89			2.89


	Restricted Stock		Performance		Restricted Stock		Performance
	Awards/Units		Share Units		Awards/Units		Share Units
Unrecognized compensation cost	$	97	$	15	$	109	$	27
Weighted average period for recognition (years)		2.5		1.9		2.7		1.9

	Other			Other
	Current			Long-term
	Liabilities			Liabilities			Total
Balance as of December 31, 2020	$	35		$	137		$	172
Changes related to 2021 merger integration		27			—			27
Changes related to prior years' restructurings		(8	)		(18	)		(26	)
Balance as of September 30, 2021	$	54		$	119		$	173

Balance as of December 31, 2019	$	20		$	1		$	21
Changes related to prior years' restructurings		(3	)		—			(3	)
Balance as of September 30, 2020	$	17		$	1		$	18


U.S. statutory income tax rate	21	%	21	%	21	%	21	%	21	%	21	%	21	%	21	%
State income taxes	0	%	0	%	0	%	1	%	1	%	0	%	1	%	1	%
Unrecognized tax benefits	0	%	18	%	0	%	0	%
Subsidiary reorganization									0	%	6	%	0	%	7	%
Deferred tax asset valuation allowance	(9	%)	4	%	(33	%)	(7	%)	0	%	(19	%)	0	%	(116	%)
Other	0	%	4	%	5	%	2	%	0	%	6	%	0	%	12	%
Effective income tax rate	12	%	47	%	(7	%)	17	%	22	%	14	%	22	%	(75	%)


	June 30, 2022			December 31, 2021
Property and equipment:
Proved	$	39,216		$	38,051
Unproved and properties under development		937			1,081
Total oil and gas		40,153			39,132
Less accumulated DD&A		(26,565	)		(25,596	)
Oil and gas property and equipment, net		13,588			13,536
Other property and equipment		2,224			2,139
Less accumulated DD&A		(699	)		(667	)
Other property and equipment, net (1)		1,525			1,472
Property and equipment, net	$	15,113		$	15,008

	September 30, 2021			December 31, 2020
8.25% due August 1, 2023 ⁽¹⁾	$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾		472			—
5.85% due December 15, 2025		485			485
7.50% due September 15, 2027		73			73
5.25% due October 15, 2027 ⁽¹⁾		390			—
5.875% due June 15, 2028 ⁽¹⁾		325			—
4.50% due January 15, 2030 ⁽¹⁾		585			—
7.875% due September 30, 2031		675			675
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium (discount) on debentures and notes		160			(20	)
Debt issuance costs		(31	)		(31	)
Total long-term debt	$	6,492		$	4,298


	June 30, 2022			December 31, 2021
8.25% due August 1, 2023	$	242		$	242
5.25% due September 15, 2024		472			472
5.85% due December 15, 2025		485			485
7.50% due September 15, 2027		73			73
5.25% due October 15, 2027		390			390
5.875% due June 15, 2028		325			325
4.50% due January 15, 2030		585			585
7.875% due September 30, 2031		675			675
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium on debentures and notes		126			149
Debt issuance costs		(28	)		(30	)
Total long-term debt	$	6,461		$	6,482

	Total
2022	$	—
2023		242
2024		472
2025		485
2026		—
Thereafter		5,164
Total	$	6,363

	Face Value		Fair Value		Optional Redemption⁽¹⁾
6.00% due January 15, 2022	$	43	$	44
8.25% due August 1, 2023		242		281	June 1, 2023
5.25% due September 15, 2024		472		530	June 15, 2024
5.75% due June 1, 2026		500		529	June 1, 2021
5.25% due October 15, 2027		600		646	October 15, 2022
5.875% due June 15, 2028		500		554	June 15, 2023
4.50% due January 15, 2030		900		978	January 15, 2025
	$	3,257	$	3,562


	Total Number of Shares Purchased		Dollar Value of Shares Purchased		Average Price Paid per Share
2021:
Fourth quarter		13,983	$	589	$	42.15
2022:
First quarter		3,979	$	230	$	57.74
Second quarter		5,052		318	$	63.07
Total plan		23,014	$	1,137	$	49.44

							Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2			Level 3								Fair Value Measurements Using:
	Amount			Value			Inputs		Inputs			Inputs		Carrying			Total Fair			Level 1		Level 2			Level 3
September 30, 2021 assets (liabilities):
														Amount			Value			Inputs		Inputs			Inputs
June 30, 2022 assets (liabilities):
Cash equivalents	$	1,321		$	1,321		$	1,321	$	—		$	—	$	3,063		$	3,063		$	3,063	$	—		$	—
Commodity derivatives	$	2		$	2		$	—	$	2		$	—	$	41		$	41		$	—	$	41		$	—
Commodity derivatives	$	(1,086	)	$	(1,086	)	$	—	$	(1,086	)	$	—	$	(647	)	$	(647	)	$	—	$	(647	)	$	—
Debt	$	(6,492	)	$	(7,629	)	$	—	$	(7,629	)	$	—	$	(6,461	)	$	(6,440	)	$	—	$	(6,440	)	$	—
Contingent earnout payments	$	135		$	135		$	—	$	—		$	135	$	129		$	129		$	—	$	—		$	129
December 31, 2020 assets (liabilities):
December 31, 2021 assets (liabilities):
Cash equivalents	$	1,436		$	1,436		$	1,436	$	—		$	—	$	1,421		$	1,421		$	1,421	$	—		$	—
Commodity derivatives	$	6		$	6		$	—	$	6		$	—	$	8		$	8		$	—	$	8		$	—
Commodity derivatives	$	(148	)	$	(148	)	$	—	$	(148	)	$	—	$	(577	)	$	(577	)	$	—	$	(577	)	$	—
Debt	$	(4,298	)	$	(5,365	)	$	—	$	(5,365	)	$	—	$	(6,482	)	$	(7,644	)	$	—	$	(7,644	)	$	—
Contingent earnout payments	$	66		$	66		$	—	$	—		$	66	$	184		$	184		$	—	$	—		$	184

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share
July 1 - July 31		16	$	27.64
August 1 - August 31		41	$	25.65
September 1 - September 30		18	$	29.29
Total		75	$	26.95