DEVON ENERGY CORP/DE - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2022


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

Commission File Number 001-32318

DEVON ENERGY CORPORATION

(Exact name of registrant as specified in its charter)


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)

Registrant’s telephone number, including area code: (405) 235-3611

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

Securities registered pursuant to Section 12(b) of the Act:


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

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.


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

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 July 20, 2022, 654.8 million shares of common stock were outstanding.

Table of Contents

DEVON ENERGY CORPORATION

FORM 10-Q

TABLE OF CONTENTS


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	12
	Note 4 – Share-Based Compensation	13
	Note 5 – Restructuring and Transaction Costs	15
	Note 6 – Other, Net	15
	Note 7 – Income Taxes	16
	Note 8 – Net Earnings Per Share	17
	Note 9 – Other Comprehensive Earnings (Loss)	17
	Note 10 – Supplemental Information to Statements of Cash Flows	18
	Note 11 – Accounts Receivable	18
	Note 12 – Property, Plant and Equipment	18
	Note 13 – Debt and Related Expenses	19
	Note 14 – Leases	20
	Note 15 – Asset Retirement Obligations	20
	Note 16 – Stockholders’ Equity	20
	Note 17 – Commitments and Contingencies	21
	Note 18 – Fair Value Measurements	23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Executive Overview	24
	Results of Operations	26
	Capital Resources, Uses and Liquidity	34
	Critical Accounting Estimates	37
	Non-GAAP Measures	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42

Signatures		43

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DEFINITIONS

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 this Quarterly Report on Form 10-Q:

"2017 Plan" means the Devon Energy Corporation 2017 Long-Term Incentive Plan.

"2022 Plan" means the Devon Energy Corporation 2022 Long-Term Incentive Plan.

“Bbl” or “Bbls” means barrel or barrels.

“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.

“Btu” means British thermal units, a measure of heating value.

“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.

“Catalyst” means Catalyst Midstream Partners, LLC.

“CDM” means Cotton Draw Midstream, L.L.C.

“DD&A” means depreciation, depletion and amortization expenses.

“ESG” means environmental, social and governance.

“G&A” means general and administrative expenses.

“GAAP” means U.S. generally accepted accounting principles.

“Inside FERC” refers to the publication Inside FERC’s Gas Market Report.

“LOE” means lease operating expenses.

“MBbls” means thousand barrels.

“MBoe” means thousand Boe.

“Mcf” means thousand cubic feet.

“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.

“MMBoe” means million Boe.

“MMBtu” means million Btu.

Table of Contents

“MMcf” means million cubic feet.

“N/M” means not meaningful.

"NCI" means noncontrolling interests.

“NGL” or “NGLs” means natural gas liquids.

“NYMEX” means New York Mercantile Exchange.

“OPEC” means Organization of the Petroleum Exporting Countries.

“SEC” means United States Securities and Exchange Commission.

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

“TSR” means total shareholder return.

“U.S.” means United States of America.

“VIE” means variable interest entity.

“WPX” means WPX Energy, Inc.

“WTI” means West Texas Intermediate.

“/Bbl” means per barrel.

“/d” means per day.

“/MMBtu” means per MMBtu.

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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:

•

the volatility of oil, gas and NGL prices;

•

risks relating to the COVID-19 pandemic or other future pandemics;

•

uncertainties inherent in estimating oil, gas and NGL reserves;

•

the extent to which we are successful in acquiring and discovering additional reserves;

•

regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters;

•

risks related to regulatory, social and market efforts to address climate change;

•

the uncertainties, costs and risks involved in our operations, including as a result of employee misconduct;

•

risks related to our hedging activities;

•

counterparty credit risks;

•

risks relating to our indebtedness;

•

cyberattack risks;

•

our limited control over third parties who operate some of our oil and gas properties;

•

midstream capacity constraints and potential interruptions in production;

•

the extent to which insurance covers any losses we may experience;

•

competition for assets, materials, people and capital;

•

risks related to investors attempting to effect change;

•

our ability to successfully complete mergers, acquisitions and divestitures;

•

our ability to pay dividends and make share repurchases; and

•

any of the other risks and uncertainties discussed in this report, our 2021 Annual Report on Form 10-K and our other filings with the SEC.

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.

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Part I. Financial Information

Item 1. Financial Statements

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Unaudited)
Oil, gas and NGL sales	$	4,100		$	2,154		$	7,275		$	3,911
Oil, gas and NGL derivatives		(170	)		(703	)		(853	)		(1,231	)
Marketing and midstream revenues		1,696			966			3,016			1,787
Total revenues		5,626			2,417			9,438			4,467
Production expenses		729			513			1,347			971
Exploration expenses		10			3			12			6
Marketing and midstream expenses		1,700			965			3,024			1,807
Depreciation, depletion and amortization		528			536			1,017			1,003
Asset dispositions		(14	)		(87	)		(15	)		(119	)
General and administrative expenses		84			94			178			201
Financing costs, net		84			80			169			157
Restructuring and transaction costs		—			23			—			212
Other, net		10			(14	)		(51	)		(43	)
Total expenses		3,131			2,113			5,681			4,195
Earnings before income taxes		2,495			304			3,757			272
Income tax expense (benefit)		557			43			824			(205	)
Net earnings		1,938			261			2,933			477
Net earnings attributable to noncontrolling interests		6			5			12			8
Net earnings attributable to Devon	$	1,932		$	256		$	2,921		$	469
Net earnings per share:
Basic net earnings per share:	$	2.94		$	0.38		$	4.42		$	0.70
Diluted net earnings per share:	$	2.93		$	0.38		$	4.40		$	0.70
Comprehensive earnings:
Net earnings	$	1,938		$	261		$	2,933		$	477
Other comprehensive earnings, net of tax:
Pension and postretirement plans		1			3			2			26
Other comprehensive earnings, net of tax		1			3			2			26
Comprehensive earnings:	$	1,939		$	264		$	2,935		$	503
Comprehensive earnings attributable to noncontrolling interests		6			5			12			8
Comprehensive earnings attributable to Devon	$	1,933		$	259		$	2,923		$	495

See accompanying notes to consolidated financial statements

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	1,938		$	261		$	2,933		$	477
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation, depletion and amortization		528			536			1,017			1,003
Leasehold impairments		7			1			8			2
Amortization of liabilities		(9	)		(7	)		(15	)		(14	)
Total losses on commodity derivatives		170			703			853			1,231
Cash settlements on commodity derivatives		(472	)		(367	)		(816	)		(599	)
Gains on asset dispositions		(14	)		(87	)		(15	)		(119	)
Deferred income tax expense (benefit)		305			24			469			(219	)
Share-based compensation		23			20			43			61
Early retirement of debt		—			(10	)		—			(30	)
Other		4			2			(17	)		2
Changes in assets and liabilities, net		198			17			55			(110	)
Net cash from operating activities		2,678			1,093			4,515			1,685
Cash flows from investing activities:
Capital expenditures		(573	)		(504	)		(1,110	)		(1,003	)
Acquisitions of property and equipment		(100	)		(5	)		(101	)		(5	)
Divestitures of property and equipment		9			49			35			64
WPX acquired cash		—			—			—			344
Distributions from equity method investments		15			8			23			18
Contributions to equity method investments		(21	)		—			(43	)		—
Net cash from investing activities		(670	)		(452	)		(1,196	)		(582	)
Cash flows from financing activities:
Repayments of long-term debt		—			(710	)		—			(1,243	)
Early retirement of debt		—			(32	)		—			(59	)
Repurchases of common stock		(324	)		—			(535	)		—
Dividends paid on common stock		(830	)		(229	)		(1,497	)		(432	)
Contributions from noncontrolling interests		—			3			—			3
Distributions to noncontrolling interests		(5	)		(5	)		(13	)		(9	)
Acquisition of noncontrolling interests		—			—			—			(24	)
Shares exchanged for tax withholdings and other		(12	)		(9	)		(85	)		(42	)
Net cash from financing activities		(1,171	)		(982	)		(2,130	)		(1,806	)
Effect of exchange rate changes on cash		(5	)		2			(3	)		5
Net change in cash, cash equivalents and restricted cash		832			(339	)		1,186			(698	)
Cash, cash equivalents and restricted cash at beginning of period		2,625			1,878			2,271			2,237
Cash, cash equivalents and restricted cash at end of period	$	3,457		$	1,539		$	3,457		$	1,539

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	3,300		$	1,348		$	3,300		$	1,348
Restricted cash		157			191			157			191
Total cash, cash equivalents and restricted cash	$	3,457		$	1,539		$	3,457		$	1,539

See accompanying notes to consolidated financial statements

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		June 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash		$	3,457		$	2,271
Accounts receivable			2,348			1,543
Other current assets			546			435
Total current assets			6,351			4,249
Oil and gas property and equipment, based on successful efforts accounting, net			13,588			13,536
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			15,113			15,008
Goodwill			753			753
Right-of-use assets			236			235
Investments			423			402
Other long-term assets			318			378
Total assets		$	23,194		$	21,025
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	668		$	500
Revenues and royalties payable			2,108			1,456
Other current liabilities			1,318			1,131
Total current liabilities			4,094			3,087
Long-term debt			6,461			6,482
Lease liabilities			259			252
Asset retirement obligations			452			468
Other long-term liabilities			949			1,050
Deferred income taxes			753			287
Stockholders' equity:
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			7,060			7,636
Retained earnings			3,107			1,692
Accumulated other comprehensive loss			(130	)		(132	)
Treasury stock, at cost, 0.2 million shares in 2022			(13	)		—
Total stockholders’ equity attributable to Devon			10,090			9,262
Noncontrolling interests			136			137
Total equity			10,226			9,399
Total liabilities and equity		$	23,194		$	21,025

See accompanying notes to consolidated financial statements

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY


													Other
							Additional						Comprehensive
	Common Stock						Paid-In			Retained			Earnings			Treasury			Noncontrolling			Total
	Shares			Amount			Capital			Earnings			(Loss)			Stock			Interests			Equity
	(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	)	$	—		$	133		$	8,486
Net earnings		—			—			—			256			—			—			5			261
Other comprehensive earnings, net of tax		—			—			—			—			3			—			—			3
Restricted stock grants, net of cancellations		2			1			(1	)		—			—			—			—			—
Common stock repurchased		—			—			—			—			—			(2	)		—			(2	)
Common stock retired		—			—			(2	)		—			—			2			—			—
Common stock dividends		—			—			—			(231	)		—			—			—			(231	)
Share-based compensation		—			—			20			—			—			—			—			20
Contributions from noncontrolling interests		—			—			—			—			—			—			2			2
Distributions to noncontrolling interests		—			—			—			—			—			—			(4	)		(4	)
Balance as of June 30, 2021		677		$	68		$	8,189		$	243		$	(101	)	$	—		$	136		$	8,535
Six Months Ended June 30, 2022
Balance as of December 31, 2021		663		$	66		$	7,636		$	1,692		$	(132	)	$	—		$	137		$	9,399
Net earnings		—			—			—			2,921			—			—			12			2,933
Other comprehensive earnings, net of tax		—			—			—			—			2			—			—			2
Restricted stock grants, net of cancellations		2			1			1			—			—			—			—			2
Common stock repurchased		—			—			—			—			—			(634	)		—			(634	)
Common stock retired		(10	)		(1	)		(620	)		—			—			621			—			—
Common stock dividends		—			—			—			(1,506	)		—			—			—			(1,506	)
Share-based compensation		1			—			43			—			—			—			—			43
Distributions to noncontrolling interests		—			—			—			—			—			—			(13	)		(13	)
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
Net earnings		—			—			—			469			—			—			8			477
Other comprehensive earnings, net of tax		—			—			—			—			26			—			—			26
Restricted stock grants, net of cancellations		6			1			(1	)		—			—			—			—			—
Common stock repurchased		—			—			—			—			—			(40	)		—			(40	)
Common stock retired		(2	)		—			(40	)		—			—			40			—			—
Common stock dividends		—			—			—			(434	)		—			—			—			(434	)
Common stock issued		290			29			5,403			—			—			—			—			5,432
Share-based compensation		1			—			61			—			—			—			—			61
Contributions from noncontrolling interests		—			—			—			—			—			—			2			2
Distributions to noncontrolling interests		—			—			—			—			—			—			(8	)		(8	)
Balance as of June 30, 2021		677		$	68		$	8,189		$	243		$	(101	)	$	—		$	136		$	8,535

See accompanying notes to consolidated financial statements

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Summary of Significant Accounting Policies

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 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 six-month periods ended June 30, 2022 and 2021 and Devon’s financial position as of June 30, 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.

Restricted Cash

As of June 30, 2022, Devon classified approximately $140 million of cash as restricted cash on the consolidated balance sheets for obligations retained related to the Barnett Shale assets and the Canadian business. Cash payments for these charges related to the Barnett assets and Canada business total approximately $10 million per quarter.

Variable Interest Entity

Cotton Draw Midstream, L.L.C. (“CDM”) is a joint venture entity formed by Devon and an affiliate of QL Capital Partners, LP. CDM provides gathering, compression and dehydration services for natural gas production in the Cotton Draw area of the Delaware Basin. Devon holds a controlling interest in CDM and the portions of CDM’s net earnings and equity not attributable to Devon’s controlling interest are shown separately as noncontrolling interests in the accompanying consolidated statements of comprehensive earnings and consolidated balance sheets. CDM is considered a VIE to Devon. The assets of CDM cannot be used by Devon for general corporate purposes and are included in, and disclosed parenthetically, on Devon's consolidated balance sheets. The carrying amount of liabilities related to CDM for which the creditors do not have recourse to Devon's assets are also included in, and disclosed parenthetically, if material, on Devon's consolidated balance sheets.

Investments

In conjunction with the Merger, Devon acquired an interest in Catalyst, which is a joint venture established among WPX, an affiliate of Howard Energy Partners, LLC (“HEP”) and certain other investors, to develop oil gathering and natural gas processing infrastructure in the Stateline area of the Delaware Basin. Under the terms of the arrangement, Devon and a holding company owned by the other joint venture investors each have a 50% voting interest in the joint venture legal entity, and HEP serves as the operator. Through 2038, Devon’s production from 50,000 net acres in the Stateline area of the Delaware Basin has been dedicated to Catalyst subject to fixed-fee oil gathering and natural gas processing agreements. The agreements do not include any minimum volume commitments. Devon accounts for the investment in Catalyst as an equity method investment.

Devon's investment in Catalyst is shown within investments on the consolidated balance sheets and Devon's share of Catalyst earnings are reflected as a component of other, net in the accompanying consolidated statements of comprehensive earnings.


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

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Disaggregation of Revenue

The following table presents revenue from contracts with customers that are disaggregated based on the type of good or service.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Oil	$	2,970	$	1,686	$	5,376	$	3,017
Gas		557		188		864		390
NGL		573		280		1,035		504
Oil, gas and NGL sales		4,100		2,154		7,275		3,911

Oil		952		610		1,728		1,109
Gas		322		134		531		281
NGL		422		222		757		397
Marketing and midstream revenues		1,696		966		3,016		1,787
Total revenues from contracts with customers	$	5,796	$	3,120	$	10,291	$	5,698

2. Acquisitions and Divestitures

WPX Merger

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. WPX was an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. 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. No fractional shares of Devon’s common stock were issued in the Merger, and holders of WPX common stock instead received cash in lieu of fractional shares of Devon common stock, if any. Based on the closing price of Devon’s common stock on January 7, 2021, the total value of Devon common stock issued to holders of WPX common stock as part of this transaction was approximately $5.4 billion. The Merger was structured as a tax-free reorganization for United States federal income tax purposes. The final allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed was finalized at December 31, 2021.

Acquisitions

In July 2022, Devon completed its acquisition of producing properties and leasehold interests located in the Williston Basin for cash consideration of approximately $830 million, net of purchase price adjustments. In the second quarter of 2022, Devon paid an $87 million cash deposit related to this acquisition, which is included within other current assets in the June 30, 2022 consolidated balance sheet and within acquisitions of property and equipment in the consolidated statement of cash flows.

Divestitures

In the first quarter of 2021, Devon completed the sale of non-core assets in the Rockies for proceeds of $9 million, net of purchase price adjustments, and recognized a $35 million gain related to the sale. Devon received $4 million in contingent earnout payments related to this transaction in the first quarter of 2022 with the potential for up to an additional $4 million in the future. The total estimated proved reserves associated with these divested assets was approximately 3 MMBoe.

Contingent Earnout Payments

Devon is entitled to contingent earnout payments associated with the sale of its Barnett Shale assets in 2020 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. Devon received $65 million in contingent earnout payments related to this transaction in the first quarter of 2022 and could receive up to an additional $195 million in contingent earnout payments for the remaining performance periods depending on future commodity prices. The valuation of the future contingent earnout payments included within other current assets and other long-term assets in the June 30, 2022 consolidated balance sheet was approximately $65 million and $60 million, respectively. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement.

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(Unaudited)

Derivative Financial Instruments

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of June 30, 2022, Devon did not have any open interest rate swap contracts.

Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.

Counterparty Credit Risk

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of June 30, 2022, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties. Given Devon's current credit ratings and the terms of the underlying contracts, Devon is not currently required to post collateral to its counterparties with respect to its open derivative positions, and we would not be required to post any such collateral as a result of any change to the amount of Devon's net liability for such positions.

Commodity Derivatives

As of June 30, 2022, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.


	Price Swaps				Price Collars
Period	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)
Q3-Q4 2022		35,000	$	44.61		36,500	$	57.96	$	78.08
Q1-Q4 2023		—	$	—		6,193	$	61.32	$	97.65


	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

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As of June 30, 2022, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.


	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

(1)

Related to the 2022 open positions, 17,500 MMBtu/d settle against the Inside FERC first of month Henry Hub index at an average price of $5.25 and 100,000 MMBtu/d settle against the end of month NYMEX index at an average price of $2.70. All 2023 open positions settle against the Inside FERC first of month Henry Hub index.

(2)

Price collars settle against the Inside FERC first of month Henry Hub Index.


	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q3-Q4 2022	El Paso Natural Gas		50,000	$	(0.85	)
Q3-Q4 2022	Houston Ship Channel		40,000	$	(0.15	)
Q3-Q4 2022	WAHA		70,000	$	(0.57	)
Q1-Q4 2023	El Paso Natural Gas		125,000	$	(1.59	)
Q1-Q4 2023	Houston Ship Channel		50,000	$	(0.13	)
Q1-Q4 2023	WAHA		70,000	$	(0.51	)
Q1-Q4 2024	WAHA		40,000	$	(0.51	)

As of June 30, 2022, Devon did not have any open NGL positions.

Financial Statement Presentation

All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the consolidated balance sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis in the consolidated balance sheets. The tables below present a summary of these positions as of June 30, 2022 and December 31, 2021.


	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	)

Share-Based Compensation

In the second quarter of 2022, Devon's stockholders approved the 2022 Plan. The 2022 Plan replaces the 2017 Plan. From the effective date of the 2022 Plan, no further awards may be made under the 2017 Plan; however, awards previously granted will continue to be governed by the terms of the respective award documents. The 2022 Plan authorizes the grant of nonqualified and incentive stock options, restricted stock awards or units and stock appreciation rights to eligible employees. Restricted stock awards or restricted stock units granted under the 2022 Plan may be subject to performance-based conditions. The 2022 Plan also authorizes the grant of nonqualified stock options, restricted stock awards or units and stock appreciation rights to non-employee directors. To

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(Unaudited)

calculate the number of shares that may be granted in awards under the 2022 Plan, options and stock appreciation rights represent one share and other awards represent 1.74 shares.

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings. The vesting for certain share-based awards was accelerated in 2021 in conjunction with the reduction of workforce described in Note 5 and is included in restructuring and transaction costs in the accompanying consolidated statements of comprehensive earnings.


	Six Months Ended June 30,
	2022		2021
G&A	$	42	$	40
Exploration expenses		1		—
Restructuring and transaction costs		—		21
Total	$	43	$	61
Related income tax benefit	$	26	$	—

Under its approved long-term incentive plan, Devon grants share-based awards to its employees. The following table presents a summary of Devon’s unvested restricted stock awards and units and performance share units granted under the plan.


	Restricted Stock Awards & Units					Performance Share Units
	Awards/Units			Weighted Average Grant-Date Fair Value		Units				Weighted Average Grant-Date Fair Value
	(Thousands, except fair value data)
Unvested at 12/31/21		7,656		$	22.15		2,076			$	24.12
Granted		1,296		$	52.98		964			$	44.05
Vested		(3,104	)	$	23.00		(1,194	)		$	28.91
Forfeited		(59	)	$	33.03		(5	)		$	68.68
Unvested at 6/30/22		5,789		$	28.49		1,841		(1)	$	31.33

(1)

A maximum of 3.7 million common shares could be awarded based upon Devon’s final TSR ranking.

The following table presents the assumptions related to the performance share units granted in 2022, as indicated in the previous summary table. The grants in the previous summary table also include the impact of performance share units granted in a prior year that vested higher than 100% of target due to Devon's TSR performance compared to our peers.


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

The following table presents a summary of the unrecognized compensation cost and the related weighted average recognition period associated with unvested awards and units as of June 30, 2022.


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

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5. Restructuring and Transaction Costs

The following table summarizes Devon’s restructuring and transaction costs.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Restructuring costs	$	—	$	23	$	—	$	166
Transaction costs		—		—		—		46
Total costs	$	—	$	23	$	—	$	212

In conjunction with the Merger closing, Devon recognized $166 million of restructuring expenses during the first six months of 2021 related to employee severance and termination benefits, settlements and curtailments from defined retirement benefits and contract terminations. Of these expenses, $40 million and $21 million resulted from settlements and curtailments of defined retirement benefits and accelerated vesting of share-based grants, respectively, which were non-cash charges. Additionally, in conjunction with the Merger closing, Devon recognized $46 million of transaction costs primarily comprised of bank, legal and accounting fees.

The following table summarizes Devon’s restructuring liabilities.


	Other			Other
	Current			Long-term
	Liabilities			Liabilities			Total
Balance as of December 31, 2021	$	38		$	111		$	149
Changes related to prior years' restructurings		(10	)		(12	)		(22	)
Balance as of June 30, 2022	$	28		$	99		$	127

Balance as of December 31, 2020	$	35		$	137		$	172
Changes related to prior years' restructurings		48			(15	)		33
Balance as of June 30, 2021	$	83		$	122		$	205

6. Other, Net

The following table summarizes Devon's other expenses (income) presented in the accompanying consolidated comprehensive statement of earnings.


	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022			2021
Estimated future obligation under a performance guarantee	$	—	$	(18	)	$	(96	)	$	(18	)
Ukraine charitable pledge		—		—			20			—
Asset retirement obligation accretion		6		7			13			14
Severance and other non-income tax refunds		—		(3	)		(3	)		(39	)
Other		4		—			15			—
Total	$	10	$	(14	)	$	(51	)	$	(43	)

The first six months of 2022 includes a $96 million benefit related to the revision of a future obligation under a performance guarantee liability for previously divested assets. Due to improved commodity prices and market conditions, the purchaser of these assets was able to fully satisfy a $35 million obligation due in the first quarter of 2022. Further, during the first quarter of 2022, Devon also reduced the estimated future exposure of the performance guarantee by $61 million based on probability-weighted cash flows for the remainder of the contract term of four years. Additionally, the first six months of 2021 included an $18 million benefit related to the revision of a future obligation under a performance guarantee liability for which the purchaser of these assets was able to partially satisfy an obligation.

The first six months of 2022 also includes a $20 million pledge for humanitarian relief for the Ukrainian people and surrounding countries supporting refugees.

During the first six months of 2021, Devon received severance and other non-income tax refunds of $39 million.

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(Unaudited)

7. Income Taxes

The following table presents Devon’s total income tax expense (benefit) and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Earnings before income taxes	$	2,495	$	304	$	3,757	$	272

Current income tax expense	$	252	$	19	$	355	$	14
Deferred income tax expense (benefit)		305		24		469		(219	)
Total income tax expense (benefit)	$	557	$	43	$	824	$	(205	)


U.S. statutory income tax rate	21	%	21	%	21	%	21	%
State income taxes	1	%	0	%	1	%	1	%
Subsidiary reorganization	0	%	6	%	0	%	7	%
Deferred tax asset valuation allowance	0	%	(19	%)	0	%	(116	%)
Other	0	%	6	%	0	%	12	%
Effective income tax rate	22	%	14	%	22	%	(75	%)

Prior to December 31, 2021, Devon maintained a valuation allowance against all U.S. federal deferred tax assets. Devon recognized approximately $250 million of deferred tax liabilities to account for the Merger. The recognition of these deferred tax liabilities caused a decrease to Devon’s net deferred tax assets and a corresponding decrease to the valuation allowance Devon had recognized on its U.S. federal deferred tax assets in the first quarter of 2021.

Due to significant increases in commodity pricing and projections of future income, in the fourth quarter of 2021, Devon reassessed its evaluation of the realizability of deferred tax assets in future years and determined that a U.S. federal valuation allowance was no longer necessary at December 31, 2021.

In the fourth quarter of 2020, Devon recorded a deferred tax asset representing the deductible outside basis difference in its investment in a consolidated subsidiary. In the second quarter of 2021, Devon realized this deferred tax asset, increasing its U.S. federal net operating loss carryforwards by $1.8 billion.

In the table above, the "other" effect for 2021 is composed primarily of permanent differences related to costs incurred in connection with the Merger. Such items represent $18 million of income tax expense in the first six months of 2021.

Pursuant to the tax sharing agreement with The Williams Companies, Inc. ("Williams") assumed in the Merger, Devon has remained responsible for the tax from audit adjustments related to the WPX business for periods prior to WPX’s spin-off from Williams on December 31, 2011. The 2011 consolidated tax filing by Williams was audited by the Internal Revenue Service (“IRS”) during which the IRS proposed adjustments related to the WPX business. After a lengthy appeals process, these matters were effectively settled with the IRS during the second quarter of 2022 upon review and approval by the Joint Committee on Taxation. Accordingly, Devon believes these matters have now been effectively settled with no material impacts to Devon.

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(Unaudited)

Net Earnings Per Share

The following table reconciles net earnings and weighted-average common shares outstanding used in the calculations of basic and diluted net earnings per share.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net earnings:
Net earnings	$	1,932		$	256		$	2,921		$	469
Attributable to participating securities		(17	)		(3	)		(33	)		(5	)
Basic and diluted earnings	$	1,915		$	253		$	2,888		$	464
Common shares:
Common shares outstanding - total		658			677			661			666
Attributable to participating securities		(6	)		(6	)		(7	)		(6	)
Common shares outstanding - basic		652			671			654			660
Dilutive effect of potential common shares issuable		2			2			2			2
Common shares outstanding - diluted		654			673			656			662
Net earnings per share:
Basic	$	2.94		$	0.38		$	4.42		$	0.70
Diluted	$	2.93		$	0.38		$	4.40		$	0.70

9. Other Comprehensive Earnings (Loss)

Components of other comprehensive earnings (loss) consist of the following:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits	$	(131	)	$	(104	)	$	(132	)	$	(127	)
Recognition of net actuarial loss and prior service cost in earnings (1)		2			—			3			1
Settlement of pension benefits (2)		—			3			—			18
Other (3)		—			—			—			7
Income tax expense		(1	)		—			(1	)		—
Accumulated other comprehensive loss, net of tax	$	(130	)	$	(101	)	$	(130	)	$	(101	)

(1)

Recognition of net actuarial loss and prior service cost are included in the computation of net periodic benefit cost, which is a component of other, net in the accompanying consolidated statements of comprehensive earnings.

(2)

The Merger triggered settlement payments to certain plan participants, and the expense associated with this settlement is recognized as a component of restructuring and transaction costs in the accompanying consolidated statements of comprehensive earnings.

(3)

Other includes a remeasurement of the pension obligation due to the Merger, which was partially offset by a change in mortality assumption.

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(Unaudited)

10.

Supplemental Information to Statements of Cash Flows


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Changes in assets and liabilities, net:
Accounts receivable	$	(346	)	$	(100	)	$	(803	)	$	(163	)
Other current assets		(85	)		88			(21	)		78
Other long-term assets		9			(14	)		75			(24	)
Accounts payable and revenues and royalties payable		540			72			787			88
Other current liabilities		93			52			101			19
Other long-term liabilities		(13	)		(81	)		(84	)		(108	)
Total	$	198		$	17		$	55		$	(110	)
Supplementary cash flow data:
Interest paid	$	85		$	105		$	185		$	219
Income taxes paid (refunded)	$	133		$	(106	)	$	110		$	(112	)

11.

Accounts Receivable

Components of accounts receivable include the following:


	June 30, 2022			December 31, 2021
Oil, gas and NGL sales	$	1,520		$	984
Joint interest billings		192			158
Marketing and midstream revenues		602			370
Other		42			38
Gross accounts receivable		2,356			1,550
Allowance for doubtful accounts		(8	)		(7	)
Net accounts receivable	$	2,348		$	1,543

12. Property, Plant and Equipment

The following table presents the aggregate capitalized costs related to Devon’s oil and gas and non-oil and gas activities.


	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

(1)

$122 million and $111 million related to CDM in 2022 and 2021, respectively.

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(Unaudited)

13.

Debt and Related Expenses

See below for a summary of debt instruments and balances. The notes and debentures are senior, unsecured obligations of Devon.


	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

Retirement of Senior Notes

In the first six months of 2021, Devon redeemed $43 million of the 6.00% senior notes due 2022, $175 million of the 5.875% senior notes due 2028, $315 million of the 4.50% senior notes due 2030, $210 million of the 5.35% senior notes due 2027 and $500 million of the 5.75% senior notes due 2026. In the first six months of 2021, Devon recognized $30 million of gains on early retirement of debt, consisting of $89 million of non-cash premium accelerations, partially offset by $59 million of cash retirement costs. The gain on early retirement is included in net financing costs in the consolidated comprehensive statements of earnings.

Credit Lines

Devon has a $3.0 billion Senior Credit Facility. As of June 30, 2022, Devon had no outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under this facility. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back non-cash financial write-downs such as impairments. As of June 30, 2022, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 23.9%.

Net Financing Costs

The following schedule includes the components of net financing costs.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Interest based on debt outstanding	$	93		$	98		$	185		$	203
Gain on early retirement of debt		—			(10	)		—			(30	)
Interest income		(2	)		—			(3	)		(1	)
Other		(7	)		(8	)		(13	)		(15	)
Total net financing costs	$	84		$	80		$	169		$	157

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

14. Leases

The following table presents Devon’s right-of-use assets and lease liabilities as of June 30, 2022 and December 31, 2021.


	June 30, 2022						December 31, 2021
	Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	207	$	29	$	236	$	211	$	24	$	235
Lease liabilities:
Current lease liabilities (1)	$	8	$	18	$	26	$	8	$	18	$	26
Long-term lease liabilities		248		11		259		247		5		252
Total lease liabilities	$	256	$	29	$	285	$	255	$	23	$	278

(1) Current lease liabilities are included in other current liabilities on the consolidated balance sheets.

Devon’s right-of-use operating lease assets are for certain leases related to real estate, drilling rigs and other equipment related to the exploration, development and production of oil and gas. Devon’s right-of-use financing lease assets are related to real estate.

15.

Asset Retirement Obligations

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


	Six Months Ended June 30,
	2022			2021
Asset retirement obligations as of beginning of period	$	485		$	369
Assumed WPX obligations		—			98
Liabilities incurred		15			20
Liabilities settled and divested		(9	)		(47	)
Revision of estimated obligation		(35	)		11
Accretion expense on discounted obligation		13			14
Asset retirement obligations as of end of period		469			465
Less current portion		17			15
Asset retirement obligations, long-term	$	452		$	450

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.

16.

Stockholders’ Equity

Share Repurchases

In November 2021, Devon authorized a share repurchase program of $1.0 billion with a December 31, 2022 expiration date. In February 2022, the Board of Directors authorized an expansion of the share repurchase program to $1.6 billion, and in May 2022, authorized a further expansion to $2.0 billion and extended the expiration date to May 4, 2023. The table below provides information regarding purchases of Devon’s common stock under the $2.0 billion share repurchase program (shares in thousands).


	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

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Dividends

Upon completion of the Merger, Devon continued its commitment to pay a quarterly dividend at a fixed rate and instituted a variable quarterly dividend, which is dependent on quarterly cash flows, among other factors. Devon raised its fixed quarterly dividend by 45%, to $0.16 per share, beginning in the first quarter of 2022 and again by 13%, to $0.18 per share, beginning in the third quarter of 2022. The following table summarizes Devon’s fixed and variable dividends for the first six months of 2022 and 2021, respectively.


	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

In August 2022, Devon announced a cash dividend in the amount of $1.55 per share payable in the third quarter of 2022. The dividend consists of an $0.18 per share fixed quarterly dividend and a $1.37 per share variable quarterly dividend and will total approximately $1.0 billion.

Noncontrolling Interests

The noncontrolling interests’ share of CDM’s net earnings and the contributions from and distributions to the noncontrolling interests are presented as components of equity.

17.

Commitments and Contingencies

Devon is party to various legal actions arising in connection with its business. Matters that are probable of unfavorable outcome to Devon and which 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. None of the actions are believed by management to likely involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.

Royalty Matters

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently named as a defendant in a number of such lawsuits, including some lawsuits in which the plaintiffs seek to certify classes of similarly situated plaintiffs. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, paid royalty proceeds in an untimely manner without including required interest, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with oil, natural gas and NGLs produced and 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 has accrued approximately $25 million in other current liabilities pertaining to such royalty matters.

Environmental and Climate Change Matters

Devon’s business is subject to numerous federal, state, tribal and 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

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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, 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 intends to vigorously 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 intends to vigorously defend against the proceedings.

Other Indemnifications and Legacy 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 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.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

18.

Fair Value Measurements

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 June 30, 2022 and December 31, 2021, as applicable. Therefore, such financial assets and liabilities are not presented in the following table.


							Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2			Level 3
	Amount			Value			Inputs		Inputs			Inputs
June 30, 2022 assets (liabilities):
Cash equivalents	$	3,063		$	3,063		$	3,063	$	—		$	—
Commodity derivatives	$	41		$	41		$	—	$	41		$	—
Commodity derivatives	$	(647	)	$	(647	)	$	—	$	(647	)	$	—
Debt	$	(6,461	)	$	(6,440	)	$	—	$	(6,440	)	$	—
Contingent earnout payments	$	129		$	129		$	—	$	—		$	129
December 31, 2021 assets (liabilities):
Cash equivalents	$	1,421		$	1,421		$	1,421	$	—		$	—
Commodity derivatives	$	8		$	8		$	—	$	8		$	—
Commodity derivatives	$	(577	)	$	(577	)	$	—	$	(577	)	$	—
Debt	$	(6,482	)	$	(7,644	)	$	—	$	(7,644	)	$	—
Contingent earnout payments	$	184		$	184		$	—	$	—		$	184

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

Level 1 Fair Value Measurements

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

Level 2 Fair Value Measurements

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.

Level 3 Fair Value Measurements

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.

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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 six-month periods ended June 30, 2022, compared to previous periods and in our financial condition and liquidity since December 31, 2021. For information regarding our critical accounting policies and estimates, see our 2021 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Executive Overview

The Merger has 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 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 moderating growth, 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:

•

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

•

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.

•

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.

•

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.

•

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

•

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.

We remain committed to capital discipline and delivering the objectives that underpin our current plan. Those objectives prioritize value creation through moderated capital investment and 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 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 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 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.

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Trends of our quarterly earnings, operating cash flow, EBITDAX and capital expenditures are shown below. “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.

Our earnings increased from the first quarter of 2022 to the second quarter of 2022 primarily due to higher commodity prices as well as higher sold volumes resulting from winter weather downtime experienced in the first quarter of 2022. WTI and Henry Hub increased 15% and 45%, respectively, from the first quarter of 2022 to the second quarter of 2022. This contributed to a 19% increase in our unhedged combined realized 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 2022 each included a hedge valuation loss, net of tax of $0.3 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 $0.2 billion, respectively. Excluding these amounts, our core earnings have been more stable over recent quarters and continue to 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 have continued to trend upward primarily due to improved commodity prices and overall market conditions as well as strong operating performance.

We exited the second quarter of 2022 with $6.5 billion of liquidity, comprised of $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 25% and 30% of our anticipated remaining 2022 oil and gas production hedged, respectively.

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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 $2.0 billion of our common shares with an expiration date of May 4, 2023. We repurchased approximately 5.1 million shares in the second quarter of 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 totaled $1.5 billion in the first six months of 2022. We recently declared a dividend payable in the third quarter of 2022 for $1.0 billion and increased our fixed dividend by 13% beginning in the third quarter of 2022.

Results of Operations

The following graphs, discussion and analysis are intended to provide an understanding of our results of operations and current financial condition. To facilitate the review, these numbers are being presented before consideration of noncontrolling interests.

Q2 2022 vs. Q1 2022

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

Production 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	%

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	Q2 2022		% of Total			Q1 2022		Change
NGLs (MBbls/d)
Delaware Basin		111		71	%		92		21	%
Anadarko Basin		25		16	%		25		-2	%
Williston Basin		9		6	%		8		17	%
Eagle Ford		9		6	%		9		10	%
Powder River Basin		2		1	%		2		2	%
Other		—		0	%		—	N/M
Total		156		100	%		136		15	%


	Q2 2022		% of Total			Q1 2022		Change
Combined (MBoe/d)
Delaware Basin		436		71	%		394		11	%
Anadarko Basin		74		12	%		75		-1	%
Williston Basin		45		7	%		48		-6	%
Eagle Ford		38		6	%		36		6	%
Powder River Basin		19		3	%		18		8	%
Other		4		1	%		4		-4	%
Total		616		100	%		575		7	%

From the first quarter of 2022 to the second quarter of 2022, the change in volumes contributed to a $224 million increase in earnings. The increase in volumes was primarily due to new well activity in the Delaware Basin as well as winter weather downtime experienced in the first quarter of 2022. We expect volumes to increase approximately 15 MBoe/d in the third quarter of 2022 due to the acquired Williston Basin assets in July 2022.

Realized Prices


	Q2 2022			Realization	Q1 2022			Change
Oil (per Bbl)
WTI index	$	108.70			$	94.45			15	%
Realized price, unhedged	$	108.93		100%	$	92.94			17	%
Cash settlements	$	(13.13	)		$	(11.32	)
Realized price, with hedges	$	95.80		88%	$	81.62			17	%


	Q2 2022			Realization	Q1 2022			Change
Gas (per Mcf)
Henry Hub index	$	7.17			$	4.96			45	%
Realized price, unhedged	$	6.37		89%	$	3.77			69	%
Cash settlements	$	(1.31	)		$	(0.62	)
Realized price, with hedges	$	5.06		71%	$	3.15			61	%


	Q2 2022		Realization	Q1 2022		Change
NGLs (per Bbl)
WTI index	$	108.70		$	94.45		15	%
Realized price, unhedged	$	40.28	37%	$	37.76		7	%
Cash settlements	$	—		$	—
Realized price, with hedges	$	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 2022, realized prices contributed to a $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 25% and 30% of our anticipated remaining 2022 oil and gas production hedged, respectively.

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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.

Cash settlements as presented in the tables above represent realized gains or losses related to the instruments described in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Production Expenses


	Q2 2022			Q1 2022			Change
LOE	$	255		$	224			14	%
Gathering, processing & transportation		177			161			10	%
Production taxes		278			214			30	%
Property taxes		19			19			0	%
Total	$	729		$	618			18	%
Per Boe:
LOE	$	4.56		$	4.33			5	%
Gathering, processing & transportation	$	3.15		$	3.11			2	%
Percent of oil, gas and NGL sales:
Production taxes		6.8	%		6.7	%		0	%

Production expenses increased from the first quarter of 2022 to the second quarter of 2022 primarily due to higher volumes. Production taxes also increased due to 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.


	Q2 2022		$ per BOE		Q1 2022		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	2,511	$	63.32	$	1,877	$	52.99
Anadarko Basin		277	$	41.15		204	$	30.31
Williston Basin		224	$	54.56		207	$	47.65
Eagle Ford		206	$	59.71		158	$	48.92
Powder River Basin		119	$	68.41		86	$	54.32
Other		34	N/M			25	N/M
Total	$	3,371	$	60.12	$	2,557	$	49.45

DD&A


	Q2 2022		Q1 2022		Change
Oil and gas per Boe	$	9.02	$	8.95		1	%

Oil and gas	$	506	$	463		9	%
Other property and equipment		22		26		-16	%
Total	$	528	$	489		8	%

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

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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

(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.

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

Income Taxes


	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.

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June 30, YTD 2022 vs. June 30, YTD 2021

Our six months ended June 30, 2022 net earnings were $2.9 billion, compared to net earnings of $477 million for the first six months ended June 30, 2021. The graph below shows the change in net earnings from the six months ended June 30, 2021 to the six months ended June 30, 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	%

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	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	%

From the six months ended 2021 to the six months ended 2022, the change in volumes contributed to a $341 million increase in earnings. The increase in volumes was primarily due to continued development in the Delaware Basin as well as increased activity in Eagle Ford. These increases were partially offset by lower volumes in the Williston Basin and Powder River Basin primarily due to natural declines.

Realized Prices


	Six Months Ended June 30,
	2022			Realization	2021			Change
Oil (per Bbl)
WTI index	$	101.57			$	61.95			64	%
Realized price, unhedged	$	101.14		100%	$	59.65			70	%
Cash settlements	$	(12.25	)		$	(11.30	)
Realized price, with hedges	$	88.89		88%	$	48.35			84	%


	Six Months Ended June 30,
	2022			Realization	2021			Change
Gas (per Mcf)
Henry Hub index	$	6.06			$	2.77			119	%
Realized price, unhedged	$	5.11		84%	$	2.58			98	%
Cash settlements	$	(0.97	)		$	(0.15	)
Realized price, with hedges	$	4.14		68%	$	2.43			70	%


	Six Months Ended June 30,
	2022		Realization	2021			Change
NGLs (per Bbl)
WTI index	$	101.57		$	61.95			64	%
Realized price, unhedged	$	39.11	39%	$	24.37			60	%
Cash settlements	$	—		$	(0.23	)
Realized price, with hedges	$	39.11	39%	$	24.14			62	%


	Six Months Ended June 30,
	2022			2021			Change
Combined (per Boe)
Realized price, unhedged	$	67.50		$	40.54			67	%
Cash settlements	$	(7.57	)	$	(6.21	)
Realized price, with hedges	$	59.93		$	34.33			75	%

From the six months ended 2021 to the six months ended 2022, realized prices contributed to a $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 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 consolidated statements of comprehensive earnings.

Production Expenses


	Six Months Ended June 30,
	2022			2021			Change
LOE	$	479		$	409			17	%
Gathering, processing & transportation		338			276			22	%
Production taxes		492			260			89	%
Property taxes		38			26			46	%
Total	$	1,347		$	971			39	%
Per Boe:
LOE	$	4.45		$	4.24			5	%
Gathering, processing & transportation	$	3.13		$	2.86			9	%
Percent of oil, gas and NGL sales:
Production taxes		6.8	%		6.7	%		1	%

Production expenses increased primarily due to higher volumes as well as an increase in production taxes resulting from higher commodity prices.

Field-Level Cash Margin


	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

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	%

DD&A increased primarily due to higher volumes which was partially offset by lower DD&A 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 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

(1)

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

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

Net financing costs include a $30 million gain in the first six months of 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


	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 six months ended June 30, 2022 and 2021.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Operating cash flow	$	2,678		$	1,093		$	4,515		$	1,685
WPX acquired cash		—			—			—			344
Acquisitions of property and equipment		(100	)		(5	)		(101	)		(5	)
Divestitures of property and equipment		9			49			35			64
Capital expenditures		(573	)		(504	)		(1,110	)		(1,003	)
Equity method investment activity, net		(6	)		8			(20	)		18
Debt activity, net		—			(742	)		—			(1,302	)
Repurchases of common stock		(324	)		—			(535	)		—
Common stock dividends		(830	)		(229	)		(1,497	)		(432	)
Noncontrolling interest activity, net		(5	)		(2	)		(13	)		(30	)
Other		(17	)		(7	)		(88	)		(37	)
Net change in cash, cash equivalents and restricted cash	$	832		$	(339	)	$	1,186		$	(698	)
Cash, cash equivalents and restricted cash at end of period	$	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 more than doubled during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The increase was primarily due to significantly increased commodity prices as well as higher volumes for the first six months of 2022 compared to 2021.

Acquisitions of Property and Equipment

During the first six months of 2022, we paid an $87 million deposit towards the acquisition of 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 June 30,				Six months Ended June 30,
	2022		2021		2022		2021
Delaware Basin	$	412	$	378	$	807	$	775
Anadarko Basin		32		9		42		18
Williston Basin		16		18		39		46
Eagle Ford		33		29		59		43
Powder River Basin		28		7		61		40
Other		3		—		6		—
Total oil and gas		524		441		1,014		922
Midstream		28		43		57		48
Other		21		20		39		33
Total capital expenditures	$	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. 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 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 second quarter and total for the first six months of 2022 and 2021. In February 2022, our Board of Directors increased our fixed dividend rate by 45% to $0.16 per share and again by 13% to $0.18 per share beginning in the third quarter of 2022. In addition to the fixed quarterly dividend, we paid a variable dividend in the first and second quarters of 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 six months of 2022 and 2021, we distributed $13 million and $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.

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 landowners to enhance our existing portfolio of assets.

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 capital requirements as discussed in this section as well as accelerate our cash-return business model.

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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 second quarter of 2022, we held approximately $3.5 billion of cash, inclusive of 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 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. The key terms to our oil, gas and NGL derivative financial instruments as of June 30, 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, we remain committed to capital discipline and focused on delivering the objectives that underpin our capital plan for 2022. We will continue to prioritize economic value over growing volumes, which is driven partially by current commodity price backwardation, supply chain constraints and 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. Furthermore, the COVID-19 pandemic has contributed to disruption and volatility in our supply chain, which has resulted, and may continue to result in labor shortages, increased costs and delays for pipe and other materials needed for our operations.

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 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.

Credit Availability

As of June 30, 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 June 30, 2022, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

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 with a stable outlook. Our credit rating from Fitch is BBB+ with a stable outlook. Our credit rating from Moody’s Investor Service is Baa3 with a 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

We are committed to a “fixed plus variable” dividend strategy. 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 and other factors deemed relevant by the Board.

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 Williston Basin for cash consideration of approximately $830 million, net of purchase price adjustments.

Capital Expenditures

Our 2022 exploration and development budget for the remainder of 2022 is expected to range from approximately $1.2 billion to $1.4 billion.

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.

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 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 two years.

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

Non-GAAP Measures

We make reference to “core earnings attributable to Devon” and “core earnings per share attributable to Devon” in “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 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

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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 5.

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.

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


	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
Earnings attributable to Devon (GAAP)	$	304		$	261		$	256		$	0.38		$	272		$	477		$	469		$	0.70
Adjustments:
Asset dispositions		(87	)		(67	)		(67	)		(0.10	)		(119	)		(91	)		(91	)		(0.13	)
Asset and exploration impairments		1			1			1			—			2			1			1			—
Deferred tax asset valuation allowance		—			(115	)		(115	)		(0.17	)		—			(378	)		(378	)		(0.57	)
Change in tax legislation		—			62			62			0.09			—			62			62			0.09
Fair value changes in financial instruments and foreign currency		334			258			258			0.38			628			483			483			0.72
Restructuring and transaction costs		23			21			21			0.03			212			183			183			0.28
Early retirement of debt		(10	)		(8	)		(8	)		(0.01	)		(30	)		(23	)		(23	)		(0.03	)
Core earnings attributable to Devon (Non-GAAP)	$	565		$	413		$	408		$	0.60		$	965		$	714		$	706		$	1.06

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 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, 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 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 June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net earnings (GAAP)	$	1,938		$	261		$	2,933		$	477
Financing costs, net		84			80			169			157
Income tax expense (benefit)		557			43			824			(205	)
Exploration expenses		10			3			12			6
Depreciation, depletion and amortization		528			536			1,017			1,003
Asset dispositions		(14	)		(87	)		(15	)		(119	)
Share-based compensation		22			20			42			40
Derivative and financial instrument non-cash valuation changes		(302	)		336			37			632
Restructuring and transaction costs		—			23			—			212
Accretion on discounted liabilities and other		10			(14	)		(51	)		(43	)
EBITDAX (Non-GAAP)		2,833			1,201			4,968			2,160
Marketing and midstream revenues and expenses, net		4			(1	)		8			20
Commodity derivative cash settlements		472			367			816			599
General and administrative expenses, cash-based		62			74			136			161
Field-level cash margin (Non-GAAP)	$	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 June 30, 2022, we have commodity derivatives that pertain to a portion of our estimated production for the last six months of 2022, as well as for 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 June 30, 2022, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately $155 million.

Interest Rate Risk

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

Foreign Currency Risk

We had no material foreign currency risk at June 30, 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 June 30, 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

There were no 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 I, Item 3. Legal Proceedings of our 2021 Annual Report on Form 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 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 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 second quarter of 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

(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.

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: August 2, 2022				/s/ Jeremy D. Humphers
				Jeremy D. Humphers
				Senior Vice President and Chief Accounting Officer