Item 1. Financial Statements

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Item 1. Financial Statements

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS


	Three Months Ended March 31,
	2026			2025
	(Unaudited)
Oil, gas and NGL sales	$	2,977		$	3,126
Oil, gas and NGL derivatives		(701	)		(98	)
Marketing and midstream revenues		1,531			1,424
Total revenues		3,807			4,452
Production expenses		894			912
Exploration expenses		25			10
Marketing and midstream expenses		1,547			1,436
Depreciation, depletion and amortization		904			912
Asset impairments		—			254
Asset dispositions		1			2
General and administrative expenses		125			130
Financing costs, net		109			123
Restructuring and transaction costs		19			18
Other, net		17			9
Total expenses		3,641			3,806
Earnings before income taxes		166			646
Income tax expense		46			137
Net earnings		120			509
Net earnings attributable to noncontrolling interests		—			15
Net earnings attributable to Devon	$	120		$	494
Net earnings per share:
Basic net earnings per share	$	0.19		$	0.77
Diluted net earnings per share	$	0.19		$	0.77
Comprehensive earnings:
Net earnings	$	120		$	509
Other comprehensive earnings, net of tax:
Pension and postretirement plans		1			1
Other comprehensive earnings, net of tax		1			1
Comprehensive earnings:		121			510
Comprehensive earnings attributable to noncontrolling interests		—			15
Comprehensive earnings attributable to Devon	$	121		$	495

See accompanying notes to consolidated financial statements.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET****S


	March 31, 2026			December 31, 2025
	(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	1,815		$	1,434
Accounts receivable		2,250			1,792
Inventory		319			336
Other current assets		378			444
Total current assets		4,762			4,006
Oil and gas property and equipment, based on successful efforts accounting, net		23,912			23,731
Other property and equipment, net		1,686			1,688
Total property and equipment, net		25,598			25,419
Goodwill		753			753
Right-of-use assets		312			299
Investments		715			727
Other long-term assets		403			395
Total assets	$	32,543		$	31,599
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	975		$	790
Revenues and royalties payable		1,678			1,491
Short-term debt		999			998
Other current liabilities		1,082			807
Total current liabilities		4,734			4,086
Long-term debt		7,387			7,391
Lease liabilities		206			197
Asset retirement obligations		986			863
Other long-term liabilities		940			907
Deferred income taxes		2,862			2,627
Stockholders' equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued621 million and 622 million shares in 2026 and 2025, respectively		62			62
Additional paid-in capital		5,316			5,388
Retained earnings		10,171			10,200
Accumulated other comprehensive loss		(121	)		(122	)
Total stockholders’ equity		15,428			15,528
Total liabilities and equity	$	32,543		$	31,599

See accompanying notes to consolidated financial statements.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
	2026			2025
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	120		$	509
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation, depletion and amortization		904			912
Asset impairments		—			254
Leasehold impairments		3			5
Accretion of liabilities		4			6
Total losses on commodity derivatives		701			98
Cash settlements on commodity derivatives		(57	)		(10	)
Losses on asset dispositions		1			2
Deferred income tax expense		234			41
Share-based compensation		22			30
Other		22			(22	)
Changes in assets and liabilities, net		(299	)		117
Net cash from operating activities		1,655			1,942
Cash flows from investing activities:
Capital expenditures		(839	)		(934	)
Acquisitions of property and equipment		(190	)		(8	)
Divestitures of property and equipment		2			133
Distributions from investments		9			9
Contributions to investments and other		(2	)		(2	)
Net cash from investing activities		(1,020	)		(802	)
Cash flows from financing activities:
Repurchases of common stock		(69	)		(301	)
Dividends paid on common stock		(155	)		(163	)
Contributions from noncontrolling interests		—			14
Distributions to noncontrolling interests		—			(9	)
Repayment of finance leases		(3	)		(274	)
Shares exchanged for tax withholdings and other		(27	)		(19	)
Net cash from financing activities		(254	)		(752	)
Net change in cash, cash equivalents and restricted cash		381			388
Cash, cash equivalents and restricted cash at beginning of period		1,434			846
Cash, cash equivalents and restricted cash at end of period	$	1,815		$	1,234

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,763		$	1,198
Restricted cash		52			36
Total cash, cash equivalents and restricted cash	$	1,815		$	1,234

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 March 31, 2026
Balance as of December 31, 2025		622		$	62		$	5,388		$	10,200		$	(122	)	$	—		$	—		$	15,528
Net earnings		—			—			—			120			—			—			—			120
Other comprehensive earnings, net of tax		—			—			—			—			1			—			—			1
Restricted stock grants, net of cancellations		1			—			—			—			—			—			—			—
Common stock repurchased		—			—			—			—			—			(94	)		—			(94	)
Common stock retired		(2	)		—			(94	)		—			—			94			—			—
Common stock dividends		—			—			—			(149	)		—			—			—			(149	)
Share-based compensation		—			—			22			—			—			—			—			22
Balance as of March 31, 2026		621		$	62		$	5,316		$	10,171		$	(121	)	$	—		$	—		$	15,428
Three Months Ended March 31, 2025
Balance as of December 31, 2024		651		$	65		$	6,387		$	8,166		$	(122	)	$	—		$	208		$	14,704
Net earnings		—			—			—			494			—			—			15			509
Other comprehensive earnings, net of tax		—			—			—			—			1			—			—			1
Restricted stock grants, net of cancellations		2			—			—			—			—			—			—			—
Common stock repurchased		—			—			(3	)		—			—			(319	)		—			(322	)
Common stock retired		(9	)		(1	)		(318	)		—			—			319			—			—
Common stock dividends		—			—			—			(154	)		—			—			—			(154	)
Share-based compensation		—			—			30			—			—			—			—			30
Contributions from noncontrolling interests		—			—			—			—			—			—			14			14
Distributions to noncontrolling interests		—			—			—			—			—			—			(9	)		(9	)
Balance as of March 31, 2025		644		$	64		$	6,096		$	8,506		$	(121	)	$	—		$	228		$	14,773

See accompanying notes to consolidated financial statements.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

S****ummary 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 2025 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 periods ended March 31, 2026 and 2025 and Devon’s financial position as of March 31, 2026.

Variable Interest Entity

CDM was a joint venture entity formed by Devon and an affiliate of QL Capital Partners, LP (“QLCP”). Devon held a controlling interest in CDM and the portions of CDM’s net earnings and equity not attributable to Devon’s controlling interest were shown separately as noncontrolling interests in the accompanying consolidated statements of comprehensive earnings and consolidated balance sheets. CDM was considered a VIE to Devon. On August 1, 2025, Devon completed the acquisition of all outstanding noncontrolling interests in CDM for $260 million. As a result of this transaction, Devon owns 100% of the equity interests in CDM.

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 March 31,
	2026		2025
Oil	$	2,423	$	2,414
Gas		205		309
NGL		349		403
Oil, gas and NGL sales		2,977		3,126

Oil		1,001		918
Gas		254		272
NGL		276		234
Marketing and midstream revenues		1,531		1,424
Total revenues from contracts with customers	$	4,508	$	4,550

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosures about specific types of expenses included in the expense captions presented on the face of the statement of operations as well as disclosures about selling expenses. This ASU will result in additional disclosures for Devon beginning with its 2027 annual reporting and interim periods beginning in 2028.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Acquisitions and Dive****stitures

Pending Merger

On February 1, 2026, Devon, Coterra and Merger Sub entered into the Merger Agreement, providing for an all-stock merger of equals. Coterra is an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico, Marcellus Shale in Pennsylvania and the Anadarko Basin in Oklahoma. On the closing date of the Merger, each share of Coterra common stock will be automatically converted into the right to receive 0.70 of a share of Devon common stock. No fractional shares of Devon’s common stock will be issued in the Merger, and holders of shares of Coterra common stock will instead receive cash in lieu of fractional shares of Devon common stock, if any. The Merger has been unanimously approved by the boards of directors of Devon and Coterra.

On May 4, 2026, the shareholders of Devon and Coterra each approved the Merger at their respective special meetings. The Merger is expected to close on May 7, 2026, subject to other customary closing conditions.

Asset Exchange

On April 1, 2025, Devon and BPX Energy dissolved their partnership and divided their acreage in the Eagle Ford Blackhawk field located in Texas' DeWitt County, resulting in increased operational flexibility for both parties. The assets exchanged were in close proximity and shared similar geological characteristics. The transaction was accounted for as an equal, non-monetary exchange, as it did not result in a significant change to the risks, expected future cash flows or the timing of those cash flows, and therefore was determined to lack commercial substance. As a result, the new acreage and underlying property costs were recorded at the historical cost of the assets exchanged.

Contingent Earnout Payments

Devon was 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 had a term of four years. Devon received $20 million in contingent earnout payments related to this transaction in the first quarter of 2025.

Derivative Fin****ancial 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 and costless price collars.

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 March 31, 2026, 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 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.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Commodity Derivatives

As of March 31, 2026, 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.


	Three-Way Price Collars
Period	Volume (Bbls/d)		Weighted Average Floor Sold Price ($/Bbl)		Weighted Average Floor Purchased Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)
Q2-Q4 2026		108,698	$	49.51	$	59.59	$	71.22
Q1-Q4 2027		37,397	$	45.78	$	55.78	$	71.89


	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q2-Q4 2026	Midland Sweet		46,000	$	1.10
Q2-Q4 2026	WTI/Brent		8,625	$	(5.61	)
Q2-Q4 2026	NYMEX Roll		86,051	$	1.24
Q1-Q4 2027	Magellan East Houston		20,000	$	1.77
Q1-Q4 2027	Midland Sweet		46,000	$	1.00

As of March 31, 2026, 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. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.


	Price Swaps				Price Collars
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q2-Q4 2026		247,500	$	3.80		230,000	$	3.26	$	4.90
Q1-Q4 2027		—	$	—		90,000	$	3.50	$	4.31


	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q2-Q4 2026	Houston Ship Channel		50,000	$	(0.29	)
Q2-Q4 2026	WAHA		150,000	$	(1.79	)

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Financial Statement Presentation

All derivative financial instruments are recognized at their current fair value as either assets or liabilities on 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 on the consolidated balance sheets. The table below presents a summary of these positions as of March 31, 2026 and December 31, 2025.


	March 31, 2026									December 31, 2025
	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	$	126		$	(4	)	$	122		$	199		$	(7	)	$	192		Other current assets
Long-term derivative asset		4			—			4			2			—			2		Other long-term assets
Short-term derivative liability		(526	)		4			(522	)		(8	)		7			(1	)	Other current liabilities
Long-term derivative liability		(55	)		—			(55	)		—			—			—		Other long-term liabilities
Total derivative asset (liability)	$	(451	)	$	—		$	(451	)	$	193		$	—		$	193

Share-Base****d Compensation

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings.


	Three Months Ended March 31,
	2026		2025
G&A	$	22	$	24
Restructuring and transaction costs		—		6
Total	$	22	$	30

Related income tax benefit	$	5	$	3

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 12/31/25		4,653		$	40.79		1,293			$	58.82
Granted		1,931		$	43.48		439			$	61.73
Vested		(1,468	)	$	44.54		(200	)		$	81.70
Forfeited		(42	)	$	41.03		(117	)		$	81.70
Unvested at 3/31/26		5,074		$	40.73		1,415		(1)	$	54.59

(1)

A maximum of 2.8 million common shares could be awarded based upon Devon’s final TSR ranking.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table presents the assumptions related to the performance share units granted in 2026, as indicated in the previous summary table.


	2026
Grant-date fair value	$	61.73
Risk-free interest rate		3.52	%
Volatility factor		33.80	%
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 March 31, 2026.


	Restricted Stock		Performance
	Awards/Units		Share Units
Unrecognized compensation cost	$	169	$	40
Weighted average period for recognition (years)		3.0		2.3

Asset Impairments

In the first quarter of 2025, Devon rationalized two headquarters-related real estate assets, triggering assets held for sale and recording asset impairments of $254 million. Both transactions closed in the first quarter of 2025 and generated aggregate sales proceeds of $120 million.

Inco****me Taxes

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


	Three Months Ended March 31,
	2026			2025
Earnings before income taxes	$	166		$	646

Current income tax expense (benefit)	$	(188	)	$	96
Deferred income tax expense		234			41
Total income tax expense	$	46		$	137

U.S. statutory income tax rate		21	%		21	%
State income taxes		3	%		1	%
Other		4	%		(1	%)
Effective income tax rate		28	%		21	%

On February 18, 2026, the IRS issued additional interim CAMT guidance through Notice 2026-7 (“the Notice”). In addition to other provisions, the Notice includes a new Adjusted Financial Statement Income (“AFSI”) adjustment beginning in 2025 for amortization of domestic research costs, including accelerated amortization under the OBBB transition rule. Accordingly, Devon's first quarter 2026 income tax expense included a current tax benefit of approximately $218 million and a corresponding deferred tax expense associated with the deferral of income taxes resulting from the Notice.

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Net Earnings Per Share

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


	Three Months Ended March 31,
	2026		2025
Net earnings available to common shareholders - basic and diluted	$	120	$	494
Common shares:
Average common shares outstanding - basic		616		643
Dilutive effect of potential common shares issuable		2		2
Average common shares outstanding - diluted		618		645
Net earnings per share available to common shareholders:
Basic	$	0.19	$	0.77
Diluted	$	0.19	$	0.77

Other Comprehensive Earnings (Loss)

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


	Three Months Ended March 31,
	2026			2025
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits	$	(122	)	$	(122	)
Recognition of net actuarial loss and prior service cost in earnings (1)		2			1
Income tax expense		(1	)		—
Accumulated other comprehensive loss, net of tax	$	(121	)	$	(121	)

(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.

Supplemental Information to Statements of Cash Flows


	Three Months Ended March 31,
	2026			2025
Changes in assets and liabilities, net:
Accounts receivable	$	(462	)	$	(63	)
Other current assets		12			(35	)
Other long-term assets		(7	)		(85	)
Accounts payable and revenues and royalties payable		379			248
Other current liabilities		(212	)		(57	)
Other long-term liabilities		(9	)		109
Total	$	(299	)	$	117
Supplementary cash flow data:
Interest paid	$	152		$	160
Income taxes paid	$	4		$	—

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

10.

Accounts Receivable

Components of accounts receivable include the following:


	March 31, 2026			December 31, 2025
Oil, gas and NGL sales	$	1,210		$	865
Joint interest billings		281			245
Marketing and midstream revenues		754			669
Other		12			20
Gross accounts receivable		2,257			1,799
Allowance for doubtful accounts		(7	)		(7	)
Net accounts receivable	$	2,250		$	1,792

11.

Property and Equipment

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


	March 31, 2026			December 31, 2025
Property and equipment:
Proved	$	59,690		$	58,573
Unproved and properties under development		1,852			1,910
Total oil and gas		61,542			60,483
Less accumulated DD&A		(37,630	)		(36,752	)
Oil and gas property and equipment, net		23,912			23,731
Other property and equipment		2,412			2,624
Less accumulated DD&A		(726	)		(936	)
Other property and equipment, net		1,686			1,688
Property and equipment, net	$	25,598		$	25,419

12.

Investments

The following table presents Devon's investments shown on the consolidated balance sheets.


	% Interest	Carrying Amount
Investments	March 31, 2026	March 31, 2026		December 31, 2025
WaterBridge	14%	$	267	$	268
Catalyst	50%		240		247
Fervo	15%		163		162
Other	Various		45		50
Total		$	715	$	727

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

13.

Debt and Re****lated Expenses

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


	March 31, 2026			December 31, 2025
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
5.20% due September 15, 2034		1,250			1,250
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
5.75% due September 15, 2054		1,000			1,000
Term Loan due September 25, 2026		1,000			1,000
Net premium on debentures and notes		21			23
Debt issuance costs		(49	)		(48	)
Total debt	$	8,386		$	8,389
Less amount classified as short-term debt		999			998
Total long-term debt	$	7,387		$	7,391

Credit Lines

Devon has a $3.0 billion revolving Senior Credit Facility. In the first quarter of 2026, Devon amended the credit agreement governing the Senior Credit Facility to, among other things, extend the maturity date from March 24, 2030 to March 24, 2031, with the option to extend the maturity date by three additional one-year periods, subject to lender consent. As of March 31, 2026, Devon had no outstanding borrowings under the Senior Credit Facility and had less than $1.0 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 March 31, 2026, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 24.9%.

Term Loan Credit Agreement

In August 2024, Devon entered into a delayed draw term loan credit agreement (the “Term Loan Credit Agreement”), providing for delayed draw term loans in an aggregate principal amount not to exceed $2.0 billion, including a 364-day tranche of $500 million and a two-year tranche of $1.5 billion. On September 27, 2024, Devon borrowed $1.0 billion on the two-year tranche (the “Term Loan”) to partially fund the closing of the Grayson Mill acquisition. The Term Loan bears interest at a rate based on term SOFR plus a spread adjustment that varies based on Devon's credit ratings. The interest rate on the Term Loan was 5.2% as of March 31, 2026.

The Term Loan Credit Agreement contains substantially the same financial covenant as the Senior Credit Facility. As of March 31, 2026, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 24.9%.

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Retirement of Senior Notes

On September 15, 2025, Devon early redeemed the $485 million of 5.85% senior notes due in December 2025 pursuant to the “par-call” rights set forth in the indenture document.

Net Financing Costs

The following schedule includes the components of net financing costs.


	Three Months Ended March 31,
	2026			2025
Net financing costs:
Interest based on debt outstanding	$	118		$	127
Interest income		(14	)		(10	)
Other		5			6
Total net financing costs	$	109		$	123

14.

Le****ases

Devon’s operating lease right-of-use assets relate to real estate, drilling rigs and other equipment related to the exploration, development and production of oil and gas. As of March 31, 2026, Devon’s financing lease right-of-use assets primarily relate to equipment related to the exploration, development and production of oil and gas. During the first quarter of 2025, Devon extinguished an approximately $300 million real estate finance lease by making a cash payment of $274 million and recognized a gain on early lease extinguishment in other, net related to the difference on the accompanying consolidated statement of comprehensive earnings. For additional information, see Note 5.

The following table presents Devon’s right-of-use assets and lease liabilities as of March 31, 2026 and December 31, 2025.


	March 31, 2026						December 31, 2025
	Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	32	$	280	$	312	$	23	$	276	$	299
Lease liabilities:
Current lease liabilities (1)	$	8	$	95	$	103	$	7	$	95	$	102
Long-term lease liabilities		21		185		206		16		181		197
Total lease liabilities (2)	$	29	$	280	$	309	$	23	$	276	$	299

(1)

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

(2)

Devon has entered into certain leases of equipment related to the exploration, development and production of oil and gas that had terms not yet commenced as of March 31, 2026 and are therefore excluded from the amounts shown above.

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15.

Asset Retir****ement Obligations

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


	Three Months Ended March 31,
	2026			2025
Asset retirement obligations as of beginning of period	$	906		$	807
Liabilities incurred		11			11
Liabilities settled and divested		(11	)		(8	)
Revision and reclassification of estimated obligation		107			55
Accretion expense on discounted obligation		14			12
Asset retirement obligations as of end of period		1,027			877
Less current portion		41			42
Asset retirement obligations, long-term	$	986		$	835

During the first quarters of 2026 and 2025, Devon increased its asset retirement obligations by approximately $107 million and $55 million, respectively, primarily due to changes in current cost estimates for its oil and gas assets.

16.

Stockhol****ders’ Equity

Share Repurchases

Devon’s Board of Directors has authorized a $5.0 billion share repurchase program with a June 30, 2026 expiration date. Pursuant to the terms of the Merger Agreement, Devon’s share repurchase activity has been suspended and is expected to remain suspended through the completion of the Merger. The table below provides information regarding purchases of Devon’s common stock under the $5.0 billion share repurchase program (shares in thousands).


	Total Number of Shares Purchased		Dollar Value of Shares Purchased		Average Price Paid per Share
$5.0 Billion Plan
2021		13,983	$	589	$	42.15
2022		11,708		718	$	61.36
2023		19,350		992	$	51.23
2024		23,944		1,044	$	43.61
2025:
First quarter		8,505		301	$	35.33
Second quarter		7,866		249	$	31.78
Third quarter		7,324		250	$	34.06
Fourth quarter		7,118		250	$	35.12
2025 Total		30,813		1,050	$	34.07
2026:
First quarter		1,850		69	$	37.39
Total plan		101,648	$	4,462	$	43.90

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Dividends

Devon pays a quarterly dividend which can be comprised of a fixed dividend and a variable dividend. The variable dividend is dependent on quarterly cash flows, among other factors. The following table summarizes Devon’s dividends paid for the first quarter of 2026 and 2025, respectively.


	Dividends		Rate Per Share
2026:
First quarter	$	155	$	0.24
2025:
First quarter	$	163	$	0.24

Noncontrolling Interests

On August 1, 2025, Devon completed the acquisition of all outstanding noncontrolling interests in CDM for $260 million. As a result of this transaction, Devon owns 100% of the equity interests in CDM. For additional information, see Note 1.

17.

Com****mitments 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 March 31, 2026, Devon has accrued approximately $60 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.

The Company has previously received separate NOVs from the EPA alleging emissions and permitting violations relating to certain of our historic operations in North Dakota, western Texas and New Mexico, respectively. The Company has been engaging with the EPA to resolve each of these matters, and Devon is actively negotiating a draft consent decree with the EPA and the Department of Justice with respect to the North Dakota NOV matter. If finalized, the consent decree may include monetary sanctions and obligations to complete mitigation projects and implement specific injunctive relief. Given that negotiations of the draft consent decree are ongoing and the uncertainty as to the ultimate result of the North Dakota NOV matter, we are currently unable to provide an estimate of potential loss; however, the costs associated with the resolution of the North Dakota NOV matter or any of the other NOV matters could be significant in amount and may include monetary penalties.

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

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(Unaudited)

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 denies the allegations in these lawsuits and intends to vigorously defend against these claims.

The State of Delaware has 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 this matter, Devon denies the allegations asserted in this lawsuit and intends to vigorously defend against these claims.

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, undertaking other restorative actions or performing requirements under surface agreements in existence at the time of disposition. For example, a predecessor entity of a Devon subsidiary previously sold certain private, state and federal oil and gas leases covering properties in shallow waters off the coast of Louisiana in the Gulf of America. These assets are generally referred to as the East Bay Field. The current operator of the East Bay Field filed for protection under Chapter 11 of the U.S. Bankruptcy Code and was unable to satisfy the eventual decommissioning obligations associated with the East Bay Field. Other companies in the chain of title of the East Bay Field have also sought bankruptcy protection and will also likely be unable to satisfy the eventual decommissioning obligations associated with the East Bay Field.

In March 2025, Devon received an order from the Department of the Interior, Bureau of Safety and Environmental Enforcement to decommission assets located on certain federal leases in the East Bay Field (the “Federal Assets”). As a result, during the first quarter of 2025, Devon recorded a contingent liability of $125 million within other liabilities in the consolidated balance sheet, reflecting the estimated costs of decommissioning the Federal Assets. The Company expects to be able to access funds available under certain bonds and a cash security account as and when Devon performs and pays these decommissioning obligations. Devon believes the funds will likely cover approximately $100 million of the estimated decommissioning costs for the Federal Assets. Accordingly, during the first quarter of 2025, Devon recorded an approximately $100 million receivable related to these sources of funds within other assets in the consolidated balance sheet. The remaining $25 million difference of the recorded decommissioning obligation and such sources of funds was recognized in the first quarter of 2025 in other, net on the consolidated statement of comprehensive earnings. Devon may also be required to perform or fund decommissioning obligations associated with the East Bay Field under state and federal regulations applicable to predecessor operators beyond amounts accrued. Factors impacting this contingency include, among others: (i) the ultimate outcome of the ongoing bankruptcy proceedings, including with respect to state lease assets included in the East Bay Field, (ii) the actual costs to decommission the Federal Assets relative to the estimates, which are subject to numerous assumptions and uncertainties, and (iii) Devon's ability to successfully access funds under decommissioning bonds and other sources.

As of March 31, 2026, Devon has accrued approximately $175 million of contingent liabilities related to such decommissioning legacy matters, including liabilities associated with the East Bay Field.

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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 March 31, 2026 and December 31, 2025, 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
March 31, 2026 assets (liabilities):
Cash equivalents	$	1,021		$	1,021		$	1,021	$	—		$	—
Commodity derivatives	$	126		$	126		$	—	$	126		$	—
Commodity derivatives	$	(577	)	$	(577	)	$	—	$	(577	)	$	—
Debt	$	(8,386	)	$	(8,292	)	$	—	$	(8,292	)	$	—
December 31, 2025 assets (liabilities):
Cash equivalents	$	764		$	764		$	764	$	—		$	—
Commodity derivatives	$	194		$	194		$	—	$	194		$	—
Commodity derivatives	$	(1	)	$	(1	)	$	—	$	(1	)	$	—
Debt	$	(8,389	)	$	(8,290	)	$	—	$	(8,290	)	$	—

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 our debt are estimated based on rates available for debt with similar terms and maturity when active trading is not available. Our variable rate debt is non-public and consists of our Term Loan. The fair value of our variable rate debt approximates the carrying value as the underlying SOFR resets every month based on the prevailing market rate.

Level 3 Fair Value Measurements

Devon had no fair value measurements using Level 3 inputs at March 31, 2026 or December 31, 2025.

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19.

Reportable Segments

Devon is a leading independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Devon’s oil and gas exploration and production activities are solely focused in the U.S. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of these operations.

Devon’s chief operating decision maker is the executive committee, which includes, among others, the chief executive officer, chief operating officers and chief financial officer. To assess the performance of its assets, Devon uses net earnings. Devon believes net earnings provides information useful in assessing its operating and financial performance across periods.

The following table reflects Devon’s net earnings, assets and capital expenditures for the time periods presented below.


	Three Months Ended March 31,
	2026		2025
Total revenues	$	3,807	$	4,452

LOE		486		479
Gathering, processing & transportation		191		204
Production and property taxes		217		229
Total significant expenses		894		912
Marketing and midstream expenses		1,547		1,436
DD&A		904		912
G&A		125		130
Financing costs, net		109		123
Income tax expense		46		137
Other segment items (1)		62		293
Total expenses		3,687		3,943

Net earnings	$	120	$	509

Total assets	$	32,543	$	30,928

Capital expenditures, including acquisitions	$	999	$	972

(1)

Other segment items included in segment net earnings are exploration expenses, asset impairments, asset dispositions, restructuring and transaction costs and other, net.

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